Level 1, Fortescue Centre
30 Terrace Road
East Perth WA 6004
T + 61 8 9265 1100
F + 61 8 9265 1199
www.vdmgroup.com.au
2015
ANNUAL REPORT
VDM GROUP LIMITED
and its Controlled Entities
ABN 95 109 829 334
VDM GROUP LIMITED
CORPORATE INFORMATION
Directors
Mr Luk Hiuming
Dr Hua Dongyi
Mr Michael Fry
Mr Vic Jakovich
Chairman
Managing Director and Chief Executive Officer
Non-executive Director
Non-executive Director
Company Secretary
Mr Padraig O’Donoghue
Registered and
Principal Office
Postal Address
Auditors
Share Register
Fortescue Centre
Level 1, 30 Terrace Road
East Perth WA 6004
Telephone (08) 9265 1100
Facsimile (08) 9265 1199
Website www.vdmgroup.com.au
Locked Bag 8
East Perth WA 6892
Ernst & Young
11 Mounts Bay Road
Perth WA 6000
Computershare Investor Services Pty Limited
Level 11, 172 St George’s Terrace
Perth WA 6000
Telephone 1300 850 505
(outside Australia) +61 3 9415 4000
VDM Group Limited shares are listed on the Australian Securities Exchange (ASX)
ASX Code
VMG
ACN
ABN
109 829 334
95 109 829 334
In this report, the following definitions apply:
“Board” means the Board of Directors of VDM Group Limited
“Company” means VDM Group Limited ABN 95 109 829 334
“VDM” or “Group” means VDM Group Limited and its controlled entities
2
VDM GROUP LIMITED
CONTENTS
FROM THE MANAGING DIRECTOR .......................................................................... 4
DIRECTORS’ REPORT ............................................................................................... 6
AUDITOR’S INDEPENDENCE DECLARATION ....................................................... 18
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .......................... 19
CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................... 20
CONSOLIDATED STATEMENT OF CASH FLOWS ................................................. 21
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .................................... 22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................. 23
DIRECTORS’ DECLARATION .................................................................................. 69
INDEPENDENT AUDITOR’S REPORT ..................................................................... 70
ASX ADDITIONAL INFORMATION ........................................................................... 72
3
VDM GROUP LIMITED
FROM THE MANAGING DIRECTOR
FROM THE MANAGING DIRECTOR
Dear Shareholders
The 2015 financial year has been a challenging period for VDM with economic headwinds impacting the
implementation of our business plan. This was reflected in the financial performance of your company.
VDM’s business plan is arranged under four operating divisions:
VDM Construction: EPC including modular and steel construction
VDM Equipment: equipment hire, sales, service, and parts
VDM Trading: import Asian goods for Australian markets and export Australian goods for Asian markets
VDM Mining: bringing Australian mining practices to Africa and Latin America
VDM Construction
The construction division’s planned growth in modular buildings, steel buildings, and steel construction has been
delayed due to the difficult market circumstances. The sustained low commodity price environment has continued
to negatively impact construction activity within, and related to, the resources industry. The decline in the Australian
dollar has increased the cost of imported modular and steel products from our Asian supply partners. These market
conditions, which are affecting all Australian construction companies, have created an extremely challenging
environment in which to win work with adequate profit margins and risk profiles.
In response to these challenges VDM Construction has trimmed its overhead but has maintained its core
management and engineering staff as well as its builder’s and HSEQ accreditations. VDM Construction maintains
a robust capability to deliver high quality construction projects to its customers and is determined to win new profit-
making contracts in the coming year.
VDM Equipment
During the year VDM Equipment continued to hire and provide equipment services to its customers. Due to subdued
metals prices and contraction of the Australian mining sector, customers were primarily sourced from the Perth
metro construction industry. This market, however, was also in an over-supply balance and therefor equipment
division growth was not achieved.
VDM has established an exciting new joint venture company with SANY a leading high quality international brand.
VDM holds a 49% interest in the JV and SANY holds a 51% interest. In June 2015 the JV joined VDM Equipment
at new office and workshop premises in Kewdale, near Perth International Airport. The direct ownership of SANY
provides the JV with several advantages including factory direct pricing that it can pass on to its customers. SANY’s
strategy is focused around product innovation, product quality, customer service and price competitiveness. VDM
is proud to partner with SANY and is confident this innovative and successful brand will flourish in Australia.
VDM Equipment was also awarded an exclusive distributorship of Changlin equipment, another major international
equipment band, and is aiming for similar arrangements with other leading equipment manufacturers.
With SANY and its other brands, VDM Equipment is positioned with the competitive advantages of a highly-quality
range of equipment for sale and hire at attractive prices, and with leading customer service and factory support. I
strongly encourage all equipment customers to view our range of equipment at Kewdale to understand the quality
and favourable pricing of equipment on offer. VDM Equipment is positioned to be a one-package solution to bring
savings and cost control to its customers.
VDM Trading
The trading division conducted business development activities to establish an import and export trading business
with Asia. It also provided its Asian business knowledge and expertise to assist the Construction and Equipment
divisions to put in place preferred supplier and exclusive distributor arrangements.
The lower Australian dollar has subdued the market for imported goods from Asia in the construction materials
markets targeted by VDM Trading. The trading division has responded by becoming more focused on leveraging
its Asian relationships to look for Australian export opportunities. It also established the parcel delivery service to
send Australian goods directly to customers in China. The lower Australian dollar and high standards of Australian
products provides an attractive opportunity to export to the growing wealthy class in China who have a discerning
appreciation for high quality consumable products.
4
VDM GROUP LIMITED
FROM THE MANAGING DIRECTOR
VDM Mining
VDM’s mining division has made significant progress towards acquiring a majority participating interest in the
Cachoeiras do Binga copper exploration project located in the Republic of Angola (Cachoeiras do Binga). As
announced on 30 September 2015, VDM, Pebric Mining and Consulting, LDA (Pebric) and Seabank Resources,
LDA (Seabank) (together the JV Parties) concluded negotiations of a Mineral Investment Contract (MIC) with
officials from the Angolan Ministry of Geology and Mining (MGM) and are in process of drafting several annexures
that will form an integral part of the MIC that will be submitted for approval and signature by the Minister of Geology
and Mining. I am looking forward to VDM soon completing the acquisition of its stake in Cachoeiras do Binga, which
is conditional on the JV parties executing an MIC with MGM.
VDM Mining is continuing to search for additional greenfield mining-project opportunities in Africa and Latin America.
Capital Raisings
A substantial amount of time has been incurred to set up the four divisions, carry out market analysis and develop
working relationships with prospective partners and clients. This resulted in the Company incurring a net cash
outflow from operations of $12.8 million over the course of the financial year. To fund this, VDM undertook capital
raisings as follows.
On 23 September 2014, a $10 million convertible loan was received from Kengkong, convertible to 1 billion
shares upon shareholder approval and at the election of Kengkong
On 1 December 2014, 1.45 billion shares were issued to Kengkong as a result of Kengkong’s election to
convert its convertible loans (5 May 2014 $4.5 million loan, and 23 September 2014 $10 million loan) to
VDM shares.
On 3 December 2014, 250 million shares were issued to a sophisticated private investor raising $3 million.
Safety
I am pleased to report that VDM had another positive safety performance with no Lost Time Injuries in the year and
a LTIFR of nil. Safety is a fundamental plank of VDM’s business and we will continue to ensure that safety is a top
priority.
Corporate
Non-executive Director, Mr Luk was appointed Chairman of VDM on 29 January 2015 and I returned to my previous
role of Managing Director and CEO.
A focus during the year was to manage the business efficiently and conserve cash while advancing growth
opportunities. On 29 January 2015 the VDM Directors agreed to an overall 18% reduction in Board and CEO
remuneration to demonstrate their commitment to cost savings measures. Subsequent to this announcement, the
Company undertook a review of staff remuneration and sought to align individual’s remuneration with market
conditions, resulting in a significant reduction in payroll costs.
I would like to thank my fellow directors for their counsel and dedication this past year as well as the efforts of
management and employees. I also thank Kengkong and our new private investor for their significant financial
support.
Dr Hua Dongyi
Managing Director and CEO
5
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
DIRECTORS’ REPORT
Your directors submit their report of VDM Group Limited (“the Company”) and of the Consolidated Entity, being the
Company and its controlled entities (“VDM” or “the Group”) for the year ended 30 June 2015.
1.
DIRECTORS
The names and details of the directors of VDM Group Limited in office at the date of this report are as follows.
Directors were in office for the entire period unless otherwise stated.
Current Directors
Luk Hiuming
Non-Executive Chairman
Appointed Non-Executive Director on 21 March 2014, appointed Non-Executive Chairman on 29 January 2015
Member of the Audit & Risk Committee
Mr Luk has abundant experience in an extensive range of business sectors. He set up C.N.Team Ltd and Y.Z.I.T.
Inc, with investments in different countries. He has experience in investments in a variety of industries, including
textile & clothing, pharmaceutical, steel, real estates, manufacturing mining, natural resources, new energy and oil
and gas. Apart from businesses in mainland China, he also has extensive international experience in various
industries around the globe. Mr Luk is currently Chairman of the boards of Wholly Fast International Ltd,
Bondcooper Brothers Co Ltd, and Kelell Inc., being overseas corporations.
Mr Luk has a relevant interest (as defined section 608 of the Corporations Act 2001) in Australia Kengkong
Investments Co Pty Ltd (“Kengkong”).
Hua Dongyi
Managing Director and Chief Executive Officer
Appointed Director on 28 August 2013, appointed Managing Director on 9 September 2013, appointed Executive
Chairman and Interim CEO on 29 November 2013, appointed Managing Director and CEO on 29 January 2015
Member of the Audit & Risk Committee
Doctorate of Engineering
Dr Hua is the former Vice President, Executive Chairman and CEO of CITIC Pacific Mining, a position he held from
October 2009 until April 2013. He was previously with Beijing-based CITIC Group, which he joined in 2002. Dr
Hua has held executive management positions during the past 15 years for construction and resource development
projects across Asia, Africa and Latin America in countries such as China, Angola, the Philippines, Pakistan, Brazil
and Algeria. He has extensive experience in project, contractor, cost, and risk management. Dr Hua is the Vice
President of the Australian China Business Council Western Australia.
Dr Hua has a relevant interest (as defined section 608 of the Corporations Act 2001) in H&H Holdings Australia Pty
Ltd (“H&H”).
Michael Fry
Non-Executive Director
Appointed 3 June 2011
Chairman of the Audit & Risk Committee
Bachelor of Commerce
Mr Fry is an experienced company manager across a broad range of industry sectors. Mr Fry has a strong
background in accounting and corporate advice having worked with KPMG (Perth) where he qualified as a
Chartered Accountant, Deloitte Touche Tohmatsu (Melbourne) and boutique corporate advisory practice Troika
Securities Ltd (Perth). From 2006 to 2011, Mr Fry was the Chief Financial Officer and Finance Director at Swick
Mining Services Limited, a publicly listed drilling services provider contracting to the mining industry in Australia and
North America.
Mr Fry is a Non-executive Director, Chief Financial Officer and Company Secretary of Cougar Metals NL, an ASX-
listed gold exploration and drilling-services company operating in Brazil. He is also Company Secretary of Globe
Metals & Mining Limited an ASX-listed company with exploration projects in Africa.
6
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
Velko (Vic) Jakovich
Non-Executive Director
Appointed 1 February 2014
Mr Jakovich has held executive positions including Managing Director of Stulz Australia Pty Ltd, Treasurer, Deputy
Chair and Chair of Villa Dalmacia Nursing Home and non-executive positions as Board Member of St John of God
Foundation for 7 years and Chair of steering committee to develop case for raising $20 million towards construction
of $50 million Comprehensive Cancer Centre at St John of God Campus, Subiaco.
Currently Mr Jakovich is the Managing Director and a senior partner in Jako Industries Pty Ltd.
Past directors that resigned during the year and until the date of this report
Michael Perrott AM, B.Com, FAIM, FAICD
Initially appointed Non-Executive Director on 2 July 2009, appointed Chairman on 26 November 2010 and Deputy
Chairman on 29 November 2013.
Mr Perrott resigned as a Director on 7 August 2014.
COMPANY SECRETARY
Padraig O’Donoghue, CA
Appointed 12 February 2014
Mr O’ Donoghue is VDM’s Chief Financial Officer and Company Secretary. He has significant experience as CFO
and Company Secretary to Australian companies. He has been CFO/Company Secretary of mining companies:
Consolidated Rutile Limited (ASX:CRT), Jabiru Metals Limited (ASX:JML) and Navigator Resources Limited
(ASX:NAV). He was also CFO and Company Secretary of mining contractor Barminco. His early career includes
PriceWaterhouseCoopers in Vancouver, Canada and 10-years with Barrick Gold in both head office and
international Commercial Manager operational roles.
2.
INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES
CORPORATE
As at the date of this report, the interests of the directors in the shares of the Company were:
Directors
Luk Hiuming
Hua Dongyi
M Fry
V Jakovich
3.
DIVIDENDS
Number of Ordinary Shares
2,070,000,000
1,085,110,976
1,000,000
44,471,421
There were no dividends declared or paid during the year ended 30 June 2015 (30 June 2014: nil).
7
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
4.
NATURE AND PRINCIPAL ACTIVITIES
The focus of VDM during the year related to establishment and growth of the four business divisions:
engineering, procurement and construction (“EPC”) (VDM Construction)
equipment sales, hire, service and parts sales (VDM Equipment)
import and export of goods to and from Asia (VDM Trading)
mining exploration, development and operation in Africa and Latin America (VDM Mining)
Construction and equipment hire activities in land development, road construction, and building construction in
Western Australia continued to be the principal business activities, which is consistent with the prior year.
General
At 30 June 2015, VDM employed 30 people in Western Australia (30 June 2014: 42).
5.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 29 September 2014, VDM announced its entry into a conditional agreement with Pebric Mining and Consulting,
LDA (Pebric) and Seabank Resources, LDA (Seabank ) to acquire a 65% participating interest in the Cachoeiras
do Binga copper exploration project located in the Republic of Angola. At the Company’s annual general meeting
on 28 November 2014, all shareholder approvals related to the agreement were obtained, which satisfies one of
the conditions of the agreement. The remaining unsatisfied condition relates to VDM executing a Mineral
Investment Agreement (MIC) with the Government of the Republic of Angola, Pebric and Seabank, which is in the
advanced stages of negotiations. Upon satisfaction of this condition, VDM will issue 650,000,000 ordinary shares
and pay $4,785,000 to Seabank to acquire its 65% interest in the project.
VDM has established a joint venture company with Sany (SANY VDM Pty Ltd). VDM holds a 49% interest in the
share capital and Sany holds a 51% interest. In June 2015 the joint venture relocated to improved office and
operational facilities in Kewdale Perth, Western Australia.
6.
