reshaping our future - ausdrill · 01 reshaping our future ... (now complete), the lack of...
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Contents>01 Reshaping our future
02 Ausdrill today
04 Significant factors
05 Financial statistics
06 Chairman’s report
08 Managing Director’s report
14 Ausdrill people at work
17 Corporate governance statement
19 Directors’ report
24 Profit and loss statements
25 Balance sheets
26 Statements of cash flows
27 Notes to and forming partof the financial statements
53 Directors’ declaration
54 Independent audit report
55 Additional information
56 Financial table
Ausdrill is undergoing fundamental
change> we have never before
experienced a mining market
where demand for services and
prices have fallen so far and have
stayed down for so long.
Our business based on provision
of contracting services faces a
number of challenges. This report
is about the challenges facing
Ausdrill and the reshaping of the
company to meet those
challenges to deliver returns and
improve shareholder value.
01
AUSDRILL LIMITED ANNUAL REPORT 2000
02
AUSDRILL LIMITED ANNUAL REPORT 2000
Ausdrill today> we are now a
global contract services company
with four businesses: exploration
and drill & blast, procurement
and logistics, mining contracting
and telecommunications
contracting.
03
AUSDRILL LIMITED ANNUAL REPORT 2000
Exploration, Drill & BlastWHO Ausdrill Limited, West African Drilling ServicesWHERE Australia, South America, West Africa, New ZealandWHAT Open Pit Drill & Blast Services to the Mining Industry, Hard Rock Exploration DrillingPEOPLE 872 EmployeesCAPITAL EMPLOYED $34.6MTURNOVER $83.7M
Mining ContractingWHO African Mining Services
WHERE Ghana (West Africa), Tanzania (East Africa)
WHAT Open Pit Load & Haul and Drill & Blast Services to the Mining Industry
PEOPLE 766 Employees
CAPITAL EMPLOYED $18.8M
PROFIT SHARE $1.8M
Procurement and LogisticsWHO Supply Direct
WHERE Australia, Africa (South, East and West), United Kingdom
WHAT Procurement and Logistic Services to the Mining Industry
PEOPLE 52 Employees
CAPITAL EMPLOYED $7.2M
TURNOVER $28.6M
TelecommunicationsWHO Diamond Communications, ACE (Australian Communications Engineering)
WHERE Western Australia
WHAT Horizontal Drilling, Trenching, Cable Laying, Cable Installation
PEOPLE 82 Employees
CAPITAL EMPLOYED $1.5M
PROFIT SHARE $0.4M
04
AUSDRILL LIMITED ANNUAL REPORT 2000
Significant factors>– Write-off of debts owing to Central American
operations and related closure costs.
– Lower rig utilisation arising from depressed market
conditions as a result of lower metal prices.
– Realised and unrealised exchange losses arising
from adverse exchange rate movements on the
group’s foreign exchange contracts, borrowings
and revenues.
– Scrapping of obsolete exploration equipment and
writedowns of other exploration equipment.
– Scrapping of consumables, which are unlikely to
be used by the existing fleet.
– Write-off of current and prior year tax benefits in
respect of our Peruvian and Honduras operations.
05
AUSDRILL LIMITED ANNUAL REPORT 2000
FINANCIAL STATISTICS
2000 1999$,000 $,000
Sales Revenue 111,971 146,246
Operating Profit After Tax- Excluding Abnormals (3,458) 4,436- Including Abnormals (9,945) 893
Balance Sheet- Total Assets 196,722 184,036- Total Liabilities 137,823 115,480- Equity 58,899 68,556
Cashflow Statistics- Net Operating Cashflow 10,830 20,797
PROFIT/LOSS(after tax and abnormals in millions)
96 97 98 99 00
EBIT TO SALES REVENUE(as a percentage)
96 97 98 99 00
EARNINGS PER SHARE(in cents)
96 97 98 99 00
8.4
9.4
4.1
0.9-9.9
12.4%
15.514.4
6.0
1.2-12.9
10.7%
5.5%4.9%
-4.9%
06
AUSDRILL LIMITED ANNUAL REPORT 2000
CHAIRMAN’S REPORT
TE O’CONNOR QC Chairman
Building a broader base> we
have a defined set of strategies
that we believe will provide
significantly improved returns
for our shareholders.
07
AUSDRILL LIMITED ANNUAL REPORT 2000
This has been an unsatisfactory year for the
company. The severe and prolonged downturn in
the gold industry, and cost containment by mining
companies in general, have had a significant
impact on our exploration and drill & blast
divisions which have been our core businesses.
Our financial performance is unacceptable and the
challenge is to reshape the company to correct
this trend and restore shareholder confidence.
The Board, with senior management, have
taken a number of steps which we believe
will reshape the company and provide
improved shareholder returns and value.
These decisions include:
> The restructuring of our Central and South
American businesses, to ensure a more
efficient and cost competitive unit.
> The establishment of a telecommunications
and utilities contracting business through
the acquisition of 50% of Diamond
Communications and 100% of Australian
Communications Engineering (ACE).
> The raising of $7.2M by way of a rights
issue to purchase ACE and to ensure the
company can take advantage of the growth
opportunities in contract mining in Africa
with our partner Henry Walker Eltin and in
telecommunications and utilities contracting.
> The development of an Internet based
electronic outsourcing and logistics platform
to automate Supply Direct’s procurement
and logistics business. The company has
taken a decision to sell down it’s holding to
ensure Supply Direct is adequately funded
to enable it to achieve its expected growth.
> Continued cost containment, and the
curtailment of non-sustaining capital
expenditure.
Following our rights issue and write down of
certain plant and stock, Net Tangible Assets of
the company equate to 48.7 cents per share.
We believe that the restructure which has been
undertaken will result in a return to profits and
the restoration of shareholder value.
Terry O’Connor QC Chairman
08
AUSDRILL LIMITED ANNUAL REPORT 2000
MANAGING DIRECTOR’S REPORT
RJ TAYLOR Managing Director
The shape of things to come>
Ausdrill is now in a very strong
position to deliver on the
strategies and goals we have
set in place for our future.
The 1999/2000 year has been one of extreme
disappointment. A bad debt in Central America,
losses from 2 major contracts in South America,
the deterioration of the Australian Dollar, and a
decline in revenue from our Australian operations
resulted in a net operating loss of $9.9M, after
tax and abnormal items.
The one pleasing highlight was our ability to
remain cash positive for the year. Net cash flow
from operations was $10.8M.
In the 1998/1999 Annual Report we advised
our strategy to combat the downturn in the
drilling industry included:
> joint venturing of operations to contain costs;
> sale of non-performing operations;
> development of business segments and
regions that will provide long-term growth.
The joint venturing of exploration operations at
this stage has not provided the benefits that were
anticipated. Whilst we have held a number of
discussions regarding the sale of non-performing
assets, values and returns have not been
satisfactory. In the exploration area we have
concluded that further exposure to this depressed
industry would not help our cause, and could in
fact further reduce returns in this division.
On the development front, it has been pleasing
to see the growth in African Mining Services. The
acquisitions of 50% of Diamond Communications
and the business of ACE have given us a strong
position in the telecommunications underground
services industry. The 2000/2001 year should
see the benefits of these acquisitions.
The addition of telecommunications underground
services will not only add to our profit but allows
us to reduce our reliance on our traditional drill
and blast and exploration businesses.
For the year we have contained non-essential
capital expenditure. We were required to outlay
$7.1M for 8 additional drill & blast rigs to support
the two year drill & blast contract at the KCGM
“Superpit”.
The challenge going forward is to:
> achieve adequate returns on assets
employed in a tough and hostile environment;
> manage the growth of African Mining
Services, Supply Direct and the
telecommunications business;
> continue cost containment and
rationalisation in our drilling divisions.
DRILL & BLAST
Our drill & blast operations have continued to
experience the impact of a downturn in work, as
operations closed, and only a small number of
new projects commenced.
In Kalgoorlie the award of the two year KCGM
Superpit Contract was the highlight of the year.
This contract has made Ausdrill the leader in
large hole contract drilling adding to our
contracts at Jimblebar (iron ore) and Cadia.
Our maintenance and engineering teams have
done an excellent job in extending the life of our
Tamrock fleet through planned and efficient
rebuild programs thereby reducing the need to
replace a portion of the fleet.
09
AUSDRILL LIMITED ANNUAL REPORT 2000
10
AUSDRILL LIMITED ANNUAL REPORT 2000
The Central American contracts with Greenstone
Resources were disastrous with Greenstone
being put into receivership, and the company
incurring a bad debt of $1.1M which included
shutdown costs. It is unlikely that any part of this
debt will be recovered. The equipment has been
shipped to Kalgoorlie to become part of our
Western Australian fleet.
South American drill & blast is a mixture of short
term civil contracts and long-term open pit mine
contracts. With the exception of the Ralco Dam
Project in Chile, the division has operated
profitably. At Ralco Dam, environmental protests
and stoppages caused continual disruption to our
operation resulting in a large loss. The project
has now been cancelled.
Our strategy for the coming year is to adequately
maintain our existing fleet with mine owners who
are tending to adopt an owner mining policy.
EXPLORATION
The market for exploration has remained in
decline, which has resulted in an over supply of
drilling capacity throughout the world.
Our emphasis continues to be focused on
developing and maintaining working relationships
on a preferred contractor basis with our key
clients who are major mining organisations.
We continue to capitalise on our strengths,
which include:
> one of the most modern and well maintained
drilling fleets in Australia;
> an experienced, highly trained and flexible
work force;
> our safety record (Ausdrill won the Australian
Drilling Industry Association’s Safety Award
for 1999);
> a fleet of equipment capable of handling
various duties including work on inland lakes.
Client support of our world best practice, high
quality workmanship, emphasis on environmental
understanding and safety standards has continued
to enhance our reputation as a preferred
contract driller.
In Western Australia we will continue to
concentrate on building on our working
relationships with existing clients that we believe
provide opportunities for maintaining a high
utilisation of our fleet in the medium term.
During the year, selective restructuring of Kalgoorlie
and Kambalda operations has occurred. The
efforts of our staff in developing cost saving
methods has been excellent. We are now at the
point where additional savings would be difficult
without foregoing our standards of maintenance,
service and safety.
Queensland and New Zealand operations remain
subdued. Declining exploration and very
aggressive bidding by our opposition has made
it difficult to obtain new contracts. However, we
only take on new contracts at acceptable margins.
In Peru the lack of continuity of work and high
overheads has resulted in large losses with little
prospect of improvement. A decision to exit the
country has been made and the operations are
currently being wound down.
Chile losses were due to the under bidding of
a major contract (now complete), the lack of
continuity of work, and the high overhead cost
of doing business.
We are rationalising the workforce, reducing the
number of expatriate drillers, and reducing our
infrastructure overheads where possible. We
have decided to concentrate mainly on reverse
circulation drilling and limit the amount of
diamond drilling.
The Board have taken a decision to scrap six
exploration rigs which are not expected to work
again and write down the value of some older
equipment. The write downs result in an abnormal
loss of $2.9M.
West African Drilling Services (WADS) has
had a difficult year, as a result of the worldwide
exploration slowdown. The company is
concentrating on reducing costs in line with the
amount of work available and WADS is also
tendering for work in neighbouring countries.
In February, WADS in conjunction with Randgold,
agreed to cancel the drill & blast contract.
The equipment and stock was purchased by
Randgold. With little drill & blast work available,
WADS is currently in the process of exiting drill
& blast in the region.
WADS maintains a dominant position in West
Africa and is well positioned to meet all
exploration demands. The challenge for it is to
gain an acceptable return on assets employed.
SUPPLY DIRECT
Our procurement and logistics outsourcing
business has continued to expand, with a number
of new clients in Africa availing themselves of
the service.
Key achievements through the year were:
> the undertaking of an e-commerce
development strategy that will deliver
improvements to existing business processes
and be the catalyst for future growth;
> Australia continued to deliver growth in
revenue and profits;
> the establishment of Logistics Direct into
a leading freight forwarding company in
West Africa;
> Supply Direct in the UK reaching constant
profitability following a very difficult year, with
the infrastructure to now fulfil its potential.
With industry poised to embrace e-commerce
worldwide, and the last stumbling blocks being
eroded, a major focus of Supply Direct for the
year has been the design and construction of a
B2B e-commerce system in conjunction with
our consultants and developers Novus-Aurora.
To contain the development costs, Supply Direct
granted Novus-Aurora the rights to use the
system in all industries other than oil, gas, mining
and engineering through an entity in which
Supply Direct will retain a 40% equity interest.
The e-commerce platform, which is being tested
internally, will provide Supply Direct with a system
to contain its costs, whilst providing suppliers
and clients with the opportunity of reducing their
marketing, purchasing and logistics costs in
addition to providing greater purchasing leverage
through collective buying.
To ensure the group gains maximum benefit out
of the e-commerce system and has the capital
to achieve the same, discussions with a number
of parties regarding a selldown of equity are
currently taking place. The alternatives range
from disposing of a minority position through to
an outright sale for the right price.
11
AUSDRILL LIMITED ANNUAL REPORT 2000
12
AUSDRILL LIMITED ANNUAL REPORT 2000
AFRICAN MINING SERVICES
African Mining Services (AMS) entered Ghana
in 1997 as a mining contractor, and has since
expanded operations not only within Ghana but
also into Tanzania. It is actively bidding further
work in countries including South Africa and
Zambia on the eastern seaboard, and Guinea
and Mali to the west.
African Mining Services business encompasses
a complete range of contract mining services
from load and haul, drill & blast, grade control to
other technical mining services such as
re-engineering of projects, to full partnering
and preferred contractor status for projects.
The current operations in Ghana continue to
perform well with contracts at Tarkwa for
Goldfields of South Africa and Damang for
Ranger Minerals. Both these contracts have
completed 3 years of the original 5 year contract
with the latter having just been extended to a
life of mine contract, being an additional term
of some 15 months.
