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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Mdm Engin. | LSE:MDM | London | Ordinary Share | VGG5941V1058 | COM SHS USD0.01 (DI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 168.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMMDM
RNS Number : 2308O
MDM Engineering Group Ltd
05 August 2014
MDM Engineering Group Limited
("MDM" or the "Company")
Full year results for the year ended 31 March 2014
MDM Engineering Group Limited (AIM:MDM), the minerals process and project management company focussed on the mining industry, is pleased to announce its audited results for the year ended 31 March 2014.
Highlights
-- Revenue of US$ 108.7 million (2013: US$ 137.2 million); -- Gross profit of US$ 24.2 million (2013: US$ 33.0 million); -- Pre-tax profit of US$ 12.2 million (2013: US$ 20.4 million); -- After tax earnings of US$ 10.4 million (2013: US$ 14.2 million); -- Basic earnings per share of US 27.66 cents per share (2013: US 37.78 cents); -- Recommended takeover offer from global engineering and construction group Foster Wheeler -- Full year dividend of US 8.00 cents per share (2013: US 28.20 cents); and
-- Strong cash position of US$ 23.7 million (2013: US$ 34.6 million) which includes restricted cash of US$ 5.1 million (2013: US$ 5.0 million) and negligible gearing.
MDM's Chief Executive Officer, Martin Smith commented:
"We are very pleased to announce another positive set of financial results, despite the current difficult market experienced in the resources sector. We could not have achieved this without the hard work and dedication of our team. The demand for MDM's services remains robust and I am delighted to report that the Company's order book and pipeline continues to look healthy going into FY2015 and beyond. We are excited about the transaction with Foster Wheeler AG announced on 13 March 2014 and expect to see this close within the third quarter of 2014."
Enquiries:
MDM Engineering Group Tel: +27 11 993-4300 Limited Martin Smith (CEO) George Bennett (Executive Director) Canaccord Genuity Limited Tel: +44 (0) 207 523 8000 NOMAD and Broker Neil Elliot Chris Fincken Joe Weaving Tavistock Communications Tel: +44 (0) 207 920 3150 Financial Public Relations and Investor Relations Emily Fenton Jos Simson
About MDM Engineering:
MDM Engineering Group Limited is a minerals process and project management company focused on the mining industry. The Company provides a wide range of services from preliminary and final feasibility studies, through to plant design, construction and commissioning. To date, the Company's clients have largely been junior and mid-tier mining corporations with blue chip clients being added to its portfolio in recent times. The Company's core technical team has a 23 year track record of completing a wide range of studies and execution projects across a variety of minerals, including precious metals, base metals, ferrous and non-ferrous metals, uranium and diamonds.
The Company has adopted an approach to project execution based on an open-book Engineering, Procurement, Construction Management ("EPCM" or "cost-plus") basis. With a core focus on Africa, MDM Engineering is setting the benchmark standard for best practice in the mining services industry through its commitment to providing the highest quality services and actively engaging with clients to ensure maximum transparency.
The Board believes that MDM has a robust business model, is financially sound and is set to continue with its positive earnings in the 2015 financial year.
The financial information that follows is an extract from the Group's annual report for the year ended 31 March 2014 and 31 March 2013. The auditors have reported on the financial statements and their report was unmodified but contained an emphasis of matter.
CHAIRMAN'S REPORT
I am pleased to present MDM's seventh set of annual results for the year ended 31 March 2014. Despite the continued depressed commodity market causing the delay or cancellation of many projects, MDM achieved a strong performance.
Our market environment
The current commodity market continues to be depressed, further undermining investor confidence in the mining industry and the business case for many projects which had been scheduled for commencement in the near term. Notwithstanding the ongoing difficulty in the markets, MDM continued to receive project proposal requests. Against this backdrop, the Company experienced declines in both revenue and earnings. Revenue for the year was $108.7 million which is 20.8% down on the previous year and profit before tax was $12.2 million, a decline of 40.1% over the previous year. The performance is still one to be satisfied with under the current market conditions. MDM enters FY 2015 importantly with a robust order book and even a stronger pipeline to pave the way forward. The Company's balance sheet is a key attribute and MDM understands the importance of preserving its cash and remaining debt free during periods of uncertain trading conditions such as those currently being experienced.
Moving ahead
On 13 March 2014, MDM announced that it had entered into a Merger Implementation Agreement ("MIA") with Foster Wheeler AG ("FW") under which FW's BVI subsidiary, FW M&M Limited will acquire all of the ordinary shares in MDM. Pending certain conditions precedent, MDM's shareholders will receive 170 pence in cash for each MDM share owned. The combined potential of FW and MDM makes strategic sense and will help enhance the capability for MDM's next chapter of growth. The transaction is expected to be completed by the end of the third quarter of this year and further updates on this transaction will be communicated to the market as appropriate.
Management continues to focus on upgrading and streamlining systems, procedures and internal administration and project controls. Now that we have been active and have successfully completed projects in various countries in Africa, such as Ghana, Tanzania and the Democratic Republic of Congo, and selected countries outside of the continent, such as Mexico, we are starting to be rewarded by being awarded repeat work and acquiring new clients based in these areas. MDM continues to focus on identifying opportunities and, helped by its improving reputation and broad technical scope, it is winning projects in Africa and abroad. With a strong balance sheet as well as its dedicated and skillful team which we have been able to retain during the past year, we consider ourselves to be well positioned to capitalize once business conditions in the resources sector improve.
With the persistent uncertainty over longer term commodity prices and the current cost-cutting focus within the resources industry, MDM continues to operate in a challenging business environment. We recognise that our clients require innovative, creative thinking and we remain cognisant that companies are looking for "value for money" projects which entail margin pressure as well as innovative commercial structuring. MDM believes that its flexible approach through its Engineering, Procurement and Construction Management (EPCM) business model puts the Company in a strong position to be successful despite this challenging environment.
Due to the MIA in place between MDM and FW, the Group will not be declaring any final dividend at this point. The full year dividend for FY2014 is US 8.00 cents per share.
Stability
MDM's staff numbers have remained at very similar levels to those of last year. Our focus on quality skills retention has translated into most of our senior members remaining on our books for a number of years leading to a pleasing maturing and stability of manpower strength. The critical skills turnover rate continues at a low, but acceptable level for the industry. This is a result of the culture and working environment that has been nurtured within the Company and enables MDM to achieve its strategic goals and maintain its high-quality performance across all of its operations and skill sets.
As at 31 March 2014, MDM had a healthy cash balance of US$ 23.7 million, which includes a restricted cash amount of US$ 5.1 million; the executive management team continues to maintain a cautious cash management practice. The current order book is at similar levels to that of a year ago and the team remains highly focused on increasing the current project pipeline further to sustain the positive organic growth demonstrated to date. MDM's success has not only been achieved through its proactive marketing strategies but also by an increased appetite from the Company's clients to maintain the relationships from the development phases of the projects right through to commissioning.
Thank you
I would like to take this opportunity to thank my fellow board members as well as the entire staff under the able leadership of Martin Smith for all the hard work and dedication that they have put in, once again, over the last year, as well as thanking our clients for their support.
Prospects
We look forward to closing the deal with FW and becoming part of a global engineering firm where we can help contribute to long-term organic growth and value creation for its clients, shareholders and employees.