OPERATING AND FINANCIAL REVIEW
The Construction division performed minor works to close-out a number of remaining contracts and actively pursued
new construction contracts. It also strengthened its capability in modular and steel construction through hiring
experienced staff and establishing preferred supplier arrangements with leading international modular and steel
manufacturers. VDM Construction is actively pursuing modular and steel construction contracts.
The Equipment division continued to hire and provide equipment services to the construction industry. The new
joint venture company, Sany VDM Pty Ltd, (VDM 49%, Sany 51%) was established in the year for purpose of Sany
equipment sales, hire, service and parts sales with the benefits of having the direct involvement and support of
Sany, a leading international equipment manufacturer. As announced on 3 November 2014, VDM Equipment was
also awarded an exclusive distributorship of Changlin equipment (a major international equipment manufacturer)
and is progressing similar arrangements with other leading equipment brands. With Sany and its other brands,
VDM Equipment has positioned itself with the competitive advantages of a highly-quality range of equipment for
sale and hire at attractive prices, and with leading customer service and factory support.
The Trading division conducted business development activities to establish an import and export trading business
with Asia. It also provided its Asian business knowledge and expertise to assist the Construction and Equipment
divisions to put in place preferred supplier and exclusive distributor arrangements.
VDM’s Mining division made significant progress towards its goal of establishing mining operations in Africa with
the 29 September 2014 signing of a conditional agreement with Pebric and Seabank to acquire a 65% participating
interest in the Cachoeiras do Binga copper exploration project located in the Republic of Angola (Angolan Copper
Project Joint Venture). Consideration for the acquisition will consist of: 1) the issue of 650 million shares
(Consideration Shares) to Seabank; and 2) the payment of $4,875,000 to Seabank. Under Angolan law, all mineral
rights are formally granted pursuant to a Mineral Investment Contract (MIC). VDM’s payment of the consideration
is conditional on VDM, Pebric, and the Government of the Republic of Angola agreeing and executing a MIC prior
to VDM making payment. Negotiations to complete the MIC are advancing.
8
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
Revenue from continuing operations was $1,253,000 a decrease of 95% from the prior year reflecting VDM’s
completion of work and close-out all remaining contracts. The Company did not enter into any new construction
contracts since the beginning of the prior year
The loss after tax of $12,377,000 (2014: $21,378,000 loss) is mainly comprised of $8,709,000 of administration
expenses (2014: $17,039,000) and $1,626,000 of impairment charges (2014: $101,000). Administration expenses
includes a non-recurring charge of $2,730,000 representing the value of construction contract security bonds
cashed by a construction customer in February 2015.
Capital Raisings
On 22 September 2014 VDM entered into a convertible loan agreement with Kengkong for $10,000,000 and was
subsequently advanced $10,000,000. On 6 May 2014 VDM was previously advanced $4,500,000 from Kengkong
under a separate convertible loan agreement. Shareholder approval of the conversions was obtained on 28
November 2014, and Kengkong subsequently exercised its conversion rights and VDM issued 1,450,000,000
ordinary shares to Kengkong at $0.01 per share in repayment of both loans on 1 December 2014.
On 3 December 2014 VDM issued 250,000,000 shares to a sophisticated investor under a private placement
agreement at the price of $0.012 per share raising $3,000,000.
7.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
On 30 July 2015 VDM announced that ASX granted VDM a waiver to listing rule 14.7 to allow VDM to issue 650
million shares (Consideration Shares) to Seabank. VDM shareholders approved the issue of the Consideration
Shares at the annual general meeting held on 28 November 2014. However, as a result of protracted negotiations
of the mineral investment contract, more than 3 months has passed since that date. Accordingly, VDM required a
waiver of ASX listing rule 14.7 to allow it to issue the Consideration Shares without a further shareholder approval.
ASX has granted the waiver on condition the Consideration Shares are issued no later than the earlier of the VDM's
next annual general meeting or 30 November 2015, and otherwise on the same terms and conditions as approved
by shareholders at the 28 November 2014 annual general meeting. In the announcement, VDM advised that
although protracted, the negotiations to complete the mineral investment contract are advancing and VDM expects
to satisfy the conditions of the waiver and issue the Consideration Shares as consideration to acquire a participating
interest in the Angolan Copper Project Joint Venture within the timeframe required by the waiver.
On 18 August 2015 VDM announced that it had entered into a conditional share placement agreement with a
sophisticated investor for placement of 1,202,087,577 VDM shares at a price of $0.015 per share to raise $18
million. The conditional share placement agreement includes the following key terms:
Completion of the share placement is conditional on VDM having entered into a mineral investment
contract with the Government of the Republic of Angola, Seabank and Pebric in relation to the Cachoeiras
do Binga copper exploration project (MIC Condition).
VDM must use all reasonable endeavours to ensure the above MIC Condition is satisfied as soon as
practicable and in any event before 31 December 2015 or such other date that the investor and VDM
agree.
Subject to completion of the share placement occurring, any future issue of securities by VDM during the
period until 17 August 2016 is subject to the investor’s prior approval. However, VDM is not required to
obtain the investor’s consent to issue the 650 million Consideration Shares to Seabank.
8.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
As noted in above section 7, VDM intends to undertake future capital raisings in the first half of the 2016 financial
year. Funds raised will be used for the proposed investment in the Angolan Copper Project Joint Venture, other
potential business growth opportunities, and general corporate working capital.
9.
ENVIRONMENTAL REGULATION AND PERFORMANCE
VDM operations are subject to environmental regulations under Commonwealth and State legislation. The Board
believes that VDM has adequate systems in place for the management of its environmental requirements and is not
aware of any breach of those environmental requirements as they apply to VDM.
9
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
10.
SHARE OPTIONS
As at the date of this report, there were no unissued ordinary shares under option (2014: nil).
11.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, VDM Group Limited has agreed to indemnify it auditors, Ernst & Young, as part of
the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify Ernst & Young during or since the financial year.
12.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
VDM Group Limited has agreed to indemnify all the directors and executive officers for any costs or expenses that
may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity
as officers of entities of the consolidated entity for which they may be held personally liable.
The Company has paid a premium to insure the directors and officers of the Company and its controlled entities.
Details of the premium are subject to a confidentiality clause under the contract of insurance.
13.
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings of committees of directors) held during the year, and the
number of meetings attended by each director, were as follows:
Number of meetings held:
Number of meetings attended:
Mr Luk
Dr Hua
Mr Fry
Mr Jakovich
Past directors
Mr Perrott
Board of
Directors’
meetings
8
Audit & Risk
Committee
meetings
3
6
8
8
7
1
2
3
3
-
-
As at the date of this report, VDM Group had an audit & risk committee of the board of directors. Members acting
on the committees of the board during the year were Mr Fry (Chair), Dr Hua and Mr Luk.
The board dissolved the Nominations and Remuneration Committee which held no meetings in the year, and the
functions and responsibilities of this committee reside with the Board. Based on current Board composition and
size, the Board considers this will provide effective governance of nominations and remuneration matters.
14.
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The directors received an Independence Declaration from the auditor of VDM Group Limited, attached on page 16.
The directors are satisfied that the provision of non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. Refer to note 35 to the consolidated financial
statements for disclosure relating to the cost of non-audit services conducted during the year.
Rounding
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where
rounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The Company
is an entity to which the Class Order applies.
10
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
REMUNERATION REPORT
This remuneration report for the year ended 30 June 2015 outlines the remuneration arrangements of VDM in
accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has
been audited as required by section 308(3C) of the Act.
The remuneration report details the remuneration arrangements for key management personnel (KMP) of VDM.
KMP are defined as those persons having authority and responsibility for planning, directing and controlling the
major activities of the VDM, directly or indirectly, including any director (whether executive or otherwise) of the
parent company.
For the purposes of this report, the term 'executive' includes the Chief Executive Officer (CEO), executive directors
and other senior executives of VDM.
The remuneration report is presented under the following sections:
1. Individual KMP disclosures
2. Board oversight of remuneration
3. Executive remuneration arrangements
4. Executive remuneration outcomes for 2015 (including link to performance)
5. Executive contracts
6. Non-Executive Director remuneration arrangements
7. Additional statutory disclosure relating to options and shares
8. Loans to key management personnel
9. Other transactions and balances with key management personnel and their related entities
1.
Individual KMP disclosures
Details of KMP of VDM are set out below. KMP served for the full year unless noted.
Current directors
D Hua
Managing Director and CEO -– appointed director on 28 August 2013, Managing
Director on 9 September 2013 and Executive Chairman and Interim Chief Executive
Officer on 29 November 2013. On 29 January 2015 Dr Hua returned to the role of
Managing Director and Chief Executive Officer.
L Hiuming
Non–Executive Chairman -– appointed to the board 21 March 2014, appointed
Chairman 29 January 2015
M Fry
Non–Executive Director – appointed 3 June 2011
V Jakovich
Non–Executive Director -– appointed 1 February 2014
Past directors
M Perrott
Current executives
X Zhu
P O’Donoghue
Non–Executive Deputy Chairman – resigned 7 August 2014
Senior Vice President, Construction – appointed 1 December 2014
Chief Financial Officer and Company Secretary – appointed 12 February 2014
2.
Board oversight of remuneration
The Board is responsible for the remuneration arrangements for directors and executives. Based on the Board’s
current composition and size, as well as the importance of remuneration decisions, the Board considers this will
provide effective governance of these matters.
The board assesses the appropriateness of the nature and amount of remuneration of executives on a periodic
basis by reference to relevant employment market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high performing director and executive team.
11
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
The Board approves the remuneration arrangements of the CEO and other executives and all awards made under
the long-term incentive (LTI) and short-term incentive (STI) plans. The Board also sets the aggregate remuneration
of NEDs which is then subject to shareholder approval.
In accordance with good corporate governance practice, the structure of NED and executive remuneration is
separate and distinct.
Remuneration report approval at 2014 Annual General Meeting
The 2014 remuneration report received positive shareholder support at the 2014 Annual General Meeting with a
vote of 98.8% in favour.
3.
Executive remuneration arrangements
Remuneration strategy
VDM’s executive remuneration strategy is designed to attract, motivate and retain high performing individuals and
align the interests of executives and shareholders.
To this end, key objectives of the Company’s reward framework are to ensure that remuneration practices:
Are aligned to the VDM’s business strategy;
Offer competitive remuneration benchmarked against the external market;
Provide strong linkage between individual and group performance and rewards; and
Align the interests of executives with shareholders through measuring total shareholder return (TSR).
In January 2015, the Board approved a Bonus Scheme based on the principal of rewarding operational employees
from a bonus pool calculated as 30% of divisional earnings results above an annual earnings target and corporate
division employees from a bonus pool calculated as the average of divisional bonuses.
This program replaces the LTI and STI programmes disclosed in the VDM’s 2014 annual report.
The Bonus Scheme is an STI based on the following structural components:
a) Bonus Pool: calculated as percentage of divisional earnings results above the earnings target for a
calendar year
b) Apportionment of the Bonus Pool: apportioned to employee divisional team members as proposed by the
Division Head and approved by the Managing Director and the Board
c) Payment of Bonus: will be paid after release of the ASX 31 December Half Year Financial Report
d) Eligibility: Persons who start employment during the year are eligible for a time-adjusted bonus payment.
Fixed remuneration
The employment contracts of executives do not include any guarantee of base pay increases. Fixed remuneration
is reviewed annually by the Board. The process consists of a review of company, divisional and individual
performance, relevant comparative remuneration internally and externally, and where appropriate external advice
independent of management. No external advice was received in the current year.
Variable remuneration – short term incentive (STI)
The previously described Bonus Scheme is VDM’s STI. It awards an annual cash bonus to executives and other
employees subject to the attainment of clearly defined VDM business unit measures.
The total potential STI available is set at a level so as to provide sufficient incentive to executives to achieve the
operational targets and such that the cost to VDM is reasonable in the circumstances. No STI payments were
made during the 2015 financial year (2014: nil).
Variable remuneration — long term incentive (LTI)
In February 2015, the board terminated the LTI plan disclosed in the prior year annual report and VDM no longer
offers equity incentives to VDM employees, including the Managing Director/CEO. Accordingly, nil equity incentives
were awarded during the 2015 financial year (2014: nil).
12
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
Company performance and the link to remuneration
Company performance and its link to short-term incentives
The financial performance measure driving the majority of the STI payment outcomes is divisional profit earnings
before Interest and Tax (EBIT). The table below shows VDM Group Limited’s gross EBIT history for the past five
years (including the current period).
EBIT
$’000
(12,752)
(16,288)
(58,769)
(29,759)
(62,810)
2015
2014
2013
2012
2011
Closing share price
($ per share)
0.006
0.01
0.01
0.05
0.07
As a result of the negative EBIT performance in 2015, no STI awards were made in the 2015 financial year.
4.
Executive remuneration outcomes for 2015 (including link to performance)
Table 1: Executive remuneration for the year ended 30 June 2015
Base
Salary
& Fees
$
Executive directors
D Hua
560,383
Cash
Bonus
$
-
Current key management personnel
P O’Donoghue
220,000
X Zhu1
157,064
937,447
-
-
-
Non-
Monetary
Benefits
$
-
-
-
-
Super
Contributions
$
18,783
18,783
10,822
48,388
Notes:
1. X Zhu was appointed on 1 December 2014.
Value of
Performance
Rights
$
Termination
Benefits
$
Total Perform
ance
Related
%
$
-
-
-
-
-
579,166
0%
-
-
-
238,783
167,886
985,835
0%
0%
0%
13
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
Table 2: Executive remuneration for the year ended 30 June 2014
Cash
Bonus
Base
Salary &
Fees
$
Executive directors
D Hua
495,122
Past executive directors
A Broad1
133,522
Current key management personnel
P O’Donoghue2
88,166
Past key management personnel
S Drury3
R Gregg4
J Kemp5
157,743
118,516
109,229
1,102,298
Non-
Monetary
Benefits
$
Super
Contrib
utions
$
Value of
Performance
Rights
$
Termination
Benefits
$
Total Perform
ance
Related
%
$
-
-
-
-
-
-
-
16,572
-
-
511,694
0%
5,833
(94,394)
312,500
357,461
(26%)
7,280
13,331
18,509
-
-
-
-
95,446
0%
58,176
229,250
-
(153,690)
72,229
55,564
(277%)
-
-
109,229
-
61,525
(248,084)
442,905
1,358,644
(18%)
$
-
-
-
-
-
-
-
Notes:
1. A Broad was terminated as Managing Director and Chief Executive Officer on 23 August 2013.
2. P O’Donoghue was appointed as Company Secretary and Chief Financial Officer on 12 February 2014.
3. S Drury was terminated as Company Secretary and Chief Financial Officer 12 February 2014.
4. R Gregg was terminated with effect from 11 October 2013.
5.
J Kemp was appointed with effect from 7 November 2012 and resigned on 6 September 2013
5.