The challenges for AMS in this year are to
maintain current margins whilst undergoing an
extensive equipment rebuild program on both
projects to see us through to the end of our
current commitments.
The only project in Tanzania at present is at the
Geita mine for Ashanti/Anglo. Having successfully
mobilised in mid 1999, AMS has been able to
meet all challenges presented on this project as
the scope of work continues to grow exponentially.
The mining contract has been expanded and
currently the value of work has increased from
US$116M to US$200M. To meet the initial
increase the equipment fleet is currently being
expanded whilst the re-engineering exercise to
determine long term strategy, cost savings and
synergies that will benefit both parties for the
final mine plan expansion is being completed.
AMS is confident of being awarded additional
work in the coming months in East Africa which
will cement the initial growth in this region and
allow AMS to consolidate and branch out to
neighbouring countries.
A stand-alone marketing and business develop-
ment team has been established to support the
current and future growth plans. This team is
now more familiar with the operating conditions
of the continent, which is expected to stand
AMS in good stead for the foreseeable future.
It is our intention to see the jointly owned
company become an independent business unit
operating from corporate headquarters within
Africa and this will be one of the challenges for
the coming year.
DIAMOND COMMUNICATIONS & ACE
During the course of the year Ausdrill entered
into a new and exciting telecommunications
market with the acquisition of 50% of Diamond
Communications. The business performed above
expectations and the outlook is positive.
The growth of the telecommunications market
has opened up many new opportunities for
outsourcing and the company is well positioned
to take advantage of these.
The company performs work direct to Telstra
and other telecommunication carriers and
specialises in the rollout of new networks, the
provision of new services and the maintenance
of existing networks. The scope of capabilities
ranges from the installation of a second phone
service in a customers home, through to long
distance fibre optic cable rollouts.
The company also performs similar services to
other utility companies, and the further
deregulation of these markets continues to
present contracting opportunities.
In July 2000, Ausdrill continued its growth in
this market through the acquisition of the assets
and business of ACE. The move provides the
two companies with access to specialist
equipment including a number of horizontal
directional drills, zero tension fibre optic ploughs,
certified hauling equipment, and fibre optic
jointing and test equipment.
The challenges for the year ahead are the
merging of the two businesses, management of
growth and increased utilisation of equipment.
PERSONNEL, HEALTH AND SAFETY
In following our new directions, people will
remain integral to achieving our business
objectives. Last year saw a further decline of
direct employees due to continued rationalisation.
The group employed 681 employees, 240 of
whom were employed outside Australia on national
employment status.
Supply Direct, with operations in Perth, Accra,
London and Johannesburg accounted for 52 of
this total, which is destined to increase to deliver
our strategy and goals for business growth.
Through jointly owned interests in African Mining
Services and West African Drilling Services,
employment is provided to a further 1,009 people
in East and West Africa.
Diamond and ACE provide employment for
82 personnel.
On matters of Health and Safety, the mining
industry continues to be highly scrutinised and
our objective of improving our safety
performance continues.
In Australia, our lost time injury frequency rate
(number of lost time injuries for each one million
hours worked) increased marginally from 8.0 to
8.6, however, we recorded a significant reduction
in days lost from 222 to 90.
Ausdrill’s Queensland operation was congratulated
by BHP Minerals in February 2000 for achieving
a 2 year lost time injury free record at the
Cannington underground site. Operations at the
Kalgoorlie Superpit and St Ives (Kambalda)
achieved 2,500 and 1,200 lost time injury free
days respectively. Another 4 operations achieved
in excess of 700 days lost time injury free.
Ausdrill’s Western Australian operations won the
Australian Drilling Industry Association’s 1999
Safety Award for the best overall safety
performance by a drilling company employing
more than 20 employees.
South American operations achieved an improved
safety record with a lost time injury frequency
rate of 11.6, down from 21.0 the previous year.
We congratulate and continue to direct employees
to adopt and sustain safe work practices as we
focus on improving our safety performance.
A continued emphasis on working safely is part
of our business strategy.
Ray Taylor Managing Director
13
AUSDRILL LIMITED ANNUAL REPORT 2000
14
AUSDRILL LIMITED ANNUAL REPORT 2000
Working with confidence>Ausdrill employs over 750highly skilled employeesacross ten countries.
05>
08>
14>
10>
13>
11>
15
AUSDRILL LIMITED ANNUAL REPORT 2000
01 Supply Direct - Unloading goods
02 ACE - Exmouth - Trenching project
03 CHA 1100 blasthole rig - Tarkwa
04 Ingersoll Rand DM45 SP rig at work
05 Lake drilling support unit
06 Tamrock CHA 1100 at work
07 Boilermaking work
08 Superpit - The workforce
09 Supply Direct - Checking client specificationson conveyor belt before shipment
10 Presplit work
11 Geita - Original truck fleet
12 Back filling blast holes
13 ACE - Drilling under the Swan River
14 Schramm 685 Exploration rig
02>
04>
07>
09>
12>
03>
06>
01>
16
AUSDRILL LIMITED ANNUAL REPORT 2000
15 WADS - Exploration drilling
16 Liebherr 984 Excavator Ayanfuri
17 Diamond Communications- Ditch witch mobilisation
18 Tarkwa 777C Dump truck
19 Tamatsu Probe drill
20 Ayanfuri - Another pit
21 Charging a shot
22 Drilltech at work
23 WADS - Exploration drilling
18>
19>
21>
15>
16>
17>
20>
22> 23>
17
AUSDRILL LIMITED ANNUAL REPORT 2000
The directors of Ausdrill Limited aspire to the very highest standards of corporate governance.
A description of the company’s main corporate governance practices is set out below. Unless otherwise stated, all thesepractices were in place for the entire year.
THE BOARD OF DIRECTORS
The Board of Directors takes ultimate responsibility for corporate governance and operates in accordance with the followingbroad principles:
• the Board should comprise between 3 and 7 directors
• the majority of the Board should be non-executive directors
• the Chairman should be a non-executive director
• the Board should comprise directors with a broad range of skills and experience
• to assist it in fulfilling its responsibilities the Board has a remuneration and audit committee.
At all times during the year there was a majority of non-executive directors on the Board. At the date of signing the directors’report the Board consisted of six non-executive directors and one executive director. Details of the directors are set out in thedirectors’ report.
Directors are initially appointed by the full Board, subject to election by shareholders at the next annual general meeting. Twomembers of the Board (excluding the Managing Director) retire by rotation at every annual general meeting of the company.
CHAIRMAN
The Chairman of the Board is a non-executive director who is elected by the full Board.
INDEPENDENT PROFESSIONAL ADVICE
Directors have the right, in connection with their duties and responsibilities as directors, to seek independent professional adviceat the company’s expense.
REMUNERATION COMMITTEE
The remuneration committee consists of the following directors:T E O’Connor (Chairman)J E AskewR G Sayers
Executive remuneration and other terms of employment are reviewed as necessary by the committee having regard toperformance, relevant comparative information and independent expert advice. As well as a base salary, remuneration packagesinclude superannuation, retirement and termination entitlements, performance-related bonuses and fringe benefits. Executivesare also eligible to participate in the Ausdrill Limited Employee Option Plan.
Remuneration of non-executive directors is determined by the Board within the maximum amount approved by the shareholdersfrom time to time.
Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidatedentity’s diverse operations.
Further information on directors’ and executives’ remuneration is set out in notes 29 and 30 to the financial statements.
AUDIT COMMITTEE
The audit committee consists of the following non-executive directors:R G Sayers (Chairman)T E O’Connor
The main responsibilities of the audit committee are to:
• review and report to the Board on the annual report and financial statements
• provide assurance to the Board that it is receiving adequate, up to date and reliable information
• assist the Board in reviewing the effectiveness of the organisation’s internal control environment covering:– effectiveness and efficiency of operations– reliability of financial reporting– compliance with applicable laws and regulations
The committee is also charged with the responsibilities of recommending to the Board the appointment, removal andremuneration of the external auditors, and reviewing the terms of their engagement, and the scope and quality of the audit.
CORPORATE GOVERNANCE STATEMENTAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES
18
AUSDRILL LIMITED ANNUAL REPORT 2000
In fulfilling its responsibilities the committee receives regular reports from management and the external auditors. It also meetswith the external auditors at least twice a year, more frequently if necessary. The external auditors have a clear line of directcommunication at any time to either the Chairman of the audit committee or the Chairman of the Board.
The committee has authority, within the scope of its responsibilities, to:
• seek any information it requires from any employee or external party
• obtain external legal or other independent professional advice.
RISK ASSESSMENT AND MANAGEMENT
The Board has identified the key business and financial risks that could jeopardise the consolidated entity achieving itsobjectives and is continuing to develop appropriate controls in conjunction with senior executives which will effectively managethose risks.
QUALITY ASSURANCE
Ausdrill Limited’s West Australian exploration, drill and blast and Kambalda operations have achieved Bureau Veritas QualityInternational Assurance to ASISO9002: 1994 status.
This certification is subject to regular audit by external auditors to ensure the continued highest standards of efficiency andeffectiveness of operations.
THE ENVIRONMENT, OCCUPATIONAL HEALTH AND SAFETY
The consolidated entity recognises the importance of environmental and occupational health and safety (OH&S) issues and iscommitted to the highest levels of performance and compliance where applicable.
The consolidated entity aims to:
• comply with all relevant legislation where required
• continually assess and improve the impact of its operations on the environment
• encourage employees to actively participate in the management of environmental and OH&S issues
• work with trade associations representing the entity’s businesses to raise standards
• use energy and other resources efficiently
• encourage the adoption of similar standards by the entity’s principal suppliers and contractors.
The consolidated entity is not directly subject to any significant environmental regulations. However, our clients are subjectto significant environmental regulations and are reliant upon the consolidated entity to fulfil their obligations pursuant tothose regulations.
CORPORATE GOVERNANCE STATEMENTAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES
19
AUSDRILL LIMITED ANNUAL REPORT 2000
Your directors present their report on the consolidated entity consisting of Ausdrill Limited (“the Company”) and the entities itcontrolled at the end of, or during the year ended 30 June 2000.
DIRECTORS
The following persons hold office as directors of Ausdrill Limited at the date of this report:
Terence Edward O’Connor QC (Non-executive Chairman)
Mr Terry O’Connor is a Barrister. He is the Chairman of the Anti-Corruption Commission of Western Australia, Chairman ofEnvironmental Solutions Limited, Chancellor of the University of Notre Dame Australia, a Director of EBM Insurance Brokers Ltd,a Director of GES International Ltd and is a Commissioner of the Australian Football League.
He is a graduate of the University of Western Australia. He was formerly a partner in the legal firm Stone James Stephen Jaques(now Mallesons Stephen Jaques).
He resides in Perth and is aged 62.
Raymond John Taylor MBA (Uni WA), Bcomm (Deakin), FASA, CPA (Managing Director)
Mr Ray Taylor was appointed as Managing Director in May 1997 after having been a non-executive director of Ausdrill from 1987.
Mr Taylor was previously Finance Director of Golden Shamrock Mines Limited and is an accountant with over 25 years ofexperience in the resource industry covering finance, accounting, taxation and planning.
He resides in Perth and is aged 53.
Ronald George Sayers (Non-executive Director)
Mr Ron Sayers founded Ausdrill in 1987 and was Managing Director until May 1997. He was formerly the branch manager of alarge mining supply Group and has been involved with the mining industry for over 20 years.
Mr Sayers is a non-executive director and consultant.
He resides in Perth and is aged 48.
James Edward Askew BE (Min) (Melb), M Eng Sci (Melb), M Aus IMM, M.A.I.M.E. (Non-executive Director)
Mr James Askew was formerly the Managing Director of Golden Shamrock Mines Limited and is now Managing Director of BlackRange Minerals Ltd. He has over 25 years experience in the mining industry, in operations, consulting and corporatemanagement and since 1978 has been primarily involved in international operations.
Mr Askew is a director of several public companies in Australia, the USA and Canada and has been a non-executive director ofAusdrill since 1987.
He resides in Sydney and is aged 52.
Robert Samuel Leatham ACSM (Non-executive Director)
Mr Bob Leatham has over 30 years experience in the mining industry in the UK, USA, Africa, South America, the Middle and Far East and Australia.
Mr Leatham retired as the Group General Manager of Ausdrill in August 2000, a position he held since April 1994, but remainsas a non-executive director of the company until the next Annual General Meeting.
He resides in Melbourne and is aged 53.
Garry Patrick Connell (Non-executive Director)
Mr Garry Connell was appointed as a non-executive director on 9 July 1999.
Mr Connell is a successful businessman in the Kalgoorlie\Goldfields region who until recently owned the Kalgoorlie FuelCompany. Mr Connell established the company as one of BP Australia Ltd’s largest independent fuel distributors in Australiasupplying many of the largest mining and industrial companies in the region.
He resides in Kalgoorlie and is aged 48.
Ronald Joseph Goguen (Non-executive Director)
Mr Ron Goguen was appointed as a non-executive director on 9 June 2000.
Mr Goguen has over 20 years experience in the international minerals exploration industry and was the President and ChiefExecutive Officer of Major Drilling Group International Inc, a Canadian company, until August 2000. Mr Goguen remains as jointchairman of the company.
He resides in Moncton, Canada and is aged 55.
PRINCIPAL ACTIVITIES
The principal continuing activities of the consolidated entity during the year consisted of:
(a) provision of drilling and blasting services in open pit mines;(b) exploration drilling services;(c) earthmoving services; and(d) provision of mining supplies and logistics services.
During the year the Company acquired a 50% interest in a company whose activities consisted of the provision of horizontaldrilling, trenching, cable and pipeline rollout services to the telecommunications industry.
