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Contents
01 Directors report24 Consolidated statement o comprehensive income25 Consolidated balance sheet26 Consolidated statement o changes in equity27 Consolidated statement o cash ows28 Notes to the consolidated fnancial statements91 Directors declaration92 Independent auditors report to the members94 Alternative perormance measures
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Our strategy delivered excellent results
in 2012 - we continued to diversiy andgrow, reporting strong fnancial returns.We strengthened leadership roles inkey regions and enhanced our ocuson adding value to our clients.
Our reputation or ingenuitycontinues to drive our success andgrowth into 2013 on the back oour global diversity, comprehensiveservice oering and stronggeographic presence.
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Appendix 4E
Preliminary final report
Appendix 4EPreliminary final report
Name of entity
Ausenco Limited (ASX: AAX)
ABN
31 114 541 114 Current reporting period 31 December 2012
Previous corresponding period 31 December 2011
Results for announcement to the market A$000Current
period
Revenues from ordinary activities Up 15.6% To $633,485
Profit from ordinary activities aftertax attributable to members
Up 57.1% To $41,395
Net profit for the period attributableto members
Up 57.1% To $41,395
Dividends (distributions) Amount per security Franked amount
per security at 30%
tax
Final dividend paid in respect of thefinancial year ended 31 December2012
10.1 cents 5.05 cents
Interim dividend declaredsubsequent to 30 June 2012
10.0 cents 2.4 cents
Previous corresponding period
- Final
- Interim
9.8 cents
3.1 cents
3.4 cents
3.1 cents
Date the final dividend is payable 1 May 2013
Record date for determiningentitlements to the final dividend
17 April 2013
There is no foreign conduit income attributed tothe dividend.
Dividend reinvestment planThe DRP is suspended and not applicable to this dividend.
There is no conduit foreign income attributed to this dividend.
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Appendix 4E
Preliminary final report
Date: 20/02/2013Patrick OConnorCompany Secretary
NOTES:
The information contained in this report is for the full year ended 31 December 2012 and the previouscorresponding period 31 December 2011.
Australian Accounting Standards are utilised when compiling the report.
The accounts have been audited and are not subject to dispute or qualification.
For the full financial statements including commentary on the results, please refer to the financial
report and press release.
NTA backing Current
reporting
period
Previous
corresponding
period
31 December 2011
Net tangible asset backing perordinary security $0.60 $0.61
Details of entities over which control has been gained or lost during the period areincluded in the audited financial statements under note 36.
Details of associates and joint venture entities are included in the audited financialstatements under note 26.
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Ausenco LimitedDirectors' report
31 December 2012Directors' report
Your Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting ofAusenco Limited and the entities it controlled at the end of, or during, the year ended 31 December 2012.
DIRECTORSThe following persons were Directors of Ausenco Limited during the whole of the financial year and up to the dateof this report:
Wayne GossZimi MekaGeorge LloydGreg MoynihanMary Shafer-MalickiBob ThorpeHank Tuten
PRINCIPAL ACTIVITIESDuring the year the principal continuing activities of the Group consisted of the provision of engineering design,project management, process controls and operations solutions to the following sectors:
Energy
Environment & Sustainability
Minerals & Metals
Process Infrastructure
Program Management
DIVIDENDS - AUSENCO LIMITEDDividends paid to members during the financial year were as follows:
2012$'000
2011$'000
Interim ordinary dividend for the financial year ended 31 December 2012 of 10.0cents per share paid on 27 September 2012 12,380 -Final ordinary dividend for the financial year ended 31 December 2011 of 9.8 centsper share paid on 4 April 2012 12,070 -Interim ordinary dividend for the financial year ended 31 December 2011 of 3.1cents per share paid on 21 September 2011 - 3,812
24,450 3,812
Subsequent to the end of the year the Directors have recommended the payment of a final dividend of 10.1 centsper fully paid ordinary share (2011: 9.8 cents), 50% franked based on tax paid at 30%. The aggregate amountproposed dividend expected to be paid on 1 May 2013 out of retained profits at 31 December 2012, but notrecognised as a liability at the end of the year is $12,476,000.
EARNINGS PER SHARE
Notes2012
Cents2011
Cents
Basic earnings per share attributable to the ordinary equity holders of theCompany 9 33.5 21.5
Diluted earnings per share attributable to the ordinary equity holders of theCompany 9 32.8 21.3
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Ausenco LimitedDirectors' report
31 December 2012(continued)
SAFETYThe Groups safety performance for the 12 months to 31 December 2012 improved wi th a Lost Time InjuryFrequency Rate (LTIFR) of 0.62 and a Total Recordable Injury Frequency Rate (TRIFR) of 2.55 per million hoursworked. This represents a 23% improvement of lost time injuries over 2011. We continue to strive for our goal ofzero harm.
REVIEW OF OPERATIONSThe Groups financial performance is explained using measures that are not defined under IFRS and are thereforetermed non-IFRS measures. The non-IFRS financial information contained within this Directors' Report and Notesto the Financial Statements has not been audited in accordance with Australian Auditing Standards. Thenon-IFRS measures used to monitor group performance are EBITDA, net debt, net gearing ratio and EBITDA tototal financing costs ratio. Business line or segment performance are monitored using adjusted EBITA. Each ofthese measures is discussed in more detail on page 94.
Revenue from continuing operations for 2012 of $633.5 million was up 15.6% on the revenue of $547.9 million forthe previous year. The Group recorded a net profit before tax for the year of $55.5 million, an earningsimprovement of $21.9 million over the net profit before tax of $33.6 million achieved in the previous 12 months.Net profit after tax attributable to shareholders was $41.4 million, an increase of $15.0 million over the $26.4million net profit after tax for the previous year. The improvement in net earnings was driven primarily by increasedearnings from the Process Infrastructure and Minerals & Metals business lines and reduced corporate overheads.
EBITDA1
for 2012 was $68.0 million, an increase of $21.1 million on the previous year EBITDA1
of $46.9 million.Basic earnings per share of 33.5 cents, an improvement of 12.0 cents per share over the earnings of 21.5 centsper share in 2011.
The Groups EBITDA margin1
was 10.7% compared to a 8.6% margin in the previous year and the after tax marginof 6.5% was higher than the 4.8% margin reported in 2011.
Net operating cash flow was $41.2 million, compared to $11.4 million in the previous year. The turnaround inoperating cash flows was driven by improved business performance and an increased management focus onworking capital management. The Groups gross cash position at 31 December 2012 was $52. 6 million (2011:$67.7 million). Net debt
1increased from $1.4 million at 31 December 2011 to $11.8 million over the year as a
result of working capital movements and movements in foreign exchange rates. The net gearing ratio1
increasedto 4.1% from 0.6% while the EBITDA to total financing costs ratio
1was 19.4 times (2011: 10.1 times).
Business Line Performance
The Group measures business line performance by reference to revenue and Adjusted EBITA1. Refer to Note 4.
The following table summarises business line performance:
Segment revenues Segment Adjusted
EBITA
2012
$'000
2011
$'000
2012
$'000
2011
$'000
Ener 12,753 2,099 44 1,152 Environment & Sustainability 29,932 36,214 (888) 2,483Minerals & Metals 375,579 309,957 58,543 50,103Process Infrastructure 154,939 144,892 28,021 15,884Program Management 51,627 47,972 471 4,617
Corporate 7,390 6,321 (26,631) (31,929)Total 632,220 547,455 59,560 40,006
EnergyIn 2012, the Energy business line achieved improved results with a $10.7 million increase in revenues and anincrease in adjusted EBITA
1of $1.2 million. The acquisition in early 2012 of Reaction Consulting Inc., an oil sands
specialist business in North America, greatly enhanced our energy portfolio and expanded our capabilities andhas contributed to promising growth throughout North America, particularly in Calgary. As a result of our expandedoffering we expect further growth in this area in 2013.
Environment & SustainabilityDuring 2012, revenues declined by 17.3% to $29.9 million. Adjusted EBITA was down from $2.5 million in 2011 toan adjusted EBITA
1loss of $0.9 million. In October 2012, Peter Bokor was appointed President, Environment &
Sustainability to drive the growth of the business globally and also implement a number of cost reductionstrategies.
1This performance measure is discussed in detail on page 94
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31 December 2012(continued)
REVIEW OF OPERATIONS (continued)Minerals & MetalsThe Minerals & Metals business line operating revenue was up 21.2% to $375.6 million in 2012. Adjusted EBITA
1
increased to $58.5 million compared with $50.1 million in 2011. The strong 2012 performance was underpinned by
the delivery of a number of significant Create phase projects including the Constancia copper project in Peru, theAktogay and Bozshakol copper projects in Kazakhstan, the Goldstrike gold project in the United States and theKestrel coal project in Australia. The business expects continued growth in 2013 across diverse regions andcommodities from the Americas to the Middle East and North Africa in gold, copper and mineral sands.
Process InfrastructureIn 2012 the Process Infrastructure business had an exceptional year with reported revenues up $10.0 million from$144.9 million in 2011 to $154.9 million in 2012. Adjusted EBITA
1increased significantly from $15.9 million in 2011
to $28.0 million in 2012. Adjusted EBITA margin improved from 11.0% in 2011 to 18.1% in 2012. As an outcome ofits strategic initiatives the business won several Create phase projects including chemical projects with CytecIndustries in Canada and an upgrade of rail and port infrastructure at Tizirs Grand Cote Operations mineral sandsproject in Senegal. The business is committed to securing a greater portion of recurring revenue assignments in2013 with growth expected to come from the commodities of coal, copper, potash, iron ore as well as in chemicalsand pharmaceuticals.
