Bhagwan Marine Pty Ltd ABN 81 009 154 349 Annual Report 30 June 2023 Bhagwan Marine Pty Ltd Directors' report 30 June 2023 The Directors present their report, together with the consolidated financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity' or ‘the group’) consisting of Bhagwan Marine Pty Ltd (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2023. Directors The following persons were Directors of Bhagwan Marine Pty Ltd during the whole of the financial year and up to the date of this report, unless otherwise stated: Name, qualifications and independence status Experience, special responsibilities, and other directorships Mr. Anthony Wooles: Chairman Director and Chairman since 2012. Has held executive and advisory roles in diverse industries including mining, oil and gas, power generation, manufacturing, telecommunications, food and beverages and retail. Non-Executive Chairman of Imdex Limited since 2016 and Non-Executive Director of High Peak Royalties Limited since 2012. Mr. Lauri Kannikoski: Managing Director Managing Director since 1985. Mrs. Kerren Kannikoski: Alternate Director Alternate Director since 2012. Company Secretary Ms. Cheryl Williams (ACCA) was appointed as Company Secretary in September 2019. Directors’ meetings The Board of Directors holds monthly board meetings which are attended by all Directors, the Alternate Director and the Company Secretary. Principal activities During the financial year the principal activities of the consolidated entity consisted of operating a diverse range of vessels, servicing the oil and gas, resources, port services, towage, construction and subsea industries. Dividends No dividends were paid during the year ended 30 June 2023 (2022: nil). Review of operations During the financial year ended 30 June 2023, the consolidated entity has continued to focus on the inshore marine sector in Australia. Revenues were generated from sectors including mining, oil and gas, port operations, civil construction, and infrastructure maintenance. The consolidated entity reported revenue from contracts with customers of $169.0m for the year (2022: $134.7m). The reported profit is $17.3m for the year (2022 restated: $2.4m). Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity during the financial year. Matters subsequent to the end of the financial year No matter or circumstance has arisen since 30 June 2023 that has significantly affected the group’s operations, results or state of affairs, or may do so in future years. Likely developments and expected results of operations Information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the consolidated entity. 2 Bhagwan Marine Pty Ltd Directors' report 30 June 2023 Environmental regulation The consolidated entity operates in compliance with the International Convention for the Prevention of Pollution from Ships (MARPOL) under Commonwealth legislation through the Australian Maritime Safety Authority (AMSA) Marine Order Regulations. State operated vessels comply with National Law Marine Orders. The consolidated entity has regulatory reporting obligations to the Clean Energy Regulator under the National Greenhouse and Energy Reporting Act 2007. Shares under option There were no unissued ordinary shares of Bhagwan Marine Pty Ltd under option at the date of this report. Shares issued on the exercise of options There were no ordinary shares of Bhagwan Marine Pty Ltd issued on the exercise of options during the year ended 30 June 2023 and up to the date of this report. Indemnity and insurance of directors and officers The Group has agreed to indemnify the directors and executives of the Group against all liabilities to another person (other than the Group or a related body corporate) that may arise from their position as directors / executives of the Group and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Group will meet the full amount of any such liabilities, including costs and expenses. During the financial year, the company has paid insurance premiums in respect of directors and executives’ liability and legal expenses insurance contracts, for the current directors and executives of the Group and its controlled entities. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors and executives’ liability and legal expenses contracts, as such disclosure is prohibited under the terms of the contract. Indemnity and insurance of auditor The company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. Rounding of amounts The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. 3 Bhagwan Marine Pty Ltd Directors' report 30 June 2023 This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Anthony Wooles Chairman 30 October 2023 Perth, WA 4 Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Bhagwan Marine Pty Ltd I declare that, to the best of my knowledge and belief, in relation to the audit of Bhagwan Marine Pty Ltd for the financial year ended 30 June 2023 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPM_INI_01 PAR_SIG_01 KPMG PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 Matthew Hingeley Partner Perth 30 October 2023 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 5 Bhagwan Marine Pty Ltd 30 June 2023 Contents 30 June 2023 Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Directors' declaration Independent auditor's report 6 7 8 9 10 11 48 49 Bhagwan Marine Pty Ltd Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2023 Consolidated Note 2023 $’000 Restated 1 2022 $’000 7 9(A) 168,973 (111,574) 57,399 132 (19,481) (20,989) (322) 16,739 3 (6,717) 10,025 134,709 (94,477) 40,232 3,758 (15,982) (19,370) (1,529) 7,109 1 (4,705) 2,405 7,318 - 17,343 2,405 - 4,626 4,626 17,343 7,031 11.56 1.60 Continuing operations Revenue from contracts with customers Cost of sales Gross profit Other income Administrative expense Depreciation and amortisation expense Impairment of assets Operating profit