DIRECTORS’ REPORTAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES
20
AUSDRILL LIMITED ANNUAL REPORT 2000
CONSOLIDATED RESULTS
The consolidated (loss)/profit for the year attributable to the members of Ausdrill Limited was:2000 1999
$’000 $’000
Operating (loss)/profit for the year after income tax (9,945) 893
EARNINGS PER SHARE
2000 1999cents cents
Basic earnings per share (12.94) 1.26
REVIEW OF OPERATIONS
A separate detailed review of group operations during the financial year is included in this Annual Report and details on thesegment results are set out in note 31 to the financial statements.
DIVIDENDS – AUSDRILL LIMITED
Details of dividends in respect of the current year are as follows:2000 1999
$’000 $’000
No interim ordinary dividend (1999: 1.0 cent per fully paid share) – 761No final ordinary dividend (1999: 1.5 cents per fully paid share) – 1,148
Total dividends in respect of the year – 1,909
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant changes in the state of affairs of the consolidated entity that occurred during the financial year under review were:
Abnormal items
Consolidated operating (loss)/profit after income tax includes the following abnormal items:
2000 1999$’000 $’000
Gross Tax Net Gross Tax NetExpenses:Contract losses 1,000 (360) 640 – – –Provision for doubtful debts 1,129 (406) 723 – – –Closure costs 281 (101) 180 – – –Consumables and spare parts writedowns 1,278 (460) 818 – – –Property, plant and equipment writedowns 3,149 (1,134) 2,015 – – –Loan to associate/controlled entity written off – – – 3,164 (1,140) 2,024
6,837 (2,461) 4,376 3,164 (1,140) 2,024
Abnormal tax expenseWrite off of non-recoverable tax losses andprepaid company tax arising from therestructuring of the consolidated entity’s,South and Central American operations(1999: West African operations) – 2,411 2,411 – 1,519 1,519
Net adjustment to deferred income taxliabilities and assets to reflectthe decrease in company tax rate to 34%/30%. – (300) (300) – – –
Abnormal tax expense – 2,111 2,111 – 1,519 1,519
Total abnormal items after tax 6,837 (350) 6,487 3,164 379 3,543
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Entitlement IssueOn 8 August 2000, the company announced a non-renounceable Entitlement Issue of one 7% Converting Preference Share for every two Ordinary Shares held at an issue price of 20c per Converting Preference Share. A Prospectus in relation to theEntitlement Issue was lodged with the Australian Securities and Investments Commission and the Australian Stock Exchange on 11 August 2000.
DIRECTORS’ REPORTAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES
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AUSDRILL LIMITED ANNUAL REPORT 2000
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR (continued)
The issue of 38,551,685 Converting Preference Shares raised approximately $7.2m, after allowing for the cost of the issue,and will be applied as follows:
$’000(a) Repay loans from Director Related Entities lent to fund the acquisition of the business of Ace Co Pty Ltd
on 6 July 2000. 1,700(b) Provide working capital for the Ace business to ensure the business continues to operate effectively. 500(c) Provide additional equity funds to contribute for expected new contracts for African Mining Services. 4,000(d) General working capital requirements. 1,000
7,200
The entitlement issue was fully underwritten.
Acquisition of Ace Co BusinessOn 3 July 2000, the company exercised an option to acquire the assets and business of Ace Co Pty Ltd for $1.7m, plus theassignment of the debt associated with the assets acquired. The acquisition was settled on 6 July 2000.
Other than the Entitlement Issue and the acquisition of the business of Ace Co, there is at the date of this report no matter or circumstance which has arisen since 30 June 2000 that has significantly affected or may significantly affect:
(a) the operations of the consolidated entity in future financial years; or(b) the results of those operations in future financial years; or(c) the state of affairs of the consolidated entity in future financial years.
LIKELY DEVELOPMENTS
Some comments on the likely developments in the operations of the consolidated entity are included in this Annual Report and in the prospectus lodged with the Australian Securities and Investment Commission on 11 August 2000.
Further detailed information on likely developments in the operations of the consolidated entity and the expected results ofoperations have not been included in this report because the directors believe it would be likely to result in unreasonablecommercial prejudice to the consolidated entity.
ENVIRONMENTAL REGULATION
The consolidated entity is not subject to any significant environmental regulations but is committed to reducing the impact of its operations on the environment. Our clients have obligations under environmental regulations and are reliant upon theconsolidated entity to ensure its operations comply with those regulations.
DIRECTORS’ INTERESTS
At the date of this report, the interests of each director in the shares and options of the parent entity are as follows:
Director Ordinary Shares Options over Un-issuedOrdinary Shares
T E O’Connor 181,396 300,000R J Taylor 66,878 800,000R G Sayers 12,405,366 340,000J E Askew 75,500 300,000R S Leatham 10,000 190,000G P Connell 7,500,000 300,000R J Goguen – –
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the company’s directors (including meetings of committees of directors)held during the year ended 30 June 2000, and the number of meetings attended by each director.
Full Meetings Meetings of Committeesof Directors Audit Committee Remuneration Committee
Number of meetings held 19 2 2Number of meetings attended by:T E O’Connor 14 2 1R G Sayers 12 1 2J E Askew 9 * 2R J Taylor 19 2 2R S Leatham 19 * *G P Connell (appointed 9 July 1999 –
18 meetings held while a director) 10 * *R J Goguen (appointed 9 June 2000 –
1 meeting held while a director) 1 * *
* Not a member of the relevant committee.
DIRECTORS’ REPORTAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES
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AUSDRILL LIMITED ANNUAL REPORT 2000
RETIREMENT OF DIRECTORS
Mr R J Goguen was appointed as a director on 9 June 2000. In accordance with the constitution of the Company,Mr R J Goguen retires as a director at the Annual General Meeting and being eligible offers himself for re-election.
Mr T E O’Connor and Mr R S Leatham retire by rotation. Being eligible, Mr T E O’Connor offers himself for re-election.Mr R S Leatham retires as a Director on 10 November 2000 and is not offering himself for re-election.
DIRECTORS’ AND EXECUTIVES’ EMOLUMENTS
The remuneration committee, consisting of three non-executive directors, advises the Board on remuneration policies andpractices generally, and makes specific recommendations on remuneration packages and other terms of employment forexecutive directors, other senior executives and non-executive directors.
Executive remuneration and other terms of employment are reviewed annually by the committee having regard to performanceagainst goals set at the start of the year, relevant comparative information and independent expert advice. As well as a basesalary, remuneration packages include superannuation and fringe benefits. Executives are also eligible to participate in theAusdrill Limited Employee Option Plan.
Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidatedentity’s operations.
Remuneration of non-executive directors is determined by the Board within the maximum amount approved by the shareholdersfrom time to time. Non-executive directors are also entitled to superannuation.
Details of the nature and amount of each element of the emoluments of each director of Ausdrill Limited and each of the 5officers of the company and the consolidated entity receiving the highest emoluments are set out in the following tables.
NON-EXECUTIVE DIRECTORS OF AUSDRILL LIMITED
Name Base Fee Superannuation Other Benefits Options TOTAL
T E O’Connor – Chairman 60,000 4,200 – 6,000 70,200J E Askew 30,000 2,100 – 6,000 38,100R G Sayers – 1,400 20,000 6,000 27,400G P Connell 30,000 2,100 – 6,000 38,100R J Goguen – – – – –
120,000 9,800 20,000 24,000 173,800
The company has a contract with a director-related entity for the provision of consultancy services for Mr R G Sayers.Mr R J Goguen was appointed as a non-executive director of the company on 9 June 2000.
EXECUTIVE DIRECTORS OF AUSDRILL LIMITED
Name Base Salary Motor Vehicle Superannuation Options Other Benefits TOTAL
R J Taylor – Managing Director 225,938 23,226 15,836 8,000 21,564 294,564R S Leatham – Group General
Manager Operations 150,075 22,076 36,082 6,000 272 214,505
376,013 45,302 51,918 14,000 21,836 509,069
The amounts disclosed above and on the next page for remuneration relating to options are the assessed fair values of optionsat the date they were granted to directors and other executives during the year ended 30 June 2000. Fair values have beenassessed using the Black-Scholes option pricing model. Factors taken into account by the Black-Scholes option pricing modelinclude the exercise price, the term of the option, the current price and expected price volatility of the underlying share, theexpected dividend yield and the risk-free interest rate for the term of the option.
Further information on the options, including the numbers of options granted to directors and other executives, is set out in thefollowing sections of this report.
OTHER EXECUTIVES OF AUSDRILL LIMITED
Name Base Salary Motor Vehicle Superannuation Options Other Benefits TOTAL
B D Mann – General &Exploration Manager Kalgoorlie 149,110 26,260 10,671 – 12,447 198,488
K G Gray – ChiefFinancial Manager 101,073 19,349 9,800 6,000 49,523 185,745
L J Steel – Drill and BlastManager Kalgoorlie 146,912 7,544 14,415 6,000 4,716 179,587
J Guild – Manager Queensland 110,000 6,982 7,700 – 22,945 147,627A R Jenaway – Human
Resources Manager 90,779 35,421 18,000 – 144,200
TOTAL 597,874 95,556 60,586 12,000 89,631 855,647
DIRECTORS’ REPORTAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES
23
AUSDRILL LIMITED ANNUAL REPORT 2000
OTHER EXECUTIVES OF THE CONSOLIDATED ENTITY
Name Salary Motor Vehicle Superannuation Options Other Benefits TOTAL
N G Shakesby – GeneralManager Peru 195,596 10,000 – – 54,496 260,092
B D Mann – General & ExplorationManager Kalgoorlie 149,110 26,260 10,671 – 12,447 198,488
P D Wright – GeneralManager Chile 146,920 9,562 6,392 – 24,895 187,769
K G Gray – Chief FinancialManager 101,073 19,349 9,800 6,000 49,523 185,745
L J Steel – Drill and BlastManager Kalgoorlie 146,912 7,544 14,415 6,000 4,716 179,587
TOTAL 739,611 72,715 41,278 12,000 146,077 1,011,681
“Other Executives” are officers who are involved in, concerned in, or who take part in, the management of the affairs of AusdrillLimited and/or controlled entities.
SHARE OPTIONS GRANTED TO DIRECTORS AND THE MOST HIGHLY REMUNERATED OFFICERS
Options over unissued shares of the Company granted during or since the end of the financial year to any of the directors or the5 most highly remunerated officers of the company and consolidated entity as part of their remuneration were as follows:
Options GrantedDirectorsT E O’Connor, Chairman 300,000R J Taylor, Managing Director 200,000R S Leatham, Executive 150,000R G Sayers, Non-executive 300,000J E Askew, Non-executive 300,000G P Connell, Non-executive 300,000
Other Executives of Ausdrill LimitedK G Gray, Chief Financial Manager 100,000L J Steel, Drill and Blast Manager Kalgoorlie 100,000
Other Executives of the Consolidated EntityK G Gray, Chief Financial Manager 100,000L J Steel, Drill and Blast Manager Kalgoorlie 100,000
The options granted to the Directors were approved at the Annual General Meeting of the Company held on 9 November 1999.
The options issued to other executives were granted under the Ausdrill Limited Employee Option Plan on 9 November 1999.
SHARE OPTIONS
Details on share options are set out in note 23(b) to the financial statements.
ROUNDING OF AMOUNTS TO NEAREST THOUSAND DOLLARS
The Company is a kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission,relating to the “rounding off” of amounts in the directors’ report and financial statements. Amounts in the directors’ report andfinancial statements have been rounded off to the nearest thousand dollars in accordance with that Class Order.
INSURANCE OF OFFICERS
During the year, the company has paid a premium in respect of insuring the directors and officers of the company and itscontrolled entities.
The insurance contract prohibits disclosure of the premium or the nature of liabilities insured against under the policy.
AUDITORS
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Law.
This report is made in accordance with a resolution of the directors:
R J TAYLORMANAGING DIRECTOR
Dated this 29th day of September 2000.
DIRECTORS’ REPORTAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES
24
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999Notes $’000 $’000 $’000 $’000
Revenue from operating activities 2 111,971 146,246 59,375 80,436Revenue from outside operating activities 2 9,610 32,652 5,919 15,921
Total Revenue 121,581 178,898 65,294 96,357
Operating (loss) profit before abnormal items& income tax 3(a) (6,789) 5,764 1,090 9,647Abnormal items before income tax 3(b) (6,837) (3,164) (2,438) (11,212)
Operating (loss) profit before income tax (13,626) 2,600 (1,348) (1,565)Income tax (benefit) expense 4(a) (5,794) 188 (348) 169Abnormal income tax expense (benefit) 4(b) 2,111 1,519 (441) –
Operating (loss) profit after income tax (9,943) 893 (559) (1,734)Operating profit attributed to outside equity interest (2) – – –
Operating (loss) profit attributed to members ofAusdrill Limited (9,945) 893 (559) (1,734)Retained profits at the beginning of the financial year 19,264 20,280 8,652 12,295
Total available for appropriation 9,319 21,173 8,093 10,561Dividends paid or provided for 5 – 1,909 – 1,909
Retained profits at the end of the financial year 9,319 19,264 8,093 8,652
Earnings per share 38
The above profit and loss statements should be read in conjunction with the accompanying notes.