Executive contracts
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts are
provided below.
Managing Director and CEO
The Managing Director and CEO, Dr Hua is employed under a rolling contract. With effect from 1 March 2015, Dr
Hua’s fixed remuneration is $515,000 per annum. The termination provisions of Dr Hua’s employment contract are
as follows:
Notice period
6 months
Payment in lieu of
notice
6 months
None
None
3 months
3 months
Treatment of STI
on termination
Pro-rated for time and
performance subject to
Board discretion
Pro-rated for time and
performance subject to
Board discretion
Treatment of LTI on
termination
Unvested awards
forfeited subject to
Board discretion
Unvested awards
forfeited
Pro-rated for time and
performance subject to
Board discretion
Unvested awards
forfeited subject to
Board discretion
Employer-initiated
termination
Termination for
serious
misconduct
Employee-initiated
termination
Other KMP
The Company may terminate all other KMP by providing three months written notice or providing payment in lieu of
the notice period. The Company may terminate a contract at any time without notice if serious misconduct has
occurred.
14
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
6.
Non-executive director remuneration arrangements
Remuneration policy
The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and
retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed
annually against fees paid to NEDs of comparable companies.
The constitution and the ASX listing rules specify that the NED fee pool shall be determined from time to time by a
general meeting. The latest determination was at the 2010 AGM held on 19 November 2010 when shareholders
approved an aggregate fee pool of $600,000 per year. This amount includes superannuation and fees paid to
directors in their capacity as members of the Board and its committees.
The Board will not seek any increase for the NED fee pool at the 2015 Annual General Meeting.
Current Structure
The remuneration of NEDs consists of directors’ fees only. There are no committee fees. NEDs do not receive
retirement benefits, other than superannuation and they do not participate in any incentive programs.
On 29 January 2015, the Board of VDM announced a series of reductions to Board remuneration to demonstrate
to shareholders its commitment to cost saving initiatives. The table below provides the NED fees prior to and after
reductions.
Annual NED fees
including superannuation
prior to 1 March 2015
Annual NED fees
including superannuation
post 1 March 2015
Board Chairman
Hiuming Luk
Non-executive director
Vic Jakovich
Non-executive director and
Chairman Audit and Risk Committee
Michael Fry
$75,000
$85,000
$75,000
$65,000
$63,750
$63,750
Table 3: Non-executive remuneration for the year ended 30 June 2015
Cash
Bonus
Base
Salary
& Fees
$
Current non-executive directors
M Fry
V Jakovich
L Hiuming
69,540
64,212
64,095
Past non-executive directors
M Perrott1
10,831
208,678
Non-
Monetary
Benefits
$
Super
Contrib
utions
$
Value of
Performance
Rights
$
-
-
-
-
-
6,606
6,100
-
-
12,706
-
-
-
-
-
Termination
Benefits
$
-
-
-
-
-
Total Perform
ance
Related
%
$
76,146
70,312
64,095
10,831
221,384
0%
0%
0%
0%
0%
$
-
-
-
-
-
Notes:
1. M Perrott resigned as a Non-Executive Director on 7 August 2014
15
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
Table 4: Non-executive remuneration for the year ended 30 June 2014
Cash
Bonus
Base
Salary &
Fees
$
Current non-executive directors
M Fry
V Jakovich1
Hiuming Luk2
75,885
28,604
19,011
Past non-executive directors
M Perrott3
B Nazer4
R Mickle5
186,337
34,413
30,364
374,614
Non-
Monetary
Benefits
$
Super
Contrib
utions
$
Value of
Performance
Rights
$
-
-
-
-
-
-
-
7,019
2,646
1,758
-
3,183
2,809
17,415
-
-
-
-
-
-
-
Termination
Benefits
$
-
-
-
-
-
-
-
Total Perform
ance
Related
%
$
82,904
31,250
20,769
186,337
37,596
33,173
392,029
0%
0%
0%
0%
0%
0%
0%
$
-
-
-
-
-
-
-
Notes:
1. V Jakovich was appointed as Non-Executive Director of VDM Group on 1 February 2014.
2. Hiuming Luk was appointed as Non-Executive Director of VDM Group on 21 March 2014.
3. M Perrott was acting CEO for the period 23 August 2013 to 6 September 2013 and was Chairman of the Board until 29
November 2013. He was non-executive Deputy Chairman from 29 November 2013 until his resignation on 7 August 2014.
4. B Nazer resigned as a Non- Executive Director of VDM Group on 29 November 2013.
5. R Mickle resigned as a Non- Executive Director of VDM Group on 29 November 2013
7.
Additional disclosures relating to options and shares
This section sets out the additional disclosures required under the Corporations Act 2001.
There were no performance rights granted to executives as remuneration during the year ended 30 June 2015
(2014: nil). Performance Rights do not carry any voting or dividend rights and will automatically become vested
performance rights once the vesting conditions have been met.
Table 5: Shareholdings of key management personnel (held directly and indirectly)
Balance
1 July 2014
Granted as
remuneration
Options
exercised
Net change
other
Balance
30 June 2015
Current directors
Hua Dongyi
M Fry
V Jakovich
Hiuming Luk
Past directors
M Perrott1
Total shareholding
1,085,110,976
1,000,000
21,219,720
620,000,000
12,400,000
1,739,730,696
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,251,7012
1,450,000,0003
1,085,110,976
1,000,000
44,471,421
2,070,000,000
(12,400,000)
1,460,851,701
-
3,200,582,397
Notes:
1. M Perrott resigned as a Non-Executive Director on 7 August 2014
2. Represents off-market purchase shares under terms and conditions no more favourable than those VDM would have adopted
if dealing at arm’s length.
3. Represents shares issued to Kengkong on conversion of convertible loans during the period as approved by shareholders
on 28 November 2014.
Option holdings of KMP
There were no options granted to KMP during the year ended 30 June 2015 (2014: nil). There were no options
held by KMP as at 30 June 2015 (2014: nil).
Performance rights holdings of KMP
There were no performance rights granted to KMP during the year ended 30 June 2015 (2014: nil). There were no
performance rights held by KMP as at 30 June 2015 (2014: nil).
16
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2015
8.
Loans to key management personnel
There were no loans granted to KMP’s during the year ended 30 June 2015 (2014: nil).
9.
Other transactions and balances with key management personnel and their related entities
(a) Details and terms and conditions of other transactions with KMP and their related parties
Kengkong
At 30 June 2014, Kengkong held 620,000,000 representing (19.8%) of the issued share capital of VDM Group.
On 22 September 2014 VDM entered into a convertible loan agreement with Kengkong for $10,000,000 and was
subsequently advanced $10,000,000. On 6 May 2014 VDM was previously advanced $4,500,000 from Kengkong
under a separate convertible loan agreement. Shareholder approval of the conversion was obtained on 29
November 2014, and Kengkong subsequently exercised its conversion rights and VDM issued 1,450,000,000
ordinary shares to Kengkong at $0.01 per share in repayment of both loans on 1 December 2014.
At 30 June 2015, Kengkong held 2,070,000,000 shares representing (42.88%) of the issued share capital of VDM
Group.
(b) Amounts recognised at the reporting date in relation to the other transactions:
Revenue and expenses
Interest expense (i)
Total expenses
Equity
Issued Capital (ii)
Total Equity
2015
$’000
270
270
14,500
14,500
Notes:
(i)
(ii)
Interest expense relates to interest accrued on Kengkong convertible loans from 1 July 2014 to the conversion date.
Issued capital relates to shares issued to Kengkong on the conversion of the convertible loans during the period.
Signed in accordance with a resolution of the directors.
Dr Hua Dongyi
Managing Director and CEO
Perth, Western Australia
31 August 2015
17
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s Independence Declaration to the Directors of VDM Group
Limited
In relation to our audit of the financial report of VDM Group Limited for the financial year ended 30 June
2015, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
T G Dachs
Partner
31 August 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TD:MW:VDM:008
VDM GROUP LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Continuing operations
Rendering of services
Other revenue
Revenue
Cost of Services
Gross profit / (loss)
Administration Expenses
Finance Costs
Impairment charges
Share based payment write-back
Share of loss of a joint venture
Notes
5
7(a)
7(c)
29
19(b)
2015
$'000
1,003
250
1,253
(3,417)
(2,164)
(8,709)
(331)
(1,626)
-
(63)
2014
$'000
24,406
184
24,590
(23,859)
731
(17,039)
(245)
(101)
248
-
Loss from continuing operations before income tax
Income tax benefit
Loss from continuing operations after income tax
Discontinued operations
Loss from discontinued operations after income tax
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
(12,893)
(16,406)
8(a)
516
1,706
(12,377)
(14,700)
9
-
(6,678)
(12,377)
(21,378)
-
-
(12,377)
(21,378)
Total comprehensive loss for the year is attributable to:
Owners of the parent
Earnings per share (cents per share)
Basic, loss for the year attributable to ordinary equity holders
of the parent
Diluted, loss for the year attributable to ordinary equity holders
of the parent
Earnings per share for continuing operations (cents per
share)
Basic, loss from continuing operations attributable to ordinary
equity holders of the parent
Diluted, loss from continuing operations attributable to ordinary
equity holders of the parent
10
10
10
10
(12,377)
(12,377)
(21,378)
(21,378)
(0.30)
(1.06)
(0.30)
(1.06)
(0.30)
(0.73)
(0.30)
(0.73)
19
VDM GROUP LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSI TION
For the year ended 30 June 2015
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
Current assets
Cash and cash equivalents
Security deposits
Trade and other receivables
Contracts in progress
Development properties
Inventory
Other assets
Total current assets
Non-current assets
Security deposits
Investment accounted for using the equity method
Development properties
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Amounts due to customers for contract work
Current tax liabilities
Interest-bearing loans and borrowings
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans and other borrowings
Deferred tax liabilities
Lease incentive liability
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Equity attributable to equity holders of the parent
Contributed equity
Reserves
Accumulated losses
Parent interests
TOTAL EQUITY
Notes
12
13
14
15
17
16
18
13
19
17
20
8
21
22
15
23
24
23
8
24
25
26
26
2015
$’000
3,524
486
301
-
-
74
10
4,395
940
917
2,012
2,201
-
9
6,079
10,474
1,148
-
-
64
2,715
3,927
-
-
141
1,214
1,355
5,282
5,192
2014
$’000
3,366
1,242
990
49
3,389
150
36
9,222
3,584
-
-
3,320
-
99
7,003
16,225
3,145
49
858
4,760
5,427
14,239
49
-
175
1,128
1,352
15,591
634
285,444
457
268,509
457
(280,709)
(268,332)
5,192
5,192
634
634
20
VDM GROUP LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2015
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
GST refunded
Income tax paid
Notes
2015
$’000
2014
$’000
1,211
49,002
(13,808)
(81,805)
171
(553)
499
(342)
129
(7)
205
(590)
Net cash flows used in operating activities
27
(12,822)
(33,066)
Cash flows from investing activities
Purchase of property, plant and equipment
Release from security deposit
Proceeds from sale of property, plant and equipment
(Investment in) / sale of associate
Purchase of intangibles
Repayments of other debtors
19(a)
Net proceeds from discontinued operations
9
Proceeds from sale of development property
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Transaction costs on issue of shares
Proceeds from share placements
Net cash flows from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
25
12
-
664
460
(980)
-
181
-
309
634
10,000
(188)
(466)
3,000
12,346
158
3,366
3,524
(1,062)
413
1,899
1,350
(12)
930
(644)
-
2,874
4,500
(1,682)
(1,616)
20,499
21,701
(8,491)
11,857
3,366
21
VDM GROUP LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQU ITY
For the year ended 30 June 2015
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued
Capital
Accumulated
losses
Equity
reserve
Other
capital
reserve
Total
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2014
268,509
(268,332)
457
Comprehensive loss for the year
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners
Conversion of Kengkong convertible loans
to shares at conversion price of $0.01 per
share on 1 December 2014
Private placement of shares issued at
$0.012 per share on 3 December 2014
Capital raising costs
-
-
(12,377)
(12,377)
14,500
3,000
(565)
-
-
-
-
-
-
-
-
Balance at 30 June 2015
285,444
(280,709)
457
-
-
-
634
(12,377)
(12,377)
-
14,500
-
-
-
3,000
(565)
5,192
Balance at 1 July 2013
248,286
(246,954)
457
248
2,037
Comprehensive loss for the year
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners
Share issued to H&H at $0.01 per share on
27 August 2013
Issue of conversion shares at $0.01 per
share on 29 November 2013
Exercise of bonus issue options at $0.05
per share on 29 November 2013
Share issued to Jimblebar creditors at
$0.01 per share on 29 November 2013
Private placement shares issued at $0.01
per share on 10 December 2013
Shares issued under the 10 December
2013 entitlements offer prospectus on 28
January 2014
Shares issued under the Shortfall offer
contained in the 10 December 2013
entitlements offer prospectus on 19 March
2014
Capital raising costs
Reverse of share-based payment
-
-
(21,378)
(21,378)
1,401
5,000
2
1,440
750
12,147
1,200
(1,717)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(21,378)
(21,378)
1,401
5,000
2
1,440
750
12,147
1,200
-
(1,717)
(248)
(248)
Balance at 30 June 2014
268,509
(268,332)
457
-
634
22
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
CORPORATE INFORMATION ............................................................................................................ 24
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .................................................................... 24
2.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS ............................. 39
3.
SEGMENT INFORMATION................................................................................................................. 41
4.
5. OTHER REVENUE ............................................................................................................................. 42
6. OTHER INCOME ................................................................................................................................ 42
EXPENSES ........................................................................................................................................ 42
7.
INCOME TAX ..................................................................................................................................... 43
8.
9.
DISCONTINUED OPERATION ........................................................................................................... 45
10. EARNINGS PER SHARE .................................................................................................................... 46
11. DIVIDENDS PROPOSED AND PAID .................................................................................................. 46
12. CASH AND CASH EQUIVALENTS ..................................................................................................... 47
13. SECURITY DEPOSITS ....................................................................................................................... 47
14. TRADE AND OTHER RECEIVABLES ................................................................................................. 48
15. CONTRACTS IN PROGRESS ............................................................................................................ 49
16.
INVENTORY ...................................................................................................................................... 49
17. DEVELOPMENT PROPERTIES.......................................................................................................... 49
18. OTHER CURRENT ASSETS .............................................................................................................. 50
19.
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD .................................................. 50
20. PROPERTY, PLANT AND EQUIPMENT ............................................................................................. 51
20. PROPERTY, PLANT AND EQUIPMENT continued ............................................................................. 52
21.
INTANGIBLE ASSETS AND GOODWILL ............................................................................................ 53
22. TRADE AND OTHER PAYABLES ....................................................................................................... 53
INTEREST-BEARING LOANS AND OTHER BORROWINGS .............................................................. 54
23.
