Table of Contents
Income Statement
Balance Sheet
Cash Flow Statement
Statement of Changes in Equity
FULL ANNUAL REPORT
Website
Directors' Report
The Board of Directors (Board) present their report together with the financial report of Swick Mining Services Limited (Swick or the Company) and its controlled entities (collectively referred to hereafter as the Group) for the financial year ended 30 June 2008(Financial Year).
Directors
The following persons were directors of the Company throughout the entire Financial Year (unless otherwise stated) and up until the date of this Directors’ Report:
- Andrew Simpson - Non-Executive Chairman.
- Kent Swick - Managing Director.
- Michael Fry - Finance Director.
- John David Nixon (David Nixon) - Non-Executive Director.
- Giuseppe Ariti (Joe Ariti) - Non-Executive Director. Appointed 11 February 2008.
- Phillip Locker - Non-Executive Director. Appointed 11 February 2008.
The following persons resigned as directors of the Company during the Financial Year:
- Randal Swick - Non-Executive Director. Appointed 24 October 2006; Resigned 17 September 2007.
- Mark McAuliffe - Non-Executive Director. Appointed 1 January 2007; Resigned 14 November 2007.
Director Profile - Andrew Simpson (Non-Executive Chairman)
Qualifications
Grad Dip (Bus), MAICD
Experience
Mr Simpson is a Senior Marketing Executive with extensive global marketing experience in the resource and mining industry, including more than 30 years of international marketing and distribution of minerals and metals. He is currently the Managing Director of Resource & Technology Marketing Services Pty Ltd, a company providing specialist marketing and business assessment advisory services to the mineral resources and technology industries, both in Australia and internationally. Mr Simpson graduated from Curtin University holding a Graduate Diploma in Business and Administration (majoring in Marketing and Finance). He has also completed the Advanced Management Program at the University of Western Australia and is a Member of the Australian Institute of Company Directors. Mr Simpson was appointed as a director of the Company on 24 October 2006.
Special Responsibilities
Mr Simpson is a member of the Board’s Remuneration Committee (Committee Chairman), Business Development & Marketing Committee (Committee Chairman) and Audit & Corporate Governance Committee.
Other Directorships During Last Three Years
* Appointed Non-Executive Chairman on 11 February 2008; ^ Appointed Non-Executive Chairman on 24 June 2008.
Director Profile - Kent Swick (Managing Director)
Qualifications
B.Eng. (Mech)
Experience
Mr Swick is a Mechanical Engineer with 20 years experience in civil construction, mining maintenance and surface and underground mineral drilling. He was previously employed by Atlas Copco Australia as a Maintenance Engineer managing underground maintenance, where he developed a strong understanding of underground mining methods and equipment. Mr Swick was the driving technical force behind the design of the Company’s innovative underground diamond drill rig and award winning surface reverse circulation drill rig. He graduated from the University of Western Australia holding a Bachelor of Engineering (majoring in Mechanical Engineering). Mr Swick was appointed as a director of the Company on 24 October 2006.
Special Responsibilities
Mr Swick is a member of the Board’s Business Development & Marketing Committee, Engineering Committee and Operations Committee.
Director Profile - Michael Fry (Finance Director)
Qualifications
B.Com
Experience
Mr Fry is a qualified Chartered Accountant with over 17 years experience in the areas of accounting and corporate advice, having worked for both KPMG (Perth) and Deloitte Touche Tohmatsu (Melbourne). Upon leaving Deloitte, Mr Fry joined boutique corporate advisory practice Troika Securities Ltd (Perth) as a Senior Corporate Advisor. More recently, he has specialised in the provision of high-level corporate advice to both listed and unlisted companies. He graduated from the University of Western Australia holding a Bachelor of Commerce (majoring in Accounting and Finance). Mr Fry was appointed as a director of the Company on 24 October 2006.
Special Responsibilities
Mr Fry is a member of the Board’s Business Development & Marketing Committee and Continuous Improvement Committee.
