COFFEY INTERNATIONAL LIMITED Financial Report 2008 · 35 Reconciliation of profit after income tax...

Financial Report 2008COFFEY INTERNATIONAL LIMITED

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CONTENTs

Corporate Directory 1Directors’ Report 2Auditors’ Independence Declaration 17Corporate Governance statement 18Income statements 24Balance sheets 25statements of Recognised Income and Expense 26Cash Flow statements 27Notes to the Financial statements 281 summary of significant accounting policies 282 Critical accounting estimates and judgements 363 Determination of fair values 374 segment information 385 Revenue 406 Expenses 417 Income tax expense 418 Current assets – Cash and cash equivalents 439 Current assets – Receivables 4310 Current assets – Other financial assets 4411 Current assets – Work in progress 4412 Non-current assets – Other financial assets 4413 Non-current assets – Property, plant and equipment 4514 Non-current assets – Deferred tax assets 4615 Non-current assets – Intangible assets 4716 Current liabilities – Payables 4817 Current liabilities – Loans and Borrowings 4918 Current liabilities – Deferred purchase consideration 4919 Employee benefits 4920 Non-current liabilities – Loans and Borrowings 5021 Non-current liabilities – Deferred purchase consideration 5122 Non-current liabilities – Deferred tax liabilities 5223 Contributed equity 5224 Reserves and retained profits 5325 Dividends 5426 Financial Instruments 5527 Director and executive disclosures 5928 Remuneration of Auditors 6029 Contingencies 6030 Commitments 6131 Related party transactions 6232 Business combinations 6333 subsidiaries 7034 Events occurring after the balance sheet date 7235 Reconciliation of profit after income tax to net cash inflow from operating activities 7236 Earnings per share 7237 share-based payments 7338 Restatement of comparative period 76Directors’ Declaration 77Independent Auditor’s Report to the Members of Coffey International Limited 78shareholder Information 80

1

Corporate DireCtory

DirectorsStephen r Williams LL.B Chairman and Non-executive Director

Stuart a Black FCa, FaiCD Non-executive Director

Charles e Jamieson aM, Ba, Diped, Hon.Faiex, MaiCD Non-executive Director

roger J olds Be (Hons), Dip. Geo. eng, Fie aust, Cpeng Managing Director

Glen H Simpson phD, B.ag.Sc. (Hons), QDa (Hons), FaiCD Executive Director

SecretaryJohn e Hartigan BComm, Ca, FCiS, GaiCD

Notice of annual General Meetingthe annual general meeting of Coffey international Limited will be held at: Macquarie Graduate School of Management Level 6 University House 51–57 pitt Street Sydney NSW 2000time: 11:30am Date: 26 November 2008

principal registered office in australiatower 1, Level 3 495 Victoria avenue Chatswood NSW 2067 australia telephone +61 2 8404 4300 Facsimile +61 2 9419 5689

Share registryregistries Limited Level 7 207 Kent Street Sydney NSW 2000

auditorKpMG Chartered accountants 10 Shelley Street Sydney NSW 2000

SolicitorsBaker & McKenzie Level 39 rialto 525 Collins Street Melbourne ViC 3000

Kennedys Level 31 Citigroup Centre 2 park Street Sydney NSW 2000

Kemp Strang Level 14 55 Hunter Street Sydney NSW 2000

Bankersaustralia and New Zealand Banking Group Level 12 20 Martin place Sydney, NSW 2000

Westpac Banking Corporation Level 3 Westpac place 275 Kent Street, Sydney, NSW 2000

Stock exchange listingsCoffey international Limited shares are listed on the australian Securities exchange. aSX Code = CoF

Website addresscoffey.com

2

your Directors present their report on the consolidated entity consisting of Coffey international Limited and the entities it controlled at the end of, or during, the year ended 30 June 2008.

Directorsthe following persons were Directors of Coffey international Limited anytime during the whole of the financial year and up to the date of this report:

Stephen r Williams (Chairman and Non-executive Director) Stuart a Black (Non-executive Director) Charles e Jamieson aM (Non-executive Director) roger J olds (Managing Director) Glen H Simpson, Dr (executive Director) paul a Mitchell (Non-executive Director)

principal activitiesDuring the year the principal continuing activities of the consolidated entity consisted of providing engineering, scientific, project management and strategic advisory services throughout australia and overseas.

there were no significant changes in the nature of the activities of the consolidated entity during the year.

DividendsDividends paid to members during the current year are as follows: 2008 2007 $’000 $’000

Final ordinary fully franked dividend for the year ended 30 June 2007 of 8 cents (2006: 8 cents) per fully paid share paid on 31 october 2007 9,104 6,157

interim ordinary fully franked dividend of 7 cents (2007: 7 cents) per fully paid share paid on 2 april 2008 8,288 7,457

17,392 13,614

in addition to the above dividends, since the end of the financial year the Directors have approved the payment of a final ordinary dividend of $10,739,000 (9 cents per fully paid share) to be paid on 31 october 2008 out of retained profits at 30 June 2008. the Company’s Dividend reinvestment plan is suspended for the final dividend.

review of operationsa summary of consolidated revenues and results for the year by significant industry segments is set out below:

Segment Revenue Segment Result

2008 2007 2008 2007 restated restated $’000 $’000 $’000 $’000

Consulting Business 335,507 213,902 43,375 29,275

international Development Business 156,952 93,047 6,900 984

project Management 67,223 56,219 5,395 2,534

eliminations (1,111) (459) – –

Consolidated 558,571 362,709 55,670 32,793

Unallocated expenses (20,622) (14,396)

Net finance expense (7,856) (4,857)

Profit before income tax expense 27,192 13,540

income tax expense (11,253) (4,480)

Profit after tax 15,939 9,060

profit attributable to minorities (632) (640)

Net profit attributable to the members of Coffey International Limited 15,307 8,420

During the year, internal control deficiencies in reconciliations between the general ledger system and the sub-ledger system in relation to the australian consulting division were identified. Following the identification, a full investigation into the cause of the reconciliation differences was undertaken. in addition to the reconciliation error that was confirmed, other errors were identified. in June 2008, it was concluded that a material error existed in relation to the 2007 financial report and a disclosure was forthwith made to the australian Securities exchange.

the restatement to the 2007 comparatives in the accounts for the year ended 30 June 2008 resulted in a reduction in the 2007 profit after tax of $4,580,000 representing 34% of the reported profit after tax of $13,640,000. the restated profit after tax is $9,060,000.

Comments on the operations of Coffey international Limited, and the results of those operations for the year under review, are set out in the annual report and form part of this report.

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earnings per share 2007 2008 restated Cents Cents

Basic earnings per share 13.9 9.3

Significant changes in the state of affairsDuring the year, the Company acquired asia pacific rail pty Limited, John Wertheimer Consultants pty Limited, the peron infrastructure Group pty Ltd, Stratcorp Consulting pty Ltd, Geoexplore Consultoria e Servicos Ltda, Webber associates UK Ltd, teal Management Services pty Limited, Management Systems international inc. and Shaheen and peaker Limited. refer to note 32 for further information on these acquisitions.

During the year the Group refinanced its borrowing facilities with a total facility of $200,000,000 and a term of 4 years.

in the opinion of the Directors, there were no other significant changes in the state of affairs of Coffey international Limited that occurred during the year under review, not otherwise disclosed in this report or the financial statements.

Matters subsequent to the end of the financial yearon 24 September 2008, the Group acquired the business assets of Bovell, Freeman and Holley for $3.0 million in cash and shares. the acquisition was undertaken by Coffey projects africa (Cpa). the Company owns 50.13% of Cpa.

except for the above, no other matter or circumstance has arisen since 30 June 2008 that has significantly affected, or may significantly affect:

(a) the consolidated entity’s operations in future financial years, or

(b) the results of those operations in future financial years, or

(c) the consolidated entity’s state of affairs in future financial years.

Likely developments and expected results of operationsComments on expected results of certain operations of the consolidated entity are included in the annual report. Further 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.

environmental regulationCoffey international Limited is committed to the protection of the environment, to the health and safety of its employees, customers and the public at large, and compliance with all applicable environmental laws, rules and regulations in the jurisdictions in which it conducts its business. the consolidated entity is not subject to significant environmental regulation in respect of its operations. there are small disposals of waste from the consolidated entity’s soil science laboratories. this waste is disposed under licence to an appropriate disposal facility.

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information on Directors

Director ExperienceSpecial responsibilities

Particulars of Director’s interests in shares of Coffey International Limited Ordinary Shares

Stephen r Williams, LL.B Chairman and Non-executive Director, age 55

Mr Williams joined the Board as Chairman in November 1994. prior to this Mr Williams had an extensive involvement with the Company as a professional advisor on its public listing in 1989. Mr Williams has many years of experience specialising in commercial and corporate areas in law and business generally. Mr Williams is based in Sydney and is a partner with Kemp Strang.

Mr Williams is also a Director of primeaG australia Limited, which is a listed public company.

Mr Williams is Chairman of the Board, Chairman of the remuneration Committee and a member of the audit Committee.

143,067

Stuart a Black, FCa, FaiCD Non-executive Director, age 53

Mr Black joined the Board in March 2002. Mr Black is based in Sydney and is Managing partner in the chartered accounting firm Chapman eastway, whilst leading the firm’s management advisory division. Mr Black is a former president of the institute of Chartered accountants in australia, former acting Chair and current Director of the accounting professional and ethical Standards Board and is a Non-executive Director of the Country education Foundation of australia Ltd and the Chartered accountants Benevolent Fund Ltd.

Mr Black is Chairman of the audit Committee and a member of the remuneration Committee.

124,655

Charles e Jamieson, aM, Ba, Diped, Hon. Faiex, MaiCD Non-executive Director, age 64

Mr Jamieson was appointed to the Board in 2005. Mr Jamieson’s extensive career in international business includes Managing Director of austrade from 1996 to 2002. prior to this Mr Jamieson held senior trade and diplomatic positions in a wide range of global market regions.

Mr Jamieson was appointed as a Member of the order of australia in 2004 for his services in trade and investment. Mr Jamieson is currently a Non-executive Director of Linfox pty Ltd. Mr Jamieson is also the Special trade envoy to the Middle east for the Victorian Government and acts as an independent advisor to companies in international business.

Mr Jamieson is a member of the audit Committee.

Nil

paul a Mitchell, oaM Ba.,M.r.p [Up], M. app. Sc., Fpia, age 57

Mr Mitchell was appointed to the Board on 1 July, 2008 and ceased as a Director on 30 July 2008. Mr Mitchell had no special responsibilities.

Mr Mitchell was president of the international Council on Mining and Metals (iCMM) from 2003 until May 2008. From 2000 until joining iCMM, Mr Mitchell was Chief executive officer of Care australia.

Mr Mitchell held no other directorships.

Nil

roger J olds, Be (Hons), DipGeoeng, Fie aust, Cpeng Managing Director, age 52

Mr olds joined the Company in 1979. Mr olds was appointed to the Board in 1995 and as Managing Director in april 1996. Mr olds was also Chief executive officer of Coffey Geosciences from 1995 to 2003. Mr olds has extensive operational and management experience with the Group and is Senior principal Geotechnical engineer. Mr olds is based in Melbourne.

Mr olds does not hold any other directorships.

Mr olds is accountable for the overall performance and strategic direction of the Company, and is the prime point of media and investor contact. Mr olds is a member of the remuneration Committee.

1,807,704

Glen H Simpson, phD, B. ag. Sc (Hons), QDa(Hons), FaiCD executive Director, age 64

Dr Simpson was appointed to the Board in august 2000. Dr Simpson is the Chief executive officer of Coffey international Development. Dr Simpson has gained extensive experience in managing and directing international development contracts in more than 30 countries, since 1975. Dr Simpson is a past Director of a number of companies operating in the international development field, and is a Foundation Fellow of the australian institute of Company Directors. Dr Simpson is based in adelaide.

Dr Simpson is Chairman of the Council for australian-arab relations, a federal government advisory body. Dr Simpson holds no other directorships.

Dr Simpson heads the Company’s international development business.

378,010

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Company SecretaryMr John e Hartigan B. Comm., Ca, FCiS, GaiCD was appointed Company Secretary on 30 January 2008. Mr Hartigan is a Fellow of Chartered Secretaries australia, a Chartered accountant and Graduate Member of the australian institute of Company Directors. He has over 12 years’ experience in corporate governance and secretariat practice in listed and unlisted public companies.

With Mr Hartigan’s appointment, the existing Company Secretaries, Mr Simon C Curtis, Ma, FCa and Mr andrew C White, Ba, Cpa resigned from the role. Mr Curtis continued as the Chief Financial officer of Coffey international Limited until his resignation on 6 June 2008 and Mr White continues as General Manager – Finance of Coffey’s international Development Business.

Meetings of Directorsthe numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2008, and the numbers of meetings attended by each Director were:

Meeting of Directors Meetings of committees

Number of meetings attended by:

audit Committee

remuneration Committee

a B a B a B

S r Williams 22 22 4 4 1 1

S a Black 22 21 4 4 1 1

C e Jamieson aM 22 21 4 3 – –

r J olds 22 22 – – 1 1

G H Simpson 22 22 – – – –

a = Number of meetings eligible to attend and held while in office B = Number of meetings attended while in office

retirement, election and continuation in office of Directorsin accordance with article 12.3 of the articles of association Mr C e Jamieson aM retires as a Director of the Company at the 2008 annual General Meeting by way of rotation and, being eligible, offers himself for re-election. in accordance with Company policy and as outlined in the Corporate Governance Statement Mr S r Williams, having been a Director for more than ten years and being eligible, offers himself for re-election.

Mr p a Mitchell oaM was appointed a Director on 1 July 2008 and ceased to be a Director on 30 July 2008.

remuneration reportthe remuneration report is set out under the following main headings:

A principles used to determine the nature and amount of remuneration

B Details of remuneration

C Service agreements

D Share-based compensation

E additional information.

the information provided in Sections a–D includes remuneration disclosures that are required under accounting Standard aaSB 124 Related Party Disclosures. the disclosures in Section e are additional disclosures required by the Corporations Act 2001 and the Corporations regulations 2001. these disclosures have been audited.

A principles used to determine the nature and amount of remuneration – audited

the Company acknowledges that its major asset and competitive advantage is its people and for this reason its remuneration strategy is critical in attracting, rewarding and retaining its intellectual capital base. the objective of the Company’s executive reward framework is therefore to ensure reward for performance is competitive and appropriate for the results delivered.

the framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and the Board ensures that executive reward satisfies the following key criteria for good reward governance practices:

• competitiveness and reasonableness

• acceptability to shareholders

• performance linkage/alignment of executive compensation

• transparency

• capital management.

the Directors consider that the Company’s executive remuneration strategy balances the interests of shareholders and employees.

alignment to shareholders’ interests is achieved by providing incentives which reward outcomes not just effort, and which include both profit and capital based Kpis. For selected key executives, economic value added compensation has been a core component of the remuneration strategy. this strategy assists in attracting and retaining high calibre executives.

alignment to employees’ interests is achieved by rewarding capability and experience, reflecting reward for individual and team contribution to growth in shareholder wealth, providing clear structure for earning rewards and providing recognition for contribution.

the framework provides a mix of fixed and incentive-based remuneration, and a blend of short and long-term incentives. as executives gain seniority with the Group, the balance of this mix generally shifts to a higher proportion of at risk rewards.

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Non-executive Directors

Fees and payments made to Non-executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually. the Board also has referred to the advice of independent remuneration consultants to ensure Non-executive Directors’ fees and payments are appropriate and in line with the market. the Chairman’s fees are determined independently to the fees of Non-executive Directors based on comparative roles in the external market. the Chairman and other Non-executive Directors are not present at any discussions relating to determination of his own remuneration. No Directors receive share options.

the current fee for Non-executive Directors was last reviewed in December 2007 and is inclusive of committee fees. Non-executive Directors’ fees are determined within an aggregate Directors’ fee limit, which is periodically recommended for approval by shareholders. the current aggregate limit is $500,000 (2007: $500,000) and was approved by shareholders in November 2006.

Retirement allowances for Directors

in line with guidance on executive and Non-executive Directors’ remuneration, there are no retirement allowances for Directors.

Executive pay

the executive pay and reward framework has three components:

• fixed remuneration

• short-term performance incentives

• long-term incentives through participation in the Coffey international employee Leveraged Share plan, on which information is set out in part D Share Based Compensation of this report.

the combination of these comprises the executive’s total remuneration.

Fixed remuneration

Fixed remuneration consists of base compensation (which is calculated on a total cost basis and includes any FBt charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds.

executives are offered a competitive fixed remuneration package which is a total employment cost package that may be delivered as a mix of cash and prescribed non-financial benefits at the executives’ discretion. external benchmarking is periodically undertaken to ensure the market competitiveness of fixed remuneration, and the level of remuneration for senior executives is reviewed annually and on promotion.

there are no guaranteed increases in fixed remuneration in any senior executives’ employment arrangements other than as disclosed in Section C of the remuneration report.

Incentives:Short-term Rewards (formerly Short-term Incentives)

Should the Company achieve pre-determined financial and non-financial targets set by the Board, then short-term rewards (Strs) are available for selected executives. each executive has a target Str opportunity depending on the accountabilities of the role and impact on organisation or business unit performance. Strs are payable twice yearly–as soon as practicable after the release of the Group’s half and full year results. each half year is viewed as a distinct assessment period. this is a change from previous years where the Sti was payable annually after release of the Group’s full year results. this is only a change of the frequency of payment. the change does not increase the maximum quantum of Str payable for the full year.

each year, the remuneration Committee considers the appropriate targets and key performance indicators (Kpis) to link the Str scheme and the level of payout if targets are met. this includes setting any maximum payout under the Str plan, and minimum levels of performance to trigger payment of Str. the Kpis are a combination of Company, team and individual performance measures and include measures such as operating eBita, net working capital, utilisation and various other leadership related performance measures.

Long-term Rewards

the Group has also implemented a long-term rewards scheme (Ltr). this component of the remuneration structure is delivered through equity as the Board believes this promotes staff retention and encourages sustained performance. the Group prohibits those employees who are granted share-based payments from entering into other arrangements that limit their exposure to losses that would arise if the share price decreased.

For details of this scheme please refer to page 11.

Economic value added compensation

the economic Value added (‘eVa’) compensation scheme was discontinued at the end of June 2007.

participation in the eVa had been restricted to three key members of the executive management team, being the two executive Directors (roger J olds and Glen H Simpson) and the former Chief Financial officer (Simon C Curtis).

With the change in composition of the executive group and the implementation of the Short-term rewards (‘Str’) scheme as part of the risk balanced incentives, the eVa was discontinued.

a deferred cash bonus from the eVa scheme in 2006 was paid to r J olds in 2008. the remaining deferred cash bonus amounts expensed in 2006 are payable to r J olds (subject to satisfaction of performance conditions) in 2009.

Vendor share-based payments

in addition to the remuneration arrangements outlined above, certain key management personnel have participated as vendors in business acquisitions entered into by the Group during the current or prior year. in each instance, the individual was not an executive of the Group prior to the acquisition. Due to the nature of certain acquisition terms, payments or benefits received by individuals are considered to be remuneration earned subsequent to the business acquisition date.

During the year, certain individuals, who were executives of an acquired business and became executives of the Group subsequent to acquisition received short term cash bonuses on the basis that the acquired business achieved certain eBita based performance targets.

in another instance, a component of the equity based acquisition consideration was deferred and is contingent upon the individual remaining an employee of the Group for a 3 to 5 year period. the component of the acquisition consideration is considered to be a share-based payment for accounting purposes and is excluded from the acquisition accounting.

these arrangements have been included in the remuneration of KMp set out in the remuneration report. the Directors consider that these arrangements are aligned with the Group’s and shareholder interests as they either reward individuals for contributing to the performance of the Group or encourage key management to remain with the Group post acquisition.

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Retirement benefits

retirement benefits are delivered via superannuation arrangements, the nature of which is subject to legislation regarding employee choice of fund.

B Details of remuneration – audited

Details of the remuneration of the Directors and the key management personnel (as defined in aaSB 124 related party Disclosures) of Coffey international Limited and the Coffey international Limited Group are set out in the following tables.

the key management personnel of Coffey international Limited at any time during the year include the Directors (see page 4) and the following executive officers:

• D L Goodin acting Chief Financial officer

• C J parsons Chief information officer

• r p Simpson Corporate Development officer

• S C Curtis Former Chief Financial officer

the key management personnel of the Group at any time during the year are the Directors of Coffey international Limited (see page 4 above), the executive officers of Coffey international Limited as listed above, and in addition the following executives who report directly to the Managing Director. the executives are:

• D a Browne Chief executive officer, Coffey Natural Systems

• J p Mcevoy Chief executive officer, the peron Group

• p Mirkov Chief executive officer, Coffey environments

• D o’toole Chief executive officer, Coffey Mining

• M C thomas Chief executive officer, Coffey Geotechnics

• K t tucker Chief executive officer, Coffey projects

• S G Jones Former Chief executive officer, Coffey Natural Systems

• p D Coney Former Chief executive officer, Coffey projects

the five Group executives who received the highest remuneration for the year ended 30 June 2008 were:

• p D Coney Former Chief executive officer, Coffey projects

• M e Duncan Managing Director, Coffey projects South africa

• r S rhodes Senior project Director, Coffey projects South africa

• r J olds Managing Director, Coffey international

• J p Mcevoy Chief executive officer, peron Group

the cash bonuses are dependent on the satisfaction of performance conditions set out in the section headed Short-term rewards above. part of the non-monetary benefits, being the shares issued under the long-term incentive plan, are subject to performance conditions.

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Key management personnel of Coffey international Limited 2008

Short-term employee benefits post-employment Salary sacrifice Cash Salary Cash non- Super- resignation Long Share- total and fees bonus monetary annuation payments Service Based benefits# Leave payments° Name $ $ $ $ $ $ $ $

Non-executive Directors:S r Williams 125,000 – – 11,560 – – – 136,560S a Black 112,384 – – 10,322 – – – 122,706C e Jamieson 92,660 – – 8,505 – – – 101,165

Executive Directors:r J olds^> 464,562 187,184 17,000 13,745 – 7,705 59,251 749,447G H Simpson^ 294,535 97,500 – 27,490 – 8,125 37,079 464,729

Executive key management personnel:D L Goodin^* 243,792 79,888 – 13,745 – 5,011 11,237 353,673C J parsons 214,092 11,550 – 13,745 – 3,843 6,165 249,395r p Simpson^ 243,792 35,750 – 13,745 – 4,344 23,382 321,013

Former parent entity executive:S C Curtis^+ (resigned 6 June 2008) 280,552 – 3,485 13,129 75,000 5,012 – 377,178

^ Denotes one of the 5 highest paid executives of the parent entity, as required under the Corporations Act 2001.* D L Goodin was appointed acting Chief Financial officer on 6 June 2008.° the fair value of the options is calculated as set out in Section D of this remuneration report and is allocated to each reporting period evenly over the period from grant date to vesting

date. the value disclosed is the portion of the fair value of the options recognised in this reporting period. in valuing the options, market conditions have been taken into account.# relates to packaged motor vehicles. > Cash bonus includes eVa payment of $49,684 in respect of 2006.+ resignation payment of $75,000 made in accordance with negotiated deed of release.

