Sedgman Limited Annual Report 2011
Limited
Annual Report 2011 For the year ended 30 June 2011 ABN 86 088 471 667
For personal use only use personal For Innovative engineering brought to life
Sedgman Limited Annual Report 2011 1 About Sedgman Sedgman Limited (ASX: SDM) was established in 1979 and is a leading provider of mineral processing and associated infrastructure solutions to the global resources industry. Specialising in the design, construction and operation of coal handling and preparation plants (CHPPs), Sedgman is recognised internationally for its mineral processing and materials handling technologies. Sedgman listed on the ASX in June 2006. The company has almost 1,000 personnel and services the global coal and metalliferous markets by offering innovative Projects and Operations capabilities. Head Office is in Brisbane with other Australian offices in Perth, Townsville and Mackay. International offices are established in Beijing, Shanghai, Ulaanbaatar, Santiago, and Johannesburg, targeting the growth regions of China/Mongolia, South America and southern Africa. Sedgman won both the Premier of Queensland’s Export Award and the Australian Export Award for the Large Services category in 2010 in recognition of the company’s success and innovation in exports. Notice of Annual General Meeting The Annual General Meeting of Sedgman Limited will be held at The Chifley at Lennons, 66 Queen Street Mall, Brisbane, Queensland on Monday 28 November 2011 at 10am. A separate Notice of
Meeting and Proxy form will be sent to shareholders. For personal use only use personal For
Front Cover: Lake Vermont 800 t/h CHPP, Bowen Basin, Queensland, Australia. Client: Lake Vermont Resources. Inside Cover: Bengalla 1,200 t/h CHPP, Hunter Valley, New South Wales, Australia. Client: Bengalla Mining Company. 2 Sedgman Limited Annual Report 2011 SEDGMAN LIMITED ANNUAL REPORT 2011 Table of Contents
The Year in Review 1 FY2011 Highlights 1 Chairman’s Message 3 Report from the CEO and Managing Director 5 Company Overview and Strategy 7 About Sedgman 9 Strategic Direction 10 Corporate Structure 11 Business Model 12 Business Activity 13 Projects Business Unit 15 Operations Business Unit 16 Sedgman in Australia 17 Sedgman in The Americas 19 Sedgman in Africa 20 Sedgman in Asia 21 Global Opportunity 22 One Sustainable Company 23 People and Values 25 Health, Safety and Environment 27 Community 28 Innovation 29 Feature Article: Coal Stockpiles and Desert Dust 31 Corporate Governance 33 Board of Directors 35 Senior Executive Group 37
For personal use only use personal For Financial Statements 39 ASX Additional Information 111 Corporate Directory 113
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1 | The Year in Review FY2011 Highlights
Achievements Operational Highlights ► Continued market leadership with greater ► Organisational review complete with Coal and than 50% market share of coal handling and Metals divisions merged into Operations and preparation plant (CHPP) projects in Australia Projects business units (formerly Operations and ► Involved in the delivery of over $2.0 billion of Engineering Services) CHPPs over the past 7.5 years ► Strong performances across Operations ► Processed 19.85 Mt/a of coal under 7 business unit as it diversifies and expands its operations contracts and 8.68 Mt/a of ore under business model 5 operations contracts ► Record revenue levels in Projects business unit, ► Progressed global growth strategy with major with over 10 major projects underway projects in all operational regions including ► Studies and early engineering at record levels for Mongolia and Mozambique – two of the world’s Projects business unit most significant emerging coal regions ► Personnel numbers increased by 29.5% to 988 ► Delivered strong financial performance with ► US$90 million EPC Boseto copper project under increases in annual revenue, reported NPAT and construction in Botswana shareholder dividends ► Delivered Ukhaa Khudag (UHG) Stage 1 CHPP ► Included in the ASX 300 Index, a ranking of project in Mongolia and subsequently awarded Australia’s largest ASX-listed companies US$12 million operational readiness and ► Successfully recruiting, retaining and motivating operations management contracts for the plant our people to facilitate operational growth ► Awarded $19 million EPCM contract for UHG ► Recognised for excellence at both the Stage 2 CHPP Queensland and Australian Export Awards with ► Theiss Sedgman Joint Venture (TSJV) won $145 wins in the Large Services category. million Lake Vermont CHPP expansion contract in Queensland’s Bowen Basin Challenges ► TSJV won $85 million Bengalla CHPP upgrade contract in New South Wales ► Coal operations margins impacted by record rainfall in the Bowen Basin forcing closure of ► Awarded $18.5 million CHPP design contract mines, which have since re-opened and $30 million procurement contract for Maules Creek in New South Wales’ Gunnedah Basin. ► Metal operations challenged by high maintenance costs and poor availability, but improved in Q4 following a Q3 operational review ► Engineering margins contracted due to three projects, which are now substantially complete ► Leadership team transition successfully completed with appointment of new Chief
Executive Officer and Chief Financial Officer. For personal use only use personal For
1 SedgmanLake Lindsay Limited 700 t/hAnnual CHPP, Report Bowen 2011 Basin, Queensland, Australia. Client: Anglo American Metallurgical Coal. Financial Results Outlook ► Combined revenue of $555.1 million1, ► Company well positioned in the key international an increase of 65.1% on FY2010 results markets of southern Africa, China/Mongolia and ► NPAT (reported) of $26.0 million, an improvement the Americas with continued opportunities for of 4.2% on FY2010 growth ► Final dividend declared of 4.0 cps fully franked. ► Global outlook for coal and metals projects Total FY2011 dividend is 7.0 cps fully franked expected to remain conducive to Sedgman’s (FY2010 6.5 cps fully franked) short, medium and longer-term strategies ► Strong balance sheet with Net Cash of ► One-year pipeline contains 62 projects totalling $13.9 million. $2.2 billion and three-year pipeline a record $7.6 billion
► Order book at June 2011 totals $606 million2, including $252 million in Projects (executable over 12–18 months), and $354 million in Operations (contract terms vary from 1 to 10 years) ► Order book and one year pipeline combined has grown by $440 million on FY2010.
1 This represents revenue of Sedgman together with Sedgman’s share of revenues from Joint Ventures 2 Excludes major contracts signed after 30 June 2011 which included the US$24 million EPCM contract for stage 3 at Energy Resource’s UHG coal mine, and the A$22.5 million CHPP improvement contract at the Bowen Basin’s Middlemount coal mine.
Order Book and One Year Pipeline EBITA Performance
$M $M 3,000 2.8b 50 45 2,500 2.4b 2.3b 40
2,000 35 30 1,500 25 20 1,000 15 500 10 5 0 0 June 10 Dec 10 Jun 11 2007 2008 2009 2010 2011
1 year pipeline H1 H2
Projects Order Book
Operations Order Book For personal use only use personal For
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1 | The Year in Review Chairman’s Message
FY2011 was a year of delivery. Sedgman successfully delivered projects in all four operational regions – Australia, Africa, Asia and the Americas. In doing so, Sedgman demonstrated that we are truly capable of servicing projects anywhere in the world.
This success meant Sedgman kept true to our In Mozambique, Sedgman neared completion commitment to deliver results for clients as well as of engineering and procurement delivery at value for shareholders. By financial year’s end, the Benga CHPP for Riversdale Mining and followed company was in a strong position in our home base its earlier detailed design of the world’s largest of Australia and continuing to grow and mature in coal preparation plant at Moatize by providing delivering projects through our international regions. construction and commissioning support for Companhia Vale de Rio Doce (“Vale”). In Australia, Sedgman retained its technological and market leadership with greater than 50% market In South Africa, Sedgman progressed towards share of CHPP projects. completion of CHPP design and construction services for Xstrata Coal’s ATCOM East project Key contracts delivered or progressed to near near Johannesburg. completion during the financial year included Middlemount CHPP in Queensland’s Bowen Basin for Middlemount Coal and Narrabri CHPP in New Perhaps the best example in FY2011 South Wales’ Gunnedah Basin for Whitehaven Coal. of Sedgman’s ability to meet the Sedgman also commenced interim operations at challenges and deliver for clients and Middlemount upon completion of the plant with full operations due to commence in Q3 FY2012. shareholders was in Asia, with the Further in Australia, Sedgman secured major development of the first coal mine contracts through its successful Thiess Sedgman in Mongolia, the Ukhaa Khudag Joint Venture, winning the $85 million Bengalla (UHG) project for Mongolian Mining CHPP upgrade for Bengalla Mining Company in New South Wales’ Hunter Valley and the $145 Corporation (MMC). million Lake Vermont CHPP expansion for Lake Vermont Resources in the Bowen Basin. Sedgman Sedgman’s successful delivery of UHG Stage 1 also won $18.5 million CHPP design and $30 million CHPP project in Mongolia’s remote, unforgiving procurement contracts for Aston Resources’ Maules South Gobi Desert resulted in it being awarded Creek in the Gunnedah Basin. Stage 2 CHPP engineering, procurement and
For personal use only use personal For construction management contracts, as well as its In the Americas Sedgman moved steadily towards first international operations management contract. commissioning the Bocamina coal handling plant The Stage 2 CHPP of the UHG project is at an and also commenced a range of feasibility studies advanced stage of construction. that have the potential to turn into projects. I acknowledge staff members who continue to Sedgman’s first African metals project, the Boseto work in the harshest conditions and around the copper project in Botswana, progressed on clock to deliver this project on schedule. Sedgman schedule with strong support out of the company’s engineering design is setting the standard for future Perth office. developments in Mongolia.
3 Sedgman Limited Annual Report 2011 Winning repeat contracts in two of the world’s most exciting emerging coal regions is a significant Sedgman’s people are its strength achievement for Sedgman and testament to and the company’s strong market its ability to develop strong client relationships. Sedgman has also gained invaluable experience position and future pipeline of delivering projects in some of the world’s most work is testament to the depth of remote locations with extreme weather conditions. talent within the business. This has Sedgman’s achievement in international markets always been the key to Sedgman’s was recognised when it won the Large Services category at both the 2010 Australian National success. Export Awards and the Premier of Queensland’s Export Awards. This was another great company Sedgman appointed Peter Richards as Director milestone and I thank all staff for their hard work in December 2010, after an extensive search and commitment to Sedgman’s success both in process. Peter brings over 30 years’ experience in Australia and globally. the resources and industrial sector. I am confident In a year that could easily have spelt ‘D for disaster’ that Sedgman has the best equipped Board and as many companies were devastated by the Executive team to facilitate ongoing international Queensland floods and cyclones, Sedgman, while expansion. affected, still kept the focus firmly on ‘D for delivery’ Over the years, Sedgman has built strong both at home and abroad – a focus which has relationships with its clients and shareholders and delivered solid results for our shareholders remains committed to developing quality business and clients. relationships. I thank all clients for their Sedgman’s inclusion in the ASX 300 reflects our continued support. company’s growth and strength. Australian and Sedgman must continue to invest in training and global share markets continue to experience developing its staff to attract and retain the best volatility which is currently affecting all companies, employees to enable it to deliver the considerable including ours. However our strong business body of work in the pipeline. fundamentals continue to underpin our business and our outlook. The directors were pleased to Sedgman’s strategy is working, it is in a position declare a fully franked dividend of 4.0 cents per of strength and it is delivering. I remain extremely share, taking the full year dividend to 7.0 cents per optimistic about the future of our company and the share fully franked, compared with FY2010 6.5 many exciting opportunities that we have identified. cents per share fully franked. FY2011 saw changes in the company’s Executive group. The Board accepted the resignation of Mark
For personal use only use personal For Read in November 2010 for personal reasons. I was extremely pleased to announce the appointment of Nick Jukes as the new CEO and Managing Director Russell Kempnich in December 2010. Nick brings to Sedgman a Chairman wealth of industry knowledge, experience and skills and has a great understanding of the business. He is the right man to lead Sedgman through its next stage of growth.
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1 | The Year in Review Report from the CEO and Managing Director
In my first report as Sedgman CEO and Managing Director, I would like to acknowledge the staff and leadership team for their commitment and support in delivering a strong performance for FY2011.
We have achieved strong operational results, We maintained our leadership position in the identified solid new opportunities for our project Australian market and advanced our position pipeline, further strengthened our business internationally. partnerships and successfully reviewed and In Australia, Sedgman secured over $310 million in improved our business structure to facilitate contracts over the past 12 months, including more future growth. than $48 million for a design and procurement Sedgman’s revenue increased by 65% to $555.1 contract for a CHPP at Aston Resources Limited’s million, including revenue from our joint venture, Maules Creek project. and our reported Net Profit After Tax increased The Thiess Sedgman Joint Venture was awarded 4.2% to $26 million. an $85 million contract to upgrade the Bengalla At June 30, our order book was $606 million and CHPP and a $145 million contract for the Lake our three-year project pipeline had increased by Vermont CHPP expansion. $1.3 billion to $7.6 billion. This pipeline includes Sedgman’s global expansion strategy continues to a strong one-year pipeline of 62 projects with deliver. In FY2011 the total value of contract work contract values totalling $2.2 billion. Our combined for the Ukhaa Khudag project in Mongolia was order book and one-year pipeline grew by $440 greater than $75 million. million over the past 12 months. Sedgman continues to expand in metals, where Sedgman recorded particularly strong results in the we are recognised as supporting major clients in second half of the year in spite of the challenges both Projects and Operations. The Boseto copper caused by adverse weather experienced in project for Discovery Metals and Phu Kham copper Queensland. These results show that Sedgman’s expansion project in Laos are showcasing our strategy to diversify into global coal and metals metals capability. markets is working and creating value for We continue to undertake operations for Gold shareholders. Fields Limited at Agnew gold mine, for BHP Billiton at Cannington silver/lead/zinc mine, and for Xstrata at Ernest Henry copper mine, McArthur River and The recent announcement of Mt Isa lead/zinc mines. There are major crushing Sedgman’sonly use personal For involvement in the and screening opportunities with both existing and BHP Billiton Project Hub is the future metals clients. forerunner to further major contract Under a four-year agreement with BHP Billiton, in place until June 2015, Sedgman is the preferred announcements in FY2012 and supplier for Definition, Engineering, Construction a significant achievement for and Commissioning Support and Testing services Sedgman. for a pipeline of metallurgical coal projects managed through the BHP Billiton Project Hub in Brisbane.
5 Sedgman Limited Annual Report 2011 In FY2011 Sedgman reviewed its organisational Sedgman will continue to pursue mergers and structure to streamline its services, capitalise acquisitions that align with our business strategy. on strengths and provide greater support to the The strength of our order book and project pipeline regions in which we operate. We have combined together with our strong business partnerships and our coal and metals engineering divisions into one solid opportunities for growth underpins optimism global Projects business unit and our metal and for the year ahead, and beyond. coal operations under a single global Operations banner. This restructure will deliver better results for Looking ahead, Sedgman is Sedgman’s clients, and ensure consistency across broadening its range of services project delivery and better sharing of knowledge and resources. within materials handling and pushing into new sectors and To facilitate the restructure we have appointed Executive General Managers in each of our commodities including infrastructure regions. We have also appointed Alan Ainsworth to and iron ore. Executive General Manager Projects and Michael Carretta to Executive General Manager Operations. Alan and Michael work across Projects and In closing, I want to again acknowledge Sedgman’s Operations globally driving consistent best practice staff and thank them for their dedication to the across all commodities. company. Sedgman is committed to investing in its people globally to ensure a loyal and skilled This year Sedgman introduced Global Forums to workforce to meet future demand. I would also like target common streams across the business and to thank clients and shareholders for their formalise the process of capturing knowledge. steadfast support. Our home region, Australia, plays a key role in supporting the growth and development of our offices globally. Innovation is at the heart of Sedgman’s success and why we are recognised as a world leader in coal processing technology. We will continue to enhance our technology leadership through initiatives such as the Sedgman Innovation Nick Jukes Global Network (SIGN). SIGN has become a core CEO and Managing Director business process and Sedgman is receiving record numbers of innovative ideas from employees, with proven processes implemented within the
For personal use only use personal For business. Sedgman focuses on creating a culture of innovation and continuous improvement that sets us apart from competitors. A key to continued success is the Sedgman Business Model – whereby we are involved in the life cycle of a project from pre-feasibility, design and construction to operations, creating a process of continuous learning which enables us to deliver the best solution for clients.
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Dikulushi Copper Silver Mine, Democratic Republic of the Congo. Client: Anvil Mining Limited. 7 SedgmanDikulushi CopperLimited Copper/SilverAnnual Report 2011 Mine, Democratic Republic of the Congo. Client: Anvil Mining Limited. Company Overview and Strategy About Sedgman Strategic Direction Corporate Structure
2 Business Model For personal use only use personal For
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2 | Company Overview and Strategy About Sedgman
Sedgman provides multi-disciplinary engineering, project delivery as well as operations services to the global resources sector, while maintaining a major focus on health, safety and the environment.
Sedgman was established in Brisbane in 1979 by The Thiess Sedgman Joint Venture the late John Sedgman. The company listed on (TSJV) the ASX in June 2006, and has grown to become a truly international company with 988 personnel In 2002, Sedgman entered into a 50% joint venture globally. partnership with Thiess Pty Ltd, one of the largest construction, mining and services providers in the Sedgman is the market leader in the design, Asia-Pacific region. The TSJV was created as a construction and operation of CHPPs in Australia, commercial delivery vehicle for large engineering and has gained international recognition for its coal services projects throughout Australia. processing and materials handling technologies. Sedgman innovatively integrates the best solutions The TSJV is Sedgman’s only joint venture to deliver some of the most reliable and productive partnership, under which it is continuing to minerals plants in the world. successfully deliver large scale CHPP projects for clients in Queensland and New South Wales, Sedgman’s success is largely due to the strong, Australia. Projects currently being delivered mutually rewarding long-term relationships it builds by the TSJV include Lake Vermont CHPP 2 in with clients, working in consultation with them to Queensland’s Bowen Basin, and Bengalla CHPP maximise the yield and optimise their return Upgrade in New South Wales. on investment. Sedgman’s success was recognised when it won the Large Services categories of both the 2010 Premier of Queensland’s Export Awards and the 2010 Australian Export Awards. The Sedgman Head Office is in Brisbane with other Australian offices in Mackay, Townsville and Perth. It has established international offices in Beijing and Shanghai (China), Ulaanbaatar (Mongolia), Santiago (Chile) and Johannesburg (South Africa), targeting the growth regions of China/Mongolia, the Americas and southern Africa. To facilitate Sedgman’s growth, the company has integrated its coal and metals divisions into Projects and Operations business units which sit across all regions driving best practice for its
clients across all commodities. For personal use only use personal For Sedgman works closely with blue chip and emerging mining clients to tailor fully-integrated coal and metals processing solutions.
Middlemount 400 t/h CHPP, Bowen Basin, Queensland, Australia. Client: Middlemount Coal.
9 Sedgman Limited Annual Report 2011 2 | Company Overview and Strategy Strategic Direction
Sedgman’s Vision To be a leading provider of mineral processing and associated infrastructure solutions to the global resources industry. Strategic Direction Sedgman will continue growing organically by:
►► Enhancing coal technology leadership
►► Strengthening client relationships
►► Converting pipeline opportunities into projects
►► Expanding operations to underpin growth
►► Continuing the international expansion
►► Growing regional offices for more autonomy and increasing collaboration. Strategic Imperatives
►► Build a stronger service offering, targeting the iron ore and metalliferous sectors and resource infrastructure projects
►► Develop new business models to better leverage Sedgman’s expertise and intellectual property
►► Create a competitive advantage through cost leadership
►► Focus on delivery capability
►► Improve margins
►► Continue integration of metals and coal operations.
For personal use only use personal For New Initiatives
►► Identifying opportunities for upstream investments (including Build, Own, Operate)
►► Identifying potential opportunities for mergers and acquisitions.
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2 | Company Overview and Strategy Corporate Structure
The diagram below outlines the regions, business Sedgman’s core business units of Projects and units and commodity sectors that Sedgman’s Operations currently deliver strong services to services encompass. Sedgman delivers services clients in both the Metals and Coal sectors and are out of a growing number of offices in the four expanding into Iron Ore and Infrastructure. geographic regions of Australia, Africa, Asia The company’s senior management levels contain and the Americas. In turn all regions receive diverse experience across Metals and Coal comprehensive corporate support. resulting in strong product and service offerings to leverage the value Sedgman provides to clients.
AFRICA AUSTRALIA ASIA THE AMERICAS CORPORATE
PROJECTS OPERATIONS
COAL METALS
IRON ORE INFRASTRUCTURE For personal use only use personal For
11 Sedgman Limited Annual Report 2011 Business Model
Sedgman maintains that globalisation goes beyond geographic locations. It means providing expertise and services that are truly world class. Sedgman aims to compete with any organisation in its chosen markets. Sedgman offers integrated services across the engineering life cycle, from feasibility studies and design to construction and operation. Knowledge gained at each stage of the Create, Build, Operate cycle is fed back into the business to enable continuous improvement. Design, construction and operational procedures are constantly improved. A sustainability strategy encompassing people, environment, social contribution and financial performance ensures Sedgman meets present demands without compromising its ability to meet future needs. Brisbane remains the hub of corporate and engineering design activity, providing integrated solutions to every business area.
E T Small Project
A Management Client and Execution Relationship R Operations Consulting E C Service Consulting P R Plant Services
Operations E O and
Maintenance A
Project T
Operational CLIENT FOCUS Feasibility Readiness E
Project Commissioning Definition
Procurement For personal use only use personal For Construction Management Engineering Design B Procurement U Construction I L D
Lake Lindsay 700 t/h CHPP, Bowen Basin, Queensland, Australia. Client: Anglo American Metallurgical Coal. Sedgman Limited Annual Report 2011 12
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13 SedgmanWilpinjong Limited 800 t/h AnnualCPP, Western Report 2011 Coalfields, New South Wales, Australia. Client: Peabody Energy. Business Activity Projects Business Unit Operations Business Unit Sedgman in Australia Sedgman in The Americas Sedgman in Africa Sedgman in Asia
3Global Opportunity For personal use only use personal For
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3 | Business Activity Projects Business Unit
Business Activity: Design, procurement and construction of coal and minerals processing projects and associated infrastructure, including process engineering, feasibility studies, engineering design and commissioning.
In FY2011 Sedgman integrated its Coal and The expansion of Sedgman’s business Metals Engineering divisions into one core Projects internationally is underpinned by its commitment business unit across its four geographic regions, to deliver solutions that best suit each client’s to drive consistent best practice for clients in all needs. The Sedgman Business Model ensures commodities. The integration will further leverage involvement in all phases of project development existing expertise in coal across mineral processing and implementation, through to successful and infrastructure, enabling sharing of best operations. Its commitment to clients is practice knowledge and our people across represented in a quality client base comprising all regions. leading international and Australian companies with a history of repeat business with Sedgman. Strong growth in project activity contributed to the company’s increase in revenue with project All regions of the Projects business unit are turnover reaching record levels. During FY2011 undertaking a record number of bankable coal and Sedgman had more than 10 active major projects metals studies in over 20 countries. This builds on and was awarded further contracts with work Sedgman’s local relationships with key clients to commencing in FY2012. We head into FY2012 develop its future pipeline of projects. with a record order book for Projects. Sedgman’s Projects business unit delivered a solid In delivering projects globally, Sedgman is safety result, with the Recordable Injury Frequency becoming a significant player in the major Rate (RIFR) and All Injury Frequncy Rate (AIFR) for emerging resource sectors of Mozambique the group reducing by over 30% over FY2011. This and Mongolia where it continues to win repeat result is testament to Sedgman’s commitment to a business. In Mozambique, Sedgman is delivering workplace free from injury and harm. on the multi-billion dollar Moatize project for Vale, and the Benga CHPP for Riversdale Mining. In Mongolia, Sedgman’s involvement in all three stages of the Ukhaa Khudag project for the Mongolian Mining Corporation (see feature on page 31) further demonstrates its ability to successfully execute significant projects world-wide.
The Projects business unit expects continuedonly use personal For strong growth, with major opportunities in coal and metals and emerging opportunities in iron ore and infrastructure.
Boseto Copper Project (computer generated model), Republic of Botswana, Southern Africa. Client: Discovery Metals Limited.
15 Sedgman Limited Annual Report 2011 3 | Business Activity Operations Business Unit
Business Activity: Operations, maintenance and management of coal and minerals processing plants. This includes process optimisation studies, long-term contracted plant operation, safety management, asset management, operations support, and sustaining capital works.
The integration of the Coal and Metals Operations Sedgman’s Operations business unit delivered divisions into one core Operations business unit a solid safety record, with the Lost Time Injury across all regions, will leverage synergies to deliver Rate (LTIR) for the group at 0.0 at the end of continued solid performance across Sedgman’s FY2011. This result is testament to Sedgman’s seven coal operations sites, and improved commitment to safety. A major reduction of the performance across its five metals operations sites. AIFR for Operations was also achieved due to the implementation of a behavioural-based safety External factors affected operations throughput program during FY2011, which is ongoing. which was slightly below target for FY2011. The wet weather and flooding in Queensland, Australia Sedgman’s operations contracts provide at the beginning of 2011 impacted operations in longer-term recurring income and diversification the Bowen Basin, resulting in reduced production, of business risk. The continued growth of the particularly at Coppabella and Moorvale coal Operations business unit is a key element of plants. Despite wet weather, most coal sites Sedgman’s long-term strategy. The company’s performed strongly for the year. three-year pipeline contains substantial opportunities including prospects across coal, FY2011 saw the successful start-up of operations metals and iron ore. at the Middlemount CHPP in the Bowen Basin, with the operations contract to commence in the third quarter of FY2012. Sedgman also Summary of Major Operating Contracts Metals Operations commenced its first international operations management contract at the UHG coal mine in 2029 Mongolia. Mt Isa 2029 Overall, coal operating sites processed 19.85 McArthur River million tonnes for the year which was 10.4% below 2011 Ernest Henry budget due mostly to the adverse weather. The 2016 metals operating sites processed 8.68 million Cannington 2015 tonnes of ore which was just below budget due Agnew to lower tonnes processed at Agnew gold mine in Western Australia and poor availability at Mt Isa 1997 2000 2005 2009 2014 2020 lead/zinc operation in Queensland. A strong Sedgman Operations performance was Summary of Major Operating Contracts recorded for the year at McArthur River lead/zinc Coal Operations mine in the Northern Territory. Sedgman’s other 2020 metals operations sites are at Cannington silver/ Middlemount 2030 lead/zinc mine and Ernest Henry copper mine UHG Mongolia 2023 For personal use only use personal For in Queensland. Following an operational review Sonoma 2015 of metals operations in the third quarter and Blair Athol integration of the operating groups, there were 2018 Coppabella sustained production improvements during the 2018 Moorvale fourth quarter. 2031 Red Mountain
1999 2004 2009 2014 2020
Prior Contracts Current Contracts Life of Mine
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3 | Business Activity Sedgman in Australia
Sedgman’s head office is in Brisbane, Queensland, and other offices are in Townsville and Mackay in Queensland and Perth in Western Australia. By the end of FY2011, Sedgman employed 802 staff in Australia. The company’s strong position in Australia has driven solid growth in revenue in FY2011.
