VDM GROUP LIMITED
and its Controlled Entities
ABN 95 109 829 334
2018
ANNUAL REPORT
VDM GROUP LIMITED
CORPORATE INFORMATION
DIRECTORS
Mr Luk Hiuming
Dr Hua Dongyi
Mr Michael Fry
Non-executive Chairman
Executive Director of Mining
Non-executive Director
CHIEF EXECUTIVE OFFICER
Mr Sam Diep (until 28 August 2017)
COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER (ACTING)
Mr Michael Fry
REGISTERED AND PRINCIPAL OFFICE
Suite 2, Level 2, 123 Adelaide Terrace
East Perth WA 6004
Telephone (08) 9265 1100
Facsimile (08) 9265 1199
Website www.vdmgroup.com.au
POSTAL ADDRESS
PO Box 3347
East Perth WA 6892
AUDITORS
Ernst & Young
11 Mounts Bay Road
Perth WA 6000
SHARE REGISTER
Computershare Investor Services Pty Limited
GPO Box 2975
Melbourne, VIC 3001
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
VDM GROUP LIMITED
CONTENTS
FROM THE EXECUTIVE DIRECTOR OF MINING ................................................ 2
DIRECTORS’ REPORT .................................................................................. 3
REMUNERATION REPORT ............................................................................. 8
AUDITOR’S INDEPENDENCE DECLARATION ................................................. 16
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .......................... 17
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................. 18
CONSOLIDATED STATEMENT OF CASH FLOWS ............................................. 19
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .................................. 20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................. 21
DIRECTORS’ DECLARATION ....................................................................... 68
INDEPENDENT AUDITOR’S REPORT ............................................................ 69
ASX ADDITIONAL INFORMATION ................................................................ 74
1
VDM GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
FROM THE EXECUTIVE DIRECTOR OF MINING
Dear Shareholders
Over the course of the past year VDM’s focus has continued to be in the area of Mining, being the
business sector that is expected to provide the best investment returns for shareholders and position
your Company for long term success.
Business overview
VDM Mining: Pleasingly, despite significant delays, VDM and its Cachoeiras do Binga (CdB) partners
were able to resolve the safety hazards and concerns at site to enable exploration activities to
commence including mapping, geophysics and most recently the commencement of a drilling
program in mid-June 2018 which is ongoing at the time of this report. The CdB partners are grateful
for the assistance and cooperation from the Government of Angola, the exploration contractor, and
technical services contractor SRK Consulting in addressing the safety situation. All parties remain
committed to the project and to completing the exploration program.
Our focus areas for VDM mining over the next 12 months are to:
1) substantially complete a mineral resource estimate for CdB, which I expect will be the first
step towards a full copper mining feasibility study for the project; and
2) bring a second major African resource asset into the Company’s mining portfolio.
The above two goals will require VDM to establish strong relationships with partners who understand
and see the potential in the investment opportunities available to VDM and are able to provide the
funding support that VDM requires. To this end, VDM was extremely pleased to welcome CF
International Limited as a major shareholder in March of this year through a $4 million placement
which was conducted at a significant premium to the Company’s share price at the time. As VDM
progresses it will require the support of partners like CF International Pty Ltd.
I remain confident that the Company’s investment in CdB will provide healthy returns for our
shareholders and partners and that the addition of a second large mining project is within VDM’s
grasp and when achieved will be a very positive development for VDM.
VDM Construction: VDM Construction has scaled-down significantly, and VDM is no longer pursuing
opportunities for involvement in the Australian building and infrastructure sectors. VDM continues
to retain capability and will review the situation on an ongoing basis.
VDM Trading: VDM Trading continues to have a very low-cost base while we continue to explore for
partnership opportunities.
Safety and Environment
It is my pleasure to report that VDM has had another outstanding 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
The board has decided that VDM’s CEO position shall continue to remain vacant whilst I focus on
progressing the CdB exploration program, the bringing in of a second major African resource asset
into the Company’s mining portfolio and further capital raisings sufficient to ensure that VDM is well-
funded to achieve its goals.
I wish to thank my fellow directors, our employees, and all VDM stakeholders for their service and
support to the Company. I am especially grateful to our largest shareholder, Australia Kengkong
Investments Co Pty Ltd, who has continued to financially back VDM’s business strategy for this past
year.
Dr Hua Dongyi
Executive Director of Mining
2
VDM GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
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 2018.
1.
DIRECTORS
Current Directors
The names and details of the directors of VDM Group Limited in office during the year and until the
date of this report are as follows: Directors were in office for the entire year unless otherwise stated.
Mr 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, 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 Australia Kengkong
Investments Co Pty Ltd.
Dr Hua Dongyi
Executive Director of Mining
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, appointed Executive Director of Mining on 1 March 2016.
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. Dr Hua is the Vice President of
the Australian China Business Council Western Australia. Dr Hua is also Executive Director and CEO
of Frontier Services Group Limited, an aviation and logistics company listed on the Hong Kong Stock
Exchange.
Mr Michael Fry
Chief Financial Officer/Company Secretary
Appointed Chief Financial Officer/Company Secretary on 12 February 2018, appointed Non-Executive
Director on 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
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 Chief Financial Officer and Company Secretary of Force Commodities Limited an ASX-listed
company (ASX:4CE) with exploration projects in Australia and Democratic Republic of Congo, and
he is Company Secretary of Globe Metals & Mining Limited an ASX-listed company (ASX:GBE) with
exploration projects in Africa. He was previously a director of ASX-listed Cougar Metals NL from
13 October 2014 to 14 June 2017.
3
VDM GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Company Secretary
Mr Michael Fry
Appointed 12 February 2018
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
Michael Fry
3.
DIVIDENDS
Number of Ordinary
Shares
2,070,000,000
1,085,110,976
1,000,000
There were no dividends declared or paid during the year ended 30 June 2018 (2017: nil).
4.
NATURE AND PRINCIPAL ACTIVITIES
VDM is comprised of 3 operating divisions:
VDM Mining: mining exploration, development and operation in Africa and Latin America.
VDM Trading: export Australian goods to Asian markets & imports Asian goods to Australia.
VDM Construction: engineering, procurement and construction.
Business activities during the period principally related to: 1) exploration of the Cachoeiras do Binga
copper project located in the Republic of Angola; 2) close-out of contracts relating to delivering
imported structural steel to VDM’s construction clients, and 3) review of trading opportunities.
The business activities of the comparative period principally related to: 1) mobilising the initial
exploration team members to the Cachoeiras do Binga copper project located in the Republic of
Angola; 2) delivering imported structural steel to VDM’s construction clients, and 3) closing VDM’s
former equipment hire and sales business, including winding up the Sany-VDM Joint Venture.
General
At 30 June 2018, VDM employed 7 people in Western Australia (2017: 9).
5.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 1 February 2018, VDM announced that it entered into a heads of agreement with Jiangxi
Copper Company Limited (Jiangxi) in relation to Jiangxi’s participation in the CdB copper project
located in the Republic of Angola. Under the agreement it is proposed that Jiangxi and VDM will
jointly share in CdB’s ownership and funding, under a joint venture 67% owned by VDM and 33%
owned by Jiangxi; and any profits of the joint venture first being allocated to repay VDM its
investment in CdB. The agreement is subject to certain conditions including: i) finalisation of a joint
venture agreement under Chinese law; ii) obtaining the consent of VDM’s existing CdB JV partners;
iii) obtaining any necessary consents from the Government of Angola; iv) Jiangxi completing its
due diligence of CdB; and v) both companies contributing initial capital investment into the new
joint venture company of RMB 10 million (VDM: 67%, Jiangxi: 33%). As at the date of this report,
Jiangxi has not yet completed its due diligence investigations.
On 22 March 2018, VDM announced that it had completed a $4 million share placement to CF
International Development Limited of Hong Kong, pursuant to the Company’s 15% placement
capacity (under ASX Listing Rule 7.1). A total of 400,000,000 new shares were issued to CF
International Development Limited at $0.01 per share. The funds are to be used to advance the
CdB copper project.
4
VDM GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
6.
OPERATING AND FINANCIAL REVIEW
The Mining division worked with its project partners to overcome safety concerns at site to enable
exploration activities to commence at the Company’s CdB copper project in Angola. Notably drilling
commenced in mid-June 2018. The CdB exploration program had experienced significant delays,
mainly related to potential safety hazards identified at site. The CdB partners received excellent
assistance and cooperation from the Government of Angola, exploration contractor Shandong Geo
Mineral International, and technical services contractor SRK Consulting in addressing the situation
and allowing the exploration program to commence.
The Construction division closed out contracts entered into for the delivery of imported structural
steel to Western Australian construction clients.
The Trading division continued to assess opportunities and to search for a partner to scale the trading
business to market-competitive levels.
The Board undertook a comprehensive risk review to identify the key risks to VDM’s business. The
review included an internal and external stakeholder analysis that identified the diverse needs of the
various stakeholders and the potential risks to VDM if those needs are not met. This analysis is
updated annually.
Risk
Funding for debt repayment, advancing
the CdB exploration program, and
other corporate activities.
Size and quality of CdB’s contained
mineralisation
Operating efficiently and safely in the
Republic of Angola
Counterparty risks related CdB
investment structure and CdB partners
Response
VDM has entered into a conditional heads of
agreement with Jiangxi to provide funding for the CdB
project and is working with other potential partners to
provide additional funding.
This risk cannot be mitigated, however VDM will aim to
avoid over-investment by undertaking a phased and
well-planned exploration program.