Key management personnel of the Coffey international Limited Group 2008

Short-term employee benefits post-employment Salary sacrifice Cash Salary Cash non- Super resignation Long Share- total and fees bonus monetary annuation payments Service Based benefits# Leave payments° Name $ $ $ $ $ $ $

Non-executive Directors:S r Williams 125,000 – – 11,560 – – – 136,560S a Black 112,384 – – 10,322 – – – 122,706C e Jamieson 92,660 – – 8,505 – – – 101,165Executive Directors:r J olds^> 464,562 187,184 17,000 13,745 – 7,705 59,251 749,447G H Simpson 294,535 97,500 – 27,490 – 8,125 37,079 464,729Executive key management personnel:D L Goodin* 243,792 79,888 – 13,745 – 5,011 11,237 353,673C J parsons 214,092 11,550 – 13,745 – 3,843 6,165 249,395r p Simpson 243,792 35,750 – 13,745 – 4,344 23,382 321,013D a Browne 184,392 12,573 – 13,745 – 2,942 2,456 216,108J p Mcevoy^ 283,392 – – 13,745 – 4,981 372,146 674,264p Mirkov 258,642 6,875 – 13,745 – 4,240 13,673 297,175D o’toole 233,892 18,750 – 13,745 – 4,175 30,424 300,986M C thomas 258,642 48,126 – 13,745 – 4,593 13,673 338,779K t tucker 289,970 7,500 17,745 27,351 – 20,560 14,916 378,042Former executives:S C Curtis (resigned 6 June 2008) 280,552 – 3,485 13,129 75,000 5,012 – 377,178 p D Coney^+ 282,548 – 52,161 100,557 – 16,681 45,743 497,690S G Jones (resigned 31 March 2008) 219,042 14,000 – 13,745 – 3,916 – 250,703Other Group executives:M e Duncan^~ 194,846 1,326,085 13,972 – – – – 1,534,903r S rhodes^~ 165,619 568,322 15,363 – – – – 749,304

^ Denotes one of the 5 highest paid executives of the Group, as required under the Corporations Act 2001.* D L Goodin was appointed acting Chief Financial officer on 6 June 2008.° the fair value of the options is calculated as set out in Section D of this remuneration report and is allocated to each reporting period evenly over the period from grant date to vesting

date. the value disclosed is the portion of the fair value of the options recognised in this reporting period. in valuing the options, market conditions have been taken into account.# relates to packaged motor vehicles. > Cash bonus includes eVa payment of $49,684 in respect of 2006.+ employment agreement expired on 30 June 2008. ~ Cash bonuses payable to M e Duncan and r S rhodes represent incentives pursuant to the Group’s acquisition of Duncan rhodes (pty) Ltd in 2006 – 2007.

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Key management personnel of Coffey international Limited 2007

Short-term employee benefits post-employment

Cash Salary Cash Non- Super- resignation Long Share- total and fees bonus monetary annuation payments Service Based benefits Leave payments° Name $ $ $ $ $ $ $ $

Non-executive Directors:

S r Williams 57,339 – – 62,011 – – – 119,350

S a Black 96,651 – – 8,699 – – – 105,350

C e Jamieson 59,908 – – 29,142 – – – 89,050

Executive Directors:

r J olds^ 446,712 – 5 12,686 – 38,520 – 497,923

G H Simpson^ 285,580 – – 14,300 – 17,739 – 317,619

Other key management personnel:

S C Curtis^ 245,093 – 1,741 12,686 – 7,625 3,990 271,135

r p Simpson^ 203,353 25,520 142 12,686 – 6,564 9,847 258,112

C J parsons^ 192,313 16,800 – 12,686 – 513 – 222,312

C a M Salton 109,501 7,500 850 10,672 – 503 503 129,529

Other parent entity executive:

D L Goodin 100,721 22,600 71 8,940 – 2,667 – 135,000

^ Denotes one of the five highest paid executives of the parent entity, as required under the Corporations Act 2001.

Key management personnel of the Coffey international Limited Group 2007

Short-term employee benefits post-employment

Cash Salary Cash Deferred Non- Super resignation Long Share- total and fees bonus cash bonus monetary annuation payments Service Based under eVa benefits Leave payments° compensation scheme Name $ $ $ $ $ $ $ $

Non-executive Directors:

S r Williams 57,339 – – – 62,011 – – – 119,350

S a Black 96,651 – – – 8,699 – – – 105,350

C e Jamieson 59,908 – – – 29,142 – – – 89,050


r J olds 446,712 – – 5 12,686 – 38,520 – 497,923

G H Simpson 285,580 – – – 14,300 – 17,739 – 317,619

Other key management personnel:

S C Curtis 245,093 – – 1,741 12,686 – 7,625 3,990 271,135

r p Simpson 203,353 25,520 – 142 12,686 – 6,564 9,847 258,112

C J parsons 192,313 16,800 – – 12,686 – 513 – 222,312

C a M Salton 109,501 7,500 – 850 10,672 – 503 503 129,529

M C thomas 210,733 80,500 – 246 13,412 – 2,177 – 307,068

p Mirkov^ 240,422 – – 891 33,686 – 42,430 – 317,429

D o’toole 212,170 42,412 – 1,521 12,686 – 25,475 5,619 299,883

S G Jones 192,661 55,000 – – 17,339 – 26,777 – 291,777

p D Coney^ 414,495 225,000 – – 26,505 – 12,236 – 678,236

Other Group executives:

M e Duncan^* 240,000 443,735 – 11,053 – – – – 694,788

r S rhodes ^* 204,000 443,735 – 12,409 – – – – 660,144

K t tucker ^ 241,294 110,000 – 11,000 22,706 – 16,241 – 401,241

^ Denotes one of the five highest paid executives of the Group, as required under the Corporations Act 2001.* the cash bonuses payable to M e Duncan and r S rhodes represent incentives pursuant to the Group’s acquisition of Duncan rhodes (pty) Ltd in 2006-2007.

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the relative proportions of remuneration for the period that are fixed and those linked to individual and Company performance are as follows:

Fixed remuneration Performance related

Name At risk STR At risk LTR

2008 2008 2008


r J olds 67% 25% 8%

G H Simpson 71% 21% 8%

Executive key management personnel of Group:

D L Goodin 74% 23% 3%

C J parsons 93% 5% 2%

r p Simpson 81% 11% 7%

D a Browne 93% 6% 1%

J p Mcevoy 100% 0% 0%

p Mirkov 93% 2% 5%

D o’toole 84% 6% 10%

M C thomas 82% 14% 4%

K t tucker 94% 2% 4%

Other executives of parent entity and Group:

p D Coney [resigned 30 June 2008] 91% 0% 9%

S C Curtis [resigned 6 June 2008] 100% 0% 0%

M e Duncan 14% 86% 0%

S G Jones [resigned 31 March 2008] 94% 6% 0%

r S rhodes 24% 76% 0%

C Service agreements – audited

remuneration and other terms of employment for the Managing Director, acting Chief Financial officer and the key management personnel are covered in employment agreements. each of these agreements provides for the provision of performance-related cash bonuses and participation, when eligible and to the extent determined by the Board, in the Coffey international Limited employee Leveraged Share plan.

the Company did not operate any share option schemes during the period.

all employment arrangements with current executives may be terminated by either party with four weeks written notice in writing other than as noted in the table below, and no termination benefits exist other than as required by the relevant legislation. the respective executives’ remuneration is reviewed as of 1 october each year by the remuneration Committee.

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Name Title Term of agreement

Current base salary including superannuation*

Termination notice

r J olds Managing Director No fixed term 500,000 6 months by employee, 18 months by employer

G H Simpson executive Director No fixed term 325,000 4 weeks by employee, 13 months by employer

D L Goodin^ acting Chief Financial officer No fixed term 300,000 4 weeks

C J parsons Chief information officer No fixed term 230,000 4 weeks

r p Simpson Corporate Development officer No fixed term 260,000 4 weeks

D a Browne Chief executive officer, Coffey Natural Systems

No fixed term 200,000 4 weeks

J p Mcevoy Chief executive officer, peron Group No fixed term 300,000 4 weeks

p Mirkov Chief executive officer, Coffey environments No fixed term 275,000 4 weeks

D o’toole Chief executive officer, Coffey Mining No fixed term 250,000 4 weeks

M C thomas Chief executive officer, Coffey Geotechnics No fixed term 275,000 4 weeks

K t tucker Chief executive officer, Coffey projects No fixed term 337,995 4 weeks

M e Duncan Managing Director, Coffey projects South africa


r S rhodes Senior project Director, Coffey projects South africa


^ the base salary refers to D L Goodin’s role as acting Chief Financial officer. D L Goodin was appointed to this role on 6 June 2008. * the base salary excludes Str and Ltr entitlements.

D Share-based compensation – audited

the establishment of the Coffey international Limited employee Leveraged Share plan entitles nominated employees in the Coffey international Limited Group (including executive Directors) to purchase shares in the Coffey international Limited entity, funded by way of interest free loans from Coffey international Limited for a subscription price. the loans are repayable from dividend entitlements. allocations of shares are determined by the Directors and the issue price of the shares is at a discount to market value as defined by Section 139Fa of the Income Tax Assessment Act 1936.

Shares issued under the Coffey international Limited employee Leveraged Share plan are accounted for as share-based payments as required by aaSB 2 Share-based payments. they are deemed to be equity-settled share-based payments for employee services. an expense has been recognised for the fair value of the shares, with a corresponding increase in reserves. the fair value is expensed for each share issue on a straight line basis, over the vesting period attaching to the shares.

the loans are non recourse in nature and accordingly provide equity upside opportunity to the individual without equity downside price risk. accordingly, for accounting purposes the arrangements are considered to be an option whereby the employee effectively has the option to repay the remaining loan balance in order to take ownership of the shares after the vesting conditions have been satisfied. the loan/exercise price reduces over the life of the arrangement by value of dividends per instrument. Due to their non recourse nature, the arrangements are not considered a loan for related party disclosure purposes.

at the most recent grant date (30 November 2007) of the issue of shares under the Long term rewards scheme 345 employees were eligible and participated in the scheme.

Grants under the Leveraged share plan during the current year comprised either Loyalty shares or performance shares. Both types of shares are subject to vesting conditions:

• Loyalty shares – the employee must remain employed by the Group for a period of three years.

• performance shares – in addition to the service condition as for the Loyalty shares, two performance measures, being epS and tSr as described below, each with a weighting of 50%, must be achieved.

the number of shares ultimately vesting depends on the level of achievement of the measures. Maximum shares are vested only when 100% of each measure is achieved. the performance measures are based on the operating epS annualised compound growth rate over three years and total Shareholder return (tSr) compared to the aSX 300 performance over the same period. these vesting conditions are subject to certain exceptions as set out in the scheme’s trust deed.

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the vesting conditions are summarised as follows:

earnings per share component

the earnings per Share (‘epS’) measure for each issue will be calculated over the three years from the beginning of the financial year during which the grant is made. the epS is based on operating profit for the three year period. a score will be awarded out of 100 depending on the annualised compound growth rate applicable to the epS in accordance to the following table:

Operating EPS annualised compound growth rate over 3 years (% per annum) Score

<10.0 0

10.0 20

12.5 40

15 60

17.5 80

20 100

a score of 100% would result in the entire 50% epS component vesting. a score of less than 100% results in an equivalent proportion of the epS component vesting.

total Shareholder return component

the total shareholder return component is measured by comparing the total Shareholder return (‘tSr’) of the Company to the aSX median value of the Measurement period. the Measurement period for each issue is the three years from the beginning of the financial year during which the grant is made. a score will be awarded for tSr performance in accordance with the following table:

TSR compared to ASX Score

Median 0 +5% 25

+10% 50

+15% 75

+20% 100

Where the performance hurdle is not met (denoted by a score of zero), the shares associated with that respective component will be forfeited. Similarly if the individual ceases employment, the arrangement is forfeited.

once the performance hurdle is achieved at the end of the three year period, the arrangement vests allowing the individual the option to settle the remaining exercise price and take ownership of the shares available to them under the grant.

prior year grants

Grants under the leveraged share plan in prior years were subject to a two year vesting condition during which period the employee must remain employed by the Company (subject to certain exceptions as set out in the Scheme’s trust deed). there were no other performance conditions associated with these grants.

the shares issued to the Coffey international Limited employees Leveraged Share plan rank equally with all other fully-paid ordinary shares on issue.

Details of shares issued not yet vested under the Coffey international Limited employee Leveraged Share plan are as follows:

Date Vesting conditions Number of shares issue price $’000 exercise price^

29 December 2006 2 years continuous service 373,172 $3.55 1,325 $3.3839

30 November 2007 3 years continuous service 3,732,952 $3.9467 14,733 $3.8932

total 4,106,124 16,058

^ exercise price represents the issue price per instrument reduced by dividends declared since grant date.

the Directors obtained an independent valuation of the shares in the Coffey international Limited employee Leveraged Share plan, on the basis that the shares granted in the plan required valuation as options, with an exercise price equal to the loan repayment value plus the net present value of expected dividends over the vesting period.

the valuation methodology used to determine the share-based payment expense was the Binomial approximation model in relation to grants with only service (Loyalty) or non market performance conditions (epS). For grants with a performance condition (tSr) a Monte Carlo simulation model was used to create an estimate of the share price values which would generate the required tSr at the end of the measurement period to meet the hurdle. as the hurdle allowed scaled vesting, the average share price value at the testing date which achieved the vesting hurdle was input into a Black Scholes/Merton ‘Up and in call barrier pricing model’. as required by aaSB 2, the model took into account the exercise price of the option, the life of the option, the current price of the underlying shares, the expected volatility of the share price, the dividends expected on the shares and the risk free interest rate for the life of the option. the expected life of the instrument was deemed to be the period from grant date to the first available date plus 12 months.

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the model inputs were as follows for the options subject to valuation:

29 December 2006 30 November 2007

Loyalty performance

risk-free rate 6.47% 6.32% 6.32%

Standard deviation 27.45% 37.31% 37.31%

Share price at effective date $4.10 $3.9467 $3.9467

exercise price (loan repayment) $3.55 $3.9467 $3.9467

annualised dividend yield 4.17% 3.96% 3.96%

Number of options (shares) 373,172 938,035 2,794,917

performance conditions None yes yes

Fair value of the share-based payment $1.74 $1.6475 epS tranche $1.6475

tSr tranche $1.5871

Details of the shares held by the Coffey international Limited employee Leveraged Share plan on behalf of the key management personnel in 2007 and 2008, in respect of the above two grants, are given below:^

Number of shares Number of Number of exercised out grants during shares vested of share plan the year during the year during the year*

2008 2007 2008 2007 2008 2007

Non-executive Directors

S r Williams – – – – – –

S a Black – – – – – –

C e Jamieson – – – – – –

Executive Directors

r J olds 187,365 – – – – 221,080

G H Simpson 117,142 – – – – –

Executive key management personnel

D L Goodin 35,583 – – – – –

C J parsons 31,489 – – – – –

r p Simpson 42,826 13,192 6,677 7,735 25,110 –

D a Browne 7,778 – – – – –

J p Mcevoy – – – – – –

p Mirkov 43,298 – – – – –

D o’toole 78,409 12,007 – 7,735 30,965 –

M C thomas 43,298 – – – – –

K t tucker 47,235 – – – – –

Other executives of parent entity and Group

p D Coney 144,854 – – – – –

M e Duncan – – – – – –

S G Jones 25,192 – – – – –

r S rhodes – – – – – –

S C Curtis 96,359 9,566 – – 33,480 –

^ in respect of the 2008 grant, the grant date was 30 November 2007, the expiry date is 30 November 2012. the exercise price was initially $3.9467 per instrument but this reduces by the dividends per share declared during the period from grant date to exercise date.

^ in respect of the 2007 grant, the grant date was 29 December 2006, the expiry date is 29 December 2011. the exercise price was initially $3.55 per instrument but this reduces by the dividends per share declared during the period from grant date to exercise date.

* Under the terms of participation of executives in the employee Leveraged Share plan, shares exercised during the year and the prior year were fully vested and loans fully repaid by way of dividends. accordingly the exercise price was nil.

Since the end of the financial year, 45,648 options over unissued shares have been granted. the exercise price at grant date is $3.9467 per option.

all instruments expire on the earlier of their expiry date or termination of the individuals’ employment. the arrangements are able to be exercised for 2 years from the vesting date. in addition to a continuing employment service condition, certain instruments granted in respect of the 2008 grant are conditional upon the Group achieving certain performance hurdles. Details of the performance hurdles are set out on page 12 of this report. For the arrangements granted in the current year, the earliest exercise date is 30 November 2010.

Vendor share-based payments

Mr J p Mcevoy was the joint owner and executive of the peron Group pty Ltd which was acquired by the Group during the year. the purchase consideration was split between cash and share components. the terms of the purchase agreement provide that 17% of the shares vest in the employee over the course of the vesting period on the relevant anniversary, if the service condition has been satisfied. the service condition requires the vendor to remain employed by the Group for a three to five year period from the date of acquisition.

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the following table sets out the number of shares subject to the service condition and the associated and vesting anniversary dates from acquisition.

anniversary date Number of shares vesting

8 august 2010 139,000

8 august 2011 46,666

8 august 2012 46,666

the fair value of the service conditional share component of the arrangement was $889,000 and is being recognised as remuneration expense for accounting purposes over the vesting period. in addition to the above, Mr J p Mcevoy was issued 1,166,667 shares on 8 august 2007 as part consideration for the acquisition of the peron Group pty Ltd. the fair value of the share consideration issued that carries no vesting conditions was $4,445,000.

E additional information – audited

Principles used to determine the nature and amount of remuneration: relationship between remuneration and company performance

the overall level of executive reward takes into account the performance of the Group over a number of years, with greater emphasis given to the current year. Net profit has been determined to be one of the financial performance targets when setting the Str. other financial and non financial targets are set for individual key management personnel. these targets are related to the achievement of group performance and are closely aligned such that there are direct consequences on shareholder wealth. Shares issued under the Ltr only vest if certain performance criteria are met. these performance criteria include earnings per Share and total Shareholder return. refer to Section D of this report for further details of the Ltr.

over the past five years, the consolidated entity’s profit from ordinary activities after income tax has grown at an average rate of almost 25% per annum, and shareholder wealth based on the Company’s share price alone has grown at an average rate of 19% per annum. epS compound growth since 2004 is over 12% per annum. Fully franked dividends paid to shareholders have increased 8.8 cents per share for the 2004 financial year to 16.0 cents per chare for the current financial year. this represents a compound annual increase of nearly 16% per annum. During the same period, average executive remuneration has grown by less than 9% per annum.

Details of remuneration: Cash bonuses

For each cash bonus in the above tables the percentage of the available bonus that was paid in the financial year and the percentage that was forfeited because the person did not meet the performance criteria is set out below. other than eVa compensation, no part of the bonuses in the table below is payable in future years.

Name Cash bonus

paid % Forfeited %

r J olds 68 32G H Simpson 60 40D L Goodin 100 –C J parsons 55 45r p Simpson 55 45D Browne 92 8J p Mcevoy N/a N/ap Mirkov 10 90D o’toole 30 70M C thomas 70 30K t tucker 10 90p D Coney [resigned 30 June 2008] N/a N/aM e Duncan* 100 –r S rhodes* 100 –S Jones [resigned 31 March 2008] 25 75

S C Curtis [resigned 5 June 2008] – 100

* the cash bonuses payable to M e Duncan and r S rhodes represent incentives pursuant to the Group’s acquisition of Duncan rhodes (pty) Ltd in 2006-07.

Details of Remuneration: Share-based payments

the table below sets out the details of the shares issued to the Coffey international Limited employee Leveraged Share plan on behalf of the key management personnel for 2007 and 2008, together with the vesting details of those shares.

year earliest Fair value Name granted Vested Forfeited vesting date at grant

% % $

r J olds 2008 N/a N/a 30 November 2010 303,453G H Simpson 2008 N/a N/a 30 November 2010 189,900D L Goodin 2008 N/a N/a 30 November 2010 57,548C J parsons 2008 N/a N/a 30 November 2010 50,927r p Simpson 2008 N/a N/a 30 November 2010 69,320 2007 – – 29 December 2008 23,008D a Browne 2008 N/a N/a 30 November 2010 12,579p Mirkov 2008 N/a N/a 30 November 2010 70,026D o’toole 2008 N/a N/a 30 November 2010 127,039 2007 – – 29 December 2008 20,941

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Details of Remuneration: Share-based payments continued

year earliest Fair value Name granted Vested Forfeited vesting date at grant

% % $

M C thomas 2008 N/a N/a 30 November 2010 70,026K t tucker 2008 N/a N/a 30 November 2010 76,393Other executives of parent entity and Groupp D Coney 2008 N/a N/a 30 November 2010 234,272S C Curtis 2008 N/a 100% N/a* N/a*

2007 N/a 100% N/a* N/a*

* resigned during the year – 2008 outstanding shares automatically forfeited on resignation.

Further details relating to the shares component of 2008 key management personnel remuneration is set out below.

a B C Value at Value at remuneration grant exercise consisting Name date date of shares

$ $ %

r J olds 303,453 – 8

G H Simpson 189,900 – 8

D L Goodin 57,548 – 3

C J parsons 50,927 – 2

r p Simpson 69,320 53,986 7

D a Browne 12,579 – 1

J p Mcevoy^ N/a N/a 55

p Mirkov 70,026 – 5

D o’toole 127,039 66,574 10

M C thomas 70,026 – 4

K t tucker 76,393 – 4

p D Coney 234,272 – 9

M e Duncan N/a N/a N/a

r S rhodes N/a N/a N/a

S C Curtis* N/a 71,982 N/a

S G Jones* N/a N/a N/a

* executives who resigned during the year obtain no value from shares granted during the year since such shares automatically forfeit on resignation.^ this represents vendor share-based payment remuneration.

a = the value at grant date calculated in accordance with aaSB 2 Share-based payment of options granted during the year as part of remuneration.