Program ManagementProgram Management's revenue increased from $48.0 million in 2011 to $51.6 million in 2012. Adjusted EBITA
1
decreased to $0.5 million in 2012 compared with the $4.6 million in 2011. Adjusted EBITA was impacted by thecompletion of two Optimise phase contracts in Sierra Leone. The business expanded its service offering throughthe strategic acquisition of business improvement and asset management specialist, The Rylson Group. A numberof significant longer-term new Optimise phase contracts were awarded in 2012 including a four year alliance-stylecontract for Oricas Kooragang Island Chemical Plant in Australia and a four year contract for Vales/SumitomosIsaac Plains coal project in Australia. The business is focused on increasing recurring revenue in 2013 through itsexpanded offering and expanding its footprint in the Americas, Middle East and Northern Africa.
Corporate
The Corporate adjusted EBITA1
was a loss of $26.6 million in 2012, an improvement over a loss of $31.9 million in2011.
SIGNIFICANT CHANGES TO THE STATE OF AFFAIRSOther than matters mentioned in this report, no significant changes in the state of affairs have occurred during theyear ended 31 December 2012.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Effective 1 January 2013, the Group has restructured its reporting segments internally. A full analysis of the
impact on segment reporting disclosures and re-allocation of assets will be carried out during 2013.
No other matter or circumstance has arisen since 31 December 2012 that has significantly affected, or maysignificantly affect:
(a) the Group's operations in future financial years, or
(b) the results of those operations in future financial years, or(c) the Group's state of affairs in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONSLikely developments in and expected results of the operations of the Group have been discussed generally in theannual report. Further information on likely developments in the operations of the consolidated entity and theexpected results of operations have not been included in this report because the Directors believe it would belikely to result in unreasonable prejudice to the Group.
ENVIRONMENTAL REGULATIONThe Group does not carry out environmentally sensitive activities in its own right. The Group's principal exposureto environmental risk lies in failing to perform services to the appropriate standard of care, resulting inenvironmental damage. Assessment and management of such risks forms part of Ausenco's risk managementand quality assurance systems. The Directors are not aware of any breaches of environmental regulations as a
result of the activities of the consolidated entity.
This performance measure is Discussed in detail on page 94
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31 December 2012(continued)
MEETINGS OF DIRECTORS
The numbers of meetings of the Company's board of Directors and of each board committee held during the yearended 31 December 2012, and the numbers of meetings attended by each Director were:
Board Audit Committee Remuneration Committee
Meetingsheld while a
Director
NumberAttended
Meetingsheld while a
Director
NumberAttended
Meetingsheld while a
Director
Numberattended
Wayne Goss 11 11 6 6 4 4
Zimi Meka 11 11 - - - -George Lloyd 11 11 6 6 4 4Greg Moynihan 11 11 6 6 - -Mary Shafer-Malicki 11 11 - - - -Bob Thorpe 11 11 6 6 - -Hank Tuten 11 11 - - 4 4
INFORMATION ON DIRECTORSWayne GossLLB, MBA. FAICDChairman / Non-Executive Director
Wayne was appointed as Chairman in 2002. He is Chairman of the National Board of Deloitte and is a formerdirector of a number of companies including, Igneus Limited, WebCentral Group Limited, Lincolne Scott Limited,Peplin Limited and Brisbane Broncos Limited. Wayne is also a former Chairman of the Board of Trustees of theQueensland Art Gallery, Free TV Australia Limited, the Government Reform Commission, South AustralianGovernment and the Advisory Council, Graduate School of Government, and University of Sydney. Wayne wasadmitted as a solicitor of the Supreme Court of Queensland in 1973 and was elected Premier of Queensland in1989 and served in that capacity until 1996. He is also a Fellow of the Australian Institute of Company Directorsand an Adjunct Professor, School of Business at The University of Queensland.
Zimi MekaB Eng (Hons) Mech, MIE Aust MAICD, RPEQChief Executive Officer and Managing Director
Zimi Meka is one of the founding directors of Ausenco Limited and was appointed as Chief Executive Officer /Managing Director in 1999. Zimis background includes senior roles in engineering and operations companiesprior to the formation of Ausenco in 1991. He has over 25 years experience in the design, construction andoperation of a wide range of processing plants and infrastructure in the minerals industry in Australia andinternationally. He is the Queensland University of Technologys 2008 Alumnus of the Year, was awarded the
Australian Institute of Mining and Metallurgys 2009 Institute Medal and is one of Australias top 100 mostinfluential engineers as awarded by Engineers Australia. He is a Fellow of Engineers Australia, a Fellow of the
Australian Institute of Mining and Metallurgy and a Member of the Australian Institute of Company Directors.
George LloydMBA, B Eng Sc (Industrial), FAICD, FAusIMMNon-Executive DirectorGeorge Lloyd has over 30 years resource industry experience and has served as a senior executive and boardmember of a number of listed and unlisted Australian resource companies with interests in minerals, energy andindustry services. He is Chairman of AWR Lloyd Limited, an Asian based firm providing mergers and acquisitions,corporate strategy, industrial research and investor relations advisory services to the mining and energy industriesin Asia and Australia. He is also Chairman of Pryme Energy Limited (since 2008), and Chairman of Cape AluminaLimited (since 2009). In addition, he is involved in a number of early stage resource project initiatives in severalcountries.
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Ausenco LimitedDirectors' report
31 December 2012(continued)
INFORMATION ON DIRECTORS (continued)
Craig Allen
MBA, B Com, LLB, Dip Fin, CA, F FinCraig Allen was appointed to the position of Company Secretary on 11 March 2011. Craig has been with Ausencosince 2004 and in his role as Chief Financial Officer is responsible for the management of Ausenco's groupfinances, including finance, corporate strategic planning, treasury, taxation, company secretarial, investmentevaluation and investor relations. He has an extensive financial, advisory and commercial background in theresource and energy industries as well as experience working on a number of large scale resource and energymergers and acquisitions.
INSURANCE OF OFFICERSDuring the financial year, the Group paid a premium to insure the Directors and officers of the Company andGroup entities. The contract of insurance prohibits the disclosure of the premiums paid and limits purchased.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings, plusapplicable court awards or settlements in connection with such proceedings, brought against the Directors and/orofficers of entities in the consolidated entity, other than where such liabilities arise out of conduct involving a wilful
breach of duty by the Directors and/or officers; the improper use by the Directors and/or officers of their position orwhere privileged information is used to gain advantage for themselves or someone else or to cause detriment tothe Company. It is not possible to apportion the premium between amounts relating to the insurance against legalcosts and those relating to other liabilities.
NON-AUDIT SERVICESThe Company may decide to employ the auditor on assignments additional to their statutory audit duties wherethe auditor's expertise and experience with the Group is important. Details of the amounts paid or payable to theauditor (PwC) for audit and non-audit services provided during the year are set out below.
The Board of Directors has considered the position and, in accordance with advice received from the Audit andRisk Management Committee, is satisfied that the provision of the non-audit services is compatible with thegeneral standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfiedthat the provision of non-audit services by the auditor, as set out below, did not compromise the auditorindependence requirements of the Corporations Act 2001 for the following reasons:
all non-audit services have been reviewed by the Audit and Risk Management Committee to ensure theydo not impact the impartiality and objectivity of the auditor
none of the services undermine the general principles relating to auditor independence as set out inAPES 110 Code of Ethics for Professional Accountants.
During the year the following fees were paid or payable for non-audit services provided by the auditor of theCompany and its related practices:
Consolidated2012
$2011
$
OTHER ASSURANCE SERVICES
PwC AustraliaOther accounting services 7,178 4,600Network firms of PwC Australia 17,542 11,039Non- PwC Australia audit firm 31,904 -
Total remunerat ion for ot her assurance services 56,624 15,639
TAXATION SERVICESPwC AustraliaTax compliance services 12,722 19,080Network firms of PwC Australia 135,137 124,519Non- PwC Australia audit firm 87,338 46,782
Total remunerat ion for oth er services 235,197 190,381Total remunerat ion for no n-audi t services 291,821 206,020
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31 December 2012(continued)
REMUNERATION REPORT
EXECUTIVE SUMMARYAusenco's remuneration strategy is designed to drive superior shareholder returns over the long term by aligningthe short and long term interests of our people and our shareholders and by attracting and retaining high qualitypeople. This strategy has been in place since Group inception and continues to evolve to ensure that it meets itsobjectives.
The Ausenco Board (the Board) believes that Ausencos remuneration strategy made an important contribution toimproved business performance in 2012 and that this will continue. The 2012 net profit after tax has positivelyimpacted the Groups five year profit performance, earnings per share, and total shareholder return measures.
Ausenco's performance over the 5 years:
2008 2009 2010 2011 2012
Earnings- NPAT 56.3 20.1 (10.7) 26.4 41.3- Basic EPS (cps) 62.7 19.0 (8.8) 21.5 33.5
Return on capital employed
26%
6%
(5%)
8%
13%
Total shareholder returns- Dividend interim and final (cps) 31.8 9.5 - 12.9 20.1- Share price at 31 December 2012 2.19 4.56 3.08 2.47 3.19- Annual Total Shareholder Return (%) a (84%) 117% (32%) (16%) 37%
a Total Shareholder Return (TSR) represents the accumulated share price when all cash dividend are reinvested at the ex-dividend date
REMUNERATION COMMITTEEThe Remuneration Committee (Committee) was established as a sub -committee of the Board in April 2006. TheCommittee is governed by its charter, which sets out the membership, responsibilities, authority and activities ofthe Committee. The Charter is available in the Investor Relations section of the Groups websitewww.ausenco.com.