24. PROVISIONS ..................................................................................................................................... 55
25. CONTRIBUTED EQUITY .................................................................................................................... 56
26. ACCUMULATED LOSSES AND RESERVES ...................................................................................... 57
27. CASHFLOW STATEMENT INFORMATION ........................................................................................ 58
28. RELATED PARTY DISCLOSURE ....................................................................................................... 58
29. SHARE-BASED PAYMENT PLANS .................................................................................................... 59
30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES ....................................................... 59
31. PARENT ENTITY INFORMATION ...................................................................................................... 63
32. COMMITMENTS ................................................................................................................................ 64
33. CONTINGENCIES .............................................................................................................................. 64
34. EVENTS AFTER THE REPORTING PERIOD ..................................................................................... 65
35. AUDITOR’S REMUNERATION ........................................................................................................... 65
36. CLOSED GROUP CLASS ORDER DISCLOSURES ............................................................................ 66
23
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
1. CORPORATE INFORMATION
The consolidated financial statements of VDM Group Limited and its controlled entities (“VDM” or the “Group”) for
the year ended 30 June 2015 were authorised for issue in accordance with resolution of the directors on 25 August
2015.
VDM Group Limited is a for-profit company limited by shares incorporated and domiciled in Australia whose shares
are publicly traded on the Australian Securities Exchange.
The activities of the Group related to establishment and growth of the following business divisions:
engineering, procurement and construction (Construction Division)
equipment sales, hire, service and parts sales (Equipment Division)
import and export of goods to and from Asia (Trading Division)
mining exploration, development and operation in Africa (Mining Division)
Construction and equipment hire activities related to land development, road construction, and building construction
in Western Australia continued to be the principal business activities during the year ended 30 June 2015, which is
consistent with the previous reporting period. Information on the Group structure and other related party
relationships is provided in note 36.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on
the historical cost basis.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars
($’000) unless otherwise stated.
The consolidated financial statements provide comparative information in respect of the previous period.
Comparative information has been reclassified to conform to the current year presentation.
b) Compliance with IFRS
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board.
c) New and amended accounting standards and interpretations
(i) Changes in accounting policies, new and amended standards and interpretations
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with
those followed in the preparation of the Group’s consolidated financial statements for the year ended 30 June 2014,
except for the adoption of the following new standards and interpretations effective as of 1 July 2014.
Reference
Title
AASB 2012-3
► Amendments to Australian Accounting Standards -
Offsetting Financial Assets and Financial Liabilities
► AASB 2012-3 adds application guidance to AASB 132
Financial Instruments: Presentation to address
inconsistencies identified in applying some of the offsetting
criteria of AASB 132, including clarifying the meaning of
"currently has a legally enforceable right of set-off" and that
some gross settlement systems may be considered
equivalent to net settlement.
Application
date of
standard
Application
date for
Group
1 January
2014
1 July 2014
24
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
Application
date of
standard
Application
date for
Group
1 January
2014
1 July 2014
1 January
2014
1 July 2014
Part A
20 Dec 2013,
1 July 2014
Part B
1 Jan 2014,
Part C
1 Jan 2015,
1 July 2014
1 July 2015
1 July 2014
1 July 2014
Reference
Title
AASB 2013-3
AASB 1031
AASB 2013-9
AASB 2014-1
Part A -Annual
Improvements
2010–2012
Cycle
► Amendments to AASB 136 – Recoverable
Amount Disclosures for Non-Financial Assets
► AASB 2013-3 amends the disclosure requirements in
AASB 136 Impairment of Assets. The amendments include
the requirement to disclose additional information about the
fair value measurement when the recoverable amount of
impaired assets is based on fair value less costs of
disposal.
► Materiality
► The revised AASB 1031 is an interim standard that
cross-references to other Standards and the Framework
(issued December 2013) that contain guidance on
materiality.
► AASB 1031 will be withdrawn when references to AASB
1031 in all Standards and Interpretations have been
removed.
► AASB 2014-1 Part C issued in June 2014 makes
amendments to eight Australian Accounting Standards to
delete their references to AASB 1031. The amendments
are effective from 1 July 2014*.
► Amendments to Australian Accounting Standards –
Conceptual Framework, Materiality and Financial
Instruments
► The Standard contains three main parts and makes
amendments to a number Standards and Interpretations.
► Part A of AASB 2013-9 makes consequential
amendments arising from the issuance of AASB CF 2013-
1.
► Part B makes amendments to particular Australian
Accounting Standards to delete references to AASB 1031
and also makes minor editorial amendments to various
other standards.
► Part C makes amendments to a number of Australian
Accounting Standards, including incorporating Chapter 6
Hedge Accounting into AASB 9 Financial Instruments.
► AASB 2014-1 Part A: This standard sets out
amendments to Australian Accounting Standards arising
from the issuance by the International Accounting
Standards Board (IASB) of International Financial
Reporting Standards (IFRSs) Annual Improvements to
IFRSs 2010–2012 Cycle and Annual Improvements to
IFRSs 2011–2013 Cycle.
► Annual Improvements to IFRSs 2010–2012 Cycle
addresses the following items:
► AASB 2 - Clarifies the definition of 'vesting conditions'
and 'market condition' and introduces the definition of
'performance condition' and 'service condition'.
► AASB 8 - Requires entities to disclose factors used to
identify the entity's reportable segments when operating
segments have been aggregated. An entity is also
required to provide a reconciliation of total reportable
segments' asset to the entity's total assets.
► AASB 116 & AASB 138 - Clarifies that the determination
of accumulated depreciation does not depend on the
selection of the valuation technique and that it is
25
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
Application
date of
standard
Application
date for
Group
1 July 2014
1 July 2014
Reference
Title
Amendments to
AASB 1053 –
Transition to and
between Tiers,
and related Tier
2 Disclosure
Requirements
[AASB 1053]
calculated as the difference between the gross and net
carrying amounts.
► The Standard makes amendments to AASB 1053
Application of Tiers of Australian Accounting Standards to:
• clarify that AASB 1053 relates only to general purpose
financial statements;
• make AASB 1053 consistent with the availability of the
AASB 108 Accounting Policies, Changes in Accounting
Estimates and Errors option in AASB 1 First-time
Adoption of Australian Accounting Standards;
• clarify certain circumstances in which an entity applying
Tier 2 reporting requirements can apply the AASB 108
option in AASB 1; permit an entity applying Tier 2
reporting requirements for the first time to do so directly
using the requirements in AASB 108 (rather that
applying AASB 1) when, and only when, the entity had
not applied, or only selectively applied, applicable
recognition and measurement requirements in its most
recent previous annual special purpose financial
statements; and
• specify certain disclosure requirements when an entity
resumes the application of Tier 2 reporting
requirements.
The adoption of these amendments did not have any material impact on the financial position or performance of
the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued
but not yet effective.
(ii) Accounting Standards and Interpretations issued but not yet effective
The following standards and interpretations have been issued by the AASB but are not yet effective for the period
ending 30 June 2015. The Group has not yet determined the impact of these standards and interpretations nor has
the Group elected to early adopt any other new Standards or amendments that are issued but not yet effective.
Reference Title
Summary
AASB 9
Financial Instruments AASB 9 (December 2014) is a new Principal
standard which replaces AASB 139. This new
Principal version supersedes AASB 9 issued in
December 2009 (as amended) and AASB 9
(issued in December 2010).
Application
date of
standard
Application
date for
Group
1 January
2018
1 July
2018
AASB 2014-3 amends AASB 11 to provide
guidance on the accounting for acquisitions of
interests in joint operations in which the activity
constitutes a business.
1 January
2016
1 July
2016
AASB
2014-3
Amendments to
Australian
Accounting
Standards –
Accounting for
Acquisitions of
Interests in Joint
Operations
[AASB 1 & AASB 11]
AASB
2014-4
Clarification of
Acceptable Methods
of Depreciation and
AASB 116 and AASB 138 both establish the
principle for the basis of depreciation and
amortisation as being the expected pattern of
1 January
2016
1 July
2016
26
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
Reference Title
Summary
Amortisation
(Amendments to
AASB 116 and AASB
138)
AASB 15
Revenue from
Contracts with
Customers
AASB
2014-10
AASB
2015-1
AASB
2015-2
AASB
2015-3
Amendments to
Australian
Accounting
Standards – Sale or
Contribution of
Assets between an
Investor and its
Associate or Joint
Venture
Amendments to
Australian
Accounting
Standards – Annual
Improvements to
Australian
Accounting
Standards 2012–
2014 Cycle
Amendments to
Australian
Accounting
Standards –
Disclosure Initiative:
Amendments to
AASB 101
Amendments to
Australian
Accounting
Standards arising
from the Withdrawal
of AASB 1031
Materiality
Application
date of
standard
Application
date for
Group
1 January
2017
1 July
2017
1 January
2016
1 July
2016
consumption of the future economic benefits of
an asset.
In May 2014, the IASB issued IFRS 15 Revenue
from Contracts with Customers, which replaces
IAS 11 Construction Contracts, IAS 18 Revenue
and related Interpretations (IFRIC 13 Customer
Loyalty Programmes, IFRIC 15 Agreements for
the Construction of Real Estate, IFRIC 18
Transfers of Assets from Customers and SIC-31
Revenue—Barter Transactions Involving
Advertising Services).
The core principle of IFRS 15 is that an entity
recognises revenue to depict the transfer of
promised goods or services to customers in an
amount that reflects the consideration to which
the entity expects to be entitled in exchange for
those goods or services.
AASB 2014-5 incorporates the consequential
amendments to a number Australian Accounting
Standards (including Interpretations) arising from
the issuance of AASB 15.
AASB 2014-10 amends AASB 10 Consolidated
Financial Statements and AASB 128 to address
an inconsistency between the requirements in
AASB 10 and those in AASB 128 (August 2011),
in dealing with the sale or contribution of assets
between an investor and its associate or joint
venture.
AASB 2014-10 also makes an editorial correction
to AASB 10.
The subjects of the principal amendments to the
Standards are set out below:
1 January
2016
1 July
2016
AASB 5 Non-current Assets Held for Sale and
Discontinued Operations:
AASB 7 Financial Instruments
AASB 119 Employee Benefits
AASB 134 Interim Financial Reporting
The Standard makes amendments to AASB 101
Presentation of Financial Statements arising from
the IASB’s Disclosure Initiative project. The
amendments are designed to further encourage
companies to apply professional judgment in
determining what information to disclose in the
financial statements
1 January
2016
1 July
2016
The Standard completes the AASB’s project to
remove Australian guidance on materiality from
Australian Accounting Standards.
1 July 2015 1 July
2015
27
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
d) Going concern
VDM incurred a net loss after tax from continuing operations for the year ended 30 June 2015 of $12,377,000 (2014:
$14,700,000). Net cash flows used in operating activities were $12,822,000 (2014: $33,066,000). At 30 June 2015,
VDM had net current assets of $468,000 (30 June 2014: $5,017,000 of net current liabilities). The cash position of
VDM at 30 June 2015 was $3,524,000 (30 June 2014: $3,366,000) with a further $1,426,000 (30 June 2014:
$4,826,000) of security deposits.
VDM will require further capital funding to progress its business strategy including the proposed Angolan copper
project investment, other business growth opportunities, and for general corporate working capital.
This report has been prepared on the going concern basis, which contemplates the continuity of normal business
activity and the realisation of assets and settlement of liabilities in the normal course of business.
In forming this view, the directors have taken into consideration that VDM intends to undertake future capital raisings
in the first half of the 2016 financial year. Progress towards this outcome has been made with the recent signing of
a conditional share placement agreement with a sophisticated investor for placement of 1,202,087,577 VDM shares
at a price of $0.015 per share to raise $18 million (refer to note 34 for an outline of the key terms of the share
placement agreement).
Should VDM not achieve the matter set out above, there is material uncertainty as to whether VDM will continue as
a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of
business and at the amounts stated in the financial report. The financial report does not include any adjustments
to assets and liabilities that may be necessary if VDM is unable to continue as a going concern
e) Basis of consolidation
The consolidated financial statements comprise the financial statements of VDM Limited and its subsidiaries as at
30 June 2015. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through it power over the investee. Specifically, the
Group controls an investee if and only if the Group has:
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption, and
when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all
relevant facts and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement(s) with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the
parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a
deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on
consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill),
liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in
profit or loss. Any investment retained is recognised at fair value.
28
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
f) Business Combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling
interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling
interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-
related costs are expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the
acquiree.
If the business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition
date fair value and any resulting gain or loss is recognised in profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of AASB
139 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value
recognised either in profit or loss or as a change to OCI. If the contingent consideration is not within the scope of AASB
139, it is measured in accordance with the appropriate Australian Accounting Standard. Contingent consideration that
is classified as equity is not remeasured and subsequent settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount
recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and
liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred,
the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and
reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still
results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain
is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets
or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of,
the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining
the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the
disposed operation and the portion of the cash-generating unit retained.
Prior to 1 July 2009
Prior to 1 July 2009 business combinations were accounted for using the purchase method. Transaction costs directly
attributable to the acquisitions formed part of the acquisition costs.
g)
Investment in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control or joint control over those
policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to
determine control over subsidiaries.
The Group’s investments in its associate and joint venture are accounted for using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The
carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the
29
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included
in the carrying amount of the investment and is neither amortised nor individually tested for impairment.
The statement of profit or loss reflects the Group’s share of the results of operations of the associate or joint venture.
Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a
change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any
changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from
transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the
associate or joint venture.
The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the
statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests
in the subsidiaries of the associate or joint venture.
The financial statements of the associate or joint venture are prepared for the same reporting period as the Group.
When necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment
loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there
is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the
Group calculates the amount of impairment as the difference between the recoverable amount of the associate or
joint venture and its carrying value, then recognizes the loss as ‘Share of profit of an associate and a joint venture’
in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and
recognises any retained investment at its fair value. Any difference between the carrying amount of the associate
or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and
proceeds from disposal is recognised in profit or loss.
h) Current versus non-current classification
The Group presents assets and liabilities in statement of financial position based on current/ non-current classification.
An asset is current when it is:
expected to be realised or intended to be sold or consumed in normal operating cycle;
held primarily for the purposes of trading;
expected to be realised within twelve months after the reporting period; or
cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
it is expected to be settled in normal operating cycle;
it is held primarily for the purpose of trading;
it is due to be settled within twelve months after he reporting period; or
there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting
period.
The Group classifies all other liabilities as non-current.
Deferred tax asset and liabilities are classified as non-current assets and liabilities.
i) Foreign currency translation
The Group’s consolidated financial statements are presented in Australian dollars, which is also the Parent’s functional
currency. For each entity, the Group determines the functional currency and items included in the financial statements
of each entity are measured using that functional currency. The Group uses the direct method of consolidation and on
disposal of a foreign operation, the gain or loss that is reclassified to profit or loss reflects the amount that arises from
using this method.