Director Profile - David Nixon (Non-Executive Director)
Qualifications
B.Sc. Eng (Mech), MAICD
Experience
Mr Nixon is a Mechanical Engineer with over 40 years experience in the mining and construction industries in Southern Africa, Australia, New Zealand, Canada and Indonesia. He was a founding executive of Signet Engineering in 1990 and a director until its acquisition by Fluor Australia in 1996, following which he was the project director for the Fluor-SKM joint venture at the $1 billion BHP Billiton Iron Ore Asset Development projects. Mr Nixon graduated from the University of Natal (South Africa) holding a Bachelor of Science (Mechanical Engineering) degree and is a member of the Australian Institute of Company Directors. Mr Nixon was appointed as a director of the Company on 1 January 2007.
Special Responsibilities
Mr Nixon is a member of the Board’s Audit & Corporate Governance Committee and Engineering Committee (Committee Chairman).
Other Directorships During Last Three Years
* Appointed Non-Executive Chairman on 8 February 2008.
Director Profile - Joe Ariti (Non-Executive Director)
Qualifications
B.Sc, Dip Min. Sci. (Murdoch), MBA (Edinburgh), MAusIMM
Experience
Mr Ariti is a Metallurgist with over 25 years experience in technical, management and executive roles in assessing, developing and managing mining projects and companies in Australia and overseas. He has been involved in the development and management of both open cut and underground mining projects in Australia, Africa, Indonesia and Papua New Guinea. Mr Ariti holds a Bachelor of Science and Diploma in Mineral Science from Murdoch University and a Masters Degree in Business Administration from the Edinburgh Business School (UK) and is a member of the Australasian Institute of Mining and Metallurgy. Mr Ariti was appointed as a director of the Company on 11 February 2008.
Special Responsibilities
Mr Ariti is a member of the Board’s Remuneration Committee, Audit & Corporate Governance Committee (Committee Chairman), Operations Committee and Continuous Improvement Committee (Committee Chairman).
Other Directorships During Last Three Years
Director Profile - Phillip Lockyer (Non-Executive Director)
Qualifications
Dip Met., Assoc Min Eng, M.Min Econs
Experience
Mr Lockyer is a Mining Engineer and Metallurgist who has over 40 years experience in the mineral industry, with a focus on gold and nickel in both underground and open pit operations. He was employed by WMC Resources for 20 years and as General Manager for Western Australia was responsible for that Company's nickel division and gold operations. Mr Lockyer also held the position of Director Operations for Dominion Mining Limited and Resolute Limited. He holds a Diploma of Metallurgy from the Ballarat School of Mines, an Associateship of Mining Engineering from the Western Australian School of Mines and a Masters of Minerals Economics from Curtin University. Mr Lockyer was appointed as a director of the Company on 11 February 2008.
Special Responsibilities
Mr Lockyer is a member of the Board’s Operations Committee (Committee Chairman) and Continuous Improvement Committee.
Other Directorships During Last Three Years
Company Secretary Profile - Jason Giltay
Qualifications
B.Com, Grad Dip (HRM)
Experience
Mr Giltay is an experienced Corporate Advisor who has provided strategic and corporate advice to companies in the resources and mining sector for the last seven years. He graduated from the University of Western Australia holding a Bachelor of Commerce (Triple Major in Finance, Marketing & General Management) and a Post Graduate Diploma in Human Resource Management. Mr Giltay was appointed as Company Secretary on 1 December 2006.
Board Committees
The Board has established a number of committees to assist the Board in fulfilling its responsibilities in a number of key areas. The current membership of these committees is as follows:
- Audit & Corporate Governance Committee - Joe Ariti (Non-Executive Director), Andrew Simpson (Non-Executive Chairman) and David Nixon (Non- Executive Director).
- Remuneration Committee - Andrew Simpson (Non-Executive Chairman), Joe Ariti (Non-Executive Director) and Jason Giltay (Company Secretary).