PROFIT AND LOSS STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES - FOR THE YEAR ENDED 30 JUNE 2000
25
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999Notes $’000 $’000 $’000 $’000
CURRENT ASSETSCash 6 6,987 5,486 3,503 1,504Receivables 7 31,502 31,503 9,808 13,107Inventories 8 10,473 13,429 6,444 8,096Other 9 32,451 40,968 58 73
Total Current Assets 81,413 91,386 19,813 22,780
NON-CURRENT ASSETSReceivables 10 27,568 27,841 48,457 44,339Investments 11 1,810 3,300 6,382 3,273Property, plant and equipment 12 47,730 52,958 35,805 36,715Intangibles 13 5,838 6,318 405 465Other 14 32,363 2,233 18 24
Total Non-Current Assets 115,309 92,650 91,067 84,816
TOTAL ASSETS 196,722 184,036 110,880 107,596
CURRENT LIABILITIESAccounts payable 15 18,780 19,420 8,022 7,107Borrowings 16 22,357 17,150 13,915 9,067Provisions 17 2,522 4,085 1,532 2,556Other 18 34,864 39,021 – –
Total Current Liabilities 78,523 79,676 23,469 18,730
NON-CURRENT LIABILITIESAccounts payable 19 1,106 1,299 3,772 1,971Borrowings 20 23,301 28,687 21,052 22,915Provisions 21 4,003 5,818 3,576 4,671Other 22 30,890 – – –
Total Non-Current Liabilities 59,300 35,804 28,400 29,557
TOTAL LIABILITIES 137,823 115,480 51,869 48,287
NET ASSETS 58,899 68,556 59,011 59,309
SHAREHOLDERS’ EQUITYParent Entity Interest
Share capital 23 50,918 50,657 50,918 50,657Reserves 24 (1,342) (1,365) – –Retained profits 9,319 19,264 8,093 8,652
Total Parent Entity Interest 58,895 68,556 59,011 59,309
Outside equity interest in controlled entities 25 4 – – –
TOTAL EQUITY 26 58,899 68,556 59,011 59,309
Commitments for expenditure 27Contingent liabilities 28
The above balance sheets should be read in conjunction with the accompanying notes.
BALANCE SHEETSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES - AS AT 30 JUNE 2000
26
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999Notes $’000 $’000 $’000 $’000
Cash flows from operating activitiesReceipts from customers 118,349 151,809 62,264 81,741Payments to suppliers and employees (103,617) (129,826) (50,239) (70,490)
14,732 21,983 12,025 11,251Dividends received from associates 801 3,067 – –Interest received 544 877 55 88Interest and other costs of finance paid (3,512) (3,502) (2,018) (2,410)Income taxes paid (1,735) (1,628) (87) (354)
Net cash inflow from operating activities 39(a) 10,830 20,797 9,975 8,575
Cash flows from investing activitiesPayments for property, plant and equipment (4,511) (2,800) (1,929) (340)Proceeds from sale of property, plant and equipment 3,731 1,941 2,589 1,655Loans to associated/controlled entities (626) (8,640) (1,244) (15,415)Repayment of loans by associated/controlled entities 2,919 1,093 – 11,075Payment for purchase of equity investments (1,000) (142) (1,000) –
Net cash inflow/(outflow) from investing activities 513 (8,548) (1,584) (3,025)
Cash flows from financing activitiesProceeds from issue of shares – 3,262 – 3,262Proceeds from secured borrowings 3,600 3,131 2,800 2,000Repayment of secured borrowings (1,528) (1,533) (1,015) (1,261)Repayment of hire purchase and lease liabilities (11,305) (13,452) (7,310) (8,292)Dividends paid (887) (1,288) (887) (1,288)
Net cash (outflow) from financing activities (10,120) (9,880) (6,412) (5,579)
Net increase (decrease) in cash held 1,223 2,369 1,979 (29)
Cash at the beginning of the financial year 2,758 (58) 1,504 1,532Effect of exchange rate changes on cash 104 447 – 1
Cash at the end of the financial year 6 4,085 2,758 3,483 1,504
Financing arrangements 20(a)Non-cash financing and investing activities 39(b)
The above statements of cash flows should be read in conjunction with the accompanying notes.
STATEMENTS OF CASH FLOWSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES - FOR THE YEAR ENDED 30 JUNE 2000
27
AUSDRILL LIMITED ANNUAL REPORT 2000
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This general purpose financial report has been prepared in accordance with relevant Accounting Standards, otherauthoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views andthe Corporations Law.
It is prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation.The accounting policies adopted are consistent with those of the previous year. Comparative information is reclassifiedwhere appropriate to enhance comparability.
(a) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Ausdrill Limited(“parent entity”) as at 30 June 2000 and the results of all controlled entities for the year then ended. Ausdrill Limited andits controlled entities together are referred to in this financial report as the consolidated entity. The effects of alltransactions between entities in the consolidated entity are eliminated in full.
Where control of an entity is obtained during a financial year, its results are included in the consolidated profit and lossstatement from the date on which control commences. Where control of an entity ceases during a financial year its resultsare included for the part of the year during which control exists.
Investments in associates are accounted for in the consolidated financial statements using the equity method. Under thismethod, the consolidated entity’s share of the after tax profits or losses of associates is recognised as revenue in theconsolidated profit and loss statement, and its share of movements in reserves is recognised in consolidated reserves.Associates are those entities over which the consolidated entity exercises significant influence, but not control.
(b) Income tax
Tax effect accounting procedures are followed whereby the income tax expense in the profit and loss statement ismatched with the accounting profit after allowing for permanent differences. The future income tax benefit relating to tax losses is not carried forward as an asset unless the benefit can be regarded as being virtually certain of realisation.Income tax on net cumulative timing differences is set aside to the deferred income tax or the future income tax benefitaccounts at the rates which are expected to apply when those timing differences reverse. The current rates have beenused for this purpose.
(c) Depreciation
Depreciation is calculated on a straight line or diminishing value basis so as to write off the cost of each item of property,plant and equipment over its expected useful life to the consolidated entity. Estimates of the remaining useful lives aremade on a regular basis for all assets with annual reassessment for major items.
The expected useful lives are as follows:
Buildings 25 yearsPlant and Equipment 2 – 10 yearsE-commerce system 5 years
(d) Intangible assets and expenditure carried forward
Goodwill
The excess of the fair value of the cost of acquisition plus incidental expenses over the fair value of the identifiable netassets acquired, including any liability for restructuring costs, is brought to account as goodwill and amortised on astraight line basis over the period of time (not exceeding twenty years) during which the benefits are expected to arise.The carrying value of intangible assets is reviewed on a regular basis.
(e) Leases
Finance leases, which effectively transfer to the entity substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the present value of the minimum lease payments, disclosed as leased plant andequipment and amortised on a straight line or diminishing value basis over the period the entity is expected to benefitfrom the use of the leased assets.
Operating lease payments, where the lessors effectively retain substantially all the risk and benefits of ownership of theleased items, are included in the determination of the operating profit in the period in which they are incurred.
(f) Employee entitlements
(i) Wages and salaries and annual leave
Liabilities for wages and salaries and annual leave are recognised and are measured as the amount unpaid at thereporting date at current pay rates in respect of employees’ services up to that date.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
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AUSDRILL LIMITED ANNUAL REPORT 2000
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Employee entitlements (continued)
(ii) Long service leave
A liability for long service leave is recognised and measured based on the estimated future cash outflow resultingfrom employees’ services up to the reporting date. Consideration is given to expected future wage and salary levels,experience of employee departures and periods of service. Expected future payments are discounted using interestrates on national government guaranteed securities with terms to maturity that match, as closely as possible, theestimated future cash outflows.
(g) Inventories
Inventories are valued at the lower of cost and net realisable value. Costs are assigned generally on the weighted averagemethod.
(h) Acquisition of assets
The cost method of accounting is used for all acquisitions of assets regardless of whether shares or other assets areacquired. Cost is determined as the fair value of the assets given up, shares issued or liabilities undertaken at the date ofacquisition plus costs incidental to the acquisition. Where goodwill arises it is brought to account on the basis describedin note 1(d).
(i) Maintenance and repairs
Maintenance, repair costs and minor renewals are charged as expenses as incurred. Significant costs incurred inoverhauling plant and equipment are capitalised and depreciated over the remaining useful life of the asset or thecomponent.
(j) Cash
For the purposes of the statements of cash flows, cash includes deposits at call which are readily convertible to cash onhand and are subject to insignificant risk of changes in value, net of outstanding bank overdrafts.
(k) Recoverable amounts of non-current assets
Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is revalued to itsrecoverable amount. To the extent that a revaluation decrement reverses a revaluation increment previously credited to, and still included in the balance of, the asset revaluation reserve, the decrement is debited directly to that reserve.Otherwise the decrement is recognised as an expense in the profit and loss statement. The recoverable amount of a non-current asset is the net amount expected to be recovered through the net cash inflows arising from its continued use and subsequent disposal. The expected net cash flows included in determining recoverable amounts have not beendiscounted to their present values.
(l) Foreign currency translation
(i) Transactions
Foreign currency transactions are initially translated into Australian currency at the rate of exchange at the date ofthe transaction. At balance date amounts payable and receivable in foreign currencies are translated to Australiancurrency at rates of exchange current at that date. Resulting exchange differences are brought to account indetermining the profit and loss for the year.
(ii) Foreign controlled entities
The foreign controlled entities Perforaciones Ausdrill Chile Ltda, Ausdrill (Peru) S.A. and Perforaciones Ausdrill de Honduras S de RL are self sustaining. Their assets and liabilities are translated into Australian currency at rates of exchange current at balance date, while their revenues and expenses are translated at the average of rates ruling during the year. Exchange differences arising on translation are taken directly to the foreign currencytranslation reserve.
The foreign controlled entities West African Mining Services Limited, Mining Technology and Supplies Limited,Ausdrill Burkina S.A.R.L., Logistics Direct Limited and Ausdrill (NZ) Limited are integrated with the consolidatedentity. Their financial statements are translated using the temporal method and resulting exchange differencesarising from translation of monetary items are brought to account in the profit and loss account in the financial yearin which the gain or loss occurs.
(iii) General commitments
Exchange gains or losses on hedge transactions are brought to account in the profit and loss account in thefinancial year in which the exchange rates change.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
29
AUSDRILL LIMITED ANNUAL REPORT 2000
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(m) Receivables and revenue recognition
Trade debtorsContract services – trade debtors are recognised monthly on the basis of units of production at agreed contract rates.
Mining supplies – a sale is recorded when goods have been despatched to a customer pursuant to a sales order and theassociated risks have passed to a carrier or customer.
All trade debtors are recognised at the amounts receivable as they are due for settlement no more than 30 days from thedate of recognition.
Collectibility of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off.A provision for doubtful debts is raised where some doubt as to collection exists.
(n) Investments
Interests in listed and unlisted securities, other than controlled and associated entities in the consolidated financialstatements, are brought to account at cost and dividend income is recognised in the profit and loss statement when receivable.
Controlled entities and associates are accounted for in the consolidated financial statements as set out in note 1(a).
(o) Trade and other creditors
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of thefinancial year and which are unpaid. The amounts are unsecured and are usually paid within 45 to 60 days of recognition.
(p) Borrowings
Loans are carried at their principal amounts which represent the present value of future cash flows associated withservicing the debt. Interest is accrued over the period it becomes due and is recorded as part of other creditors.
(q) Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred.
(r) Derivative financial instruments
Controlled entities derive income in US dollars. The consolidated entity enters into forward foreign exchange contracts to sell US dollars in order to protect against exchange rate movements. The accounting for forward foreign exchangecontracts is in accordance with note 1(l)(iii).
(s) Earnings per share
(i) Basic earnings per share
Basic earnings per share is determined by dividing the operating profit after income tax and preference sharedividends attributable to members of Ausdrill Limited by the weighted average number of ordinary sharesoutstanding 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 by taking intoaccount amounts unpaid on ordinary shares and any reduction in earnings per share that will probably arise fromthe exercise of options outstanding during the financial year.
(t) Deferred settlement of cash consideration
Where any part of the cash consideration receivable or payable on the disposal or acquisition of an asset is deferred,the fair value of the consideration is determined by discounting the amount receivable/payable to its present value. Thediscount rate used is based on the market rate at which borrowings can be made under comparable terms and conditions.
(u) Year 2000 software modification costs
Costs relating to the modification of computer software for Year 2000 compatibility were charged as expenses whenincurred.
(v) Goods and services tax systems changes
Costs incurred to update existing systems or to design, develop and implement new systems to deal with the GST arecharged as expenses as incurred, except where they result in an enhancement of future economic benefits and arerecognised as an asset.
(w) Rounding of amounts
The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and InvestmentsCommission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have beenrounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
30
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999$’000 $’000 $’000 $’000
2 OPERATING REVENUE
Revenue from operating activitiesSales revenue 111,971 146,246 59,375 80,436
Revenue from outside operating activitiesShare of net profit of associates 2,201 4,343 381 –Proceeds from sale of non-current assets 2,999 12,878 2,589 3,439Interest received/receivable
Related parties 1,926 1,783 2,803 2,216Others 236 326 55 61
Dividends from controlled entities – – – 7,890Other 2,248 13,322 91 2,315
9,610 32,652 5,919 15,921
Total Revenue 121,581 178,898 65,294 96,357
3 OPERATING (LOSS)/PROFIT
(a) Net gains and expensesOperating (loss)/profit before income tax includes the following specific net gains and expenses:
Net gains:Profit on sale of non-current assets 316 2,474 302 227
Expenses:Depreciation
Buildings 211 270 175 131Plant and equipment 4,545 4,783 2,770 3,228
Total depreciation 4,756 5,053 2,945 3,359
AmortisationPlant and equipment under finance leases 7,120 8,830 4,493 5,154Goodwill 480 480 60 60
Total amortisation 7,600 9,310 4,553 5,214
Borrowing costsFinance charges relating to finance leases 647 884 – –Hire purchase interest 1,270 1,836 1,263 1,715Interest paid/payable – other 1,596 782 755 695Exchange losses on foreign currency borrowings 659 356 – –
Borrowing costs expensed 4,172 3,858 2,018 2,410
Bad and doubtful debts written off 1,339 1,024 327 428
Foreign exchange gains and lossesNet losses/(gains) 2,746 (1,373) 158 186Exchange losses on foreign currency borrowings 659 356 – –
Net foreign exchange losses/(gains) 3,405 (1,017) 158 186
Other provisionsEmployee entitlements (38) (78) (85) (83)
Rental expense relating to operating leases 723 1,345 497 1,006
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
31
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999$’000 $’000 $’000 $’000
3 OPERATING (LOSS)/PROFIT (continued)
(b) Abnormal itemsOperating (loss)/profit after income tax includes thefollowing abnormal items:
Expenses:Loan to associate/controlled entity written off – (3,164) – (1,912)Applicable income tax benefit – 1,140 – 688
– (2,024) – (1,224)Contract losses (1,000) – – –Applicable income tax benefit 360 – – –
(640) – – –Provision for doubtful debts (1,129) – – –Applicable income tax benefit 406 – – –
(723) – – –Closure costs (281) – – –Applicable income tax benefit 101 – – –
(180) – – –Consumable and spare parts writedowns (1,278) – (832) –Applicable income tax benefit 460 – 300 –
(818) – (532) –Property, plant and equipment writedowns (3,149) – (1,606) –Applicable income tax benefit 1,134 – 578 –
(2,015) – (1,028) –Write off of investment in controlled entity – – – (9,300)Applicable income tax – – – –
– – – (9,300)Abnormal items before tax (6,837) (3,164) (2,438) (11,212)Applicable income tax benefit 2,461 1,140 878 688
Total abnormal items after tax (4,376) (2,024) (1,560) (10,524)
4 INCOME TAX
(a) The aggregate amount of income tax attributable to thefinancial year differs from the amount calculated on theoperating (loss)/profit.