Notwithstanding the difficult environment which the resources sector continues to experience, MDM foresees that its positive trading position will continue in the FY2015 year on the back of our current order book. Potential clients continue to look for engineering houses that can meet their expectations; it is in this regard that MDM believes that its ability to listen, design with purpose and deliver beyond expectation stands the Company in good stead.
Bill Nairn
Non-Executive Chairman
04 August 2014
CEO'S REVIEW
MDM has had a good operating year in spite of a depressed commodity market, characterised by the low gold price, lower commodity demands in China and labour disputes in the platinum sector in South Africa. MDM achieved a pre-tax profit of US$ 12.2 million and maintained a strong cash balance of US$ 23.7 million, inclusive of a restricted cash amount of US$ 5.1 million, for the year ending 31 March 2014 ("FY2014"). MDM declared an interim dividend in December 2013 of US$ 8.00 cents per share, which included a special dividend of US$ 3.65 cents per share.
The Company is performing well as an established brand in a depressed market, both in upfront feasibility studies and follow-on execution projects. MDM's core focus remains the African continent where it designs and builds fit-for-purpose metallurgical plants to suit our clients' needs. Over the years MDM has built a strong basis for repeat business with key clients, which is visible in the annual results.
MDM has ventured into Central America by successfully building a silver tailings retreatment plant in Parral, Mexico for one of our key clients. This will be followed by another project in Mexico for the same client in the near future, making this region a viable expansion focus for the Company. MDM continues into FY2015 having completed its large construction projects, with the future order book characterised by an increase in smaller execution projects as the industry realigns to upgrading existing facilities rather than building new green fields large developments. The project pipeline for FY2015 and beyond remains robust.
In March 2014, MDM announced it had entered into a merger implementation agreement ("MIA") with Foster Wheeler AG (Nasdaq: FWLT) ("FW") under which Foster Wheeler's BVI subsidiary, Foster Wheeler M&M Limited, will acquire all of the ordinary shares in MDM. FW is a global engineering and construction company and power equipment supplier delivering technically advanced, reliable facilities and equipment. The company's Global Engineering and Construction Group designs and constructs leading-edge processing facilities for the upstream oil and gas, LNG and gas-to-liquids, refining, chemicals and petrochemicals, power, minerals and metals, environmental, pharmaceuticals, biotechnology and healthcare industries. The MIA has been signed by both parties and as per the terms and conditions the proposed merger has been submitted to the relevant regulatory bodies for approval. The target date for conclusion is during the third quarter of 2014.
Safety
Safety on all our project execution sites remains the top priority for the Company. MDM employs skilled safety management and supervisory staff to manage safety awareness, training and monitoring of safe work practices for all work areas.
MDM creates further awareness by distributing a weekly safety bulletin, highlighting high risk areas and tendencies as well as sharing the safety statistics with our people on the ground.
The Company's safety Disabling Injury Frequency Rate ("DIFR") overall performance, company-to-date, was 0.15 at the end of May 2014, well below both the Company's target of 0.25 and industry average of 0.50. The DIFR is calculated on a 200,000 man-hour base.
Operational feedback on projects
MDM has been actively constructing six metallurgical plants in FY2014. Five of these plants will continue to be constructed in FY2015 with most of them to be completed in the first half of the financial year. New execution projects have been added to the project profile, which will provide a good project pipeline into the next two years and beyond.
The execution projects due for completion in the first half of FY2015 are:
-- African Barrick Gold - Bulyanhulu Gold Mine
o Bulyanhulu Process Plant Expansion project located in Tanzania;
o 2.4 million tonne per annum ("Mtpa") carbon in leach ("CIL") gold plant processing historical tailings and current floatation tailings;
o EPC execution contract signed in December 2012; and
o Commissioning in progress, production due to start in July 2014.
-- Banro Corporation - Namoya Gold Mine
o Namoya Gold Process Plant project located in the South Kivu province, Democratic Republic of Congo ("DRC");
o 2 Mtpa wet crushing plant with associated primary gravity gold recovery, heap leach processing of coarse product and CIL treatment of fines;
o EPCM execution contract with fixed fee, executed in conjunction with owner's team;
o First teams were mobilised to site in May 2012 prior to commissioning in early 2014;
o Currently MDM assists Banro with plant optimisation; and
o The project was previously delayed, due to financial constraints, but is now producing gold.
-- Kalagadi Resources - Umtu Manganese Mine
o Umtu Sinter Plant project located near Kuruman, South Africa;
o 3 Mtpa manganese crushing, screening and sintering process plant;
o EPCM contract awarded in November 2010;
o Completion scheduled for last quarter of 2014;
o Early feed into the plant is being commissioned while the crushing and screening plant is under construction; and
o The project was slowed down due to financial constraints and now targeting completion in 2014.
-- Foskor - Phosphate Processing Facility
o Foskor D-Bank Floatation Plant Replacement project located in Phalaborwa, South Africa;
o 5.1 Mtpa D-Bank floatation plant replacement;
o EPCM contract awarded in April 2012;
o Completion scheduled for Q4 2014; and
o Mechanical equipment and plate-work are installed, with piping, electrical and instrumentation disciplines progressing.
-- GoGold - Silver Tailings Retreatment Plant
o GoGold Resources, Parral Silver Tailings project located in Parral, Mexico;
o 1.8 Mtpa silver and gold tailings agglomeration, heap leach & Merrill Crowe process;
o EPCM contract awarded in July 2013;
o First silver and gold bar poured in June 2014; and
o Completion of plant scheduled for July 2014.
New execution work secured for FY2015:
-- Sibanye Gold - Driefontein DP2 CIL plant
o Sibanye Gold, DP2 CIL Plant project located in North West province, South Africa;
o 2.2 Mtpa CIL process plant;
o EPCM contract awarded in April 2014;
o Construction started on site in May 2014; and
o Completion of plant scheduled for last quarter of 2014.
-- Royal Bafokeng Platinum - BRPM UG2 250 kilo tonne per month ("ktpm") Blending Project
o Royal Bafokeng Platinum, platinum processing facility upgrade located in North West province in South Africa;
o 3 Mtpa process plant, upgrade screening and blending of existing facility capacity from 200 to 250 ktpm ;
o Definitive Feasibility Study ("DFS") completed in May 2014;
o Early procurement, engineering and construction activities commenced; and
o Completion of execution project due last quarter 2015.
-- Petra Diamonds - Cullinan Mill Upgrade Phase 1
o Petra Diamonds, diamond recovery plant located in Pretoria, South Africa;
o New plant to process 4 Mtpa of underground kimberlite ore with the potential to process a further 4 Mtpa of historical tailings; process will include Fully Autogenous Grinding and sorting of three different size fraction from 75mm to 12mm for both diamond concentrate and waste removal;
o Fast track Front End Engineering & Design ("FEED") awarded in May 2014;
o Procurement and construction to start in last quarter 2014; and
o Completion scheduled for Phase 1 scheduled for last quarter 2015.
Several other opportunities for further projects starting later in 2014 have been identified which will continue to fill the execution pipeline in 2015 and beyond.
Strategically, MDM strives to continue executing projects in Africa with a specific focus on West, Central and East Africa. The Company currently has registered legal entities in Ghana, the DRC and Tanzania as well as Mauritius to facilitate work outside South Africa. MDM successfully built a project for GoGold in Mexico and sees Mexico as a country of natural progression where potential work matches its skill set.