- Engineering Committee - David Nixon (Non-Executive Director), Kent Swick (Managing Director) and Leon Naude (Engineering Manager).
- Business Development & Marketing Committee - Andrew Simpson (Non-Executive Chairman), Kent Swick (Managing Director), Michael Fry (Finance Director), Jason Giltay (Company Secretary) and Geoff Muir (Business Development Manager).
- Operations Committee - Phillip Lockyer (Non-Executive Director), Joe Ariti (Non-Executive Director), Kent Swick (Managing Director) and Brian Praetz (Chief Operating Officer).
- Continuous Improvement Committee - Joe Ariti (Non-Executive Director), Phillip Lockyer (Non-Executive Director), Michael Fry (Finance Director), Brian Praetz (Chief Operating Officer), Kathryn Crockett (Contracts Administration Manager), David Rankin (Continuous Improvement Manager), Serena Fitzpatrick (Training & Development Manager) and Chris Glenn (Underground Diamond Drilling Supervisor).
Further details of the scope, responsibilities and membership of these committees are set out in the Corporate Governance Statement.
Board & Board Committee Meetings
The number of meetings of the Board and Board committees held during the Financial Year, and the number of those meetings attended by each director, were as follows:
The Operations Committee and Continuous Improvement Committee were established following the end of the Financial Year and therefore no meetings were held during the Financial Year.
Directors’ Interests in Securities
The relevant interest of each director in the share capital of the Company at the date of the Directors’ Report is as follows:
The Company proposes to issue 50,000 Class B Performance Rights and 50,000 Class C Performance Rights to each of Messrs Ariti and Lockyer under the Directors’ Share Incentive Plan, subject to shareholder approval at the Company’s 2008 annual general meeting.
Principal Activity
The principal activity of the Company during the Financial Year was the provision of mineral drilling services to the Australian mining industry, primarily in the areas of underground diamond drilling, underground longhole drilling, surface diamond drilling and surface reverse circulation drilling. There were no significant changes in the nature of the principal activity during the Financial Year.
Review of Operations
The Company’s objectives during the Financial Year were to continue the growth of the cornerstone underground diamond drilling division through further penetration of the Australian market and establish a stronger presence in the surface drilling market through the expansion of the surface reverse circulation and surface diamond drilling divisions. During the course of the Financial Year, the Company increased its commissioned rig fleet by 20 rigs from 29 rigs to 49 rigs at year’s end. The large majority of the Company’s mineral drilling revenue, approximately 75%, was generated by the underground diamond drilling division.
The Company is focused on providing a high quality mineral drilling service that delivers superior productivity, safety and versatility through innovative rig design, highly trained and motivated personnel and professional drilling practices. The Company’s ability to develop innovative rig designs that deliver superior productivity, safety and versatility, the best example of which is the underground diamond drill rig, continues to present strong growth opportunities in all divisions and attracts the larger mining houses who offer improved security of income.
Demand for mineral services throughout the Financial Year remained strong. The Australian mining industry is currently experiencing significant demand for its product. The rising demand has seen commodity prices increase significantly after a decade of depressed prices and under-investment in new mines and infrastructure. Despite recent significant pullbacks in some commodity prices, the Company believes that demand for mineral drilling services will remain strong in FY09. Importantly, the Company’s revenue is generated across a number of different commodities and predominantly at brownfields sites (ie, existing minesites) which are less affected by fluctuations in commodity prices and cycles than greenfields sites (ie, exploration projects).
Review of Results
The revenue from ordinary activities of the Group for the Financial Year was $84.2 million, up 109% from the revenue from ordinary activities of the previous year (2007: $40.2 million) and up 121% from the normalised revenue of the previous year (2007: $38.1 million).
The net profit after tax from ordinary activities of the Group for the Financial Year was $10.3 million, up 92% from the net profit after tax from ordinary activities of the previous year (2007: $5.4 million) and up 164% from the normalised net profit after tax of the previous year (2007: $3.9 million).
