Delivering shareholder value For personal use only · reflected in the reduction of debt from the...

Annual Report 2012

Delivering shareholder value

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Corporate Calendar18 October 2012Payment of Final Dividend25 October 2012Annual General Meeting13 February 2013*Announcement of 2013 First Half Results

*to be confirmed

02 SKILLED Today 04 Chairman’s Report05 CEO’s Report06 Business Overview 10 Financial Overview 12 Building a Sustainable Business16 Board of Directors18 Corporate Governance Statement23 Directors’ Report

27 Remuneration Report40 Auditor’s Independence Declaration 41 Independent Audit Report 43 Directors’ Declaration 44 Financial Statements98 Shareholder Information100 Five-year Financial Summary102 2012 Corporate Directory

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SKILLED GROUP ANNUAL REPORT 2012 01

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SKILLED GROUP ANNUAL REPORT 201202

SKILLED TODAY

The last 12 months has seen SKILLED Group deliver on its strategy to build on the Company’s core strengths and improve returns for shareholders.

We have made good progress on the implementation of our strategy including improvements in safety performance, operational processes and organisational capability, while reducing risk and delivering improvement in key fi nancial metrics.

SKILLED Group today has a balanced portfolio of businesses, a solid balance sheet and a more effi cient cost base.


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Market leader in provision of fl exible labour solutions – Tradespeople, experienced operators

& technical professionals – Engineering projects & maintenance – Offshore marine services

Positioned in key growth sectors – Mining and resources; oil and gas;

infrastructure; telecommunications – 54% revenue from WA and QLD

Strong safety record

Industrial relations expertise

Employed ~50,000 people throughout FY12, including: – ~1,100 trainees and apprentices – ~500 indigenous employees

Long-term client relationships

Well-established and trusted brand

Extensive branch network across Australia

SKILLED Group Revenue by Geography FY12

SKILLED Group Revenue by Sector FY12

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Dear Shareholders

In 2012, SKILLED Group has reported a strong fi nancial performance despite the turbulent and unpredictable economic conditions. Our performance refl ects the renewed focus on the Company’s core business of providing fl exible and value enhancing labour solutions for our clients from a more effi cient and lower cost platform. The lower, sustainable cost base and the strength of the core business have given us a stable basis to continue growing the business and to deliver improved returns to our shareholders.

We achieved underlying EBITDA of $93.1 million, an increase of 13% over EBITDA in the last financial year. Reported net profit after tax was $49.3 million, compared to $3.1 million in the previous year, and represented earnings per share of 21.1 cents. The Company’s strong performance is also reflected in the reduction of debt from the cash generated by our operations. As at 30 June 2012, our net debt was $27.4 million and the ratio of net debt to equity was 5.8%.

The Board is pleased to declare a fully franked dividend of 8.0 cents per share, taking the full year dividend to 13.0 cents per share, an increase of 10.0 cents per share from the prior year. This reflects the strong cash flow generation and strengthened balance sheet of the Company and our confidence in the outlook for SKILLED Group. The Company has significant exposure to the stable and growth industries within the Australian economy. Our exposure to the resources and energy sectors, and to national telecommunications and infrastructure markets, continue to provide resilience and flexibility to meet the changing demands of the unstable economic times.

SKILLED Group provides its clients with access to one of the largest databases of skilled workers in the country along with workplace planning to identify and meet skill requirements. It is estimated that Australia needs 500,000 to 700,000 new skilled jobs by 2015 and there are projections that more than 5 million trade positions will need to be filled by qualified workers by 2025.

We are responding to this expected increase in demand, by boosting skills training and apprenticeship numbers and by planning to minimise skills bottlenecks that exist by trade and location. For example, in 2012, we increased the number of our apprentices and trainees to over 1,100. We are also working to develop our indigenous employment program. The Group now employs more than 500 indigenous employees across all of our businesses and joint ventures and through our association with the Clontarf Foundation we are also working to improve education and employment prospects for young indigenous men.

