Forge Group Ltd Case Study (A) The Revealing Nature of Numbers

THE FORGE GROUP LTD SUMMARY In 2012-2013, Forge Group Limited had more than 2,000 employees working across eight countries on four continents. The pride in the growth story is evident, as Forge Groups 2012 Annual Report (released in September 2013) lists accomplishments in what is described as a groundbreaking year. The main milestones give a snapshot of the types of projects the company was involved in (see Figure 1). At the time of listing (June 26, 2007), Forge Group Ltd (FGL) shares traded for $0.56. (All monetary amounts discussed herein are in Australian dollars. To convert to another currency, visit www.x-rates.com.) The shares peaked at $6.98 on March 6, 2013, valuing the company at $600 million. In less than a year, FGL was placed in a trading halt (February 11, 2014). Voluntary administrators and receivers were appointed. THE ENGINEERING AND CONSTRUCTION INDUSTRY The engineering and construction sector provides significant economic activity in many countries. Large-scale engineering and construction projectsincluding highways, bridges, railways, airports, harbors, production facilities, and office and apartment buildingsprovide employment opportunities and attract large capital investment. The quantum of resources employed in this industry and the profound affect they have on society means that there are strict compliance, regulatory, environmental, and tax requirements on those operating in the sector. The governments of many countries publicly funded a number of large scale infrastructure projects in the aftermath of the Global Financial Crisis (GFC) to stimulate the economy. Joint ventures and public/private partnerships are common in the industry to reduce the risk of large-scale projects and to ensure adequate capital and expertise. Major contracts generally involve a number of different companies with primary contractor and sub-contractor status, all tendering and quoting on various stages of work in a project. This makes the industry highly competitive, and therefore it is vital to have appropriate costing and project management expertise. Mining companies also took advantage of the cheaper finance post GFC and the upswing in demand for minerals and resources. Large-scale mining projects have been the driving force for some economies, especially in Australia. But with the construction of a number of the large projects nearing completion (and moving into production phase), there is a drop in engineering and construction spending. In Australia in 2013-2014, engineering and construction spending was $128 billion, dropping $1 billion from the previous year. This increased competition in the sector and, therefore, demand for lower-priced contracts and shorter completion times. The market value of engineering and construction companies are based partly on their future secured order book. Order book is a term used in the engineering and THE FORGE GROUP LTD SUMMARY In 2012-2013, Forge Group Limited had more than 2,000 employees working across eight countries on four continents. The pride in the growth story is evident, as Forge Groups 2012 Annual Report (released in September 2013) lists accomplishments in what is described as a groundbreaking year. The main milestones give a snapshot of the types of projects the company was involved in (see Figure 1). At the time of listing (June 26, 2007), Forge Group Ltd (FGL) shares traded for $0.56. (All monetary amounts discussed herein are in Australian dollars. To convert to another currency, visit www.x-rates.com.) The shares peaked at $6.98 on March 6, 2013, valuing the company at $600 million. In less than a year, FGL was placed in a trading halt (February 11, 2014). Voluntary administrators and receivers were appointed. THE ENGINEERING AND CONSTRUCTION INDUSTRY The engineering and construction sector provides significant economic activity in many countries. Large-scale engineering and construction projectsincluding highways, bridges, railways, airports, harbors, production facilities, and office and apartment buildingsprovide employment opportunities and attract large capital investment. The quantum of resources employed in this industry and the profound affect they have on society means that there are strict compliance, regulatory, environmental, and tax requirements on those operating in the sector. The governments of many countries publicly funded a number of large scale infrastructure projects in the aftermath of the Global Financial Crisis (GFC) to stimulate the economy. Joint ventures and public/private partnerships are common in the industry to reduce the risk of large-scale projects and to ensure adequate capital and expertise. Major contracts generally involve a number of different companies with primary contractor and sub-contractor status, all tendering and quoting on various stages of work in a project. This makes the industry highly competitive, and therefore it is vital to have appropriate costing and project management expertise. Mining companies also took advantage of the cheaper finance post GFC and the upswing in demand for minerals and resources. Large-scale mining projects have been the driving force for some economies, especially in Australia. But with the construction of a number of the large projects nearing completion (and moving into production phase), there is a drop in engineering and construction spending. In Australia in 2013-2014, engineering and construction spending was $128 billion, dropping $1 billion from the previous year. This increased competition in the sector and, therefore, demand for lower-priced contracts and shorter completion times. The market value of