FY2011 has seen a resurgence in metals and coal been appointed in Perth to target opportunities opportunities in Australia, with export demand from in metals and support metals projects in the China and India driving major expansion work on company’s regions. The engineering, procurement brownfield sites and new projects. The Australian and construction contract for Discovery Metals’ resources sector has recovered from the global Boseto copper project in Botswana is being led by financial crisis and Sedgman is well positioned to the Perth office. benefit from the growth in the resources industry. Work is well advanced on PanAust Limited’s Sedgman continues its technological and market Phu Kham copper expansion project in Laos - leadership in CHPP projects in Australia with over Sedgman’s first metals design contract led by the 50% market share. In the past 7½ years Sedgman Brisbane office - which is due for completion in the has been involved in the delivery of more than $2 final quarter FY2011. This collaboration shows the billion worth of CHPPs globally. With more than 30 support that exists to ensure Sedgman services years’ experience at the top of coal technology, are expanded globally. Sedgman continues to provide more efficient Sedgman has undertaken a large amount of study processing solutions and certainty in delivery of work, including Wandoan for Xstrata, Alpha for the its projects. Hancock Group, Boggabri for Idemitsu and In Queensland, Sedgman completed construction Mt Pleasant for Rio Tinto. This will help develop the and commissioning and commenced an interim company’s future pipeline, and is expected to lead operations contract at Middlemount Coal’s CHPP to further projects. in the Bowen Basin. Sedgman also completed A significant milestone in FY2011 has been upgrade works at Wesfarmers’ Curragh North Sedgman’s work within the BHP Billiton Project mine in the Bowen Basin, and New Hope Coal’s Hub which will execute some of the world’s largest Acland mine in Queensland’s Clarence metallurgical coal projects and result in major work Moreton Basin. for Sedgman in FY2012. In New South Wales, Sedgman completed design In Operations, Sedgman continues to operate at and commenced procurement for the Maules 11 sites across Queensland and Western Australia. Creek project for Aston Resources, and reached Operations in Queensland’s Bowen Basin were practical completion of the Narrabri CHPP for impacted by wet weather and repeat flooding, Whitehaven Coal. Sedgman plans to capitalise resulting in reduced production at the beginning of on these projects and expand further into the 2011. The sites are recovering and are positioned Gunnedah Basin in FY2012. to deliver in FY2012. A key to Sedgman’s success in Australia has been As well as commencing interim operations at
itsonly use personal For strategic relationship with Thiess through the Middlemount CHPP, Sedgman was awarded a 50/50 Thiess Sedgman Joint Venture (TSJV). In three-year operations contract renewal at Gold FY2011 the TSJV was awarded the $145 million Fields’ Agnew gold mine in Western Australia. Lake Vermont CHPP expansion in the Bowen Sedgman has been continuously supplying Basin and the $85 million Bengalla CHPP upgrade crushing and screening services to the gold in New South Wales’ Hunter Valley. mine since 1997. The history of repeat business In metals, Sedgman is building a strong business reflects Sedgman’s commitment to strong client in Australia with a renewed focus on delivering relationships, and to efficient processing projects from its Perth office. Key leaders have and operations.
17 Sedgman Limited Annual Report 2011 As Sedgman’s premier region, Australia plays Middlemount 400 t/h CHPP, Bowen Basin, Queensland, Australia. a key role in providing technical and discipline Client: Middlemount Coal. support to the company’s other regions to promote best practice and consistency across Projects and Operations wherever they are Project Profile: delivered. Initiatives driven from Sedgman in Australia, such as global forums to capture and Middlemount Coal Mine share learnings, have formalised the company’s The effectiveness of the full Sedgman Business approach to knowledge sharing across Model from design to operations is demonstrated in the business. Sedgman’s involvement with the Middlemount CHPP Sedgman is well positioned to capitalise on the in Queensland’s Bowen Basin. increased demand for its services in Australia Sedgman oversaw design and construction, from and is focused on delivery. start-up phase through to full operation of the Middlemount plant. Ensuring production could commence as soon as possible, Sedgman employed FY2011 and Current Activities a staged approach delivering a single-stage 400 t/h or 2.9 Mt/a DMC/spiral/flotation plant readily upgradeable • Delivery by TSJV of $145 million Lake to 700 t/h or 5.0 Mt/a at a later date. Vermont CHPP expansion for Lake Vermont Resources in Queensland The project enabled Sedgman to showcase • Delivery by TSJV of $85 million Bengalla technology leadership, innovation and commitment CHPP upgrade for Bengalla Mining to excellence. Using extensive computer modelling Company in New South Wales and production simulations during design, the plant optimises stockpile capacity and plant configuration. • Commenced interim operations following design to commissioning of Middlemount A strong working relationship between client, CHPP for Middlemount Coal in Queensland, Middlemount Coal (jointly owned by Macarthur Coal), with full operations to commence Q3 Sedgman and site personnel ensured safe project FY2012 delivery on schedule and on budget and resulted • Completion of Wesfarmers’ Curragh North in the commencement of interim operations. The upgrade works in Queensland company anticipates commencement of the operation contract in Q3 FY2012, once the rail infrastructure for • Completion of Acland CHPP upgrade works the site has been completed. for New Hope Coal in Queensland • Delivery of $18 million Maules Creek CHPP design contract for Aston Resources in New 2010 – present South Wales ► Design, construction and operations • Delivery of $50 million Narrabri North CHPP engineering, procurement, construction ► Initial 400 t/h CHPP contract for Whitehaven Coal Operations ► Can be readily upgraded to 700 t/h New South Wales ► 4000 t/h train load-out facility • Delivery of detailed design for PanAust ► Course reject load-out facility Limited’s Phu Kham copper project expansion in Laos
For personal use only use personal For Client benefits • Five-year operations contract renewal at Blair Athol CHPP for Rio Tinto Coal Australia ► High productivity and safety standards in Queensland ► Innovation • Three-year contract renewal at Agnew gold ► A commitment to excellence mine for Gold Fields in Western Australia ► Transition in operations from limited • 12-18 month contract extension at Red production during rail construction to full Mountain CHPP for Red Mountain JV production on completion of rail line facilities (Peabody Energy/BHP Mitsui Coal) in in November Queensland.
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3 | Business Activity Sedgman in The Americas
Sedgman’s office in Santiago, Chile, is an engineering and project delivery base targeting coal and metals projects in South America, while supporting engineering design across Sedgman globally.
FY2011 and Current Activities Bocamina Power Station Coal Yard Project Sedgman was also involved in other work in (Chile). Client: Tecnimont Chile The Americas region during FY2011, including: A Sedgman-designed coal handling plant for • Feasibility study for a zinc, lead and silver the Bocamina Thermo-electric Power Station process plant in northern Chile expansion. The design provides additional capacity • Metallurgical test work and process design for for effective stockpile management and utilises one of Chile’s largest copper mines modern equipment and systems for the efficient • Process design support for a variety of mines in blending of the feed coal. Sedgman is currently Argentina and Perú carrying out final commissioning of this project, which is expected to be completed in late 2011. • Feasibility study for coal handling facilities in Colombia. El Cerrejon coal mine – CHPP Upgrade
(Colombia). Client: Carbones del Cerrejon Limited Sedgman’s Americas team has worked hard over the past few years to build a solid reputation Sedgman undertook the design, supply and locally of providing engineering and project installation of a new grizzly (ROM hopper) to delivery services to the Latin American coal and upgrade the existing Sedgman designed plant. metalliferous sectors. Sedgman aims to increase Whilst on site, additional works were supervised by revenues across South America with a specific Sedgman during the scheduled shutdown in early focus on projects in the Chilean and April 2011. The project was completed in line with Colombian markets. client safety, budget and time expectations. Inca de Oro copper-gold project – Feasibility Study (Chile). Client: Inca de Oro S.A. (a JV between PanAust Limited and Codelco) Sedgman is undertaking the feasibility study for the Inca de Oro 12 Mt/a copper project in northern Chile. The focus is on process engineering design and major infrastructure works for the mining project. The first stage of the feasibility is due for completion Q1 FY2012, with a likelihood of involvement in future stages.
2011 marked the sixth anniversary
ofonly use personal For Sedgman entering the Americas market and was celebrated with an office relocation to accommodate the ever-growing team which currently stands at 78.
The Americas office, Santiago, Chile.
19 Sedgman Limited Annual Report 2011 3 | Business Activity Sedgman in Africa
Sedgman established an office in Johannesburg in 2008 to assist with delivery of engineering, procurement, construction and operations across the Africa region. To accommodate growth, the office relocated to Centurion in FY2010. Staff numbers stood at 61 at the end of FY2011.
The Africa office is a service delivery hub targeting FY2011 and Current Activities thermal coal opportunities in South Africa and coking coal projects in the Moatize Basin in Boseto Copper Project (Botswana). Mozambique. It also provides the foundation for Client: Discovery Metals Limited delivering metals projects in Africa. Sedgman was awarded a US$90 million Sedgman has gained significant experience engineering procurement and construction and knowledge of the challenges of working in contract, which is being led by the Perth office Mozambique, where the company is currently for this Australian client. The contract initially involved with four clients on coal studies. The requires completion of Front End Engineering coal prospects for Mozambique for the next 10 Design followed by detailed design, procurement years are considerable, and are expected to and construction subject to the client’s approval. provide Sedgman with the majority of the growth Project completion is targeted for Q3 FY2012. opportunity in coal. ATCOM Coal Handling and Preparation Plant The HSE performance for the Africa region has (CHPP) Project (South Africa). seen a decline in the Recordable Injury Frequency Client: Xstrata South Africa Pty Ltd Rate (RIFR) from 6 to 4 with the Benga contract Sedgman was contracted to do the engineering, nearing 500,000 hours Lost Time Injury (LTI) free, procurement, construction and commissioning of a and the ATCOM Contract achieving 500,000 LTI 1,900 t/h coal handling plant and two 850 t/h coal free hours in May 2011. processing plant modules. Both plants are in the Significant progress has been achieved in advanced stages of commissioning. Sedgman’s Africa office with the development and Moatize 1 Coal Preparation Plant (CPP) Project introduction of Sedgman policies and procedures (Mozambique). that meet local compliance requirements, and Client: Vale provide staff with a framework to guide their career development. Sedgman completed detailed design of a 4,000 tonne per hour CPP in 2009 and is currently assisting in the overall commissioning of the CPP. Sedgman also provided construction support to Sedgman’s strategy for Africa Vale during the project. focuses on the growth of coal, Benga Coal Handling and Preparation Plant particularly in Mozambique and (CHPP) Project (Mozambique). South Africa; copper, particularly in Client: Riversdale Mozambique Limitada Sedgman has undertaken engineering, For personal use only use personal For Botswana and Zambia; and gold procurement, construction and commissioning and other minerals in West Africa. for a 800 t/h CHPP which is nearing completion with coal processing expected to commence Q2 FY2012. The plant has a new technology reflux classifier which is a first for the African coal industry.
Sedgman Limited Annual Report 2011 20 ► BACK TO CONTENTS
3 | Business Activity Sedgman in Asia
Sedgman’s Beijing office was established in 2008 to secure coal projects that service Asia’s rapid industrialisation. Employee numbers are 47 and growing to meet the demand in this region.
Significant progress was made in FY2011 with FY2011 and Current Activities the award of major contracts in the emerging coal region of Mongolia. Sedgman is one of the first UHG CHPP Project, Stages 1 and 2 companies to enter this market and its work will (Mongolia). Client: Energy Resources LLC (a set the standard for future mine developments in subsidiary of Mongolian Mining Corporation) the region. Sedgman completed the EPCM of UHG Stage Sedgman completed the engineering, procurement 1 CHPP and was awarded the Stage 2 EPCM and construction management (EPCM) of Stage contract. UHG Stage 2 CHPP is at an advanced 1 of the Ukhaa Khudag (UHG) CHPP project for stage of construction and due to be commissioned Energy Resources LLC (a subsidiary of Mongolia Q2 FY2012. Mining Corporation). This is a significant milestone UHG Stage 1 CHPP operational readiness and for Sedgman as it is the first CHPP in Mongolia. three-year operations management contracts. Site works commenced on the UHG coal mine Client: Enrestechnology LLC (a subsidiary of in the South Gobi region in August 2009. The Mongolian Mining Corporation) project is being implemented in three phases, the Sedgman was awarded its first international first phase being a 900 t/h single module plant operational readiness and operations contracts which achieved ‘coal on’ in May 2011 and was worth US$12 million over three years, which commissioned in July 2011. commenced in June 2011. Sedgman was awarded the UHG Stage 1 Establishment of Asian Procurement Hub operations management contract valued at US$12 in Beijing million in January 2011, and commenced the The hub provides Sedgman and its clients globally three-year contract in June 2011. The UHG CHPP with reliable supply of processing equipment, produces coking and thermal coal products. fabricated steel, wear resistance piping and major Operations are progressing to reach Stage 1 full electrical components. design capacity of 900 t/h output, providing a benchmark for efficiency, availability and capability Establishment of Detailed Drafting Office for the first single module of the plant. This module in Shanghai can process over five million tonnes of run-of-mine The office provides Sedgman and clients globally coal a year, based on the design of a minimum of with complete detailing, fabrication, quality 6,000 operating hours annually. inspection/control and logistics delivery services. Sedgman was also awarded the US$19 million Stage 2 UHG CHPP EPCM contract to increase capacity by an additional 5 Mt/a.
Constructiononly use personal For of the Stage 2 UHG CHPP is well advanced, with the second module scheduled for completion and commissioning in Q2 FY2012.
Stage 1, Ukhaa Khudag 900 t/h CHPP, Gobi Desert, Mongolia. Client: Energy Resources LLC (a subsidiary of Mongolian Mining Corporation).
21 Sedgman Limited Annual Report 2011 3 | Business Activity Global Opportunity
Strong Pipeline
June 10 Dec 10 June 11 $6.3 Billion $6.8 Billion $7.6 Billion
3 yr 1.8b 3 yr 2.2b 3 yr 2.4b
2 yr 2.9b 2 yr 2.8b 2 yr 3.0b
1 yr 1.6b 1 yr 1.8b 1 yr 2.2b
► Pipeline represents Sedgman’s targeted domestic and international projects
► Total pipeline has grown by $1.3 billion from June 2010 reflecting the continued recovery in the resources market
► Near term pipeline (1 year) has increased by $600 million from June 2010
► Sedgman currently has some involvement in approximately 80% of projects and operations identified.
Sedgman’s Global Footprint
The Pipeline Australia Africa Americas Asia Total Pipeline Value (3 years) $5,810m $1,219m $399m $135m $7,563m No. of Projects in pipeline 85 22 11 6 124 No. of Employees - 2011 802 61 78 47 988
No. of Employees - 2010 641 37 64 21 763 For personal use only use personal For
Sedgman Limited Annual Report 2011 22
► BACK TO CONTENTS For personal use only use personal For
Acland 550 t/h CHPP 2, Clarence Moreton Basin, Queensland, Australia. Client: New Hope Coal. 23 Sedgman Limited Annual Report 2011 One Sustainable Company People and Values Health, Safety and Environment Community
4Innovation For personal use only use personal For
Sedgman Limited Annual Report 2011 24 ► BACK TO CONTENTS
4 | One Sustainable Company People and Values
Sedgman values people first and foremost. To meet longer-term needs, Sedgman provided The company’s values are the key tenets of the financial and business support for the Queensland Sedgman culture. These values are supportive of a Resources Council’s Queensland Minerals & forward thinking, client focused company seeking Energy Academy to encourage high-school to grow with its talented people. students to consider careers in engineering. The company is also working with Engineers Australia By practising and encouraging these values, by sponsoring their Women in Engineering Sedgman will continue to be seen as a leader Program to attract women to engineering careers. across the resources sector, an excellent service provider for Sedgman’s clients and an exciting The success of the company’s recruitment and challenging workplace for existing and strategies can be attributed to building a strong potential employees. Sedgman employees are employee value proposition that involves living the encouraged to live these values through their daily company’s values. Sedgman offers the potential for work practices and interactions with clients and career growth with global opportunities, leadership colleagues. development programs, performance recognition and incentive programs, as well as market- Three key words drive the company’s human competitive remuneration packages including cash resources strategy – attract, retain and and non-cash benefits components. motivate. Attract: Resourcing to meet Retain: Engaging with the the order book workforce Sedgman’s employee retention inititative focuses Sedgman experienced 65% increase in revenue on ensuring engagement levels are high across and 30% increase in staff numbers during FY2011. all offices. Sedgman’s objective is to foster Recruitment activity peaked at over 230 vacancies. employees’ engagement in the workplace, socially With a record order book going forward, Sedgman and in the communities in which they live is building on its dynamic recruitment strategies and work. to continually meet demand. The company is also executing strategies to retain and reward existing International expansion and a growing number staff to reduce voluntary employee turnover rates. of global projects have created an increasingly diverse culture within Sedgman’s employee Sedgman’s recruitment strategies to attract people base. To effectively engage with all of its people, involve utilising a mix of traditional marketing Sedgman’s communications programs reflect a methods, as well as social media, personal “think global, act local” approach, with important interaction, and sourcing from alternative markets. messages communicated in three languages – The company introduced an Employee Referral English, Spanish and Mandarin. Program, where existing employees receive a cash bonus for introducing new staff members for Employees are invited to business functions and eligible roles. networking events, and social activities – including an annual outing for employees’ family members. In Q3 FY2011 Sedgman opened an office in Sedgman supports its social club’s efforts, and Shanghai where it has engaged an experienced promotes Club Sedgman in each office, which has team of consultant engineers, and introduced a long history of fellowship starting at head office. Sedgman management and systems. The company’s Graduate Program introduced 14only use personal For inductees to the Australian business for the Staff numbers have increased 2010/11 intake. The program supports graduates’ development as they take on broad-based, by 30% to 988 since June rotational work over a two year period with a 2010 to meet increased global focus on technical development and demand, with an emphasis hands-on experience. on engineering and project management.
25 Sedgman Limited Annual Report 2011 Through its Community Investment Program, Sedgman Values-Based Leadership Model and Sedgman employees are able to apply for Leadership Principles have been developed as part financial support for initiatives that demonstrate of the program. Leadership Competencies have the Sedgman values. Sedgman has provided also been established as the basis for assessment financial and business support for staff members’ and development of all leaders at Sedgman. participation in numerous corporate sporting teams, charitable fund-raising initiatives, The Sedgman Values: cycling events, fun runs, and support for local communities such as donation of clothes ►► Trust – we show respect and have the for orphaned babies in China and food for faith in our people to achieve our goals impoverished communities in Africa. ►► Integrity – we do what we say we will, In January 2011 staff of Sedgman’s Brisbane head in an open, honest and transparent way office were affected by floods, while staff from the Townsville and Mackay offices and sites in North ►► Caring – we seek to make a positive Queensland were affected by floods and cyclone contribution Yasi. Sedgman responded quickly to ensure the ►► Service Excellence – we understand safety of all staff during the extreme weather events, providing immediate financial assistance client value and meet the challenge where required. Staff not affected rallied to form ►► Innovation – we have the courage to groups to help their colleagues with evacuation, adopt new ideas and take considered temporary accommodation and cleaning after the risks event. Sedgman set up a Crisis Fund to enable staff to donate funds to assist their affected ►► Teamwork – we encourage and colleagues, which Sedgman matched dollar for support each other to extend our dollar. People from Sedgman offices around the capability. world gave generously, demonstrating caring and generosity towards their fellow employees. Motivate: Rewarding and Sedgman Employee Growth 2007 - 2011 developing people 988 1000
During the year Sedgman introduced the Total 900 Rewards program in Australia, which is now being 800 763 rolled out globally. Total Rewards integrates all of 685 Sedgman’s workplace offerings across the areas 700 651 600 of Compensation, Benefits and Growth, providing 537 a package that rewards high performance and 500 encourages our employees to stay and grow 400 with the company. The program takes a holistic 300
approach to employee satisfaction including 200
compensation, benefits, work-life balance, 100 recognition, structured performance planning
and review, as well as ongoing professional 2007 2008 2009 2010 2011
For personal use only use personal For development. As part of the company’s Leadership Operational Initiative in FY2010, developed to help foster and build highly capable leaders, the Sedgman Leadership Program was introduced in FY2011. The program was implemented across all of the company’s regions, with over 200 Sedgman leaders and future leaders participating in the program during the year. Tools such as the
Sedgman Limited Annual Report 2011 26 ► BACK TO CONTENTS
4 | One Sustainable Company Health, Safety and Environment
Sedgman is committed to the wellbeing of employees through the provision of a safe, healthy and environmentally responsible workplace. In FY2011 Sedgman focused on streamlining its HSE Management System across all regions, which has resulted in renewed efficiencies and focus on HSE for operations, projects and business support.
A key element of the implementation of the HSE Environmental Stewardship Management System was the application of the effective management of significant risks and Environmental impact associated with engineering behavioural aspects of persons in the workplace. projects and operations requires effective In support of this system, the following HSE stewardship strategies in the regions where initiatives were embedded throughout Sedgman Sedgman operates. Sedgman’s environmental during FY2011: strategy is consistent with industry best practice and is aligned with client requirements. • Zero Incident Programme focussing on employee behaviour In FY2011 Sedgman developed initiatives to enhance environmental performance, which • Supervisor Leadership Programme will be implemented throughout FY2012. • Ongoing Incident Investigation training to ensure These include: root cause analysis and key learnings are • Expanding the Supervisor Leadership Program identified, implemented and monitored to provide skills in environmental responsibility • HSE audits of Operations and Projects and sustainability business units • Identification of energy efficiency improvements • Review of core health and hygiene standards. during design, construction and operational phases Through continued statistical analysis of HSE indicators, Sedgman has been able to formulate • Enhanced visibility and communication to all operational strategies specifically designed to employees of environmental awareness target areas of improvement and to ultimately and responsibilities prevent incidents from occurring. This has been • Auditing to review and improve management evidenced through the marked improvement in systems and internal controls, to ensure lead indicators over the reporting year and the systems are fit for purpose and are being continued reduction in lag indicators. consistently applied during project life cycles. Sedgman’s Recordable Injury Frequency Rate (RIFR) for FY2011 was 4.9. This represents a 50% improvement on FY2010 RIFR of 10.0 and is ahead of the FY2011 RIFR target of 5.0. Sedgman will continue to improve In FY2012, Sedgman is committed to HSE performance. Health, Safety
continuingonly use personal For its focus on HSE in the following and the Environment must be areas: part of every decision, by every • Contractor management employee, every day. • HSE Management System audits • Health assessments • Expansion of Supervisor Leadership Programme to provide additional HSE skills.
27 Sedgman Limited Annual Report 2011 4 | One Sustainable Company Community
Sedgman supports the principles of sustainable development that provide positive long-term outcomes for the regions in which it operates. The company is committed to partnering with mining clients to build sustainable communities both at their mines and in the surrounding regions.
Supported and led by its executive team, • Sponsorship of Engineers Australia’s Women Sedgman has a culture of becoming involved in in Engineering Program, to assist key initiatives local communities. Sedgman identifies priority to ensure engineering becomes an inclusive areas in the neighbouring community with the profession which values, supports and objective of making meaningful contributions that celebrates the contributions of women in the support the development of a vibrant, liveable and engineering profession. sustainable community for the future. • Sponsorship of the Mackay Road Accident In FY2011 Sedgman reinvigorated its Community Action Group (RAAG) to assist programs and Investment Program with two key initiatives initiatives aimed at reducing the incidence and encompassing Community Support and a severity of road crashes in the Bowen Basin Benevolent Fund for charitable activities. The area in Queensland, Australia. Community Support initiative focuses on three • Sponsorship of Mining Family Matters, an online key areas of Education, Sports and mining community support facility, providing Local Communities. practical, professional information, services and Through the Community Support initiative, support to families in the mining and resources Sedgman invested in a range of community sector in Australia. initiatives including: Through the Benevolent Fund for charitable • Silver sponsorship of The Queensland Minerals activities, Sedgman supported a variety of charities and Energy Academy (QMEA), a partnership globally, including the Leukaemia Foundation, the between the Queensland Government, the Arthritis Foundation of Queensland, Movember, Queensland Resources Council, and training The Children’s Sanctuary in Cambodia, the Esuela and academic providers. Our sponsorship helps Pirque charity in Chile, South America and the QMEA to continue delivering programs to assist Yearn to Learn Charity supporting orphanages young people to begin highly rewarding and in China.
long-term careers in the resources sector. For personal use only use personal For
Sedgman Limited Annual Report 2011 28 ► BACK TO CONTENTS
4 | One Sustainable Company Innovation
Sedgman is proud of its reputation as a global leader in providing innovative engineering solutions. This focus on innovation is central to Sedgman’s strategy and is recognised as a core company value. Sedgman aims to provide benchmarks for the industry and generate world’s best practice in design and technology to deliver superior solutions for our clients.
Sedgman is a world leader in integrated coal Research and development is also a key processing solutions and has revolutionised the component to the Sedgman business and enables design and delivery of CHPPs. The company the company to integrate the best solutions to continues to champion innovations across mineral deliver the most reliable and productive plants in processing and its expanding service capability. the world. Continual research and development achieves greater design efficiencies, advanced In FY2010 Sedgman formalised its innovation construction methods, operational advantages and process under SIGN – Sedgman Innovation Global more productive business practices. Network. This initiative provides a channel for ideas to be submitted, reviewed and implemented In FY2011 Global Forums were established within the company. Funding is awarded to targeting common knowledge streams across innovative ideas, fostering a culture of continuous the business, including technical, commodities, improvement where innovation is encouraged HSE and business development. The forums are and rewarded. designed to capture and share knowledge. In FY2011 Sedgman announced the SIGN A Lessons Learnt initiative was also implemented Awards Program, to officially recognise the most so that design and technical learnings can be outstanding safety innovation and the most captured throughout each project and recorded in outstanding technical innovation of the year. the Sedgman Knowledge Database. The database The inaugural SIGN Awards Program promotes is accessible by employees in each region to systematic innovation as a core function incorporate learnings into daily business activities, within Sedgman. ensuring continuous improvement and a culture of best practice and consistent delivery.
Innovation and ongoing research
For personal use only use personal For and development are critical to Sedgman and ensure that the company is not just an engineering resource, but an engineering solution.
29 Sedgman Limited Annual Report 2011 Sedgman Innovations include:
► Achieving plant operation at 7,200 plus run hours per annum (compared to 5,800 - 6,400 industry standard)
► Simplified plant instrumentation requiring at least one-third less staffing
► Proving that larger diameter ‘dense medium cyclone’ coal processing works – so well that it is being installed in the world’s largest coal plant at Moatize, Mozambique
► Dramatically reduced plant footprints
► ‘Pancake’ construction method to improve safety
► Purpose-built design of the first CHPP in Mongolia – Energy Resources LLC’s
Ukhaa Khudag (UHG) mine. For personal use only use personal For
Sonoma 800 t/h CHPP, Bowen Basin, Queensland, Australia. Client: Sonoma Mine Management. Sedgman Limited Annual Report 2011 30 ► BACK TO CONTENTS
Coal stockpiles amid desert dust At Ukhaa Khudag, Sedgman has demonstrated its outstanding engineering capability in the harshest and remotest of environments. Mongolia’s first coal handling and preparation plant is commissioned
and operating in Mongolia’s South Gobi Desert. Sedgman CEO, Nick Jukes (left) with UHG Project Secretary, Oko Sodom, and Asia EGM, Peter Long in front of a ger.