Feasibility studies
One of MDM's key strategies is to secure studies with a high probability of becoming execution projects. MDM has a high conversion rate with approximately 90% of studies becoming projects. The scoping and feasibility studies are calculated on a man-hour reimbursable basis and provide a base workload contributing to the recovery of company overhead costs.
During the 12 month period, MDM completed, or is in progress of completing a number of DFSs, providing a Control Budget Estimate ("CBE") with an accuracy of +-10% as a deliverable to the client, of which some have the potential to result in large execution projects going forward:
-- Royal Bafokeng Platinum, BRPM 100 ktpm new concentrator plant. This forms part of the 250 ktpm upgrade of existing plant and planned execution starts first quarter of 2015.
-- Hummingbird Resources, Dugbe 1 Project in Liberia, which consist of a 3.5 Mtpa milling, CIL elution and detox gold plant for gold.
-- Sable Mining, Nimba Iron Ore project in Liberia and Guinea for a 3 Mtpa crushing and screening plant with rail infrastructure.
MDM continues to secure studies and projects in various commodities and has experienced a steady flow of requests to tender for this work, despite the current slow commodity expansion cycle.
Staffing and project resources
Our core staff complement at the end of March 2014 was 248 people, with 202 employees' office based and 46 employees located on project construction sites on a full time basis. This is a similar level to that in the previous year.
Execution projects outside South Africa are typically resourced with key MDM construction managers and functional supervisors, overseeing local in-country sub-contractors doing the physical construction. On selected projects MDM will do multi-discipline construction by hiring direct field labour and construction equipment.
The industry is currently under pressure for experienced personnel and MDM has continued to focus on attracting quality engineering skills and refining standard procedures, both in engineering and project management, to ensure consistent and good quality project execution. We remain pleased with our staff retention level.
The Company is recruiting young qualified trainees to supplement the future resource pool. The trainees are enrolled into an internal mentorship programme to guide them in their careers. Internal training over the broad spectrum of services is critical to the Company's success.
Dividend policy
In December MDM announced its interim results for the year ended 30 September 2013 and declared an interim dividend of US$ 8.00 cents per share, which included a special dividend of US$ 3.65 cents per share. Due to the pending transaction with Foster Wheeler it has been decided at this stage not to pay a final dividend.
Contracting strategies and project execution risk
MDM is conscious that each project contract it enters into comes with a different risk profile. The executive management team, together with the Board, reviews all project opportunities against the relevant risks. Risks are typically related to safety, payment by the client, process guarantees, scope definition and project cost estimate, scope control and change management, investment codes, foreign country taxes, market stability in terms of supply prices and resource availability, physical access and infrastructure, security, country and location of the project, logistics and other external factors. Funding accessibility, cash flow and international financial stability can also influence a project negatively.
In most cases potential risks can be mitigated by identifying them upfront and based on the uncertainty, allocate contingency measures, being monetary or actions like more upfront test work, with relative success. MDM carefully assess each project on merit and then negotiates a suitable contracting methodology to suit the risk and associated reward. Typically, MDM will prefer an EPCM (reimbursable man-hour services) contract on a project with lower scope definition or in remote locations with many unknowns, whereas a well-defined scope already designed in detail, might be attractive to contract on a Lump Sum basis at higher margins. In this case MDM will own most of the risk.
The best risk profile for MDM is to have a combination of EPCM and Lump Sum Turnkey ("LSTK") type projects, which balances the risk and reward profile.
Strategic focus
MDM's strategy is to focus on projects in Africa and Mexico, supporting clients in their growth, ensuring repeat business by delivering quality, fit-for-purpose projects.
MDM has recognised the benefit of having an association with a global engineering and construction company which can provide access and support into other markets, supporting our growth strategy. Based on this strategy, MDM has entered into an MIA with Foster Wheeler which is scheduled for conclusion late August 2014. The MDM Group will be merged with Foster Wheeler Metals & Minerals, registered in BVI. MDM will therefore delist from AIM as it is integrated into Foster Wheeler. Further details of the transaction are available from www.mdm-engineering.com and www.fwc.com.
It is the expectation of the Company that MDM will continue to operate under its current brand name and keep its existing offices.
Financial overview
MDM had a successful year on the back of a strong order book in FY2014. The Company saw the cancellation of quite a few large projects in 2013 with the fall of the gold price, specifically the Gold Fields Tarkwa Expansion Project. Despite this, MDM managed to meet its budget and forecasted profit before tax for FY2014.
Conclusion
MDM has successfully built large scale projects which prove that the Company's structure, operating model and hands-on culture is exactly right to grow its market share. MDM has been subjected to fluctuations in the commodity prices and FY2014 has been tough for the mining services industry, however the Company has managed to steer itself forward with very acceptable results. We see the next 12 months also as subdued but will continue to target projects where we believe we can make a difference and deliver fit-for-purpose and cost effective opportunities. Foster Wheeler is a pre-eminent global engineering company, that endorses the quality of MDM's business and we look forward to concluding the documentation in August and further developing the business as part of the wider Foster Wheeler Group.
Martin Smith
Chief Executive Officer
04 August 2014
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 March 31 March 2014 2013 Notes US$ US$ Assets Non-current assets 1 565 127 1 678 105 Property, plant and equipment 3 475 419 808 527 Intangible assets 4 13 371 20 716 Deferred tax asset 5 1 076 337 848 862 ========== ============ 44 909 59 701 Current assets 062 399 15 764 24 191 Trade and other receivables 6 942 154 Gross amounts due from customers 13 5 150 086 - Income tax receivable 298 857 912 317 Restricted cash 7 5 067 779 4 966 046 18 627 29 631 Cash and cash equivalents 7 398 882 ========== ============ 46 474 61 379 Total assets 189 504 ========== ============ Equity and liabilities Capital and reserves attributable to equity 26 712 27 702 holders of the parent 120 689 Share capital 8 374 591 374 591 Treasury shares 9 (177 276) (177 276) Foreign currency translation (3 682 (1 426 reserve 10 065) 625) 30 196 28 931 Accumulated profit 870 999 ========== ============ Non-current liabilities 17 636 940 503 Deferred tax liability 5 - 910 011 Interest bearing liability 11 17 636 30 492 ========== ============ 19 744 32 736 Current liabilities 433 312 16 503 15 292 Trade and other payables 12 557 052 Gross amounts due 12 106 to customers 13 - 883 Current portion of interest bearing liability 11 8 997 17 809 Provisions 14 2 403 311 3 228 852 Income tax payable 828 568 2 090 716 ========== ============ 46 474 61 379 Total equity and liabilities 189 504 ========== ============
These financials were approved and authorised for issue by the Board of directors on 4 August 2014
and were signed on its behalf by:
Martin Smith: Dominique de la Roche:_______________
CONSOLIDATED INCOME STATEMENT