30
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
Transactions and balances in foreign currencies
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency
spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of
exchange at the reporting date.
Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of
monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These
are recognised in other comprehensive income until the net investment is disposed of, at which time, the cumulative
amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary
items are also recorded in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation
of non-monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value
of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive
income or profit or loss are also recognised in other comprehensive income or profit or loss, respectively).
Group companies
On consolidation, the assets and liabilities of foreign operations are translated into Australian dollars at the rate of
exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing
at the dates of the transactions. The exchange differences arising on translation for consolidation purposes are
recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive
income relating to that particular foreign operation is recognised in profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of
assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated
at the spot rate of exchange at the reporting date.
j) Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is
probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following
specific recognition criteria must also be met before revenue is recognised:
Sale of Goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and
the cost incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership
are considered passed to the buyer at the time of delivery of the goods to the customers.
Sale of development properties
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and
the cost incurred or to be incurred in respect of the transaction can be measured reliably. Transfer of the risks and
rewards of ownership coincides with the transfer of the legal title.
Construction and infrastructure development projects
Revenue from construction and infrastructure development projects is recognised in the financial year in which the
activities are performed on a percentage of completion method or, where an independent third party provides an
estimate of the stage of works completed, based on the independent third party assessment. Where the percentage to
complete method is used, it is based on the cost incurred to date over anticipated total contract costs.
Where it is probable that total contract costs will exceed total contract revenue for a contract, the excess of costs over
revenue is recognised as an expense immediately. Where the contract outcome cannot be measured reliably, revenue
is recognised only to the extent expenses recognised are recoverable.
Rendering of services
Revenue from consulting services is recognised by reference to the stage of completion of a contract or contracts in
progress at balance sheet date or at the time of completion of the contract and billing to the customer. Stage of
completion is assessed by reference to the work performed.
Where the contract outcome cannot be measured reliably, revenue is recognised only to the extent expenses recognised
are recoverable.
31
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating
the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
Dividends
Dividend revenue is recognised when the shareholders’ right to receive the payment is established.
Rental income
Rental income from investment properties is accounted for on a straight-line basis over the lease term. Contingent rental
income is recognised as income in the periods in which it is earned. Lease incentives granted are recognised as an
integral part of the total rental income.
k)
Income tax and other taxes
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised
for all taxable temporary differences except:
when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:
when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss; or
when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in
joint ventures, in which case a deferred tax asset is recognised only to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and taxable profit will be available against which the temporary
difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax
asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent
that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the balance sheet date.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the
same taxation authority.
Tax consolidation legislation
VDM Group Limited and its wholly-owned Australian controlled entities implemented the tax consolidation legislation as
of 1 July 2004.
32
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
VDM Group Limited and the controlled entities in the tax consolidated group continue to account for their own current
and deferred tax amounts. VDM Group has applied the group allocation approach in determining the appropriate amount
of current taxes and deferred taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, VDM Group Limited also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax consolidated group.
Assets and liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in VDM Group. Details of the tax funding agreement are disclosed in note 8.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable;
and
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as
part of operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
l) Non-current assets and disposal groups held for sale
Non-current assets and disposal groups are classified as held for sale and measured at the lower of their carrying
amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use. For an asset or disposal group to be classified as held for sale, it must be available
for immediate sale in its present condition and its sale must be highly probable. Once classified as held for sale, they
are not depreciated or amortised.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value
less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal
group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously
recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
m) Property, plant and equipment
Property, plant and equipment is stated at historic cost less accumulated depreciation and any accumulated
impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost
of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the
carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs
and maintenance are recognised in profit or loss as incurred.
Depreciation is calculated on a straight-line and diminishing balance method over the estimated useful life of the
specific assets as follows:
Land – not depreciated
Buildings – over 40 years
Leasehold improvements – over 3 to 10 years
Plant and equipment – over 3 to 15 years
The assets’ residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate, at each
financial year end.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the
period the item is derecognised.
33
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
n) Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at
the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the
use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not
explicitly specified in an arrangement.
Group as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially
all the risks and rewards incidental to ownership to the Group is classified as a finance lease. An operating lease is a
lease other than a finance lease. Finance leases are capitalised at the commencement of the lease at the inception date
fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit or loss.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group
will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life
of the asset and the lease term.
Operating lease payments are recognised as an operating expense in the statement of profit or loss on a straight-line
basis over the lease term.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and benefits of ownership of an asset are classified
as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of
the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are
recognised as revenue in the period in which they are earned.
o) Contracts in progress
Contracts in progress are valued at cost plus profit recognised to date based on the value of work completed, less
provision for foreseeable losses.
Costs include both variable and fixed costs directly related to specific contracts. Those costs that are expected to be
incurred under penalty clauses and warranty provisions are also included.
When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs
associated with the construction contract is recognised as revenue and expenses respectively by reference to the
stage of completion of the contract activity at the end of the reporting period. An expected loss on the construction
contract is recognised as an expense immediately as soon as the loss is foreseeable.
In the case of a fixed price contract, the outcome of a construction contract can be estimated reliably when all the
following conditions are satisfied:
total contract revenue can be measured reliably;
it is probable that the economic benefits associated with the contract will flow to the entity;
both the contract costs to complete the contract and the stage of contract completion at the end of the reporting
period can be measured reliably; and
the contract costs attributable to the contract can be clearly identified and measured reliably so that actual
contract costs incurred can be compared with prior estimates.
In the case of a cost plus contract, the outcome of a construction contract can be estimated reliably when all the
following conditions are satisfied:
it is probable that the economic benefits associated with the contract will flow to the entity; and
the contract costs attributable to the contract, whether or not specifically reimbursable, can be clearly identified
and measured reliably.
p)
Intangible assets
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an
intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment
losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and
expenditure is taken to the statement of comprehensive income in the year in which the expenditure is incurred.
34
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an
intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for
prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate.
The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category
consistent with the function of the intangible asset.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually
or at the cash-generating unit level. The useful life of an intangible asset with an indefinite life is reviewed each reporting
period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life
assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for
on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is
derecognised.
Research and development costs
Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal
project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible
asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how
the asset will generate future economic benefits, the availability of resources to complete the development and the
ability to measure reliably the expenditure attributable to the intangible asset during its development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any
accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development
is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation
is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.
Amortisation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Software – 2.5 years
Development costs – 5 years
q) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments, AFS financial assets, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial assets are recognised initially at fair value plus, in the case of financial assets not subsequently
measured at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial
asset.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation
or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group
commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
Financial assets at fair value through profit or loss
Loans and receivables
Held-to-maturity investments
Available for sale (AFS) financial assets
35
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets
designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for
trading if they are acquired for the purpose of selling or repurchasing in the near term. The Group does not have
any such investments.
Loans and receivables
This category is the most relevant to the Group. Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market. After initial measurement, such financial assets
are subsequently measured at amortised cost using the effective interest rate (EIR) method, less impairment.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit or loss.
The losses arising from impairment are recognised in the statement of profit or loss in finance costs for loans and
in cost of sales or other operating expenses for receivables. This category generally applies to trade and other
receivables.
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-
maturity when the Group has the positive intention and ability to hold them to maturity. The Group does not have
any such investments.
AFS financial assets
AFS financial assets include equity investments and debt securities. Equity investments classified as AFS are those
that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in
this category are those that are intended to be held for an indefinite period of time and that may be sold in response
to needs for liquidity or in response to changes in the market conditions. The Group does not have any such
investments.
Impairment of financial assets
The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group
of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial
recognition of the asset (an incurred ‘loss event’) has an impact on the estimated future cash flows of the financial
asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications
that the debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest
or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable
data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears
or economic conditions that correlate with defaults.
i) Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as
appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other
payables, and loans and borrowings..
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held
for trading if they are incurred for the purpose of repurchasing in the near term. The Group does not have any such
liabilities.
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is included in finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans and borrowings.
36
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
Financial guarantee contracts
Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to
reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in
accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability
at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee.
Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the
present obligation at the reporting date and the amount recognised less cumulative amortisation. The Group does
not have any such contracts
Trade and other payables
Trade and other payables are carried at amortised cost due to their short term nature and are not discounted. They
represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid
and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods
and services. The amounts are unsecured and are typically paid within 30 days of recognition.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of
financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. The Group does not
have any such instruments.
r)
Inventories and development properties
Inventories and development properties are measured at the lower of cost or net realisable value. Net realisable value
is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated
costs necessary to make the sale. Where held at cost, cost comprises all costs of purchase, cost of conversion and
costs incurred bringing the inventories or development properties to their present location or condition. Inventory is
measured on a first in, first out basis.
s)
Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU’s)
fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other assets or groups
of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
In determining fair value less costs of disposal, recent market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement
of profit or loss in expense categories consistent with the function of the impaired asset, except for properties
previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up
to the amount of any previous revaluation.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an
indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists,
the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed
only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the
last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in
the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated
as a revaluation increase.
Goodwill is tested for impairment annually as at 30 June and when circumstances indicate that the carrying value
may be impaired.
37
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to
which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment
loss is recognised in the statement of profit or loss. Impairment losses relating to goodwill cannot be reversed in
future periods.
Intangible assets with indefinite useful lives are tested for impairment annually as at 30 June at the CGU level, as
appropriate, and when circumstances indicate that the carrying value may be impaired.
t) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and security deposits with an
original maturity of three months or less that are readily convertible to cash and which are subject to an insignificant risk
of changes in value.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interest bearing loans and
borrowings in current liabilities on the balance sheet.
u) Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs
of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any
bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
Costs of servicing equity (other than dividends);
The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of
potential ordinary shares.
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any
bonus element.
v) Provisions and employee benefits
Provisions are recognised when the has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense
relating to any provision is presented in the income statement net of any reimbursement.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle
the present obligation at the balance sheet date using a discounted cash flow methodology. If the effect of the time
value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of
money and the risks specific to the liability. The increase in the provision resulting from the passage of time is
recognised in finance costs.
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave due to be
settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date.
They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating
sick leave are recognised when the leave is taken and are measured at the rates paid or payable. Where a period end
falls between pay dates an accrual is raised for any unpaid wages and salaries at the period end.
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present
value of expected future payments to be made in respect of services provided by employees up to the reporting date
using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of
employee departures, and periods of service. Expected future payments are discounted using market yields at the
38
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
reporting date on national government bonds with terms to maturity that match, as closely as possible, the estimated
future cash outflows.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates
in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and
estimates on historical experience and on other various factors it believes to be reasonable under the circumstances,
the result of which form the basis of the carrying value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions and conditions.
Management has identified the following critical accounting policies for which significant judgements, estimates and
assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and
may materially affect financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial
statements.
a) Determination of percentage of completion of contracts
Contract revenue is recognised as revenue in the income statement using the percentage of completion method in
the reporting periods in which the work is performed. The percentage complete is calculated on:
actual costs over the sum of actual plus projected costs to complete the contract;
in the case where the Group participates in joint contracts and the Group’s costs are not representative of overall
contract costs, based on the percentage of the Group’s costs to the total estimated cost for the Group associated
with that project; or
in the case where there is an independent assessment of the percentage complete, based on the independent
assessment.
Contract costs are recognised as an expense in the income statement in the reporting periods in which the work to
which they relate is performed. Any expected excess of total contract costs over total contract revenue for the
contract is recognised as an expense immediately.
b) Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences, where management considers that it is
probable that future taxable profits will be available to utilise those temporary differences.
c)
Impairment of non-financial assets
Management assesses impairment of all non-financial assets at each reporting date by evaluating conditions specific to
the Group and to the particular asset that may lead to impairment.
d) Estimation of useful lives of assets
The estimation of the useful lives of assets has been based on historical experience as well as manufacturers’ warranties
(for plant and equipment) and lease terms (for lease equipment). In addition, the condition of the assets is assessed at
least once per year and considered against remaining useful life. Adjustments to useful lives are made when considered
necessary. Depreciation charges are included in note 20.
e) Accounting for outstanding litigations
Where the Group is involved with outstanding litigation, provisions are raised where claims against the Group are
probable and are able to be measured, at the best estimate of the expenditure required to settle the obligation at the
reporting date. Where claims are not able to be reliably measured or are subject to future events not wholly within
control of the Group, disclosure is made by way of a contingent liability note (note 33).
39
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
f) Construction warranties
In determining the level of warranty obligations required for construction contracts, VDM has made judgments in
respect of the expected performance of the product and the costs of fulfilling the performance of the construction
obligations. Historical experience and current knowledge of the performance of products has been used in
determining this provision. The related carrying amounts are disclosed in note 24.
g) Other construction contract obligations
In determining the level of other construction contract obligations VDM has made judgments in respect of the
expected amount of costs, other than warranty costs, that may be incurred in relation to completed construction
contracts. Historical experience and current knowledge of the construction contracts and subcontracts has been
used in determining this provision. The related carrying amounts are disclosed in note 24.
h) Onerous contracts
In determining the provision for onerous contracts, VDM has made judgments in respect of the expected benefits
to be derived from the contracts and the unavoidable cost of meeting the obligations of the contract. The related
carrying amounts are disclosed in note 24
Inventory net realisable value
i)
In determining inventories net realisable value, management has made judgments in respect of the estimated selling
price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary
to make the sale and the expected timing in which the sale will take place.
40
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
4. SEGMENT INFORMATION
VDM is arranged under four operating divisions: Construction, Equipment, Trading and Mining. Refer to the “Review
and Results of Operations” in the Directors’ Report for an overview of the four operating divisions. The Construction
and Equipment divisions are included as reportable segments. The Trading and Mining divisions are not yet
considered reportable segments due to the relatively small scale of their operations during the year and accordingly
they have been combined with the corporate functions as unallocated.
The following table represents revenue, profit and selected balance sheet information for the reportable segments
for the year ended 30 June 2015. VDM reported as a single operating segment in the prior year consisting of
Construction Western Operations and accordingly no comparative segment information is provided.
The accounting policies adopted for the reportable segment are consistent with those followed in the preparation of
the Group’s annual consolidated financial statements for the year ended 30 June 2015,
Year ended 30 June 2015
Revenue
Sales
Other revenue
Total segment revenue
Results
Segment results before tax
Finance Costs
Depreciation & amortisation
Impairment charges
Share of loss from Joint Venture
Reconciliation of segment results before
tax to net loss after tax
Segment results before tax
Income tax benefit
Net loss after tax per the statement of
comprehensive income
Total assets
Total liabilities
Other disclosures
Investment in an associate and a joint
venture (note 19)
Capital expenditure
Major Customers
Construction
$’000
Equipment Unallocated
$’000
$’000
345
34
379
561
-
561
97
216
313
Total
$’000
1,003
250
1,253
(3,599)
-
10
-
-
(1,624)
12
504
489
63
(7,670)
319
193
1,137
-
(12,893)
331
707
1,626
63
(12,893)
516
(12,377)
134
1,932
8,408
10,474
1,548
153
3,581
5,282
-
-
917
-
-
-
917
-
VDM Group has a number of customers to which it provides services. During 2015, VDM had three customers that
contributed greater that 10% of revenue. These three customers contributed a combined total of 61% of VDM
revenue, with individual contributions of 32% from a construction segment customer, and 15% and 14% from two
equipment segment customers (2014: three customers that contributed greater than 10% of revenue, composed of
three construction segment customers totalling 67% of revenue with individual contributions of 43%, 13% and 11%).