With attention now focused on Sedgman engineers are currently men to wrestling, they were particularly successful plant operation and designing materials handling facilities staggered at the women’s archery skills delivering two further plant modules, for module three, whose processing and that bastkana, children aged four DAVID MORRIS reports on the men plant component is identical to modules to six, were the only contestants in the and women battling the elements at one and two. Bayne and his team have 32km-each-way horse race into Sedgman’s newest frontier. commenced excavation for the the desert. plant’s foundations. In a land famed for marauding Sedgman personnel are adapting well tribesmen and the great Chinggis Also surveying the winds signalling to life some 540 km from the Mongolian Khaan, Ukhaa Khudag (UHG) coal change is Sedgman’s plant production capital of Ulaanbaatar and 200 km handling and preparation plant workers superintendent Clinton Holland, an from the Chinese border. They live are thankful that the distant dust extreme cold weather operative whose in traditional Mongolian desert tents cloud is not the stirrings of an army of last posting was a plant in Norway’s called gers, or in converted shipping horsemen pounding towards them. far north. containers with a bathroom between Rather, winds nearing 150 km/h have Production Manager Vas Vanek, ably two rooms. While the containers are conjured up the swirl of desert sand assisted by a team led by Clinton, is electrically heated, the gers rely on that has risen from the horizon and forming strong relationships with the fireplaces kept stoked with coal by a begun enshrouding the morning sky. Mongolian crews they are training to fireman throughout the night. It is autumn and a cool change will ensure the plant operates around the The miners’ camp used to be some accompany the winds’ arrival in half an clock. The recent appointment of an distance from a small outpost of a hour, dropping temperatures to interpreter to each shift has helped, and few buildings that serviced a transport sub-zero. regular awards of stuffed toy kangaroos route through the desert. Since for “a premium display of safety Sedgman construction manager Enrestechnology commissioned attitude” have proven a winner. Bayne Kuch and his team are thankful UHG coal mine and a power station they have finished module two’s main There is a growing mutual respect – the 1 km away, the local soum’s (town’s) structure and encased it in insulated Mongols because Sedgman has already population has swelled past 14,000 corrugated iron to protect equipment delivered one million tonnes of coal from and its dwellings now border the inside from dust and minus-to-plus-40- their rugged soil. Sedgman personnel camp boundary. degree Celsius extremes that plummet because they have witnessed the Numerous single-room restaurants and soar. Mongols’ toughness and adaptability. and bars have sprung up, and while When it’s really cold at UHG it’s difficult Gajraa (pron. ‘Jaga’) Okongarkal is one the vodka-fuelled karaoke nights might toonly use personal For breathe, and “too cold to snow” the such example. Originally hired as a site be an attraction in this remote area, locals say – a phenomenon really due administrator, her keenness and abilities venturing into the soum in the evenings to the dry desert air’s lack of moisture led to her becoming a key member of is off limits for safety reasons. required to form snow. As a result, the construction team. Downtime is often spent watching Sedgman’s client, Mongolian power In July just past, Sedgman teams DVDs on a laptop and looking forward company Enrestechnology LLC is attended the local version of the annual to making the two-day trip back to bringing in a snow machine to mitigate Nadaam “Festival of Manly Sports” Australia for their two weeks in seven the impact of high winds causing dust showcasing Mongolia’s major sports off. “It’s not like you’re out the back on the coal stockpiles. of archery, wrestling and horse racing. of the Bowen Basin where you’re two While not daring to challenge the local hours from Airlie Beach,” observes
Stage 1, Ukhaa Khudag 900 t/h CHPP, Gobi Desert, Mongolia. Client: Energy Resources LLC (a subsidiary of Mongolian Mining Corporation). 31 Sedgman Limited Annual Report 2011 Ian Dawson, Sedgman Manager installed heat tracers in water pipes that Operations personnel look forward Operations International, after a recent froze, disabling toilets and showers. to testing the new concept of using a visit. “The plant is miles and miles from Water is available in ample amounts, snow machine to settle stockpile dust anywhere. It’s totally different.” drawn from a vast desert artesian basin. after sand storms so savage last year that they confined workers to A road running from the newly Last winter they relied on local their rooms. constructed airstrip one side of the knowledge to pour concrete in soum and a further eight kilometres temperatures down to minus 27, using At Australian head office, Sedgman on to the mine site is currently being thermal heating equipment and anti- founding members Russ Kempnich sealed. A more challenging project freeze concrete additives. Wind also and Tom Meakin agree that building a is Enrestechnology’s plan to improve hindered slab construction erection, 15 Mt/a facility amid the South Gobi the quality of the existing earthen road shutting down the cranes. Desert has taken Sedgman’s already between UHG and the Mongolian- impeccable reputation for designing Chinese border. Clinton’s operations team is awaiting and building plants in remote areas to a arrival of its extreme weather gear. whole new level. The scene at UHG today is With temperatures down to minus 40 degrees unrecognisable from the bare site where plant positioning was contemplated even during the day, they’ll need to keep some just over two years ago by Sedgman machinery running non-stop. The team’s core General Manager Project Delivery Tony Robertson, Business Development body temperatures will have to be monitored at all Senior Engineer Cameron Dorr, Project Manager Kane Till and contractor times to prevent frostbite and they will spend only Peter Cranage. brief periods outdoors. In the very early days, site manager Craig McBaron, civil and construction engineer Nathan McColl and HSE site The myriad tonnes of steel and heavy Standard daily wear will be thick leather, equipment required to build the plant representative Trent Ayscough were insulated Canadian drillers’ boots, two instrumental in overcoming challenging are being transported along this at pairs of socks, two sets of thermal times barely traceable and pot-holed obstacles on behalf of Sedgman and underwear, over-trousers, shirt, jumper, the client. track where trucks regularly overturn. thick winter coat, two pairs of gloves, It is also the route to transport coal to neck warmer, scarf, balaclava, beanie Back to the present, Mongolia China until a rail line is built. and safety helmet. continues to emerge as one of the world’s most exciting coal production Hundreds of trucks form a continual Currently a front end loader is loading line-up on both the Mongolian and regions. Sedgman Managing Director trucks with coking coal bound for the Nick Jukes reflects on the company’s Chinese sides of the border town China border from a stockpile created Gashuun Sukhait, where every chunk significant achievement in delivering the by the plant’s coarse coal stacker. It will region’s first coal plant. of coal and piece of equipment is eventually be replaced by a much larger transferred by crane, loader or manually radial stacker to service all three plants. Even more pleasing to him is the client’s between trucks on either side of expressed confidence in appointing the border. An adjoining stockpile of thermal Sedgman to ongoing operations coal continues to grow awaiting management and undertaking Mongolia Projects Manager Bill Holt Enrestechnology’s directives on its two subsequent expansions. It reminds us that products have up to a destination. While China-bound coking demonstrates Sedgman’s ability to further 500 km to travel in China. coal is the main product, more thermal develop strong client relationships and Back at the camp, Bayne’s construction coal than is required by the nearby to deliver in the remotest and harshest team has learnt from last winter and power station is produced as well. of environments.
Sedgman’s Mongolia timeline
March 2009 July 2011 Awarded EPCM contract for third 900 t/h ► Awarded engineering design, procurement ► and construction management (EPCM) module, UHG Stage 3 CHPP contract for 900 t/h UHG Stage 1, the first September 2011 CHPP to be built in Mongolia ► 1,000,000 tonnes production milestone
January 2011 reached For personal use only use personal For ► Awarded operational readiness and three-year ► Work commences on the foundations of UHG operations contracts to manage UHG Stage 1 Stage 3 CHPP In the near future ► Awarded EPCM contract for second 900 t/h ► UHG Stage 2 to be commissioned Q2 module, UHG Stage 2 CHPP FY2012 June 2011 ► UHG Stage 3 to be commissioned at a date ► Commissioned UHG Stage 1 CHPP safely, on to be announced, bringing coal production time and on budget capability to 15 Mt/a.
Sedgman Limited Annual Report 2011 32 ► BACK TO CONTENTS
Corporate Governance Board of Directors
5Senior Executive Group For personal use only use personal For
Red Mountain 1,000 t/h CHPP, Bowen Basin, Queensland, Australia. Client: Peabody Energy / BHP Mitsui Coal. Red Mountain 1,000 t/h CHPP, Bowen Basin, Queensland, Australia. Client: Peabody Energy / BHP Mitsui Coal. 33 Sedgman Limited Annual Report 2011 For personal use only use personal For
Sedgman Limited Annual Report 2011 34 ► BACK TO CONTENTS
5 | Corporate Governance Board of Directors
Russell James Nicholas Neil Jukes Chief Executive Officer and Kempnich Managing Director Chairman Bachelor of Engineering (Civil) Bachelor of Engineering Fellow, Institution of Engineers (Mechanical) Australia
DOB: 30 December 1952 DOB: 13 July 1956
Experience and expertise Experience and expertise Russell Kempnich is the founding partner of Sedgman & Associates Pty Nick Jukes was appointed to lead Sedgman in January 2011 for a Ltd, the original company established in 1979, from which the Sedgman minimum term of three and a half years, and is responsible for guiding business has grown. the company through its next stage of growth both in Australia and globally. Russell has more than 30 years’ experience in the Australian and international coal industry. As well as recent senior management and Nick is a Civil Engineer with over 30 years’ experience in the engineering, executive responsibilities, Russell has broad experience in the areas construction and mining sectors. Prior to joining Sedgman, Nick was of coal resource evaluation, process plant design, construction Executive Director of JTAA Pty Ltd, a company he established in 2007 to and commissioning. provide consulting services to the engineering and mining sectors. Nick has also held senior executive roles at Thiess and BHP Billiton Ltd where As Managing Director of Sedgman from 1991, Russell led the he was actively involved in the planning, development, construction and organisation’s growth from a consulting and engineering firm, to a market operation of major projects throughout Australia, South East Asia and leader in coal preparation, design and construction. He was responsible South America. Nick was a previous Director of a number of companies for the expansion of the company’s operations internationally. including Sedgman Pty Ltd and Australasian Resources Pty Ltd.
In 1998 Russell became the Executive Chairman, having responsibility Other current directorships at the time for the corporate direction of the overall Sedgman group and business development. Russell became Chairman in April 2006 and no Non-Executive Director of AWE Limited. longer has executive responsibilities with Sedgman. However during Interests in shares the short period between the resignation of the previous Managing Director Mark Read on 5 November 2010 and the commencement of 110,000 ordinary shares in Sedgman Limited. Nick Jukes on 17 January 2011, Russell assumed the Managing Director responsibilities.
Other current directorships Non-Executive Director of Stanwell Corporation Limited. Special responsibilities Member of the Remuneration & Nominations Committee. Interests in shares 17,446,006 ordinary shares in Sedgman Limited.
Donald James Argent Robert John Non-Executive Director Bachelor of Commerce McDonald Certified Practicing Accountant Deputy Chairman Fellow, Chartered Institute of Bachelor of Commerce Secretaries Master of Business Administration Fellow, Australian Institute of (Hons) Company Directors
DOB: 18 March 1950 DOB: 19 July 1947
Experience and expertise Experience and expertise Rob McDonald is the principal of The Minera Group, a specialist mining Don Argent was the Director of Finance and Administration for the advisory and investment group headquartered in Australia but active Thiess Group (resigned 29 July 2011) which is one of Australia’s largest in most mining regions of the world. Minera assists a select number integrated engineering and service providers in Australia and South-East of mining companies and mining investment and finance institutions in Asia. He joined Thiess Pty Ltd in 1985, following six years initial service developing and executing business plans in the sector. Rob has more with Thiess Holdings Ltd in the late 1970s, and has had a pivotal role than 35 years’ experience in the mining sector, firstly in various roles in the finance, administration, governance, growth and success of the within the Rio Tinto group, and prior to launching Minera in investment For personal use only use personal For Thiess Group of companies over the last 26 years. banking as Managing Director of N M Rothschild & Sons. Special responsibilities Other current directorships Member of the Audit and Risk Management Committee. Non-Executive Director of Intrepid Mines Limited. Non-Executive Director of Kimberley Metals Limited. Interests in shares Special responsibilities 229,288 ordinary shares in Sedgman Limited. Chairman of the Audit and Risk Management Committee. Member of the Remuneration & Nominations Committee. Interests in shares 478,030 ordinary shares in Sedgman Limited.
35 Sedgman Limited Annual Report 2011 Roger Ronald Short Non-Executive Director Bruce Alwin Munro Bachelor of Laws Non-Executive Director Bachelor of Arts Bachelor of Engineering (Civil)
DOB: 13 October 1944 DOB: 31 December 1953
Experience and expertise Experience and expertise Roger Short is a construction lawyer and company Director. He has over Bruce Munro was appointed as Acting Managing Director for the Thiess 35 years’ experience in construction, mining and infrastructure work. Group in August 2011. The Thiess Group is one of Australia’s largest He was most recently a consultant to McCullough Robertson Lawyers integrated engineering and service providers in Australia and South-East and was previously a partner in a large national law firm. He has been a Asia and a substantial shareholder of Sedgman Limited. He joined Thiess Director of listed companies for more than 30 years. in 1986 as a Project Manager within construction and went on to work Other current directorships as Country Manager for Vietnam, Cambodia and Laos and as Manager for the construction of a major telecommunications project in Indonesia. Non-Executive Director of Payce Consolidated Limited. In 1999 he was appointed as President Director of PT Thiess Contractors Special responsibilities Indonesia, a role he fulfilled for 8 years. He was then promoted to Member of the Audit and Risk Management Committee. Executive General Manager Asia, where he focused on the Thiess Chairman of the Remuneration & Nominations Committee. Group’s growing Asian interests and in particular, the opportunities in India, before becoming Chief Executive – Mining in 2010. Prior to the Interests in shares Thiess Group, Bruce worked for Leighton Contractors. In total Bruce has 183,080 ordinary shares in Sedgman Limited. been employed for 36 years in the construction and mining industries. Interests in shares 8,983 ordinary shares in Sedgman Limited.
Peter Ian Richards Non-Executive Director Bachelor of Commerce DOB: 29 January 1959
Experience and expertise Peter Richards was appointed as a Non-Executive Director in December 2010. Peter has over 30 years’ experience in the resources and industrial sectors. He has held executive roles with international companies and serves as a Director with several ASX-listed companies. He is a former chief executive of Dyno Nobel Limited and has also held senior roles with BP plc and Wesfarmers Limited.
For personal use only use personal For Other current directorships Executive Chairman of Minbos Resources Limited, Non-Executive Chairman of Kangaroo Resources Limited, Non-Executive Director of Emeco Holdings Limited, Bradken Limited, NSL Consolidated Limited and Norfolk Group Limited. Interests in shares 2,655 ordinary shares in Sedgman Limited.
Sedgman Limited Annual Report 2011 36 ► BACK TO CONTENTS
5 | Corporate Governance Senior Executive Group
Peter Watson Executive General Manager, Australia Bachelor of Engineering (Chemical) (Hons) Ian Poole Diploma in Accountancy and Financial Chief Financial Officer Management Bachelor of Economics Fellow, Institution of Engineers Australia Member, Institute of Chartered Chartered Professional, Institution Accountants of Engineers Australia
Experience and expertise Experience and expertise Ian joined Sedgman in December 2010 and is responsible for Sedgman’s financial Peter joined Sedgman in August 2010 and is responsible for all of the Sedgman management and accountability across all regions. group activity in Australia across our existing and emerging market sectors and capabilities. Ian is a chartered accountant with over 25 years’ experience in financial, commercial and administrative management in the mining industry within Australia and the Peter is a chemical engineer with over 25 years’ experience in the mining and United States. Prior to joining Sedgman he worked for eight years in senior finance resources sector. Prior to joining Sedgman, Peter was General Manager of AMEC and commercial roles within Rio Tinto Coal Australia. Prior to that time he was Vice where he was responsible for the development and execution of business activities in President Finance and Administration for Pasminco Resources US Inc. the resources sector across Eastern Australia and the Asia-Pacific region. Peter also spent five years in Strategic Management roles for Thiess where he was a member of the Senior Executive team and played a key role in the strategic development and positioning of Thiess in existing and emerging market sectors and regions.
Javier Freire Peter Long Executive General Manager, Executive General Manager, Asia Americas Member, Australian Institute of Company Bachelor of Engineering (Civil) Directors Master of Sciences in Engineering Fellow, Australian Institute of Management
Experience and expertise Experience and expertise Javier joined Sedgman in April 2010 and is responsible for the management of Peter Long joined Sedgman in 2007 and is responsible for Sedgman’s market re- Sedgman’s Americas business, which has been identified as a key area for growth entry strategy into Asia and the development of all our Asian market activities. Peter in our international expansion strategy. Javier has authority over both Projects and oversees Sedgman’s operations and projects in the Asia region, with a particular Operations for Sedgman’s coal and metalliferous clients. focus on North Asia.
Javier is a civil engineer with over 15 years’ experience in the mining and metals Peter has 30 years’ experience in mining and related sectors. He is an experienced industry. He has lived, studied and worked in Chile, the United States, England and Director and Senior Executive and has been CEO of various companies listed on the Australia at various stages of his career. Javier was intimately involved with the growth London and Dublin Stock Exchanges. Peter has also been a Director of RACQ. He is of one of the largest Chilean engineering and EPC/EPCM companies in the mining currently a Director of Sedgman Asia Hong Kong; Sedgman Malaysia Sdn Bhd and industry, Minmetal. In 2005, Minmetal merged with Australian company Sinclair Sedgman LLC Mongolia. Knight Merz and through his time at both, Javier has held roles in Senior, Project and Client Management working on projects in Australia, Papua New Guinea and Chile.
Simon Mordecai- Jones Executive General Manager, Africa Thomas Meakin Diploma in Higher National Mechanical Principal Consultant Engineering Bachelor of Engineering (Mechanical)
For personal use only use personal For Experience and expertise Experience and expertise Simon joined Sedgman in April 2011 and is responsible for the management of Tom Meakin joined John Sedgman in 1980 and has over 30 years’ experience with Sedgman’s African business, and oversees the execution of the business model the Company. Initially, he established the multi-discipline engineering team to support across the African continent. the firm’s growing process capability. From 1986, as Chief Engineer, Tom led the team though a series of major feasibility studies and project work in both the coal and Simon is a mechanical engineer and has 34 years’ experience in the construction metalliferous industries. and manufacturing industry, operating in the projects environment. Simon held senior positions with Murray & Roberts and was Managing Director at various Murray & Following the death of John Sedgman in 1991, Tom became a Director and major Roberts subsidiaries over the last 15 years. Simon also brings a wealth of contracting shareholder and carried the responsibility for management of the materials handling, experience from Africa, having led major projects across the resources and energy structural engineering, civil engineering and project management functions. Tom industries. resigned from his position as a Director in 2006 and now has a mostly technical role.
As Principal Consultant, Tom assists in the training and mentoring of new technical staff, review of and guidance in project feasibility work, tendering for major project work and expanding the relationship the Company has with its wide range of clients.
37 Sedgman Limited Annual Report 2011 Michael Carretta Executive General Manager, Alan Ainsworth Operations Executive General Manager, Bachelor of Engineering Projects (Mineral Processing) (Hons) Bachelor of Engineering (Civil) Member, Australian Institute of Mining Member, Institution of Engineers Australia and Metallurgy
Experience and expertise Experience and expertise Alan joined Sedgman in 2008 and, having previously led the Australian Projects team, Michael joined Sedgman in 1998 and is now responsible for global contract he now leads Sedgman’s Projects business unit across all regions driving consistent operations including coal and metals plant operations, international expansion, best practice for clients in all commodities. diversifying into new market sectors and corporate governance.
Alan is a civil engineer with over 25 years’ experience in the design and delivery of Michael initially joined Sedgman as a Senior Process Engineer, and has gained minerals processing plants and other industrial projects in Australia and international extensive experience in plant operations, engineering and commissioning in his locations. After grounding his structural engineering skills in a consulting environment roles as Manager Operations Support and Manager Engineering. He held the role for 15 years, Alan held senior engineering management positions in both design and of General Manager Operations from 2006 to 2010. Michael has over 20 years’ construction organisations. experience in the coal industry, and prior to joining Sedgman held various engineering and management roles with BHP Coal.
Adrian Relf Steve Rayner General Counsel and Company Secretary Executive General Manager Bachelor of Social Science Corporate Services Bachelor of Laws Member, Australian Human Graduate Diploma in Management Resources Institute Graduate Diploma in Legal Practice
Experience and expertise Experience and expertise Steve joined Sedgman in April 2010 and is responsible for Sedgman’s Corporate Adrian joined Sedgman in 2008 as General Counsel and Company Secretary and Services, which includes Human Resources, Learning and Development, IT, Business is responsible for day to day management of Sedgman’s legal and risk department Support (ERP) and Shared Services. and company secretariat. He has been extensively involved in the establishment of Sedgman’s regional offices and the continuous improvement of group risk Steve has over 20 years’ experience in strategic and operational human resources management and governance policies and procedures. management in the oil and gas, resources, health and retail sectors. He has held senior HR positions with BP, Alcoa and Coventry Group where he built and led the Adrian has extensive legal and commercial experience in private practice and HR function through a period of rapid growth involving several acquisitions. Steve has in-house roles in the engineering, infrastructure, mining and mining services sectors. a track record of partnering with business leaders to design and implement human Adrian has been involved in the review and negotiation of major supply, maintenance capital strategies and plans as well as leading change programs. He has successfully and operations contracts for mining equipment and infrastructure in Australia, Africa built resourcing, retention and succession plans and has effectively managed and Asia, as well as advising on occupational health and safety, industrial relations, employee and industrial relations in the above sectors. patent and intellectual property, and general commercial and corporate matters.
Ron Scott General Manager Development Bachelor of Technology (Mechanical) Post-graduate Diploma in Business Administration Graduate Diploma in Management Master of Business Administration Member, Institution of Engineers Australia Chartered Professional Engineer National Professional Engineers Register
Member, Australian Institute of Company Directors For personal use only use personal For
Experience and expertise Having worked for Sedgman in the 1980s, Ron re-joined in January 2009 and leads the Development Group including Client Relationship Management, Strategy and Planning, and Marketing within Australia and globally. Ron initially joined Sedgman in the 1980s, after being invited by John Sedgman himself.
Ron is a Mechanical Engineer with over 30 years’ experience in engineering, construction, manufacturing, mining and process sectors. He has over the last 10 years worked in senior roles in Strategy and Development for Maunsell Australia (now AECOM) as well as in Alcan Engineering. Prior to that he worked as Group Business Development Manager for Barclay Mowlem in Engineering Construction in the Mining and Infrastructure environments.
Sedgman Limited Annual Report 2011 38
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39 Sedgman Limited Annual Report 2011 Financial
6Statements For personal use only use personal For
Bocamina CHP, Coronel,Sedgman Chile. Limited Client: Annual Tecnimont Report Chile. 2011 40 Financial Statements 30 June 2011
Contents Page Directors’ report...... 42 Lead auditor’s independence declaration...... 59 Corporate governance statement...... 60 Financial report Income statement...... 62 Statement of comprehensive income...... 63 Balance sheet...... 64 Statement of changes in equity...... 65 Cash flow statement...... 66 Notes to the financial statements...... 67 Directors’ declaration...... 108
Independent auditor’s report to the members...... 109 For personal use only use personal For
This financial report covers the consolidated entity consisting of Sedgman Limited and its subsidiaries. The financial report is presented in Australian currency. Sedgman Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 2 2 Gardner Close Milton QLD 4064 AUSTRALIA
41 Sedgman Limited Annual Report 2011 Directors’ report
The Directors present their report on the Group consisting of Sedgman Limited (“Sedgman” or “the Company”) and the entities it controlled at the end of, or during, the year ended 30 June 2011. Directors The following persons were directors of Sedgman Limited during the financial year: Russell James Kempnich (Appointed 6 July 1999) Nicholas Neil Jukes (Appointed 17 January 2011) Mark Andrew Read (Appointed 19 May 2008) (Resigned 5 November 2010) Donald James Argent (Appointed 12 April 2006) Robert John McDonald (Appointed 8 June 2006) Roger Ronald Short (Appointed 8 June 2006) Bruce Alwin Munro (Appointed 21 December 2009) Peter Ian Richards (Appointed 14 December 2010) Refer below for information on directors. Principal activities The principal activities of the Group during the financial year consisted of engineering and operational services to the resources industry. Operating and Financial Review Sedgman’s strategy and business model delivered a credible performance for the year. The major highlights for the Group over the year included the following: Engineering Sevices (Projects) Coal • Thiess Sedgman Joint Venture (TSJV) awarded a $145 million contract to expand the CHPP at the Lake Vermont mine in central Queensland. • TSJV signing an $85 million contract to design, procure, construct and commission an upgrade of the CHPP at the Bengalla mine on behalf of Bengalla Mining Company Pty Limited (BMC). The mine is located in the Hunter Valley region of New South Wales. • Sedgman securing a $48.5 million design and procurement contract for a CHPP at Aston Resources Limited’s Maules Creek Project. • Sedgman awarded US$19 million EPCM contracts for CHPP at UHG 2 in Mongolia. Metals • Receipt of notice to proceed on the approximately US$90 million Boseto Copper Project EPC contract in Botswana. Operations Coal • Extensions of CHPP Operating contracts at Blair Athol until February 2015 and Red Mountain for a further 12 to 18 months. • Sedgman awarded an operational readiness contract and a three-year contract to manage the CHPP at UHG 1 in Mongolia together worth US$12 million. • Despite reduced production related to the impact of wet weather in the summer months, the coal operations group was still able to meet its targeted margins demonstrating Sedgman’s reputation for delivering safe and efficient coal operations for its clients. Metals • Extensions to crushing and screening contracts at the BHP Billiton Cannington mine, Xstrata’s McArthur River mine and Gold Field’s Agnew mine. • Restructuring and integrating the metals and coal business units under a single operations banner to benefit from the synergies of having the two groups working together. In addition to the above, during the year Sedgman was awarded the winner of the Large Services category at both the Queensland Export Awards and Australian Export Awards which is testament to the success of the international expansion strategy.
Safety For personal use only use personal For Safety continues to be a major focus within Sedgman. A number of key initiatives were implemented during the year including the rollout of the HSE Management System and the piloting of a supervisors HSE training system. These initiatives have the Company well placed to achieve continual improvement in safety. Growth outlook Sedgman’s outlook in both the coal and metalliferous sectors remains positive underpinned by a project pipeline in excess of $7 billion over the next three years. Strong growth opportunities are emerging in Australia, particularly in our traditional coal markets where the Company has established an excellent track record. We remain well positioned to benefit from international opportunities given our established position in key global markets. Sedgman is also building a stronger service offering to the iron ore and metalliferous sectors. Sedgman remains very positive about its growth prospects for 2012 and beyond.