Our employees’ safety remains one of the Board’s most important priorities. During the year the refresh of our safety program continued to achieve results. Our efforts to focus on risk, to simplify our systems, and to engage all our employees delivered a major improvement in our Lost Time Injury Frequency Rate, and importantly a dramatic reduction in the number and severity of accidents and the number of near misses.

On behalf of the Board, I wish to extend our appreciation to Terry Janes, former CFO and Executive Director who retired from the Board this year after 13 years with the Company. We wish Terry all the best for his future endeavours.

I would like to thank our staff for the commitment and effort that has delivered tangible benefits for all of our stakeholders this year, and my fellow Board members for their support and ongoing commitment to the development and success of SKILLED Group.

Vickki McFadden Chairman13 September 2012

CHAIRMAN’S REPORT

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I am pleased to report that SKILLED Group has delivered improved fi nancial and operational performance in 2012.

We are encouraged by the good progress made in the implementation of our strategy including growing revenue, exiting from unprofi table business segments, reducing the cost base and improving the cash fl ow and balance sheet strength of the business.

Our competitive strengthsSKILLED is the market leading brand in the industry with an unrivalled branch network, a commitment to the safety and training of our people, and a depth of industrial relations expertise we deploy in support of our clients.

We employ around 50,000 people in the course of a year, at over 5,000 client locations across Australia and internationally. We are proud of our commitment to training with over 1,100 apprentices and trainees currently employed, and we have given over 500 indigenous employees an opportunity to work under our Indigenous Employment Program.

Our business has proven resilient in the face of some challenging economic conditions, supported by our focus on higher skill trades, experienced operators and technical professional roles, coupled with exposure to growth sectors with over half of our revenue from the resources sectors of mining and oil and gas.

SafetyOur safety performance continues to improve supported by a ‘Safety Refresh’ program that reinforces safety as our number one priority and focuses on higher risk activities through the implementation of our ‘Safety Golden Rules’ initiative that highlights key risks and actions to mitigate them at an individual activity level.

We will continue to focus on key risks, on simplifying our systems, and engaging all our employees to ensure we can continue to improve our safety performance, and reduce the number and severity of incidents, and the number of near misses.

Implementing our strategyWe have significantly improved the financial health of the business over the last year, with improvement across all financial metrics including revenue growth, cost reduction, cash flow improvement, improved profitability and balance sheet strength.

We sold non-core assets including Excelior (the call centre business) and the Tradeforce NZ labour hire business during the year and we have been disciplined in exiting from unprofitable contracts and business activities, including the exit from unprofitable vessel contracts in Offshore Marine Services.

Ongoing cost savings of $13.5 million per annum were achieved in this financial year, ahead of the $10 million target we set, and one year earlier than planned.

Our balance sheet has been strengthened through improved operating cash flow resulting in debt levels reducing from $96.6 million to $27.4 million at year end, resulting in a gearing level of 5.8% compared to 18.6% in June 2011.

While much of our focus through 2012 has been on the immediate need to reshape our business and the delivery of cash flow and cost savings in line with the strategy, we have also been building capability for longer-term competitive advantage.

We have identified further operational improvements that will improve service and reduce costs through the simplification and automation of manual processes.

We have also continued to develop a ‘One Team’ culture across the organisation, with balanced scorecards, clarified reporting structures and strengthened leadership capacity throughout the organisation.

Looking aheadWe are pleased with the improved performance in 2012, reflecting encouraging progress in implementing our strategy and building a stronger foundation for the future.

While economic conditions remain challenging, continued improvement in financial performance is expected to be supported by our exposure to high skilled roles and key growth sectors, coupled with continued benefits from the implementation of our strategy.

With a strong balance sheet and a more efficient business we look forward to continuing to improve returns for our shareholders over time.

Finally, I would like to thank all our staff for their commitment and contribution over the last year.

I would also like to thank our shareholders, customers, directors, staff and employees for their ongoing support as we continue to position the company for sustained success.