Year Year Ended Ended 31 March 31 March 2014 2013 Notes US$ US$ 108 705 137 198 Revenue 542 843 (84 531 (104 238 Cost of sales 678) 909) ========= ========= 24 173 32 959 Gross profit 864 934 (13 299 (13 606 Operating expenses 507) 648) Other income 634 259 549 490 ========= ========= 11 508 19 902 Operating profit 616 776 Investment income 15 718 896 498 511 Financial expense 16 (20 488) (10 736) ========= ========= 12 207 20 390 Profit before taxation 17 024 551 (1 847 (6 239 Taxation 18 383) 609) Profit for the year attributable to equity 10 359 14 150 holders of the parent 641 942 ========= ========= Earnings per share: Basic earnings per share - US cents 19 27.66 37.78 Diluted earnings per share - US cents 19 27.13 36.99 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 10 359 14 150 Profit for the year 641 942 Other comprehensive income that may be reclassified to income statement: Exchange differences on translation of foreign (2 255 (2 731 operations 440) 360) Total comprehensive income for the year attributable to equity holders of the 11 419 parent 8 104 201 582 ============ =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Foreign currency Retained Treasury Total capital translation Earnings Shares reserve US$ US$ US$ US$ US$ 374 (177 20 966 Balance at 1 April 2012 591 1 304 735 19 464 881 276) 931 14 150 Profit for the year - - 14 150 942 - 942 Foreign currency translation (2 731 differences - (2 731 360) - - 360) Total comprehensive income attributable to equity 11 419 holders of the parent (2 731 360) 14 150 942 - 582 ======================================= ================ =========== ======== ====== 262 Share option charge - - 262 592 - 592 (4 946 Dividends paid - - (4 946 416) - 416) 374 (177 27 702 Balance as 31 March 2013 591 (1 426 625) 28 931 999 276) 689 ============================= ======== ================ =========== ======== ====== 374 (177 27 702 Balance at 1 April 2013 591 (1 426 625) 28 931 999 276) 689 10 359 Profit for the year - - 10 359 641 - 641 Foreign currency translation (2 255 differences - (2 255 440) - - 440) Total comprehensive income attributable to equity holders of 8 104 the parent - (2 255 440) 10 359 641 - 201 ============================= ==== =========== =========== ===== ====== 260 Share option charge - - 260 166 - 166 (9 354 Dividends paid - - (9 354 936) - 936) 374 (177 26 712 Balance as 31 March 2014 591 (3 682 065) 30 196 870 276) 120 ============================= ==== =========== =========== ===== ====== CONSOLIDATED CASH FLOW STATEMENT Year Year Ended Ended 31 March 31 March 2014 2013 Notes US$ US$ Cash flows from operating 9 151 activities (488 562) 026 ========== ========== 9 151 Cash generated by operations 20 (488 562) 026 ========== ========== Cash flows from investing activities 621 705 (22 337) ========== ========== Acquisition of property, plant and equipment (76 703) (510 112) Net interest received 698 408 487 775 ========== ========== Cash flows from financing (9 376 (4 976 activities 604) 679) ========== ========== (9 354 (4 946 Dividends paid 936) 416) Long term loans repaid (21 668) (30 263) ========== ========== Net (decrease) / increase (9 243 4 152 in cash and cash equivalents 461) 010 (1 761 (2 789 Foreign exchange differences 023) 532) Cash and cash equivalents 29 631 28 269 at the start of the year 882 404 ========== ========== Cash and cash equivalents 18 627 29 631 at end of year 398 882 ========== ==========
NOTES TO THE FINANCIALS
NOTES TO THE FINANCIAL STATEMENTS
1.General information
MDM Engineering Group Ltd ("the Company") is a company incorporated in the British Virgin Islands. The Company and its subsidiaries ("the Group") are involved in minerals process engineering and project management. The principal operations are currently based in South Africa. Services include preliminary and final (bankable and definitive) feasibility studies, through to plant design, construction and commissioning.
The individual financial statements of the Group companies are presented in the currencies of the primary economic environment in which they operate. For the purpose of the consolidated financial statements, the results and financial position of the Group are presented in US dollars (US$).
2.Accounting policies
Basis of preparation
These financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS) as adopted by the European Union. The principal accounting policies are set out below and are consistent in all material respects with those applied in the previous year; except where otherwise indicated.
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts in the financial statements. The areas involving a higher degree of judgment or complexity, or areas where assumptions or estimates are significant to the financial statements are disclosed in the relevant notes.
Going concern
The directors regularly review cash flow forecasts of the Group to determine whether the Group has sufficient cash reserves to meet the future working capital requirements. When compared to last year, the Group's current order book is at similar levels to that of the previous year at the same time.
The Group still continues to see many requests for proposal and tenders from various commodities, despite this current difficult time experienced in the resources sector.
The forecasting of the business and cash flow numbers do require a set of assumptions and carries certain risks in that those studies and projects are included in the forecasting in anticipation of their being awarded. Clearly, should these not eventuate then the forecast numbers for a given year will be different.
The Board of directors are of the opinion that the Group, using actual secured studies and projects, will have the necessary cash resources to meet the current working capital requirements. The consolidated financial statements are prepared on the assumption that the Group is a going concern on the basis that the directors are satisfied that sufficient financial resources will be available to meet the Group's current and foreseeable working capital needs.
Standards in issue, not yet effective
Certain standards, amendments to published standards and interpretations have been issued that are mandatory for accounting periods beginning on or after 1 January 2014 or later periods, but which the Company has not early adopted.
At the reporting date of these financial statements, the following were in issue but not yet effective:
-- IFRS 9 Financial Instruments -- IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) -- Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) -- IFRIC 21 Levies -- Recoverable Amount Disclosures for Non-financial assets (Amendments to IAS 36) -- Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) -- IFRS 9 Financial instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) -- Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) -- Annual Improvements to IFRSs 2010-2012 cycle -- Annual Improvements to IFRSs 2011-2013 cycle -- IFRS 15 Revenue from contracts with customers.
Where relevant, the Company is still evaluating the effect of these Standards, amendments to published Standards and Interpretations issued but not yet effective, on the presentation of its financial statements.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies.
Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company makes estimates, assumptions and significant judgments concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Accounting for long term contracts
The Company makes estimates and judgments concerning the future, particularly as regards long term contract profit taking, provision, arbitrations and claims. The resulting accounting estimates can, by definition, only approximate the actual results. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Share-based payments
The Group issues equity-settled share-based payments. Equity-settled share-based payments are measured at fair value at the date of the grant. The fair value and the vesting period uses management assumptions in their calculation.
While management believes the assumptions used are appropriate, a change in the assumptions used would impact the results of the Group.
Carrying value of debtors
At each reporting period end, the Group makes estimates and judgments regarding the carrying value of debtors based on the age of the debtor, the financial position of the customer, expected payment profile and views on the customer being able to raise future finance. The resulting accounting estimate may not reflect the actual amount receivable and any difference may have a significant impact on reported results.
Consolidation policy
The consolidated financial statements combine the financial statements of the individual entities comprising the Group.
The effects of all transactions between entities in the Group have been eliminated in full and the consolidated financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances.
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies so as to obtain benefit from their activities. Subsidiaries are fully consolidated from the date on which control is transferred until the date that the control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.
Revenue recognition
Revenue for services rendered is recognised as services are rendered. Revenue is not recognised when it cannot be measured reliably or where there are significant uncertainties regarding the recovery of the consideration due, associated costs or continuing management involvement with the services rendered.
Construction contracts
A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions, or their ultimate purpose or use. Contract costs are recognised when incurred. When the outcome of the construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of the contract expenses incurred that are likely to be recoverable. When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised using the percentage of completion method. When it is probable that the total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
The Group uses the 'percentage of completion method' to determine the appropriate revenue to recognise in a given period. The stage of completion is measured with reference to the contract costs incurred up to the reporting date as a percentage of total estimated costs for each contract.