VDM’s current Executive Director of Mining has
extensive experience and strong relationships in
Angola. VDM will utilise Angolan-experienced and
reputable exploration contractors and advisors.
VDM has maintained good relations with its CdB
partners and uses written agreements and formal
decision-making processes to avoid potential
misunderstandings.
Revenue from continuing operations was $563,000 (2017: $1,430,000) a decrease of 60.6% from
the prior year reflecting the close-out of structural steel sales agreements within the Construction
division, with no new arrangements being entered into.
The loss from continuing operations after tax of $2,881,000 (2017: $3,890,000) is 25.9% lower than
the prior year, mainly due to a reduction of corporate expenses.
Shareholder Loan
VDM has a shareholder loan for $9,800,000 (2017: $9,098,000) with its largest shareholder,
Australia Kengkong Investments Co Pty Ltd (“Kengkong”) under a Framework Loan Agreement
(“FLA”). The FLA contemplates the parties entering into a secured one-year 6% loan facility that will
incorporate the FLA liabilities. Until that occurs, the FLA advances plus interest accrued at 6% per
annum are immediately repayable in the denominated currency when demanded by Kengkong.
5
VDM GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
7.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
On 19 July 2018, the Company announced the appointment of Dr Chris Yu to the position of
Exploration and Mine Manager on a permanent basis. Pursuant to the terms of Dr Yu’s remuneration
arrangements, Dr Yu was issued 52 million options with an exercise price of 1.6 cents and an expiry
date of 31 July 2021.
Apart from the above, there have been no significant events occur after 30 June 2018 date and up
to the date of this report.
8.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
VDM intends to undertake future capital raisings in the 2019 financial year. Funds raised will be used
for general corporate working capital, to progress the Cachoeiras do Binga exploration program, to
advance other potential business growth opportunities, and to repay the shareholder loan.
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.
10.
SHARE OPTIONS
As at the date of this report, there were 52 million unissued ordinary shares under option with an
exercise price of 1.6 cents (2017: 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.
6
VDM GROUP LIMITED
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
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:
Luk Hiuming
Hua Dongyi
Michael Fry
Board
meetings
Audit &
Risk
Committee
meetings
4
4
2
4
2
2
1
2
As at the date of this report, VDM Group had an audit and risk committee of the board of directors.
Members acting on the audit and risk committee of the board during the year were Mr Fry (Chair),
Dr Hua and Mr Luk.
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
30 of 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
Instrument 2016/191. The Company is an entity to which the Instrument applies.
7
VDM GROUP LIMITED
REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
REMUNERATION REPORT
REMUNERATION REPORT (AUDITED)
This remuneration report for the year ended 30 June 2018 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 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 executive directors and other senior
executives of VDM and excludes non-executive directors.
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 2018 (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
Luk Hiuming
Hua Dongyi
Michael Fry
Current executives
Chris Yu
Past executives
Sam Diep(1)
Padraig O’Donoghue
Non–Executive Chairman
Executive Director of Mining
Chief Financial Officer/Company Secretary (Appointed on 12 February 2018)
Exploration and Mine Manager (Appointed 19 July 2018)
Chief Executive Officer (Employment finished on 29 August 2017)
Chief Financial Officer/Company Secretary (Employment ceased 12 February
2018)
Notes:
1. S Diep’s employment finished on 29 August 2017 and his position of chief executive officer has not been
filled.
2. P O’Donoghue’s employment finished on 12 February 2018 and his position of chief financial officer has not
been filled.
2.
BOARD OVERSIGHT OF REMUNERATION
The Board is responsible for the remuneration arrangements of directors and executives. Based on
the Board’s present 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 directors and
executives.
8
VDM GROUP LIMITED
REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
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 2017 annual general meeting
The 2017 remuneration report received positive shareholder support at the Company’s annual
general meeting, with a vote of 89.4% in favour.
3.
EXECUTIVE REMUNERATION ARRANGEMENTS
Remuneration strategy
VDM’s executive remuneration strategy is designed to cost effectively 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.
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)
VDM has Bonus Scheme STI 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.
The Bonus Scheme is 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: to be paid after release of the Annual Financial Report;
d) Eligibility: Persons who start employment during the year are eligible for a time-adjusted
bonus payment.
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.
9
VDM GROUP LIMITED
REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
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 the Group’s gross EBIT history
for the past five financial years.
Financial
Year
EBIT
$’000
Closing share
price $
2018
2017
2016
2015
2014
(2,348)
(2,777)
(5,433)
(12,713)
(16,288)
0.002
0.001
0.003
0.006
0.01
As a result of the negative EBIT performance in 2018, no STI awards were made in the 2018 financial
year (2017: nil).
Variable remuneration — long term incentive (LTI)
VDM does not have a general equity-based incentive plan for employees, however the following two
specific option arrangements were approved as a cost-effective and non-cash remuneration incentive
to attract and retain the two key executives holding VDM’s CEO and Mining Director positions:
•
The Mr Diep’s employment contract provided for the grant of stock options during his
employment period. Mr Diep’s employment terminated on 28 August 2017, before any of his
options were granted and he is no longer entitled to any options.
• The Dr Hua’s employment contract provides for the grant of the following stock options:
o 10 million options with an exercise price of $0.015, exercisable on 11 March 2017 and
expiring on 11 March 2020.
o 10 million options with an exercise price of $0.020, exercisable on 11 March 2018 and
expiring on 11 March 2021.
o 10 million options with an exercise price of $0.025, exercisable on 11 March 2019 and
expiring on 11 March 2022.
As at the date of this report, none of Dr Hua’s options had been granted. There are no
performance or market conditions related to the options and they will not carry any voting or
dividend rights.
10
VDM GROUP LIMITED
REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
4.
EXECUTIVE REMUNERATION OUTCOMES (INCLUDING LINK TO PERFORMANCE)
Table 1: Executive remuneration for the year ended 30 June 2018
Base Salary
& Fees
Cash
Bonus
Super
Contri-
butions
Value of
Share-
based
Payments
$
$
$
Executive directors
D Hua
198,000
S Diep(1)
P O’Donoghue(2)
Totals
53,699
110,466
362,165
-
-
-
-
18,810
5,012
10,435
34,257
$
-
-
-
-
Long
Service
Leave
$
2,875
-
-
2,875
Termination
Benefits
Total
Performance
Related
$
-
-
-
-
$
%
219,685
58,711
120,901
399,297
0%
0%
0%
0%
Notes:
1. S Diep’s employment finished on 28 August 2017 and his position of chief executive officer has not been
filled.
2. P O’Donoghue’s employment finished on 12 February 2018 and his position of chief financial officer has not
been filled.
Table 2: Executive remuneration for the year ended 30 June 2017
Base Salary
& Fees
Cash
Bonus
Super
Contri-
butions
Value of
Share-
based
Payments
Long
Service
Leave
$
$
$
$
$
Executive directors
D Hua
198,000
S Diep(1)
P O’Donoghue
350,000
180,000
-
-
-
Past key management personnel
X Zhu(2)
Totals
168,058
896,058
-
-
18,810
19,616
17,100
13,413
68,939
-
-
-
-
-
2,875
672
2,372
-
5,919
Notes:
1. S Diep’s employment finished on 28 August 2017.
2. X Zhu’s employment finished on 23 March 2017.
Termination
Benefits
Total
Performance
Related
$
-
-
-
-
-
$
%
219,685
370,288
199,472
181,471
970,916
0%
0%
0%
0%
0%
11
VDM GROUP LIMITED
REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
5.
EXECUTIVE CONTRACTS
Remuneration arrangements for KMP are formalised in employment agreements. Details of these
contracts are provided below.
Chief Executive Officer
Chief Executive Officer Sam Diep’s employment terminated on 28 August 2017. He was employed
under a rolling contract with fixed remuneration of $369,616 per annum. The termination provisions
of Mr Diep’s employment contract were as follows:
Employer-initiated
termination
Termination for
serious
misconduct
Employee-initiated
termination
Notice period Payment in lieu
of notice
3 months
3 months
None
None
3 months
3 months
Treatment of STI
on termination
Pro-rated for time
and performance
subject to Board
discretion
None
Pro-rated for time
and performance
subject to Board
discretion
Treatment of LTI
on termination
Unexercised options
expire
Unexercised options
expire
Unexercised options
expire
Executive Director of Mining
The Executive Director of Mining, Dr Hua is employed under a rolling contract. Dr Hua’s fixed
remuneration is $216,810 per annum. The termination provisions of Dr Hua’s employment contract
are as follows:
Notice period Payment in lieu
of notice
6 months
6 months
None
None
3 months
3 months
Treatment of STI
on termination
Pro-rated for time
and performance
subject to Board
discretion
None
Pro-rated for time
and performance
subject to Board
discretion
Treatment of LTI
on termination
Unexercised options
expire
Unexercised options
expire
Unexercised options
expire
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.
12
VDM GROUP LIMITED
REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
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 annual general meeting
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 an increase of the NED fee pool at the 2018 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.
The table below provides the NED fees for the year ended 30 June 2018.