Mick McMahon Chief Executive Officer13 September 2012

CEO’SREPORT

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Financial PerformanceSales Revenue1,2

$1.89 billion

Operating Cash Flow (before tax)

Underlying EBITDA3

$93.1 million

Net Debt$27.4 million

Underlying EBIT3

$80.7 million

Gearing reduced to

Underlying NPAT4

$52.4 million

Dividend per share Fully Franked

13.0¢

34.2%

5.8%

85.6%13.0%

71.6%

3.9%

$109.9m

IMPROVED PERFORMANCE

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07SKILLED GROUP ANNUAL REPORT 2012

Improved profi tability across all segments as benefi ts of the Core Plus strategy are realised

Continued improvement in operating cash and reduction in debt

Sustainable cost base reduction delivered ahead of plan – Achieved $13.5 million (net) sustainable reduction in indirect cost base against

$10 million target; one year ahead of plan – Further benefi ts identifi ed from simplifi cation and automation of manual processes

Improved safety performance – 25% improvement in LTIFR

Commencement of the transformation program – Build on the improvement in effi ciency and stability of existing processes – Simplifi cation and automation of key processes and systems

Group Highlights

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Business Overview

Delivering shareholder value across

BUSINESS SEGMENTSBusiness Segment Activities

Workforce Services

SKILLED Workforce Services (WFS) is the industry leader in specialised workforce solutions through the delivery of flexible labour and project based workforce solutions including shutdowns, installations, relocations and total workforce management.

SKILLED WFS is a people business specialising in blue collar trades. It accounts for nearly 50% of SKILLED Group’s total revenue – 70% in the Eastern and 30% in the Western regions respectively.

It provides specialised workforce solutions to primary manufacturing, food and pharmaceuticals, automotive and machinery, mining and energy, oil and gas, transport and logistics, primary services, telecommunications, government and defence and utilities and infrastructure sectors.

Technical Professionals(formerly Other Staffi ng Services)

The Technical Professionals business operates nationally and provides IT&T, executive, professional services, technical professional and medically trained casual, contract and permanent solutions.This segment includes three main brands:

SWAN Contract Personnel is well known for its long standing presence in the professional, technical and engineering recruitment industry. SWAN’s speciality is in the oil and gas and mining industries. It has built a strong track record in providing project management, engineering and project support labour for onshore and offshore oil and gas, petrochemicals, mineral and infrastructure projects.

Mosaic specialises in sourcing, assessing and placing skilled professional, IT, Government and business support staff at all levels.

Origin Healthcare® is one of Australia’s largest providers of personnel and human resources solutions for the healthcare industry.

Engineering and Marine Services

Engineering and Marine services provides contract maintenance and engineering services and offshore marine staffing and vessel chartering and management services. ATIVO and Offshore Marine Services are included in this segment.ATIVO works very closely with SKILLED Workforce Services to deliver projects and capital works, whole of life maintenance services (installations, commissioning, operations and production), decommissioning and infrastructure maintenance and shutdowns, outages, relines and turnarounds.ATIVO is a leading provider of specialist maintenance and project services to the mining, manufacturing, maritime, industrial and energy resource sectors.Offshore Marine Services (OMS) is a world leading provider of offshore drilling and marine personnel to the oil and gas industry. OMS has offices based in Australia, Malta, New Zealand, Singapore, United Arab Emirates and the United Kingdom, offering a global solution to the industry’s marine vessel and manning requirements. OMS Services include: recruitment solutions, project management and marine consultancy, provision of marine and drilling personnel, catering services and rig moving.The OMSA joint venture services the Gorgon project.