The differences are reconciled as follows:
Operating (loss)/profit before income tax (13,626) 2,600 (1,348) (1,565)
Prima facie tax (refundable) payable @ 36% (4,905) 936 (485) (563)Tax effect of permanent differences:Non-deductible amortisation and depreciation 193 195 41 45Net capital gain 27 160 – –Share of net profits of associates (792) (1,562) (137) –Rebateable dividends – – – (2,842)Capital losses – – – 3,385Current year tax losses not carried forward – 293 – –Tax losses and credits transferred for nil consideration – – – 53Other (141) 157 78 43
Prima facie tax adjusted for permanent differences (5,618) 179 (503) 121(Over) under provision in previous year (176) 9 155 48
Income tax (benefit) expense attributable to operating profit (5,794) 188 (348) 169
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
32
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999$’000 $’000 $’000 $’000
4 INCOME TAX (continued)
(b) Abnormal tax expense/(benefit):Write off of non-recoverable tax losses and prepaid companytax arising from the restructuring of the consolidated entity’s,South and Central American operations(1999: West African operations) 2,411 1,519 – –
Net adjustment to deferred income tax liabilities and assetsto reflect the decrease in the company tax rate to 34%/30% (300) – (441) –
2,111 1,519 (441) –
Legislation reducing the company tax rate from 36% to 34% in respect of the 2000-2001 income tax year and then to 30% from the 2001-2002 income tax year was announced on 21 September 1999 and received Royal Assent on 10 December 1999. As a consequence, deferred tax balances which are expected to reverse in the 2000-2001 or a later income tax year have been remeasured using the appropriate new rates, depending on the timing of their reversal.
Future income tax benefits attributable to tax losses recognised as a reduction of the provision for deferred income tax are disclosed in note 21.
Parent Entity
2000 1999$’000 $’000
5 DIVIDENDS
OrdinaryInterim dividend paid
Franked @ 36% – 761Unfranked – –
Final dividend providedFranked @ 36% – 861Unfranked – 287
– 1,909
Dividends actually paid or satisfied by the issue ofshares under the dividend reinvestment plan duringthe years ended 30 June 2000 and 1999 were as follows:
Paid in cash 887 1,288Satisfied by issue of shares 261 164
1,148 1,452
Franking credits available for the subsequent financial year 678 238
The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for:
(a) franking credits or debits that will arise from the payment of income tax payable or refundable as at theend of the year;
(b) franking debits that will arise from the payment of dividends declared as at the end of the year; and
(c) franking credits that may be prevented from being distributed in the subsequent year.
The balances of the franking accounts disclosed above are based on a tax rate of 36%. Legislation dealing with theimplications for franking accounts of the company tax rate change from 36% to 34% for the 2000-2001 income tax yearwas passed in Parliament on 29 June 2000. The legislation requires companies to convert their existing Class C frankingaccount balances to an underlying tax rate of 34% on 1 July 2000. The balances of the franking accounts will increaseaccordingly and all franking debits and credits arising after 1 July 2000 (including those relating to dividends) will beentered into the converted franking account using the new rate of 34%.
Upon conversion of the franking account balance on 1 July 2000, franking credits available for subsequent financial years,based on an underlying tax rate of 34%, will increase to $740,000.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
33
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999Notes $’000 $’000 $’000 $’000
6 CURRENT ASSETS – CASH
Cash at bank and on hand 6,987 5,486 3,503 1,504
The above figures are reconciled to cash atthe end of the financial year as shown in thestatements of cash flows as follows:
Balances as above 6,987 5,486 3,503 1,504Less: Bank overdraft 16 2,902 2,728 20 –
Balances per statements of cash flows 4,085 2,758 3,483 1,504
7 CURRENT ASSETS – RECEIVABLES
Trade debtors 26,891 26,657 9,122 9,896Less: Provision for doubtful debts 1,850 477 442 115
25,041 26,180 8,680 9,781
Loans to associated entities 36 4,007 – – –Loans to controlled entities 36 – – 14 23Deferred settlement consideration – 1,874 – –Income tax refund due 692 – 57 234Other debtors 1,762 3,449 1,057 3,069
31,502 31,503 9,808 13,107
Other DebtorsThese amounts generally relate to operatingexpense rebates.
8 CURRENT ASSETS – INVENTORIES
Consumables and store items – at cost 10,473 13,429 6,444 8,096
9 CURRENT ASSETS – OTHER
Prepayments 531 1,126 52 60Foreign exchange contracts receivable 40 31,743 39,763 – –Other 177 79 6 13
32,451 40,968 58 73
10 NON-CURRENT ASSETS – RECEIVABLES
Loans to controlled entities 36 – – 47,957 44,339Loans to associated entities 36 27,568 27,789 500 –Other debtors – 52 – –
27,568 27,841 48,457 44,339
11 NON-CURRENT ASSETS – INVESTMENTS
Shares in controlled entities– at cost 34 – – 5,001 3,273– shares in associated entities 35 1,810 3,300 1,381 –
1,810 3,300 6,382 3,273
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
34
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999$’000 $’000 $’000 $’000
12 NON-CURRENT ASSETS – PROPERTY, PLANT & EQUIPMENT
Land and buildings – at cost 4,816 4,889 4,502 4,583Less: Accumulated depreciation 841 517 710 424
3,975 4,372 3,792 4,159
Plant and equipment – at cost 34,763 30,515 23,574 23,292Less: Accumulated depreciation 22,593 16,745 14,222 13,512
12,170 13,770 9,352 9,780
Plant and equipment under finance lease – at cost 54,465 56,339 38,253 37,190Less: Accumulated amortisation 23,714 21,523 15,592 14,414
30,751 34,816 22,661 22,776
E-commerce system – at cost 834 – – –
834 – – –
Total net book value 47,730 52,958 35,805 36,715
Land and buildings are revalued at three yearly intervals.Re-valuations reflect an independent assessment of thefair market value of land and buildings based on existing use.
The most recent valuations of some of the land and buildings are:Independent valuation – December 1997 (Note 1) 2,100 2,100 2,100 2,100Independent valuation – June 1998 1,400 1,400 – –Independent valuation – June 1999 1,470 1,470 1,470 1,470Independent valuation – June 2000 315 – 315 –
5,285 4,970 3,885 3,570
The independent valuations, which have not been recognisedin the financial statements, were carried out by:December 1997 – Christie Whyte & MooreJune 1998 – René Piantini Castillo in ChileJune 1999 – Mr R C Lunt AVLEJune 2000 – Mr R C Lunt AVLE
Note 1: Subsequent to the end of the financial year theCompany has completed a sale and leaseback of thisproperty. The net proceeds of $1.94m have repaid partof the secured bank loans.
13 NON-CURRENT ASSETS – INTANGIBLES
Goodwill 9,571 9,571 1,200 1,200Less: Accumulated amortisation 3,733 3,253 795 735
5,838 6,318 405 465
14 NON-CURRENT ASSETS – OTHER
Foreign exchange contracts receivable 27,984 – – –Future income tax benefit 3,645 1,020 – –Security deposit 550 489 7 2Other 184 724 11 22
32,363 2,233 18 24
The balance of the future income tax benefit aboveattributable to income tax losses is $366,138(1999: $291,100).
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
35
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999Notes $’000 $’000 $’000 $’000
15 CURRENT LIABILITIES – ACCOUNTS PAYABLE
Trade creditors 14,916 15,018 6,283 5,195Other creditors and accruals 3,864 4,402 1,739 1,912
18,780 19,420 8,022 7,107
16 CURRENT LIABILITIES – BORROWINGS
Bank overdraft 6 2,902 2,728 20 –Secured bank loans 8,125 2,472 6,642 1,558Lease liabilities 27 4,044 4,373 – –Hire purchase liabilities 27 7,286 7,577 7,253 7,509
22,357 17,150 13,915 9,067
Details relating to the secured borrowings are setout in note 20.
17 CURRENT LIABILITIES – PROVISIONS
Dividends – 1,148 – 1,148Employee entitlements 37 2,135 2,140 1,464 1,316Income tax – 319 – –Other 387 478 68 92
2,522 4,085 1,532 2,556
18 CURRENT LIABILITIES – OTHER
Foreign exchange contracts payable 40 34,864 39,021 – –
19 NON-CURRENT LIABILITIES – ACCOUNTS PAYABLE
Other creditors 1,106 1,299 – –Loans from controlled entities 36 – – 3,772 1,971
1,106 1,299 3,772 1,971
20 NON-CURRENT LIABILITIES – BORROWINGS
Secured bank loans 6,173 9,755 6,000 9,300Lease liabilities 27 2,024 5,282 – –Hire purchase liabilities 27 15,104 13,650 15,052 13,615
23,301 28,687 21,052 22,915
(a) Financing arrangementsAccess was available at balance date to thefollowing lines of credit:
Bank overdraft 4,245 4,125 300 300Commercial bill facility – 6,000 – 6,000Secured term loan 14,656 7,727 13,000 6,357Letter of credit facility/bank guarantee 1,323 1,538 67 300Revolving leasing/hire purchase limit 72,259 87,914 66,106 74,585Tape negotiation authority 740 740 740 740
93,223 108,044 80,213 88,282
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
36
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999Notes $’000 $’000 $’000 $’000
20 NON-CURRENT LIABILITIES – BORROWINGS (continued)
(a) Financing arrangements (continued)Used at Balance Date:
Bank overdraft 2,902 2,728 20 –Commercial bill facility – 4,500 – 4,500Secured term loan 14,298 7,727 12,642 6,357Letter of credit facility/bank guarantee 528 133 66 133Revolving leasing/hire purchase limit 28,458 30,883 22,305 21,124Tape negotiation authority – – – –
46,186 45,971 35,033 32,114
Unused at Balance Date:Bank overdraft 1,343 1,397 280 300Commercial bill facility – 1,500 – 1,500Secured term loan 358 – 358 –Letter of credit facility/bank guarantee 795 1,405 1 167Revolving leasing/hire purchase limit 43,801 57,031 43,801 53,461Tape negotiation authority 740 740 740 740
47,037 62,073 45,180 56,168
The bank overdrafts are payable on demand and subject to an annual review.
The revolving leasing/hire purchase facilities can be drawn down on application for the purchase of equipment for aterm up to five years. Interest is set at the time of drawdown and fixed for the term.
The secured bank loans are due for renewal in January 2001. A portion of the secured bank loan has been classifiedas non-current as the directors believe the loan will be renewed for a further period on normal commercial terms. Thesecured loans and overdraft are at variable interest rates.
The facilities for controlled entities are secured by company guarantee from the parent and cross guarantees fromother controlled entities within the consolidated entity.
The bank loans are secured by
(i) Registered mortgage debenture over all the assets and undertakings of the parent entity and some controlledentities,
(ii) Cross guarantees from some controlled entities, and
(iii) By first mortgage over some of the parent entity’s freehold land and buildings.
(b) Foreign currency hedging facilitiesThe company has access to foreign currency hedging facilities with a number of banks to allow for programmes tohedge the Group’s overall net foreign exchange exposures.
21 NON-CURRENT LIABILITIES – PROVISIONS
Deferred income tax 3,689 5,471 3,406 4,438Employee entitlements 37 314 347 170 233
4,003 5,818 3,576 4,671
The consolidated provision for deferred income tax hasbeen reduced by nil (1999: $513,720) in respect of futureincome tax benefits attributable to losses (see also note 4).
22 NON-CURRENT LIABILITIES – OTHER
Foreign exchange contracts payable 30,890 – – –
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
37
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999$’000 $’000 $’000 $’000
23 SHARE CAPITAL – AUSDRILL LIMITED
Issued and fully paid 77,103,369 ordinary shares(1999: 76,505,077) 50,918 17,255 50,918 17,255Share premium reserve transferred as at 1 July 1998 – 33,402 – 33,402
50,918 50,657 50,918 50,657
(a) Movements in issued and paid up ordinary sharecapital during the past two years were as follows:
Date Details Notes Number of Issue Price $’000Shares ’000 $
01/07/98 Balance 69,140 13,82801/07/98 Transfer Share Premium Reserve (d) – – 33,40209/04/99 Placement (e) 7,000 0.470 3,29023/04/99 Dividend Re-investment Plan Issue (c) 365 0.454 165
50,685Less transaction costs arising onshare issues 28
30/06/99 Balance 76,505 50,657
26/11/99 Dividend Re-investment Plan Issue (c) 598 0.436 261
30/06/00 Balance 77,103 50,918
The purpose of the placement in April 1999, was to assist with funding the consolidated entity’s share of the start upcosts and expansion program of the jointly owned company, African Mining Services (Tanzania) Pty Ltd.