Annual NED fees
including
superannuation
Board Chairman
Other Non-executive Directors
$65,000
$63,750
Table 3: Non-executive remuneration for the year ended 30 June 2018
Base
Salary &
Fees
Cash
Bonus
Non-
Monetary
Benefits
Super
Contri-
butions
Value of
Share-
based
Payments
Long
Service
Leave
Termination
Benefits
Total
Performance
Related
$
$
Current non-executive directors
M Fry
H Luk
Totals
58,219
65,000
123,219
-
-
-
$
-
-
-
$
5,531
-
5,531
$
-
-
-
$
-
-
-
$
-
-
-
$
%
63,750
65,000
128,750
0%
0%
0%
Table 4: Non-executive remuneration for the year ended 30 June 2017
Base
Salary &
Fees
Cash
Bonus
Non-
Monetary
Benefits
Super
Contri-
butions
Value of
Share-
based
Payments
Long
Service
Leave
Termination
Benefits
Total
Performance
Related
$
$
Current non-executive directors
M Fry
58,219
-
H Luk
Totals
65,000
123,219
-
-
$
-
-
-
$
5,531
-
5,531
$
-
-
-
$
-
-
-
$
-
-
-
$
%
63,750
65,000
128,750
0%
0%
0%
13
VDM GROUP LIMITED
REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
7.
ADDITIONAL DISCLOSURES RELATING TO OPTIONS AND SHARES
This section sets out the additional disclosures required under the Corporations Act 2001.
Table 5: Shareholdings of key management personnel (held directly and indirectly)
Balance 1 July
2017
Granted as
remuneration
Options
exercised
Net change
Other
Balance
30 June 2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,070,000,000
1,085,110,976
1,000,000
(1,000,000)
(250,000)
-
-
(1,250,000)
3,156,110,976
Total shareholding
3,157,360,976
Notes:
1.
2.
S Diep’s employment terminated on 28 August 2017.
P O’Donoghue’s employment terminated on 12 February 2018.
2018
Current directors
H Luk
D Hua
M Fry
Past executives
S Diep(1)
P O’Donoghue(2)
2017
Current directors
H Luk
D Hua
M Fry
Current executives
S Diep
P O’Donoghue
2,070,000,000
1,085,110,976
1,000,000
1,000,000
250,000
2,070,000,000
1,085,110,976
1,000,000
-
-
Total shareholding
3,156,110,976
Notes:
1.
Relates to on-market share transactions
Option holdings of KMP
Balance 1 July
2016
Granted as
remuneration
Options
exercised
Net change
Other(1)
Balance
30 June 2017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,070,000,000
1,085,110,976
1,000,000
1,000,000
250,000
1,000,000
250,000
1,250,000
3,157,360,976
There were no options granted to KMP during the year ended 30 June 2018 (2017: nil). There were
no options held by KMP as at 30 June 2018 (2017: nil).
The employment contract of CEO Mr Diep provided for the grant of options during his employment
period without any performance conditions. Mr Diep’s employment terminated on 28 August 2017,
before any of his options were granted and he is no longer entitled to any options.
The employment contract of Executive Director of Mining Dr Hua provides for the grant of options
without any performance conditions. Refer to section 5 of the Remuneration Report for details of his
options entitlement. The fair value of the options issued as at 30 June 2018 is not material.
Performance rights holdings of KMP
There were no performance rights granted to KMP during the year ended 30 June 2018 (2017: nil).
There were no performance rights held by KMP as at 30 June 2018 (2017: nil).
8.
LOANS TO KEY MANAGEMENT PERSONNEL
There were no loans granted to KMP’s during the year ended 30 June 2018 (2017: nil).
14
VDM GROUP LIMITED
REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
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
Luk Hiuming
As at 30 June 2018, VDM owed $143,000 to Mr Luk which related to directors’ fees that have not
been paid on his instruction. No interest accrues and the outstanding amount is due when demanded
by Mr Luk.
Kengkong
On 27 January 2016, VDM entered into a Framework Loan Agreement (“FLA”) with its largest
shareholder, Australia Kengkong Investments Co Pty Ltd (“Kengkong”). At 30 June 2018, the balance
of the loan was $9,800,000 (2017: $9,098,000). During the period, Kengkong had no further
advances to VDM under the terms of a FLA (2017: Kengkong advanced AUD $1,500,000 and USD
$2,134,000). The FLA contemplates the parties entering into a secured one-year 6% loan facility
that will incorporate the FLA liabilities. Until that occurs, the FLA advances plus interest accrued at
6% per annum are immediately repayable in the denominated currency when demanded by
Kengkong. VDM’s Non-executive Chairman Mr Luk controls Kengkong, refer to note 20 for full
detailed disclosure on outstanding balance.
H&H
As at 30 June 2018, VDM owes H&H Holdings Australia Pty Ltd (“H&H”) $75,000 of underwriting
commissions for the Company’s December 2013 Rights Issue (2017: $75,000). No interest accrues
and the outstanding amount is due when demanded by H&H. Dr Hua, VDM’s Executive Director of
Mining controls H&H.
(b) Amounts recognised at the reporting date in relation to the other transactions:
Statement of Comprehensive Income
Interest expense (i)
Total finance costs
Current Liabilities
Trade and other payables (ii)
Interest-bearing loans and other borrowings (iii)
Total liabilities
2018
$’000
533
533
75
9,800
9,875
2017
$’000
452
452
75
9,098
9,173
Notes:
(i) Interest expense on Kengkong shareholder loan (6% per annum).
(ii) Underwriting commission due to H&H.
(iii) Shareholder loan due to Kengkong inclusive of accrued interest
This report is made in accordance with a resolution of the directors.
Dr Hua Dongyi
Executive Director of Mining
Perth, Western Australia
4 October 2018
15
VDM GROUP LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
FOR THE YEAR ENDED 30 JUNE 2018
AUDITOR’S INDEPENDENCE DECLARATION
16
VDM GROUP LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Continuing operations
Revenue
Expenses
Materials and inventory
Employee benefits expense
Occupancy related expenses
Depreciation and amortisation
Impairment
Onerous contracts expense
Legal expenses
Finance costs
Other expenses
Total expenses
Profit/(loss) on sale of assets
Other income and expenses
Loss from continuing operations before income
tax
Notes
2018
$000
2017
$000
5
563
1,430
6a
6b
6c
6d
6e
(378)
(995)
(124)
(96)
(350)
-
(269)
(544)
(697)
(1,201)
(1,970)
(613)
(176)
(412)
(29)
(98)
(474)
(346)
(3,453)
(5,319)
9
9
(1)
(1)
(2,881)
(3,890)
Income tax expense
8
-
-
Loss from continuing operations after income
tax
(2,881)
(3,890)
Discontinued operations
Profit from discontinued operations after income tax
7
-
659
Loss for the year
Other comprehensive income
(2,881)
(3,231)
-
-
Total comprehensive loss for the year
(2,881)
(3,231)
Total comprehensive loss for the period is attributed
to:
Owners of the parent
(2,881)
(3,231)
(2,881)
(3,231)
Loss per share
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Loss per share from continuing operations
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
9
9
9
9
(0.05)
(0.05)
(0.05)
(0.05)
The accompanying notes form part of these financial statements.
(0.06)
(0.06)
(0.07)
(0.07)
17
VDM GROUP LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes
2018
$000
2017
$000
ASSETS
Current assets
Cash and cash equivalents
Security deposits
Trade and other receivables
Inventory
Total current assets
Non-current assets
Security deposits
Exploration and evaluation assets
Development properties
Property, plant and equipment
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Contributed equity
Equity reserve
Retained losses
Total equity/(net deficiency)
11
12
13
14
12
16
17
18
19
20
21
21
22
23
23
3,954
1,366
38
53
-
198
193
165
4,045
1,922
-
11,174
1,250
882
13,306
17,351
819
11,128
1,600
978
14,525
16,447
5,457
9,800
1,138
5,465
9,098
2,021
16,395
16,584
34
34
16,429
922
48
48
16,632
(185)
292,710
288,722
457
457
(292,245)
(289,364)
922
(185)
The accompanying notes form part of these financial statements.
18
VDM GROUP LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
GST refunded/(paid)
Notes
2018
$000
2017
$000
650
2,093
(3,185)
(6,440)
11
136
20
(53)
Net cash flows used in operating activities
24
(2,388)
(4,380)
Cash flows from investing activities
Purchase of property, plant and equipment
Release from security deposit
Proceeds from sale of property, plant and equipment
Proceeds from joint venture capital return
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Proceeds from issue of shares
Transaction costs on issue of shares
-
979
9
-
988
(1)
59
1,869
274
2,201
-
1,500
4,000
(12)
-
-
Net cash flows from financing activities
3,988
1,500
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
11
2,588
1,366
3,954
(679)
2,045
1,366
The accompanying notes form part of these financial statements.
19
VDM GROUP LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued
Capital
Ordinary
$000
Accumulated
Losses
$000
Equity
Reserve
$000
Total
$000
Balance at 1 July 2017
288,722
(289,364)
457
(185)
Comprehensive loss for the year
Total comprehensive loss for the
year
Transactions with owners in their
capacity as owners
Share Issue
Capital raising costs
-
-
(2,881)
(2,881)
4,000
(12)
-
-
-
-
-
-
Balance at 30 June 2018
292,710
(292,245)
457
(2,881)
(2,881)
4,000
(12)
922
Balance at 1 July 2016
288,722
(286,133)
457
3,046
Comprehensive loss for the year
Total comprehensive loss for the
year
Transactions with owners in their
capacity as owners
Capital raising costs
Capital raising costs reclassified to
expenses
-
-
-
-
(3,231)
(3,231)
-
-
-
-
-
-
(3,231)
(3,231)
-
-
Balance at 30 June 2017
288,722
(289,364)
457
(185)
The accompanying notes form part of these financial statements.