41
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
5. OTHER REVENUE
Interest
Rental income
Other
Other revenue
6. OTHER INCOME
Gain on disposal of property, plant and equipment
Other income
7. EXPENSES
a) Finance costs
Hire purchase contracts and insurance premium funding
Shareholder loans and other finance charges
Finance costs
b) Depreciation and amortisation
Depreciation
Amortisation of development costs and software
Depreciation and amortisation
Depreciation and amortisation included in cost of services
c)
Impairment charges
Impairment of development properties (note 17)
Impairment of property, plant and equipment (note 20)
Impairment charges
d) Employee benefits expense
Wages and salaries
Restructuring/ redundancy costs
Superannuation expense
Share based payment write-back
Other employee benefits expense
Total employee benefits expense
Employee benefit expenses included in cost of services
Employee benefit expenses included in administration expenses
2015
$’000
2014
$’000
190
16
44
250
127
-
57
184
200
200
1,056
1,056
41
290
331
617
90
707
515
1,137
489
1,626
4,268
159
293
-
52
4,772
2,529
2,243
33
212
245
1,468
140
1,608
882
-
101
101
11,335
765
554
(248)
324
12,730
6,614
6,566
42
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
2015
$’000
2014
$’000
8.
INCOME TAX
a)
Income Tax Expense
Current income tax:
Income tax benefit on adjustments in respect of current income
tax of previous years
(516)
(1,706)
Deferred income tax:
Relating to origination & reversal of temporary differences
Prior year tax losses no longer recognised
Adjustments in respect of deferred income tax of previous years
-
-
-
-
-
-
Income tax benefit reported in the statement of comprehensive income
(516)
(1,706)
Statement of changes in equity
Deferred income tax:
Paid up capital
Income tax expense / (benefit) reported in equity
-
-
-
-
b) Numerical reconciliation between aggregate tax expense recognised in the income statement and the
tax expense calculated in the statutory income tax return
Accounting loss before tax from continuing operations
Accounting loss before tax from discontinued operations
Accounting loss before income tax
Prima facie income tax benefit @ 30%
Employee share based payments
Non-deductible items
Unrecognised deductible temporary differences
Prior year over provision
Aggregate income tax benefit
(12,893)
-
(12,893)
(3,868)
-
374
3,494
(516)
(516)
(16,406)
(6,678)
(23,084)
(6,925)
74
408
6,443
(1,706)
(1,706)
Income tax benefit reported in the consolidated income statement
Income tax expense / (benefit) attributed to discontinued operations
Aggregate income tax benefit
(516)
-
(516)
(1,706)
-
(1,706)
43
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
c) Recognised deferred tax asset and liabilities
Statement of
financial position
Statement of
comprehensive income
2015
$’000
2014
$’000
2015
$’000
2014
$’000
Deferred tax liabilities
Contracts in progress and inventory
Other
Gross deferred tax liabilities
Deferred tax assets
Provision for employee entitlements
Provisions – other
Trade and other receivable
Trade and other payables
Property, plant and equipment
Contributed equity
Other
(45)
-
(45)
97
942
476
147
630
605
-
(15)
(2,387)
-
(306)
(15)
(2,693)
(59)
-
(59)
140
981
43
39
1,541
1,065
720
483
727
437
573
147
291
437
1,154
(156)
(669)
2,761
-
374
11
(782)
2,693
-
Deferred tax assets not recognised
(2,852)
(4,970)
(2,580)
Gross deferred tax assets
Deferred tax expense
Net deferred tax asset recognised in the balance
sheet
45
59
-
-
15
-
d) Tax losses
VDM Group has recognised a deferred tax asset of $nil (2014: $nil) for Australian income tax purposes on the
basis that it is not ‘probable’ that the carried forward revenue loss will be utilised against future assessable
taxable profits.
VDM has estimated tax losses of $138,794,000 (2014: $119,524,000). Utilisation of the carried forward tax losses
by the company is subject to satisfaction of the Continuity of Ownership Test (“COT”) or, failing that, the Same
Business Test (“SBT”). It is likely that VDM has failed COT during the 2014 financial year, therefore in order to be
able to utilise the pre-2015 losses in the future, VDM will be required to satisfy the SBT. Where VDM derives
assessable income in a future income year, an assessment of whether the same business has been carried on
between just before the COT failure and the intervening period will determine whether the losses are available for
utilisation.
e) Unrecognised temporary differences
At 30 June 2015, there are no unrecognised temporary differences associated with VDM’s investments in
subsidiaries, or joint ventures, as VDM has no liability for additional taxation should unremitted earnings be remitted
(2014: nil).
f) Tax consolidation
Members of the tax consolidation group and the tax sharing arrangement
VDM Group Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with
effect from 1 July 2004. VDM Group Limited is the head entity of the tax-consolidated group. Members of Group
have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the
entities should the head entity default on its tax payment obligations.
44
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
9. DISCONTINUED OPERATION
Financial performance of discontinued operations
Revenue
Expenses
Finance costs
Loss on re-measurement of plant and equipment to fair value less costs to sell
Loss on sale of discontinued operations
Tax (expense) / benefit
Loss from discontinued operations
Earnings per share from discontinued operations
Basic, loss for the year, from discontinued operations (cents per share)
Diluted, loss for the year from discontinued operations (cents per share)
Assets and liabilities and cash flow information of the discontinued operations
Assets
Cash and cash equivalents
Development properties
Plant and equipment
Intangible assets
Contracts in progress
Trade receivables
Other assets
Liabilities
Trade and other liabilities
Interest bearing debt
Provision for employee entitlements
Net assets attributable to discontinued operations
Sale proceeds
Transactions costs
Net proceeds
Less cash and cash equivalents
Net cash flows from disposal of the disposed entities
Net cash flows attributable to discontinued operations
Operating
Investing
Financing
Net cash (outflow) / inflow
The Group had no discontinued operations during the year.
2015
$’000
2014
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,988
(24,950)
(4)
(1,712)
(6,678)
-
(6,678)
(0.22)
(0.22)
3,666
675
765
80
6,181
1,472
387
13,226
8,714
159
1,274
10,147
3,079
3,079
(3,666)
(587)
(57)
(644)
(1,708)
731
(1,080)
(2,057)
45
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
10. EARNINGS PER SHARE
The following reflects the information used in the basic earnings per share computations:
2015
$’000
2014
$’000
a) Loss used in calculating loss per share
Net loss from continuing operations attributable to ordinary
equity holders of the parent
Net loss from discontinued operations attributable to ordinary
equity holders of the parent
Net loss attributable to ordinary equity holders of the parent for
basic earnings
b) Weighted average number of shares
(12,377)
(14,700)
-
(6,678)
(12,377)
(21,378)
Weighted average number of ordinary shares for basic and
diluted earnings per share
4,109,030,815
2,012,060,172
11. DIVIDENDS PROPOSED AND PAID
a) Declared and paid during the year
Dividends on ordinary shares:
Final dividend for 2014: nil cents per share
(2013: nil cents per share)
Interim dividend for 2015: nil cents per share
(2014: nil cents per share)
Dividends paid during the year
b) Dividend proposed, not recognised as a liability
Final dividend for 2015: nil cents per share
(2014: nil cents per share)
c) Franking credits
Franking credits available for the subsequent financial year:
Franking account balance as at the end of the financial year
at 30% (2014: 30%)
Franking debits that will arise from the refunds of income tax
receivable as at the end of the financial year
-
-
-
-
-
-
-
-
3,459
3,459
-
-
Franking credits available for future periods
3,459
3,459
46
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
12. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Cash and cash equivalents
2015
$’000
2014
$’000
3,524
3,524
3,366
3,366
Cash at bank earns interest at floating rates based on daily or term bank deposit rates.
Reconciliation to cash flow statement
For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following at 30 June:
Cash at bank and in hand
Cash for reconciliation of cash flow statement
3,524
3,524
3,366
3,366
13. SECURITY DEPOSITS
Security deposits
Current
Non-current
1,426
4,826
486
940
1,426
1,242
3,584
4,826
Under the terms of agreements with its bank guarantee and bond providers, VDM holds cash under security
deposits as collateral for bank guarantees and bonds issued in favour of VDM. Such cash is not available for
immediate use.
47
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
14. TRADE AND OTHER RECEIVABLES
Trade receivables
Other debtors
Retentions
Loans to related entities
Impairment of trade and other receivables
Trade and other receivables
a) Ageing of trade receivables
0-30 days
31- 60 days
> 60 days PDNI*
> 60 days IM**
Trade receivables
* PDNI – Past due but not impaired
**IM – Impaired
b) Allowance for impairment loss
Balance at 1 July
Charge for the year
Utilised
Balance at 30 June
2015
$’000
2014
$’000
1,818
70
-
-
(1,587)
301
134
18
79
1,587
1,818
5,891
890
16
788
(6,595)
990
331
99
323
5,138
5,891
6,595
212
(5,220)
1,587
4,364
3,108
(877)
6,595
Trade receivables are non-interest bearing and are generally on 30-60 day terms. An allowance for impairment loss
is recognised when there is objective evidence that an individual trade receivable is impaired. Impairment losses of
$212,000 (2014: $3,108,000 impairment loss) have been recognised during the year.
c) Fair value and credit risk
Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair values.
The maximum exposure to credit risk is the fair value of receivables.
d) Foreign exchange and interest rate risk
Details regarding foreign exchange and interest rate risk exposure are disclosed in note 30.
48
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
15. CONTRACTS IN PROGRESS
Contract costs incurred to date
Profit recognised to date (less recognised losses)
Less progress billings
Total construction contracts in progress
Represented by:
Amounts due from customers for contract work
Amounts due to customers for contract work
Total construction contacts in progress
Amounts due from customers for contract work
Other work in progress
Total contracts in progress
Amounts due to customers for contract work
Total amounts due to customers for contract work
VDM had no contracts in progress as at 30 June 2015.
16. INVENTORY
Consumables at cost
Inventory
17. DEVELOPMENT PROPERTIES
2015
$’000
2014
$’000
-
-
-
-
-
-
-
-
-
-
-
-
53,109
5,235
(58,351)
(7)
42
(49)
(7)
42
7
49
(49)
(49)
74
74
150
150
Development properties
2,012
3,389
Current
Non-current
a) Reconciliation of carrying amount
Balance at 1 July
Additions
Discontinued operations (note 9)
Disposals
Impairment of development properties (i)
Balance at 30 June
-
2,012
2,012
3,389
8
-
(248)
(1,137)
2,012
3,389
-
3,389
4,061
3
(675)
-
-
3,389
(i) Impairment of development properties
The 30 June 2015 balance represents VDM’s interest in a single development property located in Western Australia.
During the current period management performed a net realisable value assessment which resulted in recognition
of a $1,137,000 impairment to its carrying value (2014: nil).
49
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
18. OTHER CURRENT ASSETS
Prepayments
Other current assets
2015
$’000
2014
$’000
10
10
36
36
19. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Sany VDM Pty Ltd is an Australian company, jointly-owned by VDM and Sany, a major international equipment
manufacturer, which was established during the year for purpose of sales, hire, service and parts sales of equipment
in Australia. During the year, VDM contributed $980,000 to Sany VDM Pty Ltd for a 49% ownership interest in its
share capital.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Group's carrying amount of the investment
a) Reconciliation of carrying amount
Balance at 1 July
Investment in share capital of Sany VDM Pty Ltd
Share of equity accounted loss
Balance at 30 June
b) Share of equity accounted loss
Revenue
Cost of sales
Administrative expenses
Finance costs
Loss before tax
Income tax expense
Loss for the year (continuing operations)
Total comprehensive loss for the year (continuing operations)
Group's share of loss for the year
1,847
35
10
-
1,872
917
-
980
(63)
917
69
(2)
(195)
-
(128)
-
(128)
(128)
(63)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
20. PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements at cost
Accumulated Depreciation
Freehold land and buildings at cost
Accumulated Depreciation
Plant & equipment under lease at cost
Accumulated depreciation
Plant & equipment at cost
Accumulated depreciation
Property, plant and equipment
2015
$’000
687
(269)
418
887
(8)
879
611
(452)
159
2014
$’000
683
(177)
506
900
-
900
611
(124)
487
7,857
(7,112)
745
8,582
(7,155)
1,427
2,201
3,320
Pledged assets
Included in the balances above are assets of VDM to the value of $159,000 (2014: $487,000) held under finance
lease contracts and hire purchase contracts. These assets are pledged as security for the related hire purchase
liabilities.
Impairment of plant and equipment
A review of all plant and equipment held by the Group was performed during the year, as part of this review
management assessed if plant and equipment was being carried above its expected recoverable amount. As a
result of this review the Group determined that certain assets’ economic performance was worse than expected
and that the carrying value of these assets was greater than the fair value less costs to dispose (“FVLCD”).
Management has determined the FVLCD based on market comparable transactions (level 2 fair value). As a result
the Company impaired these assets and recognised an impairment charge of $489,000 in the current period (2014:
$101,000).
51
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
20. PROPERTY, PLANT AND EQUIPMENT continued
a) Reconciliation of carrying amount
Leasehold Improvements
As at 1 July net of accumulated depreciation
Additions
Disposals
Write down
Impairment
Depreciation
Discontinued operations
Transfer from plant & equipment and plant and equipment under lease
Transfer from freehold land and buildings
At 30 June
Freehold land and buildings
As at 1 July net of accumulated depreciation
Depreciation
Transferred from non-current assets held for sale
Transfer to leasehold improvements
At 30 June
Plant and equipment under lease
As at 1 July net of accumulated depreciation
Additions
Disposals
Impairment
Depreciation
Transfer to plant & equipment and leasehold improvements
Discontinued operations
At 30 June
Plant and equipment
As at 1 July net of accumulated depreciation
Additions
Disposals
Impairment
Depreciation
Transfer from inventory
Transfer to plant & equipment under lease and leasehold improvements
Write down
Discontinued operations
At 30 June
2015
$’000
2014
$’000
506
-
-
-
-
(101)
-
-
13
418
900
(8)
-
(13)
879
487
-
-
(256)
(72)
-
-
159
1,427
-
(46)
(233)
(436)
33
-
-
-
745
908
173
(11)
(14)
(101)
(221)
(840)
612
-
506
-
-
900
-
900
1,114
-
(19)
-
(133)
(7)
(468)
487
4,337
889
(811)
-
(1,114)
-
(605)
(100)
(1,169)
1,427
Property plant & equipment at 30 June
2,201
3,320
52
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
21. INTANGIBLE ASSETS
Software
Accumulated amortisation and impairment
Intangible assets
a) Reconciliation of carrying amount
Intangible assets
At 1 Jul
Additions
Amortisation
Discontinued operations
At 30 June
2015
$’000
2014
$’000
3,025
(3,016)
9
3,025
(2,926)
99
99
-
(90)
-
9
307
12
(140)
(80)
99
b)
Impairment of intangible assets and goodwill
There was no impairment loss recognised in the statement of comprehensive income during the year ended 30
June 2015 in relation to intangible assets (2014: nil).