Sedgman Limited Annual Report 2011 42 Directors’ report (continued)
Financial performance Net profit Net profit after tax was $26.030 million (2010: $24.987 million), an improvement of 4.2%. This result reflected substantial growth in Engineering (Projects) revenue undertaken by Sedgman in its own right or through its 50% interest in the Thiess Sedgman Joint Venture (TSJV). In addition, the Operations business was able to grow its revenue despite the impact of wet weather in Queensland during December 2010 and cyclone Yasi in January 2011, which impacted production. Operations also grew its sustaining capital business which undertakes major maintenance and modification of plants on behalf of its clients. The net profit for 2011 was subject to the following major adjustments: • Operations restructured its coal and metals business during the year and as a result of this restructure, it undertook an asset review which led to a one off write down of $4.082 million (reflected in the profit and loss through impairment of assets, accelerated depreciation and loss on sale of assets). • Foreign currency losses for the year were $4.328 million. The majority of these losses were as a result of US dollar balances held in countries with restrictive foreign currency controls, being Mozambique and China. • An increase in the effective tax rate from 7.5% in 2010 to 24.6% in 2011. The 2010 rate was less than the long term average as a result of the previous year including significant R&D tax concessions and additional tax deductions arising from acquisition costs for customer contracts due to legislation changes. Cash flows The gross cash position at 30 June 2011 was $43.184 million, decreasing from $58.004 million at 30 June 2010. The significant items that impacted this movement were: • The net cash inflow provided from operating activities totalled $25.307 million (2010: $30.966 million). This was lower than the previous year primarily because of increases in working capital, in particular work-in-progress, which has increased because of amounts due from clients which can not be billed until contractual milestones are achieved. • The net cash outflow provided from investing activities totalled $15.172 million (2010: $16.787 million). Investing activities are broadly in line with the prior year. The major change was positive cash contributions from the Group’s joint venture partnership which was more active during the year. The lower expenditure on property, plant and equipment was offset by an increase in intangibles represented by the development and implementation costs for Sedgman’s ERP. • The net cash outflow provided from financing activities totalled $21.352 million (2010: $5.250 million inflow). The cash outflow between the two years is broadly in line apart from the prior capital raising and share purchase plan and the reduced cash outlay for dividends as a result of a higher participation rate in the company’s dividend reinvestment plan. Debt position Total gross debt for the Group at 30 June 2011 was $29.273 million, with a net cash position of $13.911 million. During the year, gross debt decreased by $13.554 million. The following debt facilities operated during the year: • Finance leases for dozers and loaders at various Sedgman and Sedgman Operations (formerly Pac-Rim) operated mine sites. The amount outstanding at 30 June 2011 was $7.307 million (2010: $11.288 million). • Hire purchase agreements covering various equipment at Sedgman Operations operated mine sites. The amount outstanding at 30 June 2011 was $2.266 million (2010: $3.986 million). • A commercial loan used for the Sedgman Operations acquisition in 2006/07. The amount outstanding at 30 June 2011 was $12.105 million (2010: $17.224 million). • A commercial loan used for the Intermet acquisition in 2007/08. The amount outstanding at 30 June 2011 was $7.595 million (2010: $10.329 million). Dividends Dividends paid or declared by the Company to members since the end of the previous financial year were:
Declared and paid during the year ended Cents Total Amount 30 June 2011 per share $’000 Franked/ Unfranked Date of payment Final 2010 ordinary 3.5 7,210 Franked 17 Sept 2010
Interim 2011 ordinary 3.0 6,240 Franked 31 March 2011 For personal use only use personal For 6.5 13,450
Franked dividends declared as paid during the year were franked at the rate of 30%. After the balance sheet date, a dividend of 4.0 cents per share was declared by the Directors, franked at the rate of 30%. The record date for entitlement to this dividend will be 2 September 2011 and the payment date will be 16 September 2011. The financial effect of these dividends has not been brought to account in these financial statements for the year ended 30 June 2011 and will be recognised in subsequent financial reports.
43 Sedgman Limited Annual Report 2011 Directors’ report (continued)
Earnings per share
2011 2010 Cents Cents (a) Basic earnings per share Profit attributable to the owners of the Company 12.5 12.3 (b) Diluted earnings per share Profit attributable to the owners of the Company 12.4 12.3
Significant changes in the state of affairs Other than detailed elsewhere, there have been no significant changes in the state of affairs since 30 June 2011. Matters subsequent to the end of the financial year Other than the dividend declared subsequent to year end (refer note 24) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. Likely developments and expected results of operations Information on likely developments and the expected results in future financial years have not been included in this annual report because the Directors believe it would be likely to result in unreasonable prejudice to the Group. Shares under option and rights At the date of this report, unissued ordinary shares of the Company under rights are:
Expiry date Exercise price Number of shares
30 June 2012 - 1,410,941 30 June 2013 - 1,957,045 30 June 2014 - 1,909,192
All options from the previous year have expired by the end of the current financial year. All rights outstanding at the end of the financial year were issued under the Long Term Incentive Plan and expire on the earlier of their expiry date or termination of the employee’s employment. In addition, the ability to exercise the right is dependent upon the achievement of a performance condition. Further details are included in the Remuneration Report. There were no ordinary shares issued during the financial year as a result of the exercise of options or rights. Regulation Sedgman’s operations are regulated by national and state government legislation that encompasses environmental matters, occupational health and safety, and industrial relations. Environmental authorities are involved at all stages of a project to ensure it complies with legislation and effectively manages pollution, waste, water use, contamination, dust, noise and other issues that have the potential to impact the environment. Safety is regulated by various acts, regulations and standards. Clients also have specific safety requirements, which are a primary driver for the selection of service providers in the industry. Compliance with industrial relations regulations is achieved through planning and consultation. Individual project requirements are
assessed and appropriate strategies developed to achieve industrial harmony and legislative compliance on a “per project” basis. For personal use only use personal For
Sedgman Limited Annual Report 2011 44 Directors’ report (continued)
Information on directors Russell James Kempnich Chairman Bachelor of Engineering (Mechanical) DOB: 30 December 1952 Experience and expertise Russell Kempnich is the founding partner of Sedgman & Associates Pty Ltd, the original company established in 1980, from which the Sedgman business has grown. Russell has more than 30 years experience in the Australian and international coal industry. As well as recent senior management and executive responsibilities, Russell has broad experience in the areas of coal resource evaluation, process plant design, construction and commissioning. As Managing Director of Sedgman from 1991, Russell led the organisation’s growth from a consulting and engineering firm, to a market leader in coal preparation, design and construction. He was responsible for the expansion of the Company’s operations internationally. In 1998 Russell became the Executive Chairman, having responsibility at the time for the corporate direction of the overall Sedgman group and business development. Russell became Chairman in April 2006 and no longer has executive responsibilities with Sedgman. However during the short period between the resignation of the previous Managing Director Mark Read on 5 November 2010 and the commencement of Nick Jukes on 17 January 2011, Russell assumed the Managing Director responsibilities. Other current directorships Non-Executive Director of Stanwell Corporation Limited. Special responsibilities Member of the Remuneration & Nominations Committee. Interests in shares 17,446,006 ordinary shares in Sedgman Limited.
Nicholas Neil Jukes Managing Director Bachelor of Engineering (Civil), Fellow of the Institute of Engineers DOB: 13 July 1956 Experience and expertise Nick Jukes was appointed to lead Sedgman in January 2011 for a minimum term of three and a half years, and is responsible for guiding the Company through its next stage of growth both in Australia and globally. Nick is a Civil Engineer with over 30 years experience in the engineering, construction and mining sectors. Prior to joining Sedgman, Nick was Executive Director of JTAA Pty Ltd, a company he established in 2007 to provide consulting services to the engineering and mining sectors. Nick has also held senior executive roles at Thiess and BHP Billiton Ltd where he was actively involved in the planning, development, construction and operation of major projects throughout Australia, South East Asia and South America. Nick was a previous Director of a number of companies including Sedgman Pty Ltd and Australasian Resources Pty Ltd. Nick is a Fellow of the Institute of Engineers Australia. Other current directorships Non-Executive Director of AWE Limited. Interests in shares 110,000 ordinary shares in Sedgman Limited.
Donald James Argent Non-Executive Director Bachelor of Commerce, Certified Practicing Accountant, Fellow of Chartered Institute of Secretaries, Fellow of Australian Institute of Company Directors DOB: 19 July 1947 Experienceonly use personal For and expertise Don Argent was the Director of Finance and Administration for the Thiess Group (resigned 29 July 2011) which is one of Australia’s largest integrated engineering and service providers in Australia and South East Asia. He joined Thiess Pty Ltd in 1985, following six years initial service with Thiess Holdings Ltd in the late 1970s, and has had a pivotal role in the finance, administration, governance, growth and success of the Thiess Group of companies over the last 26 years. Special responsibilities Member of the Audit and Risk Management Committee. Interests in shares 229,288 ordinary shares in Sedgman Limited.
45 Sedgman Limited Annual Report 2011 Directors’ report (continued)
Information on directors (continued) Robert John McDonald Deputy Chairman Bachelor of Commerce, Master of Business Administration (Hons) DOB: 18 March 1950 Experience and expertise Rob McDonald is the principal of The Minera Group, a specialist mining advisory and investment group headquartered in Australia but active in most mining regions of the world. Minera assists a select number of mining companies and mining investment and finance institutions in developing and executing business plans in the sector. Rob has more than 35 years experience in the mining sector, firstly in various roles within the Rio Tinto group and prior to launching Minera, in investment banking as Managing Director of N M Rothschild & Sons. Other current directorships Non-Executive Director of Intrepid Mines Limited. Non-Executive Director of Kimberley Metals Limited. Special responsibilities Chairman of the Audit and Risk Management Committee. Member of the Remuneration & Nominations Committee. Interests in shares 478,030 ordinary shares in Sedgman Limited.
Roger Ronald Short Non-Executive Director Bachelor of Laws, Bachelor of Arts DOB: 13 October 1944 Experience and expertise Roger Short is a construction lawyer and company director. He has over 35 years experience in construction, mining and infrastructure work. He was most recently a consultant to McCullough Robertson Lawyers and was previously a partner in a large national law firm. He has been a director of listed companies for more than 30 years. Other current directorships Non-Executive Director of Payce Consolidated Limited. Special responsibilities Member of the Audit and Risk Management Committee. Chairman of the Remuneration & Nominations Committee. Interests in shares 183,080 ordinary shares in Sedgman Limited.
Bruce Alwin Munro Non-Executive Director Bachelor of Engineering (Civil) DOB: 31 December 1953 Experience and expertise Bruce Munro was appointed as Acting Managing Director for the Thiess Group in August 2011. The Thiess Group is one of Australia’s largest integrated engineering and service providers in Australia and South East Asia and a substantial shareholder of Sedgman Limited. He joined Thiess in 1986 as a Project Manager within construction and went on to work as Country Manager for Vietnam, Cambodia and Laos and as Manager for the construction of a major telecommunications project in Indonesia. In 1999 he was appointed as President Director of PT Thiess Contractors Indonesia, a role he fulfilled for 8 years. He was then promoted to Executive General Manager Asia, where he focussed on the Thiess Group’s growing Asian interests and in particular,
For personal use only use personal For the opportunities in India, before becoming Chief Executive – Mining in 2010. Prior to the Thiess Group, Bruce worked for Leighton Contractors. In total Bruce has been employed for 36 years in the construction and mining industries. Interests in shares 8,983 ordinary shares in Sedgman Limited.
Sedgman Limited Annual Report 2011 46 Directors’ report (continued)
Information on directors (continued) Peter Ian Richards Non-Executive Director Bachelor of Commerce DOB: 29 January 1959 Experience and expertise Peter Richards was appointed as a Non Executive Director in December 2010. Peter has over 30 years experience in the resources and industrial sectors. He has held executive roles with international companies and serves as a Director with several ASX-listed companies. He is a former chief executive of Dyno Nobel Limited and has also held senior roles with BP plc and Wesfarmers Limited. Other current directorships Executive Chairman of Minbos Resources Limited, Non-Executive Chairman of Kangaroo Resources Limited, Non-executive Director of Emeco Holdings Limited, Bradken Limited, NSL Consolidated Limited and Norfolk Group Limited. Interests in shares 2,655 ordinary shares in Sedgman Limited.
Mark Andrew Read Managing Director Bachelor of Engineering (Electrical), Fellow of the Institution of Engineers Australia, Advanced Management School, Harvard University, Boston USA DOB: 23 April 1961 Experience and expertise Mark Read assumed the role of CEO and Managing Director of Sedgman Limited in May 2008 and resigned on 5 November 2010. Interests in shares 338,738 ordinary shares in Sedgman Limited (as at the date of resignation on 5 November 2010). Company Secretary The company secretary is Mr Adrian Relf. He was admitted as a solicitor in 2003 and holds the qualifications of Bachelor of Social Science, Bachelor of Laws, Graduate Diploma of Legal Practice and Graduate Diploma of Management. Meetings of directors The numbers of meetings of the Company’s Board of Directors held during the year ended 30 June 2011, and the numbers of meetings attended by each Director were:
Meetings of committees Full meetings of Audit & Risk Remuneration & Directors Management Nominations A B A B A B Russell James Kempnich 5 6 3 3 Nicholas Neil Jukes 3 3 Mark Andrew Read (Resigned 5 November 2010) 2 2 Donald James Argent 6 6 4 4 Robert John McDonald 6 6 4 4 3 3 Roger Ronald Short 5 6 3 4 3 3 Bruce Alwin Munro 4 6 Peter Ian Richards 3 3
A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee during the year
Remunerationonly use personal For report - audited The remuneration report is set out under the following main headings: 1. Principles used to determine the nature and amount of remuneration 2. Service agreements 3. Details of remuneration 4. Details of share–based compensation
47 Sedgman Limited Annual Report 2011 Directors’ report (continued)
Remuneration report – audited (continued) 1. Principles used to determine the nature and amount of remuneration The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: • competitiveness and reasonableness • performance linkage / alignment of executive compensation • transparency • capital management. The Group has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. The framework shows the interests of shareholders and the executive group as discussed below: Alignment to shareholders’ interests: • focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return on assets as well as focusing the executive on key non-financial drivers of value • attracts and retains high calibre executives. Alignment to executives’ interests: • rewards capability and experience • reflects competitive reward for contribution to growth in shareholder wealth • provides a clear structure for earning rewards • provides recognition for contribution. The framework provides a mix of fixed and variable pay, and a blend of short and long-term incentives. As executives gain seniority with the Group, the balance of this mix shifts to a higher proportion of “at risk” rewards. Non-executive directors’ fees Non-executive directors may be paid, as remuneration for their services, a sum determined from time to time by Sedgman’s shareholders in a general meeting, with that sum to be divided amongst the non-executive directors in such a manner and proportion as they agree. Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the non-executive directors. Non-executive directors’ fees and payments are reviewed annually by the Board. The Chairman’s fees are determined independently to the fees of non-executive directors based on comparative roles in the external market. The non-executive directors’ remuneration is inclusive of committee fees. The maximum aggregate amount which has been approved by Sedgman’s shareholders for payment to the non-executive directors is $650,000 per annum. Non-executive directors receive their remuneration as a combination of cash, superannuation and Sedgman Limited shares under the non-executive directors on-market share purchase scheme. Non-executive directors do not receive short term incentives and are not entitled to participate in the Company’s long term equity based incentive schemes. Executive pay The executive pay and reward framework has four components:
(i) base pay and benefits (ii) short-term performance incentives (iii) long-term incentives through participation in the Long Term Incentive Plan (iv) other remuneration such as superannuation. (i) Base pay
For personal use only use personal For Executives are offered a competitive base pay using external benchmarking to ensure base pay is set to reflect the market for a comparable role. Base pay for senior executives is reviewed annually to ensure the executive’s pay is competitive with the market and an executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases included in any senior executive’s contract. Executives receive benefits including non-monetary benefits such as directors and officer’s liability insurance. (ii) Short-term incentives The Sedgman Short-term incentive (STI) scheme was introduced during the year ended 30 June 2011 and replaced the previous bonus scheme operating since 2003. The STI scheme is a structured and equitable way of rewarding executives for both Company and individual performance. The scheme is a cash based scheme.
Sedgman Limited Annual Report 2011 48 Directors’ report (continued)
Remuneration report – audited (continued) 1. Principles used to determine the nature and amount of remuneration (continued) (ii) Short-term incentives (continued) If the Group achieves certain pre-determined KPIs, a bonus pool becomes available to executives during the annual review. By using KPIs it ensures variable reward is only available when value has been created for shareholders and when financial performance is consistent with the business plan. For the year ended 30 June 2011, the KPIs required the achievement of specific performance targets in relation to net profit before tax (NPBT) and the achievement of individual KPIs by the executive. Each executive’s bonus opportunity depends on the accountabilities of the role, impact on the organisation and business unit performance. The amount of bonuses paid to individual employees is based on predetermined percentage and the discretion of the Managing Director having regard to the executive’s overall performance. Pursuant to his Executive Employment Agreement, the Chief Executive Officer is entitled to an annual bonus. The amount of this bonus depends upon the Chief Executive Officer’s performance against a series of KPIs including sustainability, commercial performance and enhancement of the Company’s brand. The maximum annual bonus payable in any year is 1.5 times the Chief Executive Officer’s base remuneration. For the current financial year, the Chief Executive Officer is entitled to a minimum bonus of 37.5% of base salary prorated for the period of employment. (iii) Long-term incentives Sedgman has established equity incentive schemes via the Executive Share Option Plan (ESOP) and the Long Term Incentive Plan (LTIP) which are intended to attract and retain executives and senior managers and motivate them to improve Sedgman’s performance and align their interests with those of the Group and its shareholders. The ESOP has now ceased to operate with all open options expiring on 30 June 2011. The ESOP was previously open to eligible executives of the Group. All options were offered to eligible executive employees for no consideration. The offer has to be in writing and specify, amongst other things, the number of options for which the eligible executives may apply, the period within which the options may be exercised and any vesting conditions to be satisfied before the option expiry date (as determined by the Board). Once the vesting conditions were satisfied, executives were able to exercise the options and acquire shares in the Company for the specified exercise price. The vesting conditions related to the net profit after tax performance of the Group together with the employee remaining with the Group for a specified period. There were no options granted under the ESOP during the financial year. The Company introduced the LTIP for its executives and other nominated senior managers during the year ended 30 June 2010. Under the LTIP, the Company may issue eligible participants with performance rights which entitle the holder to subscribe for or be transferred one fully paid ordinary share of the Company for no consideration subject to the achievement of performance conditions specified by the Board. Performance rights granted under the LTIP carry no dividend or voting rights. Those eligible to participate in the LTIP include executive directors, executives and employees of the Group. Details of performance rights granted during the financial year, including the related performance conditions, are set out on page 54. In addition to the above it is proposed Nick Jukes, Chief Executive Officer, will be entitled to participate in the LTIP per his employment contract and be granted 2,500,000 performance rights. Nick Juke’s participation in the LTIP will be in accordance with the LTIP rules including performance hurdles and is subject to shareholder approval at the 2011 Annual General Meeting. The Group does not have a formal policy in place regarding hedging of options or rights by key management personnel. Consequences of performance on shareholders wealth In considering the Group’s performance and benefits for shareholders wealth, the Board have regard to the indices outlined below, in respect of the current financial year and the previous four financial years.
2011 2010 2009 2008 2007 $ $ $ $ $ Net profit attributable to equity holders of the parent 26,029,713 24,987,061 7,093,924 23,417,551 20,860,913 Basic EPS (cents) 12.5 12.3 3.9 13.1 12.3 Dividends paid 13,449,474 12,314,262 13,566,877 13,404,620 5,112,000 Dividends paid per share (cents) 6.5 6.0 7.5 7.5 3.0 Share price at year end $1.85 $1.34 $0.97 $2.67 $3.21
Change in share price $0.51 $0.37 ($1.70) ($0.54) $1.71 For personal use only use personal For Net profit after tax is the main financial performance target when setting short-term incentives. Total Shareholder returns against a basket of peers is the main performance target for long-term incentives.
49 Sedgman Limited Annual Report 2011 Directors’ report (continued)
Remuneration report - audited (continued) 2. Service agreements Sedgman has entered into executive service agreements with key executives, which contain standard terms and conditions for agreements of this nature, including confidentiality, restraint on competition and retention of intellectual property provisions. Where necessary the agreements are expressed to cover periods specific to individual appointments, but may generally be terminated by notice by either party, or earlier in the event of certain breaches of the terms and conditions. In the event of termination for any reason, the Company will pay any accrued and untaken annual leave and, subject to the relevant legislation, any accrued and untaken long service leave owing to the executive. Specific terms and conditions of service agreements of key management personnel at the end of the financial year (other than the Managing Director which is outlined below), are summarised in the table below:
Notice period Name Position Term of agreement (by either party) Ian Poole Chief Financial Officer n/a 3 months Steve Rayner Executive General Manager Corporate Services n/a 3 months Peter Watson Executive General Manager Australia n/a 3 months Simon Mordecai – Jones Executive General Manager Africa n/a 3 months Peter Long Executive General Manager Asia 10 January 2012 3 months Javier Freire Executive General Manager Americas n/a 3 months Michael Carretta Executive General Manager Operations n/a 3 months Alan Ainsworth Executive General Manager Projects n/a 3 months
The executive service contract with Mr Read ceased following his resignation on 5 November 2010. Mr Read received a termination payment of $207,500. The Company entered into a service contract with Mr Nick Jukes which commenced on 17 January 2011 and will expire 30 June 2014 (“Initial Term”) with a further option period of 12 months (“Option Term”). The contract can be terminated by the Company immediately in certain circumstances including serious misconduct, gross neglect of duty, incompetence or engaging in conduct that causes or may cause imminent and serious risk to the health and safety of a person or the reputation, viability or profitability of the Company. Mr Jukes’ contract may also be terminated by either party upon giving 6 months’ notice, or by the Company on 3 months’ notice where due to illness or incapacity, Mr Jukes is unable to perform his duties, or is absent, for 3 calendar months. In the event of termination for any reason, the Company will pay any accrued and untaken annual leave and, subject to the relevant legislation, any accrued and untaken long service leave owing to Mr Jukes. Mr Jukes shall be entitled to participate in the LTIP scheme. Mr Jukes’ participation in the LTIP will be in accordance with the LTIP Plan rules including performance hurdles and will be subject to shareholder approval at the 2011 Annual General Meeting. It is proposed that Mr Jukes will be entitled to a maximum of 2,500,000 performance rights under the LTIP Plan in 3 tranches. Vesting of any performance rights granted under the LTIP will be subject to the LTIP rules. Mr Jukes will also be entitled to 500,000 shares as a sign-on bonus subject to shareholder approval. These shares will be subject to escrow for 12 months from Mr Jukes’ commencement date and will be issued after shareholder approval is obtained at the 2011 Annual
General Meeting. For personal use only use personal For
Sedgman Limited Annual Report 2011 50 Directors’ report (continued)
Remuneration report – audited (continued) 3. Details of remuneration Review of key management personnel structure During the financial year Sedgman undertook a review of its organisational structure to ensure that it could facilitate the creation of autonomous regions with greater accountability, authority and control over performance through regional business units. A revised structure was developed, effective from 1 November 2010, which focused on each region being overseen and managed by an Executive General Manager (EGM). The EGM is the common owner for that region’s service and the local delegated authority for decision making. Although these regional EGM’s have ultimate responsibility for their region, this does not override the organisational focus on engineering and operations. It is the responsibility of the EGM Projects and EGM Operations (newly created positions) to ensure that all engineering or operations jobs are delivered to the same standards consistently across each region. These organisational changes have meant that the regional and functional EGM’s are now defined as key management personnel for the Company. The EGM’s in charge of the financial and corporate services functions still remain as key management personnel. Amounts of remuneration Details of the remuneration of the Directors, Group and Company executives who receive the highest remuneration and other key management personnel of the Group are set out in the following tables.
Post- Proportion Value of employ- Share based of options & Short-term ment payments remuner- rights as ation proportion Cash (xvi) Non- Super- Term- (xv) perform- of salary & STI monetary annuation ination Options ance remuner- 2011 fees bonus benefits benefits benefit Shares & Rights Total related ation $ $ $ $ $ $ $ $ % % Non-executive Directors Russell Kempnich (i) 179,808 - 3,861 16,183 - 10,001 - 209,853 - - Donald Argent 65,000 - 3,861 5,850 - 10,001 - 84,712 - - Robert McDonald 40,004 - 3,861 30,846 - 10,001 - 84,712 - - Roger Short 65,000 - 3,861 5,850 - 10,001 - 84,712 - - Bruce Munro 65,000 - 3,861 5,850 - 10,001 - 84,712 - - Peter Richards (ii) 32,500 - 2,100 2,925 - 5,001 - 42,526 - - Executive Directors Nick Jukes (iii) 275,386 202,000 1,740 24,785 - - - 503,911 40.09% - Mark Read (iv) 226,864 135,000 1,347 5,786 207,500 - (208,739) 367,758 (20.05)% (56.76)% Other key management personnel Alan Wigan (v) 164,360 40,000 1,952 16,710 - - (62,265) 160,757 (13.85)% (38.73)% Steven van 242,094 55,000 1,294 17,010 - - (68,482) 246,916 (5.46)% (27.73)% Barneveld (vi) Peter Nevin (vii) 72,006 - 8,866 5,599 95,667 - (28,025) 154,113 (18.18)% (18.18)% Adam Langford (viii) 53,514 - 658 3,468 - - (27,154) 30,486 (89.07)% (89.07)% Geoff Jones (ix) 195,625 - 1,294 - - - - 196,919 - - Ian Poole (v) 153,583 30,000 2,228 50,337 - - 202,300 438,448 52.98% 46.14% Steve Rayner (x) 277,294 46,781 3,066 12,666 - - 61,549 401,356 26.99% 15.34% Peter Watson (xi) 320,983 40,000 3,299 28,888 - 136,566 529,736 33.33% 25.78% Dirk Schenk (xii) 99,712 - 1,591 - - - 18,483 119,786 15.43% 15.43% Simon Mordecai – 62,231 10,000 955 - - - - 73,186 13.66% - Jones (xiii) Peter Long (xiv) 412,360 13,260 34,498 36,290 - - - 496,408 2.67% -
Javieronly use personal For Freire (xiv) 164,669 13,260 2,556 5,005 - - 52,980 238,470 27.78% 22.22% Michael Carretta (xiv) 224,792 26,520 2,556 20,231 - - 55,699 329,798 24.93% 16.89% Alan Ainsworth (xiv) 224,792 26,520 2,556 20,231 - - 54,611 328,710 24.68% 16.61%
Totals 3,617,577 638,341 91,861 314,510 303,167 55,006 187,523 5,207,985
51 Sedgman Limited Annual Report 2011 Directors’ report (continued)
Remuneration report – audited (continued) 3. Details of remuneration (continued)
(i) Russell Kempnich acted in the Managing Director role during the period between 5 November 2010 and 17 January 2011. Russell’s remuneration reflected his additional duties over this period. (ii) Peter Richards was appointed as a non-executive director on 14 December 2010. (iii) Nick Jukes was appointed Managing Director on 17 January 2011. (iv) Mark Read resigned as Managing Director on 5 November 2010. (v) Alan Wigan, Sedgman’s previous Chief Financial Officer, was considered key management personnel from 1 July 2010 until 2 December 2010, being the date Ian Poole commenced in this position. Following this date, Alan Wigan assisted with the transition of the new Chief Executive Officer and Chief Financial Officer until his resignation on 2 February 2011. (vi) Steven van Barneveld resigned as Chief Operating Officer - Sedgman Coal on 31 October 2010. (vii) Peter Nevin resigned as Executive General Manager Business Processes on 13 September 2010. (viii) Adam Langford resigned as General Manager – Sedgman Metals Operations on 1 September 2010. (ix) Geoff Jones’ role of General Manager – Sedgman Metals Engineering was deemed key management personnel from 1 July 2010 to 31 October 2010. From 1 November 2010 this role reported into the newly created role Executive General Manager Australia. The Executive General Manager Australia is considered a key management personnel role. (x) Steve Rayner is considered key management personnel from 14 September 2010 to 30 June 2011. Steve Rayner, previously Executive General Manager Human Resources, assumed the responsibilities of Executive General Manager Business Processes following Peter Nevin’s resignation. On 1 November 2010 Steve Rayner was appointed into the newly created role Executive General Manager Corporate Services. (xi) Peter Watson is considered key management personnel from his commencement date on 23 August 2010 to 30 June 2011. Peter Watson’s initial role with the Company was Chief Operating Officer Metals. On 1 November 2010, Peter was appointed to the newly created role Executive General Manager Australia. (xii) Dirk Schenk is considered key management personnel during the period he was acting in the role Executive General Manager Africa, being 1 November 2010 to 31 March 2011. (xiii) Simon Mordecai – Jones is deemed key management personnel from the date of his commencement as Executive General Manager Africa on 1 April 2011. (xiv) Individual is deemed key management personnel from the commencement date of the new organisational structure on 1 November 2010. (xv) The fair value of the options and rights is calculated at the date of grant using Black-Scholes and Monte Carlo pricing models respectively and allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the options and rights recognised in this reporting period. In valuing the options and rights, market conditions have been taken into account. Remuneration in the form of options and rights includes negative amounts for options and rights forfeited during the year. (xvi) Sedgman has adopted a formal STI scheme which allows key management personnel bonuses to be finalised prior to the signing of the Financial Statements. This could not be determined in previous financial years. The bonus figure disclosed for key management personnel relates to bonuses accrued for financial year (FY) 2011 and bonuses paid in FY2011 relating to FY2010. Moving forward the bonus disclosed in the remuneration report will only relate to amounts accrued for that year as determined under the STI scheme. Note that all disclosed bonuses vested in the current financial year. Details of the vesting profile are shown below:
Short-term incentive bonus 3 % vested in year % forfeited in year Nick Jukes 1 n/a n/a Ian Poole 43% 57% Steve Rayner 33% 67% Peter Watson 33% 67% Simon Mordecai – Jones 2 n/a n/a Peter Long 47% 53% Javier Freire 22% 78% Michael Carretta 31% 69% Alan Ainsworth 31% 69% For personal use only use personal For 1 Nick Jukes’ bonus for the current year was paid as a condition of employment and is therefore not subject to the terms of the STI scheme. 2 Simon Mordecai – Jones’ bonus is deemed discretionary and is therefore not subject to the terms of the STI scheme. 3 Net profit after tax is the main financial performance target when setting short-term incentives.