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2012 Summary

Continued growth in activity levels in mining and resource sectors in WA, NSW and QLD and related rail and infrastructure sectors; offset by lower activity in manufacturing and logistic sectors in metropolitan and south-east Australia

Continued demand for high skilled trades and experienced operator roles

Cost savings a major driver of earnings growth Recent contract wins in mining, industrial and

FMCG sectors Strong pipeline of major projects, primarily in mining,

infrastructure and telecommunications

Continued strong revenue and earnings growth in Swan Contract Personnel, in line with mining, oil and gas activity

Solid growth in higher margin trainees, apprentices and the Indigenous Employment Program

Strong growth in the provision of Workforce Management Solutions

Growth in white collar IT&T placements Origin Healthcare turnaround strategy underway with

a focus on improved operations to meet continued demand for skilled nurses and medical staff

ATIVO: Improved revenue and earnings as a result of a focus

on lower risk core competencies of contract maintenance and projects & shutdowns

Contract wins with major mining clients for projects and shutdown services

OMS: Growth in manning revenue and margins in OMS Australia;

offset by additional make good vessel provisions Improved performance in OMS NZ and International OMSA JV growth supporting Gorgon project

FY12 FY11 ChangeRevenue ($m) 933.5 928.7 0.5%EBITDA ($m) 46.2 42.3 9.2%EBITDA margin 4.9% 4.6% 0.3%

FY12 FY11 ChangeRevenue ($m) 507.4 433.0 17.2%EBITDA ($m) 29.1 22.5 29.2%EBITDA margin 5.7% 5.2% 0.5%

FY12 FY11 ChangeRevenue2 ($m) 456.5 465.0 (1.8)%EBITDA ($m) 36.5 33.7 8.4%EBITDA margin 8.0% 7.2% 0.8%

Industry breakdown

Industry breakdown

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INCOME STATEMENT

Revenue Revenue for the Group was $1.894 billion, a 3.9% increase

on the prior comparative period (‘pcp’). Revenue growth in the core Workforce Services division

was less than 1% with continued demand for trades and skilled labour in the mining and resources sectors offset by lower activity in manufacturing sector & metropolitan areas.

Technical Professionals (formerly Other Staffi ng Services), achieved 17% revenue growth, with the Swan Contract Personnel business continuing to be a major contributor, benefi ting from the increased engineering activity in the Western Australian mining and oil and gas sectors.

Engineering and Marine Services revenue declined by 2% with improved manning activity in the second half of the year offset by reduced vessel revenue given the strategic exit of non-profi table vessels. Including our share of the OMSA joint venture contract, revenue was marginally higher than the prior year.

Earnings Before Interest, Tax, Depreciation and Amortisation (‘EBITDA’)

Underlying EBITDA from continuing operations (excluding redundancy and branch closure costs of $2.6M and costs associated with a legal settlement dating back to 2008 of $4.4M) increased 13% to $93.1M (pcp $82.3M) refl ecting increased sales revenue and, in particular, lower costs.

FINANCIALOVERVIEW

Depreciation and Amortisation Depreciation and amortisation for the year was $13.4M,

a decrease of $11.3M or 46% on the pcp, principally due to a prior period charge of $6.0M from the accelerated amortisation of the Origin employee database intangible asset which is not required in the current year, and other assets being fully amortised.

Depreciation and amortisation included $1.0M for amortisation of acquired intangibles (pcp $2.5M), the reduction refl ecting the completion of amortisation of some items during the year.

Interest Reported net interest expense (fi nance costs less interest

revenue) for the year was $8.1M, a decrease of $20.2M on the pcp, principally due to reduced levels of debt in the current year from strong cashfl ows and the share placement completed in the prior year.

Net interest expense also includes $0.5M of notional interest on earn-out liabilities for acquisitions (pcp $1.0M). The decrease on the pcp refl ects the reduction in earn-out liabilities during the period.

Tax SKILLED’s effective tax rate for the period was

30.5% (pcp 38.6%) The current year’s effective tax rate includes a $1.4M

write-off of a deferred tax asset due to changes in tax consolidation legislation. The prior year’s effective tax rate includes the effect of a non-tax deductible goodwill amortisation charge of $10.7M (tax effect $3.2M).

SKILLED’s effective tax rate is also impacted by lower income tax rates in foreign jurisdictions.