B = the value at exercise date of options that were granted as part of remuneration and were exercised during the year, being the intrinsic value of the options at that date.

C = the percentage of the value of remuneration consisting of options, based on the value of options expensed during the current year.

the above tables include the relevant disclosures in respect of Directors and the five most highly remunerated executives.

insurance of officersDuring the financial year, the Coffey international Limited Group paid a premium of $45,000 to insure the Directors and Secretaries of the Company and its australian-based controlled entities, and the General Managers of each of the divisions of the consolidated entity.

the liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a willful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else. it is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

proceedings on behalf of CompanyNo 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.

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.

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Non-audit servicesthe Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the consolidated entity are important.

Details of the amounts paid or payable to the auditor (KpMG) for audit and non-audit services provided during the year are set out in note 28.

the Board of Directors has considered the position and, in accordance with the advice received from the audit 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 directors are satisfied that the provision of non-audit services by the auditor, as set out in note 28 to the financial statements, 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 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 apeS 110 Code of ethics for professional accountants.

Details of the amounts paid or payable to KpMG for audit services provided during the year are set out in note 28 to the financial statements.

auditors’ independence declarationa copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 17.

rounding of amountsthe Company is of a kind referred to in Class order 98/0100, issued by the australian Securities & investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ report. amounts in the Directors’ report have been rounded off in accordance with that Class order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

auditorKpMG continues in office in accordance with section 327 of the Corporations Act 2001.

this report is made in accordance with a resolution of the Directors.

Stephen r Williams Chairman

roger J olds Managing Director

Sydney 29 September 2008

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

to: the Directors of Coffey international Limited

i declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2008, 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.

KpMG

John Wigglesworth partner


aUDitorS’ iNDepeNDeNCe DeCLaratioN

18

Governance Frameworkas a listed public company, Coffey international Limited (the Company) has adopted an approach to corporate governance based on a set of values and behaviours that underpin its everyday activities, ensure transparency and fair dealing, and protects stakeholder interests.

the Company has taken into account the principles and guidelines for corporate governance issued by the australian Stock exchange and formulated its system of policies and practices which contribute to the proper direction and management of the Company. the policy Statement of Corporate Governance principles and practice, first adopted by the Board in June, 2004, then amended in the 2006 financial year, was reviewed and updated during the year.

the Board of Directorsthe Board operates in accordance with the principles set out in its charter, which was reviewed and updated during the year. the charter details the Board’s functions and powers, together with the matters reserved to the Board for its own decision.

Board compositionthe Board has adopted the following principles in respect of Board composition:

• the Board is to be comprised of both executive and Non-executive Directors with the Non-executive Directors able to exercise a majority of the votes. Non-executive Directors bring a fresh perspective to the Board’s consideration of strategic, risk and performance matters and are best placed to exercise independent judgement and review and constructively challenge the performance of management

• in recognition of the importance of independent views and the Board’s role in supervising the activities of management, the Chairman must be an independent Non-executive Director and all Directors are required to bring independent judgement to bear in their Board decision-making

• the Chairman is elected by the full Board and is required to meet regularly with the Managing Director

• the Company is to maintain a balance and mix of Directors on the Board from different backgrounds with complementary competencies, skills and experience

• the Board is required to undertake an annual Board performance review and consider the appropriate balance and mix of skills required by the Board to maximise its effectiveness and its contribution to the Group

• Directors are not required to hold shares in the Company but are encouraged to do so.

responsibilitiesthe responsibilities of the Board include:

• contributing to the development, final review and approval of corporate strategy

• reviewing and approving business plans, the annual budget and financial objectives and plans including the available resources, major capital expenditure initiatives, acquisitions and divestments required to meet the business plans and budgets

• overseeing and monitoring:

– organisational performance using key indicators agreed with management

– performance toward the achievement of the Group’s strategic goals and objectives

– compliance with the Company’s code of conduct

– progress of significant corporate projects including any acquisitions or divestments

– framework and application of effective management processes

• monitoring financial performance including approval of the annual and half-year financial reports and liaison with the Company’s external auditors

• appointment, performance assessment and, if necessary, removal and replacement of the Managing Director

• ensuring that clearly defined delegations of powers are in place for management to carry out its responsibilities

• ratifying the appointment and/or removal and replacement of, and contributing to the performance assessment for, members of the senior management team including the Chief Financial officer (CFo) and the Company Secretary

• approving major corporate initiatives

• enhancing and protecting the reputation of the Group

• ensuring the principal risks facing the Group, including those associated with its legal compliance obligations, have been identified and appropriate and adequate control, monitoring, accountability and reporting mechanisms are in place

• ensuring management have appropriate policies in place to meet the statutory responsibilities of directors, such as oH&S and taxation

• ensuring that appropriate policies, and planning and monitoring systems are in place for human resource management, environmental, and occupational health and safety

• monitoring changes in relevant accounting policies and practices and approving their adoption

• making recommendations and reporting to shareholders and protecting their interests

• reviewing its own performance, including processes and composition.

Corporate GoVerNaNCe StateMeNt

19

Board membersDetails of the members of the Board, their experience, expertise, qualifications, term of office and independent status are set out in the Directors’ report under the heading ‘information on Directors’. at the date of signing the Directors’ report there are three Non-executive Directors, all of whom are deemed independent under the principles set out below, and two executive Directors. there was no change to the status of any Director during the year.

in addition the Board seeks to ensure that:

• at any point in time, its membership represents an appropriate balance and mix between Directors with experience and knowledge of the Group and Directors with an external or fresh perspective and the ability to add value to the Board’s deliberations on current and emerging issues

• the size of the Board is conducive to effective discussion and efficient decision making.

Directors’ independencethe Board has adopted specific principles in relation to Directors’ independence. these state that to be deemed independent, a Director must be a Non-executive and:

• not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company

• not employed within the last three years in an executive capacity by the Company or a controlled entity, or been a Director after ceasing to hold any such employment

• not being a principal within the last three years of a material professional adviser or a material consultant to the Company or a controlled entity, or an employee materially associated with the service provided

• not a material supplier or customer of the Company or a controlled entity, or an officer of or otherwise associated directly or indirectly with a material supplier or customer unless otherwise approved by the Board and referred to in the conflict of interest section of this report

• must have no material contractual relationship with the Company or a controlled entity other than as a director of the Group

• not been on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company.

Materiality for these purposes is determined on both quantitative and qualitative bases. an amount of over 1% (2007: 5%) of annual turnover of the Group or 5% (2007: 5%) of any relevant supplier purchases or customer sales is considered material for these purposes. in addition, a transaction of any amount or a relationship is deemed material if knowledge of it is likely to impact the shareholders’ perception of the Director’s independence.

Legal fees of an immaterial amount were paid during the year to Kemp Strang, of which Mr S r Williams is a partner, under normal commercial terms and conditions.

Conventional thinking on corporate governance offers the view that a Director’s independence may be perceived to be impacted by lengthy service on the Board. to avoid any potential concerns in this regard, the Board requires any Director with ten or more years of service as a Director to offer themself for re-election every year and by doing so, the Board will provide shareholders with the annual opportunity to make a balanced assessment of the Director’s actual and perceived independence and contribution to the Company. in the current year, this re-election due to length of service applies only to the Chairman, whom the Board believes contributes with effectiveness and independence, partly because of the depth and breadth of industry and company knowledge he has available to share.

Non-executive Directorsthe three Non-executive Directors met once during the year, in a scheduled session without the presence of management, to discuss the operation of the Board as a whole and a range of other matters. relevant matters arising from these meetings were shared and discussed with the full Board. From time to time Non-executive Directors also meet informally to discuss topical matters related to the Company and its industry.

term of officethe Company’s Constitution specifies that one third of all Directors (with the exception of the Managing Director) must retire from office at each annual general meeting (aGM). Where eligible, a Director may stand for re-election subject to the limitation that on attaining the age of 72 years the Director will retire, by agreement, at the next aGM and will not seek re-election.

Chairman and Managing Directorthe Chairman is responsible for leading the Board. the Chairman is responsible for ensuring that Directors are properly briefed for meetings, that Board activities are organised and efficiently conducted, and for ensuring that sufficient time is allocated and devoted for the consideration of items before the Board. the Managing Director is responsible for implementing Group strategies and policies.


20

Commitmentsthe Board normally holds at least ten scheduled Board meetings and an additional corporate strategy workshop during the year. Some of these meetings are held at operational sites of the Company and the Directors generally meet with local management and other stakeholders on these occasions. additional Board meetings are held at short notice when required to consider urgent matters such as acquisitions.

Non-executive Directors are expected to spend at least 30 days a year preparing for and attending Board and committee meetings and associated activities.

the number of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2008, and the number of meetings attended by each Director is disclosed on page 5.

it is the Company’s practice to allow its executive Directors to accept appointments outside the Company with prior written approval of the Board. Dr Simpson was appointed as Chairman of the Council for australian-arab relations during 2008. No other appointments of this nature were accepted during the year ended 30 June 2008.

the commitments of Non-executive Directors are reviewed each year as part of the annual performance assessment.

prior to appointment or being submitted for re-election each Non-executive Director is required to specifically acknowledge that they have and will continue to have the time available to discharge their responsibilities to the Company.

Conflict of interestsDirectors are expected to inform the Board of any potential conflicts of interest. at the commencement of each meeting of the Board, a Director has the opportunity to appraise the Board of any matter that may give rise to a conflict of interest.

entities connected with Mr S r Williams had business dealings with the consolidated entity during the year, as described in note 27 to the financial statements. Mr S r Williams declared his interest in those dealings to the Company and took no part in decisions relating to them or the preceding discussions.

independent professional adviceDirectors and Board committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company’s expense. prior written approval of the Chairman is required, but this will not be unreasonably withheld.

performance assessmentit is the Board’s policy that it consistently review the performance of the Group and management, as well as the performance of the Board and its sub-committees. the Board formally reviewed its own performance in May 2008 after a similar review session in 2007 where it obtained feedback from an independent expert in board performance assessment. the results of the 2008 review, including action plans, were documented in the Board minutes. For its 2008 review the Board considered it appropriate to conduct self assessment, and included a review by Directors of the Chairman’s performance.

the Chairman annually assesses the performance of individual Directors and meets privately with each Director to discuss this assessment.

Corporate reportingthe Managing Director and acting Chief Financial officer have made the following certifications to the Board:

• that the Company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and Group

• that the above statement is founded on an appropriate system of internal control and risk management which implements the policies adopted by the Board and that the Company’s risk management and internal controls are operating effectively in all material respects.

in addition, the Chief executive officer and Finance Manager of each operating division have made similar certifications to the Board as those required by the Managing Director and Chief Financial officer of the Company. this procedure was performed for the year ended 30 June 2008.

Board committeesthe Board has established two committees to assist in the execution of its duties and to allow detailed consideration of complex issues. Current committees of the Board are the remuneration Committee and audit Committee. the remuneration Committee is comprised of a majority of Non-executive Directors and the audit Committee is comprised entirely of Non-executive Directors. the Board believes that the current composition of the remuneration and audit Committees is appropriate, having regard to the size, structure and complexity of the Company’s operations.

each of these committees has its own written charter setting out its role and responsibilities, composition, structure, membership requirements and the manner in which the committee is to operate. these charters are reviewed on an annual basis. all matters determined by committees are submitted as recommendations to the full Board for its consideration and decision.

Minutes of committee meetings are tabled at the immediately subsequent Board meeting. additional requirements for specific reporting by the committees to the Board are addressed in the charter of the individual committees.

the Board has not established a nomination committee at this time as it believes that it is not warranted, having regard to the Company’s size, structure and complexity. the responsibilities which in larger companies may be carried out by the nomination committee are instead reserved to the full Board of Coffey international Limited for its own decision. From time to time the Board reconsiders the necessity of the formation of a nomination committee.

When the possible need for a new Director is identified or an existing Director is required to stand for re-election, the full Board reviews the current range of competencies, skills, experience and expertise on the Board, identifies and documents its needs, then prepares a short-list of candidates with appropriate competencies, skills and experience that in the Board’s judgement can be expected to be complementary to the performance of the Board. Where necessary, advice is sought from independent search consultants.

the full Board then appoints the most suitable candidate who must stand for election at the next aGM of the Company. reappointment of existing Directors is not automatic and is contingent on past performance and contribution to the Company along with their expected performance and contribution having regard to the Company’s size, structure and complexity in the future.


21

the Board has resolved that notices of meeting for the election of Directors will fully comply with the aSX Corporate Governance Council’s corporate governance principles and recommendations.

New Directors are provided with a letter of appointment setting out their responsibilities, rights and the terms and conditions of their employment. all new Directors participate in a formal induction program which covers financial, strategic, operations and risk management issues as well as expectations for Director behaviour.

remuneration Committeethe current members of the remuneration Committee are as follows:

S r Williams (Chairman) (Non-executive Director) S a Black (Non-executive Director) r J olds (Managing Director)

the secretary of the Committee is the Company Secretary.

Directors and other persons who are not members of the Committee may be invited at the discretion of the Chairman of the Committee to attend and participate.

Details of the Directors’ qualifications, experience and attendance at remuneration Committee meetings are set out in the Directors’ report on pages 4 to 5.

the remuneration Committee operates in accordance with its charter. it advises the Board on remuneration policies and practices generally, and makes specific recommendations on remuneration packages and other terms of employment for executive Directors and other senior executives. the Company’s remuneration practices are disclosed in greater detail in the remuneration report included in the Directors’ report on pages 5 to 15.

Committee members receive briefings from an external remuneration expert on recent developments on remuneration and related matters as required.

each member of the senior executive team has an employment contract covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. the standard contract refers to a specific formal job description.

executive remuneration and other terms of employment are reviewed annually by the remuneration Committee having regard to personal and corporate performance, contribution to long term growth, relevant comparative information and independent expert advice.

Further information on Directors’ and executives’ remuneration is set out in the remuneration report and note 27 to the financial statements.

the remuneration Committee’s terms of reference include responsibility for reviewing any transactions between the organisation and the Directors, or any interest associated with the Directors, to ensure the structure and the terms of the transaction are in compliance with the Corporations Act 2001 and are appropriately disclosed.

audit Committeethe current members of the audit Committee are as follows:

S a Black (Chairman) (Non-executive Director) S r Williams (Non-executive Director) C e Jamieson (Non-executive Director)

the Company auditor – Messrs KpMG are issued a standing invitation to attend and participate in meetings.

the Chief Financial officer and the Group Financial Controller are issued a standing invitation to attend and participate in meetings.

the secretary of the Committee is the Company Secretary.

Details of the Directors’ qualifications, expertise, experience and attendance at audit Committee meetings are set out in the Directors’ report on pages 4 to 5.

the audit Committee has appropriate financial expertise and all members have a working knowledge of the industries in which the Group operates.

the audit Committee operates in accordance with a charter. the main responsibilities of the committee are to:

• review, assess and approve the annual report, the half-year financial report and all other financial information published by the Company or released to the australian Securities exchange (aSX)

• assist the Board in reviewing the effectiveness of the Company’s internal control environment covering:

– reliability of financial reporting

– effectiveness and efficiency of operations

– compliance with applicable laws and regulations

• recommend to the Board the appointment, removal and remuneration of the external auditor, and review the terms of their engagement, the scope and quality of the audit and assess their performance

• consider the independence and competence of the external auditor on an ongoing basis

• review and approve the level of non-audit services provided by the external auditor and ensure it does not adversely impact on auditor independence

• review and monitor related party transactions and assess their propriety

• oversee the Company’s internal audit process

• report to the Board on matters relevant to the audit Committee’s role and responsibilities

• review the Company’s accounting policies and make recommendations to the Board.


22

in fulfilling its responsibilities, the audit Committee:

• receives regular reports from management and the external auditor

• meets with the external auditor privately without management at least once a year or more frequently if necessary

• reviews any significant disagreements between the external auditor and management, irrespective of whether they have been resolved

• provides the external auditor with a clear line of direct communication at any time to either the Chairman of the audit Committee or the Chairman of the Board.

the audit Committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

external auditorsthe Company and audit Committee policy is to appoint external auditors who clearly demonstrate quality and independence. the performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs.

in view of the introduction of a five year rotation requirement under CLerp 9, it is the current external auditor’s policy to rotate audit engagement partners on listed companies at least every five years. the current audit engagement partner was introduced for the audit for the year ended 30 June 2008, and in accordance with the transitional provisions of the new requirement, will rotate off the engagement at the conclusion of the 30 June 2012 audit.

an analysis of fees paid to the external auditors, including a breakdown of fees for non-audit services, is provided in note 28 to the financial statements. it is the policy of the external auditors to provide an annual declaration of their independence to the audit Committee.

the external auditor is required to attend the aGM and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

risk assessment and managementthe Board is responsible for ensuring there are adequate policies in relation to overseeing and managing risk and internal control systems. in summary, the Company policies are designed to ensure strategic, operational, legal, reputation and financial risks are identified, assessed, addressed and monitored to enable achievement of the Group’s business objectives.

Considerable importance is placed on maintaining a strong control environment. there is an organisation structure with clearly drawn lines of accountability and delegation of authority. adherence to the code of conduct is required at all times and the Board actively promotes a culture of quality and integrity.

in accordance with their risk management policy, each operating division reports regularly to the Managing Director and the Board on the key business risks, including changes in principal and material risks, in their area, in accordance with their risk management policy which covers identification, assessment, monitoring and mitigation of risks.

policies and procedures cover management accounting, financial reporting, appraisal of potential acquisitions, environment, occupational health and safety, it security, compliance and other risk management issues. to date the Company has not had an independent internal audit department. rather management, has chosen to conduct an internal audit by way of peer review processes. During 2008, the Board initiated a tender process for the consideration, selection and initial appointment of a suitably qualified and resourced external professional services firm for the implementation of a more appropriate internal audit function having regard to the current size, structure and complexity of the Company.

the Board holds an annual corporate strategy workshop attended by the Board and executive management. this is held over several days and reviews the Group’s strategic direction in detail and includes specific focus on the identification of the key business and financial risks which could prevent the Company from achieving its strategic plans and objectives.

in addition the Board requires that each major proposal submitted to the Board for decision is accompanied by a comprehensive risk assessment and, accordingly, management’s proposed mitigation strategies.


23


Code of Conductthe Company recognises the need for Directors, management and employees to observe the highest standards of behaviour and business ethics when engaging in corporate activity. the Company currently has a Code of Conduct and ensures compliance with it. the Code requires that at all times all Company personnel act with the utmost integrity, objectivity and in compliance with the spirit of the law and Company policies.

the key elements of the Share trading by employees policy are:

• identification of those employees restricted from trading – relevant employees (those who have access to price-sensitive information) may acquire shares in the Company, but are prohibited from dealing in Company shares or exercising options

• detailing the periods in which all Group employees can trade Coffey Shares. the only periods in which any employee can trade is during the first 21 days after either the release of the Company’s half-year and annual results to the australian Securities exchange (‘aSX’) or the annual general meeting provided they are not aware of any information that could materially affect the Company’s share price

• to raise awareness that the Company strongly advises that shares should not be traded whilst in possession of price sensitive information not yet released to the market, even if it is within one of the 21 day periods identified above

• to raise the awareness of legal prohibitions including transactions with colleagues and external advisers.

the Code of Conduct and the Company’s trading policy are provided to each new employee as part of their induction training and all employees are required to comply with the Code.

Continuous disclosure and shareholder communicationthe Board has nominated the Chairman and the Managing Director as authorised Company spokesmen, to liaise and communicate directly with the media when and as required on company matters.

the Company Secretary has been nominated as the person responsible for communications with the aSX. this role includes responsibility for ensuring compliance with the continuous disclosure requirements in the aSX listing rules and overseeing and co-ordinating information disclosure to the aSX, analysts, brokers, shareholders, the media and the public.

When analysts are briefed on aspects of the Group’s operations, and the material used in the presentation is not already publicly available information, it is specifically released to the aSX immediately before the presentation. in the unlikely event that any price sensitive information has been inadvertently disclosed, then this information is also immediately released to the aSX.

Shareholders are directed to online access to the Company’s annual and half yearly reports and where they request, receive a printed copy.

all recent Company announcements, media releases, details of Company general meetings, certain of the Company’s corporate governance information and financial reports for the last three years are available on the Company’s website, coffey.com. the website also provides a mechanism for shareholders to communicate with the Company through electronic means.

this financial report covers both Coffey international Limited as an individual entity and the consolidated entity consisting of Coffey international Limited and its subsidiaries. the financial report is presented in australian currency.

Coffey international Limited is a company limited by shares, incorporated and domiciled in australia. its registered office and principal place of business is:

Coffey international Limited Level 3, tower 1 495 Victoria avenue Chatswood NSW 2067

a description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and activities on page 2 in the Directors’ report, which is not part of this financial report.

the financial report was authorised for issue by the Directors on 29 September 2008. the Company has the power to amend and reissue the financial report.

through the use of the internet, the Company has ensured that its corporate reporting is timely, complete, and available globally at minimum cost to the Company. all media releases, financial reports and other information are available on our website: coffey.com.