20
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
1. CORPORATE INFORMATION ....................................................................................... 22
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .................................................... 22
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS ................... 38
4. SEGMENT INFORMATION .......................................................................................... 40
5. REVENUE ................................................................................................................ 42
EXPENSES ............................................................................................................... 43
6.
7. DISCONTINUED OPERATIONS .................................................................................... 44
INCOME TAX ........................................................................................................... 45
8.
LOSS PER SHARE ..................................................................................................... 47
9.
10. DIVIDENDS PROPOSED AND PAID .............................................................................. 47
11. CASH AND CASH EQUIVALENTS ................................................................................. 48
12. SECURITY DEPOSITS ................................................................................................ 48
13. TRADE AND OTHER RECEIVABLES .............................................................................. 49
14. INVENTORY ............................................................................................................. 50
15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD ...................................... 50
16. EXPLORATION AND EVALUATION ASSETS ................................................................... 51
17. DEVELOPMENT PROPERTIES ...................................................................................... 51
18. PROPERTY, PLANT AND EQUIPMENT ........................................................................... 52
19. TRADE AND OTHER PAYABLES ................................................................................... 53
20. INTEREST BEARING LOANS AND OTHER BORROWINGS ................................................ 54
21. PROVISIONS ........................................................................................................... 55
22. CONTRIBUTED EQUITY ............................................................................................. 56
23. ACCUMULATED LOSSES AND RESERVES ..................................................................... 57
24. CASHFLOW STATEMENT INFORMATION ...................................................................... 57
25. RELATED PARTY DISCLOSURE ................................................................................... 58
26. FINANCIAL ASSETS AND FINANCIAL LIABILITIES ......................................................... 59
27. PARENT ENTITY INFORMATION .................................................................................. 63
28. COMMITMENTS ........................................................................................................ 64
29. EVENTS AFTER THE REPORTING PERIOD..................................................................... 64
30. AUDITOR’S REMUNERATION ...................................................................................... 65
31. CLOSED GROUP CLASS ORDER DISCLOSURES ............................................................. 65
21
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 2018 were authorised for issue in accordance with a resolution
of the directors on 3 October 2018.
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.
Business activities during the period principally related to: 1) mobilising the initial exploration team
members to the Cachoeiras do Binga copper project located in the Republic of Angola; 2) delivering
imported structural steel to VDM’s construction clients.
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
year.
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 2017, except for the adoption of the new standards and interpretations
effective for the first time for entities with an annual reporting period ending on or after 30 June
2018 that are outlined in the following table. The adoption of these new standards and
interpretations did not have any material impact on the financial position or performance of the
Group.
22
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
(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 year ending 30 June 2018. The Group has not elected to early adopt these or any other new
Standards and amendments that are issued but not yet effective.
Pronouncement
& Title
Summary
AASB 9, and
relevant
amending
standards
Financial
Instruments
AASB 15, and
relevant
amending
standards
Revenue from
Contracts with
Customers
AASB 9 replaces AASB 139 Financial Instruments: Recognition and
Measurement.
Except for certain trade receivables, an entity initially measures a
financial asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs.
Debt instruments are subsequently measured at fair value through
profit or loss (FVTPL), amortised cost, or fair value through other
comprehensive income (FVOCI), on the basis of their contractual cash
flows and the business model under which the debt instruments are
held.
There is a fair value option (FVO) that allows financial assets on
initial recognition to be designated as FVTPL if that eliminates or
significantly reduces an accounting mismatch.
Equity instruments are generally measured at FVTPL. However, entities
have an irrevocable option on an instrument-by-instrument basis to
present changes in the fair value of non-trading instruments in other
comprehensive income (OCI) without subsequent reclassification to
profit or loss.
For financial liabilities designated as FVTPL using the FVO, the
amount of change in the fair value of such financial liabilities that is
attributable to changes in credit risk must be presented in OCI. The
remainder of the change in fair value is presented in profit or loss,
unless presentation in OCI of the fair value change in respect of the
liability’s credit risk would create or enlarge an accounting mismatch in
profit or loss.
All other AASB 139 classification and measurement requirements for
financial liabilities have been carried forward into AASB 9, including the
embedded derivative separation rules and the criteria for using the
FVO.
The incurred credit loss model in AASB 139 has been replaced with
an expected credit loss model in AASB 9.
The requirements for hedge accounting have been amended to more
closely align hedge accounting with risk management, establish a more
principle-based approach to hedge accounting and address
inconsistencies in the hedge accounting model in AASB 139.
AASB 15 replaces all existing revenue requirements in Australian
Accounting Standards (AASB 111 Construction Contracts, AASB 118
Revenue, AASB Interpretation 13 Customer Loyalty Programmes, AASB
Interpretation 15 Agreements for the Construction of Real Estate,
AASB Interpretation 18 Transfers of Assets from Customers and AASB
Interpretation 131 Revenue – Barter Transactions Involving Advertising
Services) and applies to all revenue arising from contracts with
customers, unless the contracts are in the scope of other standards,
such as AASB 117 (or AASB 16 Leases, once applied).
The core principle of AASB 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 an entity expects to be
entitled in exchange for those goods or services. An entity recognises
revenue in accordance with the core principle by applying the following
steps:
• Step 1: Identify the contract(s) with a customer
• Step 2: Identify the performance obligations in the contract
• Step 3: Determine the transaction price
• Step 4: Allocate the transaction price to the performance obligations
in the contract
• Step 5: Recognise revenue when (or as) the entity satisfies a
performance obligation.
Application
date
Of standard:
1 January
2018
For Group:
1 July 2018
Of standard:
1 January
2018
For Group:
1 July 2018
23
AASB 2014-10
Amendments to
Australian
Accounting
Standards – Sale
or Contribution of
Assets between
an Investor and
its Associate or
Joint Venture
AASB 2016-5
Amendments to
Australian
Accounting
Standards –
Classification and
Measurement of
Share-based
Payment
Transactions
AASB 16
Leases
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Pronouncement
& Title
Summary
The amendments clarify that a full gain or loss is recognised when a
transfer to an associate or joint venture involves a business as defined
in AASB 3 Business Combinations. Any gain or loss resulting from the
sale or contribution of assets that does not constitute a business,
however, is recognised only to the extent of unrelated investors’
interests in the associate or joint venture.
AASB 2015-10 defers the mandatory effective date (application date)
of AASB 2014-10 so that the amendments are required to be applied
for annual reporting periods beginning on or after 1 January 2018.
Application
date
Of standard:
1 January
2018
For Group:
1 July 2018
This Standard amends AASB 2 Share-based Payment, clarifying how to
account for certain types of share-based payment transactions. The
amendments provide requirements on the accounting for:
• The effects of vesting and non-vesting conditions on the
measurement of cash-settled share-based payments
• Share-based payment transactions with a net settlement feature for
Of standard:
1 January
2018
For Group:
1 July 2018
withholding tax obligations
• A modification to the terms and conditions of a share-based
payment that changes the classification of the transaction from
cash-settled to equity-settled.
Of standard:
1 January
2019
For Group:
1 July 2019
AASB 16 requires lessees to account for all leases under a single on-
balance sheet model in a similar way to finance leases under AASB 117
Leases. The standard includes two recognition exemptions for lessees –
leases of ’low-value’ assets (e.g., personal computers) and short-term
leases (i.e., leases with a lease term of 12 months or less). At the
commencement date of a lease, a lessee will recognise a liability to
make lease payments (i.e., the lease liability) and an asset
representing the right to use the underlying asset during the lease
term (i.e., the right-of-use asset).
Lessees will be required to separately recognise the interest expense
on the lease liability and the depreciation expense on the right-of-use
asset.
Lessees will be required to remeasure the lease liability upon the
occurrence of certain events (e.g., a change in the lease term, a
change in future lease payments resulting from a change in an index or
rate used to determine those payments). The lessee will generally
recognise the amount of the remeasurement of the lease liability as an
adjustment to the right-of-use asset.
Lessor accounting is substantially unchanged from today’s
accounting under AASB 117. Lessors will continue to classify all leases
using the same classification principle as in AASB 117 and distinguish
between two types of leases: operating and finance leases.
AASB-9 (Financial Instruments)
The Group has continued to assess the impact of the adoption of the AASB 9 standard. Preparation
work to reach readiness to apply the new standard fully retrospectively from 1 July 2018 is ongoing.
The Group does not expect a significant impact on its financial position or performance.
AASB-15 (Revenue from Contracts with Customers)
In relation to the above-noted implementation of AASB 15, the Group plans to adopt the standard
using the "modified retrospective method." Under that method, the Group will apply the rules to all
contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment
for the cumulative effect of the change and providing additional disclosures comparing results to
previous accounting standards. The Group does not currently have any open contracts that will be
affected by the implementation and therefore based on the work performed to date, does not expect
a material impact from the implementation of the new standard.
The Group has not yet determined the impact of the other standards and amendment that are issued
but not yet effective.
24
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
d) Going concern
VDM incurred a net loss after tax from continuing operations for the year ended 30 June 2018 of
$2,881,000 (2017: $3,890,000). Net cash flows used in operating activities were $2,388,000 (2017:
$4,380,000). At 30 June 2018, VDM had net current liabilities of $12,350,000 (30 June 2017:
$14,662,000). The cash position of VDM at 30 June 2018 was $3,954,000 (30 June 2017:
$1,366,000) with a further $38,000 of security deposits (30 June 2017: $1,017,000).