engineering and construction companies are based partly on their future secured order book. Order book is a term used in the engineering and construction sector to capture the companys future work and the dollar value of the work. The future work is contracted through the normal selling of services and through tendering for large-scale works needed by governments and large private companies. If a project is very large, it may be divided into segments with a separate tender process for each segment. Companies have to carefully consider the risk attached to each segment of the larger project and the interrelationship of each of the segments. A company can be held liable to another company if their segment completion is delayed and the other company cannot complete its work on time, as per their contract, because of the delay. For example, when building a tunnel, the riskier segment may be blasting the rock and strengthening the actual tunnel. Excavating the ground and surfacing the road may not carry the same risk but could be held up if the blasting and strengthening is not completed on time. In comparison to a retail or manufacturing concern, the products being sold are large capital works that tend not to be completed within a neat 12-month period. This means that there needs to be payment points built into the contracts. These are called milestones. Once a project milestone is reached, it triggers a point when the engineering and construction company can invoice the purchaser and recognize the revenue in its accounts. The product cost (Cost-of-Goods-Sold) expensed against this revenue will contain material, labor, equipment costs, and sub-contractor costs. These costs are all capitalized into inventory at the time they are incurred but not expensed until they reach a milestone. A lot of dollars, long-term time horizons, subjective milestones, and the application of large capital equipment costs contribute to the overall business risk in the sector. Many companies have suffered as a result of stalled projects, unforeseen circumstances or problems, poor costing of the work, and mismanaged cash flow. Within the industry, there is usually significant take-over activity. This is driven in part by companies not performing well and/or insolvency and also by normal merger and acquisition activity. Smaller companies find it difficult to compete with larger companies for the larger projects and generally need to combine or merge in some way or stay small. This adds further risk and places the financial statements and the order book under increased scrutiny as business valuations rely on this information.

THE FORGE GROUP LTD (FGL) The company was a success story. It listed on the Australian stock exchange on June 26, 2007, from a private construction company called AiConstruction. It was a well-run company that needed access to more capital if it was to continue to grow. Within a year, it made its first acquisition by taking over Abesque Engineering. The company survived the Global Financial Crisis and leveraged to the subsequent mining and construction boom led by Chinas appetite for minerals and resources. Over the next few years, the company grew organically and in April 2010 another construction company called Clough bought 13% (10.5 million shares) of FGL ordinary shares, thus becoming the largest shareholder. Clough continued to purchase shares in FGL until it divested its total holding of 35% in March 2013. Clough management explained its divestment by indicating that expectations of joint ventures between the two companies did not eventuate, and, therefore, the equity holding was cashed in to allow the pursuit of other objectives. In January 2012, FGL undertook a major acquisition by purchasing CTEC Pty Ltd. In essence, the acquisition meant taking over two major projects. The Diamantina Power Station (DPS) Project in Queensland, Australia, and the West Angelas Power Station (WAPS) Project in the Pilbara region of Western Australia. It was expected that these major projects would add $7.5 million and $10.8 million to earnings before interest, tax, depreciation, and amortization (EBITDA) in 2012 and 2013, respectively. The purchase price was $16 million up-front with further payments due on the meeting of specified performance targets (total paid was $32.26 million). This increased FGLs order book significantly, and FGLs share price rose in response. In June 2013, FGL acquired Taggart Global for $43 million. This purchase meant that FGL was now diversifying into asset management and into other economies. SHARE MARKET INFORMATION The historical share price chart since listing is shown in Figure 2.

CTEC PURCHASE In the wash up of the demise of FGL is the attention being paid to two main contracts: The Diamantina Power Station (DPS) Project in Queensland, Australia, and the West Angelas Power Station (WAPS) Project in the Pilbara region of Western Australia. Both projects were acquired after FGL took over CTEC Pty Ltd on January 13, 2012. The purchase of CTEC was to change the business model by bringing sub-contracting work in-house with the intended consequence of taking out the middle man and thereby increasing earnings (by negating sub-contractor margins). The CTEC purchase payment terms required an up-front payment of $16 million with subsequent payments conditional on meeting performance criteria (possible further payment of $40 million in total). CTECs prior year (June 30, 2011) EBIT was $2 million, with expected EBITDA at year end 2012 and 2013 to be $18.4 million and $24.8 million, respectively. The DPS and WAPS projects were to increase this expected EBITDA by $7.5 million in 2012 and $10.8 million in 2013.