Sedgman Limited Annual Report 2011 52 Directors’ report (continued)
Remuneration report – audited (continued) 3. Details of remuneration (continued)
Post- Proportion employ- Share based of Value of Short-term ment payments remuner- options as ation proportion Cash Non- Super- Term- perform- of salary & Cash monetary annuation ination (iv) ance remuner- 2010 fees bonus benefits benefits benefit Shares Options Total related ation $ $ $ $ $ $ $ $ % % Non-executive Directors Russell Kempnich 90,000 - 6,444 8,100 - 10,002 - 114,546 - - Peter Hay (i) 26,166 - 2,613 2,355 - 5,001 - 36,135 - - Donald Argent 65,000 - 6,444 5,850 - 10,002 - 87,296 - - Robert McDonald 40,000 - 6,444 30,850 - 10,002 - 87,296 - - Roger Short 48,750 - 6,444 22,100 - 10,002 - 87,296 - - Gregory Miller (ii) 32,500 - 3,072 2,925 - 5,001 - 43,498 - - Bruce Munro (iii) 37,855 - 3,372 3,407 - 5,001 - 49,635 - - Executive Directors Mark Read 412,814 300,000 6,444 59,995 - - 208,739 987,992 30.40% 21.15% Other key management personnel Alan Wigan 282,500 65,000 6,444 31,275 - - 110,177 495,396 13.15% 22.29% Steven van 307,500 90,000 6,444 35,774 - - 128,555 568,273 15.87% 22.66% Barneveld Peter Nevin 278,257 45,000 33,402 31,384 - - 44,658 432,701 9.84% 9.77% Adam Langford 216,083 42,000 6,444 23,227 - - 46,946 334,700 12.59% 14.07% Geoff Jones 383,795 35,000 3,796 17,850 - - - 440,441 7.96% - Totals 2,221,220 577,000 97,807 275,092 - 55,011 539,075 3,765,205
(i) Peter Hay resigned as a non-executive director on 25 November 2009. (ii) Gregory Miller resigned as a non-executive director on 21 December 2009. (iii) Bruce Munro was appointed as a non-executive director on 21 December 2009. (iv) The fair value of the options and rights is calculated at the date of grant using Black-Scholes and Monte Carlo pricing models respectively and allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the options and rights recognised in this reporting period. In valuing the options and rights, market conditions have been taken into account. Remuneration in the form of options and rights includes negative amounts for options and rights forfeited during the year.
4. Details of share-based compensation Options The terms and conditions of each grant of options by Sedgman Limited over ordinary shares of the Company under the Employee Share Options Plan (ESOP) affecting remuneration in the previous or current reporting periods are as follows:
Grant date Expiry date Exercise price Fair value per option at grant date Vesting date 20 February 2007 30 June 2011 $2.43 $0.232 1 September 2010 24 September 2007 30 June 2010 $2.35 $0.793 1 September 2009 5 May 2008 30 June 2010 $2.35 $0.793 1 September 2009
18 September 2008 30 June 2011 $2.40 $0.229 1 September 2010 For personal use only use personal For Options granted under the ESOP carry no dividend or voting rights. The fair value at grant date was determined using a Black-Scholes option pricing model. When exercisable, each option is convertible into one ordinary share of Sedgman Limited and the shares will rank for dividends declared on or after the date of issue. The options will lapse upon the earlier of the date specified by the Board or events contained in the ESOP rules, including non- achievement of performance conditions, termination of employment, resignation, death or disablement. No options were granted under the ESOP during the year ended 30 June 2011 or subsequent to the end of the financial year. No options were exercised during the financial year.
53 Sedgman Limited Annual Report 2011 Directors’ report (continued)
Remuneration report – audited (continued) 4. Details of share-based compensation (continued) Options (continued) Details of vesting profiles of the options granted as remuneration to eligible Group and Company executives who receive the highest remuneration and other key management person of the Group are detailed below.
Options granted % vested in % forfeited in Financial years in Name Number Date year year which grant vests Alan Wigan 80,000 18 September 2008 100% - 2011 Steven van Barneveld 80,000 18 September 2008 100% - 2011 Peter Nevin 15,000 18 September 2008 100% - 2011 Adam Langford 80,000 18 September 2008 100% - 2011 Michael Carretta 50,000 18 September 2008 100% - 2011 Alan Ainsworth 30,000 18 September 2008 100% - 2011
Performance rights Performance rights over the ordinary shares of the Company were granted by Sedgman Limited to key management personnel during the financial year following approval of the Long Term Incentive Plan (LTIP) by shareholders at the Company’s Annual General Meeting on 25 November 2009. Performance rights granted during the 2011 financial year were issued in three tranches and are subject to performance conditions outlined below with the following measurement and vesting profile:
Tranche Performance measurement period Vesting date 1 1 July 2009 to 30 June 2012 1 July 2012 2 1 July 2010 to 30 June 2013 1 July 2013 3 1 July 2011 to 30 June 2014 1 July 2014
The performance rights are issued to employees for no consideration and are subject to the employee’s continuing employment and lapse upon resignation or termination (unless certain circumstances such as death or disability where vesting is at the discretion of the Board) or failure to achieve the specified performance vesting condition. The performance rights will immediately vest and become exercisable if in the Board’s opinion a vesting event occurs (as defined in the plan rules) such as a takeover bid or winding up of the Company. The performance vesting condition for performance rights issued is relative to the Total Shareholder Return (TSR). At the end of each tranche’s performance measurement period, the Board will rank the Company’s TSR against a peer group that currently comprises 19 other companies considered by the Board to be peers or competitors of the Company. The percentage of performance rights in each respective tranche that will vest and become exercisable will depend upon the Company’s TSR performance relative to the companies in the peer group (as determined by the Board) as set out in the table below:
Sedgman TSR ranking Percentage of performance rights (at end of performance measurement period) in relevant tranche that vest 1-5 100% 6 90% 7 80% 8 70% 9 60% 10 50%
For personal use only use personal For 11-20 0%
Sedgman Limited Annual Report 2011 54 Directors’ report (continued)
Remuneration report – audited (continued) 4. Details of share-based compensation (continued) Performance rights (continued) Details of performance rights granted as remuneration to each of the Group and Company executives who receive the highest remuneration and other key management person of the Group are set out below:
Fair value per % % right at grant Vested Forfeited Number Grant date date In Year In Year Vesting date Directors of Sedgman Limited Mark Read 1,000,000 22 February 2010 $0.86 - 100% 1 July 2012 1,000,000 22 February 2010 $0.86 - 100% 1 July 2013 1,000,000 22 February 2010 $0.83 - 100% 1 July 2014 Group/Company executives who receive the highest remuneration and other key management person Alan Wigan 230,000 22 February 2010 $0.86 - 100% 1 July 2012 230,000 22 February 2010 $0.86 - 100% 1 July 2013 230,000 22 February 2010 $0.83 - 100% 1 July 2014
Steven van 250,000 22 February 2010 $0.86 - 100% 1 July 2012 Barneveld 250,000 22 February 2010 $0.86 - 100% 1 July 2013 250,000 22 February 2010 $0.83 - 100% 1 July 2014
Peter Nevin 100,000 22 February 2010 $0.86 - 100% 1 July 2012 100,000 22 February 2010 $0.86 - 100% 1 July 2013 100,000 22 February 2010 $0.83 - 100% 1 July 2014
Adam Langford 100,000 22 February 2010 $0.86 - 100% 1 July 2012 100,000 22 February 2010 $0.86 - 100% 1 July 2013 100,000 22 February 2010 $0.83 - 100% 1 July 2014
Geoff Jones ------
Dirk Schenk 100,000 22 February 2010 $0.86 - 100% 1 July 2013 100,000 22 February 2010 $0.83 - 100% 1 July 2014
Ian Poole 125,000 24 November 2010 $1.46 - - 1 July 2012 250,000 24 November 2010 $1.39 - - 1 July 2013 250,000 24 November 2010 $1.29 - - 1 July 2014
Steve Rayner 100,000 22 February 2010 $0.86 - - 1 July 2013 100,000 22 February 2010 $0.83 - - 1 July 2014 50,000 8 January 2011 $1.62 - - 1 July 2012
Peter Watson 250,000 28 July 2010 $1.02 - - 1 July 2013 250,000 28 July 2010 $0.95 - - 1 July 2014
Javier Freire 100,000 22 February 2010 $0.86 - - 1 July 2012 100,000 22 February 2010 $0.86 - - 1 July 2013 100,000 22 February 2010 $0.83 - - 1 July 2014
Michael Carretta 100,000 22 February 2010 $0.86 - - 1 July 2012
100,000 22 February 2010 $0.86 - - 1 July 2013 For personal use only use personal For 100,000 22 February 2010 $0.83 - - 1 July 2014
Alan Ainsworth 100,000 22 February 2010 $0.86 - - 1 July 2012 100,000 22 February 2010 $0.86 - - 1 July 2013 100,000 22 February 2010 $0.83 - - 1 July 2014 The fair value of performance rights granted was determined using a Monte Carlo simulation model. No performance rights granted to key management personnel vested during the financial year. The performance rights to be granted to the Managing Director have not been included in the table above as they are subject to the approval of shareholders at the Company’s 2011 Annual General Meeting.
55 Sedgman Limited Annual Report 2011 Directors’ report (continued)
Remuneration report – audited (continued) 4. Details of share-based compensation (continued) Analysis of movements in options and performance rights The movement during the reporting period, by value, of options and performance rights over ordinary shares in the Company held by each Group and Company executives who receive the highest remuneration and other key management person of the Group is detailed below.
Value of options and rights Granted in year Exercised in Lapsed in year Name $ (A) year $ (B) $ (C) Directors of Sedgman Limited Mark Read - - 5,320,000 Nick Jukes - - - Other key management personnel of the Group and Company Alan Wigan - - 1,276,500 Steven van Barneveld - - 1,407,500 Peter Nevin - - 521,000 Adam Langford - - 475,000 Geoff Jones - - - Ian Poole 852,625 - - Steve Rayner 80,850 - - Peter Watson 492,500 - - Dirk Schenk * - - - Simon Mordecai – Jones - - - Peter Long - - - Javier Freire - - - Michael Carretta - - - Alan Ainsworth - - -
(A) The value of options and rights granted in the year is their fair value calculated at grant date using either a Black-Scholes option-pricing model for options or a Monte Carlo simulation-pricing model for rights with a TSR performance condition. The total value of the options and rights granted is included in the table above. This amount is allocated to remuneration over the vesting period in accordance with Australian Accounting Standards. (B) The value of options and rights exercised during the year is calculated as the market price of shares of the Company as at close of trading on the date the options or rights were exercised (after deducting the price paid to exercise the option). (C) The value of the options and rights that lapsed during the year represents the benefit forgone and is calculated at the date the option and right lapsed assuming the performance criteria had been achieved. * Individual not considered key management personnel by the date the rights lapsed. Indemnification and Insurance of officers and auditors Indemnification The Company has agreed to indemnify the current Directors and all officers of its controlled entities against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors or officers of the Company and its controlled entities, except where liability arises out of conduct involving a lack of good faith. The Company has not indemnified or made a relevant agreement for indemnifying against a liability any person who is or has been an auditor of the Company. Insurance premiums
For personal use only use personal For The Company has insured its indemnification of liabilities in respect of Directors and officers of the Company and its controlled entities.
Sedgman Limited Annual Report 2011 56 Directors’ report (continued)
Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important. Details of the amounts paid or payable to the auditor (KPMG) for audit and non-audit services provided during the year are set out below. The Board has considered the position and, in accordance with the advice received from the Audit and Risk Management Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the Audit and Risk Management Committee to ensure they do not impact the impartiality and objectivity of the auditor • the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards. During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms.
Consolidated 2011 2010 $ $ Audit services KPMG Australia: Audit and review of financial reports Current year 235,000 190,000 Prior year 22,100 - Group’s share of fees for audit of joint ventures 11,600 11,500 Other regulatory audit services 23,950 8,000 Overseas KPMG firms: Audit and review of financial reports Current year 131,304 30,691 Prior year 38,504 - Total remuneration for audit services 462,458 240,191 Other services KPMG Australia: Taxation services 136,279 75,498 Research and development allowance services 150,000 530,000 Risk and forensic services 11,900 10,213 Other advisory services 42,685 - Overseas KPMG firms: Taxation services 213,286 90,360 Risk and forensic services - 40,402
Total remuneration for other services 554,150 746,473 For personal use only use personal For
57 Sedgman Limited Annual Report 2011 Directors’ report (continued)
Auditor A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 59 and forms part of the directors’ report for the financial year ended 30 June 2011. KPMG continues in office in accordance with section 327 of the Corporations Act 2001. Rounding The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. This report is made in accordance with a resolution of Directors.
Russell James Kempnich Chairman
Nicholas Neil Jukes Managing Director
Brisbane
18 August 2011 For personal use only use personal For
Sedgman Limited Annual Report 2011 58 Lead Auditor’s Independence Declaration
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the Directors of Sedgman Limited I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2011, there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Jason Adams Partner
Brisbane
18 August 2011 For personal use only use personal For
KPMG, an Australian partnership and a member firm of the KPMG Liability limited by a scheme approved under network of independent member firms affiliated with KPMG Professional Standards Legislation. International, a Swiss cooperative.
59 Sedgman Limited Annual Report 2011 Corporate governance statement
Sedgman is committed to implementing and maintaining the highest standard of corporate governance policies. Sedgman’s corporate governance charter is intended to instil good corporate governance and to build a culture of best practice both in Sedgman’s own internal practices and in dealing with others. The Board has assessed Sedgman’s current practice against the ASX Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice Recommendations” (the Guidelines) and notes that the Company’s practices are consistent with the Guidelines except where stated below.
Principle 1 – Lay solid foundations for management and oversight The Board’s primary role is the protection and enhancement of long-term shareholder value. The key governance principles adopted by the Board in governing Sedgman are contained in the Board Charter, which is published on Sedgman’s website www.sedgman.com Sedgman has implemented policies which set out those matters for which the Board is responsible and those which have been delegated to management. Clear guidelines have been established as to the levels of authority of all members of management. The most significant responsibilities of the Board are: • Approving, evaluating and monitoring strategy and performance against financial and non-financial targets • Approving and overseeing major expenditure, acquisitions and investments • Appointing and overseeing the performance of executive management • Approving and overseeing systems of risk management and internal compliance and control, codes of ethics and conduct and legal and statutory review • Approving and monitoring financial and other reporting and the operation of committees.
Principle 2 – Structure the Board to add value The Board currently comprises of seven directors who have a broad range of experience, expertise, skills, qualifications and contacts relevant to the business of the Company and the mining and engineering sectors. One third of the Directors (excluding the Managing Director) are required to retire from office each year. Retiring Directors may be re- elected. Only the Managing Director, Mr Nicholas Jukes, is an Executive Director. The remaining directors are non-executive Directors of whom Mr Robert McDonald, Mr Roger Short and Mr Peter Richards (who was appointed on 14 December 2010) are independent in accordance with the Guidelines. The Chairman, Mr Russell Kempnich, and two other Directors, Mr Donald Argent and Mr Bruce Munro, are non-executive Directors but are not deemed “independent” in accordance with the Guidelines. However, these Directors have extensive experience and knowledge of the industries in which Sedgman operates and Sedgman does not believe that their decision making is compromised. During the course of the year Mr Mark Read resigned as an Executive Director on 5 November 2010. Mr Read was replaced by Mr Nicholas Jukes on 17 January 2011. All Directors may, at Sedgman’s expense, obtain independent advice concerning any aspect of Sedgman’s operations. The Remuneration & Nominations Committee ensures that the Board comprises individuals which are best able to discharge their duties as Directors and add value to Sedgman and that senior management are remunerated in a manner that attracts, retains and rewards performance that increases shareholder returns. This committee comprises Mr Roger Short, Mr Robert McDonald and Mr Russell Kempnich. The Remuneration & Nominations Committee’s charter is published on the Company’s website.
Principle 3 – Promote ethical and responsible decision making The Board has adopted a detailed code of ethics and values to guide Directors and executives in the performance of their duties. All Directors, executives and employees are expected to act with integrity at all times and to enhance the Company’s reputation and performance.
For personal use only use personal For The Board has also adopted a detailed code of conduct for transactions in securities. The purpose of this code is to define the circumstances and periods in which Directors, executives, and specified employees, are permitted to deal in securities so as to minimise the risk of securities being traded when those persons are in possession of price sensitive information that is not in the public domain. These periods are the four weeks following the announcement of half-year and full-year results and four weeks following the Annual General Meeting. Trading in these periods is subject to those persons not being in possession of price sensitive information. Both codes have been designed with a view to ensuring the highest ethical and professional standards, as well as compliance with applicable legal obligations. Both codes can be reviewed in the investors section of the Company’s website.
Sedgman Limited Annual Report 2011 60 Corporate governance statement (continued)
Principle 4 – Safeguard integrity in financial reporting The Managing Director and the Chief Financial Officer state in writing to the Board each reporting period that Sedgman’s financial reports present a true and fair view of the Company’s financial position and are in accordance with relevant accounting standards. An Audit and Risk Management Committee has been established and met on four occasions during the year. This committee complies with the Guidelines and consists of three non-executive Directors (currently Mr Robert McDonald, Mr Roger Short and Mr Donald Argent) and has its own charter which can be reviewed on the Company’s website. The Committee makes recommendations to the Board on the adequacy of the external audit, risk management and compliance procedures.
Principle 5 – Make timely and balanced disclosure The Company has established policies and procedures to enable accurate, timely, clear and adequate disclosure to the market in compliance with the ASX Listing Rules. Continuous disclosure is a permanent item on the agenda for Board Meetings. The Directors have entered into agreements with the Company to inform the Company of any trading undertaken by them in the Company’s securities or any other relevant information. The Company Secretary has been appointed under the Listing Rules as the Continuous Disclosure Officer.
Principle 6 – Respect the rights of shareholders The Board recognises the importance of this principle and aims to keep shareholders informed of the Company’s performance and major developments through annual reports and other correspondence, including all ASX announcements. All these documents are contained on the investors section of the Company’s website, and shareholders may register to receive all documents and announcements electronically. Shareholders are encouraged to attend and participate at general meetings. Sedgman’s auditors attend the Annual General Meeting and are available to answer shareholders’ questions.
Principle 7 – Recognise and manage risk The Board, together with management, has sought to identify, monitor and mitigate risk. The Company has implemented an enterprise risk management framework based on AS-4360 to ensure that it only takes on business which provides an acceptable risk/reward profile and does not expose the Company to unacceptable commercial risk. Internal controls are monitored by management on a regular basis and improved if necessary. The Board requires and has received assurance from the Managing Director and Chief Financial Officer that the Company’s risk management and internal compliance and control system is operating efficiently and effectively. In addition to regular reviews by the Company, the Audit and Risk Management Committee regularly review the effectiveness of the risk management system.
Principle 8 – Remunerate fairly and responsibly Remuneration of Directors and executives is fully disclosed in the annual report and any changes with respect to key executives announced in accordance with continuous disclosure requirements. The Company’s policy in relation to remuneration is to ensure that remuneration packages properly reflect the person’s duties and responsibilities and that the remuneration is competitive to attract, retain and motivate people of the highest quality and rewards performance. As noted above at Principle 2, the Board has established a Remuneration & Nominations Committee. In performing its remuneration function, this Committee advises on remuneration policy in respect of the Board and senior executives to ensure conformance with market best practices and alignment with shareholder interests. The Board believes that an appropriate equity incentive scheme assists in attracting and retaining executives, motivates them to improve
Sedgman’s performance and aligns their interests with those of the Group and its shareholders. For personal use only use personal For
61 Sedgman Limited Annual Report 2011 Income Statement For the year ended 30 June 2011
2011 2010 Notes $’000 $’000 Revenue from services 507,704 326,548 Other income 3 1,066 1,239 Changes in construction work in progress 34,545 9,561 Raw materials and consumables used (331,769) (176,134) Depreciation and amortisation expense 4 (19,175) (15,734) Employee expenses (111,473) (87,935) Agency contract fees (13,583) (6,001) Other expenses (31,809) (21,953) Finance costs 4 (2,026) (1,795) Share of net profits/(losses) of joint venture partnerships accounted for using the 32 1,034 (791) equity method Profit before income tax 34,514 27,005 Income tax expense 5 (8,484) (2,018) Profit for the year 26,030 24,987
Profit attributable to owners of Sedgman Limited 26,030 24,987
Cents Cents Earnings per share for profit attributable to the ordinary equity holders of the company: Basic earnings per share 36 12.5 12.3 Diluted earnings per share 36 12.4 12.3
The above income statement should be read in conjunction with the accompanying notes. For personal use only use personal For
Sedgman Limited Annual Report 2011 62 Statement of comprehensive income For the year ended 30 June 2011
2011 2010 Notes $’000 $’000 Profit for the year 26,030 24,987
Other comprehensive income Exchange differences on translation of foreign operations (net of tax) 23(a) (1,060) (601) Other comprehensive income for the year, net of tax (1,060) (601) Total comprehensive income for the year 24,970 24,386
Total comprehensive income for the year is attributable to owners of Sedgman Limited 24,970 24,386 24,970 24,386
The above statement of comprehensive income should be read in conjunction with the accompanying notes. For personal use only use personal For
63 Sedgman Limited Annual Report 2011 Balance Sheet As at 30 June 2011
2011 2010 Notes $’000 $’000 ASSETS Current assets Cash and cash equivalents 6 43,184 58,004 Trade and other receivables 7 137,479 82,656 Current tax assets 8 - 4,649 Inventories 9 6,696 6,219 Total current assets 187,359 151,528
Non-current assets Trade and other receivables 7 1,103 - Investments accounted for using the equity method 10 172 - Available-for-sale financial assets 11 1,000 1,000 Property, plant and equipment 12 57,110 67,136 Deferred tax assets 13 4,110 3,207 Intangible assets 14 47,823 42,741 Total non-current assets 111,318 114,084 Total assets 298,677 265,612
LIABILITIES Current liabilities Trade and other payables 15 104,950 77,441 Interest bearing liabilities 16 10,788 12,786 Provisions 17 12,378 12,592 Current tax liabilities 18 435 - Total current liabilities 128,551 102,819
Non-current liabilities Interest bearing liabilities 19 18,485 30,041 Provisions 21 566 566 Total non-current liabilities 19,051 30,607 Total liabilities 147,602 133,426 Net assets 151,075 132,186
EQUITY Contributed equity 22 96,719 90,378 Reserves 23(a) 4,395 4,427 Retained profits 23(b) 49,961 37,381 Parent entity interest 151,075 132,186 Total equity attributable to owners of the Company 151,075 132,186
The above balance sheet should be read in conjunction with the accompanying notes. For personal use only use personal For
Sedgman Limited Annual Report 2011 64 Statement of changes in equity For the year ended 30 June 2011
Reserves Foreign currency Equity Contributed translation compensation Retained equity reserve reserve earnings Total Equity Notes $’000 $’000 $’000 $’000 $’000 Balance at 1 July 2009 58,474 (324) 3,495 24,708 86,353 Total comprehensive income for the year * - (601) - 24,987 24,386 Transactions with owners in their capacity as owners *: Contributions of equity 22 31,904 - - - 31,904 Employee share options and rights 23 - - 1,857 - 1,857 Dividends provided for or paid 24 - - - (12,314) (12,314) 31,904 - 1,857 (12,314) 21,447 Balance at 30 June 2010 90,378 (925) 5,352 37,381 132,186
Balance at 1 July 2010 90,378 (925) 5,352 37,381 132,186 Total comprehensive income for the year * - (1,060) - 26,030 24,970 Transactions with owners in their capacity as owners *: Contributions of equity 22 6,341 - - - 6,341 Employee share options and rights 23 - - 1,028 - 1,028 Dividends provided for or paid 24 - - - (13,450) (13,450) 6,341 - 1,028 (13,450) (6,081) Balance at 30 June 2011 96,719 (1,985) 6,380 49,961 151,075
* Amounts recognised are disclosed net of income tax (where applicable)
The above statement of changes in equity should be read in conjunction with the accompanying notes. For personal use only use personal For
65 Sedgman Limited Annual Report 2011 Cash flow statement For the year ended 30 June 2011
2011 2010 Notes $’000 $’000 Cash flows from operating activities Cash receipts from customers 477,250 313,438 Cash payments to suppliers and employees (446,653) (272,713) 30,597 40,725 Interest received 932 348 Financing costs paid (1,919) (1,672) Income taxes paid (4,303) (8,435) Net cash inflow/(outflow) from operating activities 35 25,307 30,966 Cash flows from investing activities Distributions and loans from/(to) joint venture partnerships 2,207 (2,095) Payments for property, plant and equipment 12 (9,662) (16,704) Proceeds from sale of property, plant and equipment 14 2,012 Acquisition of intangible asset 14 (7,731) - Net cash (outflow)/inflow from investing activities (15,172) (16,787) Cash flows from financing activities Proceeds from issue of shares - 31,282 Proceeds from exercise of share options - 560 Payment of financing transaction costs (581) (801) Finance lease payments (5,701) (4,757) Repayment of borrowings (7,961) (9,583) Dividends paid 24 (7,109) (11,451) Net cash inflow/(outflow) from financing activities (21,352) 5,250 Net increase/(decrease) in cash and cash equivalents (11,217) 19,429 Effect of exchange rate fluctuations on cash held (3,603) - Cash and cash equivalents at 1 July 58,004 38,575 Cash and cash equivalents at 30 June 6 43,184 58,004
The above cash flow statement should be read in conjunction with the accompanying notes. For personal use only use personal For
Sedgman Limited Annual Report 2011 66 Notes to the Financial Statements For the year ended 30 June 2011
Contents Page 1 Summary of significant accounting policies...... 68 2 Operating segments...... 78 3 Other income...... 79 4 Expenses...... 79 5 Income tax expense...... 80 6 Current assets – Cash and cash equivalents...... 80 7 Trade and other receivables...... 80 8 Current assets – Current tax assets...... 81 9 Current assets – Inventories...... 81 10 Non-current assets – Investments accounted for using the equity method...... 81 11 Non-current assets – Available-for-sale financial assets...... 81 12 Non-current assets – Property, plant and equipment...... 82 13 Non-current assets – Deferred tax assets...... 83 14 Non-current assets – Intangible assets...... 83 15 Current liabilities – Trade and other payables...... 84 16 Current liabilities – Interest bearing liabilities...... 84 17 Current liabilities – Provisions...... 84 18 Current liabilities – Current tax liabilities...... 85 19 Non-current liabilities – Interest bearing liabilities ...... 85 20 Non-current liabilities – Deferred tax liabilities...... 85 21 Non-current liabilities – Provisions...... 86 22 Contributed equity...... 86 23 Reserves and retained profits...... 87 24 Dividends...... 88 25 Key management personnel disclosures...... 89 26 Remuneration of auditors...... 93 27 Contingencies...... 93 28 Commitments...... 94 29 Related party transactions...... 95 30 Subsidiaries...... 95 31 Deed of cross guarantee...... 96 32 Interests in joint ventures...... 98 33 Financial instruments...... 99 34 Events occurring after the balance sheet date...... 102 35 Reconciliation of profit after income tax to net cash inflow from operating activities...... 102
36only use personal For Earnings per share...... 103 37 Progress claims in advance...... 103 38 Share-based payments...... 104 39 Parent entity financial information...... 106
67 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report of Sedgman Limited (“the Company”) as at and for the year ended 30 June 2011 comprises the Company and its controlled entities (together referred to as “the Group”) and the Group’s interests in joint ventures. The financial report was authorised for issue by the directors on 18 August 2011. (a) Basis of preparation Statement of Compliance This general purpose financial report has been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group complies with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared on the historical cost basis, except for available-for-sale assets (refer 1(l)). Certain comparative amounts have been reclassified to conform with the current year’s presentation. Operational spares totalling $4.863 million have been reclassified from property plant and equipment assets (note 12) to inventories (note 9) in the current financial year following a review of the nature of the individual items. New and amended standards adopted by the Group The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 July 2010: • AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project • AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-Settled Share-based Payment Transactions • AASB 2009-10 Amendments to Australian Accounting Standards - Classification of Rights Issues • AASB 101 Presentation of Financial Statements outlined in AASB 2010-4 Further amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 101] • AASB Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments The adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods. The adoption of AASB 101 relates only to disclosures which have been applied retrospectively and allow the Group to disclose transactions recognised as other comprehensive income in the notes to the financial statements. (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Sedgman Limited (“Company” or “parent entity”) as at 30 June 2011 and the results of all subsidiaries for the year then ended. Sedgman Limited and its subsidiaries together are referred to in this financial report as the Group. Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(aa)). (ii) Joint venture partnerships and jointly controlled entities Joint venture partnerships are those arrangements over whose activities the Group has joint control, established by contractual agreement and profits and losses are shared equally. Investments in joint venture partnerships and jointly controlled entities are accounted for using equity accounting principles. Investments in joint ventures are carried at the lower of the equity accounted amount and recoverable amount. The Group’s share of the jointly controlled partnerships and entities net profit or loss is recognised in the income statement from the date the joint control commenced until the date joint control ceases. Other movements in reserves are recognised directly in consolidated For personal use only use personal For reserves. Details of the joint ventures are set out in note 32.