Earnings per share for the Financial Year were 7.17 cents (basic) and 7.14 cents (diluted) (2007: basic and diluted 5.48 cents; and 3.98 cents normalised).
The net assets of the Group as at 30 June 2008 were $68.4 million (2007: $31.0 million).
The results for the Financial Year were in line with the forecasts previously announced to the market and continue to highlight the Company’s ability to deliver year-on-year revenue growth of approximately 100%. The growth in revenue and profits has been driven by the on-going investment in new drilling equipment to satisfy strong demand for the Company’s mineral drilling services. The on-going investment in new drilling equipment also positions the Company for strong revenue and profit growth in future financial years.
Significant Changes in State of Affairs
Significant changes in the state of affairs of the Group during the Financial Year were as follows:
- In July 2007, the Company acquired the assets and business of Perth based machining shop Eaton Engineers for a cash consideration of $440,000 to expedite the development of a new in-house engineering department at the Company’s South Guildford workshop facilities.
- The Group secured new mineral drilling contracts with a number of major mining houses, including Barrick, Jubilee Mines (now owned by Xstrata) and OZ Minerals.
- The Company approved the build of four new rigs for the surface reverse circulation drilling division and continued with its 45 rig build program for the underground diamond drilling division.
- In August 2007, a total of 3,250,000 options were issued to employees of the Group pursuant to the Company’s Employee Share Option Plan. These options are exercisable on or before 30 November 2009 (and not before 30 June 2009) at an exercise price of $1.25. A total of 250,000 of these options have subsequently expired as a result of employees ceasing employment with the Group.
- In October 2007, the Company completed a placement of 19.89 million shares to institutional and sophisticated investors at $1.42 per share, raising $28.25 million before costs, to fund the Company’s rig build programs. The Swick family also elected to reduce its holding in the Company by a total of 28 million shares via a share sale undertaken simultaneously with the placement at $1.42 per share.
- In August 2007, a total of 200,000 options were issued to an employee of the Group pursuant to the Company’s Employee Share Option Plan. These options are exercisable on or before 30 November 2010 (and not before 30 June 2010) at an exercise price of $1.95.
- In December 2007, the Company issued to specified directors a total of 475,000 in each class of performance rights (ie, Class A, Class B and Class C) following the approval of the issue at the Company’s annual general meeting in November 2007.
- In March 2008, a total of 75,000 options were issued to an employee of the Group pursuant to the Company’s Employee Share Option Plan. These options are exercisable on or before 31 December 2010 (and not before 30 June 2010) at an exercise price of $1.25.
- In April 2008, the Company announced the appointment of Mr Brian Praetz in the newly created role of Chief Operating Officer.
- In May 2008, the Company announced the appointment of Mr William Gove in the newly created role of General Manager (North America) as part of the Company’s strategy to expand its underground diamond drilling services into North America, with an initial focus on Canada.
- In June 2008, the Company approved the build of four new multi-purpose rigs, capable of both surface reverse circulation and surface diamond drilling, with KWL Boart Longyear to facilitate the establishment of a new surface multi-purpose drilling division.
Significant Events Subsequent to Balance Date
Significant events subsequent to the balance date were as follows:
- In July 2008, a total of 300,000 options were issued to an employee of the Group pursuant to the Company’s Employee Share Option Plan. These options are exercisable on or before 31 March 2011 (and not before 30 September 2010) at an exercise price of $1.25.
- In August 2008, the Company approved the build of an additional four new multi-purpose rigs, taking the surface multi-purpose fleet to eight rigs.
- In September 2008, a total of 200,000 options were issued to an employee of the Group pursuant to the Company’s Employee Share Option Plan. These options are exercisable on or before 31 July 2011 (and not before 31 July 2010) at an exercise price of $1.50.