Instead cost overruns and poor budgeting meant that the projects revised 2013 estimates showed a $61 million project margin loss for the DPS project and a $41.7 million project margin loss on the WAPS project. The cost overruns on these two projects lead to the profit downgrade and contributed to the resulting shortage of cash. Added to that was the discovery of an early payment to the vendors of CTEC Pty Ltd before its performance conditions were met. Further, the payment of bonuses to the previous Managing Director, Peter Hutchinson, of $375,000 was made for a successful acquisition and integration. These payments are the subject of further investigations by the liquidator.

DPS AND WAPS COSTING AND BUDGETING In any business the costing and budgeting systems are critical to success. The FGL administrator report for 2013/2014 (year ending January 2014) shows that the: Actual work-in-progress income for the period was $126 million below management forecast. Labor costs were $70 million over budget. Material costs were $55 million over budget. Work-in-progress overheads were $22 million over budget. FINANCIAL INFORMATION The financial statements for 2010-2014 are presented in Tables 2-5.

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2 SHARE MARKET INFORMATION The historical share price chart since listing is shown in Figure 2. Figure 2: FGL Share Price $8 $7 Closing Price S6 $5 M $4 $3 $2 $1 SO 6/27/2010 6/27/2011 6/27/2012 6/27/2007 6/27/2008 6/27/2009 6/27/2013 The market closing prices, major announcements, and significant shareholding changes are listed in chronological order in Table 1. $0.78 3 Table 1. Timeline of Forge Group Ltd (FGL) Date Closing Market Major Announcement/Change June 27, 2007 $0.56 FGL listed on Australian Stock Exchange June 30, 2008 June 30, 2009 $0.43 Global Financial Crisis impact April 6, 2010 $2.96 Clough purchases 10.5 million shares for 13% ownership June 30, 2010 $2.66 June 30, 2012 55.46 June 30, 2012 $4,37 January 13, 2012 $5.25 FGL purchases 100% of CTEC Pty Ltd for $32.26 million March 6, 2013 $6,98 Peak share price March 26, 2013 $6.05 Clough sells FGL shares at $6,05 ($187 million, 35% of FGL) May 17, 2013 FGL awarded major contract (Dugald Rover) June 3, 2013 FGL acquiras Taggart Global (U.S.company) at S43 million July 2, 2013 FGL awarded major contract (TAN Burrup plant) June 30, 2013 $4.09 August 29, 2013 Annual Report released NPAT at S63 million, equity at $213.5 million, dividend at $0.14 per share September 2, 2013 $1.47 billion joint venture with Duro Felguera announced (value to Forge is $830 million-order book now at 2.1 billion) September 12, 2013 FGL awarded major contract (Yandicroogina for Rio Tinto-S100 million contract) September 19, 2013 FG), major contract terminated (Dugald River) October 7, 2013 FGL declaros $50 million in major contracts in U.S. and Australia since June 1, 2013 November 4, 2013 $4.18 Trading halt November 5, 2013 ANZ Bank (major financier) appoints KordaMentha to review books November 28, 2013 FGL Market Announcement -ANZ Bank supports and negotiates new finance facilities -Considering equity capital raising -Identifies underperforming assets (ie, CTEC projects) -Negotiates agreements with customers and sub-contractors -Normal operations for other parts of business November 28, 2013 $0.69 FGL Market Announcement -$127 profit write down on two large contracts (Diamantina Power Station and West Angelas Power Station; $45 million to complete both projects) -Challenging liquidity period (net cash flow Nov. and Dec.) -ANZ Bank continued support with some adjustment to finance facilities -Business as usual November 28, 2013 $0.69 Trading haltlifted December 4, 2013 FGL Market Announcement -In response to ASX query, indicated became aware