annual report 2014 - boom safe act observations by managers and supervisors have increased by 63%...
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AnnuAl RepoRt 2014
BOOM LOgistics AnnuAL RepORt 2014II
Directors R John Robinson Brenden C Mitchell Fiona R V Bennett Terrence C Francis Terence A Hebiton
company secretary Iona MacPherson
registereD office Level 6, 55 Southbank Boulevard Southbank Vic 3006 Telephone (03) 9207 2500 Fax (03) 9207 2400
internet aDDress www.boomlogistics.com.au
share register Computershare Investor Services Pty Ltd 452 Johnston Street Abbotsford, Victoria, 3067 Investor Enquiries 1300 850 505
annual general meeting Wednesday, 22 October 2014 at 11:00am Baker & McKenzie Lawyers Level 19, 181 William Street Melbourne Vic 3000
CoRpoRAte DiReCtoRy Contents Corporate Directory IFC
Chairman’s Report 2
Managing Director’s Report 4
Our Customers, Markets & Operations 8
Our Health, Safety, Environment & Quality 10
Our People & Systems 12
Corporate Governance 13
Directors’ Report 23
Annual Financial Statements 45
ASX Additional Information 99
• To be the safest and leading lifting solutions company in Australia and equal to the best in the world. • To be recognised as a top performing company of high standing and integrity delivering superior value
to our customers, people and shareholders. • To be respected by the community.
• Safety Always – people, community, equipment, property, environment. • Our Customers – driving for our customer’s success. • Our People – our diversity and different skills make us strong. • Teamwork – contributing, listening, looking out for one another and being accountable as individuals
and as a team. • Achieving our best so that our business thrives.
• Over 40 depots across Australia. • Approximately 800 staff Australia wide. • Over 350 cranes in all size ranges up to 750 tonne. • Over 270 travel towers.
1BOOM LOgistics AnnuAL RepORt 2014
DeliVeRinG inDustRiAl seRViCes utilisinG opeRAtoRs AnD equipment – CRAnes, tRAVel toweRs, tRAnspoRt AnD otheR Assets.
“ Boom Logistics Limited (“Boom” or “the Company”) is a national industrial services group that provides superior crane logistics and lifting solutions to Australian Industry.
Boom delivers industrial services utilising operators and equipment – cranes, travel towers, transport and other assets – for major customers in the mining and resources, energy, utilities and infrastructure sectors.
Boom seeks to be recognised by our customers, employees, communities and shareholders as the supplier of high value lifting solutions without injury.
1BOOM LOgIstIcs AnnuAL RepORt 2014
BOOM LOgistics AnnuAL RepORt 20142
in lookinG AheAD we will Continue to foCus on oppoRtunities foR fuRtheR effiCienCy GAins AnD ContinuinG Cost ReDuCtion.
“ The business challenges experienced during the 2014 financial year continued the pattern evident for much of the preceding year. The mining services sector once again faced a combination of customer pricing pressure and reduced activity. This was most keenly felt across the coal industry with producers in Queensland’s Bowen Basin and the New South Wales Hunter Valley adjusting to sustained price falls for both steaming coal and metallurgical coal. The conditions for service providers to the industry are further impacted by excess service capacity built up during the boom period, with consequent cutthroat competition for any new tender opportunities. These circumstances were apparent in retendering for the BHPB Mitsubishi Alliance (BMA) contract in the Bowen Basin where the combination of a 50% reduction in revenue earned from the contract over the past three years and high fixed costs incurred in servicing remote locations had translated into contract losses at the Earnings before Interest and Tax (EBIT) level over the last 6 months of the contract. Boom was unable to reach agreement on commercial terms sufficient to generate a return on the assets to be employed and has since supported BMA in transitioning to a new supplier at 30 June 2014.