Future Developments
The 2009 financial year offers further opportunities for the Company to build its presence in the underground diamond drilling sector, both in Australia and Canada. On-going rig build programs and a strengthened business development focus will assist in capitalising on these opportunities.
In addition, the Company will focus on growing its surface reverse circulation, surface diamond and surface multi-purpose drilling divisions, supported by additional rig build programs. The Company believes that the iron ore market in Western Australia offers significant potential for growth, particularly for the Company’s award winning surface reverse circulation drill rigs.
Environmental Regulations
In the course of its drilling activities, the Group is required to adhere to environmental regulations imposed on it by various regulatory authorities, particularly those regulations relating to ground disturbance and the protection of rare and endangered flora and fauna. From time to time, compliance with these environmental regulations is audited by client personnel where deemed necessary to do so by the client.
The Group has not received any notification from any regulatory authority or client of any breaches of environmental regulations and to the best of its knowledge has complied with all material environmental requirements up to the date of the Directors’ Report.
Dividends
No dividends were paid to shareholders or recommended or declared for payment to shareholders by the Group during the Financial Year.
Options & Interests
Options on Issue at date of Directors’ Report
As at the date of the Directors’ Report, the following options were on issue:
The holders of options have no rights to participate in any share issue or interest issue of the Company. No options were exercised during the Financial Year or subsequent to the end of the Financial Year. A total of 250,000 of the 30 November 2009 options had expired as at the date of the Directors’ Report (ie, of 3.25 million issued).
Performance Rights on Issue at date of Directors’ Report
As at the date of the Directors’ Report, the Company had on issue 475,000 Class A Performance Rights, 475,000 Class B performance rights and 475,000 Class C performance rights. Each performance right will vest as one fully paid ordinary share subject to the satisfaction of certain performance criteria. Details of the terms and conditions of the performance rights are set out in the Remuneration Report.
Performance rights were issued for nil consideration. The holders of performance rights have no rights to participate in any share issue or interest issue of the Company. No performance rights vested during the Financial Year or subsequent to the end of the Financial Year.
Proceedings on Behalf of the Group
No person has applied for leave of Court to bring proceedings on behalf of the Group or intervened in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings.
The Group was not a party to any such proceedings during the Financial Year.
Non-Audit Services
The Company may decide to employ its auditor PKF on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or Group are important.
Details of the amount paid or payable to the auditor for the audit and non-audit services provided during the year are set out in note 24 to the Financial Statements.
The Board has considered the position and, in accordance with the advice received from the Audit & Corporate Governance Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Board is satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
- All non-audit services have been reviewed by the Audit & Corporate Governance Committee to ensure they do not impact the impartiality and objectivity of the auditor.
- None of the services undermine the general principles relating to auditor independence as set out in Professional Statement APES110, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Group, acting as advocate for the Group or jointly sharing economic risk and rewards.
Auditor Independence
The Board received the attached independence declaration from the auditor of the Company and its controlled entities which forms part of the Directors’ Report.
Indemnification & Insurance of Officers & Auditors
During the Financial Year, the Group has paid a premium in respect of insuring the directors and officers of the Group. The terms of the premium paid are commercial in confidence and therefore have not been disclosed.
Remuneration Report
The Remuneration Report details the nature and amount of remuneration for each Director of the Company and each key Manager of the Group with the greatest authority for the strategic direction and management of the entity.
Remuneration Policy
The remuneration policy of the Group is designed to align the interests of Directors and Management with the interests of shareholders and the Company’s objectives by providing a fixed remuneration component and offering specific long-term incentives linked to performance. The Board believes that the remuneration policy is appropriate and effective in its ability to attract, retain and motivate suitably qualified and experienced Directors and Management to direct and manage the Group’s business and corporate activities, as well as to create goal congruence with the Company’s shareholders.