of problems with Diamantina Power Station and West Angelas Power Station projects in late Sept. with margin erosians due to cost overruns and delays causing the profit down- grade. Casting analysis during Oct, and Nov. led to requested trading halt and profit downgrade in Nov. December 17, 2013 FGL awarded major $40 million contract in North American coal sector January 10, 2014 $1.25 Trading halt until January 14, 2014 January 14, 2014 $1.02 Trading halt until January 28, 2014 January 24, 2014 January 28, 2014 $0.90 February 10, 2014 $0.92 Trading ceases February 11, 2014 Board appoints administrators, and secured creditors appoint receivers. Table 2. Comprehensive Income Statement in thousands of Australian dollars) June 30, 2010 $246,169 June 30, 2011 421,595 June 30, 2012 $774,879 June 30, 2013 $1,054,100 Unaudited January 31, 2014 $520,041 1711,430) 9,696 (125,171) (79,194) (3,218) 15,000 1211,000) (157,191) (5,159) (516,867) (164,502) (16,292) (582) (656,334) (256,515) (21,361) (5,380) (1,628) (7,1321 537 (304) (8,043) (21,033) (12,711) 257 188 Revenue Cost of sales Changes in inventories of finished goods and WIP Materials, plant, and contractor costs Employee benefits expense Depreciation and amortization Consulting fees Provision for impairment losses Other expenses Other gains and losses Expenses Results from Operating Activities Finance income Finance costs Net finance income Share of profit/(loss) of associates and jointly controlled entities Net Profit Before Tax Income tax expense Net Profit After Tax Foreign exchange differences (net of tax) Total Comprehensive Income $40,059 1,023 (716) $307 $54,898 3,079 (711) $2,368 (513) $56,753 (17,920) $38,833 (1,946) $35,887 $64,182 5,698 12,850) $2,848 3,052 $70,082 (20,780) $49,302 (310) S48,992 $93,665 6,939 (4.816) $2,123 (5,679) $90,109 (27.190) $62,919 1,826 $64,745 $40,366 (10,915) $29,451 (346) $(324,162 12,30 S(326,463) $29,105 Table 3. Balance Sheet (in thousands of Australian dollars) Unaudited January 31, 2014 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013 $51.921 $78,285 $15,316 Current Assets Cash and cash equivalents Short-term deposits Trade and other receivables Inventories and WIP Current tax assets Other assets Noncurrent assets classified as held for sale Total Current Assets $51,091 72,500 196,884 11,331 42,162 14,621 49,542 29.622 $90,728 2.748 83.254 150,491 2,535 1,560 103,279 40,616 1,574 2,487 (23,415) 2,246 6,900 $117.850 $159,023 $334,293 $331,316 $135,796 73,293 1.424 10,468 71,546 9,124 26,789 1.827 36,577 2,043 Noncurrent Assets Trade and other receivables Term deposits Property, plant, and equipment Deferred tax assets Investments accounted for using equity method Intangibles Other assets Total Noncurrent Assets Total Assets 7,051 14,260 67,736 4,273 2,545 48,243 15,621 15,637 40,332 44,237 $162,087 54,257 $213,280 144,108 $478,401 132,894 $464.210 90.467 163.750 $299,556 52.968 299,909 219,568 11.139 Current Liabilities Trade and other payables Borrowings Current tax liabilities Provisions Other liabilities Total Current Liabilities 2,789 8,644 525 72.845 3.272 6,387 755 267,169 8.734 8,367 825 3,970 63,731 $363,640 $64,926 583,259 $285,095 $234,677 1,517 4901 51 Noncurrent Liabilities Trade and other payables Borrowings Deferred tax liabilities Investments accounted for using the equity method Provisions Other liabilities Total Noncurrent Liabilities 9246 17.453 2,793 489 14,547 1,067 493 5 308 299 164 489 493 50,667 $52,184 $3,785 $5,559 $29,981 $16,107 88.818 315,076 250,784 68,711 93,376 415,824 (116,268) 124,426 163,325 213,426 42,839 44.294 45,430 42,768 Total Liabilities Net Assets Equity Issued capital Profit reserve Reserves Retained earnings Total Equity Number of shares Share price (159,036) 1,034 49,505 93,376 