Sedgman Limited Annual Report 2011 68 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies (continued) (b) Principles of consolidation (continued) (iii) Transactions eliminated on consolidation Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with joint venture partnerships and jointly controlled entities are eliminated to the extent of the Group’s interest in the joint ventures with adjustments made to “Investments accounted for using the equity method” and “Share of net profits/(losses) of joint venture partnerships accounted for using the equity method”. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are consumed or sold by the joint ventures or, if not consumed or sold by the joint ventures, when the Group’s interest in such is disposed of. (c) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. All operating segments’ operating results are regularly reviewed by the Group’s CEO (the chief operating decision maker) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly other income and foreign exchange losses. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. (d) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is Sedgman Limited’s functional and presentation currency. (ii) Transactions and balances Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined. (iii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet • income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions) • all resulting exchange differences are recognised in other comprehensive income and presented in the foreign currency translation reserve (“FCTR”) in equity. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented within equity in the FCTR. (e) Revenue and other income Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns,
tradeonly use personal For allowances and duties and taxes paid. Revenue is recognised for the major business activities as follows: (i) Rendering of services other than construction contracts Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST) payable to the taxation authority.
69 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies (continued) (e) Revenue and other income (continued) Revenue from design and project management services is recognised in the period in which the service is provided, having regard to the stage of completion of the contract. The stage of completion is assessed by reference to an assessment of work performed. Where the outcome of a contract cannot be reliably estimated, contract costs are expensed as incurred. Where it is probable that the costs will be recovered, revenue is only recognisable to the extent of costs incurred. An expected loss is recognised immediately as an expense. The Group also generates revenue from the secondment of employees to the Thiess Sedgman Joint Venture at agreed charge-out rates. (ii) Construction contracting Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. Contract revenue and expenses are recognised in accordance with the percentage of completion method unless the outcome of the contract cannot be reliably estimated. Where it is probable that a loss will arise from a construction contract, the excess of total costs over revenue is recognised as an expense immediately. Where the outcome of a contract cannot be reliably estimated, contract costs are recognised as an expense as incurred, and where management is satisfied that the costs will be recovered, revenue is recognised to the extent of costs incurred. The stage of completion of a contract is measured by reference to an assessment of total costs incurred to date as a percentage of the estimated total costs of the contract. (iii) Interest income Interest income is recognised as it accrues, taking into account the effective yield on the financial asset. (iv) Dividend income Dividend income is recognised as it accrues. (v) Other income The revenue recognition policy for construction work in progress is described above. All other items of other income are recognised as they accrue. (f) Income tax Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; differences relating to investments in subsidiaries and jointly controlled entities to the extent that they will probably not reverse in the foreseeable future; and taxable temporary differences arising on the initial recognition of goodwill. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend. (i) Investment allowances
For personal use only use personal For Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets (investment allowances). The Group accounts for such allowances as tax credits, which means that the allowance reduces current tax liabilities and current income tax expense.
Sedgman Limited Annual Report 2011 70 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies (continued) (f) Income tax (continued) (ii) Tax consolidation legislation The Company is the head entity in a tax-consolidated group comprising the Company and all of its Australian wholly owned subsidiaries. As a consequence, all members of the tax-consolidated group are taxed as a single entity. (g) Leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases (note 12). Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other interest-bearing liabilities (notes 16 and 19). Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 28). Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. (h) Impairment of assets The carrying amounts of the Group’s non-current assets, trade and other receivables (see accounting policy (j)), construction contract assets (see accounting policy (y)) and available-for-sale financial assets (see accounting policy (l)), are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated (see accounting policy (w)). For goodwill, the recoverable amount is estimated each year at the same time. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit” - “CGU”). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs that are expected to benefit from the synergies of the combination. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGUs (group of CGUs), and then to reduce the carrying amount of the other assets in the CGU (group of CGUs) on a pro-rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (i) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts are shown within interest bearing liabilities in current liabilities in the balance sheet. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. (j) Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. The amounts are generally due for settlement within 30 days. Trade and other receivables are presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impaired receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables (refer 1(w)). The amount of the impairment loss is recognised in the income statement in other expenses.
(k)only use personal For Inventories Inventories of spare parts and consumables are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
71 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies (continued) (l) Available-for-sale financial assets Available-for-sale financial assets, comprise investments in unlisted equity securities which are measured at fair value. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Changes in fair value, other than impairment losses, are recognised directly in equity. When the investment is derecognised, the cumulative gain or loss in equity is transferred to the income statement. If there is objective evidence of impairment, the cumulative loss, measured as the difference between the acquisition cost and the current fair value less any impairment losses previously recognised in the profit or loss, is removed from equity and recognised in the profit or loss. Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period. If the fair value of an equity instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss. (m) Critical accounting estimates and judgements The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity are disclosed below. Actual results may differ from these estimates. Judgements made by management in the application of Australian Accounting Standards that have a significant effect on the financial report and estimates with a significant risk of material adjustment in the next year are as follows: • Assessment of projects on a percentage of completion basis, in particular with regard to accounting for variations, the timing of profit recognition and the amount of profit recognised (refer note 37); • Testing of assets for impairment (refer note 14). Critical accounting judgements in applying the Group’s accounting policies are as follows: • Estimation of the economic life of property, plant and equipment (refer note 1 (n)) and intangibles (refer note 1(o)). Revision of useful lives of intangible assets accounting estimate During the year the estimated useful lives of the brand and customer contract intangible assets were revised following an assessment of the expected contractual completion dates. The net effect of the changes in the current financial year was an increase in the amortisation expense of customer contracts by $401,497 and the brand of $119,930. Assuming these intangible assets are held until the end of their estimated useful lives, the net increase in amortisation charges over the next three years will be $3.301 million. Post this period, amortisation charges will be lower than originally forecast by $3.823 million. Review of carrying values of certain items of plant and equipment During the year, the Group completed a review of plant and equipment in the Sedgman Operations business unit. As a result of this review, an impairment charge of $2.544 million was recognised to write the carrying value of the equipment down to its estimated recoverable amount. The impairment loss has been recognised within other expenses in the income statement. (n) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment (including land and buildings) are stated at cost less accumulated depreciation (see below) and impairment losses (see accounting policy (h)). The cost of self-constructed assets and acquired assets includes (i) the cost of materials and direct labour and any other costs directly attributable to bringing the assets to a working condition for their intended use, (ii) the initial estimate at the time of installation and during the period of use, when relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and (iii) changes in the measurement of existing liabilities recognised for these costs resulting from changes in the timing or outflow of resources required to settle the obligation or from changes in the discount rate. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. (ii) Subsequent costs Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. For personal use only use personal For
Sedgman Limited Annual Report 2011 72 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies (continued) (n) Property, plant and equipment (continued) (iii) Depreciation Depreciation is calculated using the straight line method to allocate their cost or re-valued amounts, net of their residual values, over their estimated useful lives. The estimated useful lives in the current and comparative periods are as follows: • Buildings 50 years • Blair Athol CHPP 5 years • Plant and equipment 2.5 – 10 years • Motor vehicles 3 – 7 years • Structural improvements 7 – 40 years • Leased plant and equipment 3 – 10 years Assets are depreciated from their date of acquisition. The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. (iv) Sale of non-current assets The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal (including incidental costs). The gain or loss is recognised as income or an expense. (o) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired (refer 1(h)), and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. (ii) Brands Brands have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. (iii) Customer contracts Customer contracts acquired as part of a business combination are recognised separately from goodwill. The customer contracts are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses. (iv) IT development and software Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service and direct payroll and payroll related costs of employees’ time spent on the project. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the group has an intention and ability to use the asset. (v) Amortisation Amortisation is recognised in the income statement on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and previous periods are as follows: • Brands 7.25 years (2010: 13 years) • Customer contracts 1-7.25 years (2010: 1-13 years) • Software 5 years (2010: Nil) The amortisation period remaining is three years for the brands and customer contracts, and five years for software. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Estimated useful lives were reviewed in 2011 (refer 1(m)). (p) Trade and other payables
Tradeonly use personal For and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date.
73 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies (continued) (q) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. (r) Finance costs Finance costs include interest on borrowings using the effective interest method, amortisation of discounts or premiums relating to borrowings, amortisation of ancillary costs incurred in connection with arrangement of borrowings and unwinding of the discount on liabilities. Borrowing costs are expensed. (s) Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the future expected cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the effect of discounting is recognised as a finance cost. (i) Decommissioning In accordance with the Group’s applicable legal requirements, a provision for decommissioning in respect of the Blair Athol CHPP is recognised. The provision is the best estimate of the present value of the expenditure required to settle the decommissioning obligation at the reporting date, based on current legal requirements and technology. Future decommissioning costs are reviewed annually and any changes are reflected in the present value of the decommissioning provision at the end of the reporting period. The amount of the provision for future decommissioning costs is capitalised and is depreciated in accordance with the policy set out in note 1(n). (ii) Provision for Make Good A provision for make good has been recognised in relation to the Group’s legal obligation at the end of the occupancy lease for the head office premises. (iii) Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract. (t) Employee benefits (i) Wages and salaries, annual leave and sick leave Liabilities for employee benefits for wages, salaries, annual leave and sick leave that are expected to be settled within 12 months of reporting date represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including related on-costs, such as superannuation, workers compensation insurance and payroll tax. Non-accumulating non-monetary benefits such as housing and cars are expensed by the Group as the benefits are taken by the employee. (ii) Long service leave The Group’s net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wages and salary rates including related on-costs and expected settlement dates, and is discounted using the rates attached to the Commonwealth Government bonds at the balance sheet date which have maturity dates approximating to the terms of the Group’s obligations.
(iii) Share-based payments For personal use only use personal For Share-based compensation benefits are provided to employees via an executive share option plan and long term incentive plan. Non- executive directors receive a proportion of their annual remuneration in shares purchased on market.
Sedgman Limited Annual Report 2011 74 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies (continued) (t) Employee benefits (continued) The fair value of options and rights granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options and rights. The fair value of options and rights at grant date is independently determined using Black-Scholes and Monte Carlo pricing models respectively, which takes into account the terms and conditions upon which the options and rights were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options and rights that vest except where forfeiture is only due to share prices not achieving the threshold for vesting. (iv) Bonus plan The Group recognises a liability for bonuses based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where it is contractually obliged to pay an amount under the bonus plan or where there is a past practice that has created a constructive obligation. (v) Superannuation Contributions to defined contribution plans are recognised as an expense as they are made. (vi) Termination benefits Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. Termination benefits for voluntary redundancies are recognised if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. (u) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares, options or rights are shown in equity as a deduction, net of tax from the proceeds. Incremental costs directly attributable to the issue of new shares, options or rights for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. Where any Group company purchases the Company’s equity instruments, for example as the result of a share buy-back or a share- based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of Sedgman Limited as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of Sedgman Limited. (v) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (w) Recoverable amount of assets The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e., the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Receivables are individually assessed for impairment.
Theonly use personal For recoverable amount of other assets or cash-generating units is the greater of their fair value less costs to sell and value in use. 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 or cash-generating unit. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
75 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies (continued) (x) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (y) Construction work in progress Valuation Construction contracts in progress represent the gross unbilled amount expected to be collected from customers for contract work performed to date. Construction work in progress is carried at cost plus profit recognised to date based on the value of work completed less progress billings and less provision for foreseeable losses, allocated between amounts due from customers and amounts due to customers. Cost includes both variable and fixed costs directly related to specific contracts, and those which can be attributed to contract activity in general and which can be allocated to specific contracts on a reasonable basis and other costs specifically chargeable under the contract. Construction work in progress is presented as part of trade and other receivables in the balance sheet for all contracts in which costs incurred plus recognised profits exceed progress billings. Where progress billings exceed cost plus profit recognised to date the net amount is presented in trade and other payables. (z) Rounding of amounts The Group is of a kind referred to in Class Order 98/100 dated July 1998, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, unless otherwise stated. (aa) Business combinations The acquisition method of accounting is used to account for all business combinations. For every business combination, the Group identifies the acquirer, which is the combining entity that obtains control of the other combining entities or businesses. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. Acquisitions on or after 1 July 2009 (i) Measuring goodwill The Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to the previous owners of the acquiree, and equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent consideration and share-based payment awards of the acquiree that are replaced mandatorily in the business combination (see below). If a business combination results in the termination of pre-existing relationships between the Group and the acquiree, then the lower of the termination amount, as contained in the agreement, and the value of the off-market element is deducted from the consideration transferred and recognised in other expenses. (ii) Share-based payment awards When share-based payment awards exchanged (replacement awards) for awards held by the acquiree’s employees (acquiree’s awards) relate to past services, then a part of the market-based measure of the awards replaced is included in the consideration transferred. If they require future services, then the difference between the amount included in consideration transferred and the market-based
measure of the replacement awards is treated as post-combination compensation cost. For personal use only use personal For
Sedgman Limited Annual Report 2011 76 Notes to the Financial Statements (continued) For the year ended 30 June 2011
1. Summary of significant accounting policies (continued) (aa) Business combinations (continued) (iii) Contingent liabilities A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably. (iv) Non-controlling interest The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree. (v) Transaction costs Transactions costs that the Group incurs in connection with a business combination, such as finder’s fees, legal fees, due diligence fees, and other professional and consulting fees, are expensed as incurred. Acquisitions between 1 July 2004 and 1 July 2009 For acquisitions between 1 July 2004 and 1 July 2009, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately in profit or loss. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combinations were capitalised as part of the cost of the acquisition. (ab) Parent entity financial information The Group has applied amendments to the Corporations Act 2001 that remove the requirement for the Group to lodge parent entity financial statements. The financial information for the parent entity, Sedgman Limited, disclosed in note 39 has been prepared on the same basis as the consolidated financial statements, except as set out below. Investments in subsidiaries and joint venture partnerships Investments in subsidiaries and joint venture partnerships are accounted for at cost in the financial statements of Sedgman Limited. (ac) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or before the end of the reporting period but not distributed at the end of the reporting period. (ad) New accounting standards and interpretations The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2011, but have not been applied in preparing this financial report. • AASB 9 Financial Instruments includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the project to replace AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 will become mandatory for the Group’s 30 June 2014 financial statements. Retrospective application is generally required, although there are exceptions, particularly if the entity adopts the standard for the year ended 30 June 2012 or earlier. The Group has not yet determined the potential effect of the standard. • AASB 124 Related Party Disclosures (revised December 2009) simplifies and clarifies the intended meaning of the definition of a related party and provides a partial exemption from the disclosure requirements for government-related entities. The amendments, which will become mandatory for the Group’s 30 June 2012 financial statements, are not expected to have any impact on the financial statements. • AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements introduces a revised differential reporting framework in Australia effective from 1 July 2013. Sedgman Limited is listed on the ASX and is not eligible to adopt the two standards. Therefore there is no impact on the financial statements of the entity. • AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets affect entities that sell, factor, securitise, lend or otherwise transfer financial assets. The amendments, which will become mandatory for the Group’s 30 June 2012 financial statements, will not have an impact on the Group. • AASB 2010-8 Amendments to Australian Accounting Standards - Deferred tax: Recovery of Underlying Assets provides a practical approach for measuring deferred tax assets and deferred tax liabilities when investment property is measured using the fair value
For personal use only use personal For model. The amendments, which will become mandatory for the Group’s 30 June 2013 financial statements, will not have an impact on the Group.
77 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
2. Operating segments (a) Description of segments The Group has two reportable segments, as described below, which are the Group’s strategic business units. For each of the strategic business units, the CEO reviews internal management reports on a monthly basis. The following summary describes the operations in each of the Group’s reportable segments: Engineering Services (Projects) Design, construction and commissioning of coal handling and preparation plants, minerals processing plants and other related equipment. Operations Operation and ownership of coal handling and preparation plants, and ore crushing and screening plants. Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax as included in the internal management reports that are reviewed by the Group’s CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.
Engineering Services (Projects) Operations Consolidated 2011 $’000 $’000 $’000
External revenue 345,525 162,179 507,704 Interest and finance charges (993) (1,033) (2,026) Impairment of plant and equipment - (2,544) (2,544) Depreciation and amortisation expense (3,370) (15,805) (19,175) Share of net profits/(losses) of joint venture partnerships 1,034 - 1,034 Reportable segment profit before income tax 31,093 6,683 37,776 Reportable segment assets 194,426 104,251 298,677 Reportable segment liabilities (112,450) (35,152) (147,602) Investments accounted for using the equity method 172 - 172 Payable to joint venture partnerships (2,857) - (2,857) Capital expenditure 4,802 4,860 9,662
2010
External revenue 186,001 140,547 326,548 Interest and finance charges (247) (1,548) (1,795) Depreciation and amortisation expense (2,602) (13,132) (15,734) Share of net profits/(losses) of joint venture partnerships (791) - (791) Reportable segment profit before income tax 16,223 9,543 25,766 Reportable segment assets 167,100 98,512 265,612 Reportable segment liabilities (92,398) (41,028) (133,426) Payable to joint venture partnerships (1,512) - (1,512) Capital expenditure 2,965 13,739 16,704
2011 2010
Reconciliation of reportable segment profit or loss: $’000 $’000 For personal use only use personal For Total profit or loss for reportable segments 37,776 25,766 Other income 1,066 1,239 Other expenses - foreign exchange losses (4,328) - Total profit before income tax 34,514 27,005
Sedgman Limited Annual Report 2011 78 Notes to the Financial Statements (continued) For the year ended 30 June 2011
2. Operating segments (continued) (b) Geographical segments In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of Group offices. Segment assets are based on the geographical location of the assets.
Non-current Non-current Revenues assets Revenues assets 2011 2011 2010 2010 $’000 $’000 $’000 $’000 Australia 315,153 102,951 256,463 109,786 Botswana 12,129 - - - Chile 22,093 1,025 23,897 431 China 20,080 197 9,585 128 Colombia 811 - - - Mongolia 6,250 62 - - Mozambique 17,841 329 - - South Africa 113,347 541 36,603 532 507,704 105,105 326,548 110,877
(c) Major Customers Revenues from two customers of the Group’s Engineering (Projects) segment represents $140.188 million of the Group’s total revenues. 3. Other income 2011 2010 $’000 $’000 Interest income 932 348 Sundry income 134 542 Foreign exchange gains - 349 1,066 1,239
4. Expenses 2011 2010 $’000 $’000 Depreciation and amortisation Property, plant and equipment 12,492 9,031 Leased plant and equipment 3,831 3,959 Customer contracts 2,482 2,494 Brands 370 250 Total depreciation and amortisation 19,175 15,734
Impairment of plant and equipment (note 1 (m)) 2,544 -
Foreign exchange losses (disclosed within other expenses) 4,328 -
Finance costs Interest and finance charges paid/payable 2,026 1,779 Interest associated with increase in provisions due to the passage of time - 16
Finance costs expensed 2,026 1,795 For personal use only use personal For Interest income (note 3) (932) (348) Net finance costs 1,094 1,447
Contributions to defined contribution superannuation funds by the Group for the year ended 30 June 2011 amounted to $6.660 million (2010: $5.724 million). Losses incurred by the Group on the sale of property, plant and equipment for the year ended 30 June 2011 were $524,743 (2010: losses $322,906).
79 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
5. Income tax expense
2011 2010 $’000 $’000
(a) Income tax expense Current tax 10,926 5,467 Current tax – prior year adjustment * (1,538) (3,548) Deferred tax (739) 99 Deferred tax – prior year adjustment * (165) - 8,484 2,018
(b) Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense 34,514 27,005 Tax at the Australian tax rate of 30% (2010: 30%) 10,354 8,102 Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Other non-allowable deductions 718 154 Tax exempt income (43) - Difference in overseas tax rates (781) (546) Benefit arising from changes to tax consolidation legislation - (2,144) Under (over) provision in prior years * (1,703) (3,548) Sundry (61) - Total income tax expense 8,484 2,018
* Included in the overprovision in prior years is an amount of $588,750 (2010: $3,348,921) which relates to the finalisation of the Group’s claim for the R&D tax concession in Australia and construction tax allowances of $792,451 (2010: Nil) in South Africa. 6. Current assets – Cash and cash equivalents
2011 2010 $’000 $’000
Cash at bank 43,184 58,004 43,184 58,004
The weighted average effective interest rate applicable to cash as at 30 June 2011 is 2.56% (2010: 2.21%). The weighted average interest rate on cash held throughout the year ended 30 June 2011 was 2.73% (2010: 3.06%). Foreign currency controls exist in certain jurisdictions in which Sedgman operates, namely China and Mozambique. As a result, cash reserves can build up from time to time in those jurisdictions until the necessary approval processes are completed to enable repatriation of funds to Australia. At 30 June 2011 cash reserves in China and Mozambique were $6.536 million and $2.305 million respectively. 7. Trade and other receivables
2011 2010 $’000 $’000
Trade receivables 74,581 63,929 Provision for impairment of receivables (4,265) (3,982) Construction work in progress (note 37) 48,836 18,602 Other receivables and prepayments 19,430 4,107 138,582 82,656
Non-Current 1,103 - For personal use only use personal For Current 137,479 82,656
Trade and other receivables are non-interest bearing and are expected to be received within 12 months. The Group’s exposure to credit risks and impairment losses related to trade and other receivables (excluding construction work in progress) are disclosed in note 33. At 30 June 2011 other receivables and prepayments include retentions of $7.462 million related to construction contracts in progress, of which $1.103 million is non-current.