Specifically, the remuneration policy has been put in place to ensure that:
- remuneration practices and systems support the Group’s wider objectives and strategies;
- remuneration of Directors and Management is aligned to the long-term interests of shareholders within an appropriate control framework;
- remuneration of Directors and Management reflects their duties and responsibilities;
- remuneration of Directors and Management is comparative and competitive, thereby attracting, retaining and motivating suitably qualified and experienced people; and
- there is a clear relationship between performance and remuneration.
During the past five financial years, the Company (including its predecessors) has consistently delivered year-on-year revenue growth of approximately 100% and similarly significant increases in net profit. The Company delivered outstanding growth in revenue and profit for the Financial Year, underpinned by its ability to develop innovative drill rigs, deliver a highly professional service and attract and retain experienced and qualified personnel at both a management and operational level. The Company believes its remuneration policy has been effective in attracting and retaining Directors and Management capable of determining and delivering upon the strategies which have generated outstanding growth for the Company.
Remuneration Committee
The Board has established a Remuneration Committee to assist the Board in fulfilling its responsibilities in relation to developing and assessing the Group’s remuneration policies to ensure that remuneration is sufficient and reasonable and that its relationship to performance is clear. The primary objectives of the Remuneration Committee are to develop remuneration policies for the Group that are appropriate to the organisation with respect to its size, peers and market conditions, and to recommend remuneration packages and incentive schemes for Directors and Management, and remuneration packages for Non-Executive Directors, that motivate and reward performance, attract and retain quality people, and align interests with those of shareholders.
Remuneration Structure - Non-Executive Directors
Objective
The Board seeks to set remuneration for Non-Executive Directors at a level which provides the Company with the ability to attract and retain suitably qualified and experienced directors, whilst incurring a cost which is acceptable to shareholders. Non-Executive Directors should be adequately remunerated for their time and effort and the risks inherently involved with holding such a position.
Structure
The Company’s Constitution and the ASX Listing Rules specify that the remuneration of Non-Executive Directors shall be determined from time to time by shareholders at general meeting. The latest determination was at a general meeting held on 8 June 2007, when shareholders approved to increase the maximum aggregate remuneration by $150,000 to $300,000 per annum.
Specific remuneration levels for Non-Executive Directors are reviewed at least annually by the Remuneration Committee. The Remuneration Committee provides recommendations for the remuneration of Non-Executive Directors, including the Chairman, and the Board is then responsible for ratifying the recommendations, if appropriate. As at the date of the Directors’ Report, remuneration for Non-Executive Directors was set at $50,000 per annum plus superannuation, with remuneration for the Non-Executive Chairman set at $75,000 per annum plus superannuation.
Non-Executive Directors are eligible to participate in the Company’s equity based incentive plans, which may include the issue of shares, performance rights and options, subject to any required shareholder approvals. The Company believes that this eligibility for Non-Executive Directors is appropriate in the circumstances, given the competitive market for experienced and qualified Non-Executive Directors, the growing risks associated with public company directorships and the need to align the interests of Non-Executive Directors with shareholders whilst preserving the Company’s cash position.
Board operating costs do not form part of Non-Executive Directors’ remuneration.
Remuneration Structure - Executive Directors & Management
Objective
The remuneration for Executive Directors and Management is designed to promote superior performance and long-term commitment to the Company. The Board aims to reward Executive Directors and Management with a level and mix of remuneration commensurate with their position and responsibilities within the Group.
The Company’s remuneration policy for Executive Directors and Management reflects its commitment to align remuneration with shareholders’ interests and to retain appropriately qualified executive talent for the benefit of the Group. The principles of the policy are:
1) to provide rewards that reflect the competitive market in which the Company operates;
2) individual reward should be linked to performance criteria; and
3) executives should be rewarded for both financial and non-financial performance.
Structure
Remuneration for Executive Directors and Management may comprise fixed and variable remuneration components. Remuneration is reviewed at least annually by the Remuneration Committee. The Remuneration Committee provides recommendations for the remuneration of Executive Directors and Management and the Board is then responsible for ratifying the recommendations, if appropriate. Remuneration packages for Executive Directors and Management currently comprise a base salary and superannuation (fixed components), and may also include cash bonuses and securities (variable, performance based components).
