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
END
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