The Committee met four times during the financial year. Attendance at those meetings is detailed in this DirectorsReport.
The following Directors were members of the Committee during the year:
Name Position DurationHank Tuten Chairman From April 2006Wayne Goss Member From April 2006George Lloyd Member From April 2006
The Committee invites members of management to assist in its deliberations (except concerning their ownremuneration).
During the year neither the Committee nor Management engaged Remuneration Consultants for advice in relation
to the remuneration of Key Management Personnel (KMP).
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31 December 2012(continued)
REMUNERATION REPORT (continued)
REMUNERATION POLICY AND STRUCTUREThe Committee is responsible for ensuring that the Group has coherent remuneration policies and practices thatenable it to attract and retain executives, and employees who will generate sustained business performance,
create value for shareholders and support the Groups goals and values.The Board has adopted the Committee recommended remuneration policies that are designed to:
Enable review of and, where appropriate, reflect market practices and remuneration trends
Facilitate recommendations to the Board in relation to the Groups remuneration policies and procedures
Enable monitoring of Director, Non-Executive Director and senior management performance and
Facilitate recommendations to the Board in relation to the remuneration of senior management andNon-Executive Directors.
The executive remuneration and reward framework provides a mix of fixed and variable remuneration, including ablend of short and long term incentives. As an executives impact on business performance increases in the
Group, the balance of this mix shifts to a higher proportion of at risk rewards. The framework has threecomponents comprising the executives total remuneration:
1. Fixed remuneration and benefits set by reference to market data and not directly related to the Group'sfinancial performance.
2. Short term performance incentives set by reference to market data and not wholly related to the Group'sfinancial performance.
3. Long term performance incentives aligned with those drivers which the Board believes will underpinsustainable long term growth in shareholder value.
KEY MANAGEMENT PERSONNEL AND OTHER EXECUTIVES' REMUNERATIONThe Remuneration Report shows remuneration information for the Key Management Personnel (KMP) of Ausencoand the Company as defined in AASB 124 Related Party Disclosures. The remuneration structure provides for afixed remuneration component only. The structure for Senior Executive personnel incorporates at risk componentsas part of the Group's short and long term incentive plans in addition to fixed remuneration. The remunerationarrangements for each of these groups are discussed separately in this report, with KMP individuals divided intothree separate groups for the ease of reference:
NON-EXECUTIVE DIRECTORS, being those individuals listed on pages 4 to 5 of the Financial Report.
EXECUTIVE DIRECTOR, being Mr Zimi Meka - Chief Executive Officer and Managing Director.
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Ausenco LimitedDirectors' report
31 December 2012(continued)
REMUNERATION REPORT (continued)KEY MANAGEMENT PERSONNEL AND OTHER EXECUTIVES' REMUNERATION (continued)OTHER SENIOR EXECUTIVES, being those individuals who report directly to the Chief Executive Officer andhave the requisite authority and responsibility for planning, directing and controlling the activities of the Group andthe Company. These individuals are listed below. They are all KMP of the Group and the Company:
Mr Craig Allen - Chief Financial Officer
Mr Nick Bell - Chief Operating Officer
Mr Greg Chrisfield - Chief Sustainability Officer (Ceased on 17 March 2012)
Ms Jean Kowalski - Chief Commercial Officer (Ceased on 1 July 2012)
Mr Frank Mellish - Chief Marketing Officer
Mr Neil Trembath - Chief People Officer (to 15 March 2012), Chief People and Sustainability Officer (from16 March 2012)
Mr Paul Young - Chief Information Officer
SENIOR EXECUTIVE REMUNERATION POLICYThe Group's Senior Executive remuneration and reward structure is designed to:
Demonstrate a clear relationship between the Group's and Executive's performance and remuneration
Provide sufficient and reasonable rewards to ensure the Group attracts and retains suitably qualifiedexecutives for key roles on a global, regional and local basis
Apply quantifiable and measurable performance targets that are aligned to the Group's strategic plan,
within an appropriate control framework
Measure and reward executive performance using financial and non-financial key performance indicatorswhich are structured to include both lead and lag indicators of performance.
The Board recognises that it is necessary for remuneration packages of Senior Executives to include both a fixedcomponent and an incentive or performance related component, a portion of which is an equity component vestingat the end of each two, three and four year period following grant.
The relative proportion of total remuneration packages that is performance based is set out in the table below:
Role Title Name FixedRemuneration
Short-termincentive
Long-termincentive
Chief Executive Officer Zimi Meka 70% 30% 0%
Chief Financial Officer Craig Allen 60% 16% 24%Chief Operating Officer Nick Bell 63% 15% 22%Chief Sustainability Officer Greg Chrisfield a 73% 11% 16%Chief Commercial Officer Jean Kowalski b 73% 11% 16%Chief Marketing Officer Frank Mellish 78% 9% 13%Chief People and Sustainability Officer Neil Trembath 73% 11% 16%Chief Information Officer Paul Young 78% 9% 13%
a - Mr Chrisfield ceased to be Key Management Personnel on 17 March 2012b - Ms Kowalski ceased to be Key Management Personnel on 1 July 2012
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31 December 2012(continued)
REMUNERATION REPORT (continued)FIXED REMUNERATIONThe total remuneration packages for Senior Executives contain a fixed component. This is expressed as a specificamount that the executive may take in a form agreed with the Group and is determined based on the scope andnature of the individual's role, their performance and experience. The fixed component of remuneration is set at a
level to reflect the market range for a comparable role. In addition, the past performance of the Executive isassessed, as are the performance of business lines within his or her control and the contribution of the Executiveto the overall performance of the Group.
Senior Executives may choose to receive benefits by way of salary sacrificed motor vehicles and superannuation.All benefits received by Senior Executives are disclosed below. In addition, the Group provides superannuation inaccordance with its legal obligations in the relevant global jurisdictions.
SHORT-TERM INCENTIVE ("STI") PLANThe terms of employment for Senior Executives contain a short term annual performance based component. TheSTI plan involves linking specific targets or key performance indicators ("KPIs") with the opportunity to earn cashincentives based on a percentage of base salary.
Any portion of the STI that is not achieved in any financial year may not be deferred to future financial years.
Currently 60% of the KPIs for the STI plan relate to financial performance. In general, the performance conditionsare related to the Group's overall profitability and the financial performance of the Group when measured againstthe annual business plan.
The remaining 40% of the KPIs for the STI plan relate to non-financial performance. These non-financial indicatorsinclude lead and lag indicators directly linked to the KPIs included in the Group's strategic plan. The non-financialKPIs are linked to outstanding performance in the following areas:
client satisfaction
health, safety and the environment in support of the Group's objective of "Safety in all we do"
people management and development, and
adherence to and implementation of the Group's strategic business planThe Board considers these performance conditions to be appropriate because they directly link remuneration tothe strategic objectives and direction of Ausenco, achievement of financial and non-financial targets andidentification of new growth opportunities that are important for Ausenco's future success.
The basis for determining whether the performance criteria for the financial KPIs are met is an objectivemeasurement against the audited financial statements for the financial year. The non-financial KPIs are assessedagainst relevant criteria which take into account the Group's safety performance, people and performancemeasures including retention, and specific actions required to implement the business plan. Measurement of thenon-financial KPIs involves the assessment of a combination of objective measures. KPIs are generally chosenbecause they focus on the key behaviours or results the Group seeks to attain, are capable of measurement andcan be readily audited.
In addition to the annual targets described above, significant projects are from time to time assigned their own
KPIs.LONG TERM INCENTIVE ("LTI") PLAN - PERFORMANCE RIGHTS PLAN ("PRP")The Groups LTI plan is designed to link executive and selected management personnel reward with the keyperformance drivers which underpin sustainable long term growth in total shareholder return, comprising earningsgrowth, share price appreciation, dividends and capital returns to shareholders.
The Board determines on an annual basis whether the LTI plan will operate in the year. Participation in the LTIplan is offered at the discretion of the Board to eligible executives and selected management personnel who areable to influence the generation of shareholder wealth over the long term. The LTI plan provides the opportunity toreceive performance rights, subject to the satisfaction of performance hurdles and vesting periods (EligibleEmployees).
The Groups PRP provides for performance rights to be issued to Eligible Employees. Under the PRP, EligibleEmployees are invited to apply for performance rights, each of which entitles the holder to subscribe for one fully
paid ordinary share in the Company at a nil exercise price.
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31 December 2012(continued)
REMUNERATION REPORT (continued)LONG TERM INCENTIVE ("LTI") PLAN - PERFORMANCE RIGHTS PLAN ("PRP") (continued)Subject to the relevant performance hurdles being satisfied, each performance right entitles the holder to
subscribe for one fully paid ordinary share in the Company at a nil exercise price. One third of the rights grantedvest at the end of each two, three and four year period following grant, subject to an overriding service condition.Performance rights carry no dividend or voting rights.
Where a participant leaves the Group, the terms of the PRP prescribe that the Board may exercise its discretion toallow a proportion of performance rights to vest and be exercised. The Board may deem any performance rights to
have lapsed if, in the opinion of the Board, the Eligible Employee acts fraudulently or dishonestly or is in breach ofany of their obligations to the Group.
In the event of a takeover or other formal scheme for the acquisition of the shares of the Group, the Directors mayexercise their discretion to determine that all unvested performance rights vest, subject to further conditions to bedetermined by the Board.