Sedgman Limited Annual Report 2011 80 Notes to the Financial Statements (continued) For the year ended 30 June 2011
8. Current assets – Current tax assets
2011 2010 $’000 $’000 Income tax refundable - 4,649 - 4,649
9. Current assets – Inventories 2011 2010 $’000 $’000 Spare parts and consumables 6,696 6,219 6,696 6,219
10. Non-current assets – Investments accounted for using the equity method 2011 2010 $’000 $’000 Interests in joint venture partnerships (note 32) 172 - 172 -
11. Non-current assets – Available-for-sale financial assets Available-for-sale financial assets include the following classes of financial assets:
2011 2010 $’000 $’000 Unlisted securities Equity securities 1,000 1,000
1,000 1,000 For personal use only use personal For
81 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
12. Non-current assets – Property, plant and equipment Blair Structural Leased Land & Athol Plant & Motor improve- plant & Buildings CHPP Equipment vehicles ments equipment Total $’000 $’000 $’000 $’000 $’000 $’000 $’000
At 1 July 2009 Cost 3,978 3,979 49,297 1,631 3,098 34,283 96,266 Accumulated depreciation (75) (3,413) (15,440) (636) (406) (10,539) (30,509) Net book amount 3,903 566 33,857 995 2,692 23,744 65,757
Year ended 30 June 2010 Opening net book amount 3,903 566 33,857 995 2,692 23,744 65,757 Additions - - 16,387 287 30 - 16,704 Disposals - - (2,295) (40) - - (2,335) Depreciation charge (30) (566) (8,011) (335) (89) (3,959) (12,990) Closing net book amount 3,873 - 39,938 907 2,633 19,785 67,136
At 30 June 2010 Cost 3,978 3,979 63,389 1,878 3,128 34,283 110,635 Accumulated depreciation (105) (3,979) (23,451) (971) (495) (14,498) (43,499) Net book amount 3,873 - 39,938 907 2,633 19,785 67,136
Year ended 30 June 2011 Opening net book amount 3,873 - 39,938 907 2,633 19,785 67,136 Transfers within property, - - 4,984 139 26 (5,149) - plant and equipment Transfers to intangible assets - - (203) - - - (203) Foreign exchange impact - - (79) - - - (79) Additions - - 8,116 716 828 2 9,662 Disposals - - (523) (16) - - (539) Impairment loss * - - (2,544) - - - (2,544) Depreciation charge (29) - (11,232) (584) (647) (3,831) (16,323) Closing net book amount 3,844 - 38,457 1,162 2,840 10,807 57,110
At 30 June 2011 Cost 3,978 3,979 82,200 3,030 4,077 24,098 121,362 Accumulated depreciation (134) (3,979) (43,743) (1,868) (1,237) (13,291) (64,252) Net book amount 3,844 - 38,457 1,162 2,840 10,807 57,110
* Refer note 1 (m). For personal use only use personal For
Sedgman Limited Annual Report 2011 82 Notes to the Financial Statements (continued) For the year ended 30 June 2011
13. Non-current assets – Deferred tax assets 2011 2010 $’000 $’000 The balance comprises temporary differences attributable to: Unrealised foreign exchange loss 857 2 Employee benefits 3,702 3,085 Doubtful debts 1,273 1,195 Surplus lease space - 681 Equity raising costs 276 276 Dismantling provision 170 170 Joint Venture distributions 1,096 1,094 Sundry 462 533 Total deferred tax assets 7,836 7,036
Set-off of deferred tax liabilities pursuant to set-off provisions (note 20) (3,726) (3,829) Net deferred tax assets 4,110 3,207
Deferred tax assets expected to be recovered within 12 months 5,904 4,761 Deferred tax assets expected to be recovered after more than 12 months (1,794) (1,554) 4,110 3,207
All movements in temporary differences are recognised in deferred tax expenses. No amounts have been recognised directly in equity. 14. Non-current assets – Intangible assets Customer Software Goodwill Brand Contracts Total $’000 $’000 $’000 $’000 $’000 At 1 July 2009 Cost - 51,304 3,270 21,159 75,733 Accumulated amortisation and impairment charge - (20,000) (645) (9,603) (30,248) Net book amount - 31,304 2,625 11,556 45,485
Year ended 30 June 2010 Opening net book amount - 31,304 2,625 11,556 45,485 Amortisation for the year - - (250) (2,494) (2,744) Closing net book amount - 31,304 2,375 9,062 42,741
At 30 June 2010 Cost - 51,304 3,270 21,159 75,733 Accumulated amortisation and impairment charge - (20,000) (895) (12,097) (32,992) Net book amount - 31,304 2,375 9,062 42,741
Year ended 30 June 2011 Opening net book amount - 31,304 2,375 9,062 42,741 Reclassification from property, plant and 203 - - - 203 equipment
Acquisitions 7,731 - - - 7,731 For personal use only use personal For Amortisation for the year - - (370) (2,482) (2,852) Closing net book amount 7,934 31,304 2,005 6,580 47,823
At 30 June 2011 Cost 7,934 51,304 3,270 21,159 83,667 Accumulated amortisation and impairment charge - (20,000) (1,265) (14,579) (35,844) Net book amount 7,934 31,304 2,005 6,580 47,823
83 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
14. Non-current assets – Intangible assets (continued) For the purpose of impairment testing, goodwill is allocated to the Group’s operating business units which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes. The aggregate carrying amounts of goodwill allocated to each unit are as follows:
2011 2010 $’000 $’000 Sedgman Operations * 15,790 15,790 Sedgman Engineering 15,514 15,514 31,304 31,304
* During the year, the Pac-Rim Group’s operations were integrated and are now managed as part of the Sedgman Operations business unit covering services in the metals and coal sectors. Consequently goodwill is now allocated to the cash-generating unit comprising the activities of the Sedgman Operations business unit. The recoverable amount of a cash-generating unit is determined based on value-in-use calculations. These calculations use cash flow projections based on financial forecasts approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using an estimated growth rate of 3.0%. In performing the value-in-use calculations, the Group has applied a post-tax discount rate of 11.2% (equivalent to a pre-tax discount rate of 13.0%). 15. Current liabilities – Trade and other payables 2011 2010 $’000 $’000 Trade payables 16,804 18,328 Payable to joint venture partnerships (note 32) 2,857 1,512 Progress claims in advance (note 37) 16,845 19,862 Other creditors and accruals 68,444 37,739 104,950 77,441
Trade and other payables are non-interest bearing and are expected to be settled within 12 months. 16. Current liabilities – Interest bearing liabilities 2011 2010 $’000 $’000 Lease liabilities (note 28) 3,166 5,701 Commercial loans (secured) 7,622 7,085 Total current interest-bearing borrowings 10,788 12,786
Total financing facilities at reporting date are $139.450 million (2010: $147.399 million). Total utilised facilities at reporting date are $63.866 million (2010: $91.031 million). The commercial loans are secured by a fixed and floating charge over Sedgman Limited and are subject to an effective interest rate at 30 June 2011 of 5.86% (2010: 5.66%). The loans are due for repayment in May 2014 and January 2015. 17. Current liabilities – Provisions 2011 2010 $’000 $’000 Employee benefits 12,085 10,149 Surplus lease space - 2,272
For personal use only use personal For Make good 273 - Demobilisation 20 171 12,378 12,592
Sedgman Limited Annual Report 2011 84 Notes to the Financial Statements (continued) For the year ended 30 June 2011
17. Current liabilities – Provisions (continued) Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Surplus lease space Make Good * Demobilisation Total $’000 $’000 $’000 $’000 Carrying amount at start of year 2,272 - 171 2,443 Charged/(credited) to the income statement - additional provisions recognised - 273 - 273 - unused amounts reversed during the year (422) - - (422) Amounts used during the year (1,850) - (151) (2,001) Carrying amount at end of year - 273 20 293 * A provision for make good has been recognised in relation to the Group’s legal obligation at the end of the occupancy lease for the head office premises. 18. Current liabilities – Current tax liabilities
2011 2010 $’000 $’000 Income tax payable 435 - 435 -
19. Non-current liabilities – Interest bearing liabilities 2011 2010 $’000 $’000 Lease liabilities (note 28) 6,407 9,573 Commercial loans (secured) 12,078 20,468 Total non-current borrowings 18,485 30,041
Refer to Note 16 for terms of commercial loans. 20. Non-current liabilities – Deferred tax liabilities 2011 2010 $’000 $’000 The balance comprises temporary differences attributable to: Property, plant and equipment 318 84 Brands 602 712 Customer relationships 1,796 2,006 Land and buildings 793 793 Sundry 217 234 Total deferred tax liabilities 3,726 3,829 Set-off of deferred tax liabilities pursuant to set-off provisions (note 13) (3,726) (3,829) Net deferred tax liabilities - -
Deferred tax liabilities expected to be settled within 12 months - - Deferred tax liabilities expected to be settled after more than 12 months - - - -
For personal use only use personal For All movements in temporary differences are recognised in deferred tax expenses. No amounts have been recognised in equity.
85 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
21. Non-current liabilities – Provisions 2011 2010 $’000 $’000 Dismantling Blair Athol CHPP 566 566 566 566
There was no movement in the dismantling provision for the Blair Athol CHPP during the year.
22. Contributed equity 2011 2010 2011 2010 Shares Shares $’000 $’000 (a) Share capital Ordinary shares Fully paid 209,752,689 205,986,681 96,719 90,378 209,752,689 205,986,681 96,719 90,378
(b) Movements in ordinary share capital: Number of Date Details shares $’000
1 July 2009 Balance 180,974,246 58,474 26 Aug 2009 Issue of ordinary shares for cash 20,000,000 26,000 21 Sept 2009 Share purchase plan 4,063,449 5,282 25 Nov 2009 Share options exercised during the year 400,000 560 31 March 2010 Dividend reinvestment plan issues 548,986 863 Transaction costs (net of tax) - (801) 25,012,435 31,904 30 June 2010 Balance 205,986,681 90,378 17 Sept 2010 Dividend reinvestment plan issues 2,011,217 3,387 31 March 2011 Dividend reinvestment plan issues 1,754,791 2,954 3,766,008 6,341 30 June 2011 Balance 209,752,689 96,719
Terms and conditions Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up the Company and its controlled entities, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of liquidation. Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital.
Accordingly, the Company does not have authorised capital or par value in respect of its issued shares. For personal use only use personal For
Sedgman Limited Annual Report 2011 86 Notes to the Financial Statements (continued) For the year ended 30 June 2011
23. Reserves and retained profits 2011 2010 $’000 $’000 (a) Reserves Foreign currency translation reserve (1,985) (925) Equity compensation reserve 6,380 5,352 4,395 4,427
Movements: Foreign Currency Translation Reserve Balance 1 July (925) (324) Currency translation differences (included in other comprehensive income) (1,060) (601) Balance 30 June (1,985) (925)
Equity Compensation Reserve Balance 1 July 5,352 3,495 Movement in share options and rights 1,028 1,857 Balance 30 June 6,380 5,352
(b) Retained profits Movements in retained profits were as follows: Retained earnings at the beginning of the financial year 37,381 24,708 Profit for the year 26,030 24,987 Dividends (13,450) (12,314) Retained earnings at the end of the financial year 49,961 37,381
Nature and purpose of reserves Foreign currency translation reserve Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as described in note 1(d). The reserve is recognised in the income statement when the foreign operation is disposed of. Equity compensation reserve The equity compensation reserve recognises the fair value of options and rights issued as compensation to employees but
not exercised. For personal use only use personal For
87 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
24. Dividends 2011 2010 $’000 $’000 (a) Ordinary shares Final fully franked dividend Dividend per share $0.035 (2010: $0.03) based on tax paid @ 30% 7,210 6,151 Interim fully franked dividend Dividend per share $0.03 (2010: $0.03) based on tax paid @ 30% 6,240 6,163 Total dividends provided for or paid 13,450 12,314
Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan during the years ended 30 June 2011 and 30 June 2010 were as follows:
Paid in cash 7,109 11,451 Satisfied by issue of shares 6,341 863 13,450 12,314
After the balance sheet date the following dividend was proposed by the Directors. The dividend has not been provided for. The record date for entitlement to this dividend will be 2 September 2011. The declaration and subsequent payment of dividends has no income tax consequences.
Cents per Franked/ Date of share unfranked Payment Final ordinary 4.0 Franked 16 Sept 11
The financial effect of these dividends has not been brought to account in the financial statements for the year ended 30 June 2011 and will be recognised in subsequent financial reports. (b) Franked dividends The franked portions of the final dividends recommended after 30 June 2011 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 30 June 2011.
2011 2010 $’000 $’000 Franking credits available for subsequent financial years based on tax rate of 30% (2010: 30%) 20,386 22,549 20,386 22,549
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) franking credits that will arise from the payment of the amount of the current tax liabilities (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were paid as dividends. The ability to utilise franking credits is dependent upon there being sufficient available profits to declare dividends. The impact on the dividend franking account of dividends proposed after the balance sheet date but not recognised as a liability is to
reduce it by $3.596 million (2010: $3.090 million). For personal use only use personal For
Sedgman Limited Annual Report 2011 88 Notes to the Financial Statements (continued) For the year ended 30 June 2011
25. Key management personnel disclosures During the financial year Sedgman undertook a review of its organisational structure to ensure that it could facilitate the creation of autonomous regions with greater accountability, authority and control over performance through regional business units. A revised structure was developed, effective from 1 November 2010, which focused on each region being overseen and managed by an Executive General Manager (EGM). The EGM is the common owner for that region’s service and the local delegated authority for decision making. Although these regional EGM’s have ultimate responsibility for their region, this does not override the organisational focus on engineering and operations. It is the responsibility of the EGM Projects and EGM Operations (newly created positions) to ensure that all engineering or operations jobs are delivered to the same standards consistently across each region. These organisational changes have meant that the regional and functional EGM’s are now defined as key management personnel for the Company. The EGM’s in charge of the financial and corporate services functions still remain as key management personnel. The following table discloses the Group’s key management personnel (KMP) for the financial year:
Name Title Period included as KMP Russell Kempnich Chairman 1 July 2010 to 30 June 2011 Nicholas Jukes Executive Director 17 January 2011 to 30 June 2011 Mark Read Executive Director 1 July 2010 to 5 November 2010 Donald Argent Non-Executive Director 1 July 2010 to 30 June 2011 Robert McDonald Non-Executive Director 1 July 2010 to 30 June 2011 Roger Short Non-Executive Director 1 July 2010 to 30 June 2011 Bruce Munro Non-Executive Director 1 July 2010 to 30 June 2011 Peter Richards Non-Executive Director 14 December 2010 to 30 June 2011 Alan Wigan Chief Financial Officer 1 July 2010 to 2 December 2010 Steven van Barneveld Chief Operating Officer - Sedgman Coal 1 July 2010 to 31 October 2010 Peter Nevin Executive General Manager Business Processes 1 July 2010 to 13 September 2010 Adam Langford General Manager - Sedgman Metals Operations 1 July 2010 to 1 September 2010 Geoff Jones General Manager - Sedgman Metals Engineering 1 July 2010 to 31 October 2010 Ian Poole Chief Financial Officer 2 December 2010 to 30 June 2011 Steve Rayner Executive General Manager Corporate Services 14 September 2010 to 30 June 2011 Peter Watson Executive General Manager Australia 23 August 2010 to 30 June 2011 Dirk Schenk Executive General Manager Africa 1 November 2010 to 31 March 2011 Simon Mordecai – Jones Executive General Manager Africa 1 April 2011 to 30 June 2011 Peter Long Executive General Manager Asia 1 November 2010 to 30 June 2011 Javier Freire Executive General Manager Americas 1 November 2010 to 30 June 2011 Michael Carretta Executive General Manager Operations 1 November 2010 to 30 June 2011 Alan Ainsworth Executive General Manager Projects 1 November 2010 to 30 June 2011
(a) Key management personnel compensation
2011 2010 $ $ Short-term employee benefits 4,347,779 2,896,027 Post-employment benefits 314,510 275,092 Termination benefits 303,167 - Share-based payments 242,529 594,086 5,207,985 3,765,205
Information regarding key management personnel compensation and some equity instruments disclosures as required by Corporations Regulation 2M.3.03 is provided in the remuneration report section of the directors’ report.
Apartonly use personal For from the details disclosed in this note, no director has entered into a material contract with the Company since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year-end.
89 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
25. Key management personnel disclosures (continued) (b) Equity instrument disclosures relating to key management personnel (i) Option holdings The number of options over ordinary shares in the Company held during the financial year by each Director of Sedgman Limited and other key management personnel of the Group, including their personally related parties, is set out below.
2011 Balance at Granted as Balance at Vested Vested and the start of compen- Expired / end of the during the exercisable Name the year * sation Exercised Forfeited year year at year end Directors of Sedgman Limited Russell Kempnich ------Nicholas Jukes ------Mark Read - - - - n/a n/a n/a Donald Argent ------Robert McDonald ------Roger Short ------Bruce Munro ------Peter Richards ------Other key management personnel of the Group Alan Wigan 80,000 - - (80,000) n/a 80,000 n/a Steven van Barneveld 80,000 - - (80,000) n/a 80,000 n/a Peter Nevin 15,000 - - (15,000) n/a 15,000 n/a Adam Langford 80,000 - - (80,000) n/a 80,000 n/a Geoff Jones - - - - n/a - n/a Ian Poole ------Steve Rayner ------Peter Watson ------Dirk Schenk - - - - n/a - n/a Simon Mordecai – Jones ------Peter Long ------Javier Freire ------Michael Carretta 50,000 - - (50,000) - 50,000 - Alan Ainsworth 30,000 - - (30,000) - 30,000 -
* Balance at the start of the year relates to 1 July 2010 or the date that an employee became a key management personnel.
2010 Balance at Granted as Balance at Vested Vested and the start of compen- Expired / end of during the exercisable Name the year sation Exercised Forfeited the year year at year end Directors of Sedgman Limited Russell Kempnich ------Mark Read ------Peter Hay (resigned 400,000 - (400,000) - n/a 400,000 n/a 25/11/2009) Donald Argent ------Robert McDonald ------Roger Short ------Bruce Munro ------
For personal use only use personal For Gregory Miller (resigned - - - - n/a n/a n/a 21/12/2009) Other key management personnel of the Group Alan Wigan 430,000 - - (350,000) 80,000 350,000 - Steven van Barneveld 480,000 - - (400,000) 80,000 400,000 - Peter Nevin 75,000 - - (60,000) 15,000 60,000 - Adam Langford 130,000 - - (50,000) 80,000 50,000 - Geoff Jones ------
Sedgman Limited Annual Report 2011 90 Notes to the Financial Statements (continued) For the year ended 30 June 2011
25. Key management personnel disclosures (continued) (b) Equity instrument disclosures relating to key management personnel (continued) (ii) Performance rights holdings The number of performance rights over the ordinary shares in the Company held during the financial year by each Director of Sedgman Limited and other key management personnel of the Group, including their personally related parties, is set out below.
2011 Balance at Granted as Balance at Vested the start of compen- Expired / end of during the Vested at Name the year * sation Exercised Forfeited the year year year end Directors of Sedgman Limited Russell Kempnich ------Nicholas Jukes ------Mark Read 3,000,000 - - (3,000,000) n/a n/a n/a Donald Argent ------Robert McDonald ------Roger Short ------Bruce Munro ------Peter Richards ------Other key management personnel of the Group Alan Wigan 690,000 - - (690,000) n/a n/a n/a Steven van Barneveld 750,000 - - (750,000) n/a n/a n/a Peter Nevin 300,000 - - (300,000) n/a n/a n/a Adam Langford 300,000 - - (300,000) n/a n/a n/a Geoff Jones - - - - n/a n/a n/a Ian Poole - 625,000 - - 625,000 - - Steve Rayner 200,000 50,000 - - 250,000 - - Peter Watson - 500,000 - - 500,000 - - Dirk Schenk 200,000 - - (200,000) n/a n/a n/a Simon Mordecai – Jones ------Peter Long ------Javier Freire 300,000 - - - 300,000 - - Michael Carretta 300,000 - - - 300,000 - - Alan Ainsworth 300,000 - - - 300,000 - -
* Balance at the start of the year relates to 1 July 2010 or the date that an employee became a key management personnel.
2010 Balance at Granted as Balance at Vested the start of compen- Expired / end of the during the Vested at Name the year sation Exercised Forfeited year year year end Directors of Sedgman Limited Russell Kempnich ------Mark Read - 3,000,000 - - 3,000,000 - 3,000,000 Peter Hay (resigned - - - - n/a n/a n/a 25/11/2009) Donald Argent ------Robert McDonald ------Roger Short ------Bruce Munro ------Gregory Miller (resigned - - - - n/a n/a n/a
21/12/2009)only use personal For Other key management personnel of the Group Alan Wigan - 690,000 - - 690,000 - 690,000 Steven van Barneveld - 750,000 - - 750,000 - 750,000 Peter Nevin - 300,000 - - 300,000 - 300,000 Adam Langford - 300,000 - - 300,000 - 300,000 Geoff Jones ------
91 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
25. Key management personnel disclosures (continued) (b) Equity instrument disclosures relating to key management personnel (continued) (iii) Share holdings The number of shares in the Company held during the financial year by each Director of Sedgman Limited and other key management personnel of the Group, including their personally related parties, is set out below.
2011 Received during Balance at the Granted as the year on Balance at start of compens- the exercise of Other changes the end of Name the year * ation options during the year the year Directors of Sedgman Limited Ordinary shares Russell Kempnich 17,440,357 5,649 - - 17,446,006 Nicholas Jukes 110,000 - - - 110,000 Mark Read 338,738 - - - n/a Donald Argent 215,152 5,649 - 8,487 229,288 Robert McDonald 454,561 5,649 - 17,820 478,030 Roger Short 170,152 5,649 - 7,279 183,080 Bruce Munro 3,334 5,649 - - 8,983 Peter Richards - 2,655 - - 2,655 Other key management personnel of the Group Ordinary shares Alan Wigan 400,000 - - - n/a Steven van Barneveld 734,149 - - - n/a Peter Nevin 402,692 - - - n/a Adam Langford - - - - n/a Geoff Jones - - - - n/a Dirk Schenk - - - - n/a Ian Poole - - - - - Steve Rayner - - - - - Peter Watson - - - - - Simon Mordecai – Jones - - - - - Peter Long - - - - - Javier Freire - - - - - Michael Carretta 574,933 - - 10,244 585,177 Alan Ainsworth - - - - -
* Balance at the start of the year relates to 1 July 2010 or the date that an employee became a key management personnel.
2010 Received during Balance at the Granted as the year on Balance at start of compens- the exercise of Other changes the end of Name the year ation options during the year the year Directors of Sedgman Limited Ordinary shares Russell Kempnich 18,433,921 6,436 - (1,000,000) 17,440,357 Mark Read 336,046 - - 2,692 338,738 Peter Hay (resigned 25/11/2009) 8,334,084 3,102 400,000 (2,500,000) n/a Donald Argent 208,716 6,436 - - 215,152
For personal use only use personal For Robert McDonald 439,620 6,436 - 8,505 454,561 Roger Short 163,716 6,436 - - 170,152 Bruce Munro - 3,334 - - 3,334 Gregory Miller (resigned 21/12/2009) 16,985 3,102 - - n/a Other key management personnel of the Group Ordinary shares Alan Wigan 400,000 - - - 400,000 Steven van Barneveld 701,335 - - 32,814 734,149 Peter Nevin 300,000 - - 102,692 402,692 Adam Langford - - - - - Geoff Jones - - - - -
Sedgman Limited Annual Report 2011 92 Notes to the Financial Statements (continued) For the year ended 30 June 2011
26. Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:
Consolidated 2011 2010 $ $ Audit services KPMG Australia: Audit and review of financial reports Current year 235,000 190,000 Prior year 22,100 - Group’s share of fees for audit of joint ventures 11,600 11,500 Other regulatory audit services 23,950 8,000 Overseas KPMG firms: Audit and review of financial reports Current year 131,304 30,691 Prior year 38,504 - Total remuneration for audit services 462,458 240,191
Other services KPMG Australia: Taxation services 136,279 75,498 Research and development allowance services 150,000 530,000 Risk and forensic services 11,900 10,213 Other advisory services 42,685 - Overseas KPMG firms: Taxation services 213,286 90,360 Risk and forensic services - 40,402 Total remuneration for other services 554,150 746,473
27. Contingencies Contingent liabilities Claims Claims have been brought against a controlled entity in relation to contracts terminated in prior financial years. The controlled entity has been granted indemnity by the Group’s insurer who has taken over defence of the claim. The Directors are of the opinion that no provision is required. While no liability is admitted, any amount that may become payable is covered by the Group’s insurance policy. Guarantees and Performance Bonds Bank guarantees and performance bonds have been given in respect of work in progress contracts and leased premises of the Group
amounting to $34.593 million (2010: $48.204 million). For personal use only use personal For
93 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
28. Commitments (i) Operating leases
2011 2010 $’000 $’000 Non-cancellable Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within one year 3,935 4,665 Later than one year but not later than five years 9,753 6,546 Later than five years 862 - 14,550 11,211
The Group leases buildings under operating leases expiring within the next 5.5 years. The leases involve lease payments comprising a base amount plus an incremental contingent rental. Contingent rentals are based on Fixed Increase Percentages and the Consumer Price Index. The operating lease rental expense recognised in the year ended 30 June 2011 was $3.435 million (2010:$5.688 million). (ii) Finance leases
2011 2010 $’000 $’000 Commitments in relation to finance leases are payable as follows: Within one year 3,839 6,742 Later than one year but not later than five years 7,301 11,139 Minimum lease payments 11,140 17,881 Less: Future finance charges (1,567) (2,607) Total lease liabilities 9,573 15,274 Representing lease liabilities: Current (note 16) 3,166 5,701 Non-current (note 19) 6,407 9,573 9,573 15,274
The Group leases plant and equipment under finance leases expiring within five years. At the end of the lease term, the Group has the option to purchase the equipment at the residual prices set in the lease.
Refer Note 32 for commitments relating to joint ventures. For personal use only use personal For
Sedgman Limited Annual Report 2011 94 Notes to the Financial Statements (continued) For the year ended 30 June 2011
29. Related party transactions (a) Parent entity The parent entity within the Group is Sedgman Limited. (b) Directors The names of persons who were Directors of the Company at any time during the financial year are as follows: R J Kempnich, N N Jukes, D J Argent, R J McDonald, R R Short, B A Munro, P I Richards and M A Read. All of these persons were also Directors during the year ended 30 June 2010, except for P I Richards and N N Jukes who were appointed on 14 December 2010 and 17 January 2011 respectively. M A Read held office as Director until his resignation on 5 November 2010. (c) Subsidiaries Interests in subsidiaries are set out in note 30. (d) Key management personnel Disclosures relating to key management personnel are set out in note 25. (e) Loans to/from related parties The related party payable to the Thiess Sedgman Joint Venture is non-interest bearing and at call as set out in note 15. (f) Thiess Sedgman Joint Venture (TSJV) During the year Sedgman provided engineering consulting services to the TSJV of $12.242 million (2010: $1.738 million). These services were provided under Sedgman’s normal terms and conditions. At year end the amount payable to the TSJV was $2.857 million (2010: $1.512 million). 30. Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b):
Equity Holding Country of 2011 2010 Name of entity incorporation Class of shares % % Parent entity Sedgman Limited Australia Controlled entities Sedgman Asia Ltd Hong Kong Ordinary 100 100 Sedgman Botswana (Pty) Ltd Botswana Ordinary 100 100 Sedgman Engineering Technology (Beijing) Co Ltd China Ordinary 100 100 Sedgman Employment Services Pty Ltd Australia Ordinary 100 100 Sedgman International Employment Services Pty Ltd Australia Ordinary 100 100 Sedgman LLC * Mongolia Ordinary 100 - Sedgman Malaysia Sdn Bd ** Malaysia Ordinary 100 - Sedgman Mozambique Limitada Mozambique Ordinary 100 100 Sedgman S.A. Chile Ordinary 99 99 Sedgman S.A.S. *** Colombia Ordinary 100 - Sedgman South Africa (Pty) Ltd South Africa Ordinary 100 100 Sedgman Operations Employment Services Pty Ltd (formerly Australia Ordinary 100 100 Pac-Rim Investments Pty Ltd) Sedgman Operations Pty Ltd (formerly Pac-Rim (Qld) Pty Ltd) Australia Ordinary 100 100 Contrelec Engineering Pty Ltd Australia Ordinary 100 100 Intermet Engineering Pty Ltd Australia Ordinary 100 100
Tambala Pty Ltd Mauritius Ordinary 100 100 For personal use only use personal For * Incorporated 27 July 2010 ** Incorporated 12 July 2010 *** Incorporated 14 December 2010
95 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
31. Deed of cross guarantee Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and directors’ report. It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up. The subsidiaries subject to the Deed are: • Contrelec Engineering Pty Ltd • Intermet Engineering Pty Ltd • Sedgman Operations Employment Services Pty Ltd (formerly Pac-Rim Investments Pty Ltd) • Sedgman Operations Pty Ltd (formerly Pac-Rim (Qld) Pty Ltd) A consolidated income statement, consolidated statement of comprehensive income and consolidated balance sheet, comprising the Company and controlled entities which are a party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee, for the year ended 30 June 2011 is set out as follows:
(a) Consolidated income statement, consolidated statement of comprehensive income and summary of movements in consolidated retained earnings 2011 2010 $’000 $’000 Income statement Revenue from services 339,790 267,958
Other income (266) 923 Changes in construction work in progress 16,182 (4,331) Raw materials and consumables used (188,246) (122,304) Depreciation and amortisation expense (18,800) (15,562) Employee expenses (97,794) (79,098) Agency contract fees (11,098) (5,980) Other expenses (22,311) (19,126) Finance costs (1,909) (1,791) Share of net profits/(losses) of joint venture partnerships accounted for using the equity method 1,034 (791) Profit before income tax 16,582 19,898 Income tax expense (3,736) (432) Profit for the year 12,846 19,466
Statement of comprehensive income Profit for the year 12,846 19,466 Other comprehensive income Exchange differences on translation of foreign operations (net of tax) - - Other comprehensive income for the year, net of tax - - Total comprehensive income for the year 12,846 19,466
Summary of movements in consolidated retained earnings Retained earnings at the beginning of the financial year 32,001 24,849 For personal use only use personal For Profit for the year 12,846 19,466 Dividends provided for or paid (13,450) (12,314) Retained earnings at the end of the financial year 31,397 32,001
Sedgman Limited Annual Report 2011 96 Notes to the Financial Statements (continued) For the year ended 30 June 2011
31. Deed of cross guarantee (continued) (b) Consolidated Balance Sheet 2011 2010 $’000 $’000 ASSETS Current assets Cash and cash equivalents 20,206 31,022 Trade and other receivables 92,247 67,216 Current tax assets 346 6,006 Inventories 6,696 6,219 Total current assets 119,495 110,463 Non-current assets Trade and other receivables 8,209 - Investments accounted for using the equity method 172 - Available-for-sale financial assets 1,000 1,000 Property, plant and equipment 54,956 66,045 Deferred tax assets 2,371 3,207 Intangible assets 47,823 42,741 Total non-current assets 114,531 112,993 Total assets 234,026 223,456 LIABILITIES Current liabilities Trade and other payables 56,408 42,238 Interest bearing liabilities 10,788 12,786 Provisions 9,112 10,094 Total current liabilities 76,308 65,118 Non-current liabilities Trade and other payables 4,244 - Interest bearing liabilities 18,485 30,041 Provisions 566 566 Total non-current liabilities 23,295 30,607 Total liabilities 99,603 95,725 Net assets 134,423 127,731 EQUITY Contributed equity 96,719 90,378 Reserves 6,307 5,352 Retained profits 31,397 32,001 Parent entity interest 134,423 127,731
For personal use only use personal For
97 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
32. Interests in joint ventures (a) Joint venture partnerships Carrying value of Ownership interest investments 2011 2010 Name and principal activity 2011 2010 $’000 $’000 Thiess Sedgman Joint Venture – 50% 50% (2,685) (1,512) Design and construction of CHPPs (2,685) (1,512) Included in the balance sheet as: Investments accounted for using equity method (note 10) 172 - Trade and other payables (note 15) (2,857) (1,512) (2,685) (1,512)
2011 2010 $’000 $’000 Share of joint venture assets and liabilities Thiess Sedgman Joint Venture current assets 8,714 391 Thiess Sedgman Joint Venture non-current assets - - Total current assets 8,714 391 Thiess Sedgman Joint Venture current liabilities 11,399 1,903 Thiess Sedgman Joint Venture non-current liabilities - - Total liabilities 11,399 1,903 Net assets (2,685) (1,512)
Share of joint venture revenue, expenses and results Revenues 25,052 2,216 Expenses (24,018) (3,007) Net profit/(loss) before income tax 1,034 (791)
Share of post-acquisition retained profits attributable to joint ventures Share of joint venture retained profits at beginning of the year (1,512) 40 Share of joint venture net profit 1,034 (791) Share of distribution paid (2,207) (761) Share of joint venture retained profits at end of the year (2,685) (1,512)
Share of joint venture commitments contracted but not yet provided or payable Within one year 331 318 One year or later and no later than five years 169 499
500 817 For personal use only use personal For
Sedgman Limited Annual Report 2011 98 Notes to the Financial Statements (continued) For the year ended 30 June 2011
33. Financial instruments The Group has exposure to the following risks from their use of financial instruments: • Market risk • Credit risk • Liquidity risk This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. (a) Risk management framework The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established a Risk Management group within Corporate, which is responsible for developing and monitoring the Group’s risk management policies. This Group reports to the Audit and Risk Management Committee and the Board throughout the year on its activities. The Group’s risk management policies and procedures are established to identify and analyse the risks faced by the Group, and monitor those risks. Risk management policies and procedures are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aim to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. (b) Market risk (i) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar (USD).