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Net Profi t after Tax Reported NPAT of $49.3M increased from $3.1M in the

prior year. Underlying NPAT from continuing operations (after adjusting

for the after-tax effect of the adjustments to EBITDA referred to earlier, amortisation of acquired intangibles, notional interest on earn-out liabilities and changes in relation to tax consolidation legislation) increased 86% to $52.4M.

BALANCE SHEET Funds employed were at $475.7M at 30 June 2012, funded

by $27.4M of net debt and $448.3M of shareholders’ equity. Funds employed decreased by $36.1M (7.1%) compared

to the pcp, mainly due to a decrease in operating working capital balances.

Key fi nancial ratios are as follows: Leverage (net debt / EBITDA) of 0.3 decreased from

1.2 in the pcp; Interest cover (EBITDA / net interest expense) was

12.2 times (pcp 3.5 times); and Gearing (net debt / net debt plus equity) decreased

to 6% (pcp 19%). Shareholders’ equity increased by $33.0M largely due to

the profi t generated during the period less dividends paid.

CASH FLOW

Operating activities Cash infl ows from operating activities (including tax

payments) were $101.8M, $26.1M higher than the pcp. Earnings adjusted for non-cash items were $10.2M higher

than the pcp. Working capital balances decreased by $27.5M largely due

to strong collection of receivables in June 2012 and higher payables and provisions.

Tax paid of $8.1M compared to payments of $3.3M in the pcp.

Investing activities The net cash infl ow from the sale of the Excelior and

Tradeforce NZ businesses during the year was $10.7M The net cash outfl ow from purchase of businesses of $10.2M

(pcp $20.3M) was due to acquisition earn-out payments. Other capital expenditure of $8.2M comprised payments

for intangible assets (mainly computer systems and software) and property, plant and equipment (mainly leasehold improvements and offi ce equipment).

Financing activities Interest payments were $9.5M during the year compared

to $20.7M in the pcp. Dividends of $18.7M were paid during the year representing

a 3 cents per share fi nal dividend for the 2011 fi nancial year and a 5 cents per share interim dividend for the 2012 fi nancial year.*

* Dividends declared in respect of FY12 totalled 13.0 cents per share (5 cents per share for the FY12 interim dividend and 8 cents per share for the FY12 final dividend).

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BUILDING A SUSTAINABLE BUSINESS

SafetySafety is both a value and a practice. Over the past 12 months, SKILLED Group has progressively improved on our already high safety performance standards. This is not only the right thing to do for our employees, but it is also vital to maintain our strategic leadership in all sectors we operated in, particularly the resource and mining sectors.Through the Refresh of Safety, referred to in last year’s annual report, we have continued to improve our safety performance and recommitted to the objective of Zero Harm. Central to this has been SKILLED Group’s Safety Golden Rules. These rules are now well embedded and have been embraced across our business. We are also working with clients to evolve their own approach to managing their key safety risks. One way to measure the success of the Golden Rules is by the reduction in frequency and severity of incidents. The 2012 Lost Time Injury Frequency Rate reduced by approximately 25 per cent with our All Injury Frequency Rate dropping by 15 per cent. In May, we received the RCSA McLean Award for Safety, recognising the work of the Safety Refresh program. In addition SKILLED Group was re-certified to AS 4801:2001 Occupational Safety & Health System.We continue to streamline our processes to ensure their relevance to those on the front line. We have relaunched the Take-5 process, reinvigorated our safety training programs and launched touch-screen technology to make our systems accessible and practical in the field.An important objective for the year was navigating the new national harmonised legislation for occupational health and safety. Much work has been undertaken by our safety and compliance managers to develop a full understanding of and compliance to the legislation.

EnvironmentIn preparation for the Carbon Tax coming into effect on 1 July this year, SKILLED Group carried out a thorough assessment of our reporting obligations under the National Greenhouse & Energy Reporting Act with particular reference to our OMS Australia operations. The assessment found that SKILLED Group meets all corporate and facility reporting thresholds. Our carbon footprint has reduced in 2012, although largely through divestments of businesses that had higher intensity carbon use. However we actively reduced our carbon emissions with the replacement of the vehicle fleet with more efficient vehicles as well as the major office relocation in Melbourne, bringing together five offices into a new, fit-for-purpose head office building.