VDM will require further capital funding:
•
for general corporate working capital including trade and other payables, and provisions that
become due (refer to notes 19 and 21);
to progress its business strategy including the Cachoeiras do Binga exploration program;
to pursue other business growth opportunities; and
to settle shareholder loans once called (refer to note 20).
•
•
•
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 the Group expects:
•
to undertake future capital raisings sufficient to meet the above noted funding requirements and
the Group is consulting with potential sophisticated investors in this regard; and
• VDM’s largest shareholder, Australia Kengkong Investments Co Pty Ltd will not demand
repayment of amounts due under the FLA
• A Cachoeiras do Binga joint venture partner will not demand repayment of the outstanding
creditor balance detailed in note 19 until the Group’s next significant capital raising or when the
Group’s financial status has a significant improvement.
Should VDM not achieve the matters 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 adjustment relating to the recoverability or classification of
recorded asset amounts or to the amounts or classifications of liabilities that may be necessary
should VDM not be able 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 2018. 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
25
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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.
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.
26
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
g) Joint arrangements
The Group undertakes certain business activities through joint arrangements. A joint arrangement is
an arrangement over which two or more parties have joint control. Joint control is the contractually
agreed sharing of control over an arrangement which exists only when the decisions about the relevant
activities (being those that significantly affect the returns of the arrangement) require the unanimous
consent of the parties sharing control. The Group’s joint arrangements are of two types, either:
i.
ii.
joint operations; or
joint ventures.
A joint operation is a type of joint arrangement in which the parties with joint control of the arrangement
have rights to the assets and obligations for the liabilities relating to the arrangement. In relation to its
interests in joint operations, the financial statements of the Group includes:
liabilities, including its share of any liabilities incurred jointly;
• assets, including its share of any assets held jointly;
•
• revenue from the sale of its share of the output arising from the joint operation;
• share of the revenue from the sale of the output by the joint operation; and
• expenses, including its share of any expenses incurred jointly
All such amounts are measured in accordance with the terms of each arrangement which are in
proportion to the Group’s interest in the joint operation.
A joint venture is a type of joint arrangement in which the parties with joint control of the arrangement
have rights to the net assets of the arrangement. Investments in joint ventures are accounted for using
the equity method.
h) Investments 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.
The Group’s investments in associates and joint ventures 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 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 associates and joint ventures 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 associates and joint ventures 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 investments in associates or joint ventures. At each reporting date, the
Group determines whether there is objective evidence that the investment in the associates or joint
ventures is impaired. If there is such evidence, the Group calculates the amount of impairment as
27
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 associates and joint ventures’ in the statement
of profit or loss.
Upon loss of significant influence over the associates or joint control over the joint ventures, 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.
i) 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 the 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.
j) 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.
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
28
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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.
k) 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.
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
29
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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.
l) 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.
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.
30
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 is 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.
m) 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.
n) 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
31
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
(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.
o) 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.
p) 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.
32
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
q) 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.
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
r) 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.
33
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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
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.
ii) 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,
34
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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.
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.
s) 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.
t) Exploration and evaluation expenditure:
Expenditure on acquisition, exploration and evaluation of mineral resources relating to an area of interest
is partially or fully capitalised, and recognised as an exploration and evaluation asset where rights to
tenure of the area of interest are current and;
35
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
i.
it is expected that expenditure will be recouped through successful development and exploitation
of the area of interest or alternatively by its sale and/or;
ii. exploration and evaluation activities are continuing in an area of interest but at reporting date
have not yet reached a stage which permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves.
An area of interest refers to an individual geological area whereby the presence of a mineral deposit is
considered favourable or has been proved to exist. It is common for an area of interest to contract in
size progressively, as exploration and evaluation lead towards identification of a mineral deposit, which
may prove to contain economically recoverable reserves. When this happens during the exploration for
and evaluation of mineral resources, exploration and evaluation expenditures are still included in the
cost of the exploration and evaluation asset notwithstanding that the size of the area of interest may
contract as the exploration and evaluation operations progress. In most cases, an area of interest will
comprise a single mine or deposit.
Impairment
The carrying value of exploration and evaluation assets are assessed for impairment regularly and if
information becomes available suggesting that the recovery of any of the assets is unlikely or that the
Group no longer holds tenure, the relevant asset amount is written off to the profit or loss in the period
when the new information becomes available.
Exploration and evaluation assets are disclosed in note 16.
u) 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.
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
36
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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.
v) 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.
w) 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.
x) 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
37
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
future payments are discounted using market yields at the reporting date on high quality corporate
bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.
y) Comparatives
Certain comparatives have been reclassified to comply with the current year presentation.
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) 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.
b) 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 18.
c) 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 as disclosed in note 28(c).
d) 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 21.
e) 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 21.
f) Onerous contracts
38
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 21.
g) Impairment of development properties
In determining the recoverability of development properties, management has made judgments in
respect of the estimated selling price in the ordinary course of business, benchmarked to available
market data less the estimated costs necessary to make the sale and the expected timing in which
the sale will take place.
h) Joint arrangements
Judgement is required to determine when the Group has joint control, which requires an assessment
of the relevant activities and when the decisions in relation to those activities require unanimous
consent. The Group has determined that the relevant activities for its joint arrangements relate to
the operating and capital decisions of the arrangement, such as: the approval of the capital
expenditure program for each year, and appointing, remunerating and terminating the key
management personnel of, or service providers to, the joint arrangement. The considerations made
in determining joint control are similar to those necessary to determine control over subsidiaries.
Judgement is also required to classify a joint arrangement as either a joint operation or joint venture.
Classifying the arrangement requires the Group to assess their rights and obligations arising from
the arrangement.
Specifically, it considers:
• The structure of the joint arrangement – whether it is structured through a separate vehicle
• When the arrangement is structured through a separate vehicle, the Group also considers the
rights and obligations arising from:
o
the legal form of the separate vehicle;
o
the terms of the contractual arrangement; and
o other facts and circumstances (when relevant).
This assessment often requires significant judgement, and a different conclusion on joint control and
also whether the arrangement is a joint operation or a joint venture, may materially impact the
accounting.
i) Exploration and evaluation expenditures
The application of the Group’s accounting policy for exploration and evaluation expenditure requires
judgements to determine whether expenditure will be capitalised and carried as exploration and
expenditure assets or be written off to the profit or loss in the period.
39
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
4.
SEGMENT INFORMATION
is arranged under
trading, and
VDM
iii) mining. Each division was a reportable segment in the current reporting period. The accounting
policies adopted for the reportable segment are consistent with those followed in the preparation of
the Group’s financial statements for the year ended 30 June 2017.
three operating divisions:
i) construction,
ii)
The following table presents the revenue, profit and selected balance sheet information for the
Group’s reportable segments for the year ended 30 June 2018.
2018
Construction
Trading
Mining
Unallocated
Total
$000
$000
$000
$000
$000
Revenue
External revenue
Total segment revenue
Results
446
446
Segment results before tax
(364)
-
-
-
54
922
Finance costs
Depreciation & amortisation
Impairment
Reconciliation of segment results
before tax to net loss after tax
Segment results before tax
Net loss after tax from
continuing operations per the
statement of comprehensive
income
Total assets
Total liabilities
Other disclosures
Exploration and evaluation asset
additions
Major Customers
-
-
-
-
-
-
-
-
-
-
117
117
563
563
(267)
(2,250)
(2,881)
-
-
-
544
96
350
544
96
350
(2,881)
(2,881)
10,829
6,468
17,351
4,818
10,689
16,429
-
-
46
-
46
During 2018, VDM had one customer that contributed greater than 10% of revenue. This customer
contributed a total of 75% of VDM revenue which was from the Construction segment (2017: one
customer contributed greater than 10% of revenue. This customer contributed a total of 87% of VDM
revenue which was from the Construction segment).
40
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
The following table presents the revenue, profit, and selected expenditure information for the year
ended 30 June 2017 and selected balance sheet information as at 30 June 2017 for the Group’s
reportable segments.
Revenue
External revenue
Total segment revenue
Results
Construction
Trading
Mining
Unallocated
Total
$000
$000
$000
$000
$000
1,266
1,266
8
8
-
-
156
156
1,430
1,430
Segment results before tax
(217)
(81)
(324)
(3,268)
(3,890)
Finance Costs
Depreciation & amortisation
Impairment
Reconciliation of segment results
before tax to net loss after tax
Segment results before tax
Net loss after tax from continuing
operations per the statement of
comprehensive income
Total assets
Total liabilities
Other disclosures
Exploration and evaluation asset
additions
Property plant and equipment
additions
2
-
-
492
1,630
-
-
-
-
-
-
1
-
-
-
-
-
472
176
412
474
176
412
(3,890)
(3,890)
10,783
5,172
16,447
4,875
10,126
16,632
2,853
-
-
1
2,853
1
41
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
5.
REVENUE
Sales revenue
Revenue from operating activities
Total sales revenue
Other revenue
Interest
Net rental income
Other
Total other revenue
Total revenue
2018
$000
2017
$000
355
355
11
8
189
208
563
1,274
1,274
20
10
126
156
1,430
42
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
6.