70,699,487 (912) 81.080 124,462 81,541,569 (1.221) 119.116 163,325 86,169,014 $4.37 45,430 62,919 1.471 103,606 213,426 86,169,014 (116,268) 86,169,014 S2.66 $5.46 $4.20 Table 4. Statement of Cash Flows (in thousands of Australian dollars) 2010 2011 2012 2013 431,399 (373.464) 744,720 (631,924) 1.176.226 (1.113,073) 245,418 (215,240) 943 (670) $30,451 638 (20,390) $38,183 (21,537) $91,259 (45,231) $17,922 (8,371) 224 (11,2571 6,485 3,079 (39,737) 500 5,649 186,760) 1,023 (19,521) 869 7,379 73.545 130 (205) (3,439) Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Other revenue Income taxes paid Nat cash flows provided by operating activities Cash Flows from Investing Activities Payments for property, plant, and equipment Proceeds from disposal of property, plan, and equipment Interest received Term deposits matured/expired Amount received from joint ventures Acquisition of investments of associates Payment of deferred consideration Net cash flows provided by/used in financing activities Cash Flows from Financing Activities Proceeds from issue of share capital Proceeds from borrowings Repayment of borrowings Interest paid Dividends paid Net cash provided by/used in financing activities Net increase/decrease in cash and equivalents Cash and equivalents at beginning of year Effect of exchange rate changes Cash and equivalents at end of year (19,798) $42,604 (7,124) (1,898) (123,787) 18,907 1,458 13,464) (4,131) 1271) (3,419) 1,136 23,011 14.698) 12,850) (11,265) 9,152 (9,654) (4,877) (15,510) (658) 17,257) $11,086 $5,334 S120,889) S(9,921) 26,364 34,413 (27,194) 39,637 17,440 51,921 78,285 51.091 67 6 $57,920 $78,285 $51,091 590,728 Table 5. Reconciliation (in thousands of Australian dollars) Profit for the year after tax Depreciation and amortization Other noncash differences Decrease/Increase in trade debtors and receivables Decrease/Increase in inventaries and WIP Decrease/Increase in other current assets Increase in deferred tax assets Decrease/Increase in trade and payables Decrease/Increase in current tax liatsilities Decrease/Increase in deferred tax liabilities Increase in other provisions Net cash inflow from operating activities 2010 $29,450 3,217 907 125,202) (9,696) 1104) 1779) 21,881 10.649 64 2011 $38,832 5,159 (1.815) 17,380) (15,000) 671 (215) 19,877 12,311) 2012 S49,302 16,292 143,488) [154,393) 18,291 1913) (2,231) 203,417 1,980 2,742 260 $91,259 2013 $62,919 21,361 28,409 119,258 1139,1601 927 14,851) (37,123) (10,903) 11.727) 88 $17,922 64 $30,451 365 $38,183 2 SHARE MARKET INFORMATION The historical share price chart since listing is shown in Figure 2. Figure 2: FGL Share Price $8 $7 Closing Price S6 $5 M $4 $3 $2 $1 SO 6/27/2010 6/27/2011 6/27/2012 6/27/2007 6/27/2008 6/27/2009 6/27/2013 The market closing prices, major announcements, and significant shareholding changes are listed in chronological order in Table 1. $0.78 3 Table 1. Timeline of Forge Group Ltd (FGL) Date Closing Market Major Announcement/Change June 27, 2007 $0.56 FGL listed on Australian Stock Exchange June 30, 2008 June 30, 2009 $0.43 Global Financial Crisis impact April 6, 2010 $2.96 Clough purchases 10.5 million shares for 13% ownership June 30, 2010 $2.66 June 30, 2012 55.46 June 30, 2012 $4,37 January 13, 2012 $5.25 FGL purchases 100% of CTEC Pty Ltd for $32.26 million March 6, 2013 $6,98 Peak share price March 26, 2013 $6.05 Clough sells FGL shares at $6,05 ($187 million, 35% of FGL) May 17, 2013 FGL awarded major contract (Dugald Rover) June 3, 2013 FGL acquiras Taggart Global (U.S.company) at S43 million July 2, 2013 FGL awarded major contract (TAN Burrup plant) June 30, 2013 $4.09 August 29, 2013 Annual Report released NPAT at S63 million, equity at $213.5 million, dividend at $0.14 per share September 2, 2013 $1.47 