In determining individual remuneration packages, the Remuneration Committee reviews the individual’s specific role and responsibilities (as set out in their job description) and their remuneration relative to their position within the Group and with positions in comparable companies through the use of market data and surveys. Where appropriate, a package may be adjusted to reflect the role, responsibilities and importance of that position and to keep pace with market trends and ensure continued remuneration competitiveness. In conducting a comparative analysis, the Group’s expected performance for the year is considered in the context of the Group’s capacity to fund remuneration budgets. From time to time, a review of the total remuneration package by an independent remuneration consultant may be undertaken to provide an independent reference point.
Fixed Remuneration
The components of the fixed remuneration of Executive Directors and Management are determined individually and may include:
- cash remuneration;
- superannuation;
- accommodation and travel benefits; and
- motor vehicle, parking and other benefits.
Variable Remuneration
The components of the variable remuneration of Executive Directors and Management are determined individually and may include:
- short term incentives - Executive Directors and Management are eligible to participate in a cash bonus if so determined by the Remuneration Committee and the Board; and
- long term incentives - Executive Directors and Management are eligible to receive shares, performance rights and options if so determined by the Remuneration Committee and the Board.
Key Management
The key Management personnel of the Group, who are also the highest paid executives of the Group, are:
- Kent Swick - Managing Director.
- Michael Fry - Finance Director.
- Brian Praetz - Chief Operating Officer.
- Leon Naude - Engineering Manager.
- Geoff Muir - Business Development Manager (formerly Operations Manager Region West).
- Glenn Blackley - Operations Manager Longhole.
- Martin Jeffrey - Operations Manager Region East.
Brian Praetz commenced employment in the new position of Chief Operating Officer on 7 April 2008. Geoff Muir transferred to the new position of Business Development Manager on 16 June 2008.
Employment Contracts
As at the date of the Financial Report, the Group had entered into employment contracts with the following Directors:
Kent Swick
The key terms of Mr Swick’s current service agreement are as follows:
- The service arrangement commenced 1 July 2006 and continues until terminated.
- Remuneration paid under the service agreement is required to be reviewed annually by the Remuneration Committee.
- If the service agreement is terminated without cause, Mr Swick must be paid one month’s remuneration for each full year, or pro rata for each part year, of service to the Group from 1 July 2006.
- If the service agreement is terminated as a result of a change in control, Mr Swick must be paid twelve’s month’s remuneration (provided that any such additional amount shall, at all times, be limited to the maximum extent permitted by the ASX Listing Rules).
Michael Fry
The key terms of Mr Fry’s current service agreement are as follows:
- The service arrangement commenced 1 July 2006 and continues until terminated.
- Remuneration paid under the service agreement is required to be reviewed annually by the Remuneration Committee.
- If the service agreement is terminated without cause, Mr Fry must be paid one month’s remuneration for each full year, or pro rata for each part year, of service to the Group from 1 July 2006.
- If the service agreement is terminated as a result of a change in control, Mr Fry must be paid twelve’s month’s remuneration (provided that any such additional amount shall, at all times, be limited to the maximum extent permitted by the ASX Listing Rules).
There are no other contracts to which a Director is a party or under which a Director is entitled to a benefit other than as disclosed in the Directors’ Report or the Financial Statements.
Key Management are employed under employment agreements that continue until terminated, provide for annual reviews of remuneration and provide for four weeks notice of termination.
Employee Share Option Plan
The Company has adopted an Employee Share Option Plan (ESOP). The objective of the ESOP is to provide the Company with a remuneration mechanism, through the issue of options in the capital of the Company, to motivate and reward the performance of its employees.
Director Share Incentive Plan
The Company has adopted a Directors’ Share Incentive Plan (DSIP). The objective of the DSIP is to provide the Company with a remuneration mechanism, through the issue of securities in the capital of the Company, to motivate and reward the performance of its directors.