FiNaNCiaL reportS 30 JUNe 2008

24

Consolidated Company

2008 2007 2008 2007 restated Notes $’000 $’000 $’000 $’000

Revenue 5 558,571 362,709 19,940 13,500

raw materials, subcontractor costs and consumables (209,291) (113,270) – –

employee benefits expense (241,922) (183,844) (342) (254)

Depreciation and amortisation expenses 6 (9,868) (6,837) – –

occupancy costs (17,919) (9,030) – –

other expenses 6 (44,523) (31,331) – –

Results from operating activities 35,048 18,397 19,598 13,246

Finance income 5 569 401 364 807

Finance expenses 6 (8,425) (5,258) – –

Net finance expense (7,856) (4,857) 364 807

profit before income tax 27,192 13,540 19,962 14,053

income tax (expense)/benefit 7 (11,253) (4,480) 739 (244)

Profit for the year 15,939 9,060 20,701 13,809

Attributable to:

Members of Coffey international Limited 15,307 8,420 20,701 13,809

Minority interest 632 640 – –


Earnings per share for profit attributable to the ordinary equity holders of the Company:

Basic earnings per share (cents) 36 13.9c 9.3c

Diluted earnings per share (cents) 36 13.0c 9.2c

refer to note 38 for details of the 2007 restatement.the above income statements should be read in conjunction with the accompanying notes.

iNCoMe StateMeNtS For tHe year eNDeD 30 JUNe 2008

25


2008 2007 2008 2007 restated Notes $’000 $’000 $’000 $’000

ASSETS

Current assets

Cash and cash equivalents 8 52,643 14,609 – 468

trade and other receivables 9 128,702 94,146 181,638 120,097

other financial assets 10 981 – – –

Work in progress 11 21,096 5,539 – –

income tax receivable – 70 – –

Total current assets 203,422 114,364 181,638 120,565

Non-current assets

receivables 1,132 1,485 – 91

investments 12 – – 92,907 100,145

plant and equipment 13 27,519 17,841 – –

Deferred tax assets 14 6,972 4,766 368 493

intangible assets 15 205,022 143,626 – –

Total non-current assets 240,645 167,718 93,275 100,729

Total assets 444,067 282,082 274,913 221,294

LIABILITIES

Current liabilities

Bank overdraft 17 247 251 1,141 –

trade and other payables 16 61,014 26,905 66,901 38,706

Loans and borrowings 17 1,671 – – –

Deferred purchase consideration 18 5,598 1,527 1,915 1,336

Current tax liabilities 3,233 – 59 2,244

employee benefits 19 18,212 12,472 – –

Total current liabilities 89,975 41,155 70,016 42,286

Non-current liabilities

Loans and borrowings 20 144,667 60,487 – 7

Deferred purchase consideration 21 5,506 859 2,080 693

Deferred tax liabilities 22 5,041 – – –

employee benefits 19 2,816 2,010 – –

Total non-current liabilities 158,030 63,356 2,080 700

Total liabilities 248,005 104,511 72,096 42,986

Net assets 196,062 177,571 202,817 178,308

EQUITY

Contributed equity 23 182,058 165,972 182,058 165,972

reserves 24 7,201 3,217 8,130 3,101

retained profits 24 5,719 7,804 12,629 9,235

Equity attributable to ordinary equity holders of the Company 194,978 176,993 202,817 178,308

Minority interest 1,084 578 – –

Total equity 196,062 177,571 202,817 178,308

refer to note 38 for details of the 2007 restatement.the above balance sheets should be read in conjunction with the accompanying notes.

BaLaNCe SHeetS aS at 30 JUNe 2008

26


2008 2007 2008 2007 restated $’000 $’000 $’000 $’000

Foreign currency translation differences for foreign operations (1,538) 30 – –

effective portion of changes in fair value of cash flow hedges 976 – – –

income tax on income and expense recognised directly in equity (294) – – –

Income and expense recognised directly in equity (856) 30 – –


Total recognised income and expense for the year 15,083 9,090 20,701 13,809

attributable to:

equity holders of the Company 14,577 8,512 20,701 13,809

Minority interest 506 578 – –

Total recognised income and expense for the year 15,083 9,090 20,701 13,809

refer to note 38 for details of the 2007 restatement.the above statements of recognised income and expenses should be read in conjunction with the accompanying notes.

StateMeNtS oF reCoGNiSeD iNCoMe aND eXpeNSe For tHe year eNDeD 30 JUNe 2008

27


2008 2007 2008 2007 Notes $’000 $’000 $’000 $’000

Cash flows from operating activities

receipts from customers (inclusive of goods and services tax) 631,614 347,647 – –

payments to suppliers and employees (inclusive of goods and services tax) (572,462) (341,489) – –

59,152 6,158 – –

Dividends received from subsidiaries – – 12,240 13,500

interest received 569 401 364 –

interest paid (8,425) (5,258) – –

income taxes paid (13,156) (8,726) (8,109) (6,563)

Net cash (outflow)/inflow from operating activities 35 38,140 (7,425) 4,495 6,937

Cash flows from investing activities

payments for plant and equipment (11,494) (9,095) – 6,937

payments for intangible assets (1,686) – – –

payment for purchase of companies/businesses, net of cash acquired (53,216) (40,722) – (8,471)

payment of deferred consideration (764) – (586) –

proceeds from sale of plant and equipment 1,398 369 – –

Net cash (outflow) from investing activities (65,762) (49,448) (586) (8,471)

Cash flows from financing activities

repayment of borrowings (118,999) (5,960) – 352

proceeds from borrowings 201,711 – – 76,856

proceeds from issue of shares, net of costs 1,236 76,856 1,236 –

Dividends paid to shareholders 25 (15,254) (10,312) (15,254) (10,312)

Dividends paid to minority interest shareholders (362) – – –

payment of finance lease liabilities (767) – – –

Loans (advanced to)/repaid from controlled entities – – 8,500 (62,765)

Net cash inflow/(outflow) from financing activities 67,565 60,584 (5,518) (4,131)

Net increase/(decrease) in cash held 39,943 3,711 (1,609) 2,597

Cash and cash equivalents at the beginning of the financial year 14,358 10,572 468 (2,129)

effects of exchange rate changes on cash (1,905) 75 – –

Cash and cash equivalents at the end of the year 8 52,396 14,358 (1,141) 468

the above cash flow statements should be read in conjunction with the accompanying notes.

CaSH FLoW StateMeNtS For tHe year eNDeD 30 JUNe 2008StateMeNtS oF reCoGNiSeD iNCoMe aND eXpeNSe For tHe year eNDeD 30 JUNe 2008

28

1 Summary of significant accounting policiesthe principal accounting policies adopted in the preparation of the financial report are set out below. these policies have been consistently applied to all years presented and have been applied consistently by the Group entities, unless otherwise stated. the financial report includes separate financial statements for Coffey international Limited (the Company) as an individual entity and the consolidated entity (the Group) consisting of Coffey international Limited and its subsidiaries.

a) Basis of preparation

Statement of compliance

the financial report is a general purpose financial report which has been prepared in accordance with australian accounting Standards (aaSBs) (including australian interpretations) adopted by the australian accounting Standards Board (aaSB) and the Corporations Act 2001. the consolidated financial report of the Group and the financial report of the Company comply with international Financial reporting Standards (iFrSs) and interpretations adopted by the international accounting Standards Board (iaSB).

the financial statements were approved by the Board of Directors on 29 September 2008.

Early adoption of standards

the Group has not elected to apply any amended accounting standards early on the basis that those standards which have been amended do not materially affect the policies of Coffey international Limited. refer to note 1(aa) for an assessment of the impact of new aaSBs not adopted early.

Historical cost convention

these financial statements have been prepared under the historical cost convention except for the following:

• derivative financial instruments are measured at fair value

• financial instruments at fair value through profit or loss are measured at fair value

the methods used to measure fair values are discussed further in the notes.

Use of estimates and judgements

the preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. actual results may differ from these estimates.

estimates and underlying assumptions are reviewed on an ongoing basis. revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

in particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes:

• Business combinations

• intangible assets – measurement of the recoverable amounts of cash-generating units containing goodwill and other intangible assets

• employee benefits – measurement of share-based payments

• provisions

• Financial instruments – valuation of financial instruments

• Leases – lease classification.

b) principles of consolidation

(i) Subsidiaries

the consolidated financial statements incorporate the assets and liabilities of all entities controlled by the Company as at 30 June 2008 and the results of all controlled entities for the year then ended.

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. the existence and effect of potential voting rights that are currently exerciseable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date from which control is transferred to the Group. they are de-consolidated from the date that control ceases.

the purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note 1(e)).

the Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary.

intercompany transactions, balances and unrealised gains on transactions between Group companies 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 Group.

Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and balance sheet respectively.

investments in subsidiaries are accounted for at cost in the Company’s financial statements.

(ii) Employee Share Trusts

the Group has formed trusts to administer the Group’s employee share schemes. these trusts are consolidated, as the substance of the relationship is that the trusts are controlled by the Group. For accounts purposes the trusts are considered an agent of the Company and accordingly are incorporated into the Company’s results and balance sheet.

NoteS to tHe FiNaNCiaL StateMeNtS For tHe year eNDeD 30 JUNe 2008

29

1 Summary of significant accounting policies (continued)

c) income tax

the income tax expense for the year is the tax payable on the current year’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.

the relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. an exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are reviewed at each reporting date and 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.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

Tax Consolidation legislation

Coffey international Limited and its wholly-owned australian controlled entities implemented the tax consolidation legislation as of 1 July 2003.

the head entity, Coffey international Limited, and the controlled entities in the tax consolidated group account for their own tax expense/income and deferred tax amounts. these tax amounts are measured as if each entity in the tax consolidated Group continues to be a stand-alone taxpayer in its own right.

in addition to its own current and deferred tax amounts, Coffey international Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated Group.

assets or liabilities arising under tax funding arrangements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details about the tax funding arrangements are disclosed in note 7.

any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

d) Foreign currency translation

(i) Functional and presentation currency

items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). the consolidated financial statements are presented in australian dollars, which is Coffey international Limited’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency 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 year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or a financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges which are recognised directly in equity.

(iii) Group Companies

the results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency, being australian dollars, are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to aaSBs are treated as assets and liabilities of the foreign entity and translated at the closing rate. Goodwill arising on acquisitions before the date of transition to aaSBs is treated as an australian dollar denominated asset.


30

1 Summary of significant accounting policies (continued)Since 1 July 2004, the Group’s date of transition to aaSBs, such differences have been recognised in the foreign currency translation reserve (FCtr).

Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in equity in the FCtr.

e) Business combinations

the purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured at the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition.

Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. transaction costs arising on the issue of equity instruments are recognised directly in equity.

identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. if the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. the discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

f) Segment reporting

a business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. a geographical segment is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments. Segment information is presented in respect of the Group’s business and geographical segments. the Group’s primary format for segment reporting is based on business segments. the business segments are determined based on the Group’s management and internal reporting structure.

inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise loans and borrowings and related expenses, corporate assets and corporate/group expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

g) revenue recognition

revenue is measured at the fair value of the consideration received or receivable. amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. revenue is recognised for the major business activities as follows:

(i) Consulting Business

revenue from a contract to provide consulting services is recognised by reference to the services performed under the contract. this is normally determined as services performed up to and including the balance sheet date as a proportion of the total to be performed, and revenue from time and material contracts recognised at the contractual hourly rates as labour hours are delivered and direct expenses are incurred. Where it is probable that a loss will arise from a long term contract, the excess of total costs over revenue is recognised as an expense immediately.

(ii) International Development Business

Contract revenue and expenses are recognised in accordance with the percentage of completion method unless the outcome of the contract cannot be reliably estimated. Where it is probable that a loss will arise from a long term contract, the excess of total costs over revenue is recognised as an expense immediately.

Where the outcome of a contract cannot be reliably estimated, contract costs are recognised as an expense as incurred, and where it is probable that the costs will be recovered, revenue is recognised to the extent of costs incurred.

For fixed price contracts, the stage of completion is measured by reference to costs incurred to date as a percentage of estimated total costs for each contract. revenue from cost plus contracts is recognised by reference to the recoverable costs incurred during the reporting period plus the percentage of fees earned. percentage of fees earned is measured by the proportion that costs incurred to date bear to the estimated total costs of the contract.

(iii) Project Management Business

Contract revenue and expenses are recognised in accordance with the percentage of completion method unless the outcome of the contract cannot be reliably estimated. Where it is probable that a loss will arise from a long term contract, the excess of total costs over revenue is recognised as an expense immediately.

(iv) Interest income

interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. interest income on impaired loans is recognised using the original effective interest rate.

(v) Dividend

Dividends are recognised as revenue when the right to receive payment is established.

(vi) Other income

other income is brought to account when received or receivable.


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h) trade receivables

all trade receivables are recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. trade receivables are generally due for settlement no more than 30 days from the date of recognition.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. a provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. the amount of the provision is recognised in the income statement.

i) Work in progress

(i) Consulting Business

Work in progress represents the sales value of unbilled labour and disbursements less provisions for amounts considered non-recoverable.

(ii) International Development Business

Long term contract work in progress is stated at the aggregate of contract costs incurred to date plus recognised profits less recognised losses and progress billings. if there are contracts where progress billings exceed the aggregate costs incurred plus profits less losses, the net amounts are presented under other liabilities.

Contract costs include all costs directly related to specific contracts and costs that are specifically chargeable to the customer under the terms of the contract.

(iii) Project Management Business

Work-in-progress on construction management contracts is stated at the aggregate of contract costs incurred to date plus recognised profits less recognised losses and progress billings. if there are contracts where progress billings exceed the aggregate costs incurred plus profits less losses, the net amounts are presented under other liabilities.

Contract costs include all costs directly related to specific contracts and costs that are specifically chargeable to the customer under the terms of the contract.

j) impairment of assets

Financial assets

a financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. a financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

an impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. an impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

individually significant financial assets are tested for impairment on an individual basis. the remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

all impairment losses are recognised in profit or loss. any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to profit or loss.

an impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

Non-financial assets

the carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. if any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date.

the recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. in assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the ‘cash-generating unit’). the goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

an impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. impairment losses are recognised in profit or loss. impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

an impairment loss in respect of goodwill is not reversed. in respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.


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k) investments

Controlled entities are accounted for in the consolidated financial statements as set out in note 1(b). interests in joint venture operations are accounted for as set out in note 1(t).

l) plant and equipment

all plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. the cost of property, plant and equipment at 1 July 2004, the date of transition to aaSBs, was determined by reference to its fair value at that date.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. all other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation is calculated on either a straight line basis or on a diminishing value basis to write off the net cost of each item of plant and equipment (excluding land) over its expected useful life to the consolidated entity. estimates of residual values and remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. the expected useful lives of plant and equipment and motor vehicles held at the reporting date ranges from three to eight years.

an asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying value is greater than its estimated recoverable amount.

Where items of plant and equipment have separately identifiable components which are subject to regular replacement, those components are assigned useful lives distinct from the item of plant and equipment to which they relate.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. these are included in the income statement.

m) Leasehold improvements

the cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or the estimated useful life of the improvement to the consolidated entity, whichever is the shorter. options to extend premises leases are excluded when determining the period over which the cost is to be amortised. Leasehold improvements held at the reporting date are being amortised over three to fifteen years.

the Group has a policy which requires for the providing for costs associated with making good a leased premises. the provision is recognised over the term of the lease.

n) Leases

Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. the corresponding rental obligations, net of finance charges, are included in other long term payables.

each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. the interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. the plant and equipment and motor vehicles acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the period of the lease.

incentives received on entering into operating leases are recognised as liabilities. the liability is reduced in line with the lease term.

o) intangible assets

(i) Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and jointly controlled entities.

Acquisitions prior to 1 January 2003

as part of its transition to aaSBs, the Group elected to restate only those business combinations that occurred on or after 1 January 2003. in respect of acquisitions prior to 1 January 2003, goodwill represents the amount recognised under the Group’s previous accounting framework, australian Gaap.

Acquisitions on or after 1 January 2003

For acquisitions on or after 1 January 2003, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognised immediately in profit or loss.

Acquisitions of minority interests

Goodwill arising on the acquisition of a minority interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the net assets acquired at the date of exchange.

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses. in respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment.


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(ii) Customer contracts and customer relationships

Customer contracts and related customer relationships (customer relationships), where reliably measurable, acquired as part of a business combination are considered to have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. amortisation is calculated based on the timing of the projected cash flows of the contracts over their estimated useful lives, which currently vary from one to four years.

(iii) Non-compete agreements

Non-compete agreements are considered to have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. amortisation is calculated using the straight-line method to allocate the cost of non-compete agreements over their estimated useful lives of three years.

(iv) Brand Names

Brand names are considered to have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. amortisation is calculated using the straight line method to allocate the cost of brand names over their estimated useful lives, which vary from three to five years.

(v) IT development and software

Costs incurred in developing systems that will contribute to future period financial benefits through revenue generation and/or cost reductions are capitalised to software and systems. amortisation is calculated on a straight line basis between three and ten years depending on the nature of the software.

it development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Group has an intention and ability to use the asset.

p) trade and other payables

these amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. the amounts are unsecured and are usually paid within 45 days of recognition.

provisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. a provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. the discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. the increase in the provision due to the passage of time is recognised as interest expense.

q) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are incremental costs relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liabilities for at least 12 months after the balance sheet date.

r) Dividends

provision is made for the amount of any dividend declared, determined or publicly recommended by the Directors on or before the end of the financial year but not distributed at balance date.

s) Derivative financial instruments – Cash flow hedges

the Group holds derivative instruments to hedge against its interest rate risk exposure. the Group does not enter into derivative financial instruments for trading speculative purposes. However financial instruments entered into to hedge an underlying exposure that does not qualify for hedge accounting are accounted for as trading instruments.

Derivatives are recognised at fair value; attributable transaction costs are recognised in the profit/loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes in the fair value of the derivative hedging instrument as a cash flow hedge are recognised directly to equity to the extent that the hedge is effective. to the extent that the hedge is ineffective, changes in fair value are recognised in the income statement.

if the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then the hedge accounting is discontinued prospectively. the cumulative gain or loss previously recognised in equity remains there until the forecast transaction occurs and is transferred to the income statement in the same period that the hedged item affects the income statement.

t) Joint venture operations

the proportionate interests in the assets, liabilities and expenses of joint venture operations have been incorporated in the financial statements under the appropriate headings.


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u) employee benefits

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries expected to be settled within 12 months of the reporting date are recognised in current other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

(ii) Annual leave and long service leave

the liabilities for annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in the current provision for employee benefits and are measured in accordance with (i) above. the liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the non-current provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. expected future payments are discounted using interest rates on national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows.

(iii) Bonus plans

a liability for employee benefits in the form of bonus plans is recognised in other payables when there is no realistic alternative but to settle the liability and at least one of the following conditions is met:

• there are formal terms in the plan for determining the amount of the benefit;

• the amounts to be paid can be reliably determined before the time of completion of the financial report; or

• past practice gives clear evidence of the amount of the obligation.

Liabilities for bonus plans regardless of whether they are expected to be settled within 12 months or more than 12 months, are measured at amounts expected to be paid when they are settled.

(iv) Superannuation

the amount charged to the income statement in respect of superannuation represents the contributions made by the Group to superannuation funds in accordance with applicable legislation or as established under employee contracts of employment.

(v) Employee benefit on-costs

employee benefit on-costs, including superannuation, payroll tax and workers compensation, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

(vi) Ownership-based remuneration schemes

ownership-based remuneration is provided to employees via the Coffey international Limited employee Leveraged Share plan and the Carson Group employee Share trusts. Shares issued under these schemes are treated as options in accordance with aaSB 2 Share-based payments. information relating to these share plans is set out in note 37.

the fair value of shares granted under the Coffey international employee Leveraged Share plan and the Carson Group Share trusts are recognised as an employee benefit expense with a corresponding increase in equity. the fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the shares. the amount recognised as an expense is adjusted to reflect the actual number of share options that vest, except for those that fail to vest due to market and service conditions not being met.

the valuation methodology used to determine the share-based payment expense was the Binomial approximation model in relation to grants with only service (Loyalty) or non-market performance conditions (epS). For grants with a performance condition (tSr) a Monte Carlo simulation model was used to create an estimate of the share price values which would generate the required tSr at the end of the measurement period to meet the hurdle. as the hurdle allowed scaled vesting, the average share price value at the testing date which achieved the vesting hurdle was input into a Black Scholes/Merton ‘Up and in call barrier pricing model’. as required by aaSB 2, the model took into account the exercise price of the option, the life of the option, the current price of the underlying shares, the expected volatility of the share price, the dividends expected on the shares and the risk-free interest rate for the life of the option. the expected life of the instrument was deemed to be the period from grant date to the first available date plus 12 months.

the fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. at each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. the employee benefit expense recognised each period takes into account the most recent estimate. the impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.

Where shares are issued to employees, as compensation for the provision of services and receipt by the employee is subject to completion of a service period, the market value of the shares issued is recognised as an employee benefit expense with a corresponding increase in equity when the employees become entitled to the shares.

(vii) Share-based payments

the share-based payment reserve comprises the fair value of share-based payment plans recognised as an expense in the income statement.

v) Borrowing costs

Borrowing costs are expensed in the income statement over the period of the borrowings using the effective interest method.

Borrowing costs include:

• interest on bank overdrafts and short-term and long-term borrowings

• amortisation of discounts or premiums relating to borrowings

• amortisation of ancillary costs incurred in connection with the arrangement of borrowings

• finance lease charges.


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w) Cash and cash equivalents

Cash and cash equivalents includes 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 change in value, and bank overdrafts.

x) Contributed equity

ordinary shares are classified as equity.

incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.

y) earnings per share

(i) Basic earnings per share

Basic earnings per share is determined by dividing net profit after income tax attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares, which comprise share options granted to employees and shares issued as consideration as part of acquisitions.

options granted to employees which are accounted for as share-based payments are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share. the options have not been included in the determination of basic earnings per share.

z) Goods and Services tax (GSt)

revenues, expenses and assets are recognised net of the amount of associated GSt, unless the GSt incurred is not recoverable from the taxation authority. in this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

receivables and payables are stated inclusive of the amount of GSt receivable or payable. the net amount of GSt recoverable from the taxation authority is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. the GSt components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.

(aa) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2008 reporting periods. the Group’s and the Company’s assessment of the impact of these new standards and interpretations is set out below.

(i) AASB 3 Business Combinations

revised aaSB 3 changes the application of acquisition accounting for business combinations and the accounting for non-controlling (minority) interests. Key changes include: the immediate expensing of all transaction costs; measurement of contingent consideration at acquisition date with subsequent changes through the income statement; measurement of non-controlling (minority) interests at full fair value or the proportionate share of the fair value of the underlying net assets; guidance on issues such as required rights and vendor indemnities; and the inclusion of combination by contract alone and those involving mutuals. the revised standard becomes mandatory for the Group’s 30 June 2010 financial statements. the Group has not yet determined the potential effect of the revised standard on the Group’s financial report.

(ii) AASB 101 Presentation of Financial Statements

revised aaSB 101 presentation of Financial Statements introduces as a financial statement (formerly ‘primary’ statement) the ‘statement of comprehensive income’. the revised standard does not change the recognition, measurement or disclosure of transactions and events that are required by other aaSBs. the revised aaSB 101 will become mandatory for the Group’s 30 June 2010 financial statements. the Group has not yet determined the potential effect of the revised standard on the Group’s disclosures.