(b) Options to take up ordinary shares in the capital of Ausdrill Limited outstanding and granted during the year aredetailed as follows:
(i) Non-Executive Director OptionsThe non-executive directors of the company as at 9 November 1999, being Messrs T E O’Connor, R G Sayers,J E Askew and G P Connell were each granted 300,000 options at that date to acquire the same number ofordinary shares in the company. These options expire on 9 November 2004 and are exercisable at any time after 9 November 2000 at $1.20. No shares were issued during the year by virtue of the exercise of these options andthe number of unissued ordinary shares under these options at the date of this report is 1,200,000.
(ii) Ausdrill Limited Employee Option PlanThe number of options granted during the year under the Ausdrill Limited Employee Option Plan was 200,000(1999: nil). Outstanding unlisted options under the Ausdrill Limited Employee Option Plan to acquire fully paidordinary shares in the company as at the date of this report are as follows:
No of Options Expiry Date Exercise Price
(1) 4th allocation (09/01/96) 213,334 09/01/01 $0.74(2) 5th allocation (04/12/96) 80,000 04/12/01 $1.57(3) 6th allocation (25/02/98) 570,000 25/02/03 $1.01(4) 7th allocation (09/11/99) 100,000 09/11/04 $0.48
963,334
Options issued prior to 14 November 1997 can be exercised in three equal tranches or portions with the firsttranche being capable of being exercised at any time after the first anniversary of the issue date, the secondtranche being capable of exercise after the second anniversary of the issue date and the third tranche beingcapable of being exercised on or after the third anniversary of the issue date. Options issued subsequent to 14 November 1997 can be exercised in three tranches being one sixth after the first anniversary of the issuedate, two sixths after the second anniversary of the issue date and the balance after the third anniversary of the issue date.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
38
AUSDRILL LIMITED ANNUAL REPORT 2000
23 SHARE CAPITAL – AUSDRILL LIMITED (continued)
During the year ended 30 June 2000 no (1999: nil) ordinary shares were issued by virtue of the exercise ofoptions issued pursuant to the Ausdrill Limited Employee Option Plan. The number of unissued ordinary sharesunder these options at the date of this report is 963,334 (1999: 983,667) and no ordinary shares have beenissued since year end. During the year and to the date of this report, 220,333 options granted under the AusdrillLimited Employee Option Plan lapsed due to terminations of employment.
Particulars of options granted to and not exercised by directors under the Ausdrill Limited Employee Option Plan tothe date of this report are as follows:
Mr R G Sayers 40,000Mr R S Leatham 40,000
No options were granted to or exercised by directors during the financial year or since year end.
The names of all persons who currently hold options granted under the Ausdrill Limited Employee Option Plan areentered in the register kept by the company pursuant to section 170 of the Corporations Law and inspection ofthe register may be made free of charge.
(iii) Managing Director OptionsMr R J Taylor holds 600,000 options to acquire the same number of ordinary shares in the company. The issue ofoptions was approved by shareholders at the Annual General Meeting held on 14 November 1997. The options areexercisable in three tranches being one sixth after the first anniversary of the issue date, two sixths after thesecond anniversary of the issue date and the balance after the third anniversary of the issue date. The optionsexpire on 14 November 2002 and are exercisable at a fixed price of $1.70 per share. The number of unissuedordinary shares under these options at the date of this report is 600,000 (1999: 600,000).
(iv) Executive Director OptionsThe executive directors of the company as at 9 November 1999, being Messrs R J Taylor and R S Leatham,were granted 200,000 and 150,000 options respectively at that date to acquire the same number of ordinaryshares in the company. These options expire on 9 November 2004 and are exercisable at $0.70. The options areexercisable in three tranches being one sixth after the first anniversary of the issue date, two sixths after thesecond anniversary of the issue date and the balance after the third anniversary of the issue date. No shares wereissued during the year by virtue of the exercise of these options and the number of unissued ordinary sharesunder these options at the date of this report is 350,000.
No person entitled to exercise any option under (i), (ii), (iii) or (iv) above has or had, by virtue of the option, a rightto participate in any share issue of any other body corporate.
(c) The company has a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part oftheir dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. Shares areissued under the plan at a 5.0% discount to the weighted average market price for the 5 days up to and including thebooks close date.
(d) In accordance with section 1446 of the Corporations Law, the amounts standing to the credit of the share premiumaccount on 1 July 1998 became part of share capital. This was a consequence of the abolition of par values of shareswhich took effect on 1 July 1998. As all of the share premium account related to ordinary shares, the balance hasbeen allocated to ordinary share capital.
(e) On 1 April 1999 the company appointed Patterson Ord Minnet to place 7,000,000 ordinary shares at an issue price of47 cents per share. The placement was fully subscribed and shares were allotted on 9 April 1999.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
39
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999Notes $’000 $’000 $’000 $’000
24 RESERVES
Reserves:Foreign currency translation reserve (1,342) (1,365) – –
Movements:Share premium accountBalance at beginning of financial year – 33,402 – 33,402Transfer to share capital – (33,402) – (33,402)
Balance at end of financial year – – – –
Foreign currency translation reserveBalance at beginning of financial year (1,365) (273) – –Exchange difference on translation of foreigncontrolled entities (194) (721) – –Exchange difference on translation of foreignassociated entities 217 (371) – –
Balance at end of financial year (1,342) (1,365) – –
25 OUTSIDE EQUITY INTERESTS IN CONTROLLED ENTITIES
Interest in:Share capital 9 – – –Retained (losses) (5) – – –
4 – – –
26 EQUITY
Total equity at the beginning of the financial year 68,556 67,237 59,309 59,525Net (loss)/profit attributable to members ofAusdrill Limited (9,945) 893 (559) (1,734)Net exchange difference on translation of financial report of foreign controlled and associate entities 23 (1,092) – –Transactions with owners as owners:
Contributions of equity, net of transaction costs 23 261 3,427 261 3,427Dividends provided for or paid 5 – (1,909) – (1,909)
Total changes in outside equity interest 25 4 – – –
Total equity at the end of the financial year 58,899 68,556 59,011 59,309
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
40
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999Notes $’000 $’000 $’000 $’000
27 COMMITMENTS FOR EXPENDITURE
(a) Lease commitmentsOperating leasesCommitments for minimum lease payments in
relation to operating leases are payable as follows:Not later than one year 172 103 50 103Later than one year but not later than two years 9 – 9 –
181 103 59 103
Representing:Operating leases cancellable within 12 months – – – –Operating leases non-cancellable 181 103 59 103
181 103 59 103
Finance leasesCommitments in relation to finance leases are
payable as follows:Not later than one year 4,464 4,873 – –Later than one year but not later than two years 1,813 4,030 – –Later than two years but not later than five years 291 1,677 – –
Total minimum lease commitments 6,568 10,580 – –Less: Future finance charges 500 925 – –
Finance lease liabilities 6,068 9,655 – –
Representing lease liabilities:Current 16 4,044 4,373 – –Non-current 20 2,024 5,282 – –
6,068 9,655 – –
Hire purchaseHire purchase expenditure contracted and
provided for, payable:Not later than one year 8,599 8,831 8,560 8,749Later than one year but not later than two years 5,961 6,284 5,927 6,266Later than two years but not later than five years 11,237 8,603 11,218 8,590
Total minimum hire purchase commitments 25,797 23,718 25,705 23,605Less: Future finance charges 3,407 2,491 3,400 2,481
Hire purchase liabilities 22,390 21,227 22,305 21,124
Current 16 7,286 7,577 7,253 7,509Non-current 20 15,104 13,650 15,052 13,615
22,390 21,227 22,305 21,124
(b) Capital commitmentsTotal capital expenditure contracted for at balance
date but not recognised as liabilities, payable:Not later than one year – 307 – 307
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
41
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999$’000 $’000 $’000 $’000
28 CONTINGENT LIABILITIES
Controlled entitiesGuarantees by the parent entity in respect of:(a) leased and hire purchased plant and equipment
of controlled entities – – 4,152 5,920(b) bank overdraft of controlled entities – – 1,670 1,515(c) secured loans – – 1,656 435
– – 7,478 7,870
Other personsIndemnity to bankers in respect of guaranteegiven to client for contract performance.
Associated entitiesThe company has provided a Guarantee andIndemnity for the performance of a mining contractby an associated entity.
The Group has provided a several Guarantee andIndemnity to the financiers of associated entitiesfor funding the acquisition of plant and equipment. 29,382 22,081 29,382 22,081
No material losses are anticipated in respect ofany of the above contingent liabilities.
29 REMUNERATION OF DIRECTORS
Remuneration paid or payable, or otherwisemade available, to directors by entities in theconsolidated entity and related parties in connectionwith the management of affairs of the parent entityor of its controlled entities. 682,869 642,090 682,869 642,090
The number of parent entity directors whose incomefrom the parent entity or related parties was withinthe following bands:
$ $ 2000 1999
0 – 9,999 1 –20,000 – 29,999 1 130,000 – 39,999 2 160,000 – 69,999 – 170,000 – 79,999 1 –
210,000 – 219,999 1 –240,000 – 249,999 – 1280,000 – 289,999 – 1290,000 – 299,999 1 –
Details of options granted to and exercised by directors during the year ended 30 June 2000 are set out in note 23(b).
Directors’ remuneration excludes insurance premiums paid by the parent entity in respect of directors’ and officers’liability insurance contracts as the contracts do not specify premiums paid in respect of individual directors and officers.The insurance contracts prohibit disclosure of the premium or the nature of liabilities insured against under the policies.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
42
AUSDRILL LIMITED ANNUAL REPORT 2000
Executive ExecutiveOfficers of the Officers of the
Consolidated Entity Parent Entity
2000 1999 2000 1999$ $ $ $
30 REMUNERATION OF EXECUTIVES
Remuneration received, or due and receivable,from entities in the consolidated entity and relatedentities by executive officers (including directors)whose income was at least $100,000:Executive officers of the parent entity 2,455,606 2,485,906 2,455,606 2,485,906Executive officers of other entities in the consolidated entity 148,914 140,033 – –
2,604,520 2,625,939 2,455,606 2,485,906
The number of executive officers (including directors)whose income from entities within the consolidatedentity or related parties was within the following bands:
$ $
100,000 – 109,999 3 1 3 1110,000 – 119,999 – 7 – 7120,000 – 129,999 4 1 4 1130,000 – 139,999 1 1 1 1140,000 – 149,999 4 3 3 2150,000 – 159,999 – 1 – 1170,000 – 179,999 1 2 1 2180,000 – 189,999 1 – 1 –190,000 – 199,999 1 – 1 –210,000 – 219,999 1 – 1 –240,000 – 249,999 – 1 – 1280,000 – 289,999 – 1 – 1290,000 – 299,999 1 – 1 –
The number of employee options granted to executive officersof the parent entity was 200,000 during the year ended30 June 2000 (1999: nil). The number of employee optionsoutstanding to executive officers (including directors) at30 June 2000 is 870,000 (1999: 737,000).
The terms and conditions relating to the options are set out in note 23(b)(ii).
Details on insurance premiums paid in respect of directors and officers are set out in note 29.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
43
AUSDRILL LIMITED ANNUAL REPORT 2000
31 FINANCIAL REPORTING BY SEGMENTS
The company and consolidated entity operates predominantly in one industry being the supply of services to the mining industry.