EXPENSES
a) Employee benefits expense
Wages and salaries
Restructuring/redundancy costs
Superannuation expense
Other employee benefits expense
Total employee benefits expense
b) Depreciation and amortisation
Depreciation
Total depreciation and amortisation
c) Impairment charges
Impairment of development properties (note 17)
Total impairment charges
d) Finance costs
Bank fees and other finance charges
Interest
Total finance costs
e) Other expenses
Insurances
Telecommunications
Computer costs
Bad debts provision
Foreign exchange losses/(gains)
Other
Total other expenses
2018
$000
2017
$000
911
-
78
6
1,785
32
129
24
995
1,970
96
96
350
350
11
533
544
144
15
39
185
138
176
697
176
176
412
412
22
452
474
223
34
67
-
(122)
144
346
43
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
7.
DISCONTINUED OPERATIONS
On 28 July 2016, VDM announced the closure of its Equipment division. A strategic review of the
equipment hire and sales business concluded it needed to be significantly scaled up in size in order
to reach a sustainable positive cash flow. Foreseeable overcapacity in most areas of the Australian
equipment market meant that expansion of the division would be a high-risk investment and the
prudent decision for VDM shareholders was to close the equipment business.
As at 30 June 2017 all of the segment’s assets were sold and liabilities settled. There was no
discontinued operations of VDM in the accounts as at 30 June 2018.
2018
$000
2017
$000
Financial performance of discontinued operations
Revenue
Expenses
Operating loss
Finance costs
Profit on sale of assets
Share of loss from joint venture
Profit from discontinued operations before income tax
Income tax expense
Profit from discontinued operations after income tax
Assets and liabilities of the discontinued operations
Total Assets
Total Liabilities
Net assets attributable to discontinued operations
Net cash flows attributable to discontinued operations
Operating
Investing
Financing
Net cash (outflow) / inflow
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21
(209)
(188)
-
1,256
(409)
659
-
659
2,387
-
2,387
168
1,869
-
2,037
44
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
8.
INCOME TAX
a) The components of tax expense comprise:
Current income tax:
Income tax expense on adjustments in respect of current income
tax of previous years
-
-
2018
$000
2017
$000
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 expense reported in the statement of
comprehensive income
-
-
-
-
-
-
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
Total accounting loss before tax
(2,881)
(3,231)
(2,881)
(3,231)
Prima facie income tax expense @ 27.5%
(792)
(889)
Prior year tax over provision
Tax adjustment for non-deductible expenses
Temporary differences and unrecognised tax losses
Aggregate income tax expense
Income tax expense reported in the consolidated income
statement
Aggregate income tax expense
-
96
696
-
-
-
-
202
687
-
-
-
Current period income tax amounts were calculated based on a reduced corporate income tax rate
of 27.5% (2017: 27.5%).
45
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
8.
INCOME TAX (CONTINUED)
c) Recognised deferred tax asset and
liabilities other than tax losses
Statement of
financial position
Statement of
comprehensive
income
2018
$000
2017
$000
2018
$000
2017
$000
Deferred tax liabilities
Other
Gross deferred tax liabilities
Deferred tax assets
Provision for employee entitlements
Provisions – other
Trade and other receivables
Trade and other payables
Contributed equity
(21)
(21)
(21)
(21)
34
277
402
110
32
41
505
351
135
158
-
-
7
228
(51)
25
126
Deferred tax assets not recognised
(834)
(1,169)
(335)
Gross deferred tax assets
Deferred tax expense
Net deferred tax asset recognised in the
balance sheet
21
21
-
-
-
-
21
21
21
215
133
7
129
(526)
(21)
-
d) Tax losses
VDM Group has recognised a deferred tax asset of $nil (2017: $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 $128,755,000 (2017: $125,467,000). 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 2015 financial year, therefore in order to be able to utilise the pre-2016 losses in the future,
VDM may 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 2018, there were 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 (2017: 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.
46
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
9.
LOSS PER SHARE
a) Loss used in calculating loss per share
Net loss from continuing operations attributable to ordinary
equity holders of the parent
Net loss attributable to ordinary equity holders of the
parent for basic earnings
2018
$000
2017
$000
(2,881)
(3,890)
(2,881)
(3,231)
b) Weighted average number of shares
No.
No.
Weighted average number of ordinary shares for basic and
diluted earnings per share
5,589,441,774
5,477,660,952
10.
DIVIDENDS PROPOSED AND PAID
a) Declared and paid during the year
Dividends on ordinary shares:
Final dividend for 2018: nil cents per share
(2017: nil cents per share)
Interim dividend for 2018: nil cents per share
(2017: nil cents per share)
Dividends paid during the year
b) Dividend proposed, not recognised as a liability
Final dividend for 2018: nil cents per share
(2017: 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 27.5% (2017: 27.5%)
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
47
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
11.
CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Cash and cash equivalents
Reconciliation to cash flow statement
For the purposes of the cash flow statement, cash and cash
equivalents comprise the following at 30 June:
2018
$000
2017
$000
3,954
3,954
1,366
1,366
Cash at bank and in hand
Cash for reconciliation of cash flow statement
3,954
3,954
1,366
1,366
Cash at bank earns interest at floating rates or term deposit rates.
12.
SECURITY DEPOSITS
Security Deposits
Current
Non-current
Total security deposits
38
1,017
38
-
38
198
819
1,017
Security deposits are comprised of cash pledged as collateral for bank guarantees issued by the
Group. The security deposits are not available for immediate use.
48
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
13.
TRADE AND OTHER RECEIVABLES
Trade receivables
Other debtors
Retentions
Loans to related parties
2018
$000
2017
$000
1,336
104
76
-
1,395
-
76
-
Impairment of trade and other receivables
(1,302)
(1,278)
Impairment of other debtors and retentions
Total trade and other receivables
a) Ageing of trade receivables
0 - 30 days
31 - 60 days
> 60 days PDNI*
> 60 days IM**
Total trade receivables
b) Allowance for impairment loss
Balance at 1 July 2017
Charge for the year
Utilised
Balance at 30 June 2018
* PDNI – past due not impaired
** IM - impaired
(161)
53
-
4
30
-
193
86
-
31
1,302
1,336
1,278
1,395
1,278
1,615
185
-
1,463
-
(337)
1,278
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.
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 26.
49
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
2018
$000
2017
$000
14.
INVENTORY
Consumables at cost
Total inventory
15.
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
a) Reconciliation of carrying amounts
Balance at 1 July
Investment in share capital of Sany VDM Pty Ltd
Capital returned
Share of equity accounted loss for the year
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
Total comprehensive loss for the year
Group's share of loss for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
165
165
682
-
(273)
(409)
-
37
(23)
(854)
6
(834)
-
(834)
(834)
(409)
At 30 June 2018, VDM holds no interest in Sany VDM Pty Ltd an Australian company previously
jointly-owned by VDM and Sany. During the 2017 period $273,000 of capital in Sany VDM Pty Ltd
was returned to the Group.
50
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
16.
EXPLORATION AND EVALUATION ASSETS
Balance as at 1 July
Additions
Balance as at 30 June
2018
$000
2017
$000
11,128
46
11,174
8,275
2,853
11,128
There has been $46,000 of additions in the period for exploration and evaluation (30 June 2017:
$2,853,000).
Ultimate recoupment of the exploration and evaluation assets is dependent on the successful
development and commercial exploitation or sale of the respective mining areas.
17.
DEVELOPMENT PROPERTIES
Development properties
Total development properties
Reconciliation of carrying amounts
Balance at 1 July
Additions
Disposals
Impairment of development properties
Balance at 30 June
1,250
1,250
1,600
1,600
1,600
2,012
-
-
(350)
1,250
-
-
(412)
1,600
Impairment Assessment
Management engaged the services of an independent property valuer who performed a net realisable
value assessment which resulted in recognition of a $350,000 impairment to development properties
(2017: $412,000). The valuation is based on comparable sales in the same area (level 3 fair value
hierarchy).
51
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
18.
PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements at cost
Accumulated depreciation
Total leasehold improvements
Freehold land and buildings at cost
Accumulated depreciation
Total freehold land and buildings
Plant & equipment at cost
Accumulated depreciation
Total plant & equipment
2018
$000
2017
$000
14
(6)
8
887
(33)
854
68
(48)
20
660
(568)
92
887
(25)
862
983
(959)
24
Total property, plant and equipment
882
978
Reconciliation of carrying amounts
Leasehold Improvements
Balance at 1 July net of accumulated depreciation
Additions
Disposals
Depreciation
Balance at 30 June
Freehold land and buildings
Balance at 1 July net of accumulated depreciation
Depreciation
Balance at 30 June
Plant and equipment
Balance at 1 July net of accumulated depreciation
Disposals
Depreciation
Balance at 30 June
92
-
-
(84)
8
862
(8)
854
24
-
(4)
20
265
1
(9)
(165)
92
870
(8)
862
587
(547)
(16)
24
Total property, plant and equipment
882
978
52
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
19.
TRADE AND OTHER PAYABLES
Trade payables and accruals
Employee related payables
GST payable
Other payables
Total trade and other payables
2018
$000
2017
$000
755
2
11
4,689
5,457
732
20
18
4,695
5,465
Other payables includes $4,875,000 of purchase consideration due to a Cachoeiras do Binga joint
venture partner less the share of exploration costs of $186,000 incurred by the Group in accordance
with the terms of the joint venture agreement (30 June 2017: $4,875,000 less share of exploration
costs of $180,000). Under the terms of the cash consideration agreement VDM shall pay the full
remaining balance to the Cachoeiras do Binga joint venture partner within 21 days of completion of
VDM’s next significant capital raising or when VDM’s financial status has a significant improvement.
a) Fair values
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 26.
c) Entities subject to class order relief
VDM Group Limited provides financial guarantees to its subsidiaries by way of a Deed of Cross
Guarantee (refer to note 27(b)).