(iii) AASB 8 Operating Segments and AASB 2007-3

amendments to australian accounting Standards arising from aaSB 8 and aaSB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. aaSB 8 may result in a change in the approach to segment reporting, as it requires adoption of a ‘management approach’ to reporting on the financial performance. the information being reported will be based on what the key decision makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. the Group has not yet decided when to adopt aaSB 8. application of aaSB 8 may result in different segments, segment results and different types of information being reported in the segment note of the financial report. However, it will not affect any of the amounts recognised in the financial statements.

(iv) AASB 123 Borrowing Costs

revised aaSB 123 removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. the revised aaSB 123 will become mandatory for the Group’s 30 June 2010 financial statements and will constitute a change in accounting policy for the Group. in accordance with the transitional provisions the Group will apply the revised aaSB 123 to qualifying assets for which capitalisation of borrowing costs commences on or after the effective date. the Group had not yet determined the potential effect of the revised standard on the Group’s financial report.


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(v) AASB 127 Consolidated and Separate Financial Statements

revised aaSB 127 changes the accounting for investments in subsidiaries. Key changes include; the re-measurement to fair value of any previous/retained investment when control is obtained/lost, with any resulting gain or loss being recognised in profit/loss; and the treatment of increases in ownership interest after control is obtained as transactions with equity holders in their capacity as equity holders. the revised standard becomes mandatory for the Group’s 30 June 2010 financial statements. the Group had not yet determined the potential effect of the revised standard on the Group’s financial report.

(vi) AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payment: Vesting Conditions and Cancellations

aaSB 2008-1 amendments to australian accounting Standard–Share-based payment: Vesting Conditions and Cancellations changes the measurement of share-based payments that contain non-vesting conditions. aaSB 2008-1 becomes mandatory for the Group’s 30 June 2010 financial statements. the Group has not yet determined the potential effect of the amending standard on the Group’s financial report.

(vii) AASB Interpretation 15 Agreements for the Construction of Real Estate

aaSB interpretation 15 agreements for the Construction of real estate contains useful clarification and guidance on accounting for real estate construction agreements but could have a wider application than the real estate construction industry alone. the interpretation provides guidance on the accounting standards applicable for construction agreements and the timing of revenue recognition. in applying the percentage of completion method to agreements within the scope of aaSB 118, the requirements of aaSB 111 in respect of the recognition of revenue and related expenses apply. the interpretation becomes mandatory for the Group’s 30 June 2010 financial statements. the Group has not yet determined the potential effect of the interpretation of the Group’s financial report.

2 Critical accounting estimates and judgementsestimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

a) Critical accounting estimates and assumptions

the Group makes estimates and assumptions concerning the future. the resulting accounting estimates will, by definition, seldom equal the related actual results. the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Estimated impairment of goodwill

the Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(j). the recoverable amounts of cash-generating units have been determined by applying a ‘value in use’ method using assumptions of future profit margins. refer to note 15 for the details of these assumptions and the potential impact of changes to the assumptions.

(ii) Income taxes

the Group is subject to income taxes in australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the worldwide provision for income taxes. there are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. the Group recognises liabilities for anticipated tax audit issues based on whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

b) Critical judgements in applying the entity’s accounting policies

(i) Intangible assets and business combinations

aaSB 3 and aaSB 138, the australian standards on business combinations and intangibles respectively, require the acquirer to separately identify the acquiree’s identifiable assets and liabilities, including other intangibles arising on acquisition. this means that the acquirer must recognise other intangible assets, separately from goodwill, where the definition of an intangible asset is met and the fair value of the intangible asset can be measured reliably.

the Directors commissioned an independent expert, having satisfied themselves that the expert was appropriately qualified to form a view on the matters under consideration. the Directors reviewed the methodologies used by the expert and made enquiries with management to assure themselves that the factual information used by the expert was correct prior to relying on the expert’s opinion.

the Directors accept the expert’s opinion that identified qualifying intangibles as at the date of acquisition should be separated out from goodwill and recorded as a separate intangible asset subject to amortisation. accordingly, the Group capitalised contracts in hand, customer relationships, brand names and non-compete agreements and amortised them as described in note 1(o). For further details, refer to note 15.

(ii) Revenue recognition in relation to long term contracts

the timing of revenue recognition in relation to long term contracts, primarily in the international Development business, is subject to significant judgement. Management ensures that the timing of revenue recognition in relation to these contracts is appropriate through regular reassessments of the percentage completion and the costs to completion of the projects.


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3 Determination of fair valuesa number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

a) property, plant and equipment

the fair value of property, plant and equipment recognised as a result of a business combination is based on market values. the market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. the market value of items of plant and equipment and motor vehicles are based on the quoted market prices for similar items.

b) intangible assets

the fair value of customer contracts, customer relationships, non-compete agreements and brand names acquired in a business combination is based on discounted cash flows expected to be derived from the use of the assets. the Company engaged an independent expert to determine the fair value of these intangible assets as described in 2(b).

c) Work in progress

the fair value of work in progress acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the work in progress.

d) trade and other receivables

the fair value of trade and other receivables, excluding work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

e) Derivatives

the fair value of interest rate swaps is based on broker quotes. those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.

f) Non-derivative financial liabilites

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. in respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

g) Share-based payment transactions

the valuation methodology used to determine the share-based payment expense was the Binomial approximation model in relation to grants with only service (Loyalty) or non market performance conditions (epS). For grants with a performance condition (tSr) a Monte Carlo simulation model was used to create an estimate of the share price values which would generate the required tSr at the end of the measurement period to meet the hurdle. as the hurdle allowed scaled vesting, the average share price value at the testing date which achieved the vesting hurdle was input into a Black Scholes/Merton ‘Up and in call barrier pricing model’. as required by aaSB 2, the model took into account the exercise price of the option, the life of the option, the current price of the underlying shares, the expected volatility of the share price, the dividends expected on the shares and the risk-free interest rate for the life of the option. the expected life of the instrument was deemed to be the period from grant date to the first available date plus 12 months.


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4 Segment information

primary segment information – Business segments

International Project Consulting Development Management Eliminations Consolidated 2008 $’000 $’000 $’000 $’000 $’000

Services revenue 335,496 156,952 66,123 – 558,571

inter-segment sales 11 – 1,100 (1,111) –

total sales revenue 335,507 156,952 67,223 (1,111) 558,571

Segment result 43,375 6,900 5,395 – 55,670

Unallocated expenses (20,622)

Net interest expense (7,856)

Profit before income tax 27,192

income tax expense (11,253)

Minorities (632)

Profit for the year attributable to members 15,307

Segment assets 225,773 76,657 97,030 399,460

Unallocated assets 44,607

total assets 444,067

Segment liabilities 39,205 42,755 12,538 94,497

Unallocated liabilities 153,508

total liabilities 248,005

Depreciation and amortisation expenses 3,498 1,417 2,281 7,196

Unallocated 2,672

total depreciation and amortisation 9,868

Share-based payment expenses 2,777 154 1,932 4,863

Unallocated 166

total share-based payments 5,029

acquisitions of plant and equipment and intangibles^ 12,081 5,746 3,843 21,670

Unallocated 985

total acquisitions 22,655

^ excludes goodwill.

Unallocated liabilities primarily consist of external funding for the Group.


39

4 Segment information (continued)

primary segment information – Business segments (continued)

International Project Consulting Development Management Eliminations Consolidated 2007 (Restated) $’000 $’000 $’000 $’000 $’000

Services revenue 213,885 93,032 55,792 – 362,709

inter-segment sales 17 15 427 (459) –

total sales revenue 213,902 93,047 56,219 (459) 362,709

Segment result 29,275 984 2,534 – 32,793

Unallocated expenses (14,396)

Net interest expense (4,857)

Profit before income tax 13,540

income tax expense (4,480)

Minorities (640)

Profit for the year attributable to members 8,420

Segment assets 190,783 25,183 55,503 271,469

Unallocated assets 10,613

total assets 282,082

Segment liabilities 70,890 4,775 6,105 81,770

Unallocated liabilities ` 22,741

total liabilities 104,511

Depreciation and amortisation expenses 2,155 719 3,102 5,976

Unallocated 861

total depreciation and amortisation 6,837

Share-based payment expenses 641 – 2,042 2,683

Unallocated 254

total share-based payments 2,937

acquisitions of plant and equipment and intangibles^ 6,003 121 5,256 11,380

Unallocated 3,879

total acquisitions 15,259

^ excludes goodwill.

Business segments

the business segments derive revenue from the principal activities of the Coffey international Limited group, being the provision of engineering, scientific, project management and strategic advisory services in the development assistance, earth sciences, natural resources, rail, infrastructure and property sectors throughout australia and overseas.

the Consulting Business comprises Coffey Geotechnics, Webber and associates, Shaheen and peaker, CtL, Coffey environments, Coffey Natural Systems, Coffey Mining, Geoexplore, peron Group (including Stratcorp Consulting) and asia pacific rail and comprises businesses in both australia and overseas. the international Development Business comprises Coffey international Development, Specialist training australia and Management Services international in australia and overseas. the project Management business comprises Coffey projects, John Wertheimer Consultants, teal Management Services and comprises businesses in both australia and overseas.


40

4 Segment information (continued)

Secondary segment information – Geographical segments

Acquisitions of plant and equipment, Segment revenues intangibles and from sales to other non–current external customers Segment assets segment assets

2008 2007 2008 2007 2008 2007 restated restated $’000 $’000 $’000 $’000 $’000 $’000

australia 317,981 228,344 131,899 206,422 11,061 13,234

americas 83,056 – 97,597 – 7,511 –

pacific region 55,385 50,469 19,115 25,231 390 738

South east asia 44,974 37,388 7,470 13,785 69 147

other Countries 57,175 46,508 39,978 26,031 3,624 1,140

558,571 362,709 296,059 271,469 22,655 15,259

Unallocated assets 148,008 10,613

total assets 444,067 282,082

Geographical segments

the consolidated entity’s divisions operate in the following main geographical areas:

australia is the home country of the parent entity and principal area of operation for the Consulting Business and the project Management Business.

americas comprises of operations carried on in Brazil, Canada and the United States.

South east asia comprises operations carried on in indonesia, philippines, Vietnam, Laos and Cambodia.

pacific region comprises operations carried on in New Zealand, papua New Guinea and the pacific islands.

other Countries comprises operations carried on in the United arab emirates and other Gulf States, iraq, Morocco, South africa, Senegal, Ghana, Burundi, ethiopia, Kenya, Malawi, rwanda, Sudan, Sierra Leone, United Kingdom, China, Sri Lanka, india, Bangladesh, Mongolia, Nepal, the Maldives, russia, albania, Kosovo, Ukraine and Central asian republics.

all business segments operate within the above geographical segments.

5 revenue Consolidated Company

2008 2007 2008 2007 restated $’000 $’000 $’000 $’000

Services 558,571 362,709 – –

Other revenue

interest 569 401 364 807

Dividends – – 19,940 13,500

559,140 363,110 20,304 14,307


41

6 expenses Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Profit before income tax includes the following specific expenses:

Depreciation

plant and equipment 1,853 1,371 – –

Leasehold improvements 1,821 297 – –

it equipment 2,014 1,810 – –

Motor vehicles 349 209 – –

Motor vehicles under finance lease 488 – – –

total depreciation 6,525 3,687 – –

Amortisation

Contracts, client relationships and brand names on acquisition 3,343 3,150 – –

total amortisation 3,343 3,150 – –

Finance Costs

interest and finance charges paid/payable 8,425 5,258 – –

Net loss on disposal of plant and equipment 219 25 – –

rental expense relating to operating leases 15,154 7,395 – –

Net foreign exchange losses

Foreign exchange losses 1,234 421 – –

Foreign exchange gains (706) (255) – –

Net foreign exchange losses recognised in profit before income tax for the year 528 166 – –

7 income tax expense Consolidated Company

2007 2008 restated 2008 2007 $’000 $’000 $’000 $’000

(a) income tax expense

Current tax 15,539 7,818 (16) 724

Deferred tax (4,586) (2,698) 125 (480)

Under/(over) provided in prior years 300 (640) (848) –

11,253 4,480 (739) 244

income tax expense is attributable to:

profit for the year 11,253 4,480 (739) 244

aggregate income tax expense 11,253 4,480 (739) 244

Deferred income tax/(revenue) expense included in income tax expense comprises:

Decrease/(increase) in deferred tax assets (note 14) (2,618) (1,753) 125 (480)

(Decrease)/increase in deferred tax liabilities (note 22) (1,968) (945) – –

(4,586) (2,698) 125 (480)


42

7 income tax expense (continued) Consolidated Company

2007 2008 restated 2008 2007 $’000 $’000 $’000 $’000

b) Numerical reconciliation of income tax expense to prima facie tax payable

profit from continuing operations before income tax expense 27,192 13,540 19,962 14,053

tax at the australian tax rate of 30% (2007: 30%) 8,158 4,062 5,989 4,216

tax effect of amounts which are not deductible/ (taxable) in calculating taxable income:

entertainment 153 102 – –

Share-based payments 1,509 881 103 78

Non-taxable compensation receipt – (202) – –

Non deductible expenses 145 306 – –

Lease incentive income 79 – – –

other miscellaneous permanent differences (94) – – –

exempt income (394) – (5,982) (4,050)

9,556 5,149 110 244

Difference in overseas tax rates 1,397 (29) – –

Under/(over) provision in prior years 300 (640) (849) –

income tax expense 11,253 4,480 (739) 244

c) amounts recognised directly in equity

aggregate current and deferred tax arising in the reporting period and not recognised in the profit or loss but directly debited or credited to equity:

Current tax – credited to equity – – – –

Net deferred tax – debited/(credited) directly to equity 294 – – –

294 – – –

the deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.

d) tax consolidation legislation

Coffey international Limited and its wholly-owned australian entities have implemented the tax consolidation legislation as of 1 July 2003. the accounting policy in respect of this legislation is set out in note 1(c).

the entities have entered into a tax funding arrangement under which the wholly-owned entities fully compensate Coffey international Limited for any current tax payable assumed and are compensated by Coffey international Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Coffey international Limited under the tax consolidation legislation. the funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements.

the amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. the head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. the funding amounts are recognised as intercompany receivables or payables (see note 31).


43

8 Current assets – Cash and cash equivalents Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Cash at bank and in hand 51,656 13,618 – 468

Deposits on call 987 991 – –

52,643 14,609 – 468

a) reconciliation to cash at the end of the year

Balances as above 52,643 14,609 – 468

Bank overdrafts (note 17) (247) (251) (1,141) –

Balances per statement of cash flows 52,396 14,358 (1,141) 468

the above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows.

9 Current assets – receivables Consolidated Company

2008 2007 2008 2007 restated $’000 $’000 $’000 $’000

trade receivables 121,689 90,479 – –

Less: provision for impairment losses (note 26) (3,414) (1,763) – –

118,275 88,716 – –

Loans to controlled entities (note 31) – – 179,955 119,574

other receivables 7,675 4,125 1,683 523

prepayments 2,752 1,305 – –

128,702 94,146 181,638 120,097

a) other receivables

these amounts generally arise from transactions outside the normal operating activities of the Group. interest may be charged at commercial rates where the terms of repayment exceed six months. Collateral is not normally obtained.

b) effective interest rates and credit risk

the Group’s exposures to credit and currency risk and impairment losses related to trade and other receivables are disclosed in note 26.


44

10 Current assets – other financial assets Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Derivative financial instrument 981 – – –

981 – – –

the Group holds an interest rate swap against the majority of its australian dollar borrowings which is marked to market. Hedge accounting is applied to this derivative financial instrument.

11 Current assets – Work in progress Consolidated Company

2008 2007 2008 2007 restated $’000 $’000 $’000 $’000

Unbilled contract revenue 21,096 5,539 – –

21,096 5,539 – –

amounts totalling $5,103,000 (2007: $8,207,000) billed as advances on contracts in progress are included in consolidated other payables.

12 Non-current assets – other financial assets Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Shares in subsidiaries – – 93,782 101,020

other investments – – – –

– – 93,782 101,020

Less: provision for write-down to recoverable amount – – (875) (875)

– – 92,907 100,145

these financial assets are carried at cost.

as a result of internal restructuring the Company has transferred some of its shares in subsidiaries to other members of the Group.


45

13 Non-current assets – property, plant and equipment Plant and Leasehold Motor Total equipment improvements vehicles Consolidated $’000 $’000 $’000 $’000

Year ended 30 June 2007

opening net book amount 9,218 1,975 – 11,193

additions 6,593 2,502 – 10,753

acquisitions of subsidiaries 1,658 – – 1,658

Disposals (394) – – (394)

Foreign exchange rate differences (22) (2) – (24)

Depreciation charge (3,390) (297) – (3,687)

Closing net book amount 13,663 4,178 – 17,841

At 30 June 2007

Cost 28,773 5,573 – 34,346

accumulated depreciation (15,110) (1,395) – (16,505)

Net book amount 13,663 4,178 – 17,841

Plant and Leasehold Motor Total equipment improvements vehicles Consolidated $’000 $’000 $’000 $’000


opening net book amount 13,663 4,178 – 17,841

additions 5,522 5,972 3,561 15,055

acquisitions of subsidiaries 2,838 – – 2,838

Disposals (1,500) (117) – (1,617)

Foreign exchange rate differences (46) (27) – (73)

Depreciation charge (4,216) (1,821) (488) (6,525)

Closing net book amount 16,261 8,185 3,073 27,519

At 30 June 2008

Cost 34,027 11,626 3,561 49,214

accumulated depreciation (17,766) (3,441) (488) (21,695)

Net book amount 16,261 8,185 3,073 27,519


46

14 Non-current assets – Deferred tax assets Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

The balance comprises temporary differences attributable to:

impairment of receivables 1,024 331 – –

employee benefits 6,308 4,029 – –

Lease incentives 329 205 – –

amortisation of assets 62 149 368 493

accrued expenses 1,234 1,100 – –

tax losses 77 – – –

9,034 5,814 368 493

Set off of deferred tax liabilities of Company pursuant to set off provisions (note 22) (2,062) (1,048) – –

Net deferred tax assets 6,972 4,766 368 493

Movements:

opening balance at 1 July 5,814 3,335 493 13

Credited/(charged) to the income statement (note 7) 2,618 1,753 (125) 480

Credited/(charged) to equity – – – –

acquisition of subsidiary (note 32) 602 726 – –

Closing balance at 30 June 9,034 5,814 368 493


47

15 Non-current assets – intangible assets Customer Non–compete Software Contracts Brands relationships agreements intangibles Goodwill Total Consolidated $’000 $’000 $’000 $’000 $’000 $’000 $’000


opening net book amount 1,426 – – – – 75,285 76,711

acquisitions of subsidiaries 3,670 835 – – – 65,560 70,065

amortisation charge* (3,084) (66) – – – – (3,150)

Closing net book amount 2,012 769 – – – 140,845 143,626

At 30 June 2007

Cost or fair value 6,781 835 – – – 140,845 148,461

accumulated amortisation (4,769) (66) – – – – (4,835)

Net book amount 2,012 769 – – – 140,845 143,626

Consolidated


opening net book amount 2,012 769 – – – 140,845 143,626

acquisition of subsidiary 3,146 – 2,355 531 527 56,494 63,053

intangible additions – – – – 1,686 – 1,686

amortisation charge* (2,251) (296) (649) (27) (120) – (3,343)

Closing net book amount 2,907 473 1,706 504 2,093 197,339 205,022

At 30 June 2008

Cost or fair value 9,927 835 2,355 531 2,213 197,339 213,200

accumulated amortisation (7,020) (362) (649) (27) (120) – (8,178)

Net book amount 2,907 473 1,706 504 2,093 197,339 205,022

* amortisation of $3,343,000 ( 2007:$3,150,000 ) is included in depreciation and amortisation expense in the income statement.


48

15 Non-current assets – intangible assets (continued)

a) impairment tests for goodwill

Goodwill is allocated to the Group’s cash generating units (CGUs) or groups of CGUs identified according to business operations and/or country of operation.

a summary of the goodwill allocation is presented below.

2008 2007 $’000 $’000

environments 30,326 30,231

Geotechnics 23,765 18,082

Mining 22,401 15,525

Natural Systems 2,391 2,391

rail 6,528 –

peron Group 15,262 –

Stratcorp Consultants 3,482 –

international Development australia 921 921

international Development UK 6,292 6,292

Specialist training 233 233

international Development US 15,934 –

project Management 69,804 67,170

197,339 140,845

the recoverable amount of each CGU, or where applicable, groups of CGU’s is determined based on value in use calculations. these calculations use cash flow projections based on financial plans approved by management covering a three year period, this being the time period over which the Company prepares its strategic plan. Cash flows beyond this three year period are extrapolated using the estimated growth rate stated below. the growth rate does not exceed the long–term average growth rate for the business in which the CGU operates.

b) Key assumptions used for value in use calculations

Management determined budgeted gross margin based on a combination of past performance and the future expectations for each CGU.

in carrying out the impairment tests for goodwill, a growth rate of 3% was assumed, this being a conservative estimate of the likely growth beyond current levels. post-tax discount rates varying between 12.2% and 15.7% were used, and varied across each CGU assessed to reflect the appropriate cost of capital for that CGU, taking into account the business segment and geographical region in which that CGU primarily operates. the equivalent pre-tax discount rates are between 15% and 24% (2007: 17%). post-tax discount rates were applied to post-tax cash flows.

c) impact of possible changes in key assumptions

the key assumptions used in the CGU impairment tests are viewed by management to be relatively conservative, hence the risk of any goodwill amounts being at potential risk of impairment is considered to be low.

each of the value in use calculations produced results which demonstrated that each CGU has a recoverable amount that exceeds its carrying value.

16 Current liabilities – payables Consolidated Company

2008 2007 2008 2007 restated $’000 $’000 $’000 $’000

trade payables 23,865 7,063 – –

other payables 37,149 19,842 4 7

amounts owed to controlled entities (refer note 31) – – 66,897 38,699

61,014 26,905 66,901 38,706


49

17 Current liabilities – overdrafts, Loans and Borrowings Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Secured

Bank overdrafts 247 251 1,141 –

Lease liabilities 672 – – –

total secured current borrowings 919 251 1,141 –

Unsecured

Lease incentives 967 – – –

other loans 32 – – –

total unsecured current borrowings 999 – – –

total current borrowings 1,918 251 1,141 –

a) interest rate exposures

the Group’s exposure to interest rate risk related to borrowings are disclosed in note 26.

b) Fair value disclosures

Details of the fair value of borrowings for the Group are set out in note 26.

c) Security

Details of the security relating to each of the secured liabilities and further information on the bank overdrafts and bank bills are set out in note 20.

d) Finance lease liabilities

the finance lease commitments in the above table relate primarily to motor vehicle leases and have varying terms and escalation clauses.