Options Issued to Management
During the Financial Year, the key Management personnel of the Group listed below were issued options by the Company pursuant to the ESOP:
* The options held by Brian Praetz were issued in July 2008 subsequent to the end of the Financial Year, however, for accounting purposes, the grant of the options was taken to have occurred during the Financial Year.
The options were issued under the ESOP to provide an incentive component in the remuneration package of the key Managers with the aim of further motivating and rewarding the performance of the key Managers in managing the operations and strategic direction of the Company.
Performance Rights Issued to Directors
During the Financial Year, the Directors of the Company listed below were issued performance rights by the Company pursuant to the DSIP:
Class A Performance Rights accrue upon the release of the Company’s audited financial report for the 2008 financial year evidencing that the Company has achieved normalised earnings before interest, tax, depreciation and amortisation (EBITDA) for the 2008 financial year of at least $25 million and shall vest on the day immediately following the day the Company holds its 2008 annual general meeting.
Class B Performance Rights accrue on the release of the Company’s audited financial report for the 2009 financial year evidencing that the Company has achieved normalised EBITDA for the 2009 financial year of at least $40 million and shall vest on the day immediately following the day the Company holds its 2009 annual general meeting.
Class C Performance Rights accrue on the release of the Company’s audited financial report for the 2010 financial year evidencing that the Company has achieved normalised EBITDA for the 2010 financial year of at least $55 million and shall vest on the day immediately following the day the Company holds its 2010 annual general meeting.
If the milestones for the Class A or Class B Performance Rights are not satisfied in accordance with the above criteria, the milestones may be satisfied by the Company achieving normalised EBITDA for the next financial year of at least $44 million (in the 2009 financial year) or $60.5 million (in the 2010 financial year), being an amount which is 10% greater than the milestone EBITDA figure for that particular financial year.
Participating Directors must remain a Director of the Company throughout the vesting period for the Performance Rights to vest on the vesting date.
The performance rights were issued under the DSIP to provide a performance-linked incentive component in the remuneration package of the Directors with the aim of further motivating and rewarding the performance of the Directors in managing the operations and strategic direction of the Company and achieving specified profit performance milestones within a specified performance period.
The number of performance rights issued and their terms and conditions, including the profit performance milestones, were approved by the Board following recommendations made by the Company’s Remuneration Committee. In making its recommendations, the Remuneration Committee considered the increases in EBITDA that must be achieved above and beyond the Company’s internal EBITDA forecasts at the date of the recommendations (ie, “stretch” targets) in order for the profit performance milestones to be met.
Remuneration for FY08
Notes: 1 - Commenced 11 February 2008. 2 - Resigned 17 September 2007. 3 - Resigned 14 November 2007. 4 - Commenced 7 April 2008. The options held by Brian Praetz were issued in July 2008 subsequent to the end of the Financial Year, however, for accounting purposes, the grant of the options was taken to have occurred during the Financial Year and therefore the value of the options has been included in the remuneration for FY08.
The relative proportion of remuneration related to performance, through the issue of performance rights to Directors, is: Andrew Simpson - 40.8%; David Nixon - 40.3%; Kent Swick - 25.6%; and Michael Fry - 31.2%. The percentage of remuneration that consists of options is: Brian Praetz - 58%; Leon Naude - 12.7%; Geoff Muir - 19.9%; Glenn Blackley - 19.4%; and Martin Jeffrey - 19.4%.
Remuneration for FY07
Notes: 5 - Commenced 24 October 2006. 6 - Commenced 1 January 2007. 7 - Commenced 14 May 2007.
Sign-off on Directors’ Report
The Directors’ Report has been made in accordance with a resolution of the Directors.
KENT SWICK
MANAGING DIRECTOR
For and on behalf of the Board of Directors of Swick Mining Services Ltd.
Perth, Western Australia,24 September 2008