53
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
20.
INTEREST BEARING LOANS AND OTHER BORROWINGS
Shareholder loan (AUD denominated)
Shareholder loan (USD denominated)
Total interest bearing loans and other borrowings
a)
Fair values
2018
$000
2017
$000
5,096
4,704
9,800
4,826
4,272
9,098
The carrying amount of current interest-bearing loans approximates 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
26.
c) Financing facilities
Credit cards
Bank guarantees
Balance at 30 June 2018
20
18
38
40
977
1,017
The bank guarantee facility limit is equal the amount of bank guarantees issued and outstanding in
favour of VDM. The credit card facility is available subject to annual review.
d) Shareholder loans
During the period VDM’s largest shareholder, Australia Kengkong Investments Co Pty Ltd
(“Kengkong”), had no further advances to VDM under the terms of a Framework Loan Agreement
(“FLA”) (2017: AUD $1,500,000 and AUD $2,799,000 [USD $2,134,000]). At 30 June 2018,
$9,800,000 (2017: $9,098,000) shareholder loans were due. The FLA contemplates the parties
entering into a secured one-year 6% per annum loan facility that will incorporate the FLA liabilities.
Until that occurs, the FLA advances, plus accrued interest of 6% per annum are immediately
repayable in the denominated currency when demanded by Kengkong. An interest rate of 20% per
annum applies if VDM defaults on the loan.
The 30 June 2018 shareholder loan balances include $533,000 of interest accrued in the year (2017:
$452,000 of accrued interest) and $169,000 of unrealised foreign exchange losses recorded in the
year (2017: $71,000 of unrealised foreign exchange gains). As part of the AGM held on November
28 2016, Kengkong is entitled to first ranking security over the assets and properties of the Group.
54
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
21.
PROVISIONS
Current
Employee entitlements
Construction warranties
Onerous contracts
Other construction contract obligations
Other provisions
Total current provisions
Non-Current
Employee entitlements
Onerous contracts
Other provisions
Total non-current provisions
2018
$000
2017
$000
88
509
2
217
322
125
605
885
222
184
1,138
2,021
34
-
-
34
24
-
24
48
Total provisions
1,172
2,069
a) Movement in provisions
2018
Employee entitlements
Construction warranties
Onerous contracts
Other construction contract obligations
Other provisions
Total provisions
Balance
1 Jul
2017
$000
Arising
during
the year
$000
Utilised
during
the year
$000
Unused
amounts
reversed
$000
Balance
30 Jun
2018
$000
149
605
885
222
208
2,069
64
-
-
17
205
286
(91)
(41)
(786)
(6)
(14)
-
(55)
(97)
(16)
(77)
122
509
2
217
322
(938)
(245)
1,172
2017
Employee entitlements
Construction warranties
Onerous contracts
Other construction contract obligations
Other provisions
Total provisions
Balance
1 Jul
2017
$000
Arising
during
the year
$000
Utilised
during
the year
$000
Unused
amounts
reversed
$000
Balance
30 Jun
2018
$000
205
567
1,426
297
268
114
122
487
47
-
(170)
-
(61)
(23)
(902)
(126)
(37)
(60)
(85)
-
149
605
885
222
208
2,763
770
(1,230)
(234)
2,069
55
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
21.
PROVISIONS (CONTINUED)
b)
Nature and timing of provisions
Construction warranties are estimated costs for warranty claims on completed construction projects
based on past experience. It is estimated that these costs will be incurred in the next financial
year.
Onerous contracts are estimated net unavoidable costs of meeting obligations under onerous
contacts.
Other construction contract obligations are estimated costs, other than warranty claims, related to
construction contracts.
Other provisions are mainly comprised of remaining deductibles under insurance claims. The
insurance deductible portion is estimated to be incurred in the next financial year.
Provisions estimated to be settled after the end of the next financial year are classified as non-
current. Provisions estimated to be settled in the next financial year are classified as current.
22.
CONTRIBUTED EQUITY
a) Ordinary shares
Issued and fully paid
Balance at 1 July 2016
Share issues
Balance at 1 July 2017
Share Issues
Capital raising costs
Balance at 30 June 2018
2018
$000
2017
$000
292,710
288,722
Number of
Shares
$000
5,477,660,952
288,722
-
-
5,477,660,952
288,722
400,000,000
-
4,000
(12)
5,877,660,952
292,710
b) 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.
c) 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.
In the short to medium term the Company is focussed on maintaining an appropriate level of
working capital. Until achievement of profitable operations and positive cash flow, the Directors do
not anticipate paying dividends.
The level of dividends paid 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.
56
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
23.
ACCUMULATED LOSSES AND RESERVES
a) Movement in accumulated losses
Balance at 1 July
(289,364)
(286,133)
Net loss attributable to members of VDM Group Limited
(2,881)
(3,231)
Balance at 30 June
(292,245)
(289,364)
2018
$000
2017
$000
b) Movement in equity reserve
Balance at 1 July
Balance at 30 June
457
457
457
457
Equity reserve
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 did not result in a loss of control. The reserve is attributable to the equity
of the parent.
CASHFLOW STATEMENT INFORMATION
24.
Reconciliation of net profit after tax to the net cash flows from operations
2018
$000
2017
$000
Net loss after tax
Non-cash items:
Depreciation and amortisation
Impairment of assets
Profit on disposal of property, plant and equipment
Share of equity accounted loss
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventory
Increase in trade and other creditors
Decrease in provisions
(2,881)
(3,231)
96
350
(9)
-
140
164
406
(654)
189
412
(1,256)
409
(324)
(109)
90
(560)
Net cash flows used in operating activities
(2,388)
(4,380)
57
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
25.
RELATED PARTY DISCLOSURE
Note 3 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) Due from associates
At 30 June 2018, the amount due from associates is Nil (2017: Nil)
c) Transactions with key management personnel
Luk Hiuming
As at 30 June 2018, VDM owed $143,000 to Mr Luk which related to directors’ fees that have not
been paid on his instruction. No interest accrues and the outstanding amount is due when
demanded by Mr Luk.
Kengkong
On 27 January 2016, VDM entered into a Framework Loan Agreement (“FLA”) with its largest
shareholder, Australia Kengkong Investments Co Pty Ltd (“Kengkong”). The FLA contemplates the
parties entering into a secured one-year 6% loan facility that will incorporate the FLA liabilities.
Until that occurs, the FLA advances plus interest accrued at 6% per annum are immediately
repayable in the denominated currency when demanded by Kengkong. VDM’s Non-executive
Chairman Mr Luk controls Kengkong, refer to note 20 for full detailed disclosure on outstanding
balance.
H&H
As at 30 June 2018, VDM owed H&H Holdings Australia Pty Ltd (“H&H”) $75,000 of underwriting
commissions for the Company’s December 2013 Rights Issue (2017: $75,000) No interest accrues
and the outstanding amount is due when demanded by H&H. Dr Hua, VDM’s Executive Director of
Mining controls H&H.
d) Transactions with related parties other than key management personnel
There were no transactions entered into with related parties other than key management personnel
during the years ended 30 June 2018, and 30 June 2017, except for those noted above.
e) Compensation for key management personnel
Short term
Long term
Post-employment
Total compensation
2018
$
2017
$
485,384
1,019,277
2,875
5,919
39,788
74,470
528,047
1,099,666
58
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
26.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
a) Financial assets
Cash and cash equivalents (note 11)
Security deposits (note 12)
Trade and other receivables (note 13)
Total Financial Assets
b) Financial liabilities
3,954
38
53
1,366
1,017
193
4,045
2,576
Current interest-bearing loans and borrowings
6% secured interest-bearing loan from Kengkong (note 20)
Total current interest-bearing loans and borrowings
9,800
9,800
9,098
9,098
c) Other financial liabilities
Other financial liabilities, other than interest-bearing loans
and borrowings
Trade and other payables (note 19)
Total other financial liabilities
5,457
5,457
5,465
5,465
d) Financial instruments risk management objectives and policies
The Group’s principal financial liabilities, comprise of loans and borrowings and trade and other
payables. The main purpose of these financial liabilities is to finance the Group’s operations and to
provide guarantees to support its operations. The Group’s principal financial assets include trade
and other receivables, and cash and security deposits that derive directly from its operations.
Credit, liquidity and market risk (including interest rate and foreign exchange risk) arise in the
normal course of 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, loans, 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.
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. Shareholder loans
bear a fixed interest rate therefore they are not exposed to any interest rate risk.
59
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
26.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
The financial instruments exposed to variable interest rate risk are as follows:
Financial assets
Cash and cash equivalents (note 11)
Security deposits (note 12)
Balance at the end of the year
3,954
38
3,992
1,366
1,017
2,383
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)
40
(40)
24
(24)
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.
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. VDM has a concentration trade receivables credit risk
with its major customer (refer to “major customers” in note 4). Financial instruments are held
amongst reputable financial institutions thus minimising the risk of default of these counterparties.
The maximum exposure to credit risk at the reporting date was as follows:
Cash and cash equivalents (note 11)
Security deposits (note 12)
Trade and other receivables (note 13)
2018
$000
2017
$000
3,954
38
53
1,366
1,017
193
4,045
2,576
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.