18 Current liabilities – Deferred purchase consideration Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Deferred purchase consideration arising from acquisitions 5,598 1,527 1,915 1,336

19 employee benefits Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Current liabilities

annual leave 11,744 7,857 – –

Long service leave 6,468 4,615 – –

18,212 12,472 – –

Non-current liabilities

Long service leave 2,816 2,010 – –

total employee benefits 21,028 14,482 – –

the employee superannuation expense for the year ended 30 June 2008 is $11,973,000 (2007: $8,695,000).


50

20 Non-current liabilities – Loans and Borrowings Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Secured

Bills payable – 58,500 – –

Lease liabilities 1,634 – – –

total secured non-current borrowings 1,634 58,500 – –

Unsecured

Bills payable* 141,890 – – –

Lease incentives 1,095 – – –

other loans 48 1,987 – 7

total non secured non-current borrowings 143,033 1,987 – 7

144,667 60,487 – 7

* included in the above bills payable amount are capitalised loan establishment fees of $893,000 which are being amortised over the term of the loan.


2008 2007 2008 2007 $’000 $’000 $’000 $’000

a) total secured liabilities

the total secured liabilities (current and non-current) are as follows:

Bank overdrafts 247 251 – –

Bills payable – 58,500 – –

Lease liabilities 2,306 – – –

total secured borrowings 2,553 58,751 – –

b) assets pledged as security

in the 2007 year, the bank loans, overdraft and bill acceptance facilities of the Company and its controlled entities were secured by a deed of interlocking guarantee between relevant entities in the Group or a fixed and floating charge over all assets in the Group. in the 2008 year, the bank loans, overdrafts and bank acceptance facility were unsecured.


2008 2007 2008 2007 $’000 $’000 $’000 $’000

Current

Floating charge

Cash and cash equivalents – 14,609 – –

receivables – 94,146 – 120,097

inventories – 5,539 – –

total current assets pledged as security – 114,294 – 120,097

Non-current

Floating charge

receivables – 1,485 – –

other financial assets – – – –

plant and equipment – 17,841 – –

other intangible financial assets – 4,766 – 493

total non-current assets pledged as security – 24,092 – 493

Motor vehicles under finance lease 3,073 – – –

total assets pledged as security 3,073 138,386 – 120,590


51

20 Non-current liabilities – Loans and Borrowings (continued) Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

c) Financing arrangements

Credit standby arrangements

total facilities

Bank overdrafts 5,000 20,000 – 20,000

Unsecured bill facility 195,000 95,000 – 95,000

200,000 115,000 – 115,000

Used at balance date

Bank overdrafts 247 251 – –

Unsecured bill facility 142,783 – – –

Bank guarantees 8,610 – – –

Secured bill acceptance facility utilised by other group companies – 58,500 – 58,500

151,640 58,751 – 58,500

Unused at balance date

Bank overdrafts 4,753 19,749 – 20,000

Unsecured bill acceptance facility 43,607 36,500 – 36,500

48,360 56,249 – 56,500

Bank loan facilities

total facilities 200,000 115,000 – 115,000

Used at balance date 151,640 58,751 – 58,500

Unused at balance date 48,360 56,249 – 56,500

the $200,000,000 facilities are the combination of an acquisition facility to be used for the sole purpose of business acquisitions and a working capital facility. at balance date the working capital facility was partly utilised by $8,610,000 (2007: $2,057,000) of bank guarantees (note 29). the facility agreement has a four year term.

21 Non-current liabilities – Deferred purchase consideration Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Deferred purchase consideration arising from acquisitions 5,506 859 2,080 693


52

22 Non-current liabilities – Deferred tax liabilities Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

The balance comprises temporary differences attributable to:

receivables 5,031 214 – –

intangibles 1,778 834 – –

Derivative financial liabilities at fair value 294 – – –

total deferred tax liabilities 7,103 1,048 – –

Set off of deferred tax liabilities against deferred tax assets pursuant to set off provisions (note 14) (2,062) (1,048) – –

5,041 – – –

Movements:

opening balance at 1 July 1,048 510 – –

Credited/(charged) to the income statement (note 7) (1,968) (945) – –

Credited/(charged) to equity (294) 1,483 – –

acquisition of subsidiary (note 32) 8,317 – – –

Closing balance at 30 June 7,103 1,048 – –

23 Contributed equity

a) Movements in share capital

Date DetailsNumber of

shares $’000

Balance at the beginning of the year 109,359,731 165,972

Jul–07 Shares issued on purchase of John Wertheimer pty Ltd and asia pacific rail pty Ltd 116,641 502

Jul–07 Shares issued to exempt employees share scheme 133,509 573

Jul–07 Shares issued on purchase of peron Group pty Ltd 2,800,000 8,890

aug–07 Shares issued on purchase of Stratcorp Consulting 395,778 689

oct–07 Dividend reinvestment plan issues (note(c)) 628,889 2,138

Nov–07 Shares issued on purchase of Webber associates UK Limited 182,124 468

Nov–07 Coffey international Limited employee Share plan issues exercised 3,732,952 –

Dec–07 Shares issued to broker in trust for Geoexplore Consulting Services Ltd 505,050 1,293

Jan–08 Shares issued on purchase of teal Management Services pty Ltd 263,160 750

Mar–08 Shares issued on purchase of Coffey international Development Holdings Limited (formerly Forum 226 Limited)*

277,511

697

apr–08 Shares issued on purchase of Shaheen & peaker Limited 930,107 86

Balance at the end of the year 119,325,452 182,058

* this represents a tranche payment for an acquisition which took place during the 2006 year.


53

23 Contributed equity (continued)

b) ordinary shares

ordinary shares entitle the holder to participate in dividends and proceeds on winding up of the Company in proportion to the number of, and amounts paid on, the shares held.

on a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote.

c) Dividend reinvestment plan

the Company has established a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather then being paid in cash. Shares issued under the plan have been issued at a 5% discount to the market price. the Company’s dividend reinvestment plan will be suspended for the final dividend.

d) Coffey international Limited employee Leveraged Share plan and Carson Group Share trust

information relating to the Coffey international Limited employee Leveraged Share plan and Carson Group Share trust, including details of shares issued under the plan, are set out in note 37.

24 reserves and retained profits Consolidated Company

2007 2008 restated 2008 2007 $’000 $’000 $’000 $’000

a) reserves

Foreign currency translation reserve (1,611) 116 – –

Share-based payments reserve 8,130 3,101 8,130 3,101

Hedging reserve 682 – – –

Balance 30 June 7,201 3,217 8,130 3,101

Movements:

Foreign currency translation reserve

Balance 1 July 116 86 – –

Currency translation differences arising during the year attributable to equity holders of the Company (1,538) 30 – –

Currency translation differences arising during the year attributable to minority interests (189) – – –

Balance 30 June (1,611) 116 – –

Movements:

Share-based payments reserve

Balance 1 July 3,101 164 3,101 164

Share based payment expense for parent 342 254 342 254

Share based payment expense for employees of subsidiaries 4,687 2,683 4,687 2,683

Balance 30 June 8,130 3,101 8,130 3,101

Movements:

Hedging reserve

Balance 1 July – – – –

Changes in fair value arising during the year (net of tax)* 682 – – –

Balance 30 June 682 – – –

* During the year, no amounts were transferred from the hedging reserve to the income statement in respect of derivative instruments.

(i) Foreign currency translation reserve

the foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity. the reserve is recognised in profit and loss when the net investment is disposed of.

(ii) Share-based payments reserve

the share-based payments reserve comprises the fair value of share-based payments recognised as an expense in the income statements.

(iii) Hedging reserve

the hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. the cumulative deferred gain or loss on the hedge is recognised in profit and loss when the hedged transaction impacts the profit or loss, consistent with applicable accounting policy.


54

24 reserves and retained profits (continued) Consolidated Company

2008 2007 2008 2007 restated $’000 $’000 $’000 $’000

b) retained profits

Movements in retained earnings were as follows:

Balance 1 July 7,804 12,997 9,235 9,039

Net profit for the year 15,307 8,420 20,701 13,809

Dividends paid by parent (17,392) (13,613) (17,307) (13,613)

Balance 30 June 5,719 7,804 12,629 9,235

25 Dividends 2008 2007 $’000 $’000

Ordinary shares

Final dividend of 8 cents (2007: 8 cents) per fully paid share paid 31 october 2007 Franked @ 30% 9,104 6,157

interim dividend of 7 cents (2007: 7 cents) per fully paid share paid 2 april 2008 Franked @ 30% 8,288 7,456

17,392 13,613

Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan during the years ended 30 June 2008 and 2007 were as follows:

paid in cash 15,254 10,312

Satisfied by issue of shares 2,138 3,301

17,392 13,613

a) Dividends not recognised at year end

in addition to the above dividends, since year end Directors have recommended the payout of a final dividend of 9 cents per fully paid share (2007: 8 cents per share final dividend) fully franked based on tax paid at 30%. the aggregate amount of the proposed dividend to be paid 31 october 2008 out of retained profits, but not recognised as a liability at year end, is $10,739,000 (2007: $8,746,000).

b) Franked dividends

the franked portions of the final dividend recommended after 30 June 2008 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ended 30 June 2008.

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Franking credits available for subsequent financial years based on a tax rate of 30% (2007: 30%) 20,915 18,489 20,915 18,489

20,915 18,489 20,915 18,489

the above amount represents the balance of the franking account as at the end of the financial year, adjusted for:

(a) franking credits that will arise from the payment of the amount of the provision for income tax.

(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date.

(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

the consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were paid as dividends.

the impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of $4,602,400 (2007: $3,733,000).


55

26 Financial instrumentsthe Group’s principal financial instruments comprise receivables, payables, bank loans and overdrafts, finance leases, cash and short term deposits and derivatives. the Group has exposure to the following risks from its use of financial instruments:

• market risk including interest rate risk and currency risk;

• liquidity risk;

• credit risk.

this note presents both qualitative and quantitative information about the Group’s exposure to each of the above risks and its objectives, policies and processes for measuring and managing those risks.

a) interest rate risk

the Group enters into fixed interest rate instruments to manage cash flows risk associated with the interest rates on borrowings that are floating. interest rate instruments allow the Group to swap floating rate borrowings into fixed rate borrowing. the Group adopts a policy of ensuring that the majority of its exposure to interest rates on borrowings is on a fixed rate basis.

as at the reporting date, a single interest rate swap is in place with the maturity of the swap contract being 28 February 2012.

the Group designates qualifying derivatives (interest rate swaps) as cash flow hedges and applies hedge accounting in order to manage volatility in the profit and loss.

Exposure to interest rate risk

at the reporting date the interest rate profile of the Group’s interest bearing financial instruments was:


2007 2008 restated 2008 2007 $’000 $’000 $’000 $’000

Fixed rate instruments

Financial assets – – – –

Financial liabilities (99,291) – – –

(99,291) – – –

Variable rate instruments

Financial assets* 52,597 13,113 15,286 15,797

Financial liabilities (45,152) (61,536) – –

7,445 (48,423) 15,286 15,797

* excludes cash on hand.

the balance of the Company’s overdraft is offset against the cash balances of various subsidiaries within the Group and as such, the Company has no interest expense in its own right.

Cash flow sensitivity analysis for interest rates risk

a 100 basis point change in interest rates would have increased or (decreased) the Group’s equity and profit or loss by the amounts shown below. this analysis assumes that all other variables in particular foreign exchange rates remain constant. the analysis was performed on the same basis for 2007.

Consolidated 2008 2007

Profit/(Loss) Equity Profit/(Loss) equity $’000 $’000 $’000 $’000

Interest rate increase 1%

Variable rate borrowings (1,045) (1,640) (751) (751)

interest rate swaps – 595 – –


Profit/(Loss) Equity profit/(Loss) equity $’000 $’000 $’000 $’000

Interest rate decrease 1%

Variable rate borrowings 1,045 1,640 751 751

interest rate swaps – (595) – –

a 100 basis point increase/decrease in interest rates would have a negligible impact on the Company’s equity and profit or loss.

b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. the Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

the lines of credit available to the Group at balance date are disclosed in note 20.


56

26 Financial instruments (continued)the following are the contractual maturities of the financial liabilities, including estimated interest:

Effective Carrying Contractual 6 months 6-12 1-2 2-5 2008 interest rate amount cash flows or less months years years Consolidated Notes % $’000 $’000 $’000 $’000 $’000 $’000

Non-derivative financial liabilities

Unsecured bank loans 20 8.8% 141,890 188,999 6,304 6,304 12,608 163,783

trade and other payables 16 0.0% 61,014 61,014 61,014 – – –

Bank overdraft 8 8.4% 247 247 247 – – –

Finance leases 20 8.5% 2,306 2,325 432 398 692 803

Derivative financial liabilities

interest rate swaps used for hedging 10 8.8% (981) (218) (30) (30) (59) (99)

2007 Consolidated


Secured bank loans 20 7.0% 58,500 65,667 2,048 2,048 61,571 –

trade and other payables 16 0.0% 26,905 26,905 26,905 – – –

Bank overdraft 8 7.0% 251 253 253 – – –

2008 Company


Loans from subsidiaries 16 0.0% 66,897 66,897 – – – 66,897

trade and other payables 16 0.0% 4 4 4 – – –

Bank overdraft 8 0.0% 1,141 1,141 1,141 – – –

the balance of the Company’s overdraft is offset against the balances of various subsidiaries within the Group and as such, the Company has no interest expense in its own right.

2007 Company


Loans from subsidiaries 16 0.0% 38,699 38,699 – – – 38,699

trade and other payables 16 0.0% 7 7 7 – – –

the loans receivable by the Company are from wholly owned subsidiaries and are payable on demand.

c) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and work in progress. For the Company, it arises from receivables due from subsidiaries.

Exposure to credit risk

the Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. the demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, have less of an influence on credit risk. Geographically and on a customer basis, there is no concentration of credit risk. exposures by geographic area are set out below.

the Group has a credit policy under which each new customer is analysed for creditworthiness before the Group’s payment and delivery terms and conditions are offered. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.

the Group have established an allowance for impairment that represents their estimate of incurred losses in respect of trade receivables and work in progress. the main components of this allowance are a specific loss component that relates to individually significant exposures.


57

26 Financial instruments (continued)the carrying amount of the Group’s financial assets represents the maximum credit exposure. the Group’s maximum exposure to credit risk at the reporting date was:

Carrying amount

2008 2007 Note $’000 $’000

Loans, receivables and unbilled charges 9,11 149,798 99,685

Cash and cash equivalents 8 52,643 14,609

Derivatives 10 981 –

203,422 114,294

the Group’s maximum exposure to credit risk for trade receivables at the reporting dates by geographical region was:

Carrying amount

2008 2007 $’000 $’000

australia 72,482 61,088

americas 29,227 982

pacific region 3,011 7,619

South east asia 2,274 9,133

other regions 11,281 9,894

118,275 88,716

the Company has no credit exposure at 30 June 2008 as all financial assets represent loans to related parties and no amounts are past due.

Impairment losses

the aging and impairment of the Group’s trade receivables at the reporting date was:

Gross Impairment Gross Impairment

2008 2008 2007 2007 restated $’000 $’000 $’000 $’000

Not past due 67,587 – 45,327 –

past due 0–30 days 10,921 – 7,227 –

past due 31–120 days 30,836 – 29,962 –

past due 121 days to one year 11,431 3,161 7,184 1,591

More than one year 914 253 779 172

121,689 3,414 90,479 1,763

the movement in the allowance for impairment losses in respect of trade receivables during the year was as follows:

2008 2007 $’000 $’000

Balance at 1 July 1,763 929

impairment loss recognised 1,651 834

Balance at 30 June 3,414 1,763

Based on historical default rates, the Group believes that no impairment allowance is necessary in respect of the trade receivables not past due or past due up to 120 days.


58

26 Financial instruments (continued)

d) Currency risk

the Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities.

interest on borrowings is denominated in currencies that match the cash flows generated by the underlying operations for the Group, primarily aUD, CaD and USD. this provides an economic hedge and no derivatives are entered into.

Exposure to currency risk

the Group is exposed to the effect of changes in exchange rates on its operations. it does not use financial instruments to hedge the foreign exchange exposure, with all trade transactions which require the sale or purchase of foreign currency being covered on a spot basis.

the Group’s year end balance sheet exposure to foreign currency risk was as follows, based on notional amounts. the following are financial assets and liabilities in currencies other than the reporting currency of the Group.

2008 United Consolidated Great New Arab South Australian $’000 British Zealand Emirates African Pound Dollar Dirham Rand

Cash 548 1,520 1,654 1,279

trade receivables 5,093 2,998 1,474 2,521

trade payables (1,277) (403) (27) (195)

Gross balance sheet exposure 4,364 4,115 3,101 3,605

2008 (continued) United Consolidated States Brazilian Canadian Other Australian $’000 Dollar Real Dollar Currencies

Cash (20,489) 1,381 (8,048) 2,574

trade receivables 35,580 786 8,883 2,057

trade payables (12,290) (196) (1,539) (219)

Gross balance sheet exposure 2,801 1,971 (704) 4,412

United 2007 Great New Arab South United Consolidated British Zealand Emirates African States Other Australian $’000 Pound Dollar Dirham Rand Dollar Currencies

Cash 902 1,374 2,948 975 – 1,023

trade receivables 4,969 2,852 1,760 2,917 982 1,068

trade payables (1,076) (425) (200) (474) (233) (23)

Gross balance sheet exposure 4,795 3,801 4,508 3,418 749 2,068

the Company does not have exposure to any foreign exchange risk with all subsidiary loans held in australian dollars.

the following significant exchange rates applied during the year:

Average rate Reporting date spot rate

2008 2007 2008 2007

Great British pound 0.45 0.41 0.48 0.37New Zealand Dollar 1.17 1.15 1.26 1.10 United arab emirates Dirham 3.32 2.90 3.52 3.10 South african rand 6.55 5.66 7.46 6.00 United States Dollar 0.90 – 0.96 – Brazilian real 1.57 – 1.53 –

Foreign exchange rate sensitivity analysis

a 10% strengthening/(weakening) of the australian dollar against the following currencies at 30 June would have (decreased)/increased equity and profit or loss by the amounts shown below. this analysis assumes that all other variables in particular interest rates remain constant. the analysis was performed on the same basis for 2007.


Profit/Loss Equity profit/Loss equity $’000 $’000 $’000 $’000

aUD strengthens by 10% (662) (2,151) (428) (1,758)

aUD weakens by 10% 809 2,629 523 2,149


59

26 Financial instruments (continued)

e) Fair Values

the fair values of financial assets and liabilities, together with the carrying amounts as shown in the balance sheet, are as follows:

2008 2007

Carrying Carrying Amount Fair Value amount Fair Value Consolidated $’000 $’000 $’000 $’000

Loans and receivables 149,798 149,798 99,685 99,685Cash and cash equivalents 52,643 52,643 14,609 14,609Unsecured bank loans (141,890) (141,890) – –interest rate swaps used for hedging (981) (981) – –Secured bank loans – – (58,500) (58,500)trade and other payables (61,014) (61,014) (26,905) (26,905)Finance leases (2,306) (2,343) – –Bank overdraft (247) (247) (251) (251)

CompanyLoans to subsidiaries 179,955 179,955 119,574 119,574Cash and cash equivalents – – 468 468trade and other payables (4) (4) (7) (7)Bank overdraft (1,141) (1,141) – –Loans from subsidiaries (66,897) (66,897) (38,699) (38,699)

the basis for determining fair values is disclosed in note 3.

f) Capital Management

the Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. the Group defines capital as being total shareholders’ equity excluding minority interests, and the level of dividends to ordinary shareholders. the Board monitors the level of dividends to ordinary shareholders. at present, employees hold approximately 3.9% of the issued shares in the Company.

the Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. Management closely monitors the Group to ensure that banking debt covenants are complied with.

there were no changes in the Group’s approach to capital management during the year.

27 Director and executive disclosures

a) Key management personnel compensation


2008 2007 2008 2007 $’000 $’000 $’000 $’000

Short-term employee benefits 3,840 3,520 2,220 1,849post-employment benefits 209 179 113 76Long Service Leave 71 181 29 71Share-based payments 584 20 137 14 4,704 3,900 2,499 2,010

the Company has taken advantage of the relief provided by Corporations regulation 2M.6.04 and has transferred the detailed remuneration disclosures to the Directors’ report. the relevant information can be found in sections a to e of the remuneration report on pages 5 to 15.

b) Loans to key management personnel

Loans outstanding at the end of the current and prior year are for the purchase of shares under the Coffey international Limited employee Leveraged Share plan. the shares are issued at conditions no more favourable than those available to other employees. No interest is payable on the loan balances and the loans are non recourse to the executive. the terms and conditions of the Coffey international Limited employee Leveraged Share plan are described in note 37.

the non recourse loans are reduced over the life of the arrangement by the value of dividends paid per instrument. therefore for accounting purposes the loan is not recognised as a receivable but rather is treated as an option to purchase shares in the Company and no loan balances are disclosed.

No write-downs or allowances for doubtful receivables have been recognised in relation to any loans made to key management personnel.


60

27 Director and executive disclosures (continued)

c) other transactions with key management personnel

transactions entered into with Directors of Coffey international Limited Group and specified executives of the consolidated entity are within normal employee relationships, on terms and conditions no more favourable than those available to other employees or shareholders. they include:

• share issues under the Coffey international Limited employee Leveraged Share plan (note 37)

• dividends from shares in Coffey international Limited

• terms of employment and reimbursement of expenses.

Legal fees of $369,567 (2007: $934,293) were paid during the year to Kemp Strang, of which S r Williams is a partner, under normal commercial terms and conditions.

28 remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms:


2008 2007 2008 2007 $ $ $ $

Audit services

Fees paid to KpMG australia for audit and review of financial reports and other audit work under the Corporations Act 2001 542,561 – – –

Fees paid to KpMG overseas firms for audit and review of financial reports and other audit work 222,822 – – –

remuneration paid to KpMG for audit services 765,383 – – –

Fees paid to non-KpMG audit firms for the audit or review of financial reports of any entity in the consolidated entity 114,004 610,659 – –

total remuneration paid to non-KpMG firms for audit services 879,387 610,659 – –

Non-audit assurance services

Fees paid to KpMG australian firm in relation to:

it project assurance review 82,495 –

agreed upon procedure – loan covenants review 5,144

total remuneration paid to KpMG for non-audit assurance services 87,639 – – –

967,026 610,659 – –

it is the Group’s policy to employ KpMG on assignments additional to their statutory audit duties where KpMGs’ expertise and experience within the Group are important. these assignments are principally other assurance services approved by the audit Committee, or where KpMG is awarded assignments on a competitive basis. it is the Group’s policy to seek competitive tenders for all major consulting projects.