Finance income Finance costs Profit before tax 8 9(B) 9(C) 9(D) 8 9(E) Income tax benefit Profit for the period attributable to the owners of Bhagwan Marine Pty Ltd Other comprehensive income Items that will not be reclassified to profit or loss Revaluation of vessels Other comprehensive income for the year, net of tax 10 18 Total comprehensive income for the year attributable to the owners of Bhagwan Marine Pty Ltd Earnings per share Basic and diluted earnings per share (dollars) 1 11 Refer to Note 20 for more details. The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes to the consolidated financial statements 7 Bhagwan Marine Pty Ltd Consolidated statement of financial position For the year ended 30 June 2023 2023 $’000 Consolidated Restated 1 2022 $’000 Restated 1 2021 $’000 12 13 14 15 16 42 33,964 2,858 1,757 1,401 40,022 516 34,658 2,414 911 6 38,505 332 17,697 2,288 434 3,333 24,084 17 10 18 19 20 21 1,455 7,318 117,583 20,356 9,990 156,702 6,415 118,797 23,167 4,566 152,945 1,455 120,292 18,860 5 140,612 196,724 191,450 164,696 22 23 19 24 30,073 32,156 8,572 3,399 74,200 34,229 34,104 8,996 2,735 80,064 15,316 23,456 7,931 2,570 49,273 23 19 24 45,992 12,021 378 58,391 49,797 14,556 243 64,596 67,503 7,834 327 75,664 Total liabilities 132,591 144,660 124,937 Net assets 64,133 46,790 39,759 65,910 47,898 (49,675) 64,133 65,910 47,898 (67,018) 46,790 65,910 43,272 (69,423) 39,759 Note Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Assets held for sale Total current assets Non-current assets Other investments Deferred tax assets Property, plant and equipment Right-of-use assets Intangible assets Non-current financial assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Loans and borrowings Lease liabilities Employee benefits Total current liabilities Non-current liabilities Loans and borrowings Lease liabilities Employee benefits Total non-current liabilities Equity Issued capital Reserves Accumulated losses Total equity 1 25 25 Refer to Note 20 for more details. The above consolidated statement of financial position should be read in conjunction with the accompanying notes to the consolidated financial statements 8 Bhagwan Marine Pty Ltd Consolidated statement of changes in equity For the year ended 30 June 2023 Consolidated Issued capital Reserves Accumulated losses Total equity $’000 $’000 $’000 $’000 Balance at 1 July 2021 (restated) 1 65,910 43,272 (69,423) 39,759 Profit after income tax benefit for the year (restated) 1 Revaluation of vessels Total comprehensive income for the year (restated) 1 Balance at 30 June 2022 (restated) 1 65,910 4,626 4,626 47,898 2,405 2,405 (67,018) 2,405 4,626 7,031 46,790 Consolidated Issued capital Reserves Accumulated losses Total equity $’000 $’000 $’000 $’000 Balance at 1 July 2022 (restated) 1 65,910 47,898 (67,018) 46,790 Profit after income tax benefit for the year Total comprehensive income for the year Balance at 30 June 2023 65,910 47,898 17,343 17,343 (49,675) 17,343 17,343 64,133 1 Refer to Note 20 for more details. The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes to the consolidated financial statements 9 Bhagwan Marine Pty Ltd Consolidated statement of cash flows 30 June 2023 Consolidated 2023 $’000 Restated 1 2022 $’000 185,655 (151,053) (4,916) (799) 28,887 126,191 (102,735) (3,513) (1,686) 18,257 (11,558) 250 (11,308) (9,038) 9,603 565 (4,528) (2,953) (10,572) (18,053) (8,592) 378 (10,423) (18,637) Net (decrease)/increase in cash and cash equivalents (474) 185 Cash and cash equivalents at the beginning of the financial year 516 331 42 516 Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest and other finance costs paid Payments for SaaS customisation Net cash from operating activities 30 Cash flows from investing activities Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash (used in)/generated from investing activities Cash flows from financing activities Repayment of borrowings (Repayment)/proceeds in multi-option facility Principal element of lease payments Net cash used in financing activities 23 Cash and cash equivalents at the end of the financial year 1 12 Refer to Note 20 for more details. The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to the consolidated financial statements 10 Bhagwan Marine Pty Ltd Notes to the consolidated financial statements 30 June 2023 Note 1. Reporting entity Bhagwan Marine Pty Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 3, 251 St Georges Terrace Perth, Western Australia 6000 The consolidated financial statements comprise Bhagwan Marine Pty Ltd and the entities it controlled at the end of, or during, the year. The Group is a for-profit entity and a description of the nature of the group’s operations and its principal activities are included in the directors' report, which is not part of the financial statements. Note 2. Basis of preparation These consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board and the Corporations Act 2001. These consolidated financial statements are the first general purpose financial statements which have been prepared in accordance with Australian Accounting Standards. In the prior year, the consolidated financial statements were prepared in accordance with Australian Accounting Standards – Simplified Disclosures. There was no impact on the recognition and measurement of amounts recognised in the statements of financial position, profit or loss and other comprehensive income and cash flows of the Group as a result of the change in the basis of preparation. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Group comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Consequently, this financial report has been prepared in accordance with and complies with IFRS as issued by the IASB. The consolidated financial statements have been prepared under the historical cost convention, except for contingent consideration, derivative financial instruments and vessel assets which are measured at fair value. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 5. These consolidated financial statements were authorised for issue by the Company’s board of directors on 30 October 2023. Details of the Group’s accounting policies are included in Note 4. Going concern The financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and the settlement of liabilities in the normal course of business. The Group’s financing facilities with a carrying amount of $80,867k all expire on or before 31 December 2024 (refer Note 23). The ability of the Group to continue to operate is dependent on it having access to adequate funding, and also to continue to generate adequate cash and profit. This will require that the Group maintain compliance with the terms of its loan facilities including loan covenants, and then renewing the facilities prior to their expiry, or if required obtaining alternative funding. 11 Bhagwan Marine Pty Ltd Notes to the consolidated financial statements 30 June 2023 Note 2. Basis of preparation (continued) Going concern (continued) Discussions with the Group’s existing financiers are at an advanced stage and the directors are confident based on these discussions that the Group will be able to renew its loans and financing facilities at an amount and on satisfactory terms. Further, the Group has prepared a cash flow forecast for a 12-month period from the date of these financial statements. The cash flow forecast is sensitive to revenue from both contracted and new business. Based on this forecast, the directors are confident that the Group will generate positive cash flows from operations and will maintain compliance with bank covenants. Accordingly, the directors believe that, at the date of approving the financial statements, there are reasonable grounds to believe that the Group will have sufficient funds to meet its obligations as and when they fall due and are of the opinion that the use of the going concern basis remains appropriate. Note 3. Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency. Note 4. Significant accounting policies Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in Note 29. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Bhagwan Marine Pty Ltd ('company' or 'parent entity') as at 30 June 2023 and the results of all subsidiaries for the year then ended. Bhagwan Marine Pty Ltd and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities, and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received, and the fair value of any investment retained together with any gain or loss recognised in profit or loss. Foreign currency translation Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. 12 Bhagwan Marine Pty Ltd Notes to the consolidated financial statements 30 June 2023 Note 4. Significant accounting policies (continued) Revenue Revenue from contracts with customers is recognised over time when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue from Subsea services Revenue from subsea services is derived from the provision of a diverse range of services, through the provision of purpose-built vessels, to companies operating in subsea environments, including commercial diving, complete integrated subsea Inspection, Maintenance and Repair (IMR), construction and decommissioning services and the provision of equipment, personnel and materials. The services provided in each contract are all integrated and represent single performance obligations. These services are contracted on a set rate per day. Revenue is recognised over the period of time based on the number of days the customer utilises the services provided and on completion of performance obligations. Income received in advance is deferred until the service is rendered. Revenue from Offshore, Port and Civil construction services Revenue from these services, is derived from the provision of a diverse range of services, including project management, wharf & jetty construction, coastal towage, crew and cargo transfers, dredging and the provision of specialised vessels, equipment, personnel, to customers across a variety of industries. The services provided in each contract are all integrated and represent single performance obligations. These services are contracted on a set rate per day. Revenue is recognised over the period of time based on the number of days the customer utilises the services provided and on completion of performance obligations. Income received in advance is deferred until the service is rendered. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or ● When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled, and it is probable that the temporary difference will not reverse in the foreseeable future; and ● Taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. 13 Bhagwan Marine Pty Ltd Notes to the consolidated financial statements 30 June 2023 Note 4. Significant accounting policies (continued) Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Bhagwan Marine Pty Ltd (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within loans and borrowings in current liabilities on the statement of financial position unless the overdraft account is used for financing. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Other receivables are recognised at amortised cost, less any provision for impairment. Inventories Inventory of fuel is stated at cost on a 'first in first out' basis. Cost comprises of direct cost of fuel and delivery costs, duties and other taxes. Costs are determined after deducting rebates and discounts received or receivable. Non-current assets or disposal groups classified as held for sale Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. 14 Bhagwan Marine Pty Ltd Notes to the consolidated financial statements 30 June 2023 Note 4. Significant accounting policies (continued) An impairment loss is r