60
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
26.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
The financial instruments exposed to US dollar foreign exchange rate risk are as follows:
Financial assets
Cash and cash equivalents
Balance at the end of the year
Financial liabilities
132
132
131
131
Interest bearing loans and other borrowings (note 20)
4,704
4,272
The following table summarises the sensitivity on US dollar foreign exchange rate exposures, in
existence at the balance sheet date. The sensitivity is based on foreseeable changes over a
financial year.
Post-tax gain / (loss)
+ 10% (100 basis points)
- 10% (100 basis points)
Liquidity risk
(457)
457
(414)
414
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 and exploration
expenditures through operating cash flow and equity capital raisings.
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 projects which have not been recognised as income. The table also
excludes contractual commitments classified as operating leases (refer to note 28). 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 2018.
2018
$000
2017
$000
Repayment obligations in respect of loans, hire purchase facilities and trade and other payables are
as follows:
Not later than one year
15,257
14,563
Later than one year but not later than two years
Later than two years but not later than three years
Later than three years
-
-
-
-
-
-
15,257
14,563
61
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
26.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
The following table reflects a maturity analysis of financial liabilities.
Total
$000
0-60
Days
$000
61 Days
- 1 Year
$000
1- 5
Years
$000
>5
Years
$000
Year ended 30 June 2018
Financial liabilities
Trade and other payables (note
19)
Interest bearing loans and other
borrowings (note 20)
5,457
768
4,689
9,800
9,800
-
Total financial liabilities
15,257
10,568
4,689
Year ended 30 June 2017
Financial liabilities
Trade and other payables (note
19)
Interest bearing loans and other
borrowings (note 20)
5,465
770
4,695
9,098
9,098
-
Total financial liabilities
14,563
9,868
4,695
e) Fair value
-
-
-
-
-
-
-
-
-
-
-
-
At 30 June 2018 there are no financial assets or financial liabilities which are accounted for at fair
value. Carrying amounts approximate the fair value of financial assets and financial liabilities
presented in the Consolidated Statement of Financial Position.
f) Changes in liabilities arising from financial activities
1 Jul
2017
Cash flows
$000
$000
Foreign
exchange
movement
$000
Accrued
Interest
Other
30 Jun
2018
$000
$000
$000
Year ended 30
June 2018
Current interest-
bearing loans and
borrowings
Total liabilities
from financing
activities
Year ended 30
June 2017
Current interest-
bearing loans and
borrowings
Total liabilities
from financing
activities
9,098
-
169
533
9,098
-
169
533
-
-
9,800
9,800
1 Jul
2016
$000
Cash flows
$000
Foreign
exchange
movement
$000
Accrued
Interest
Other
30 Jun
2017
$000
$000
$000
4,421
1,500
(74)
452
2,799
9,098
4,421
1,500
(74)
452
2,799
9,098
The ‘Other’ column includes an amount paid on an outstanding payable by Kengkong on behalf of
the Group (refer note 20d).
62
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
27.
PARENT ENTITY INFORMATION
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated loss
Option reserve
Total shareholders’ equity
2018
$000
2017
$000
3,989
16,045
15,089
15,123
1,772
14,352
14,488
14,536
292,710
288,722
(292,245)
(289,364)
457
922
457
(185)
Loss of parent entity
(2,881)
(3,231)
Total comprehensive loss of the parent entity
(2,881)
(3,231)
a)
Bank guarantees
As at 30 June 2018, VDM Group Limited had $18,000 of bank guarantees on issue as security for
leased properties (2017: $403,000).
As at 30 June 2018, VDM Group Limited was exposed contingent liabilities of AOA 53,313,000 related
to bank guarantees provided to the Angolan government for contractual obligations under the
Cachoeiras do Binga Mining Investment Contract. AOA is the currency of the Republic of Angola and
the 30 June 2018 contingent amount translates to AUD $291,000 (2017: AUD $418,000).
b)
Guarantees in relation to debts of subsidiaries
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 VDM Group Limited
and the Closed Group 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 2018 (2017: nil).
63
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
28.
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
2018
$000
2017
$000
13
-
-
13
810
277
-
1,087
b) Property, plant and equipment commitments
VDM has no capital expenditure commitments at 30 June 2018 (2017: nil).
c) Legal claims
The following matters could lead to VDM incurring material losses if the claimants are successful
with their claims:
Construction claim
VDM and a customer have offsetting claims relating to a terminated construction project in Western
Australia in 2013 and neither party has taken legal action to enforce their claims. The amount and
expected timing of the claims is not disclosed as this could prejudice VDM in the dispute.
Mechanical services consulting claim
During the period, VDM received notification of a claim related to consulting work on the installation
of mechanical services for two commercial buildings located in Western Australia during 2008 and
2009. As a result VDM has provided an amount equal to its maximum exposure of $250,000
relating to this matter under its insurance policy less legal costs to date of $45,000.
d) Bank guarantees
As at 30 June 2018, VDM had $18,000 of bank guarantees on issue as security for leased
commercial property and to guarantee performance of contracts (2017: $977,000).
29.
EVENTS AFTER THE REPORTING PERIOD
On 19 July 2018, the Company announced the appointment of Dr Chris Yu to the position of
Exploration and Mine Manager on a permanent basis. Pursuant to the terms of Dr Yu’s
remuneration arrangements, Dr Yu was issued 52 million options with an exercise price of 1.6 cents
and an expiry date of 31 July 2021.
Apart from the above, there have been no significant events occur after 30 June 2018 date and up
to the date of this report.
64
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30.
AUDITOR’S REMUNERATION
Amount received or receivable by Ernst & Young Australia for:
Auditing financial statements
Non-audit fees (tax compliance & other advisory)
Total auditor's remuneration
67,783
62,744
-
-
67,783
62,744
2018
$
2017
$
31.
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
2017
2018
*
VDM Trading Pty Ltd
VDM Mining Pty Ltd
VDM Equipment Pty Ltd
VDM Construction Pty Ltd
Keytown Constructions Pty Ltd
VDM Developments Pty Ltd
*
*
*
*
*
* VVDM Engineering (Eastern Operations) Pty Ltd
*
Burchill VDM Pty Ltd
* VVDM Group Limited International (Dubai
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
*
Branch) Pty Ltd
BCA Consultants Pty Ltd
VDM Africa Holidings Ltd
The EB Trust
Australia
British Virgin Islands
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
a) 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.
65
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
31.
CLOSED GROUP CLASS ORDER DISCLOSURES (CONTINUED)
The consolidated statement of comprehensive income and statement of financial position of the
entities that are members of the Closed Group are as follows:
b) Statement of comprehensive income
Closed Group
2018
$000
2017
$000
Loss from continuing operations before income tax
(2,532)
(3,477)
Income tax expense
-
-
Loss from continuing operations after income tax
(2,532)
(3,477)
Profit from discontinued operations after income tax
-
659
Loss for the year
Non-controlling interest
Dividends paid
(2,532)
(2,818)
-
-
-
-
Accumulated losses at the beginning of the year
(285,845)
(283,027)
Accumulated losses at the end of the year
(288,377)
(285,845)
66
VDM GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
31.
CLOSED GROUP CLASS ORDER DISCLOSURES (CONTINUED)
c) Statement of financial position
ASSETS
Current Assets
Cash and cash equivalents
Security deposits
Trade and other receivables
Inventory
Total Current Assets
Non-Current Assets
Security deposits
Exploration and evaluation assets
Property, plant and equipment
Total Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Total Current Liabilities
Non-Current Liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Equity reserve
Retained losses
Total Equity
Closed Group
2018
$000
2017
$000
3,952
38
5,174
-
9,164
-
11,174
882
12,056
21,220
1,363
198
5,314
165
7,040
819
11,128
978
12,925
19,965
5,458
9,800
1,138
5,464
9,098
2,021
16,396
16,583
34
34
16,430
4,790
48
48
16,631
3,334
292,710
288,722
457
457
(288,377)
(285,845)
4,790
3,334
67
VDM GROUP LIMITED
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2018
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
2018 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(b);
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 2018; and
subject to the satisfactory achievement of the matters described in note 2(d), as at the date
of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in Note 31 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
Executive Director of Mining
Perth, Western Australia
4 October 2018
68
VDM GROUP LIMITED
INDEPENDENT AUDIT OR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2018
INDEPENDENT AUDITOR’S REPORT
69
VDM GROUP LIMITED
INDEPENDENT AUDIT OR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2018
70
VDM GROUP LIMITED
INDEPENDENT AUDIT OR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2018
71
VDM GROUP LIMITED
INDEPENDENT AUDIT OR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2018
72
VDM GROUP LIMITED
INDEPENDENT AUDIT OR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2018
73
VDM GROUP LIMITED
ASX ADDITIONAL INFORMATION
FOR THE YEAR ENDED 30 JUNE 2018
ASX ADDITIONAL 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 27 September 2018.
TWENTY LARGEST SHAREHOLDERS
Shareholder
Australia Kengkong Investments Co Pty Ltd
H & H Holdings Australia Pty Ltd
Thriving Treasure Limited
CF International Development Limited
Sino Plant Holding Limited
Citicorp Nominees Pty Limited
Seawire Limited
Golden Bloom Investments Pty Ltd
J P Morgan Nominees Australia Limited
Miss Xiaoli Jia
Miss Shan He
Mr Yuejin Li & Mr David Shuo Li
Ms Chang Li
BNP Paribas Nominees Pty Ltd
Myoora Pty Ltd
Mr Aaron Francis Quirk
Mr Brian Hon Leung Lee
Mr Van Tuan Vo
Miss Fang Ning Du
HSBC Custody Nominees
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