29 Contingencies

Contingent liabilities

the company and consolidated entity had contingent liabilities at 30 June 2008 in respect of:


2008 2007 2008 2007 $’000 $’000 $’000 $’000

Guarantees:

Guarantees given in respect of bank overdrafts and loans of subsidiaries and guarantees 8,610 2,057 – –

8,610 2,057 – –

these guarantees may give rise to liabilities in the Company if the subsidiaries do not meet their obligations under the terms of the bank overdrafts, loans, leases or other liabilities subject to the guarantees.

General

the Group has received several notifications of potential professional indemnity claims. these notifications rarely eventuate as actual liabilities but in the event they become claims and are successful it is expected they will be adequately covered by the insurance policy held by the Group.

No material losses are anticipated in respect of any of the above contingent liabilities.


61

30 Commitments Consolidated Company

2008 2007 2008 2007 $’000 $’000 $’000 $’000

a) Capital commitments

Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:Property plant & equipment:payable:Within one year 295 – – –Later than one year but not later than five years 179 – – –Later than five years – – – 474 – – –

b) Lease commitments – operating

Commitments for minimum lease payments in relation to non cancellable operating leases are payable as follows:Within one year 15,188 9,746 – –Later than one year but not later than five years 34,569 22,697 – –Later than five years 2,796 4,926 – 52,553 37,369 – –representing:Non cancellable operating leases 52,553 37,369 – – 52,553 37,369 – –

the 2007 operating lease commitments included above have been adjusted from the figures disclosed in last year’s annual report to align them with the methodology used for presentation of the 2008 figures. the adjustment is due to the exclusion of amounts relating to the uncommitted extensions of premises leases from operating lease commitments.

the operating lease commitments in the above table relate primarily to commercial offices, it and laboratory equipment leases which expire from within one year to within eight years. these leases have varying terms, escalation clauses and renewal rights. on renewal, the terms of the leases are renegotiated.

c) remuneration commitments

Consolidated Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Commitments for the payment of salaries and other remuneration under long-term employment contracts in existence at the reporting date but not recognised as liabilities payable:Within one year – 383 – –Later than one year but not later than five years – 90 – – – 473 – –

the amounts disclosed as remuneration commitments above arise from the economic Value added (‘eVa’) compensation scheme which was discontinued at the end of June 2007. these amounts arise from the service contracts of key management personnel referred to in section C of the remuneration report on pages 10 to 11 that are not recognised as liabilities and are not included in the key management personnel compensation.


62

31 related party transactions

a) Company

the ultimate parent company of the Group is Coffey international Limited.

b) Subsidiaries

interests in subsidiaries are set out in note 33.

c) Key management personnel

Disclosures relating to Directors and specified executives are set out in note 27.

d) transactions with related parties


2008 2007 2008 2007 $’000 $’000 $’000 $’000

Tax consolidation legislation

Current tax payable assumed from wholly owned tax consolidated entities – – 6,80 4 6,559

Dividend Revenue

Subsidiaries – – 19,940 13,500

Interest Income

Subsidiaries – – 364 807

Share-based payments

Compensation received from subsidiaries for:

Coffey international Limited employee Leveraged Share plan – – 1,007 942

Carson employee Share trusts – – 1,058 1,196

Vendor shares issued but not yet vested for accounting purposes – – 2,622 1,487

– – 4,687 3,625

e) related party loans

the following balances are outstanding at the reporting date in relation to loans with related parties:


2008 2007 2008 2007 $ $ $ $

Current receivables (tax funding agreement)

Wholly-owned tax consolidated entities – – 6,804,259 6,558,975

f) Loans to/from related parties


2008 2007 2008 2007 $ $ $ $

Loans to subsidiaries

Beginning of the year – – 119,574,475 40,918,533

Loans advanced – – 83,392,481 80,610,051

Loan repayments received – – (23,012,064) (1,954,109)

end of year (note 9) – – 179,954,892 119,574,475

Loans from subsidiaries

Beginning of the year – – (38,699,314) (53,734,623)

Loans advanced – – (66,908,755) (3,690,300)

Loan repayments made – – 38,711,544 18,725,609

end of year (note 16) – – (66,896,525) (38,699,314)

No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties.

transactions relating to dividends, calls on partly paid ordinary shares and subscriptions for new ordinary shares were on the same terms and conditions that applied to other shareholders.

all other transactions were made on normal commercial terms and conditions and at market rates, except that there are no fixed terms for the repayment of loans between the parties meaning that such loans are effectively at call, and interest is not normally charged on at call loans within the wholly owned australian group.

outstanding balances are unsecured and are repayable in cash.


63

32 Business combinationsCurrent year acquisitions

a) asia pacific rail and John Wertheimer Consultants

Summary of acquisition

on 2 July 2007 Coffey international Limited acquired 100% of the issued share capital of asia pacific rail pty Ltd, asia pacific rail (NSW) pty Ltd and John Wertheimer Consultants pty Ltd.

the acquired businesses contributed revenues of $12,152,000 and net profit before tax of $2,027,000 to the Group for the period from 2 July 2007 to 30 June 2008. as the transaction date approximated the start of the financial year the estimated revenue and profit contribution is consistent with that recognised and noted above.

at the date of acquisition, the acquired entity was involved in project management and rail infrastructure consulting.

Details of the fair value of the assets and liabilities acquired and goodwill are as follows:

$’000

purchase consideration: (refer to a(i) below)

Cash paid 6,587

Shares issued 502

Deferred consideration 487

Direct costs relating to the acquisition 110

total purchase consideration 7,686

Fair value of net identifiable assets acquired (excluding goodwill) (refer to a(ii) below) 282

Goodwill (refer to note 15 ) 6,528

intangible asset – customer relationships (refer to note 15) 426

intangible asset – software intangible (refer to note 15) 450

7,686

the apportionment of intangible assets is supported by an independent valuation.

the shares component of the purchase price comprised 116,641 shares with a fair value of $4.30, this being the average price on the day of issue.

the goodwill is attributable to the high profitability of the acquired business, the skills of its staff and synergies expected to arise after the Company’s acquisition of the new subsidiary.

Consolidated

2008 a(i) Purchase consideration $’000

outflow of cash to acquire subsidiary, net of cash acquired

Cash consideration 6,587


Less: Balances acquired

Cash 664

Bank overdraft –

Net outflow of cash 6,033

Acquiree’s carrying Fair amount value a(ii) Assets and liabilities acquired $’000 $’000

the assets and liabilities arising from the acquisition are as follows:

Cash 664 664

trade receivables 950 950

other receivables 51 51

Work in progress 1,089 1,089

plant and equipment 183 183

Deferred tax asset 345 345

trade payables (1,665) (1,665)

provision for employee benefits (466) (466)

tax liability (288) (288)

Deferred tax liability (318) (581)

Net assets 545 282


64

32 Business combinations (continued)

b) the peron Group


on 8 august 2007 Coffey Strategy pty Limited acquired 100% of the issued share capital of the peron Group pty Limited

the acquired business contributed revenues of $8,180,000 and net profit before tax of $557,000 to the Group for the period from 8 august 2007 to 30 June 2008. if the acquisition had occurred on 1 July 2007, the contribution to consolidated revenue and consolidated profit for the year ended 30 June 2008 would have been approximately $9,155,000 and $624,000 (including a share-based payment expense of $811,954) respectively.

at the date of acquisition, the acquired entity was involved in the provision of transaction advisory work on infrastructure projects.


$’000

purchase consideration: (refer to b(i) below)

Cash paid 6,923

Shares issued 8,890



Fair value of net identifiable assets acquired (excluding goodwill) (refer to b(ii) below) 114

Goodwill (refer to note 15) 15,262


15,928


the shares component of the purchase price comprised 2,333,333 shares with a fair value of $3.81, this being the average price on the day of issue.


b(i) Purchase consideration Consolidated

2008 $’000





Cash 465

Bank overdraft –


Acquiree’s carrying amount Fair value b(ii) Assets and liabilities acquired $’000 $’000


Cash 465 465




Deferred tax liability – (167)

Net assets 281 114


65


c) Webber associates UK Limited


on 6 November 2007, Coffey Geotechnics UK Limited acquired 100% of the issued share capital of Webber associates UK Limited.

the acquired business contributed revenues of $1,882,000 and net loss before tax of $205,000 to the Group for the period from 6 November 2007 to 30 June 2008. if the acquisition had occurred on 1 July 2007, the contribution to consolidated revenue and consolidated profit for the year ended 30 June 2008 would have been approximately $2,906,000 and a loss of $316,000 (including a share-based payment expense of $77,909) respectively.

at the date of acquisition, the acquired entity was involved in geotechnical consulting.


$’000

purchase consideration: (refer to c(i) below)

Cash paid 2,309

Shares issued 468



Fair value of net identifiable assets acquired (excluding goodwill) (refer to c(ii) below) 1,124



2,784



the goodwill is attributable to the skills of its staff and synergies expected to arise after the Company’s acquisition of the new subsidiary.

c(i) Purchase consideration Consolidated

2008 $’000





Cash 258

Bank overdraft –


Acquiree’s carrying amount Fair value c(ii) Assets and liabilities acquired $’000 $’000


Cash 258 258

trade receivables 1,448 1,448


Work in progress 159 159


trade payables (192) (192)


Current tax liabilities (302) (302)


Net assets 1,172 1,124

as a result of time constraints, the initial accounting for the Webber associates UK combination has been determined provisionally as at the acquisition date. Under aaSB 3 Business Combinations any adjustments to those provisional values as a result of completing the initial accounting may be recognised within 12 months of the acquisition date.


66


d) Geoexplore Consulting Services


On 1 December 2007 Coffey Mining Pty Limited acquired 100% of the issued share capital of Geoexplore Consulting Services Limited

The acquired business contributed revenues of $13,355,000 and net profit before tax of $1,118,000 to the Group for the period from 1 December 2007 to 30 June 2008. If the acquisition had occurred on 1 July 2007, the contribution to consolidated revenue and consolidated profit for the year ended 30 June 2008 would have been approximately $23,055,000 and $1,931,000 (including a share-based payment expense of $395,040) respectively.

At the date of acquisition, the acquired entity was involved in exploration and software development consultancy services to the mining industry.


$’000

Purchase consideration: (refer to d(i) below)

Cash paid 6,939

Shares issued 1,293


Total purchase consideration 8,653

Fair value of net identifiable assets acquired (excluding goodwill) (refer to d(ii) below) 454


Intangible asset – customer relationships (refer to note 15) 470

Intangible asset – non-compete agreements (refer to note 15) 189

8,653

The apportionment of intangible assets is supported by an independent valuation.

The shares component of the purchase price comprised 336,700 shares with a fair value of $3.84, this being the average price on the day of issue.

The goodwill is attributable to the high profitability of the acquired business, the skills of its staff and synergies expected to arise after the Company’s acquisition of the new subsidiary.

d(i) Purchase consideration Consolidated

2008 $’000

Outflow of cash to acquire subsidiary, net of cash acquired




Cash 1,507

Bank overdraft –


Acquiree’s carrying amount Fair value d(ii) Assets and liabilities acquired $’000 $’000

The assets and liabilities arising from the acquisition are as follows:

Cash 1,507 1,507

Trade receivables 2,271 2,271

Other receivables 262 262

Plant and equipment 954 954

Intangibles – Software 77 77

Deferred tax asset 257 257

Trade payables (245) (245)

Provision for employee benefits (3,774) (3,774)



Net assets 653 454

As a result of time constraints, the initial accounting for the Geoexplore Consulting Services Limited combination has been determined provisionally as at the acquisition date. Under AASB 3 Business Combinations any adjustments to those provisional values as a result of completing the initial accounting may be recognised within 12 months of the acquisition date.

NOTeS TO The FINANCIAL STATeMeNTS FOr The yeAr eNDeD 30 JUNe 2008

67


e) Management Systems International Inc


On 29 February 2008 Coffey International Development Inc. acquired 100% of the issued share capital of Management Systems International Inc.

The acquired business contributed revenues of $55,048,000 and net profit before tax of $2,887,000 to the Group for the period from 1 March 2008 to 30 June 2008. If the acquisition had occurred on 1 July 2007, the contribution to consolidated revenue and consolidated profit for the year ended 30 June 2008 would have been approximately $165,144,000 and $8,663,000 respectively.

At the date of acquisition, the acquired entity was involved in global development consultancy and dispute resolution.


$’000

Purchase consideration: (refer to e(i) below)

Cash paid 21,657

Deferred consideration 8,718


Total purchase consideration 30,934

Fair value of net identifiable assets acquired (excluding goodwill) (refer to e(ii) below) 11,512


Intangible asset – customer contracts (refer to note 15) 3,146

Intangible asset – non-compete agreements (refer to note 15) 342

30,934

The apportionment of intangible assets is supported by an independent valuation.

The goodwill is attributable to the high profitability of the acquired business, the skills of its staff and synergies expected to arise after the Company’s acquisition of the new subsidiary.

e(i) Purchase consideration Consolidated

2008 $’000

Outflow of cash to acquire subsidiary, net of cash acquired




Cash 2,004

Bank overdraft –


Acquiree’s carrying amount Fair value e(ii) Assets and liabilities acquired $’000 $’000

The assets and liabilities arising from the acquisition are as follows:

Cash 2,004 2,004

Trade receivables 32,811 32,811

Other receivables 3,894 3,894

Plant and equipment 839 839

Trade payables (12,932) (12,932)

Provision for employee benefits (6,544) (6,544)

Current tax liability (1,464) (1,464)

Deferred tax liability (6,051) (7,096)

Net assets 12,557 11,512

As a result of time constraints, the initial accounting for the Management Systems International Inc. combination has been determined provisionally as at the acquisition date. Under AASB 3 Business Combinations any adjustments to those provisional values as a result of completing the initial accounting may be recognised within 12 months of the acquisition date.

NOTeS TO The FINANCIAL STATeMeNTS FOr The yeAr eNDeD 30 JUNe 2008

68


f) Shaheen and peaker Group


on 1 april 2008 Coffey Canada inc. and Coffey international Limited acquired 100% of the issued share capital of Shaheen and peaker Group.

the acquired business contributed revenues of $6,864,000 and net profit before tax of $708,000 to the Group for the period from 1 april 2008 to 30 June 2008. if the acquisition had occurred on 1 July 2007, the contribution to consolidated revenue and consolidated profit for the year ended 30 June 2008 would have been approximately $27,912,000 and $2,880,000 (including a share-based payment expense of $1,016,292) respectively.

at the date of acquisition, the acquired entity was involved in geotechnical consulting including laboratory, soil and materials testing.


$’000

purchase consideration: (refer to f(i) below)

Cash paid 8,327

Shares issued 86

Deferred consideration 1,039



Fair value of net identifiable assets acquired (excluding goodwill) (refer to f(ii) below) 5,173



9,783




f(i) Purchase consideration Consolidated

2008 $’000





Cash 619

Bank overdraft –


Acquiree’s carrying amount Fair value f(ii) Assets and liabilities acquired $’000 $’000


Cash 326 326

trade receivables 7,127 7,127




trade payables (1,807) (1,807)

Bank overdraft (293) (293)




Net assets 5,303 5,173

as a result of time constraints, the initial accounting for the Shaheen & peaker Group combination has been determined provisionally as at the acquisition date. Under aaSB 3 Business Combinations any adjustments to those provisional values as a result of completing the initial accounting may be recognised within 12 months of the acquisition date.


69


g) other acquisitions

the following other acquisitions also took place but were immaterial to the Group:

on 3 September 2007 the peron Group acquired the business of Stratcorp Consulting.

on 8 January 2008 Coffey projects acquired 100% of the shares of teal Management Services pty Ltd.

on a combined basis if the acquisitions had occurred on 1 July 2007, the contribution to consolidated revenue and consolidated profit for the year ended 30 June 2008 would have been approximately $4,869,000 and $608,000 (including a share-based payment expense of $205,439) respectively.


$’000

purchase consideration: (refer to g(i) below)

Cash paid 4,557

Shares issued 1,439



Fair value of net identifiable assets acquired (excluding goodwill) (refer to g(ii) below) 174



6,226


g(i) Purchase consideration Consolidated

2008 ’000





Cash 339

Bank overdraft –


Acquiree’s carrying amount Fair value g(ii) Assets and liabilities acquired $’000 $’000


Cash 339 339

trade receivables 190 190




trade payables (97) (97)




Net assets 270 174

as a result of time constraints, the initial accounting for the Stratcorp Consulting and teal Management combinations have been determined provisionally as at the acquisition date. Under aaSB3 Business Combinations any adjustments to those provisional values as a result of completing the initial accounting may be recognised within 12 months of the acquisition date.

Prior year acquisitions

Details of business combinations undertaken in the 2007 financial year have not been included in this report as there have been no material changes to the amounts disclosed in the 2007 financial report. For details of these combinations, please refer to the 2007 financial report.


70

33 Subsidiariesthe consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b):

Equity Holding

Name of entityCountry of incorporation

Class of shares

2008 %

2007 %

aquaclear technology pty Limited australia ordinary 100% 100%

asia pacific rail (NSW) pty Limited (acquired 2 Jul 07) australia ordinary 100% –

asia pacific rail pty Limited (acquired 2 Jul 07) australia ordinary 100% –

Balance Consulting australia pty Limited australia ordinary 100% 100%

BFp Consultants pty Limited australia ordinary 100% 100%

Carson Group australia pty Limited australia ordinary 100% 100%

Carson Group NSW admin pty Limited australia ordinary 100% 100%

Carson Group pty Limited australia ordinary 100% 100%

Carson Group QLD pty Limited australia ordinary 100% 100%

Carson Group Vic admin pty Limited australia ordinary 100% 100%

Carson Group Vic pty Limited australia ordinary 100% 100%

CCG Group pty Ltd australia ordinary 100% 100%

Centre for international Dispute resolution & Management pty Limited (deregistered on 7 Nov 2007)

australia ordinary – 100%

Clifton Coney Group (NSW) pty Limited australia ordinary 100% 100%

Clifton Coney Group (QLD) pty Limited australia ordinary 100% 100%

Clifton Coney Group (Sa) pty Limited australia ordinary 100% 100%

Clifton Coney Group (ViC) pty Limited australia ordinary 100% 100%

Clifton Coney Group (Wa) pty Limited australia ordinary 100% 100%

Coffey Corporate pty Limited australia ordinary 100% 100%

Coffey environments pty Limited australia ordinary 100% 100%

Coffey Geosciences pty Limited australia ordinary 100% 100%

Coffey Geotechnics pty Limited australia ordinary 100% 100%

Coffey information pty Limited (formerly Coffey Agriculture UAE Pty Limited)

australia ordinary 100% 100%

Coffey international Development pty Limited australia ordinary 100% 100%

Coffey international Development (Middle east) pty Limited australia ordinary 100% 100%

Coffey Metago environmental engineers pty Limited australia ordinary 50% 50%

Coffey Mine Development pty Limited australia ordinary 100% 100%

Coffey Mining pty Limited australia ordinary 100% 100%

Coffey MpW pty Limited australia ordinary 100% 100%

Coffey Natural Systems pty Limited australia ordinary 100% 100%

Coffey partners international pty Limited australia ordinary 100% 100%

Coffey international Development (Middle east) pty Limited australia ordinary 100% 100%

Coffey project Management pty Ltd australia ordinary 100% 100%

Coffey projects (australia) pty Limited australia ordinary 100% 100%

Coffey rail pty Limited australia ordinary 100% 100%

Coffey Strategy pty Ltd (incorporated 26 Jul 07) australia ordinary 100% –

DaSCeM pty Limited australia ordinary 100% 100%

enterra pty Limited australia ordinary 50% 50%

Farsands Facilities Management Limited australia ordinary 100% 100%

Farsands risk Management pty Limited australia ordinary 100% 100%

Farsands Solutions pty Limited australia ordinary 100% 100%

it environmental (australia) pty Limited australia ordinary 100% 100%

John Wertheimer Consultants pty Ltd (acquired 2 Jul 07) australia ordinary 100% –

Macsis pty Limited australia ordinary 100% 100%

MpL Group pty Limited australia ordinary 100% 100%

peron Group pty Ltd (acquired 8 Aug 07) australia ordinary 100% –

project V pty Limited (deregistered on 16 Jan 08) australia ordinary – 50%

rSG Global Consulting pty Ltd australia ordinary 100% 100%

Soil & rock engineering pty Limited australia ordinary 100% 100%

Specialist training australia pty Limited australia ordinary 100% 100%

teal Management Services pty Ltd (acquired 7 Jan 08) australia ordinary 100% –


71

Equity Holding

Name of entityCountry of incorporation

Class of shares

2008 %

2007 %

Water Studies pty Limited australia ordinary 100% 100%

Clifton Coney Group (indo-China) Limited BVi ordinary 100% 100%

Coffey projects (Middle east) pty Limited (formerly Clifton Coney Group (ME) Limited)

BVi ordinary 100% 100%

Coffey projects international pty Limited (formerly Clifton Coney International Limited)

BVi ordinary 100% 100%

Geoexplore Consultoria e Servicos Ltda (acquired 1 Dec 07) Brazil ordinary 100% –

Coffey Canada inc. (incorporated 29 Feb 08) Canada ordinary 100% –

Coffey Geotechnics inc. (incorporated 29 Feb 08, merged with Shaheen and Peaker Limited acquired 1 Apr 08)

Canada ordinary 100% –

Geo-Canada Limited (acquired 1 Apr 08) Canada ordinary 100% –

S&p Geo-engineering Limited (acquired 1 Apr 08) Canada ordinary 100% –

Coffey asia Limited Hong Kong ordinary 100% 100%

Coffey (Malaysia) Sdn Bhd Malaysia ordinary 100% 100%

Coffey Holdings Sdn Bhd Malaysia ordinary 100% 100%

Carson Group (aKL) Limited New Zealand ordinary 100% 100%

Carson Group (Si) Limited New Zealand ordinary 100% 100%

Carson Group (WGtN) Limited New Zealand ordinary 100% 100%

Carson Group Ltd New Zealand ordinary 100% 100%

Carson investments (aKL) Limited New Zealand ordinary 100% 100%

Carson investments (Si) Limited New Zealand ordinary 100% 100%

Carson investments (WGtN) Limited New Zealand ordinary 100% 100%

Clifton Coney Group (NZ) Limited New Zealand ordinary 100% 100%

Coffey Geotechnics (NZ) Limited New Zealand ordinary 100% 100%

Coffey information (NZ) Ltd (incorporated 18 Apr 08) New Zealand ordinary 100% –

Coffey international NZ Limited New Zealand ordinary 100% 100%

Coffey projects (New Zealand) Limited New Zealand ordinary 100% 100%

aquaclear technology (pakistan) pvt Limited pakistan ordinary 95% 95%

Coffey philippines inc.* philippines ordinary 40% 40%

Coffey international inc. philippines ordinary 100% –

Coffey international Development Sp. zo.o (formerly enterplan polska zo.o)

poland ordinary 100% 100%

rSG Senegal SarL Senegal ordinary 100% 100%

Coffey projects (Singapore ) pte. Ltd (incorporated 8 May 08) Singapore ordinary 100% –

Coffey international (africa) (pty) Limited (formerly Clifton Coney Group (Africa) (Pty) Limited)

South africa ordinary 100% 100%

Coffey Mining (South africa)(pty) Limited South africa ordinary 100% 100%

Coffey projects (africa) (pty) Limited (formerly Duncan Rhodes (Pty) Limited)

South africa ordinary 51% 51%

Duncan rhodes Construction (pty) Limited South africa ordinary 51% 51%

Duncan rhodes procurement (pty) Limited South africa ordinary 51% 51%

rSG Global Consulting (Sa) (pty) Limited South africa ordinary 100% 100%

Coffey thailand Limited thailand ordinary 49% 49%

Sta Free Zone Limited Liability Company Uae ordinary 100% 100%

Coffey (UK) Limited UK ordinary 100% 100%

Coffey Geotechnics Limited (incorporated 1 Nov 07) UK ordinary 100% –

Coffey international Development Holdings Limited UK ordinary 100% 100%

Coffey international Development Limited UK ordinary 100% 100%

eDGe Consultants UK Ltd UK ordinary 100% 100%

rural partnerships Limited UK ordinary – 50%

Webber associates UK Limited (acquired 6 Nov 07) UK ordinary 100% –

Coffey environments inc. (incorporated 16 Jan 08) USa ordinary 100% –

Coffey international Development inc. (incorporated 27 Sept 07) USa ordinary 100% –

Coffey international inc. USa ordinary 100% 100%

Management Systems international inc. (acquired 28 Feb 08) USa ordinary 100% –

Xeon inc USa ordinary 100% 100%

Clifton Coney Group (Vietnam) Limited Vietnam ordinary 100% 100%

* the remaining 60% of the issued capital is held by a third party for the benefit of the Coffey international group.