PERFORMANCE RIGHTS HURDLESThe Board believes that a combination of Earnings Per Share (EPS) growth and Total Shareholders Return (TSR)
is the most appropriate measure for Ausenco executives and best reflects current market practice. For selectedmanagement personnel EPS is deemed to be the measure most appropriate. Consequently, the Group uses dualmeasures of EPS growth and TSR hurdles for executives, whilst the hurdle for selected management personnel isEPS only.
For executives EPS and TSR performance targets are equally weighted to 50%. Each executives performancerights are exercisable subject to EPS measurement in accordance with the following table. The balance of eachexecutives performance rights entitlement for each year will be measured by the Groups TSR against a group oforganisations considered to be Ausencos key peers globally.
For selected management personnel the performance targets for the PRP are 100% subject to EPS measurementin accordance with the same table.
Earnings Per Share Target Total Shareholder Return Targets
EPS growth above CPIperformance target
Rights Vesting TSR growth aboveComparator Group
Rights Vesting
Less than 4% above CPItarget
0% Less than 50% percentile 0%
4% above CPI target20% for executives 50% for
selected managementpersonnel
50th percentile 30%
More than 4% above CPI
target
An additional 7.5% for each1% An additional 12.5% for
each 1% increment for
selected managementpersonnel
Between 50th and 75th
percentile
From 51st to 75th, 0.8%increase for each 1.0%
percentile
More than 8% above CPItarget
50% for executives 100%for selected management
personnelAt or above 75th percentile 50%
The peer group comprises AMEC, Fluor Corporation, Jacobs, Lycopodium, Sedgman, SNC Lavalin, Wood Groupand Worley Parsons. During 2012, the Shaw Group was acquired by CB&I and has been removed from the peergroup.
Basic earnings per share is determined by dividing the operating profit attributable to members of the Group by theweighted average number of ordinary shares outstanding during the financial year, as required under AASB 133Earnings per Share. Growth in EPS will be measured by comparing the EPS in the base year and themeasurement years calculated on a normalised basis. EPS growth was greater than 8% above the CPI target in2012 and therefore 100% of the EPS component will vest.
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REMUNERATION REPORT (continued)LONG TERM INCENTIVE ("LTI") PLAN - PERFORMANCE RIGHTS PLAN ("PRP") (continued)The TSR growth measure represents the change in the capital value of a listed entitys share price over a period,plus dividends, expressed as a percentage of the opening value. During 2012, TSR growth was above the 75
th
percentile resulting in 100% of the TSR component share rights vesting.
EXECUTIVE OPTIONS PLAN ("EOP")Prior to the Company's listing on the ASX, it operated a cash based incentive plan which provided conditions forattraction and retention of Senior Executives and was commensurate with individual performance. The EOP wasestablished in April 2006 as a replacement LTI plan for Senior Executives and to also operate as a complimentaryreward mechanism for eligible executive employees in specific circumstances.
Under the EOP, eligible executive employees are invited to apply for options, each of which entitles the holder tosubscribe for one fully paid ordinary share in the Company at an exercise price equal to the Company's sharemarket price at the time of grant. The EOP provides for options, with associated time based vesting conditions, tobe issued to eligible executive employees.
Options are granted for a three-year period, with one third of each option tranche vesting and becoming
exercisable after each subsequent annual anniversary of the date of grant, subject to an overriding servicecondition. Options expire five years after the date of grant. Options granted under the EOP carry no dividend orvoting rights.
Where a participant leaves the Group, the terms of the EOP prescribe that the Board may exercise its discretion toallow a proportion of performance rights to vest and be exercised. The Board may deem any options to havelapsed if, in the opinion of the Board, the executive acts fraudulently or dishonestly or is in breach of any of theirobligations to the Group.
In the event of a takeover or other formal scheme for the acquisition of the Shares in the Group, the Board mayexercise their discretion to determine that all unvested options vest, subject to further conditions to be determinedby the Board.
There are currently no participants in the EOP and no outstanding options in the EOP.
EMPLOYEE SHARE ACQUISITION PLAN ("ESAP")In 2006, shareholders approved the ESAP and the first instalment of this was launched in August 2008.Participation in the ESAP is open to all personnel employed on a permanent basis by the Group (EligibleEmployees).
The ESAP was designed to assist with retaining permanent employees of the Group by enabling them to share inthe organisations success. The ESAP provides the Groups Eligible Employees with an enhanced opportunity toacquire shares in the Company.
Each annual ESAP offer is subject to Board approval. Following the initial offer in 2008, the Board elected toforego the offer in 2009 and 2010 due to the uncertain economic climate and its impact on contributed equity. In2011, due to a turnaround in the economic climate, the Board resolved to reinstate the ESAP offer.
Under the 2008 ESAP offer, Eligible Employees were able to purchase Ausenco shares up to a specifiedpercentage of their base salary (the 2008 Employee Contribution). The 2008 Employee Contribution wasmatched by Ausenco with an equal Company Contribution for an equivalent number of shares, vesting pro rataover the next three years following the 2008 ESAP offer.
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REMUNERATION REPORT (continued)EMPLOYEE SHARE ACQUISITION PLAN ("ESAP") (continued)Shares purchased under the 2008 ESAP were restricted and made available for sale by transfer to each EligibleEmployee in three equal annual instalments in November 2009, 2010 and 2011. These restrictions were removedfrom Plan Shares purchased with the 2008 Employee Contribution if a participating Eligible Employee ceased
employment with the Group.
2008 ESAP participants who ceased employment forfeited any shares purchased with the Company Contributionunless those shares have already passed their vesting periods.
Shares acquired under the 2008 ESAP may be held in trust by the Trustee for a maximum period of ten years afterthe date of the initial offer. At the expiry of ten years, shares acquired under the 2008 ESAP will be transferred tothe relevant Eligible Employee.
Under the 2011 and 2012 ESAP offer, Eligible Employees were invited to contribute between $500 and $5,000 topurchase Ausenco shares (Employee Contribution Shares). Ausenco agreed to match the participantsEmployee Contribution Shares at a ratio of 3:1, providing the participant with one conditional right to receive an
Ausenco share at a later date for each Employee Contribution Share, provided the participant remains an EligibleEmployee during that period (ESAP Conditional Right).
ESAP Conditional Rights, are unlisted securities, have no voting rights or entitlement to dividends, they cannot betraded or transferred and are held in trust until the necessary vesting criteria have been met. Upon vesting aparticipants ESAP Conditional Rights will automatically convert into ordinary shares and once converted will havefull voting rights and dividend entitlements and will remain in the Ausenco Performance Trust until such time asthey are transferred or sold.
The Employee Contribution Shares along with the ESAP Conditional Rights (together the ESAP Securities) willbe held by the Trustee until such time as they are transferred, sold or forfeited. The Trustee remains the legalowner of all ESAP Securities so long as they remain held by the Ausenco Performance Trust. The participants arethe beneficial owners of their ESAP Employee Contribution Shares and entitled to the full voting rights anddividend entitlements attached to each ESAP Employee Contribution Share.
Details of performance rights and options over ordinary shares in the Company provided as remuneration to eachof the Group's Senior Executives are set out below. When exercisable, each performance right and option isconvertible into one ordinary share of the Company.
Plan participants may not enter into any transaction designed to remove the 'at risk' aspect of an instrument beforeit vests.