SKILLED Group has a responsibility to its stakeholders to develop a sustainable future for the organisation and a positive impact on the society and environment in which it operates. We work towards achieving this in the following ways: developing the potential of our people, enhancing their safety at work, promoting opportunity and equity in the community, ensuring we respect and protect the environment around us, in addition to delivering sustained fi nancial performance.

As the largest provider of skilled workforce solutions in Australia, SKILLED Group has an extensive reach across the national economy as well as many local communities.During the last financial year, we employed 50,000 skilled workers on more than 5,000 project and work sites across all states and territories, and across all sectors of the economy. These sites include some of the largest major projects in the country that are vital to Australia’s national prosperity and well-being.With such a significant footprint, SKILLED Group takes its sustainability and community responsibilities seriously. Our efforts to meet these responsibilities are organised around four key, interlinked areas: Safety, Environment, People and Community.

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13SKILLED GROUP ANNUAL REPORT 2012

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Trainees and ApprenticesSKILLED Group is a company that sources, trains and prepares, competent people – experienced operators and tradespeople – to fill jobs. The Company employed over 50,000 Australians in the course of last year and had around 1,100 people go through our trainee and apprentice programmes. This gives us a good perspective on where the shortages and mismatches are appearing in the job market as Australia deals with the resources boom, subdued growth in the manufacturing sector and continued macro-economic growth. The shortfall in trade occupations has grown significantly over the last 18 months and this situation is likely to worsen unless we implement sustainable strategies to address skills shortages. We firmly believe that traineeships and apprenticeships in the right trades and geographies will play an increasingly critical role over the next decade in order to ensure that the oil and gas, resource and civil and construction projects are fully resourced. With an Australia-wide footprint, SKILLED will be at the heart of filling the gaps for large and small companies around the country by selecting the right people and providing them with the right training.

SKILLED Technical Trades FoundationThe SKILLED Technical Trades Foundation (STTF) was initiated by the Company’s founder, Frank Hargrave, AO.Through the Foundation, the Company has also continued to provide financial assistance and mentoring to trainees and trade apprentices to help them complete their technical qualifications. Since its inception in 2004, over $250,000 has been awarded to over 90 trainees and apprentices across SKILLED Group. Approximately $56,000 was awarded to 17 successful candidates in this financial year. SKILLED views this program as an important initiative to ensure opportunities for personal and career development are shared by our newest employees in the front-line workforce.

A GREAT TEAM OF PEOPLE

PeopleSKILLED Group is a people business which seeks to meet employer demands for the best skilled labour in a rapidly-changing commercial and competitive environment. This makes it even more important to ensure that as a company, the 50,000 employees we are responsible for are both equipped from a skills and training perspective to carry out their role for clients as safely and effectively as possible.With this in mind, ongoing investment to ensure our clients and employees benefit from their engagement with SKILLED Group is paramount. Investment in our people over the past 12 months and into the next year has been focussed on recognising, motivating and developing the most valuable assets in our business. This investment, directed at developing established programs and implementing new initiatives, is particularly aimed at ensuring our values are deeply embedded across all our businesses. By simplifying key work processes and activities over the past 12 months, we have aimed to significantly improve the engagement, retention and productivity of our team members. Providing a simpler, more efficient work environment is critical not just for the ongoing satisfaction, engagement and retention of employees within SKILLED Group, but also for the quality of service they provide on behalf of SKILLED to our clients and their employees.