The Group presents as an asset the gross amounts due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retentions are included in trade and other receivables.
The Group presents as a liability (excess billings over work done) the gross amounts due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).
Leases
A distinction is made between finance leases which transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of the leased asset and operating leases under which the lessor retains substantially all the risks and rewards. Where an asset is acquired by means of a finance lease, the fair value of the leased property or the present value of minimum lease payments, if lower, is established as an asset at the beginning of the lease term.
A corresponding liability is also established and each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. Operating lease rental expense is recognised as an expense on a straight line basis over the lease term, or on a systematic basis more representative of the time pattern of the user's benefit.
Taxation
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.
Deferred tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is determined using tax rates enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
Deferred tax liabilities are recognised for all taxable temporary differences, except in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Impairment of assets
The Group assesses at each balance sheet date whether there is any indication that any of its assets have been impaired. If such indication exists, the asset's recoverable amount is estimated and compared to its carrying value.
Impairment losses are immediately recognised as an expense in the income statement, unless the relevant asset is carried at a revalued amount in which case the impairment loss is treated as a revaluation decrease. A reversal of an impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Translation of foreign currency transactions
Transactions in foreign currencies on initial recognition in the functional currency are recorded by applying to the foreign currency amount the spot exchange rate at the date of the transaction. At each balance sheet date:
(a) foreign currency monetary items are reported using the closing rate; and
(b) non-monetary items which are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially translated during the period are recognised in the income statement in the period in which they arise.
Translation of the financial statements of foreign operations
The following procedures are used in translating the results and financial position of the entity from its functional currency to the presentation currency:
(a) assets and liabilities at the closing rate at the balance sheet date;
(b) income and expense items at exchange rates at the dates of the transactions; and
(c) all resulting exchange differences recognised as a separate component of equity.
Exchange differences arising on a monetary item that forms part of the net investment in a foreign operation are recognised initially in a separate component of equity and recognised in profit or loss on disposal of the net investment.
Trade and other receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairments. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Property, plant and equipment
These assets are stated at cost and are depreciated on the straight-line basis at annual rates considered appropriate to reduce book values to estimated residual values over the remaining useful lives as follows:
Computer equipment - 33.3% Furniture and fittings - 16.67% Leasehold improvements - over period of lease Motor vehicles - 20% Office equipment - 20% Plant and equipment - 20%
Residual values and useful economic lives are reassessed on an annual basis.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and any possible impairment losses. The intangible asset is amortised over 10 years on the straight line method and charged to the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments that are convertible to a known amount of cash.
Trade and other payables
Trade accounts, notes payable, other payables and accrued liabilities represented the principal amounts outstanding at balance sheet date plus, where applicable, any accrued interest.
Short-term employee benefits
Short term employee benefits are employee benefits (other than termination benefits and equity compensation benefits) which fall due wholly within 12 months after the end of the period in which employee services are rendered. They comprise wages, salaries, social security obligations, short-term compensation absences, profit sharing and bonuses payable within 12 months and non-mandatory benefits such as medical care, housing, car, and service goods.
The undiscounted amount of short-term employee benefits expected to be paid is recognised as an expense.
Share-based payment arrangements
Goods or services received or acquired in a share-based payment transaction are recognised as an increase in equity if the goods or services were received in an equity-settled share-based payment transaction or as a liability if the goods and services were acquired in a cash settled share-based payment transaction.
For equity-settled share-based transactions, goods or services received are measured directly at the fair value of the goods or services received provided this can be estimated reliably.
If a reliable estimate cannot be made the value of the goods or services is determined indirectly by reference to the fair value of the equity instrument granted. The Black - Scholes model is used in the determination of the fair value at the date of measurement for equity-settled share-based transactions.
Transactions with employees and others providing similar services are measured by reference to the fair value at grant date of the equity instrument granted and are charged to the income statement over the vesting period of the equity instrument.
Provisions
Provisions are recognised in the balance sheet when there is a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.
Segmental Reporting
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.
3 Property, plant and equipment Year Year Ended Ended March March 2014 2013 US$ US$ Computer equipment 1 082 Cost 1 130 568 787 (658 Accumulated depreciation (903 332) 804) Net book value 227 236 423 983 ========== ========= Furniture and fittings Cost 263 152 256 294 (118 Accumulated depreciation (168 137) 370) Net book value 95 015 137 924 ========== ========= Lease improvements Cost 195 674 185 968 Accumulated depreciation (133 911) (76 556) Net book value 61 763 109 412 ========== ========= Motor vehicles Cost 244 559 232 377 (129 Accumulated depreciation (171 103) 234) Net book value 73 456 103 143 ========== ========= Office equipment Cost 90 584 90 407 Accumulated depreciation (73 277) (57 525) Net book value 17 307 32 882 ========== ========= Plant and equipment Cost 5 737 5 737 Accumulated depreciation (5 095) (4 554) Net book value 642 1 183 ========== ========= Total property, plant and equipment 1 853 Aggregate cost 1 930 274 570 Aggregate accumulated (1 454 (1 045 depreciation 855) 043) ---------- --------- Aggregate net book value 475 419 808 527 ---------- 3 Property, plant and equipment (continued) 2014 Net Additions Disposals Depreciation Translation Net book difference book value value 1 April 31 2013 March US$ 2014 US$ Computer 423 (198 (45 227 equipment 983 56 567 (8 786) 669) 859) 236 Furniture 137 (16 95 and fittings 924 6 858 - (33 698) 069) 015 Leasehold 109 (12 61 improvements 412 14 338 (4 632) (45 137) 218) 763 103 (15 (12 73 Motor vehicles 143 27 422 241) (29 607) 261) 456 Office 17 equipment 32 882 823 (646) (12 339) (3 413) 307 Plant and equipment 1 183 - - (410) (131) 642 ========== ============ ============ ============== ============== ============= 808 106 (29 (319 (89 475 Total 527 008 305) 860) 951) 419 ========== ============ ============ ============== ============== ============= 2013 Net Additions Disposals Depreciation Translation Net book difference book value value 1 April 31 2012 March US$ 2013 US$ Computer 329 343 (209 (38 423 equipment 668 887 (1 823) 088) 661) 983 Furniture 137 (20 137 and fittings 646 61 164 - (40 790) 096) 924 Leasehold (10 109 improvements 75 325 77 272 - (33 047) 138) 412 155 (22 103 Motor vehicles 971 17 726 - (47 919) 635) 143 Office 32 equipment 34 539 10 859 - (7 219) (5 297) 882 Plant and equipment 874 1 027 - (619) (99) 1 183 ========== ============ ============ ============== ============== ============= 734 511 (338 (96 808 Total 023 935 (1 823) 682) 926) 527 ========== ============ ============ ============== ============== ============= * Some of the motor vehicles are encumbered (refer to note 11) Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ 4 Intangible assets Designs and processes Balance at the beginning of the year 20 716 31 459 Amortisation (4 950) (5 874) Translation difference (2 395) (4 869) ============================== ============= Balance at the end of the year 13 371 20 716 ============================== ============= 5 Deferred tax Deferred tax assets 1 076 Temporary timing differences 337 848 862 ============================== ============= The components of the deferred tax asset are: General provisions 627 611 807 339 Deferred construction income - 2 880 Taxable losses 435 340 - Other 13 386 38 643 ============================== ============= 1 076 337 848 862 ============================== ============= Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ 5 Deferred tax (continued) Reconciliation of deferred tax assets Balance at the beginning 1 187 of the year 848 862 385 (152 Charge for the year 163 981 755) (185 Translation difference 63 494 768) =========== =========== Balance at the end 1 076 of the year 337 848 862 =========== =========== The above deferred tax assets have been recognised as management are of the opinion that the Group will generate adequate future profits against which these deferred tax assets can be reversed. Deferred tax liability The components of the deferred tax liability are: Unremitted distributable reserves of subsidiaries - 910 011 =========== =========== Reconciliation of deferred tax liabilities Balance at the beginning 910 011 - of the year Charge for the year - 989 181 Reversed during the year (910 011) Utilised during the - - year Translation difference - (79 170) =========== =========== Balance at the end of the year - 910 011 =========== =========== At 31 March 2014 the South Africa subsidiary had distributable reserves totaling US$ 13 768 124 (2013: US$ 17 306 750). Nothing has been provided in 2014 (2013: US$ 910 011) in respect of the distributable reserves that could be paid in the foreseeable future. If the reserves were to be distributed an amount of US$ 2 065 219 (2013: US$ 1 686 002) would be payable. No provision has been made for this amount as MDM Engineering Group Limited has control over the timing of the distribution and no payment is likely in the foreseeable future. 6 Trade and other receivables 14 105 23 182 Trade receivables 563 244 Prepayments 106 443 150 884 1 552 Other 936 858 026 =========== =========== 15 764 24 191 942 154 =========== =========== Provision for impairment of debtors Opening balance 124 801 - Provided for in the 1 459 year 441 124 801 Translation difference 99 733 - =========== =========== 1 683 Closing balance 975 124 801 =========== =========== 7 Cash, cash equivalents and restricted cash Cash and cash equivalents 14 898 18 965 Bank balances 903 514 3 723 10 655 Short term deposits 274 914 Cash on hand 5 221 10 454 =========== =========== 18 627 29 631 398 882 =========== =========== Restricted Cash 5 067 4 966 Restricted Cash 779 046 Restricted cash represents guarantees with a South African financial institution against which either performance or retention bonds are issued on certain projects. Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ 8 Share capital Authorised 200 000 000 ordinary shares 2 000 2 000 of USD 0.01 cents each 000 000 Issued 37 459 107 ordinary shares of USD 0.01 each issued and fully paid 374 591 374 591 Reconciliation of the number Number Number of shares outstanding: 37 459 37 459 Opening balance 107 107 Shares issued - - =========== =========== 37 459 37 459 Closing balance 107 107 =========== =========== 9 Treasury shares 177 276 177 276 ----------- ----------- At the annual general meeting held on 4(th) November 2008 the Group was authorised to purchase its own shares. In March 2009 the Group bought back a total of 200 000 shares at a price of 62 pence per share. These shares are currently held as treasury shares. 10 Foreign currency translation reserve (1 426 1 304 Opening balance 625) 735 Translation loss for the (2 255 (2 731 year 440) 360) =========== =========== (3 682 (1 426 Closing balance 065) 625) =========== =========== The translation reserve comprises all foreign exchange differences arising on the translation of the financial statements of foreign operations that do not have a US$ functional currency. 11 Interest bearing liability Installment sales: 17 636 30 492 =========== =========== Amount owing 26 633 48 301 Less: amount payable within 1 year included in current liabilities (8 997) (17 809) =========== =========== The installment sales bear interest at the South African prime bank overdraft rate, plus a margin. These rates are currently at 8.5%. The loans are secured by motor vehicles with a book value of US$ 73 456 (2013: US$ 103 143). The loans are repayable in monthly installments of US$ 1 340 (2013: US$ 1 757), exclusive of interest. Refer to note 3 for details of the assets pledged. Due in less than 1 year 8 997 17 809 Due later than one year but not later than 5 years 17 636 30 492 ============ =========== Total interest bearing liability 26 633 48 301 ============ =========== Year Year Ended Ended 31 March 31 March 2014 2013 12 Trade and other US$ US$ payables 8 455 8 568 Trade payables 316 377 1 021 Other payables 825 689 016 7 222 5 702 Accruals 552 659 ============ =========== 16 503 15 292 557 052 ============ =========== 13 Gross amounts due (from) / to customers Gross amounts due (from) / to (5 150 12 106 customers 086) 883 ------------ ----------- Amounts due from contract customers included in trade and other 2 664 7 957 receivables 422 262 Amounts due (from) / to contract 5 150 (12 106 customers 086 883) ------------ ----------- 7 814 (4 149 508 621) ------------ ----------- Contract costs incurred plus 112 405 25 698 recognized profits to date 795 538 (104 591 (29 848 Less: cash received from customers 287) 159) ------------ ----------- 7 814 (4 149 508 621) ------------ ----------- Gross amounts due to customers represents the excess of amounts billable, less costs incurred to date, plus profit recognized under IAS 11. 14 Provisions Opening balance: 1 995 Bonuses 827 815 620 1 233 Contingency 025 - Provided for the year: 2 599 3 018 Bonuses 985 463 1 320 Contingency 638 881 781 Utilised for the year: (2 953 (1 396 Bonuses 932) 402) Contingency (584 796) - Unused amounts reversed: Bonuses (500) (286 269) Contingency (339 115) - Translation difference: Bonuses (101 273) (155 585) Contingency (84 791) (87 756) Closing balance: 1 540 1 995 Bonuses 107 827 1 233 Contingency 863 204 025 2 403 3 228 Total 311 852 ------------ ----------- Bonuses are a combination of project and company bonus provided during the year. Contingency is the provision as required during the 12 months defects and liability period after the completion of a project. Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ 15 Investment income Interest income 718 896 498 511 ========== ========== 16 Financial expense Interest expense 20 488 10 736 ========== ========== 17 Profit before taxation Profit before taxation is stated after charging / (crediting): Amortisation 4 950 5 874 Auditors remuneration - audit services 146 125 165 573 Consulting fees 173 168 154 325 Depreciation 319 860 338 682 Operating lease expenses 511 852 495 611 Provision for bad 1 459 debts and impairment 441 124 801 Total employee 6 948 6 791 costs 579 734 Share based payments 260 166 262 592 Net exchange rate differences (147 895) 231 622 18 Taxation 2 383 4 947 - Current 238 102 (1 073 1 141 - Deferred 992) 936 - Withholding tax payable 538 137 150 571 ========== ========== 1 847 6 239 383 609 ========== ========== Statutory tax rate 0% 0% Adjustment for : Increase on rate for foreign earnings 16.9% 21.0% Non-deductible expenses 2.8% 2.2% Timing differences (9.5%) 6.9% Withholding taxes 0.1% 0.5% Dividend tax 4.3% - Prior year adjustment 0.5% - Effective tax rate 15.1% 30.6% ========== ========== Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ 19 Basic and diluted earnings per share Basic earnings per share is based on the Group's net profit for the year attributable to equity shareholders divided by the weighted average number of ordinary shares in issue during the year. Net profit attributable 10 359 14 150 to equity holders 641 942 10 359 14 150 Basic earnings 641 942 Basic weighted number 37 459 37 459 of ordinary shares 107 107 Diluted weighted number 38 178 38 257 of ordinary shares 610 482 Basic earnings per share - US cents 27.66 37 78 Diluted earnings per share - US cents 27.13 36.99 Reconciliation of basic weighted average number of ordinary shares to diluted weighted average number of ordinary shares: Basic weighted average 37 459 37 459 number of ordinary shares 107 107 Dilutive effect of weighted average share options 719 503 798 375 =========== =========== Diluted weighted average number 38 178 38 257 of ordinary shares 610 482 =========== =========== At 31 March 2014 there were 4 533 666 (2013: 3 765 166) share options in issue which could have a potential dilutive effect on the base profit per share in the future. 