2011 2010 $’000 $’000 Financial Assets Foreign cash held 15,830 9,105 Trade and other receivables 13,725 486 29,555 9,591 Financial Liabilities Trade and other payables 3,775 - 3,775 - Net Exposure 25,780 9,591
The following sensitivity analysis is based on the foreign currency risk exposures in existence at the balance sheet date. With all other variables held constant, the below table illustrates how post tax profit and equity for the Group would have been affected had the Australian dollar moved against the US Dollar:
2011 2010 $’000 $’000 Impact on post-tax profit: +10% AUD / USD (1,641) (610) -10% AUD / USD 2,005 746 Impact on equity: +10% AUD / USD (1,641) (610) -10% AUD / USD 2,005 746
The Group regularly monitors the level of its foreign currency exposure and where appropriate, considers the use of foreign exchange
contracts to manage significant exposures. There were no foreign exchange contracts entered at 30 June 2011 (2010: nil). For personal use only use personal For
99 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
33. Financial instruments (continued) (b) Market risk (continued) (ii) Interest rate risk The Group’s main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. At 30 June 2010 and 30 June 2011, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk:
2011 2010 $’000 $’000 Financial Assets Cash and cash equivalents assets 43,156 57,979 43,156 57,979 Financial Liabilities Commercial loans 19,790 27,752 19,790 27,752 Net Exposure 23,366 30,227
The other financial instruments of the Group not included in the above table are not subject to cash flow variable interest rate risk. The Group regularly analyses its interest rate exposure. Within this analysis, consideration is given to potential renewals of existing positions, alternative financing, alternative positions and the mix of fixed and variable interest rates. The Group does not use derivative financial instruments to manage its interest rate exposure. The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date:
2011 2010 $’000 $’000 Impact on post-tax profit: +1% (100 basis points) 164 212 -1% (100 basis points) (164) (212) Impact on equity: +1% (100 basis points) 164 212 -1% (100 basis points) (164) (212)
(c) Credit risk Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions, and represents the potential financial loss if counterparties fail to perform as contracted. The Group also has a policy in place to ensure that surplus cash is invested with financial institutions of appropriate credit worthiness. The credit risk of financial assets of the Group which have been recognised on the Balance Sheet is generally the carrying amount, net of any provision for impairment. The Group manages its credit risk by maintaining strong relationships with a broad range of clients. The Group’s trade and other receivables relate mainly to participants in the mining industry. At the balance sheet date, there were five customers which represented 50% (2010: three customers which represented 51%) of the Group’s trade receivables. There were no other significant concentrations of credit risk. During the year, there were no significant changes in the credit terms of any customers. In addition, receivables balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. For some trade receivables the Group may also obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement. The maximum exposure to credit risk is represented by the carrying amount of financial assets of the Group, excluding investments, For personal use only use personal For which have been recognised on the Balance Sheet.
Sedgman Limited Annual Report 2011 100 Notes to the Financial Statements (continued) For the year ended 30 June 2011
33. Financial instruments (continued) (d) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet liabilities as they fall due. The following are the contractual maturities of financial liabilities:
Less than 1 More than 5 year 1 to 2 years 2 to 5 years years $’000 $’000 $’000 $’000 Year ended 30 June 2011 Financial liabilities Trade and other payables 104,950 - - - Lease liabilities 3,839 2,250 5,050 - Commercial loans 8,667 8,667 3,969 - 117,456 10,917 9,019 -
Year ended 30 June 2010 Financial liabilities Trade and other payables 77,441 - - - Lease liabilities 5,701 3,166 6,407 - Commercial loans 7,283 7,707 12,762 - 90,425 10,873 19,169 -
Refer Note 16 for details of the Group’s financing facilities. (e) Impairment of receivables The aging of the Group’s trade receivables at the reporting date was:
Gross Impairment Gross Impairment Consolidated 2011 2011 2010 2010 $’000 $’000 $’000 $’000
Not past due 55,058 - 48,713 - Past due 0-30 days 10,711 - 7,813 - Past due 31-60 days 839 - 2,619 - More than 61 days 7,973 4,265 4,784 3,982 74,581 4,265 63,929 3,982
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
2011 2010 $’000 $’000 Balance at 1 July 3,982 4,060 Impairment loss recognised / (reversed) 283 (78) Balance at 30 June 4,265 3,982
There was no impairment losses recognised in relation to the Group’s other receivables at 30 June 2011 (2010:Nil). For personal use only use personal For
101 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
33. Financial instruments (continued) (f) Fair values The fair value of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are set out below.
Carrying amount Fair value 2011 2010 2011 2010 Consolidated $’000 $’000 $’000 $’000 Financial assets Cash and cash equivalents 43,184 58,004 43,184 58,004 Trade and other receivables 138,582 82,656 138,582 82,656 Available-for-sale assets 1,000 1,000 1,000 1,000
Financial liabilities Trade and other payables 104,950 77,441 104,950 77,441 Interest bearing liabilities 29,273 42,827 29,273 42,827
(g) Capital management risk The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it may continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares. There were no changes in the Group’s approach to capital management during the year. 34. Events occurring after the balance sheet date Other than the dividend declared subsequent to year end (refer note 24) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. 35. Reconciliation of profit after income tax to net cash inflow from operating activities 2011 2010 $’000 $’000 Profit for the year 26,030 24,987 Depreciation and amortisation 19,175 15,734 Impairment losses/(reversals) 283 (78) Spares written off to expenses 220 - Impairment of plant and equipment 2,544 - Employee share options and rights 1,028 1,857 Net (gain) loss on sale of non-current assets 525 323 Share of (profits)/losses of joint venture partnerships (1,034) 791 Net unrealised foreign exchange differences 2,622 (349) Increase/(decrease) in trade creditors (1,524) 7,447 Increase/(decrease) in other creditors 30,705 18,398 Increase/(decrease) in progress claims (3,017) 3,302 Increase/(decrease) in current tax liabilities 435 (1,863) Increase/(decrease) in provision for employee entitlements 1,936 62 Increase/(decrease) in provision for surplus lease space provision (2,272) 470 Increase/(decrease) in provision for demobilisation and make good provisions 122 81 Decrease/(increase) in current tax assets 4,649 (4,649)
Decrease/(increase) in deferred tax assets (903) 94 For personal use only use personal For Decrease/(increase) in trade receivables (10,652) (7,619) Decrease/(increase) in work in progress (30,234) (13,689) Decrease/(increase) in other receivables (14,044) (14,694) Decrease/(increase) in prepayments (698) 489 Decrease/(increase) in inventories (725) - Other items 136 (128) Net cash (outflow) inflow from operating activities 25,307 30,966
Sedgman Limited Annual Report 2011 102 Notes to the Financial Statements (continued) For the year ended 30 June 2011
36. Earnings per share 2011 2010 Cents Cents (a) Basic earnings per share Basic earnings per share 12.5 12.3 12.5 12.3 (b) Diluted earnings per share Diluted earnings per share 12.4 12.3 12.4 12.3
(c) Reconciliations of earnings used in calculating earnings per share
2011 2010 $’000 $’000 Basic earnings per share Profit attributable to the ordinary equity holders of the Company used in calculating basic earnings per share 26,030 24,987 Diluted earnings per share Profit attributable to the ordinary equity holders of the Company used in calculating diluted earnings per share 26,030 24,987
(d) Weighted average number of shares used as the denominator
2011 2010 Number Number Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Issued ordinary shares as at 1 July 205,986,681 180,974,246 Effect of dividend reinvestment plan 2,023,726 138,375 Effect of share options exercised - 238,904 Effect of capital raising and share purchase plan - 21,255,989 Weighted average number of ordinary shares as at 30 June 208,010,407 202,607,514 Effect of share options and rights 1,706,847 985,302 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 209,717,254 203,592,816
Performance rights of 1,909,192 were not included in the weighted average number of ordinary shares for the diluted earnings per share calculation because they were anti-dilutive. 37. Progress claims in advance 2011 2010 $’000 $’000 Construction work in progress comprises: Contract costs and net profits to date 640,120 709,233 Less: Progress billings (608,129) (710,493) Net construction work in progress 31,991 (1,260)
Net construction work in progress comprises: Amounts due from customers – trade and other receivables (note 7) 48,836 18,602
Amountsonly use personal For due to customers – trade and other payables (note 15) (16,845) (19,862) 31,991 (1,260)
103 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
38. Share-based payments (a) Executive Share Option Plan (equity-settled) The Group has established a share option programme that entitles employees to acquire shares in the Company. All options are offered to employees for no consideration and once the vesting conditions are satisfied, enable the employee to acquire shares in the Company for the specified exercise price. The vesting conditions relate to Net Profit after Tax and the completion of a specified service period. The terms and conditions of the grants are as follows:
Balance Granted Exercised Expired/ Balance Vested & at start of during during Forfeited at end of exercisable Exercise the year the year the year during the the year at end of the Grant Date Expiry date price Number Number Number year Number Number year Number 2011 18 September 2008 30 June 2011 $2.40 3,252,500 - - (3,252,500) - - 3,252,500 - - (3,252,500) - - Weighted average exercise price $2.40 - - $2.40 - - 2010 8 June 2006 30 June 2010 $1.40 1,000,000 - (400,000) (600,000) - - 24 September 2007 30 June 2010 $2.35 3,303,400 - - (3,303,400) - - 18 September 2008 30 June 2011 $2.40 3,657,500 - - (405,000) 3,252,500 - 7,960,900 - (400,000) (4,308,400) 3,252,500 - Weighted average exercise price $2.25 - $1.40 $2.22 $2.40 -
No options were granted during the 2011 or 2010 financial years. (b) Long Term Incentive Plan (LTIP) (equity-settled) Performance rights were granted to employees for no consideration during the financial year following approval of the Long Term Incentive Plan (LTIP) by shareholders at the Company’s Annual General Meeting on 25 November 2009. Performance rights granted during the financial year were issued in three tranches and are subject to performance conditions outlined below with the following measurement and vesting profile:
Tranche Performance measurement period Vesting date Expected Life Risk free rate 1 1 July 2009 to 30 June 2012 1 July 2012 2.36 years 4.69 % – 5.31% 2 1 July 2010 to 30 June 2013 1 July 2013 3.36 years 4.69 % – 5.31% 3 1 July 2011 to 30 June 2014 1 July 2014 4.36 years 4.69 % – 5.31%
The performance rights are issued to employees for no consideration and are subject to the employee’s continuing employment and lapse upon resignation or termination (unless certain circumstances such as death or disability where vesting is at the discretion of the Board) or failure to achieve the specified performance vesting condition. The performance rights will immediately vest and become exercisable if in the Board’s opinion a vesting event occurs (as defined in the plan rules) such as a takeover bid or winding up of the Company. The performance vesting condition for performance rights issued during the 2011 or 2010 financial years is relative Total Shareholder Return (TSR). At the end of each tranche’s performance measurement period, the Board will rank the Company’s TSR against a peer group that currently comprises 19 other companies considered by the Board to be peers or competitors of the Company. The percentage of performance rights in each respective tranche that will vest and become exercisable will depend upon the Company’s TSR performance relative to the companies in the peer group (as determined by the Board) as set out in the table below:
Sedgman TSR ranking Percentage of performance rights (at end of performance measurement in relevant tranche that vest period)
1-5 100% For personal use only use personal For 6 90% 7 80% 8 70% 9 60% 10 50% 11-20 0%
Sedgman Limited Annual Report 2011 104 Notes to the Financial Statements (continued) For the year ended 30 June 2011
38. Share-based payments (continued) (b) Long Term Incentive Plan (LTIP) (equity-settled) (continued) The fair value of services received in return for performance rights granted is based on the fair value of the rights granted measured using a Monte Carlo model. A summary of performance rights granted to Executives and other participants and the inputs used to determine the fair value of performance rights granted are as follows:
Fair Granted value Share Balance at / Added Forfeited Vested Balance at at price at start of the during the during the during the the end of Grant grant date of Expected Dividend year year year year year Date date grant volatility yield Number Number Number Number Number 2011 Tranche 1 22 Feb 10 $0.860 $1.41 50% 4.96% 2,880,244 10,697 1,680,000 - 1,210,941 24 Nov 10 $1.463 $1.98 45% 3.29% - 125,000 - - 125,000 01 Jan 11 $1.782 $2.28 45% 2.85% - 25,000 - - 25,000 08 Jan 11 $1.617 $2.08 45% 3.13% - 50,000 - - 50,000 2,880,244 210,697 1,680,000 - 1,410,941
Tranche 2 22 Feb 10 $0.860 $1.41 50% 4.96% 3,320,309 13,912 1,902,176 - 1,432,045 28 Jul 10 $1.018 $1.55 45% 4.19% - 250,000 - - 250,000 24 Nov 10 $1.394 $1.98 45% 3.29% - 250,000 - - 250,000 01 Jan 11 $1.665 $2.28 45% 2.85% - 25,000 - - 25,000 3,320,309 538,912 1,902,176 - 1,957,045
Tranche 3 22 Feb 10 $0.830 $1.41 50% 4.96% 3,263,293 16,966 1,896,067 - 1,384,192 28 Jul 10 $0.952 $1.55 45% 4.19% - 250,000 - - 250,000 24 Nov 10 $1.285 $1.98 45% 3.29% - 250,000 - - 250,000 01 Jan 11 $1.480 $2.28 45% 2.85% - 25,000 - - 25,000 3,263,293 541,966 1,896,067 - 1,909,192
Totals 9,463,846 1,291,575 5,478,243 - 5,277,178 For personal use only use personal For
105 Sedgman Limited Annual Report 2011 Notes to the Financial Statements (continued) For the year ended 30 June 2011
38. Share-based payments (continued) (b) Long Term Incentive Plan (LTIP) (equity-settled) (continued)
Fair value Share Balance Granted Forfeited Vested Balance at at price at at start of during the during the during the the end of grant date of Expected Dividend the year year year year year Grant Date date grant volatility yield Number Number Number Number Number 2010 Tranche 1 22 Feb 10 $0.86 $1.41 50% 4.96% - 2,880,244 - - 2,880,244 - 2,880,244 - - 2,880,244
Tranche 2 22 Feb 10 $0.86 $1.41 50% 4.96% - 3,320,309 - - 3,320,309 - 3,320,309 - - 3,320,309
Tranche 3 22 Feb 10 $0.83 $1.41 50% 4.96% - 3,263,293 - - 3,263,293 - 3,263,293 - - 3,263,293
Totals - 9,463,846 - - 9,463,846 During the year ended 30 June 2011 an expense of $0.967 million (2010: $0.892 million) was recognised by the Group in respect of the LTIP. 39. Parent entity financial information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts:
2011 2010 $’000 $’000 Result of the parent entity Profit for the year 17,554 16,290 Other comprehensive income - - Total comprehensive income for the year 17,554 16,290 Balance Sheet of parent at year end Current assets 107,669 96,228 Total assets 228,218 205,015 Current liabilities 78,047 60,670 Total liabilities 100,314 88,390 Equity Contributed equity 96,719 90,378 Reserves 6,185 5,352 Retained profits 25,000 20,895 Total Equity 127,904 116,625
(b) Contingent liabilities of the parent entity Bank guarantees and performance bonds have been given in respect of work in progress contracts and leased premises of the parent
amounting to $34.593 million (2010: $48.204 million). For personal use only use personal For The parent entity did not have any other contingent liabilities as at 30 June 2011 or 30 June 2010.
Sedgman Limited Annual Report 2011 106 Notes to the Financial Statements (continued) For the year ended 30 June 2011
39. Parent entity financial information (continued) (c) Guarantees entered into by the parent entity The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of its subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed, are disclosed in Note 31. No liability was recognised by the parent entity in relation to this guarantee. (d) Commitments (i) Operating leases
2011 2010 $’000 $’000 Non-cancellable Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year 3,266 4,665 Later than one year but not later than five years 8,030 6,546 Later than five years 862 - 12,158 11,211
The parent entity leases buildings under operating leases expiring within the next 5.5 years. The leases involve lease payments comprising a base amount plus an incremental contingent rental. Contingent rentals are based on Fixed Increase Percentages and the Consumer Price Index. The operating lease rental expense recognised in the year ended 30 June 2011 was $2.493 million (2010:$5.178 million). (ii) Finance leases 2011 2010 $’000 $’000 Commitments in relation to finance leases are payable as follows: Within one year 2,041 4,481 Later than one year but not later than five years 5,976 8,017 Minimum lease payments 8,017 12,498
Less: Future finance charges (1,331) (2,034) Total lease liabilities 6,686 10,464
Representing lease liabilities: Current 1,542 3,778 Non-current 5,144 6,686
6,686 10,464 For personal use only use personal For
107 Sedgman Limited Annual Report 2011 Directors’ Declaration
1. In the opinion of the directors of Sedgman Limited (the “Company”):
(a) The consolidated financial statements and notes that are set out on pages 62 to 107 and the Remuneration report in the Directors’ report, set out on pages 47 to 56, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2011 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. There are reasonable grounds to believe that the Company and the group entities identified in Note 31 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those group entities pursuant to ASIC Class Order 98/1418. 3. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2011. 4. The directors draw attention to Note 1(a) to the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors.
Russell James Kempnich Chairman
Nicholas Neil Jukes Managing Director Brisbane
18th August 2011 For personal use only use personal For
Sedgman Limited Annual Report 2011 108 Audit Report
Independent auditor’s report to the members of Sedgman Limited Report on the financial report We have audited the accompanying financial report of Sedgman Limited (the Company), which comprises the consolidated balance sheet as at 30 June 2011, and the consolidated income statement and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year ended on that date, notes 1 to 39 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the Company are responsible for the preparation and fair presentation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the presentation of the financial report that is free from material misstatement, whether due to fraud or error. In note 1(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion:
(a) the financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1(a). For personal use only use personal For
KPMG, an Australian partnership and a member firm of the KPMG Liability limited by a scheme approved under network of independent member firms affiliated with KPMG Professional Standards Legislation. International, a Swiss cooperative.
109 Sedgman Limited Annual Report 2011 Audit Report (continued)
Independent auditor’s report to the members of Sedgman Limited (continued) Report on the remuneration report We have audited the Remuneration Report included in pages 47 to 56 of the directors’ report for the year ended 30 June 2011. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with auditing standards. Auditor’s opinion In our opinion, the Remuneration Report of Sedgman Limited for the year ended 30 June 2011, complies with Section 300A of the Corporations Act 2001.
KPMG
Jason Adams Partner Brisbane
18 August 2011 For personal use only use personal For
Sedgman Limited Annual Report 2011 110 ASX Additional Information
Below is the additional information required by the Australian Securities Exchange Limited (ASX) listing rules, which is not disclosed elsewhere in this report. Shareholdings (as at 6 October 2011) Substantial shareholders The number of ordinary shares held by substantial shareholders and their associates are set out below:
Name No. of ordinary shares held THIESS PTY LTD 68,817,801 MR RUSSELL KEMPNICH & RELATED PARTIES 17,448,410 ELEY GRIFFITHS GROUP 13,424,897
Voting rights The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
Distribution of equity security holders – ordinary shares
Percentage of Range Total holders issued capital 1 – 1,000 489 0.11 1,001 – 5,000 1,023 1.43 5,001 – 10,000 651 2.35 10,001 – 100,000 782 9.07 100,001 and above 64 87.04 Total 3,009 100.00
Unmarketable parcels Minimum Parcel Size Holders Units Minimum $500.00 parcel at $1.8850 per unit 266 180 10,963
For personal use only use personal For
111 Sedgman Limited Annual Report 2011 ASX Additional Information (continued)
20 largest shareholders as at 6 October 2011
Name No. of ordinary Percentage of shares held capital held THIESS PTY LTD 68,817,801 32.46 J P MORGAN NOMINEES AUSTRALIA LIMITED 20,277,166 9.56 NATIONAL NOMINEES LIMITED 20,168,882 9.51 TERRAFORD PTY LTD 17,425,205 8.23 CITICORP NOMINEES PTY LIMITED 9,641,449 4.55 MINERAL RESOURCE ENGINEERING SERVICES PTY LTD 9,248,584 4.37 COGENT NOMINEES PTY LIMITED 6,236,137 2.94 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 4,091,322 1.93 COGENT NOMINEES PTY LIMITED 2,923,274 1.38 ZENRAY PTY LIMITED ATF THE ZENRAY FAMILY TRUST 3,928,354 1.85 AUST EXECUTOR TRUSTEES NSW LTD 2,212,457 1.04 RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED 1,591,290 0.75 MR IAN THOMAS ATF THE IAN THOMAS FAMILY TRUST 1,467,414 0.69 MS NANCY LEE THOMAS ATF THE THOMAS FAMILY ACCOUNT 1,343,326 0.63 RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED 1,242,282 0.59 CITICORP NOMINEES PTY LIMITED 1,045,164 0.49 MILTON CORPORATION LIMITED 1,036,869 0.49 CHRYSALIS INVESTMENTS PTY LTD ATF THE ELLIS SUPERFUND 859,669 0.41 QUEENSLAND INVESTMENT CORPORATION 833,655 0.39 UBS NOMINEES PTY LTD 800,000 0.38
175,190,300 82.64 For personal use only use personal For
Sedgman Limited Annual Report 2011 112 ► BACK TO CONTENTS
Corporate Directory
Company Sedgman Australian Offices Sedgman Limited Sedgman Limited ABN 86 088 471 667 Head Office Sedgman Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. Level 2, 2 Gardner Close Milton QLD 4064 Directors AUSTRALIA Russell Kempnich Chairman Telephone: +61 7 3514 1000 Nick Jukes CEO and Managing Director Facsimile: +61 7 3514 1999 Email: [email protected] Robert McDonald Deputy Chairman Website: www.sedgman.com Donald Argent Non-Executive Director Postal address: Roger Short Non-Executive Director PO Box 1801 Bruce Munro Non-Executive Director Milton BC QLD 4064 Peter Richards Non-Executive Director AUSTRALIA Company Secretary Townsville Adrian Relf 14-64 Industrial Avenue Bohle Industrial Estate Registered and head office Townsville QLD 4810 AUSTRALIA Level 2, 2 Gardner Close Milton QLD 4064 Telephone: +61 7 4795 7500 AUSTRALIA Facsimile: +61 7 4774 6181 Email: [email protected] Telephone: +61 7 3514 1000 Postal Address: Facsimile: +61 7 3514 1999 PO Box 7237 Email: [email protected] Garbutt QLD 4814 Website: www.sedgman.com AUSTRALIA Postal address Perth PO Box 1801 Suite 3, 3 Craig Street Milton BC QLD 4064 Burswood WA 6100 AUSTRALIA AUSTRALIA Share registry Telephone: +61 8 6255 0000 Facsimile: +61 8 6255 0099 Computershare Investor Services Pty Limited Email: [email protected] 117 Victoria Street Postal Address: West End QLD 4101 PO Box 39 AUSTRALIA Burswood WA 6100 Telephone: 1300 552 270 AUSTRALIA Facsimile: +61 7 3229 9860 Mackay Independent auditors 11 / 121 Boundary Road Paget (Mackay) QLD 4740 KPMG AUSTRALIA Riparian Plaza Level 16, 71 Eagle Street Telephone: +61 7 3113 6560 Brisbane QLD 4000 Facsimile: +61 7 4968 1717 AUSTRALIA
For personal use only use personal For Telephone: +61 7 3233 3111 Facsimile: +61 7 3233 3100 Stock exchange listing Sedgman Limited is listed on the Australian Securities Exchange. The home exchange is Brisbane. ASX Code SDM
41 Sedgman Limited Annual Report 2011 Sedgman International Offices CHINA AFRICA Sedgman Engineering Technology Sedgman South Africa Pty Ltd (Beijing) Co Ltd Centurion Beijing 1st Floor Eco Court Suite 1004, Tower 1 340 Witch Hazel Avenue TEDA Times Center Centurion 0157 No.15 Guanghua Road SOUTH AFRICA Chaoyang District Postal Address: Beijing 100026 Postnet Suite 425 P.R. CHINA Private Bag x108 Telephone: +86 10 8588 6508 Centurion 0046 SOUTH AFRICA Facscimile: +86 10 8588 6387 Telephone: +27 12 648 2000 Facsimile: +27 12 661 2299 Shanghai A06, Level 3, Tower H No.76 West Songxing Road THE AMERICAS Boashan District Shanghai 200940 Sedgman S.A. P.R. CHINA Santiago Telephone: +86 10 8588 6512 Av. Apoquindo 4501, Piso 17 Las Condes Santiago MONGOLIA CHILE Sedgman LLC Telephone: +56 2 365 6100 Ulaanbaatar Facsimile: +56 2 365 6199 1st Floor, Section D, Sky Plaza Olympic Street 12, SB District Ulaanbaatar MONGOLIA Telephone: +976 7012 5516
Facsimile: +976 7012 5517 For personal use only use personal For
Kinsevere Copper Mine, Katanga Province, Democratic Republic of the Congo. Client: Anvil Mining Limited. Sedgman Limited Annual Report 2011 42 For personal use only use personal For
Annual Report 2011 For the year ended June 2011. ABN 86 088 471 667
Sedgman Limited Annual Report 2011 43