22. TRADE AND OTHER PAYABLES
Trade payables and accruals
Employee related payables
GST payable
Trade and other payables
a) Fair values
1,042
3,004
68
38
59
82
1,148
3,145
Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.
b)
Interest rate, foreign exchange and liquidity risk
Information regarding interest rate, foreign exchange and liquidity risk exposure is disclosed in note 30.
c) Financial guarantees
VDM Group Limited provides financial guarantees to its subsidiaries by way of a Deed of Cross Guarantee as
disclosed in note 36.
53
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
23. INTEREST-BEARING LOANS AND OTHER BORROWINGS
Interest bearing shareholder convertible loan
Hire purchase liabilities (note 32(b))
Interest bearing loans and other borrowings
Current
Non-current
a) Fair values
2015
$’000
2014
$’000
-
64
64
64
-
4,569
240
4,809
4,760
49
The carrying amount of VDM’s current and non-current borrowings approximates their fair values.
b)
Interest rate, foreign exchange and liquidity risk
Terms of the hire purchase agreements provide for a fixed interest rate. Information regarding interest rate, foreign
exchange and liquidity risk exposure is disclosed in note 30.
c) Assets pledged as security
Finance arrangements
Plant and equipment under lease
Floating charge
All the remaining wholly owned assets
d) Finance facilities
Credit cards
Bank guarantees
Contract performance bonds
Total finance facilities available
159
487
10,315
15,738
150
1,245
-
1,395
139
2,085
5,287
7,511
The bank guarantee facility and contract performance bond facility limits are equal the amount of bank guarantees
and bonds issued and outstanding in favour of VDM. The facility limits automatically reduce as bank guarantees
and bonds are returned or expire. The credit card facility is available subject to annual review.
54
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
24. PROVISIONS
Current
Employee entitlements
Insurance excess
Construction warranties
Loss making construction contracts
Onerous contracts
Other construction contract obligations
Non-current
Employee entitlements
Onerous contracts
2015
$’000
2014
$’000
305
-
665
-
1,279
466
2,715
17
1,197
1,214
457
170
765
8
1,666
2,361
5,427
10
1,118
1,128
Total provisions
3,929
6,555
a) Movement in provisions
Balance
1 July
2014
$’000
Arising
during the
year
$’000
Utilised
during the
year
$’000
Unused
amounts
reversed
$’000
Balance
30 June
2015
$’000
Employee entitlements
Provision for insurance excess
Construction warranties
Loss making construction contracts
Onerous contracts
Other construction contract obligations
Total provisions
467
170
765
8
2,784
2,361
6,555
78
-
43
-
1,198
-
1,319
(124)
(170)
(122)
(8)
(1,506)
(1,117)
(3,047)
(99)
-
(21)
-
-
(778)
(898)
322
-
665
-
2,476
466
3,929
b) Nature and timing of provisions
Construction warranties
A provision is recognised for expected warranty claims on completed construction projects based on past
experience. It is expected that these costs will be incurred in the next financial year.
Onerous contracts
A provision is recognised for expected net unavoidable costs of meeting its obligations under onerous contacts.
Other construction contract obligations
A provision is recognised for expected costs, other than warranty claims, related to construction contracts. The 30
June 2014 comparatives have been adjusted to reclassify the provision for other construction cost obligations of
$2,361,000 from trade and other payables to appropriately reflect the nature of the obligations.
55
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
25. CONTRIBUTED EQUITY
a) Ordinary shares
Issued and fully paid
Movement in ordinary shares
Balances at 1 July 2014
Conversion of Kengkong convertible loans to shares at
conversion price of $0.01 per share on 1 December 2014
Private placement of shares issued at $0.012 per share on
3 December 2014
Capital raising costs
Balances at 30 June 2015
c) Treasury shares
Treasury shares held in trust
Movement in treasury shares
Balance at 1 July 2014
Sold for proceeds of $841
Balance at 30 June 2015
2015
$’000
2014
$’000
285,444
268,509
Number of
Shares
$'000
3,127,660,952
268,509
1,450,000,000
14,500
250,000,000
3,000
4,827,660,952
(565)
285,444
2015
2014
Number of
Shares
Number of
Shares
-
80,094
Number of
Shares
80,094
(80,094)
-
The number of treasury shares at 1 July 2014 includes a correction to the previously reported number to reduce it
by 142,770 shares.
d) Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up
on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the
Company.
e) Capital management
When managing capital, the Board's objective is to ensure the Company continues as a going concern as well as
to maintain optimal returns to shareholders and benefits for other stakeholders.
Following the prior year’s significant restructuring and implementation of the new business strategy, the Company
remains focussed on returning to profitability in the short to medium term and maintaining an appropriate level of
working capital. Upon realisation of the benefits of the restructuring activities, the Directors shall reconsider the
levels of after tax profits that the Company anticipates paying as dividends.
56
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
The payment of dividends by the Company in the future will depend upon the availability of distributable earnings,
the Company’s franking credit position, operating results, available cash flow, financial condition, taxation position,
future capital requirements, as well as general business and financial conditions and any other factors the Directors
may consider relevant.
VDM is not subject to any externally imposed capital requirements.
2015
$’000
2014
$’000
26. ACCUMULATED LOSSES AND RESERVES
a) Movement in accumulated losses
Balance at 1 July
Net loss attributable to members of VDM Group Limited
Balance at 30 June
(268,332)
(12,377)
(280,709)
(246,954)
(21,378)
(268,332)
The accumulated losses balance at 1 July 2013 includes a $179,000 correction to the previously reported amount.
The adjustment flows through to the balance at 1 July 2014.
f) Movement in other capital reserve
Balance at 1 July
Share based payment (note 29)
Balance at 30 June
b) Movement in equity reserve
Balance at 1 July
Balance at 30 June
-
-
-
248
(248)
-
457
457
457
457
The equity reserve is used to record differences between the carrying value of non-controlling interests and the
consideration paid/received, where there has been a transaction involving non-controlling interests that do not result
in a loss of control. The reserve is attributable to the equity of the parent.
57
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
27. CASHFLOW STATEMENT INFORMATION
a) Reconciliation of net profit after tax to the net cash flows from operations
Net loss after tax
Non- cash items:
Depreciation and amortisation
Impairment of assets
Assets written off
Gain on disposal of property, plant and equipment
Share based payment reversal
Share of loss of a joint venture
Loss recognised on re-measurement to fair value less costs to sell
Interest expense accrued
lease expense
Change in operating assets and liabilities:
Decrease in trade and other receivables
Decrease in contracts in progress
Decrease in inventory
Decrease in trade and other creditors
Decrease in provisions
Decrease in income taxes payable
Net cash flows used in operation activities
2015
$’000
2014
$’000
(12,377)
(21,378)
707
1,626
-
(261)
-
63
-
-
-
849
-
43
(1,991)
(623)
(858)
(12,822)
1,608
101
114
(1,058)
(248)
-
1,712
242
194
9,434
(5,531)
158
(11,302)
(4,818)
(2,294)
(33,066)
28. RELATED PARTY DISCLOSURE
Note 36 provides the information about VDM’s structure including details of the subsidiaries and the parent
company.
a) Ultimate parent
VDM Group Limited is the ultimate Australian parent entity.
b) Loans to associate
VDM has nil loans to associates at 30 June 2015 (2014: $788,000 loan to associate that was fully provided for).
c) Transactions with key management personnel
Refer to the remuneration report for transactions and balances with key management personnel.
d) Transactions with related parties other than key management personnel
There were no transactions that were entered into with related parties other than key management personnel during
2015 and 2014.
58
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
e) Compensation for key management personnel
Short term
Post employment
Share-based payments
Termination benefits
Total compensation
29. SHARE-BASED PAYMENT PLANS
a) Recognised share based payment reversal
2015
$’000
1,146
61
-
-
1,207
2014
$’000
1,477
79
(248)
443
1,751
Reversal arising from equity-settled share based payment transactions
Share based payment reversal
-
-
(248)
(248)
b) Termination of previous share-based payment plans
At 30 June 2015, there were nil outstanding options under the employee option plan and nil outstanding
performance rights under the executive performance rights plan (30 June 2014: nil). There were no share-based
payments or reversals during the year ended 30 June 2015. In February 2015, the Board terminated the all of
VDM’s share-based employee remuneration plans, being the employee option plan and the executive performance
rights plan.
30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Credit, liquidity and market risk (including interest rate and foreign exchange risk) arise in the normal course of the
VDM’s business. VDM manages its exposure to these key financial risks in accordance with VDM’s financial risk
management policy. The objective of the policy is to support the delivery of VDM’s financial targets whilst protecting
future financial security. VDM’s principal financial instruments comprise receivables, payables, bank loans and
overdrafts, hire purchase liabilities, cash and security deposits.
VDM uses different methods to measure and manage different types of risks to which it is exposed. These include
monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for
interest rate and foreign exchange. Ageing analysis and monitoring of specific credit allowances are undertaken to
manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts.
Primary responsibility for identification and control of financial risks rests with the Audit and Risk Committee under
the authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below.
Risk exposures and responses
a) Market risk
Interest rate risk
Interest rate risk is the risk that the Group’s financial position will be adversely affected by movements in interest
rates that will increase the cost of floating rate debt or opportunity losses that may arise on fixed rate borrowings in
a falling interest rate environment. Interest rate risk on cash and security deposits is not a material risk due to the
short term nature of these financial instruments.
59
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
The financial instruments exposed to variable interest rate risk are as follows:
Financial assets
Cash and cash equivalents (note 12)
Security deposits (note 13)
Balance at the end of the year
Financial liabilities
Interest bearing borrowings and loans (note 23)
2015
$’000
2014
$’000
3,524
1,426
4,950
3,366
4,826
8,192
64
4,809
The following table summarises the sensitivity on the interest rate exposures, (excluding opportunity cost of fixed
rate borrowings) in existence at the balance sheet date. The sensitivity is based on foreseeable changes over a
financial year.
Post-tax gain / (loss)
+ 1% (100 basis points)
- 1% (100 basis points)
Impact on profit
57
(57)
35
(35)
The movement in profit is due to lower / higher interest income from variable rate cash balances. Other than
retained earnings, there is no impact on equity in the consolidated entity.
Foreign currency risk
Foreign currency risk arises from transactions, assets and liabilities that are denominated in a currency that is not
the functional currency of the transacting entity. Measuring the exposure to foreign currency risk is achieved by
regularly monitoring and performing sensitivity analysis on VDM’s financial position. Currently there is no foreign
exchange hedge programme in place.
At balance sheet date, VDM had no foreign currency denominated financial instruments.
b) Credit risk
Credit risk arises from the financial assets of VDM, which comprises cash and cash equivalents and trade and other
receivables. VDM’s exposure to credit risk arises from potential default of the counter party, with a maximum
exposure equal to the carrying amount of these instruments.
VDM manages its credit risk by trading only with recognised, creditworthy third parties, and as such collateral is not
requested nor is it VDM’s policy to securitise its trade and other receivables. Customers are subject to credit
verification procedures including an assessment of their independent credit rating, financial position, past
experience and industry reputation. Receivables balances are monitored on an ongoing basis. At balance sheet
date there were no significant concentrations of credit risk within VDM and financial instruments are held amongst
reputable financial institutions thus minimising the risk of default of counterparties.
The maximum exposure to credit risk at the reporting date was as follows:
Cash and cash equivalents (note 12)
Security deposits (note 13)
Trade and other receivables (note 14)
2015
$’000
2014
$’000
3,524
1,426
301
5,251
3,366
4,826
990
9,182
60
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
c) Liquidity risk
Liquidity risk is the risk that the entity will encounter difficulty in meeting its commitments concerning its financial
liabilities. As a result, the liquidity position of VDM Group is managed to ensure sufficient liquid funds are available
to meet our financial commitments in a timely and cost-effective manner.
VDM continually monitors its liquidity position including cash flow forecasts to determine the forecast liquidity
position and maintain appropriate liquidity levels. The objective of VDM is to have sufficient cash and finance
facilities to meet short term commitments, and to fund capital expenditure through a mixture of hire purchase and
cash.
The table below reflects all contractually fixed payments for settlement, repayments and interest resulting from
recognised financial assets and liabilities and does not recognise any cash for unresolved claims against our
projects which have not been recognised as income. The table also excludes contractual commitments classified
as operating leases (refer to note 32). The obligations presented are the undiscounted cash flows for the respective
upcoming fiscal years. Cash flows for financial assets and liabilities without fixed amount or timing are based on
the conditions existing at 30 June 2015. Repayment obligations in respect of the bank loans, hire purchase facilities
and trade and other payables are as follows:
Not later than one year
Later than one year but not later than two years
Later than two years but not later than three years
Later than three years
2015
$’000
1,212
-
-
-
1,212
2014
$’000
7,905
49
-
-
7,954
61
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
The following table reflects a maturity analysis of financial assets and liabilities based on management’s expectation
of settlement.
Year ended 30 June 2015
Financial assets
Cash & cash equivalents (note 12)
Security deposits (note 13)
Trade receivables and other receivables (note 14)
Financial liabilities
Trade and other payables (note 22)
HP liabilities (note 32)
Net maturity
Year ended 30 June 2014
Financial assets
Cash & cash equivalents
Security deposits
Other receivables
Trade receivables
Financial liabilities
Trade payables
Other payables
HP liabilities
Interest bearing loans and borrowings
Net maturity
d) Fair value
Total
$’000
3,524
1,426
301
5,251
1,148
65
1,213
4,038
3,366
4,826
237
753
9,182
1,843
1,302
253
4,722
8,120
1,062
0-60
days
$’000
61 days-
1 year
$’000
1-5
years
$’000
>5
Years
$’000
3,524
357
134
4,015
1,148
50
1,198
2,817
3,366
207
237
430
4,240
758
1,302
34
-
2,094
-
129
167
296
-
15
15
-
940
-
940
-
-
-
281
940
-
1,035
-
323
1,358
1,085
-
170
4,722
5,977
-
3,584
-
-
3,584
-
-
49
-
49
2,146
(4,619)
3,535
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 30 June 2015 there are no financial assets or financial liabilities which are accounted for at fair value. There is
no difference between the carrying amounts and fair value of financial assets and financial liabilities presented in
the Consolidated Statement of Financial Position.