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CommunityOur efforts to leave a sustained and positive footprint in the communities and the broader economy in which we operate have been focussed on improving indigenous employment outcomes. It is important, in our view, to ensure indigenous people are not subject to continuing chronic under-representation in Australia’s skilled labour market. As the largest private provider of skilled labour in Australia, we believe SKILLED can and should make a significant difference in this important area of economic and social equity.Our investment in this area has been directed in two important ways. First, we have doubled our target for Indigenous employment to 1,000 employees by 2015. This follows the Company successfully achieving its target of employing 500 indigenous workers by 1 July 2012 under the Australian Employment Covenant which the Company signed in June 2009. Our early success in achieving our objectives was recognised when OMS and the OMS Alliance JV were jointly presented with the AMMA National Award for Indigenous Employment and Retention. The AMMA Award recognises an organisation which has implemented a training or employment initiative that has resulted in the successful engagement of Indigenous Australians within a local community. The award was an outstanding achievement as OMS and the OMS Alliance JV programs were judged against every company in Australia actively involved in the resources sector including oil and gas and mining companies. The second way in which we are assisting employment opportunities within the indigenous community is through a new partnership with the nationally-renowned Clontarf Foundation. Established in 2000, the Foundation exists to improve the education, discipline, self-esteem, life skills and employment prospects of young Aboriginal men. Since opening its first Academy for 25 boys on the campus of the Clontarf Aboriginal College in Perth in 2000, the Foundation now has over 2,500 boys in 45 schools across Western Australia, Northern Territory and Victoria. SKILLED is working with Clontarf in a number of ways to boost student technical skills and career thinking through activities such as hosting student groups in SKILLED workplaces, participating in Clontarf’s regional employment forums and building relationships with the students and gaining their confidence through participation in the activities mentioned above.

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BOARD OF DIRECTORS

(Top L to R):Vickki McFadden, Mick McMahon, Bob Herbert, Tracey Horton, Tony Cipa, Max Findlay, Terry Janes, Tim Paine

Vickki McFadden, 53BComm, LLBIndependent Non-Executive ChairmanAppointed to the Board in September 2005, Vickki has been a director for seven years.Chairman of the Nomination Committee, and a member of the Audit & Risk Committee and the Remuneration Committee.

Skills and experienceVickki McFadden has broad experience in finance and law and brings to the Board considerable experience in corporate finance transactions. Previously, Ms McFadden was employed as a Director/Principal of Centaurus Corporate Finance and Managing Director, Investment Banking, at Merrill Lynch in Australia.

Current Directorships and OfficesMember, Advisory Board and Executive Committee of Australian School of Business, The University of New South Wales (since August 2000)Member, The Takeovers Panel (since March 2008)Director, The Myer Family Company Holdings Pty Ltd, The Myer Family Investments Pty Ltd, Sidney Myer Custodian Pty Ltd and The Myer Family Company Ltd (since August 2011)

Mick McMahon, 49BEc, Harvard Business School Advanced Management Program (2009)Chief Executive Officer and Managing DirectorAppointed to the Board in November 2010, Mick has been a director for 21 months.

Skills and experienceMick McMahon has been Managing Director and CEO of the Company since November 2010. Prior to joining SKILLED Group, Mick spent 19 years with Shell both in Australia and overseas. Roles included Vice President Retail Marketing for Shell’s global retail business, Director of Shell UK and Ireland downstream businesses, GM Strategy & Marketing for Shell Europe and running the Australian retail business. In addition, Mick has experience across national marketing, supply chain, IT and strategy roles. In 2005 Mick was appointed Managing Director of Coles Express responsible for the newly formed alliance between Coles and Shell. Mick held this role through to 2009, in addition to responsibility for Supply Chain, Marketing and Coles Liquor. Mick was appointed Chief Operating Officer Coles from 2007 to 2009 as the business transitioned to Wesfarmers ownership.Mick worked as a Senior Advisor with TPG Capital engaging on current and potential investments in the energy, retail and industrial sectors in Australia and overseas, prior to joining SKILLED Group.

Current Directorships and OfficesChairman, Red Rock Leisure Pty Ltd (since December 2009)Member of Business Council of AustraliaVictorian Councillor of the Australian Industry Group

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Tony Cipa, 57BBus, Grad Dip Accounting, CPAIndependent Non-Executive DirectorAppointed to the Board April 2011, Tony has been a director for 16 months.Chairman of the Audit & Risk Committee.