Geographical segments The Intersegment2000 financial year Australasia Africa (i) Americas (ii) Eliminations Consolidated
$’000 $’000 $’000 $’000 $’000
Sales to customers outside theconsolidated entity 87,492 1,319 23,160 – 111,971
Intersegment sales 275 165 – (440) –Other revenue 9,702 1,820 440 (2,352) 9,610
Total revenue 97,469 3,304 23,600 (2,792) 121,581
Consolidated operating (loss) beforeabnormal items and income tax (1,477) 1,444 (6,540) (216) (6,789)
Abnormal items (6,837)
Consolidated operating (loss) beforeincome tax (13,626)
Total assets 184,503 2,804 18,432 (9,017) 196,722
Geographical segments1999 financial year
Sales to customers outside theconsolidated entity 102,242 12,310 31,694 – 146,246
Intersegment sales 2,158 17 – (2,175) –Other revenue 13,112 26,696 172 (7,328) 32,652
Total revenue 117,512 39,023 31,866 (9,503) 178,898
Consolidated operating profit beforeabnormal items and income tax 4,449 5,001 (2,151) (1,535) 5,764
Abnormal items (3,164)
Consolidated operating profit beforeincome tax 2,600
Total assets 160,835 5,299 25,518 (7,616) 184,036
(i) The African operations are carried on in Ghana, Burkina Faso, Guinee and Tanzania.(ii) The Americas includes operations in Chile, Peru, Nicaragua and Honduras.(iii) Intersegment pricing is on an “arms length” basis.(iv) The African and Australasian consolidated operating profit/(loss) before income tax includes the after tax share of
profit of associated entities.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
44
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999$ $ $ $
32 REMUNERATION OF AUDITORS
Remuneration for audit or review of the financial reports ofthe parent entity or any entity in the consolidated entity:Auditor of parent entity
Parent entity 58,000 64,500 58,000 64,500Controlled entities 41,561 13,012 – –
Other auditors of controlled entities 35,903 30,744 – –
135,464 108,256 58,000 64,500
Remuneration for services:Auditor of parent entity
Parent entity 180,132 380,953 180,132 380,953Controlled entities 287,277 130,883 – –
Other auditors 23,440 53,270 – –
490,849 565,106 180,132 380,953
Total 626,313 673,362 238,132 445,453
33 RECEIVABLES AND PAYABLES DENOMINATED IN FOREIGN CURRENCIES
Amounts not effectively hedged (AUD equivalents)Consolidated Parent Entity
2000 1999 2000 1999$’000 $’000 $’000 $’000
ReceivablesCurrent
Chilean Pesos 663 817 – –
PayablesCurrent
Pounds Sterling 616 45 – –New Zealand Dollars 177 589 – –
Non-currentChilean Pesos 559 810 – –New Zealand Dollars – 17 – –
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
45
AUSDRILL LIMITED ANNUAL REPORT 2000
34 INVESTMENTS IN CONTROLLED ENTITIESCountry of Class of Equity Holding
Incorporation Shares 2000 1999Parent entityAusdrill Limited
Controlled entitiesAusdrill (Ghana) Pty Ltd Australia Ordinary 100% 100%Ausdrill (NZ) Limited New Zealand Ordinary 100% 100%Perforaciones Ausdrill Chile Ltda * Chile Ordinary 100% 100%Golden Plains Pty Ltd Australia Ordinary 100% 100%Ausminco Mining & Equipment Suppliers Pty Ltd Australia Ordinary 100% 100%Supply Direct Pty Ltd Australia Ordinary 100% 100%West African Mining Services Ltd Ghana Ordinary 100% 100%Mining Technology and Supplies Ltd Ghana Ordinary 100% 100%Ausdrill International & Management Services Pty Ltd Australia Ordinary 100% 100%Ausdrill International Pty Ltd Australia Ordinary 100% 100%Ausdrill Australasia Pty Ltd Australia Ordinary 100% 100%Ausdrill (Peru) S.A. * Peru Ordinary 100% 100%Ausdrill Senegal S.A.R.L. Senegal Ordinary 100% 100%Ausdrill Guinee S.A.R.L. Guinee Ordinary 100% 100%Ausdrill S.U.A.R.L. Mali Ordinary 100% 100%ADIMF Ltd Malta Ordinary 100% 100%IMFAD Ltd Malta Ordinary 100% 100%Perforaciones Ausdrill de Honduras S de RL * Honduras Ordinary 100% 100%Australian Communication Engineering Pty Ltd Australia Ordinary 100% 100%
(Formerly Direct Drilling Pty Ltd)Logistics Direct Ltd Ghana Ordinary 90% 100%Production Assist Pty Ltd United Kingdom Ordinary 100% 100%
All controlled entities are directly controlled by Ausdrill Limited with the exception of:
1. Supply Direct Pty Ltd which is 100% owned by Golden Plains Pty Ltd.
2. Ausdrill Australasia Pty Ltd, Ausdrill (Peru) S.A., Perforaciones Ausdrill de Honduras S de RL, Ausdrill Senegal S.A.R.L.,Ausdrill Guinee S.A.R.L., Ausdrill S.U.A.R.L., ADIMF Ltd, West African Mining Services Limited which are 100% ownedby Ausdrill International Pty Ltd.
3. Logistics Direct Ltd is 90% owned by Supply Direct Pty Ltd.
4. Mining Technology and Supplies Limited which is 100% owned by West African Mining Services Ltd.
5. IMFAD Ltd which is 100% owned by ADIMF Ltd.
6. Perforaciones Ausdrill Chile Ltda is 99% owned by Ausdrill Ltd and 1% owned by Ausdrill International Pty Ltd.
7. Production Assist Pty Ltd which is 100% owned by Supply Direct Pty Ltd.
Ausdrill Limited carries on business in Australia. Ausdrill (Ghana) Pty Ltd, West African Mining Services Limited, MiningTechnology and Supplies Limited and Logistics Direct Limited carry on business in Ghana. Perforaciones Ausdrill Chile Ltdacarries on business in Chile, Ausdrill (NZ) Limited carries on business in New Zealand, Ausdrill (Peru) S.A. carries onbusiness in Peru, and Perforaciones Ausdrill de Honduras S de RL carries on business in Honduras.
Steps have been taken for the voluntary liquidation of West African Mining Services Ltd, Mining Technology and SuppliesLtd, ADIMF Ltd, IMFAD Ltd and Production Assist Pty Ltd.
* Controlled entities audited by other PricewaterhouseCoopers firms.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
46
AUSDRILL LIMITED ANNUAL REPORT 2000
35 INVESTMENTS IN ASSOCIATES
Investments in associates are accounted for in the consolidated accounts using the equity method of accounting.
Information relating to the associates is set out below:
Name of Company Principal Activity Ownership Interest ConsolidatedCarrying Amount
2000 1999 2000 1999% % $’000 $’000
African Mining Services (Ghana) Pty Ltd Contract Mining 50.0 50.0 428 2,580African Mining Services (Tanzania) Pty Ltd Contract Mining 40.0 40.0 – –West African Drilling Services Pty Ltd Exploration Drilling 50.0 50.0 – 720Supply Direct South Africa Pty Ltd Supply and Logistics 50.0 50.0 – –Diamond Communications Pty Ltd Horizontal Drilling 50.0 – 1,382 –
1,810 3,300
The investments in African Mining Services (Ghana) Pty Ltd, African Mining Services (Tanzania) Pty Ltd and West AfricanDrilling Services Pty Ltd are held by Ausdrill International Pty Ltd. The investment in Supply Direct South Africa Pty Ltd isheld by Supply Direct Pty Ltd. The investment in Diamond Communications Pty Ltd is held by Ausdrill Ltd. The investmentscomprise an interest in the ordinary share capital of the associates.
The reporting date for West African Drilling Services Pty Ltd is 31 January.Consolidated
2000 1999$’000 $’000
Movements in carrying amounts of investments in associatesCarrying amount at beginning of financial year 3,300 2,395Share of operating profits after income tax 2,201 4,343Share of exchange difference on translation 217 (371)Dividends received/receivable (4,908) (3,067)Acquisition of interest in associate 1,000 –
Carrying amount at end of financial year 1,810 3,300
Results attributable to associatesOperating profit before income tax 3,455 6,785Less income tax expense 1,254 2,442
Operating profit after income tax 2,201 4,343Retained profits attributable to associates at beginning of financial year 3,488 2,212Less: Dividends received/receivable 4,908 3,067
Retained profits attributable to associates at end of financial year 781 3,488
Reserves attributable to associatesForeign currency translation reserveBalance at beginning of financial year (188) 183Share of exchange difference on translation 217 (371)
Balance at end of financial year 29 (188)
Share of associates’ contingent liabilities – –
Share of associates’ expenditure commitmentsCapital commitments 614 1,056Lease commitments 156 –
770 1,056
Summary of the performance and financial position of associatesThe aggregate profits, assets and liabilities of associates are:Net profits after income tax 2,029 8,657Assets 164,933 156,348Liabilities 164,788 149,779
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
47
AUSDRILL LIMITED ANNUAL REPORT 2000
36 RELATED PARTIES
The names of persons who were directors of Ausdrill Limited at any time during the financial year are as follows:
T E O’ConnorR G SayersJ E AskewR J TaylorR S LeathamMr G P Connell was appointed as a director on 9 July 1999.Mr R J Goguen was appointed as a director on 9 June 2000.
Information relating to amounts paid in relation to the remuneration of directors can be found at note 29. No director isentitled to any retirement or termination benefit.
(a) Transactions of directors and director-related entities concerning shares or share options:
(i) Aggregate numbers of shares and share options of Ausdrill Limited, acquired or disposed of by directors or theirdirector-related entities were as follows:
Acquired Disposed
2000 1999 2000 1999
Ordinary shares 7,426 4,656 – –Executive director options 350,000 – – –Non-executive director options 1,200,000 – – –
All transactions relating to shares of the company were on the same basis as similar transactions with othershareholders.
(ii) Aggregate number of shares and share options of Ausdrill Limited held directly, indirectly or beneficially bydirectors or their director-related entities at balance date were:
2000 1999
Ordinary shares 18,239,140 12,731,714Employee share plan options 80,000 80,000Non-executive director options 1,200,000 –Executive director options 350,000 –Managing director options 600,000 600,000
An entity related to Mr G P Connell held 5,500,000 ordinary shares at the date of his appointment as a director on 9 July 1999.
(b) Other transactions of directors and director-related entities:
(i) Provision of accommodation and catering on normal trading terms and conditions from a hotel partly owned byMr R G Sayers.
(ii) A contract with a director-related entity for the provision of consultancy services for Mr R G Sayers on normalcommercial terms and conditions.
(c) Wholly-owned group:
The wholly-owned group consists of Ausdrill Limited and its wholly-owned controlled entities as detailed in note 34.
Transactions between Ausdrill Limited and related parties in the wholly-owned group during the years ended30 June 2000 and 1999 consisted of:
(i) Loans made by Ausdrill Limited.(ii) Loans repaid to Ausdrill Limited.(iii) Interest charged by Ausdrill Limited.(iv) Sales and provision of services by Ausdrill Limited.(v) Management fees charged by Ausdrill Limited.(vi) Management fees charged to Ausdrill Limited.(vii) Transfer of tax credits and losses to and by Ausdrill Limited.(viii)Transfer of certain financial assets and liabilities from Ausdrill Limited.
The above transactions were made on normal commercial terms and conditions and at market rates, except that thereare no fixed terms of repayment of principal on loans advanced by Ausdrill Ltd and tax credits and losses which weretransferred for nil consideration in 2000 (1999: nil). The average interest rate charged on the loans during the yearwas 8.20% (1999 : 7.71%).
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
48
AUSDRILL LIMITED ANNUAL REPORT 2000
36 RELATED PARTIES (continued)Parent Entity
2000 1999$’000 $’000
Aggregate amounts receivable from and payable to related partiesin the wholly-owned group at balance date were as follows:
Current receivables – controlled entities 14 23Non-current receivables – controlled entities 47,957 44,339Current payables – controlled entities 235 246Non-current payables – controlled entities 3,772 1,971
Aggregate amounts included in the determination of operating profitbefore income tax that resulted from transactions with related partiesin the wholly-owned group were as follows:
Interest revenue – controlled entities 2,803 2,216Dividends – controlled entities – 7,890Management fees – controlled entities (1,093) (659)Loan to controlled entity written off – (1,912)
Consolidated Parent Entity
2000 1999 2000 1999$’000 $’000 $’000 $’000
(d) Other related parties
Aggregate amounts receivable from and payable to eachclass of other related parties at balance date were as follows:
Current receivablesTrade debtors – associated entities 4,462 5,525 – –Loans to associated entities 4,007 – – –
Non-current receivablesLoans to associated entities 27,568 27,789 500 –
Aggregate amounts brought to account in relation to othertransactions with each class of other related parties:
Revenue from contracting and other services to associatedentities 6,939 5,030 – –
Proceeds from sale of property, plant and equipment toassociated entities 816 10,515 816 1,362
Proceeds from sale of stock, consumables and incidentalsto associated entities – 7,430 – 1,626
Interest received/receivable from associated entities 1,926 1,783 – –
Management fees received/receivable from associated entities 1,989 1,556 – –
Loan to associated entity written off – (3,164) – –
Transactions with other related parties were made on normal commercial terms and conditions and at market rates,except that there are no fixed terms of repayment of loans. The average interest rate on loans during the year was9.73% (1999: 9.97%).
Ownership interests in related partiesInterests held in controlled entities are set out in note 34 and interests held in associated entities are set out in note 35.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
49
AUSDRILL LIMITED ANNUAL REPORT 2000
37 EMPLOYEE ENTITLEMENTSConsolidated Parent Entity
2000 1999 2000 1999Notes $’000 $’000 $’000 $’000
Provision for employee entitlementsCurrent 17 2,135 2,140 1,464 1,316Non-current 21 314 347 170 233
Aggregate employee entitlement liability 2,449 2,487 1,634 1,549
Employee Numbers Number NumberNumber of employees at the reporting date 681 747 403 409
Ausdrill Limited Employee Option PlanParticipation in the plan is limited to those employees in the full-time employment of the company or a controlled entitywhom the directors invite to become participants. Further details relating to the plan are set out in note 23(b).
Superannuation CommitmentsAll employees of the company are entitled to join the Ausdrill Limited Superannuation Plan which provides benefits onretirement, disability or death. This plan provides benefits based on years of service and amounts contributed. Employeesmay contribute to the Ausdrill Limited fund or a fund of their choice and the company contributes at a percentage ofemployees’ wages and salaries in accordance with its legal requirements.
Consolidated
2000 199938 EARNINGS PER SHARE
Basic earnings per share (12.94¢) 1.26¢Diluted earnings per share (12.94¢) 1.26¢Weighted average number of ordinary shares outstanding during the yearused in the calculation of basic earnings per share. 76,861,437 70,801,032
Information concerning the classification of securities:
OptionsOptions granted to non-executive directors, the managing director, executive directors and to employees under the AusdrillLimited Employee Option Plan are considered to be potential ordinary shares and are included in the determination ofdiluted earnings per share if the exercise price is below the current market price at balance date. The options have notbeen included in the determination of basic earnings per share. Details relating to options are set out in note 23(b).