72

34 events occurring after the balance sheet dateon 24 September 2008, the Group acquired the business assets of Borell, Freeman and Holley for $3.0 million in cash and shares. the acquisition was undertaken by Coffey projects africa (Cpa). the Company owns 50.13% of Cpa.

except for the above, no other matter or circumstance has arisen since 30 June 2008 that has significantly affected, or may significantly affect:

a) the consolidated entity’s operations in future financial years, or

b) the results of those operations in future financial years, or

c) the consolidated entity’s state of affairs in future financial years.

35 reconciliation of profit after income tax to net cash inflow from operating activities Consolidated Company

2008 2007 2008 2007 restated $’000 $’000 $’000 $’000

profit for the year 15,939 9,060 20,701 13,809

Depreciation and amortisation 9,868 6,837 – –

Non-cash employee benefits expense – share-based payments 5,029 2,937 342 254

Dividend income not yet received – – (7,700) –

Net exchange differences 528 190 – – Net loss on sale of non-current assets 219 25 – –

Change in operating assets and liabilities, net of effects from purchase of controlled businesses

(increase)/Decrease trade debtors 17,185 (18,290) – –

(increase)/Decrease in work in progress (14,303) 2,755 – –

(increase)/Decrease in net future deferred tax asset (5,682) (1,677) 125 (480)

(increase)/Decrease in other current receivables 2,119 (4,966) – –

(Decrease)/increase in trade payables and employee benefits 5,410 (1,456) – –

(Decrease)/increase in provision for income taxes payable 1,828 (2,840) (2,185) (6,130)

operating movements in intercompany balances – – (6,788) (516)

Net cash inflow from operating activities 38,140 (7,425) 4,495 6,937

36 earnings per share Consolidated

2008 2007 restated Cents Cents

a) Basic earnings per share

profit from continuing operations attributable to the ordinary equity holders of the Company 13.9 9.3

b) Diluted earnings per share

profit from continuing operations attributable to the ordinary equity holders of the Company 13.0 9.2

c) reconciliations of earnings used in calculating earnings per share

2008 2007 $’000 $’000

Basic earnings per share

profit for the year 15,939 9,060

profit for the year attributable to minority interests (632) (640)

profit for the year attributable to the ordinary equity holders of the Company used in calculating basic earnings per share 15,307 8,420

Diluted earnings per share

profit for the year attributable to the ordinary equity holders of the Company used in calculating basic earnings per share 15,307 8,420


73

36 earnings per share (continued) 2008 2007 No. of No. of Consolidated shares shares

d) Weighted average number of shares used as the denominator

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 110,215,955 90,133,205

adjustments for calculation of diluted earnings per share:

Coffey international employee Leveraged Share plan shares 3,848,773 1,028,047

Vendor shares issued but not yet vested for accounting purposes 1,813,756 74,522

Carson Group employee Share trusts 631,907 19,028

Vendor shares not yet issued but recorded for accounting purposes 875,390 –

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 117,385,781 91,254,802

e) information concerning the classification of securities

(i) Vendor shares issued but not yet vested for accounting purposes

Vendor shares issued but not yet vested for accounting purposes are treated as the equivalent of options to acquire ordinary shares and are included as potential ordinary shares in the determination of diluted earnings per share.

(ii) Share Plans

Shares granted to employees under the Coffey international Limited employee Leveraged Share plan and Carson employee Share trusts are considered to be potential ordinary shares and have been included in the denominator of diluted earnings per share to the extent to which they are dilutive. these shares have not been included in the determination of basic earnings per share. Details relating to these shares are set out in note 37.

37 Share-based payments

a) Coffey international Limited employee Leveraged Share plan

the establishment of the Coffey international Limited employee Leveraged Share plan was approved by special resolution at the annual General Meeting of the Company which was held on 21 November 1995 and later amended at the annual General Meeting of the Company which was held on 23 November 2007.

the Coffey international Limited employee Leveraged Share plan entitles nominated employees in the Coffey international Limited Group (including executive Directors) to purchase shares in the Coffey international Limited entity funded by way of interest free loans from Coffey international Limited for the subscription price. the loans are repayable from dividend entitlements. allocations of shares are determined by the Directors and the issue price of the shares is at a discount to market value as defined by Section 139Fa of the Income Tax Assessment Act 1936.

at the most recent grant date of the issue of shares under the scheme, 345 employees were eligible to participate in the scheme.

the shares issued under the scheme are subject to a two year vesting condition during which period the employee must remain employed by the Group (subject to certain conditions as set out in the scheme’s trust deed).

the shares issued to the Coffey international Limited employee Leveraged Share plan rank equally with all other fully paid ordinary shares on issue.

Details of issues not yet vested under the Coffey international Limited employee Leveraged Share plan are as follows:

Date Vesting conditions Number of shares Issue price $’000 Exercise price

29 December 2006 2 years service 373,172 $3.55 1,325 $3.3839

30 November 2007 3 years service 3,732,952 $3.9467 14,733 $3.8932

Total 4,106,124 16,058


74

37 Share-based payments (continued)

the number and weighted average share prices of share options is as follows:

Weighted Weighted average average exercise Number exercise Number price of options price of options 2008 2008 2007 2007

outstanding at 1 July $1.55 1,733,247 $0.79 2,536,406

Forfeited during the period – – $0.49 (10,266)

exercised during the period $0.00 (888,840) $0.00 (1,166,064)

Granted during the period $3.95 3,732,952 $3.55 373,172

outstanding at 30 June $3.60 4,620,868 $1.55 1,733,248

exercisable at 30 June $1.84 416,512 $0.42 1,009,805

options outstanding at 30 June 2008 have an exercise price ranging from $0.7242 to $3.8932 and weighted average contractual life of 3.97 years. Shares exercised during the year and prior year were fully vested and loans fully repaid and accordingly the exercise price was nil.

the total amount outstanding on the Coffey international Limited employee Leveraged Share plan at the balance date is $16,614,000 (2007: $2,152,000).

Valuation of share-based payments

the Directors obtained an independent valuation of the shares in the Coffey international employee Leveraged Share plan, on the basis that the shares granted in the plan are treated as options for accounting purposes, with an exercise price equal to the initial loan repayment value less the net present value of expected dividends over the vesting period.

the valuation methodology used to determine the share-based payment expense was the Binomial approximation model in relation to grants with only service (Loyalty) or non market performance conditions (epS). For grants with a performance condition (tSr) a Monte Carlo simulation model was used to create an estimate of the share price values which would generate the required tSr at the end of the measurement period to meet the hurdle. as the hurdle allowed scaled vesting, the average share price value at the testing date which achieved the vesting hurdle was input into a Black Scholes/Merton ‘Up and in call barrier pricing model’. as required by aaSB 2, the model took into account the exercise price of the option, the life of the option, the current price of the underlying shares, the expected volatility of the share price, the dividends expected on the shares and the risk-free interest rate for the life of the option. the expected life of the instrument was deemed to be the period from grant date to the first available date plus 12 months.

the model inputs were as follows for the options subject to valuation:

29 December 2006 30 November 2007Grant date Loyalty performance

risk-free rate 6.47% 6.32% 6.32%

Standard deviation 27.45% 37.31% 37.31%

Share price at effective date $4.10 $3.9467 $3.9467

exercise price (loan repayment) $3.55 $3.9467 $3.9467

annualised dividend yield 4.17% 3.96% 3.96%

Number of options (shares) 373,172 938,035 2,794,917

performance conditions None yes yes

Fair value of the share-based payment $1.74 $1.6475 epS tranche $1.6475

tSr tranche $1.5871

b) Carson Group employee Share trusts

the establishment of the Carson Group employee Share trusts were approved by Carson Group prior to acquisition by Coffey international Limited on 1 November 2006.

the Carson Group employee Share trusts entities nominated employees in the Carson Group to receive shares in Coffey international Limited for no consideration.

allocation of the shares was determined by the Directors (principals) of Carson Group prior to its acquisition by Coffey international Limited

at grant date of the shares under the schemes, 106 employees were eligible to participate in the schemes.

the shares issued under the schemes are subject to a three year vesting condition during which period the employee must remain employed by the Group (subject to certain conditions as set out in the trust deed). the exercise price of these shares is nil.


75

37 Share-based payments (continued)the shares issued to the Carson Group employee Share trusts rank equally with all other fully paid ordinary shares on issue. Details of issues under the Carson Group employee Share trusts are as follows:

Date Number of Shares issue price $’000

1 November 2006 766,667 $3.60 2,760

there were no grants, exercises or forfeitures during the 2008 year.


the total value of the shares issued to the Carson Group employee Share trusts of $2,760,000 will be expensed over the three year vesting period, subject to meeting the service vesting conditions.

c) Vendor shares issued but not yet vested for accounting purposes

the consideration for a number of acquisitions made during the year included shares issued to vendors, who became employees of the Group, that have not yet vested for accounting purposes. all options are exercised immediately upon vesting.

the shares issued to these vendor employees are subject to vesting conditions of service periods of between one to five years during which period the employee must remain employed by the Group. the exercise price of these shares is nil.

For further details on the accounting treatment and valuation of the payments to vendors, in the form of shares, subject to service conditions, refer to note 3(g).

Date Details of the shares issued Vesting conditions Number of shares

Issue price $’000

July 2007 purchase of peron Group pty Ltd 3 to 5 years service 466,667 3.81 1,778

august 2007 purchase of Stratcorp Consulting 5 years service 197,889 3.48 689

November 2007 purchase of Webber associates UK Limited 3 years service 60,708 3.85 234

December 2007 issued to broker in trust for Geoexplore Consulting Services Ltd

1 to 3 years service 168,350 3.84 646

January 2008 purchase of teal Management Services Limited 4 years service 65,790 3.80 250

april 2008 purchase of Shaheen and peaker Limited 1 to 3 years service 889,211 2.11 1,876

1,848,615 5,473

the number and weighted average share prices of vendor shares is as follows.

Weighted Weighted average average exercise Number exercise Number price of options price of options 2008 2008 2007 2007

outstanding at 1 July nil 973,673 nil –

Forfeited during the period nil (43,509) nil –

exercised during the period nil – nil –

Granted during the period nil 1,848,615 nil 973,673

outstanding at 30 June nil 2,778,779 nil 973,673


the fair value of these arrangements is considered to be the present value of the related shares at the date of acquisition and is being recognised as remuneration expense for accounting purposes proportionally over the vesting period.

d) expenses arising from share-based payment transactions

total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:


2008 2007 2008 2007 $’000 $’000 $’000 $’000

Shares issued under Coffey international Limited employee Leveraged Share plan 1,349 254 342 254

Carson employee Share trusts 1,058 1,196 – –

Shares issued through business combinations but not yet vested for accounting purposes 2,622 1,487 – –

5,029 2,937 342 254

38 restatement of comparative periodDuring the year, internal control deficiencies in reconciliations between the general ledger system and the sub ledger system in relation to the australian consulting division were identified. Following the identification, a full investigation into the cause of the reconciliation differences was undertaken. in addition to the reconciliation error that was confirmed, other errors were identified. in June 2008, it was concluded that a material error existed in relation to the 2007 financial report and a disclosure was forthwith made to the australian Securities exchange.

the reconciliation error relating to work in progress resulted in an overstatement of revenue of $3,683,000, understatement of raw material and subcontractor expense of $731,000 and overstatement of work in progress of $4,414,000. a reconciliation error in relation to trade debtors resulted in an overstatement of revenue and trade debtors of $1,862,000. other errors comprised an over accrual of recoupable losses on a business combination leading to an overstatement of debtors and understatement of other expenses of $455,000 and a correction to lease incentive recognition of $188,000.

the restatement to the 2007 comparatives in the accounts for the year ended 30 June 2008 resulted in a reduction in the 2007 profit after tax of $4,580,000, representing 34% of the reported profit after tax of $13,640,000. the restated profit after tax is $9,060,000.

2007 annual 2007 report restatement restated $’000 $’000 $’000

income statement for the year ended 30 June 2007

revenue 368,254 (5,545) 362,709

raw materials, subcontractors and consumables (112,539) (731) (113,270)

occupancy costs (9,218) 188 (9,030)

other expenses (30,876) (455) (31,331)

employee benefits (183,844) – (183,844)

Depreciation and amortisation (6,837) – (6,837)

Net finance expense (4,857) – (4,857)

Profit before income tax 20,083 (6,543) 13,540

income tax expense (6,443) 1,963 (4,480)

Profit for the year 13,640 (4,580) 9,060

profit attributable to minority interests (640) – (640)

Profit attributable to members of Coffey International Limited 13,000 (4,580) 8,420

earnings per share attributable to the ordinary equity holders of the Company:

Basic earnings per share (cents) 14.4c (5.1c) 9.3c

Diluted earnings per share (cents) 14.2c (5.0c) 9.2c

Balance Sheet as at 30 June 2007

Current assets

trade and other receivables 96,463 (2,317) 94,146

Work in progress 9,953 (4,414) 5,539

income tax receivable – 70 70

other assets 182,327 – 182,327

Current liabilities

trade and other payables (34,950) 188 (34,762)

Current tax liabilities (1,893) 1,893 –

other liabilities (69,749) – (69,749)

Net assets 182,151 (4,580) 177,571

Equity

retained profits 12,384 (4,580) 7,804


76

77

DireCtorS’ DeCLaratioN

in the Directors’ opinion:

(a) the financial statements and notes and the remuneration disclosures that are contained in the remuneration report in the Directors’ report set out on pages 23 to 76 are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company’s and Group’s financial position as at 30 June 2008 and of their performance, for the financial year ended on that date; and

(ii) complying with australian accounting Standards, (including the australian accounting interpretations) and the Corporations regulations 2001; and

(b) the financial report also complies with international Financial reporting Standards as disclosed in Note 1(a); and

(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and

(d) the audited remuneration disclosures set out on pages 5 to 15 of the Directors’ report comply with accounting Standards aaSB 124 related party Disclosures, the Corporations Act 2001 and the Corporations regulations 2001.

the Directors have been given the declarations by the Managing Director and the Chief Financial officer required by section 295a of the Corporations Act 2001.

this declaration is made in accordance with a resolution of the Directors.

Stephen r Williams Chairman

roger J olds Managing Director


78

Report on the financial report

We have audited the accompanying financial report of Coffey international Limited (the Company), which comprises the balance sheets as at 30 June 2008, and the income statements, statements of recognised income and expense and cash flow statements for the year ended on that date, a summary of significant accounting policies and other explanatory notes 1 to 38 and the Directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

the Directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with australian accounting Standards (including the australian accounting interpretations) and the Corporations Act 2001. this responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. in note 1, the Directors also state, in accordance with australian accounting Standard aaSB 101 presentation of Financial Statements, that the financial report, comprising the financial statements and notes complies with international Financial reporting Standards.

Auditor’s responsibility

our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with australian auditing Standards. these auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. the procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. in making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. an audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and australian accounting Standards (including the australian accounting interpretations), a view which is consistent with our understanding of the Company’s and the Group’s financial position and of their performance. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

in conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion

in our opinion:

(a) the financial report of Coffey international Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and

(ii) complying with australian accounting Standards (including the australian accounting interpretations) and the Corporations regulations 2001.

(b) the financial report of the Group also complies with international Financial reporting Standards as disclosed in note 1.

Restatement of prior period comparative balances

Without qualification to the opinion expressed above, we draw attention to Note 38 to the financial statements. During the year ended 30 June 2008 the Group identified certain material errors in the preparation of the 30 June 2007 financial report with respect to the recognition and measurement of the work in progress and trade receivable balances reported in the balance sheet as at 30 June 2007 and revenue reported in the income Statement for the year ended 30 June 2007. as required by aaSB108: Accounting Policies, Changes in Accounting Estimates and Errors, the errors have been adjusted retrospectively by restating the comparative amounts for the prior period in which the error occurred.

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Report on the Remuneration Report

We have audited the remuneration report included on pages 5 to 15 of the Directors’ report for the year ended 30 June 2008. the Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300a of the Corporations Act 2001. our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion

in our opinion, the remuneration report of Coffey international Limited for the year ended 30 June 2008, complies with Section 300a of the Corporations Act 2001.

KpMG

John Wigglesworth partner

29 September 2008

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SHareHoLDer iNForMatioN

the shareholder information set out below was applicable as at 15 September 2008.

A Breakdown of shareholdingsHolders Total units %

1-1,000 973 529,167 0.4431,001-5,000 2,033 5,581,901 4.6705,001-10,000 935 7,059,224 5.90710,001-100,000 1,435 40,041,763 33.503100,001-99,999,999,999 130 66,303,667 55.477totals 5,506 119,515,722 100.000

B equity security holders

the names of the twenty largest holders of quoted equity securities as at 15 September 2007 are listed below:

Name Ordinary Shares

Number heldPercentage of issued shares

National Nominees Limited 11,434,038 9.567Coffey international employee Leveraged Share plan pty Ltd 4,620,868 3.866aNZ Nominees Limited (Cash income a/c) 4,609,296 3.857J p Morgan Nominees australia Limited 3,940,235 3.297argo investments Limited 3,664,361 3.066evelin investments pty Limited 1,950,000 1.632Citicorp Nominees pty Limited (CFS Developing Companies a/c) 1,796,244 1.503McDemvoy investments pty Ltd (the peron Group a/c) 1,446,668 1.210Citicorp Nominees pty Limited 1,317,322 1.102HSBC Custody Nominees (australia) Limited 1,242,617 1.040Cogent Nominees pty Limited 1,015,355 0.850Mr roger John olds 1,012,178 0.847Banlan pty Ltd 900,000 0.753Mrs Fjelda Betty Martin 882,143 0.738rBC Dexia investor Services australia Nominees pty Limited 863,617 0.723Mr peter Dodson Coney, Ms Deborah Donnay Coney & Ms Jennifer Lee Crouch (Coney Super Fund a/c) 778,410 0.651UBS Wealth Management australia Nominees pty Ltd 765,258 0.640Mr Stanley Henry Goodhew 757,649 0.634peronista tee Company pty Ltd (the peronista a/c) 754,550 0.631Citicorp Nominees pty Limited (CFSiL Cwlth Small Co 7 a/c) 740,824 0.620total of top 20 44,491,633 37.227

Voting rights

the voting rights attached to the ordinary shares are that on a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

CONTENTs

Corporate Directory 1Directors’ Report 2Auditors’ Independence Declaration 17Corporate Governance statement 18Income statements 24Balance sheets 25statements of Recognised Income and Expense 26Cash Flow statements 27Notes to the Financial statements 281 summary of significant accounting policies 282 Critical accounting estimates and judgements 363 Determination of fair values 374 segment information 385 Revenue 406 Expenses 417 Income tax expense 418 Current assets – Cash and cash equivalents 439 Current assets – Receivables 4310 Current assets – Other financial assets 4411 Current assets – Work in progress 4412 Non-current assets – Other financial assets 4413 Non-current assets – Property, plant and equipment 4514 Non-current assets – Deferred tax assets 4615 Non-current assets – Intangible assets 4716 Current liabilities – Payables 4817 Current liabilities – Loans and Borrowings 4918 Current liabilities – Deferred purchase consideration 4919 Employee benefits 4920 Non-current liabilities – Loans and Borrowings 5021 Non-current liabilities – Deferred purchase consideration 5122 Non-current liabilities – Deferred tax liabilities 5223 Contributed equity 5224 Reserves and retained profits 5325 Dividends 5426 Financial Instruments 5527 Director and executive disclosures 5928 Remuneration of Auditors 6029 Contingencies 6030 Commitments 6131 Related party transactions 6232 Business combinations 6333 subsidiaries 7034 Events occurring after the balance sheet date 7235 Reconciliation of profit after income tax to net cash inflow from operating activities 7236 Earnings per share 7237 share-based payments 7338 Restatement of comparative period 76Directors’ Declaration 77Independent Auditor’s Report to the Members of Coffey International Limited 78shareholder Information 80

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COFFEY INTERNATIONAL LIMITED Financial Report 2008 · 35 Reconciliation of profit after income tax...

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