The assessed fair value at grant date of the performance rights and options granted to the individuals is allocatedequally over the period from grant date to vesting date and the amount is included in the remuneration tablesshown below. During the year, the Group granted rights to Senior Executives set out in the following table:
OPTIONS AND RIGHTS AS REMUNERATION
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REMUNERATION REPORT (continued)OPTIONS AND RIGHTS AS REMUNERATION (continued)2012 Optionsand Rights
Number ofoptions /
rights held at1 Jan 2012
a,b
Performancerights
granted in thecurrent
financial year
Optionsgranted in
the currentfinancial
year
Options /Rights
exercisedduring the
currentfinancial
year
Options /Rights
forfeitedduring the
currentfinancial
year
Number ofoptions /
rights held at31 Dec 2012
c
Number ofoptions /
rights vestedin the
currentfinancial
year
Number ofoptions /
rights vestedat 31 Dec
2012
EXECUTIVE DIRECTORZimi Meka 67,118 - - 35,970 - 31,148 35,970 -Total 67,118 - - 35,970 - 31,148 35,970 -KEY MANAGEMENT PERSONNELCraig Allen 77,441 110,745 - 21,297 - 166,889 21,297 -Nick Bell 103,299 122,469 - 42,974 - 182,794 20,718 -Greg Chrisfield d 29,171 - - 14,426 14,745 - 7,213 -Jean Kowalski e 10,566 40,038 - - 50,604 - - -Frank Mellish 6,837 28,215 - - - 35,052 - -Neil Trembath 30,745 47,058 - 1,042 - 76,761 8,386 7,344Paul Young 16,970 27,066 - - - 44,036 3,895 3,895Total 275,029 375,591 - 79,739 65,349 505,532 61,509 11,239Grand Total 342,147 375,591 - 115,709 65,349 536,680 97,479 11,239
a - Or date of appointment if laterb - Opening balance adjusted to exclude Mr Roxburgh who ceased to be Key Management Personnel on 15 April 2011c - Or date of retirement/resignation if earlierd - Mr Chrisfield ceased to be Key Management Personnel on 17 March 2012e - Ms Kowalski ceased to be Key Management Personnel on 1 July 2012
2011 Optionsand Rights
Number ofoptions /
rights held at1 Jan 2011 a
Performancerights
granted inthe current
financialyear
Optionsgranted in
the currentfinancial
year
Options /Rights
exercisedduring the
currentfinancial
year
Options /Rights
forfeitedduring the
currentfinancial
year
Number ofoptions /
rights held at31 Dec 2011
b
Number ofoptions /
rights vestedin the
currentfinancial
year
Number ofoptions /
rights vestedat 31 Dec
2011
EXECUTIVE DIRECTORZimi Meka 546,293 - - 441,105 38,070 67,118 35,970 -Total 546,293 - - 441,105 38,070 67,118 35,970 -KEY MANAGEMENT PERSONNELCraig Allen 121,805 75,399 - 60,651 59,112 77,441 21,297 -Nick Bell 125,524 82,287 - 40,000 64,512 103,299 20,718 22,256Greg Chrisfield 30,015 29,490 - 7,213 23,121 29,171 7,213 -Jean Kowalski c - 21,129 - - 10,563 10,566 - -Frank Mellish d - 13,674 - - 6,837 6,837 - -Ken Roxburgh e 41,343 - - 17,194 6,498 17,651 6,461 5,595Neil Trembath 32,645 30,027 - 8,386 23,541 30,745 8,386 -Paul Young 16,899 18,357 - 3,895 14,391 16,970 3,895 -Total 368,231 270,363 - 137,339 208,575 292,680 67,970 27,851Grand Total 914,524 270,363 - 578,444 246,645 359,798 103,940 27,851a - Or date of appointment if laterb - Or date of retirement/resignation if earlierc - Ms Kowalski was appointed on 18 April 2011d - Mr Mellish was appointed on 9 May 2011
e - Mr Roxburgh ceased to be Key Management Personnel on 15 April 2011
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REMUNERATION REPORT (continued)OPTIONS AND RIGHTS AS REMUNERATION (continued)The following table shows unissued ordinary shares of Ausenco Limited under options / rights at the date of thisreport:
Grant date ExpirydateExercise
price
Balance atstart of the
year
Grantedduring the
year
Exercisedduring the
year
Expiredduring the
year
Balance atend of the
year
Exercisableat end ofthe year
Number Number Number Number Number Number201219-Feb-08 19-Feb-15 $- 33,621 - 18,613 - 15,008 15,00825-Feb-08 19-Feb-15 $- 7,397 - 4,154 - 3,243 3,24305-Mar-08 19-Feb-15 $- 1,941 - 534 - 1,407 1,40723-Jun-08 19-Feb-15 $- 4,614 - 4,614 - - -17-Mar-09 17-Mar-14 $- 618,024 - 232,196 31,381 354,447 135,05101-Jan-11 01-Jan-16 $- 1,032,450 - - 405,888 626,562 -01-Jan-12 01-Jan-17 $- - 1,493,976 - 178,107 1,315,869 -
1,698,047 1,493,976 260,111 615,376 2,316,536 154,709
Weighted average exercise price $- $- $- $- $- $-
Grant date Expirydate
Exerciseprice
Balance atstart ofthe year
Grantedduring
the year
Exercisedduring the
year
Forfeitedduring the
year
Balance atend of the
year
Exercisableat end of the
year
Number Number Number Number Number Number
2011
27-Apr-06 27-Aug-11 $1.00 333,333 - 333,333 - - -18-Dec-06 18-Dec-11 $- 373,339 - 373,339 - - -19-Feb-08 19-Feb-15 $- 73,211 - 33,565 6,025 33,621 9,70225-Feb-08 19-Feb-15 $- 10,366 - 314 2,655 7,397 4,722
05-Mar-08 19-Feb-15 $- 6,075 - 2,934 1,200 1,941 93831-Mar-08 10-Sep-12 $- 2,982 - - 2,982 - -23-Jun-08 31-Dec-11 $- 40,000 - 40,000 - - -23-Jun-08 19-Feb-15 $- 4,614 - - - 4,614 3,076
17-Mar-09 17-Mar-14 $- 908,436 - 183,634 106,778 618,024 102,04401-Jan-10 01-Apr-15 $- 359,208 - - 359,208 - -01-Jan-11 01-Jan-16 $- - 1,032,450 - - 1,032,450 -
2,111,564 1,032,450 967,119 478,848 1,698,047 120,482
Weighted average exercise price $0.15 $- $0.34 $- $- $-
For options / rights granted, the fair value at grant date is determined using the Hull White option pricing modelthat takes into account the exercise price, the term of the options / rights, the impact of dilution, the share price at
grant date and expected price volatility of the underlying share, the expected dividend yield and the risk freeinterest rate for the term of the options / rights. The model inputs for the options / rights granted during the yearended 31 December 2012 included:
(i) Share price at grant date in 2012 was $2.49; (2011 issue: $3.05) (ii) Expected price volatility of the companys shares: 39.4%; (2011 issue: 44.1%)(iii) Expected dividend yield: 5.1%; (2011 issue: 3.0%) and(iv) Risk free interest rate: 4.90% (2011 issue: 4.75%).
The expected price volatility is based on historic volatility, adjusted for any expected changes to future volatilitydue to publicly available information.
The fair value of share rights granted during 2012 is $1.59 (2011: $2.08).
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REMUNERATION REPORT (continued)EXECUTIVE SERVICE AGREEMENTSThe remuneration and other terms of employment for Senior Executives are formalised in Executive Service
Agreements. These agreements provide for the Senior Executive's remuneration, including fixed annualremuneration and performance related STI plan (cash bonuses as disclosed below), and may include participation
in the LTI plan.As part of their fixed annual remuneration, Senior Executives may receive benefits including motor vehicles. Inaddition, fixed annual remuneration will include provision for superannuation, pension scheme and like benefits orpayments which Ausenco is required to provide in respect of its employees.
Specific Information regarding the Executive Service Agreements for Senior Executives in 2012 is summarisedbelow:
Name Position Terms of agreement /contract and date
commenced if during theyear
TotalEmployment
Cost a
TargetSTI b
Notice Period- Employee
Notice Period- Company
Zimi Meka Chief Executive Officer 3 years from 15 June 2012c 906,100 47% 6 months 6 monthsCraig Allen Chief Financial Officer No fixed term 493,566 30% 6 months 6 monthsNick Bell Chief Operating Officer No fixed term 629,800 26% 6 months 6 monthsGreg Chrisfield Chief Sustainability Officerd No fixed term 307,244 16% 6 months 6 monthsJean Kowalski Chief Commercial Officere No fixed term 334,565 16% 6 months 6 monthsFrank Mellish Chief Marketing Officer No fixed term 314,356 12% 6 months 6 monthsNeil Trembath Chief People and
Sustainability OfficerNo fixed term 393,239 16% 6 months 6 months
Paul Young Chief Information Officer No fixed term 335,058 12% 6 months 6 months
a Total Employment Cost (TEC) in Ausenco's primary measure of fixed remuneration - which included annual base salary andsuperannuation but excludes leave accrued but not taken and non-monetary benefits. It does not include STI or LTI payments.
b Target STI as a percentage of base salary is subject to achievement of an individual and Ausenco's performance objectives and overallcompliance with Ausenco's values. The Target STI percentage represents the amount payable for Ausenco and the individualschecking on-target performance. Achieving threshold or stretch goals to these objectives acts as a multiplier to these individual STItargets.
c Mr Meka's employment contract provides for successive three year rollover terms unless otherwise terminated by the giving of notice.d Mr Chrisfield ceased to be Key Management Personnel on 17 March 2012e Ms Kowalski ceased to be Key Management Personnel on 1 July 2012
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REMUNERATION REPORT (continued)REMUNERATION PAID AND OTHER SPECIFIC DISCLOSURES
Details of RemunerationDetails of the remuneration paid to Senior Executives of Ausenco and the Company during the 2012 financial yearis set out in the following table:
Details of remuneration Primary Benefits PostEmployments
Long-termBenefits
Share BasedPayments
Salary andfees
STI/ CashBonus
Non-monetarybenefits
SuperannuationBenefits
Long Serviceleave
PerformanceRights Plan ESAP Termination
benefitsTotal
Percentage ofremuneration
that consists ofshare-based
payments$ $ $ $ $ $ $ $ $ $
Zimi Meka FY2012 831,284 199,121 - 92,736 69,716 33,398 - - 1,226,255 2.7%FY2011 667,328 68,807 5,517 66,252 84,417 81,748 - - 974,069 8.4%
Sub-total FY2012 831,284 199,121 - 92,736 69,716 33,398 - - 1,226,255 2.7%FY2011 667,328 68,807 5,517 66,252 84,417 81,748 - - 974,069 8.4%
KEY MANAGEMENT PERSONNELCraig Allen FY2012^ 465,466 80,325 - 27,658 14,830 83,657 - - 671,936 12.5%
FY2011^ 408,979 34,834 5,517 23,344 9,035 96,843 - - 578,552 16.7%
Nick Bell FY2012^ 577,798 94,617 7,290 60,517 - 91,767 - - 831,989 10.8%
FY2011^ 495,826 52,236 5,517 49,326 - 83,245 - - 686,150 12.1%
Greg Chrisfield a FY2012 63,241 16,550 - 9,133 - 30,880 - 185,996 305,800 10.1%
FY2011 281,875 3,532 5,517 25,687 - 66,024 - - 382,635 17.3%
Jean Kowalski b FY2012 153,470 26,815 - 16,226 - 4,674 1,144 41,319 243,648 2.4%
FY2011 210,128 - - 18,912 - 17,588 - - 246,628 7.1%
Frank Mellish FY2012 321,610 19,944 - 28,400 - 17,216 - - 387,170 4.4%
FY2011 213,488 - - 16,154 - 11,383 - - 241,025 4.7%
Neil Trembath FY2012 360,770 31,072 3,040 35,266 - 34,786 1,179 - 466,113 7.5%
FY2011 294,000 29,605 16,209 29,124 - 31,690 - - 400,628 7.9%
Paul Young FY2012 279,025 19,099 - 26,831 - 20,257 - - 345,212 5.7%
FY2011 240,652 20,081 5,517 23,466 - 19,795 - - 309,511 6.4%
Sub-total FY2012 2,221,380 288,422 10,330 204,031 14,830 283,237 2,323 227,315 3,251,868 8.7%
FY2011c 2,144,948 140,288 38,277 186,013 9,035 326,568 - - 2,845,129 11.5%
Grand total FY2012 3,052,664 487,543 10,330 296,767 84,546 316,635 2,323 227,315 4,478,123 7.1%
FY2011c 2,812,276 209,095 43,794 252,265 93,452 408,316 - - 3,819,198 10.7%
^ - Highest Paid Executivea - Mr Chrisfield ceased to be Key Management Personnel on 17 March 2012b - Ms Kowalski ceased to be Key Management Personnel on 1 July 2012c - Opening balance adjusted to exclude Mr Roxburgh who ceased to be Key Management Personnel on 15 April 2011
NON-EXECUTIVE DIRECTOR REMUNERATION POLICYThe fees paid to Non-Executive Directors are set at levels which reflect both the responsibilities of, and the timecommitments required from each Non-Executive Director to discharge their duties. The Non-Executive Directorsdo not receive performance related payments.