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
50
AUSDRILL LIMITED ANNUAL REPORT 2000
Consolidated Parent Entity
2000 1999 2000 1999$’000 $’000 $’000 $’000
39 NOTES TO THE STATEMENTS OF CASH FLOWS
(a) Reconciliation of net cash inflow from operatingactivities to operating profit (loss) after income tax
Operating (loss) profit after income tax (9,943) 893 (559) (1,734)
Non-cash items:Depreciation and amortisation 12,356 14,363 7,498 8,573Profit on sale of non-current assets (316) (2,474) (302) (227)Bad debts and provision for doubtful debts 1,339 1,024 327 428Net unrealised exchange (gains) losses 3,858 934 – 188Dividends from controlled entities – – – (7,890)Interest receivable from controlled entities – – (2,803) (2,189)Share of associates after tax profit after dividends (2,201) (1,276) (381) –Write off of investments – 306 – 9,300Loss on loan to associated entity/controlled entity 80 3,164 – 1,912Stock adjustments 1,278 – 832 –Property, plant and equipment adjustments 3,149 – 1,606 –
Change in operating assets and liabilities:(Increase) decrease in receivables (125) (1,160) 2,798 1,189(Increase) decrease in other operating assets (17,063) (20,633) 18 108Decrease (increase) in inventories 1,748 3,536 820 730Increase (decrease) in other provisions (132) 8 61 (233)Increase (decrease) in provision for income tax (1,011) 19 177 128(Decrease) in provision for deferred income tax (1,782) (1,012) (1,032) (313)Increase (decrease) in trade and other creditors 22,220 22,033 915 (1,395)Decrease (increase) in future income tax benefit (2,625) 1,072 – –
Net cash provided by operating activities 10,830 20,797 9,975 8,575
(b) Non-cash financing and investing activities:
Acquisition of plant and equipment by means offinance leases and hire purchase 8,694 10,684 8,491 5,584Loans to associated entities\controlled entities – 17,321 – 2,417Issue of shares under company dividend reinvestment plan 261 164 261 164
The above items are not reflected in the statements of cash flows. The loans to associated entities in 1999 relate tothe consolidated entity’s contribution of property, plant and equipment and inventory arising from the restructuring ofthe West African operations.
40 FINANCIAL INSTRUMENTS
(a) Credit risk exposures
The credit risk on financial assets of the consolidated entity which have been recognised on the balance sheet, otherthan investments in shares, is generally the carrying amount, net of any provisions for doubtful debts.
(b) Net fair value of financial assets and liabilities
(i) On-balance sheet
The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financialliabilities of the consolidated entity approximates their carrying value.
The net fair value of other monetary financial assets and financial liabilities is based upon market prices where amarket exists or by discounting the expected future cash flows by the current interest rates for assets andliabilities with similar risk profiles.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
51
AUSDRILL LIMITED ANNUAL REPORT 2000
40 FINANCIAL INSTRUMENTS (continued)
Equity investments traded on organised markets have been valued by reference to market prices prevailing atbalance date. For non-traded equity investments, the net fair value is an assessment by the directors based onthe underlying net assets, future maintainable earnings and any special circumstances pertaining to a particularinvestment.
(ii) Off-balance sheet
The parent entity and certain controlled entities have potential financial liabilities which may arise from certaincontingencies disclosed in note 28. As explained in that note, no material losses are anticipated in respect of anyof those contingencies and the net fair value approximates the amounts disclosed in note 28.
(c) Interest rate risk exposures
The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for each classof financial assets and financial liabilities is set out in the following table.
Exposure arises predominantly from assets and liabilities bearing variable interest rates as the consolidated entityintends to hold fixed rate assets and liabilities to maturity.
Floating Fixed interest rate Non-Interest maturing in interest
Rate 1 year over 1 to Bearing Totalor less 5 years
Notes $’000 $’000 $’000 $’000 $’000
2000Financial assetsCash 6 6,987 – – – 6,987Receivables 7, 10 31,575 – – 27,495 59,070Foreign exchange contracts 9, 14 – – – 59,727 59,727
38,562 – – 87,222 125,784
Weighted average interest rate (pa) 8.82% – –
Financial liabilitiesBank overdrafts and loans 16, 20 17,200 – – – 17,200Trade and other creditors 15, 19 – – – 19,886 19,886Lease liabilities 16, 20 – 4,044 2,024 – 6,068Hire purchase liabilities 16, 20 – 7,286 15,104 – 22,390Foreign exchange contracts 18, 22 – – – 65,754 65,754
17,200 11,330 17,128 85,640 131,298
Weighted average interest rate (pa) 9.59% 7.37% 7.94%Net financial (liabilities) assets 21,362 (11,330) (17,128) 1,582 (5,514)
1999Financial assetsCash 6 5,486 – – – 5,486Receivables 7, 10 27,309 – – 32,035 59,344Foreign exchange contracts 9 – – – 39,763 39,763
32,795 – – 71,798 104,593
Weighted average interest rate (pa) 8.74% – –
Financial liabilitiesBank overdrafts and loans 16, 20 14,955 – – – 14,955Trade and other creditors 15, 19 – – – 20,719 20,719Lease liabilities 16, 20 – 4,373 5,282 – 9,655Hire purchase liabilities 16, 20 – 7,577 13,650 – 21,227Foreign exchange contracts 18 – – – 39,021 39,021
14,955 11,950 18,932 59,740 105,577
Weighted average interest rate (pa) 7.80% 6.83% 6.36%Net financial assets (liabilities) 17,840 (11,950) (18,932) 12,058 (984)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
52
AUSDRILL LIMITED ANNUAL REPORT 2000
40 FINANCIAL INSTRUMENTS (continued)
2000 1999Notes $’000 $’000
Reconciliation of net financial assets to net assetsNet financial (liabilities) as above (5,514) (984)
Non-financial assets and liabilitiesInventories 8 10,473 13,429Investments in associates 11, 35 1,810 3,300Property, plant and equipment 12 47,730 52,958Intangibles 13 5,838 6,318Other assets 9, 14 5,087 3,438Provisions 17, 21 (6,525) (9,903)
Net assets per balance sheet 58,899 68,556
41 EVENTS OCCURING AFTER REPORTING DATE
Entitlement Issue
On 8 August 2000, the company announced a non-renounceable Entitlement Issue of one 7% Converting Preference Sharefor every two Ordinary Shares held at an issue price of 20c per Converting Preference Share. A Prospectus in relation tothe Entitlement Issue was lodged with the Australian Securities and Investments Commission and the Australian StockExchange on 11 August 2000.
The issue of 38,551,685 Converting Preference Shares raised approximately $7.2m, after allowing for the cost of theissue, and will be applied as follows:
$’000(a) Repay loans from Director Related Entities lent to fund the acquisition of the business of
Ace Co Pty Ltd on 6 July 2000. 1,700(b) Provide working capital for the Ace business to ensure the business continues to operate effectively. 500(c) Provide additional equity funds to contribute for expected new contracts for African Mining Services. 4,000(d) General working capital requirements. 1,000
7,200
The Entitlement Issue was fully underwritten.
Acquisition of Ace Co Business
On 3 July 2000 the company exercised an option to acquire the assets and business of Ace Co Pty Ltd for $1.7m, plus theassignment of the debt associated with the assets acquired. The acquisition was settled on 6 July 2000.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES – FOR THE YEAR ENDED 30 JUNE 2000
53
AUSDRILL LIMITED ANNUAL REPORT 2000
The directors declare that the financial statements and notes set out on pages 24 to 52:
(a) comply with Accounting Standards, the Corporations Regulations and other mandatory professional reporting requirements;and
(b) give a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2000 and oftheir performance, as represented by the results of their operations and their cash flows, for the financial year ended onthat date.
In the directors’ opinion:
(a) the financial statements and notes are in accordance with the Corporations Law; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become dueand payable.
This declaration is made in accordance with a resolution of the directors.
R J TAYLORMANAGING DIRECTOR
Dated this 29th day of September 2000.
DIRECTORS’ DECLARATIONAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES
55
AUSDRILL LIMITED ANNUAL REPORT 2000
STOCK EXCHANGE REQUIREMENTS
The shareholder information set out below was applicable at 28 September 2000.
DISTRIBUTION
(i) Analysis of number of shares by size of holding:
Range of holding Ordinary OptionsShares
1 – 1,000 184 –1,001 – 5,000 768 –5,001 – 10,000 426 –10,001 – 100,000 493 9100,001 and over 35 9
Total Number of holders 1,906 18
(ii) There were 483 holders of less than a marketable parcel of 2,500 ordinary shares.
TWENTY LARGEST SHAREHOLDERS
The names of the twenty largest shareholders of fully paid ordinary shares are listed below:
Rank Name of shareholder Number of shares % Held
1 UDR Group Ltd 13,861,857 17.982 Cherry Garden Nominees Pty Ltd 12,263,744 15.913 Westpac Custodian Nominees Ltd 6,423,924 8.334 Sheriffmuir Pty Ltd 5,500,000 7.135 Permanent Trustee Australia Ltd 3,387,758 4.396 National Nominees Ltd 2,979,301 3.867 Chase Manhattan Nominees Ltd 2,508,565 3.258 Barminco Pty Ltd 1,766,837 2.299 Civic Transport Super Funds Pty Ltd 1,409,718 1.8310 Commonwealth Custodial Services Ltd (No. 100 account) 1,293,372 1.6811 G P Connell and R W Dunn (Connell Contractors Super Fund) 1,250,000 1.6212 G P Connell and R D Connell (R D Connell Super Fund) 750,000 0.9713 Citicorp Equity Capital Ltd 488,709 0.6314 Rodney Bruce Ebsworth 400,000 0.5215 ERLUP Nominee Pty Ltd 383,179 0.5016 Mercantile Mutual Life Insurance Company Ltd 379,406 0.4917 Commonwealth Custodial Services Ltd (No. 17 account) 250,000 0.3218 Citicorp Nominees Pty Ltd 247,031 0.3219 Citicorp Equity Capital Ltd 228,051 0.3020 Victorian Workcover Authority 214,116 0.28
The twenty largest shareholders hold 55,985,568 shares which is equal to 72.60% of the 77,103,369 total shares on issue.
SUBSTANTIAL SHAREHOLDING
The company has received substantial shareholder notices for:
Name Number of shares % Held
(i) UDR Group Ltd 13,638,541 17.69(ii) Cherry Garden Nominees Pty Ltd 12,263,744 15.91(iii) Sheriffmuir Pty Ltd 7,500,000 9.73(vi) Layne Christensen Australia Pty Ltd 5,422,797 7.03
VOTING RIGHTS
Every member present at a meeting of the company in person or by proxy shall have one vote and upon a poll each share shallhave one vote.
ADDITIONAL INFORMATIONAUSDRILL LIMITED AND ITS CONTROLLED ENTITIES
56
AUSDRILL LIMITED ANNUAL REPORT 2000
1996 1997 1998 1999 2000
REVENUESales $’000 129,809 161,444 138,304 146,246 111,971Other $’000 6,090 3,740 6,542 32,652 9,610
Total $’000 135,899 165,184 144,846 178,898 121,581
PROFITOperating Profit (Loss) $’000 13,101 15,250 5,710 5,764 (6,789)Abnormal Items (before income tax) $’000 – – – (3,164) (6,837)Taxation $’000 4,735 5,828 1,618 188 (5,794)Abnormal Tax $’000 – – – 1,519 2,111After Tax $’000 8,366 9,422 4,092 893 (9,943)
BALANCE SHEETTotal Assets $’000 104,037 139,510 163,056 184,036 196,722Total Liabilities $’000 57,650 76,022 95,819 115,480 137,823Shareholders’ Funds $’000 46,387 63,488 67,237 68,556 58,899
DIVIDENDSDividends per Share cents 8.0 9.0 3.0 2.5 0.0Total Dividends $’000 4,857 6,070 2,074 1,909 -Payout Ratio(% of net pre-abnormal income) % 58.1 64.4 50.7 34.2 -Number of Shares # 57,197,133 67,888,428 69,140,292 76,505,077 77,103,369
DEPRECIATION AND AMORTISATION Property, Plant & Equipment $’000 9,480 13,799 14,383 13,883 11,876
NET INTEREST EXPENSE $’000 3,010 2,061 1,876 1,393 1,351
NET EXTERNAL DEBT $’000 25,822 27,444 44,242 39,198 38,121
NET DEBT/NET TANGIBLE ASSETS(including FITB) % 66.8 48.8 73.2 63.0 71.8
EBITDA(including intangibles amortisation) $’000 26,085 31,590 22,449 21,520 6,918
EBIT $’000 16,111 17,311 7,586 7,157 (5,438)
EBIT TO SALES REVENUE % 12.4 10.7 5.5 4.9 (4.9)
EMPLOYEES AT YEAR END # 855 977 855 747 681
FINANCIAL TABLEAUSDRILL LIMITED
CompanyParticulars>AUSDRILL LIMITED
ACN 009 211 474
DIRECTORS
Terence E O’Connor, ChairmanRaymond J Taylor, Managing DirectorJames E AskewRobert S LeathamRonald G SayersGarry P ConnellRonald J Goguen
CHIEF FINANCIAL MANAGER
Mark J Hughes
SECRETARIES
Gregory A DowerMark J Hughes
AUDITORS
PricewaterhouseCoopersThe Quadrant, 1 William StreetPerth, Western Australia 6000
SOLICITORS
Malleson Stephens JaquesLevel 10, 152 St Georges TerracePerth, Western Australia 6000
BANKERS
Westpac Banking Corporation Limited109 St Georges TerracePerth, Western Australia 6000
SHARE REGISTER
Computershare Registry Services Pty LtdLevel 2, Reserve Bank Building45 St Georges TerracePerth, Western Australia 6000Telephone (08) 9323 2000Facsimile (08) 9323 2033
HEAD OFFICE (REGISTERED OFFICE)
170 Kewdale RoadKewdale, Western Australia 6105Telephone (08) 9353 3055Facsimile (08) 9353 1953
WEST AUSTRALIAN OFFICE
149 Forrest StreetBoulder, Western Australia 6432Telephone (08) 9093 2533Facsimile (08) 9093 2544
QUEENSLAND OFFICE
617 Ingham RoadGarbutt, Queensland 4814Telephone (07) 4774 8177Facsimile (07) 4774 8110
CHILE OFFICE
Santa Beatriz 126Providencia, Santiago, ChileTelephone (562) 236 1446Facsimile (562) 236 0652