20 Note to the cash flow statement Cash generated by operations 12 207 20 390 Profit before taxation 024 551 Depreciation and amortisation 324 810 344 556 Net exchange rate differences 147 895 (231 622) 2 413 Provisions (825 541) 232 Share based payments 260 166 262 592 Net interest received (698 408) (487 775) (4 183 (3 957 Taxation paid 523) 560) =========== =========== 7 232 18 733 423 974 Working capital (7 720 (9 582 changes 985) 948) Gross amounts due (5 150 - from customers 086) Trade and other 8 426 receivables 212 932 404 (4 117 Restricted cash (101 733) 135) Trade and other 1 211 (8 189 payables 505 440) Gross amounts due (12 106 1 791 to customers 883) 223 =========== =========== 9 151 Cash generated by operations (488 562) 026 =========== =========== 21 Share based payments On the 30th April 2008, the company adopted the Group Global Share Option Plan ("Plan Options"), to allow individuals to be granted the right to acquire ordinary shares in the company. The Board may grant options under the Plan Options to any director, employee of the Group or consultants and contractors providing services to the Group selected by the Board. Plan Options may be granted by the Board at any time when dealing in the ordinary shares is not restricted by law, regulation or applicable guidelines. Options may be exercised over a period of three years, calculated from the first anniversary of the granting of the options and in three equal tranches, with the Plan Options lapsing on the eighth anniversary of the grant date. A maximum of 15% of the company's issued ordinary shares in any 10 year period when added to any other options granted under all Group employee share schemes and similar share option agreements are available under the scheme. The number and weighted average exercise price of the share options is as follows: 2014 Share options Weighted average Number exercise price of options (pence/share) Outstanding at the beginning of the year 120.0 3 765 166 Issued during the year 122.5 793 500 Forfeited during the year 113.9 (25 000) Outstanding at the end of the year 120.3 4 533 666 ================= ============ Exercisable at the end of the year 3 478 333 ============ 2013 Share options Weighted average Number exercise price of options (pence/share) Outstanding at the beginning of the year 120.4 4 204 333 Forfeited during the year 126.4 (439 167) Outstanding at the end of the year 120.0 3 765 166 ================= ============ Exercisable at the end of the year 2 971 491 ============ Options granted during the year 793 500 options have been granted during the year. The options outstanding at 31 March 2014 have an exercise price in the range of 58 pence to 178 pence and a weighted average contractual life of 3.96 years (2013: 4.09 years). The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the share options granted is calculated using the Black - Scholes model. Options are stated in Pounds sterling as the company is listed on the AIM market of the London Stock Exchange. The fair values for the options issued during 2014 were calculated using the Black - Scholes option pricing model. The inputs into the model were as follows: Share price 122.5p Exercise price 122.5p Expected volatility 56.9% Expected life (years) 8 years Risk-free rate (%) 1.5% Expected dividend yield (%) 9.5% The Group recognised total expenses of US$ 260 166 (2013: US$ 262 592) related to equity share based payment transactions during the year. 22 Financial instruments The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of equity balances. The Group's overall strategy remains unchanged from 2013. Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ Capital risk management Interest bearing debt (26 633) (48 301) 18 627 29 631 Cash and cash equivalents 398 882 5 067 4 966 Restricted cash 779 046 ============ =========== 23 668 34 549 Net funds 544 627 26 712 27 702 Equity 120 689 ============ =========== Categories of financial instruments Financial assets Loans and receivables 18 627 29 631 Cash and cash equivalents 398 882 5 067 4 966 Restricted cash 779 046 15 658 24 040 Receivables 499 270 Gross amounts due from 5 150 - customers 086 Financial liabilities 16 530 15 340 At amortised cost 190 353 In the opinion of the directors, the fair value of all financial instruments are not materially different from their book values at year end. Cash and cash equivalents all have a maturity of 32 days or less (2013: 32 days or less) and restricted cash has a maturity of 2 months or longer (2013: 2 months or longer) Financial liabilities repayable within 1 year amount to US$ 17 341 122 (2013: US$ 29 507 460) and the balance of US$ 17 636 (2013: US$ 30 492) is repayable after the 1 year period. Financial risk management objectives Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk. In respect of cash deposits, the Group's policy is to use the services of a range of large banks with high credit ratings. The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of any allowances for doubtful receivables and impairment of US$1 683 975 (2013: US$ 124 801), estimated by the Group's management based on the current economic environment and the payment track records. The Group has amounts due from a major customer at year end that represent more than 35% of the trade receivables balance. This was reduced to 26% after year end. Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ Trade receivables ageing 6 364 11 604 Current trade receivables 320 191 2 247 2 116 Amounts in 30 to 60 days 008 913 1 650 Amounts in 60 to 90 days 878 873 210 4 615 7 810 Amounts in 90 days + 362 930 ============ =========== 14 105 23 182 Total 563 244 ============ =========== 22 Financial instruments (continued) The amounts over 30 days are considered overdue, but not impaired. Included in the above 90 days + balance are amounts of US$ 3 335 111 from Namoya, US$ 682 493 from Kalagadi Manganese and US$ 381 394 from Tharisa. US$ 700 000 was received from Namoya after year end and US$ 2 042 915 from Kalagadi Managanese. At the year end, an amount of US$ 7 130 259 was owed by Namoya Mining SARL, (a wholly owned subsidiary of Banro Corporation Limited). This amount is not disputed by the client however the Namoya project is in final stages of commissioning and plant optimisation and has experienced operational issues with expected gold production being below expectation due to the ore composition being different from the original test work being fed to the plant. The operational issues have influenced on the amount of cash being generated by the client and their ability to service their financial obligations. These problems have meant that payment of the amounts outstanding has been deferred and as a result an impairment of US$ 849 612 has been recorded to reduce the carrying value to the estimated fair value. Management continue to work with Namoya to overcome the operations issues so that cash flow will improve allowing for repayment of the debtor and are hopeful full settlement will occur. However there are risks associated with the development, financing and operation of a mine that could restrict the ability of the client to pay the amount owed or mean that the timing of repayments is not as envisaged. The outcome of the matter cannot presently be determined, and the value of the debtor recovered may vary significantly from that included in the financial statements. Market risk The Group's activities expose it primarily to risk in changes to commodity prices. The risk of these changes is that possible execution by potential clients in the market are slowed down, postponed or stopped until such time that the commodity market recovers. Currently the Group's order book is similar to that of the previous year at this time. Management therefore consider the market risk to be similar to the market risk when compared to last year. Management through active marketing look to continually reduce this risk on the Group's business. Foreign currency risk The Group undertakes certain transactions in foreign currencies. Hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters. The impact on profit and loss should there be a 10% movement on currency is US$ 278 231 (2013: US$ 799 395). Further to the above the Group operates a foreign operation with a functional currency of ZAR and a 10% movement on the currency will have a US$ 7 775 (2013: US$ 107 077) impact on equity. Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ Cash, cash equivalents and restricted cash are held in the following currencies: 10 045 8 907 US Dollars 623 985 South African Rand (ZAR: US$ 13 624 25 641 = 10.5953) 042 216 Other 25 512 48 727 ============ ======================== 23 695 34 597 177 928 ============ ======================== Interest rate risk The Group is exposed to interest rate risk as entities within the Group borrow funds at floating interest rates. Management however believe this amount to be immaterial due to the value of the interest bearing debt as well as assets on the balance sheet. Liquidity risk Ultimate responsibility for liquidity risk management rests with the Board of directors, which has built an appropriate liquidity risk management framework for the management of the Group's short term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and banking facilities by continually monitoring forecast and actual cash flows and matching maturity profiles of financial assets and liabilities. Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ 23 Directors emoluments Executive directors 1 265 1 392 Emoluments 181 218 Share based payment 103 173 105 478 ============ ========== 1 368 1 497 354 696 ============ ========== Non-executive directors Fees 147 651 93 312 147 651 93 312 ============ ========== 1 516 1 591 Total 005 008 ============ ========== Individual director's emoluments 2014 Executive Basic Bonuses Vehicle Total salary allowances year ended and 31 March leave 2014 pay 153 Mr M T Smith 300 456 833 - 454 289 150 Mr G S J Bennett 270 453 578 - 421 031 Mr D C de la 140 Roche 243 164 757 5 940 389 861 445 1 265 Total 814 073 168 5 940 181 ========== =========== ============ ============ Non-executive Fees Bonuses Total for year ended services 31 March 2014 Mr W A Nairn 58 440 29 132 87 572 Mr M R Summers 40 053 20 026 60 079 =========== ============ ============ Total 98 493 49 158 147 651 =========== ============ ============ 2013 Executive Basic Bonuses Vehicle Total salary allowances year ended and 31 March leave 2013 pay 177 Mr M T Smith 334 221 942 - 512 163 175 Mr G S J Bennett 280 181 018 - 455 199 Mr D C de la 147 Roche 270 118 701 7 037 424 856 500 1 392 Total 884 520 661 7 037 218 ========== =========== ============ ============ Non-executive Fees Total for year ended services 31 March 2013 Mr W A Nairn 55 309 55 309 Mr M R Summers 38 003 38 003 ============ ============ Total 93 312 93 312 ============ ============ 23 Directors emoluments (continued) 2014 share Total Options Options Average Total options 1 April granted lapsed option 31 March 2013 price 2014 pence 125 Mr M T Smith 425 000 000 - 109.7 550 000 125 Mr G S J Bennett 775 000 000 - 132.4 900 000 Mr D C de la 125 Roche 300 000 000 - 115.2 425 000 Mr M R Summers 250 000 - - 145.0 250 000 ========= ========= ======== ========== 1 750 375 2 125 Total 000 000 - 000 ========= ========= ======== ========== Directors' interest in shares As at 31 March 2014, none of the directors held any shares in the capital of MDM Engineering Group Limited, other than Mr WA Nairn who held 75 000 ordinary shares (2013: 75 000). The directors are the only key management of the Group. 24 Segmental reporting The following information is given about the Group's reportable segments: IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. The Group has only one business segment and this is the supply of engineering services. Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ Geographic information: Revenue 46 406 29 433 Mauritius 013 203 38 065 9 427 Tanzania 868 139 21 932 95 631 Republic of South Africa 109 693 Democratic Republic 2 301 1 706 of Congo 552 808 1 000 Ghana - 000 108 705 137 198 Total 542 843 ---------- ---------- Non-current assets The amounts of non-current assets in each of the foreign entities are not material and therefore not disclosed. Major customers: During the current year there were only two customers that accounted for more than 10% of the revenue: 75 587 25 771 Customer A 671 742 79 692 Customer B 35 705 556 Customer C 11 754 - 188 ========== ========== 25 Related parties The remuneration of directors is determined by the Remuneration Committee having regard to their performance and market trends. The remuneration of the directors is disclosed under note 23. 26 Group entities Name Country Ownership Principle of incorporation activity MDM Technical Africa South 100% owned Mineral (Pty) Limited Africa by the process (MTA) Company engineering MDM Engineering Mauritius 100% owned Management Investments by the services Ltd (MDMEInv) Company MDM Engineering Projects Mauritius 100% owned Mineral Ltd by MDMEInv process (MDMEP) engineering MDM Projects - Tanzania Tanzania 99.9% owned Mineral Ltd by MDMEP process (MDM Tanzania) engineering MDM Projects - Ghana Ghana 100% owned Mineral Ltd by MDMEP process (MDM Ghana) engineering STE MDM Engineering DRC 99.0% owned Mineral SPRL by MDMEP process (MDM DRC) Engineering Mexico 99.0% owned Global Mining Projects by MDMEP Mineral and engineering SA process DE CV (MDM Mexico) engineering Year Year Ended Ended 31 March 31 March 2014 2013 US$ US$ 27 Operating lease commitments The Group has entered into a lease commitment to rent premises. The breakdown of the future commitment is as follows: 438 0 - 1 year 306 460 494 150 1 - 5 years 237 673 987 ------------- ------------- 588 Total 543 1 134 481 ------------- ------------- 28 Contingent liability Success fee 1 090 - 000 On 13 March 2014, MDM announced that it had entered into a Merger Implementation Agreement ("MIA") with Foster Wheeler AG (FW) under which FW has made a recommended offer to acquire the entire issued and to be issued share capital of MDM. Under the terms of the acquisition, MDM's shareholders would receive 170 pence in cash for each share. In terms of this MIA various conditions precedent need to be fulfilled prior to the deal closing. In the event that all the conditions precedent are fulfilled, MDM will have an obligation to pay GMP Securities Australia Pty Limited a success fee of 1% of the transaction value which is estimated at US$ 1 090 000. Tanzanian Revenue Authority 8 632 - taxation claim 162 In May 2014 the Tanzanian Revenue authorities issued a jeopardy assessment on MDM Engineering Projects Limited (the Mauritian entity) on the incorrect assumption that this revenue was earned in Tanzania. MDM has established an entity in Tanzania through which it has operated all of its Tanzanian activities. Furthermore MDM Tanzania has complied with all the taxation laws and is up to date with all its direct and indirect taxation in Tanzania. All revenues declared in Mauritius have been earned outside the republic of Tanzania and are therefore not subject to taxation in Tanzania. MDM Engineering projects Limited have objected against the assessment. The Directors believe that this claim has no substance and therefore no provision has been made. 29 Exchange rates The exchange rates used in converting the financial information of subsidiaries from the functional currency of ZAR to the presentation currency are as follows: Year-end rate 10.5953 9.2521 Year average rate 10.1012 8.5116 30 Dividends paid and declared During the year the following dividends were proposed and paid: * A final dividend of US 16.90 cents per share, amounting to US$ 6 342 502 paid in respect of the year ended 31 March 2013. * An interim dividend of US 8.00 cents per share, amounting to US$ 3 012 434 paid in respect of the 6 month interim period to 30 September 2013.
This information is provided by RNS
The company news service from the London Stock Exchange
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