The Company has continued to adjust its structure and underlying operations to meet the prevailing conditions. We are moving towards a “One Boom” structure by integrating our Boom Sherrin travel tower business with the Boom Crane business. This will generate cost savings through shared activity and will facilitate cross selling of services. Good progress is being made and we expect the integration to be substantially complete by March 2015. We are also close to completing the centralisation of various back office functions
with resultant administrative cost savings and improved business visibility. Substantial progress has also been made in reducing direct costs with the cooperation of employees in renegotiating Enterprise Bargaining Agreements (EBAs) where uncompetitive arrangements are incompatible with the current challenging business environment. In some circumstances it has been necessary to implement redundancies and the Company’s workforce has been reduced by a further 17% following a 12% reduction in FY13. These changes include both direct and indirect positions across the business.
Restructuring has also involved the sale of surplus assets, generally from older equipment across the crane fleet as well as redundant access equipment. These surplus equipment sales delivered $17.3 million of income and a net profit on sale during FY14. The average age of Boom’s crane fleet at the year end was 9 years.
In turning to the FY14 financial results, as released to the market in mid August, the restructuring has resulted in a provision of $6.5 million and a further $9.3 million has been brought to account in asset impairments, resulting in a net tangible asset backing at 30 June of $0.49 per share, compared with $0.51 at the same time last year. The Company has also taken a deliberately conservative approach to goodwill by impairing the total carrying value of $70.8 million. This reflects both current market volatility and recent ASIC guidance with respect to variability between prior period actual cash flows compared to budget expectations, itself a consequence of market volatility. This removes all goodwill from the Company’s balance sheet as at 30 June 2014.
3BOOM LOgistics AnnuAL RepORt 2014
After taking account of these impairments, which are non- cash accounting adjustments, the statutory net loss for the year ended 30 June 2014 was $79.5 million. Our trading result for FY14, excluding non-trading items was a net profit after tax of $3.9 million. This compares with the FY13 trading profit of $2.5 million. Directors have not declared a dividend for FY14.
Despite difficult business conditions, the Company continued to generate substantial free cash flows and these have been primarily directed to further reductions in debt, with net debt at 30 June reducing by $26.3 million from the same period last year to $89.5 million. The business also invested some $16 million in new capital during the year. The redeployment of current assets will allow new contracts and those in prospect to be serviced without significant new capital expenditure during FY15, while surplus asset sales are expected to be at a comparable level to FY14. Directors are of the view that in the current volatile operating environment capital management during FY15 should continue to prioritise debt reduction.
In looking ahead we will continue to focus on opportunities for further efficiency gains and continuing cost reduction. Current restructuring initiatives already mentioned are integral to this process. There are also good growth opportunities and we have previously announced new supplier agreements with Fortescue Metals Group to provide crane and associated labour services to their mining operations at Cloudbreak, Christmas Creek, Solomon and Anderson Point, Port Hedland. We also signed supplier agreements in late FY14 with Aurizon Operations Limited and Vestas Wind Farm Maintenance Services. We will continue to seek out opportunities to diversify our revenue base.
Turning to Board matters, Howard Critchley resigned as a non-executive director during the year to take up a role in a larger organisation. We have deferred filling the casual vacancy for the time being as part of the focus on reducing overheads across the business.
I would like to conclude this report to shareholders by again acknowledging the dedication of management during particularly challenging times. We have a good core business to work with but it requires fortitude and persistence under prevailing conditions to meet these challenges.
John Robinson Non-Executive Chairman
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mAnAGinG DiReCtoR’s RepoRt
Caring for the health and safety of our customers, people, environment and community is a core value that drives every one of our activities and decisions. Our safety focus has been uncompromisingly sustained during the 2014 financial year and I am very pleased to report that our Total Recordable Injury Frequency Rate (TRIFR) has continued its downward trend and has improved by 20% over the course of the year. This is the continuation of a downward trend over several years and during FY15 we will strive to achieve a TRIFR below 10.
Safe Act Observations by managers and supervisors have increased by 63% over the year