billion joint venture with Duro Felguera announced (value to Forge is $830 million-order book now at 2.1 billion) September 12, 2013 FGL awarded major contract (Yandicroogina for Rio Tinto-S100 million contract) September 19, 2013 FG), major contract terminated (Dugald River) October 7, 2013 FGL declaros $50 million in major contracts in U.S. and Australia since June 1, 2013 November 4, 2013 $4.18 Trading halt November 5, 2013 ANZ Bank (major financier) appoints KordaMentha to review books November 28, 2013 FGL Market Announcement -ANZ Bank supports and negotiates new finance facilities -Considering equity capital raising -Identifies underperforming assets (ie, CTEC projects) -Negotiates agreements with customers and sub-contractors -Normal operations for other parts of business November 28, 2013 $0.69 FGL Market Announcement -$127 profit write down on two large contracts (Diamantina Power Station and West Angelas Power Station; $45 million to complete both projects) -Challenging liquidity period (net cash flow Nov. and Dec.) -ANZ Bank continued support with some adjustment to finance facilities -Business as usual November 28, 2013 $0.69 Trading haltlifted December 4, 2013 FGL Market Announcement -In response to ASX query, indicated became aware of problems with Diamantina Power Station and West Angelas Power Station projects in late Sept. with margin erosians due to cost overruns and delays causing the profit down- grade. Casting analysis during Oct, and Nov. led to requested trading halt and profit downgrade in Nov. December 17, 2013 FGL awarded major $40 million contract in North American coal sector January 10, 2014 $1.25 Trading halt until January 14, 2014 January 14, 2014 $1.02 Trading halt until January 28, 2014 January 24, 2014 January 28, 2014 $0.90 February 10, 2014 $0.92 Trading ceases February 11, 2014 Board appoints administrators, and secured creditors appoint receivers. Table 2. Comprehensive Income Statement in thousands of Australian dollars) June 30, 2010 $246,169 June 30, 2011 421,595 June 30, 2012 $774,879 June 30, 2013 $1,054,100 Unaudited January 31, 2014 $520,041 1711,430) 9,696 (125,171) (79,194) (3,218) 15,000 1211,000) (157,191) (5,159) (516,867) (164,502) (16,292) (582) (656,334) (256,515) (21,361) (5,380) (1,628) (7,1321 537 (304) (8,043) (21,033) (12,711) 257 188 Revenue Cost of sales Changes in inventories of finished goods and WIP Materials, plant, and contractor costs Employee benefits expense Depreciation and amortization Consulting fees Provision for impairment losses Other expenses Other gains and losses Expenses Results from Operating Activities Finance income Finance costs Net finance income Share of profit/(loss) of associates and jointly controlled entities Net Profit Before Tax Income tax expense Net Profit After Tax Foreign exchange differences (net of tax) Total Comprehensive Income $40,059 1,023 (716) $307 $54,898 3,079 (711) $2,368 (513) $56,753 (17,920) $38,833 (1,946) $35,887 $64,182 5,698 12,850) $2,848 3,052 $70,082 (20,780) $49,302 (310) S48,992 $93,665 6,939 (4.816) $2,123 (5,679) $90,109 (27.190) $62,919 1,826 $64,745 $40,366 (10,915) $29,451 (346) $(324,162 12,30 S(326,463) $29,105 Table 3. Balance Sheet (in thousands of Australian dollars) Unaudited January 31, 2014 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013 $51.921 $78,285 $15,316 Current Assets Cash and cash equivalents Short-term deposits Trade and other receivables Inventories and WIP Current tax assets Other assets Noncurrent assets classified as held for sale Total Current Assets $51,091 72,500 196,884 11,331 42,162 14,621 49,542 29.622 $90,728 2.748 83.254 150,491 2,535 1,560 103,279 40,616 1,574 2,487 (23,415) 2,246 6,900 $117.850 $159,023 $334,293 $331,316 $135,796 73,293 1.424 10,468 71,546 9,124 