62
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
31. PARENT ENTITY INFORMATION
Information relating to VDM Group Limited
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated loss
Option reserve
Total shareholder's equity
Loss of parent entity
Total comprehensive loss of the parent entity
a) Bank guarantees
Parent Entity
2014
$’000
2015
$’000
4,766
7,012
1,513
1,820
285,444
(280,709)
457
5,192
8,270
9,792
8,665
9,158
268,509
(268,332)
457
634
(12,377)
(12,377)
(21,378)
(21,378)
As at 30 June 2015 VDM Group Limited had $403,000 (2014: $313,000) held in bank guarantees with banks
relating to bonds on leased property.
b) Guarantees in relation to debts of subsidiaries
Pursuant to class order 98/1418 VDM Group Limited and the Closed Group have entered into a Deed of Cross
Guarantee on 1 February 2010. The effect of the deed is that VDM Group Limited has guaranteed to pay any
deficiency in the event of winding up of controlled entities or if they do not meet their obligations under the terms
of overdrafts, loans, leases or other liabilities subject to the guarantee.
c) Property, plant and equipment commitments
VDM Group Limited had no capital commitments at 30 June 2015 (2014: nil).
63
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
32. COMMITMENTS
a) Operating leases
Within one year
One year or later but no later than 5 years
After more than 5 years
Total minimum lease payments
2015
$’000
2014
$’000
2,372
4,356
-
6,728
2,794
5,788
-
8,582
During the year VDM made operating lease payments totalling $2,758,000 (2014: $2,458,000).
The Group has entered into operating leases on commercial properties. These leases have average terms of
between 2 and 3 years. The leases include a clause for an annual fixed percentage increase in the rental charge.
b) Hire purchase commitments
Not later than 1 year
After 1 year but not more than 5 years
Total minimum lease payment
Future finance charges
Present value of minimum lease payments (note 23)
Total hire purchase liability Included in the financial statements as:
Current - hire purchase liability
Non - current - hire purchase liability
Included in interest bearing loans and other borrowings (note 23)
c) Property, plant and equipment commitments
VDM has no capital expenditure commitments at 30 June 2015 (2014: nil).
33. CONTINGENCIES
a) Legal claims
65
-
65
(1)
64
64
-
64
204
49
253
(13)
240
191
49
240
There were three matters existing as at 30 June 2015 that may lead to VDM incurring material losses if claims made
by counterparties are successful for the full amount of the values claimed.
Subcontractor claim
VDM engaged a subcontractor on a project in Western Australia. The subcontractor commenced a court action
against VDM following termination of the subcontract in 2011. Both VDM and the subcontractor have offsetting
claims and VDM continues to defend its position.
Construction claim
VDM and a customer have offsetting claims relating to a terminated construction project in Western Australia in
2013. The customer cashed $2.4 million of security bonds provided by VDM under the contract in 2013, and neither
party has taken legal action to enforce their claims.
Engineering claim
VDM has been afforded confirmation of cover by its insurers for a claim related to an offshore engineering project.
VDM’s maximum exposure is $120,000 which represents the balance of the insurance policy excess.
64
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
b) Bank guarantees and insurance bonds
As at 30 June 2015 VDM had bank guarantees of $1,245,000 as security for leased commercial property and to
guarantee performance of contracts (2014: $1,957,000).
As at 30 June 2015 VDM had nil insurance bonds to guarantee performance of contracts (2014: $5,287,000).
34. EVENTS AFTER THE REPORTING PERIOD
On 30 July 2015 VDM announced that ASX granted VDM a waiver to listing rule 14.7 to allow VDM to issue 650
million shares (Consideration Shares) to Seabank Resources, LDA (Seabank). VDM shareholders approved the
issue of the Consideration Shares at the annual general meeting held on 28 November 2014. However, as a result
of protracted negotiations of the mineral investment contract, more than 3 months has passed since that date.
Accordingly, VDM required a waiver of ASX listing rule 14.7 to allow it to issue the Consideration Shares without a
further shareholder approval. ASX has granted the waiver on condition the Consideration Shares are issued no
later than the earlier of the VDM's next annual general meeting or 30 November 2015, and otherwise on the same
terms and conditions as approved by shareholders at the 28 November 2014 annual general meeting. In the
announcement, VDM advised that although protracted, the negotiations to complete the mineral investment contract
are advancing and VDM expects to satisfy the conditions of the waiver and issue the Consideration Shares as
consideration to acquire a participating interest in the Angolan Copper Project Joint Venture within the timeframe
required by the waiver.
On 18 August 2015 VDM announced that it has entered into a conditional share placement agreement with a
sophisticated investor for placement of 1,202,087,577 VDM shares at a price of $0.015 per share to raise $18
million. The conditional share placement agreement includes the following key terms:
Completion of the share placement is conditional on VDM having entered into a mineral investment
contract with the Government of the Republic of Angola, Seabank, and Pebric Mining and Consulting LDA
in relation to the Cachoeiras do Binga copper exploration project (MIC Condition).
VDM must use all reasonable endeavours to ensure the above MIC Condition is satisfied as soon as
practicable and in any event before 31 December 2015 or such other date that the investor and VDM
agree.
Subject to completion of the share placement occurring, any future issue of securities by VDM during the
period until 17 August 2016 is subject to the investor’s prior approval. However, VDM is not required to
obtain the investor’s consent to issue the 650 million Consideration Shares to Seabank.
35. AUDITOR’S REMUNERATION
Amount received or receivable by Ernst & Young for:
Auditing financial statements
Non audit fees (tax compliance & other advisory)
Total auditor's remuneration
2015
2014
110,000
162,000
272,000
127,000
130,000
257,000
65
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
36. CLOSED GROUP CLASS ORDER DISCLOSURES
The consolidated financial statements include the financial statements of VDM Group Limited and the subsidiaries
listed in the following table.
Subsidiary Name
Country of
Incorporation
% equity interest
2015
2014
* VDM Trading Pty Ltd
* VDM Mining Pty Ltd
* VDM Equipment Pty Ltd
* VDM Construction Pty Ltd
* Keytown Constructions Pty Ltd
* VDM Developments Pty Ltd
* VDM Engineering (Eastern Operations) Pty Ltd
* Burchill VDM Pty Ltd
* VDM Consulting Pty Ltd
* VDM Group Ltd International (Dubai Branch) Pty Ltd
* BCA Consultants Pty Ltd
* Barlow Gregg VDM Pty Ltd
* VDM Investments Pty Ltd
* VDM Consulting (NSW) Pty Ltd
* VDM Consulting (VIC) Pty Ltd
* VDM Equity Incentives Pty Ltd
* VDM CCE Pty Ltd
* VDM Projects Pty Ltd
* VDM Asset Management Pty Ltd
* VDM Contracting Pty Ltd
* Belleng VDM Pty Ltd
* Anagan Pty Ltd
VDM Africa Holidings Ltd
The EB Trust
VDM Hyparspace Pty Ltd
VDM Consulting (UAE) Pty Ltd
VDMAHP Pty Ltd
Track Procurement Services Pty Ltd
a) Joint ventures in which VDM is a Joint Venturer
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
British Virgin Islands
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
0%
0%
0%
0%
100%
100%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
50%
50%
VDM has a 49% interest in Sany VDM Pty Ltd (2014: nil). For more details refer to note 19.
b) Entities subject to class order relief
* The annotated companies and VDM Group Limited entered into a Deed of Cross Guarantee on 1 February 2010
(the “Closed Group”). The effect of the deed is that VDM Group Limited has guaranteed to pay any deficiency in
the event of winding up of controlled entities or if they do not meet their obligations under the terms of overdrafts,
loans, leases or other liabilities subject to the guarantee. The controlled entities have also given a similar guarantee
in the event that VDM Group Limited is wound up or if it does not meet its obligations under the terms of overdrafts,
loans, leases or other liabilities subject to the guarantee.
66
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
The consolidated income statement and balance sheet of the entities that are members of the Closed Group are
as follows.
c) Statement of comprehensive income
Loss from continuing operations before income tax
Income tax benefit
Loss after tax from continuing operations
(Loss)/profit from discontinued operations
Net Loss for the year
Non-controlling interest
Dividends paid
Accumulated losses at the beginning of the year
Accumulated losses at the end of the year
Closed Group
2015
$’000
2014
$’000
(11,745)
1,096
(10,649)
-
(10,649)
-
-
(266,960)
(277,609)
(16,388)
1,706
(14,682)
(6,678)
(21,360)
-
-
(245,600)
(266,960)
67
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STAT EMENTS
For the year ended 30 June 2015
ASSETS
Current assets
Cash and cash equivalents
Security deposits
Trade and other receivables
Contracts in progress
Development properties
Inventory
Other assets
Total current assets
Non-current assets
Security deposits
Investment accounted for using the equity method
Development properties
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Amounts due to customers for contract work
Current tax liabilities
Deferred tax liability
Interest-bearing loans and borrowings
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans and other borrowings
Deferred tax liabilities
Lease incentive liability
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Closed Group
2015
$’000
3,521
486
5,416
-
-
74
10
2014
$’000
3,363
1,242
6,099
49
241
150
36
9,507
11,180
940
917
-
3,584
-
-
2,201
3,320
-
9
4,067
13,574
1,148
-
-
-
64
2,715
3,927
-
-
141
1,214
1,355
5,282
8,292
-
99
7,003
18,183
3,151
49
1,438
-
4,760
5,427
14,825
49
-
175
1,128
1,352
16,177
2,006
285,444
268,509
457
457
(277,609)
(266,960)
8,292
2,006
The closed group comparatives have been restated to reflect the current year closed group account allocations.
68
VDM GROUP LIMITED
DIRECTORS’ DECLARATI ON
For the year ended 30 June 2015
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of VDM Group Limited, I state that:
In the opinion of the directors:
(a)
the financial statements and notes of the consolidated entity are in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and
of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b)
(c)
(d)
(e)
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in note 2;
Subject to the satisfactory achievement of the matters described in note 2(d), there are reasonable
grounds to believe that the consolidated entity will be able to pay its debts as and when they become due
and payable;
this declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2015;
and
as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in Note 36 will be able to meet any obligations or liabilities to which they are or may
become subject, by virtue of the Deed of Cross Guarantee.
On behalf of the Board
Dr Hua Dongyi
Managing Director and CEO
Perth, Western Australia
31 August 2015
69
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent auditor's report to the members of VDM Group Limited
Report on the financial report
We have audited the accompanying financial report of VDM Group Limited, which comprises the consolidated
statement of financial position as at 30 June 2015, the consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended,
notes comprising a summary of significant accounting policies and other explanatory information, and the directors'
declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from
time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as
the directors determine are necessary to enable the preparation of the financial report that is free from material
misstatement, whether due to fraud or error. In Note 2(b), the directors also state, in accordance with Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International
Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal controls relevant to the entity's preparation and fair presentation of the financial report in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating
the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We
have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included
in the directors’ report.
Opinion
In our opinion:
a.
the financial report of VDM Group Limited is in accordance with the Corporations Act 2001, including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June 2015 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(b).
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TD:MW:VDM:009
Report on the remuneration report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2015. The
directors of the company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of VDM Group Limited for the year ended 30 June 2015, complies with
section 300A of the Corporations Act 2001
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 2(d) in the financial report which describes the principal
conditions that raise doubt about the entity’s ability to continue as a going concern. These conditions indicate the
existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going
concern and therefore, the company may be unable to realise its assets and discharge its liabilities in the normal
course of business.
Ernst & Young
T G Dachs
Partner
Perth
31 August 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TD:MW:VDM:009
VDM GROUP LIMITED
ASX ADDITIONAL INFORMATION
For the year ended 30 June 2015
ASX ADDITIONAL INFORMATION
SHAREHOLDER INFORMATION
Additional information required by ASX Listing Rules and not shown elsewhere in the report is set out below. The
information is current as of 16 October 2015.
Number of ordinary
fully paid shares held
% held of shares
2,070,000,000
1,085,110,976
290,747,139
250,000,000
125,000,000
110,384,232
71,203,789
44,471,421
20,581,794
20,502,126
20,300,000
18,000,000
13,478,250
12,400,000
12,000,000
10,849,293
9,500,000
8,000,000
8,000,000
7,981,364
4,208,510,384
42.88
22.48
6.02
5.18
2.59
2.29
1.47
0.92
0.43
0.42
0.42
0.37
0.28
0.26
0.25
0.22
0.20
0.17
0.17
0.17
87.19
Shareholder
Australia Kengkong Investments Co Pty Ltd
H & H Holdings Australia Pty Ltd
J P Morgan Nominees Australia Limited
Sino Plant Holding Limited
Golden Bloom Investments Pty Ltd
UBS Nominees Pty Ltd
Citicorp Nominees Pty Limited
Jako Industries Pty Ltd
HSBC Custody Nominees
miss Shan He
Austindo (WA) Pty Ltd
Mr Brian Hon Leung Lee
Mr Aaron Francis Quirk
Duncraig Investment Services Pty Ltd
Mr John Finlay Mckenzie Rowley
Miss Fang Ning Du
Mrs Cheng Huang
M & C Coghlan Pty Ltd
Noel Kennedy Smith
UOB Kay Hian Private Limited
Total
SHARES IN VOLUNTARY ESCROW
There are no shares in voluntary escrow
SUBSTANTIAL SHAREHOLDINGS
The following shareholders have declared a relevant interest in the number of voting shares at the date of giving
notice under Part 6C.1 of the Corporations Act.
Shareholder
Australia Kengkong Investments Co Pty Ltd
H & H Holdings Australia Pty Ltd
Sino Plant Holding Limited
Number of ordinary
fully paid shares held
2,070,000,000
1,085,110,976
250,000,000
% held of shares
42.88
22.48
5.18
72
VDM GROUP LIMITED
ASX ADDITIONAL INFORMATION
For the year ended 30 June 2015
DISTRIBUTON OF SHAREHOLDINGS
Range of holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Rounding
Total
Number of
shareholders
Number of
ordinary shares
% of shares
170
111
88
672
832
16,902
350,410
697,925
38,296,998
4,788,298,717
-
0.01
0.01
0.79
99.18
0.01
1,873
4,827,660,952
100.00
The number of shareholders with less than a marketable parcel is 764 holding in total 16,060,660 shares.
VOTING RIGHTS
All ordinary shares issued by VDM Group Limited carry one vote per share without restriction.
73
Level 1, Fortescue Centre
30 Terrace Road
East Perth WA 6004
T + 61 8 9265 1100
F + 61 8 9265 1199
www.vdmgroup.com.au
2015
ANNUAL REPORT
VDM GROUP LIMITED
and its Controlled Entities
ABN 95 109 829 334