In setting fee levels for the Non-Executive Directors, the Committee, which makes recommendations to the Board,takes into account:
the Group's remuneration policies independent professional advice fees paid by comparable companies the level of remuneration necessary to attract and retain directors of a suitable calibre, and the general time commitment required from Directors and the risks associated with discharging the
duties attaching to the role of Director.
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REMUNERATION REPORT (continued)NON-EXECUTIVE DIRECTOR REMUNERATION POLICY (continued)Non-Executive Directors' fees, including Committee fees, are set by the Board within the maximum aggregateamount of $600,000 (2011: $600,000) approved by shareholders at the 2012 Annual General Meeting. Total fees
paid during the 2012 financial year were $501,590 (2011: $457,130).Non-Executive Directors receive a base fee of $82,827 (2011: $75,300) per annum in relation to their services asa Director. The Chairman of the Board received an annual fee of $170,282 (2011: $154,800) reflecting the greatertime commitment required. The Chairman of the Board does not receive any additional fees for Committeemembership or participation. There are no additional fees paid to Directors who sit on sub-committees such as theRemuneration Committee and the Audit Committee.
In accordance with Rule 13.4 of the Constitution, Directors are also permitted to be paid additional fees for specialduties which may be in addition to, or in substitution of fees otherwise paid to Directors, within the aggregateremuneration cap approved by shareholders.
Directors are also entitled to be reimbursed for all business related expenses, including travel on the Group'sbusiness, which may be incurred in discharge of their duties.
Superannuation contributions are made on behalf of the Non-Executive Directors in accordance with Ausenco'sstatutory superannuation obligations.
The Board, with the assistance of the Committee, reviews its approach to Non-Executive Director remuneration toensure it remains in line with general industry practice principles of corporate governance.
The Non-Executive Director fee arrangements were reviewed during the 2012 financial year to ensure that theyadequately reflect the increased size and complexity of Ausenco and the consequent enhanced responsibilitiesassociated with membership of the Committees of the Board, as well as increased travel requirements ofmembers of the Board.
REMUNERATIONDetails of Non-Executive Directors' remuneration for the financial years ended 31 December 2012 and 31December 2011 are set out in the following table:
Details of remuneration Primary Benefits Post employment TotalSalary and fees
STI/ CashBonus
Statutorysuperannuation
Other
$ $ $ $ $
NON-EXECUTIVE DIRECTORS
Wayne Goss FY 2012 156,222 - 14,060 - 170,282
FY 2011 142,018 - 12,782 - 154,800
George Lloyd FY 2012 76,144 - 6,683 - 82,827
FY 2011 69,083 - 6,217 - 75,300
Greg Moynihan FY 2012 75,988 - 6,839 - 82,827
FY 2011 70,119 - 6,311 - 76,430
Mary Shafer-Malicki FY 2012 82,827 - - - 82,827
FY 2011 75,300 - - - 75,300
Bob Thorpe FY 2012 75,988 - 6,839 - 82,827
FY 2011 69,083 - 6,217 - 75,300
Hank Tuten a FY 2012 - - - - -
FY 2011 - - - - -
Total FY 2012 467,169 - 34,421 - 501,590
FY 2011 425,603 - 31,527 - 457,130
a - Mr Tuten does not receive a fee for his role as a Director
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REMUNERATION REPORT (continued)DIRECTORS' / KEY MANAGEMENT PERSONNEL'S SHAREHOLDINGSParticulars of Directors' and Key Management Personnel's beneficial interests in options, performance rights andshares of the Company, including their personally related parties interests, as at the date of this report are set outin note 29 of the financial statements.
2012Shares
Balance at 1Jan 2012a
Sharesgranted as
remuneration
Sharesacquired
during theyear
Received onexercise ofoptions /
rights
Shares soldBalance at
31 Dec 2012
DIRECTORS
Wayne Goss 1,209,934 - - - - 1,209,934
Zimi Meka 15,947,224 - 509,432 35,970 480,246 16,012,380
George Lloyd 220,376 - 4,481 - - 224,857
Greg Moynihan 30,688 - - - - 30,688
Mary Shafer-Malicki - - 5,000 - - 5,000
Bob Thorpe 11,118,250 - - - - 11,118,250
Hank Tuten 3,642,668 - - - - 3,642,668
Sub-total 32,169,140 - 518,913 35,970 480,246 32,243,777
SENIOR EXECUTIVESCraig Allen 837,430 - 171,536 21,297 126,536 903,727
Nick Bell 107,465 - 314 42,974 - 150,753
Greg Chrisfield b 14,901 - - 14,426 - 29,327
Jean Kowalski c 1,796 - 299 - - 2,095
Frank Mellish - - - - - -
Neil Trembath 26,880 - 909 1,042 - 28,831
Paul Young 23,125 - 3,800 - - 26,925
Sub-total 1,011,597 - 176,858 79,739 126,536 1,141,658
Grand total 33,180,737 - 695,771 115,709 606,782 33,385,435
a - Opening balance adjusted to exclude Mr Roxburgh who ceased to be Key Management Personnel on 15 April 2011
b - Mr Chrisfield ceased to be Key Management Personnel on 17 March 2012
c - Ms Kowalski ceased to be Key Management Personnel on 1 July 2012
2012 Options andPerformance rights
Balance at 1Jan 2012a
Granted asremuneration
Exercise ofoptions / rights
Options / rightsforfeited
Balance at 31Dec 2012
DIRECTORS
Zimi Meka 67,118 - 35,970 - 31,148
Sub-total 67,118 - 35,970 - 31,148
SENIOR EXECUTIVES
Craig Allen 77,441 110,745 21,297 - 166,889
Nick Bell 103,299 122,469 42,974 - 182,794
Greg Chrisfield b 29,171 - 14,426 14,745 -
Jean Kowalski c 10,566 40,038 - 50,604 -
Frank Mellish 6,837 28,215 - - 35,052Neil Trembath 30,745 47,058 1,042 - 76,761
Paul Young 16,970 27,066 - - 44,036
Sub-total 275,029 375,591 79,739 65,349 505,532
Grand total 342,147 375,591 115,709 65,349 536,680
a - Opening balance adjusted to exclude Mr Roxburgh who ceased to be Key Management Personnel on 15 April 2011
b - Mr Chrisfield ceased to be Key Management Personnel on 17 March 2012
c - Ms Kowalski ceased to be Key Management Personnel on 1 July 2012
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REMUNERATION REPORT (continued)DIRECTORS' / KEY MANAGEMENT PERSONNEL'S SHAREHOLDINGS (continued)
2011
Shares
Balance at 1
Jan 2011
Sharesgranted as
remuneration
Sharesacquired
during theyear
Received onexercise of
options /rights
Shares soldBalance at
31 Dec 2011
DIRECTORS
Wayne Goss 1,209,934 - - - - 1,209,934
Zimi Meka 15,506,085 - 34 441,105 - 15,947,224
George Lloyd 218,025 - 2,351 - - 220,376
Greg Moynihan 30,688 - - - - 30,688
Mary Shafer-Malicki - - - - - -
Bob Thorpe 11,118,250 - - - - 11,118,250
Hank Tuten 3,629,952 - 12,716 - - 3,642,668
Sub-total 31,712,934 - 15,101 441,105 - 32,169,140
SENIOR EXECUTIVESCraig Allen 773,604 - 3,175 60,651 - 837,430
Nick Bell 74,300 - 165 40,000 7,000 107,465Greg Chrisfield 7,688 - - 7,213 - 14,901
Jean Kowalski a - - 1,796 - - 1,796
Frank Mellish b - - - - - -
Ken Roxburgh c 598,617 - - 17,914 95,407 520,404
Neil Trembath 16,412 - 2,082 8,386 - 26,880
Paul Young 19,006 - 224 3,895 - 23,125
Sub-total 1,489,627 - 7,442 138,059 102,407 1,532,001
Grand total 33,202,561 - 22,543 579,164 102,407 33,701,141
a - Ms Kowalski was appointed on 18 April 2011b - Mr Mellish was appointed on 9 May 2011c - Mr Roxburgh ceased to be Key Management Personnel on 15April 2011
2011 Options andPerformance rights
Balance at 1Jan 2011
Granted asremuneration
Exercise ofoptions / rights
Options / rightsforfeited
Balance at 31Dec 2011
DIRECTORS
Zimi Meka 546,293 - 441,105 38,070 67,118
Sub-total 546,293 - 441,105 38,070 67,118
SENIOR EXECUTIVESCraig Allen 121,805 75,399 60,651 59,112 77,441
Nick Bell 125,524 82,287 40,000 64,512 103,299
Greg Chrisfield 30,015 29,490 7,213 23,121 29,171
Jean Kowalski a - 21,129 - 10,563 10,566
Frank Mellish b - 13,674 - 6,837 6,837
Ken Roxburgh c 41,343 - 17,194 6,498 17,651
Neil Trembath 32,645 30,027 8,386 23,541 30,745Paul Young 16,899 18,357 3,895 14,391 16,970
Sub-total 368,231 270,363 137,339 208,575 292,680
Grand total 914,524 270,363 578,444 246,645 359,798
a - Ms Kowalski was appointed on 18 April 2011b - Mr Mellish was appointed on 9 May 2011c - Mr Roxburgh ceased to be Key Management Personnel on 15April 2011
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Ausenco LimitedDirectors' report
31 December 2012(continued)
REMUNERATION REPORT (continued)DIRECTORS' / KEY MANAGEMENT PERSONNEL'S SHAREHOLDINGS (continued)
ADDITIONAL INFORMATIONThe following table provides the options / rights granted to date to KMP and provides for the maximum value ofoptions yet to vest.