26,789 1.827 36,577 2,043 Noncurrent Assets Trade and other receivables Term deposits Property, plant, and equipment Deferred tax assets Investments accounted for using equity method Intangibles Other assets Total Noncurrent Assets Total Assets 7,051 14,260 67,736 4,273 2,545 48,243 15,621 15,637 40,332 44,237 $162,087 54,257 $213,280 144,108 $478,401 132,894 $464.210 90.467 163.750 $299,556 52.968 299,909 219,568 11.139 Current Liabilities Trade and other payables Borrowings Current tax liabilities Provisions Other liabilities Total Current Liabilities 2,789 8,644 525 72.845 3.272 6,387 755 267,169 8.734 8,367 825 3,970 63,731 $363,640 $64,926 583,259 $285,095 $234,677 1,517 4901 51 Noncurrent Liabilities Trade and other payables Borrowings Deferred tax liabilities Investments accounted for using the equity method Provisions Other liabilities Total Noncurrent Liabilities 9246 17.453 2,793 489 14,547 1,067 493 5 308 299 164 489 493 50,667 $52,184 $3,785 $5,559 $29,981 $16,107 88.818 315,076 250,784 68,711 93,376 415,824 (116,268) 124,426 163,325 213,426 42,839 44.294 45,430 42,768 Total Liabilities Net Assets Equity Issued capital Profit reserve Reserves Retained earnings Total Equity Number of shares Share price (159,036) 1,034 49,505 93,376 70,699,487 (912) 81.080 124,462 81,541,569 (1.221) 119.116 163,325 86,169,014 $4.37 45,430 62,919 1.471 103,606 213,426 86,169,014 (116,268) 86,169,014 S2.66 $5.46 $4.20 Table 4. Statement of Cash Flows (in thousands of Australian dollars) 2010 2011 2012 2013 431,399 (373.464) 744,720 (631,924) 1.176.226 (1.113,073) 245,418 (215,240) 943 (670) $30,451 638 (20,390) $38,183 (21,537) $91,259 (45,231) $17,922 (8,371) 224 (11,2571 6,485 3,079 (39,737) 500 5,649 186,760) 1,023 (19,521) 869 7,379 73.545 130 (205) (3,439) Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Other revenue Income taxes paid Nat cash flows provided by operating activities Cash Flows from Investing Activities Payments for property, plant, and equipment Proceeds from disposal of property, plan, and equipment Interest received Term deposits matured/expired Amount received from joint ventures Acquisition of investments of associates Payment of deferred consideration Net cash flows provided by/used in financing activities Cash Flows from Financing Activities Proceeds from issue of share capital Proceeds from borrowings Repayment of borrowings Interest paid Dividends paid Net cash provided by/used in financing activities Net increase/decrease in cash and equivalents Cash and equivalents at beginning of year Effect of exchange rate changes Cash and equivalents at end of year (19,798) $42,604 (7,124) (1,898) (123,787) 18,907 1,458 13,464) (4,131) 1271) (3,419) 1,136 23,011 14.698) 12,850) (11,265) 9,152 (9,654) (4,877) (15,510) (658) 17,257) $11,086 $5,334 S120,889) S(9,921) 26,364 34,413 (27,194) 39,637 17,440 51,921 78,285 51.091 67 6 $57,920 $78,285 $51,091 590,728 Table 5. Reconciliation (in thousands of Australian dollars) Profit for the year after tax Depreciation and amortization Other noncash differences Decrease/Increase in trade debtors and receivables Decrease/Increase in inventaries and WIP Decrease/Increase in other current assets Increase in deferred tax assets Decrease/Increase in trade and payables Decrease/Increase in current tax liatsilities Decrease/Increase in deferred tax liabilities Increase in other provisions Net cash inflow from operating activities 2010 $29,450 3,217 907 125,202) (9,696) 1104) 1779) 21,881 10.649 64 2011 $38,832 5,159 (1.815) 17,380) (15,000) 671 (215) 19,877 12,311) 2012 S49,302 16,292 143,488) [154,393) 18,291 1913) (2,231) 203,417 1,980 2,742 260 $91,259 2013 $62,919 21,361 28,409 119,258 1139,1601 927 14,851) (37,123) (10,903) 11.727) 88 $17,922 64 $30,451 365 $38,183