Dateoptions/rights
granted
Numberof
options/rights
granted
% vestedduringyear
%forfeitedin year
Date firstoption/right
tranchecan be
exercised
Fair valueper
option/right at
grant date
Exerciseprice peroption/right
ExpiryDate
Minimumvalue ofoptions/rights to
vest
Maximumvalue ofoptions/rights to
vest
EXECUTIVE DIRECTORZimi Meka 19-Feb-08 36,168 33% - 19-Feb-10 $6.25 $0.00 19-Feb-15 - -
17-Mar-09 155,739 33% - 17-Mar-11 $1.83 $0.00 17-Mar-14 - 57,001
01-Jan-10 76,143 33% - 01-Apr-12 $3.94 $0.00 01-Apr-15 - -
SENIOR EXECUTIVES
Craig Allen 19-Feb-08 21,405 33% - 19-Feb-10 $6.25 $0.00 19-Feb-15 - -
17-Mar-09 92,214 33% - 17-Mar-11 $1.83 $0.00 17-Mar-14 - 33,751
01-Jan-10 42,831 33% - 01-Apr-12 $3.94 $0.00 01-Apr-15 - -
01-Jan-11 75,399 - - 01-Jan-13 $2.35 $0.00 01-Jan-16 - 88,625
01-Jan-12 110,745 - - 01-Jan-14 $1.84 $0.00 01-Jan-17 - 203,771
Nick Bell 23-Jun-08 40,000 33% - 31-Dec-10 $6.00 $0.00 31-Dec-11 - -
23-Jun-08 11,538 33% - 19-Feb-10 $6.30 $0.00 19-Feb-15 - -
17-Mar-09 95,901 33% - 17-Mar-11 $1.83 $0.00 17-Mar-14 - 35,099
01-Jan-10 46,743 33% - 01-Apr-12 $3.94 $0.00 01-Apr-15 - -
01-Jan-11 82,287 - - 01-Jan-13 $2.35 $0.00 01-Jan-16 - 97,725
01-Jan-12 122,469 - - 01-Jan-14 $1.84 $0.00 01-Jan-17 - 225,343
Greg Chrisfield a 17-Mar-09 36,066 33% - 17-Mar-11 $1.83 $0.00 17-Mar-14 - -
01-Jan-10 16,752 33% - 01-Apr-12 $3.94 $0.00 01-Apr-15 - -
01-Jan-11 29,490 - 50% 01-Jan-13 $2.35 $0.00 01-Jan-16 - -
01-Jan-12 40,038 - 100% 01-Jan-14 $1.84 $0.00 01-Jan-17 - -
Jean Kowalski b 01-Jan-11 21,129 - 50% 01-Jan-13 $2.38 $0.00 01-Jun-16 - -
Frank Mellish 01-Jan-11 13,674 - - 01-Jan-13 $2.38 $0.00 01-Jan-16 - 16,073
01-Jan-12 28,215 - - 01-Jan-14 $1.84 $0.00 01-Jan-17 - 51,916
Neil Trembath 19-Feb-08 7,815 33% - 19-Feb-10 $6.25 $0.00 19-Feb-15 - -
17-Mar-09 36,720 33% - 17-Mar-11 $1.83 $0.00 17-Mar-14 - 26,879
01-Jan-10 17,058 33% - 01-Apr-12 $3.94 $0.00 01-Apr-15 - -
01-Jan-11 30,027 - - 01-Jan-13 $2.35 $0.00 01-Jan-16 - 35,294
01-Jan-12 47,058 - - 01-Jan-14 $1.84 $0.00 01-Jan-17 - 86,587
Paul Young 17-Mar-09 19,476 33% - 17-Mar-11 $1.83 $0.00 17-Mar-14 - 14,25601-Jan-10 10,428 33% - 01-Apr-12 $3.94 $0.00 01-Apr-15 - -
01-Jan-11 18,357 - - 01-Jan-13 $2.35 $0.00 01-Jan-16 - 21,581
01-Jan-12 27,066 - - 01-Jan-14 $1.84 $0.00 01-Jan-17 - 49,801
a - Mr Chrisfield ceased to be Key Management Personnel on 17 March 2012
b - Ms Kowalski ceased to be Key Management Personnel on 1 July 2012
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Ausenco LimitedDirectors' report
31 December 2012(continued)
22
AUDITORS INDEPENDENCE DECLARATIONA copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 isset out on page 23.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and InvestmentsCommission, relating to the 'rounding off' of amounts in the directors' report. Amounts in the directors' report havebeen rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to thenearest dollar.
AUDITORSPwC Australia continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors.
Zimi MekaDirector
George LloydDirector
Brisbane19 February 2013
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23
PricewaterhouseCoopers, ABN 52 780 433 757
Riverside Centre, 123 Eagle Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Auditors Independence DeclarationAs lead auditorfor the audit of Ausenco Limited for the year ended31 December 2012, I declare that to the best of
my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Ausenco Limited and the entities it controlled during the period.
S P Neill Brisbane
Partner 19 February 2013
PricewaterhouseCoopers
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Ausenco LimitedConsolidated statement of comprehensive income
For the year ended 31 December 2012Consolidated
Notes 2012$'000
2011$'000
Revenue from continuing operations 5 633,485 547,942
Other income 5 1,009 572
Staff and contractors costs (407,162) (342,689)
Directly attributed project costs (111,770) (94,324)
Office and administration costs (45,496) (56,857)
Other expenses (814) (7,183)
Depreciation and amortisation expense 6 (10,196) (9,157)
Finance costs 7 (3,507) (4,742)
Profit before income tax 55,549 33,562
Income tax expense 8 (14,154) (7,208)
Profit for the year 41,395 26,354
Other comprehensive income
Changes in the fair value of cash flow hedges 22 - 611
Exchange differences on translation of foreign operations 22 2,725 (2,717)
Net investment hedge 22 (695) (5,931)
Income tax relating to components of other comprehensive income 22 - (155)
Other comprehensive profit / (loss) for the year, net of tax 2,030 (8,192)
Total comprehensive income for the year 43,425 18,162
Profit for the year attributable to the ordinary equity holders of theCompany:
Owners of Ausenco Limited 41,395 26,354
41,395 26,354
Total comprehensive income for the year attributable to the ordinary equityholders of the Company:
Owners of Ausenco Limited 43,425 18,162
43,425 18,162
Cents CentsEarnings per share for profit attributable to the ordinary equityholders of the Company:Basic earnings per share 9 33.5 21.5
Diluted earnings per share 9 32.8 21.3
The above consolidated statement of comprehensive income should be read in conjunction with theaccompanying notes.
1 The 2011 numbers have been reclassified to improve comparability with 2012. Refer to note 2(a).
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Ausenco LimitedConsolidated balance sheet
As at 31 December 2012Consolidated
Notes 2012$'000
2011$'000
ASSETSCurrent assetsCash and cash equivalents
10
52,625
67,661
Trade and other receivables 11 87,797 82,380Unbilled revenue 12 52,887 50,538Current tax receivables 2,850 4,557Other current assets 13 7,253 3,691Total current assets 203,412 208,827
Non-current assetsTrade and other receivables 11 2,360 2,342
Available-for-sale financial assets - 28Property, plant and equipment 14 24,980 28,570Intangible assets 15 200,337 177,008Deferred tax assets 16 24,640 25,001Other non-current assets 13 1,966 1,504Total non-current assets 254,283 234,453
Total assets 457,695 443,280
LIABILITIES
Current liabilitiesTrade and other payables 17 81,413 84,550Billings in advance 12 8,109 12,751Borrowings 18 29,347 9,268Current tax liabilities 7,156 6,890Provisions 19 2,844 1,075Other current liabilities 20 3,038 2,373Total current liabilities 131,907 116,907
Non-current liabilitiesBorrowings 18 35,054 59,798Deferred tax liabilities 16 5,300 2,366Provisions 19 2,564 2,606Other non-current liabilities 20 8,682 8,805Total non-current liabilities 51,600 73,575
Total liabilities 183,507 190,482
Net assets 274,188 252,798
EQUITYContributed Equity 21 216,878 215,177Reserves 22 (37,174) (39,918)Retained earnings 23 94,484 77,539Total equity 274,188 252,798
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
1 The 2011 numbers have been reclassified to improve comparability with 2012. Refer to note 2(a).
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Ausenco LimitedConsolidated statement of changes in equity
For the year ended 31 December 2012
Consolidated Notes
Ordinaryshares
ReservesRetainedearnings
Total
$'000 $'000 $'000 $'000
Balance at 1 January 2011 209,605 (30,705) 54,997 233,897
Total comprehensive income forthe year - (8,192) 26,354 18,162
Transactions with owners in theircapacity as owners:
Contributions of equity, net oftransaction costs
21 5,572 - - 5,572
Dividends provided for or paid 24 - - (3,812) (3,812)
Employee share plan 22 - (1,021) - (1,021)
5,572 (1,021) (3,812) 739
Balance at 31 December 2011 215,177 (39,918) 77,539 252,798
Balance at 1 January 2012 215,177 (39,918) 77,539 252,798
Total comprehensive income forthe year - 2,030 41,395 43,425
Transactions with owners in their capacity asowners:
Contributions of equity, net of
transaction costs21 2,701 - - 2,701
Share buy-back, inclusive oftransaction costs
21 (1,000) - - (1,000)
Dividends provided for or paid 24 - - (24,450) (24,450)
Employee share plans 22 - 714 - 714
1,701 714 (24,450) (22,035)
Balance at 31 December 2012 216,878 (37,174) 94,484 274,188
The above consolidated statement of changes in equity should be read in conjunction with the accompanyingnotes.
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Ausenco LimitedConsolidated statement of cash flowsFor the year ended 31 December 2012
Consolidated
Notes2012$'000
20111
$'000Cash flows from operating activities
Receipts from customers (inclusive of GST) 693,992 571,046
Payments to suppliers and employees (inclusive of GST) (641,963) (552,673)52,029 18,373
Interest received 1,265 789
Borrowing costs paid 7(a) (3,507) (4,734)
Income taxes paid (8,563) (3,067)
Net cash inflow from operating activities 27 41,224 11,361
Cash flows from investing activities
Payments for property, plant and equipment 14 (4,418) (8,967)Payments for intangibles (14,571) (2,468)
Acquisition of subsidiary, net of cash acquired 36 (5,160) -
Proceeds from disposal of non-current assets 338 5,450
Net cash outflow from investing activities (23,811) (5,985)
Cash flows from financing activities
Proceeds from borrowings - 21,863
Repayment of borrowings (10,412) (19,049)
Share buy-back 21(a) (1,000) -
Dividends paid 24(a) (21,761) (3,103)
Net cash outflow from financing activities (33,173) (289)
NET INCREASE / (DECREASE) IN CASH HELD (15,760) 5,087
Cash and cash equivalents at the beginning of the financial period 67,661 63,594
Effects of exchange rate changes on cash and cash equivalents 724 (1,020)
Cash and cash equivalents at end of year 52,625 67,661
Non-cash financing activitiesDividends satisfied by the issue of shares under the dividend reinvestment plan are shown in note 21.
The above consolidated statement of changes in equity should be read in conjunction with the accompanyingnotes.
1 The 2011 numbers have been reclassified to improve comparability with 2012. Refer to note 2(a).
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Ausenco LimitedNotes to the consolidated financial statements
For the year ended 31 December 2012
1 General information
Ausenco Limited (the Company) and its subsidiaries (together, the Group) provide engineering design, projectmanagement, process controls and operations solutions to the energy, environment & sustainability, minerals &metals, process infrastructure and program management sectors. The Group operates around the world with
projects in APAC/Africa, North America and South America regions. During the year, the Group acquired control ofRylson Pty Limited, an Australian based global provider of business improvement and asset managementsolutions and Reaction Consulting Inc. a Canadian based specialist provider of engineering services in the SAGDbitumen and oil sands sectors.
The company is a public company limited by shares, which is listed on the Australian Securities Exchange andincorporated and domiciled in Australia. The address of its registered office is 144 Montague Road, SouthBrisbane, Queensland, 4101, Australia.
2 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set outbelow. These policies have been consistently applied to all the years presented, unless otherwise stated. Thefinancial statements are for the consolidated entity consisting of Ausenco Limited and its subsidiaries.
(a) ComparativesDuring the year and as part of its implementation of uniform systems in all its businesses, the group reviewed theclassification of expenses as well as assets and liabilities. The reclassifications did not affect net asset, basic anddiluted earnings per share.
In relation to expenses the Group has ceased presenting reimbursable costs and is now presenting directlyattributed project costs as a separate line item. To enhance comparability the prior year numbers have beenrevised. Directly attributed project costs for 2011 are now $94,428k with the significant reclassification being officeand administration reduced by $20,109k and reimbursable costs of $68,605k reallocated.
During the year deferred tax assets and liabilities were offset where there was a legally enforceable right to offsetand the Group intends to either settle on a net basis or to realise the asset and liabilities simultaneously. Toenhance comparability the prior year numbers have been revised. The impact on this is to reduce the deferred taxasset and liability by $6,462k.
The 2011 cash flow statement has been revised to gross up the receipts from customers and payments tosuppliers for Goods and Services Tax ($60.5 million).
(b) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian AccountingStandards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent IssuesGroup Interpretations and the Corporations Act 2001. The consolidated financial statements of the Group alsocomply with International Financial Reporting Standards (IFRS) as issued by the International AccountingStandards Board (IASB). These financial statements have been prepared under the historical cost conventionexcept for derivatives which are stated at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accountingestimates. It also requires management to exercise its judgment in applying the Group's accounting policies. The
areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates aresignificant to the financial statements, are disclosed in note 3.
(i) New and amended standards adopted by the Group
None of the new standards and amendments to standards that are mandatory for the first time for the financialyear beginning on or after 1 January 2012 affected any of the amounts recognised in the current period or anyprior period and are not likely to affect future periods.
(ii) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periodsbeginning after 1 January 2013, and have not been applied in preparing these consolidated financial statements.None of these is expected to have a significant effect on the consolidated financial statements of the group, exceptthe following set out below:
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Ausenco LimitedNotes to the consolidated financial statements
For the year ended 31 December 2012(continued)
2 Summary of significant accounting policies (continued)
(b) Basis of preparation (continued)
(ii) New standards and interpretations not yet adopted (continued)
AASB 9 Financial Instruments (effective from 1 January 2015)
AASB 9 was issued in November 2009 and October 2010 and addresses the classification, measurement andrecognition of financial assets and financial liabilities. It replaces the parts of AASB 139 that relate to theclassification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into twomeasurement categories; those measured at fair value and those measured at amortised cost. The determinationis made at initial recognition. The classification depends on the entitys business model for managing its financialinstruments and the contractual cash flow characteristics of the instrument. There will be no impact on the Groupsaccounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that aredesignated at fair value through profit or loss and the group does not have any such liabilities. The derecognitionrules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have notbeen changed. The group is yet to assess the full impact of AASB 9 and intends to adopt no later than the
accounting period beginning on or after 1 January 2015.
In August 2011, the AASB issued a suite of five new and amended standards which address the accounting forjoint arrangements, consolidated financial statements and associated disclosures.
AASB 10 Consolidated Financial Statements (effective 1 January 2013)
AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and SeparateFinancial Statements, and Interpretation 12 Consolidation Special Purpose Entities. The core principle that aconsolidated entity presents a parent and its subsidiaries as if they are a single economic entity remainsunchanged, as do the mechanics of consolidation. However, the standard introduces a single definition of controlthat applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns.Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can bepositive, negative or both. Control exists when the investor can use its power to affect the amount of its returns.There is also new guidance on participating and protective rights and on agent/ principal relationships. While thegroup does not expect the new standard to have a significant impact on its composition, it has yet to perform adetailed analysis of the new guidance in the context of its various investees that may or may not be controlledunder the new rules.
AASB 11 Joint Arrangements (effective 1 January 2013)
AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer onthe legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the
joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified aseither a joint operation or a joint venture. Joint ventures are accounted for using the equity method, and the choiceto proportionately consolidate will no longer be permitted. Parties to a joint operation will account for their share ofrevenues, expenses, assets and liabilities on the basis of the groups interests in those assets and liabilities.
Whist the Group does not expect the new standard to have a significant impact on the accounting for jointventures, we are still finalising our detailed analysis.
AASB 12 Disclosure of Interests in Other Entities (effective 1 January 2013)
AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB11 and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of thisstandard by the Group will not affect any of the amounts recognized in the financial statements, but will impact thetype of information disclosed in relation to the Groups investments.
The new standards will be first applied in the financial statements for the annual reporting period ending 31December 2013.
There are no other AASBs or Interpretations that are not yet effective that would be expected to have a material
impact on the Group.
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Ausenco LimitedNotes to the consolidated financial statements
For the year ended 31 December 2012(continued)
2 Summary of significant accounting policies (continued)
(c) Principles of consolidation(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of the Group as at 31 December 2012.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power togovern the financial and operating policies, generally accompanying a shareholding of more than one half of thevoting rights. The existence and effect of potential voting rights that are currently exercisable or convertible areconsidered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated fromthe date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The purchase or acquisition method of accounting is used to account for the acquisition of subsidiaries by theGroup (refer to note 2(i).
Intercompany transactions, balances, income and expenses on transactions between group companies areeliminated. Profits and losses resultin