Skills and experienceTony Cipa spent 20 years with CSL Limited in various senior finance roles, commencing prior to its float on the ASX in 1990. Between 1994 and 2000 Tony was Chief Financial Officer and was appointed to the Board of CSL Limited as Finance Director in 2000 until his retirement in 2010.

Current Directorships and OfficesMansfield District Hospital (since July 2011)

Max Findlay, 65BEcIndependent Non-Executive DirectorAppointed to the Board in March 2010, Max has been a director for two and a half years.A member of the Audit & Risk Committee, the Remuneration Committee and the Nomination Committee.

Skills and experienceMax Findlay has had a long and distinguished career in services and manufacturing. He worked with Programmed Maintenance Services (PMS) for over 20 years and held the positions of Business Development Manager, General Manager and Managing Director, a role he held for 18 years. Prior to joining PMS, Max’s experience included 11 years with Australian Consolidated Industries, three years with Vinyl Clad (a division of Smith & Nephew) and five years with James Sephton Plastics.

Current directorships and officesChairman, EVZ Limited (since April 2008).Director, The Royal Children’s Hospital (since March 2009)Chairman, Redflex Holdings Limited (since November 2009)Director, SMEC Holdings Limited (trading as Snowy Mountain Engineering Corporation) (since April 2010)Chairman, Rhodes Contracting Pty Ltd (since August 2008)

Bob Herbert AM, 68BCommIndependent Non-Executive DirectorAppointed to the Board in November 2003, Bob has been a director for nine years. Chairman of the Remuneration Committee.

Skills and experienceAs the former CEO of Australian Industry Group, Bob Herbert brings considerable industry experience to the Board. He has been involved with Australian Industry Group and its predecessor organisation, Metal Trades Industry Association of Australia, since 1961, including 30 years as a director in numerous roles. Bob is now involved in various company director and advisory roles. In April 2010, he was appointed by the Federal Government as Water Supplier Advocate.

Current Directorships and OfficesDeputy Chairman, Industry Capability Network Limited (since May 2003)Trustee, Melbourne Cricket Ground Trust (since November 2003)

Water Supplier Advocate, appointed by the Department of Innovation, Industry, Science and Research, Commonwealth Government (since April 2010)Trustee, Emergency Services Superannuation Board (since June 2010)

Tracey Horton, 49BEc (Hons), MBAIndependent Non-Executive DirectorAppointed to Board in February 2011, Tracey has been a director for 18 months.A member of the Audit & Risk Committee and the Nomination Committee.

Skills and experienceTracey Horton was Dean of The University of Western Australia Business School between February 2005 and August 2011. Prior to this position, she worked in Australia and in the United States as an economist, business analyst and management consultant. Tracey has worked in both the public and private sectors including significant periods at the Reserve Bank of Australia, based in Sydney and Bain & Company, based in San Francisco. She brings extensive strategy development, performance improvement, business turnaround and leadership experience to the Board.

Current Directorships and OfficesChair, West Australian Museum Foundation (since March 2002)Chair, D’Orsogna Ltd (since November 2004)Deputy Chair, Council of Presbyterian Ladies College (since March 2010)Director, Cullen Wines (Australia) Ply Ltd (since March 2010)Director, AHG Limited (since May 2012) Director, Navitas Limited (since June 2012)

Terry Janes, 59BComm FCPA, CFTP, Wharton AMPChief Financial Officer and Executive DirectorAppointed Chief Financial Offi cer and to the Board in July 1998, Terry served as a director for 14 years until his retirement on 30 June 2012.

Skills and experienceAs Chief Financial Officer, Terry Janes had overall responsibility for the finance, accounting, tax, treasury and risk management functions at SKILLED Group for the past 14 years. Terry has over 20 years’ experience in a wide range of senior finance roles including as Chief Financial Officer for major operating divisions in the steel and minerals business at BHP.

Tim Paine, 48BEc, LLBCompany Secretary and Group General Counsel

Skills and experienceTim Paine joined SKILLED Group in March 2010 and has over 20 years’ experience in corporate counsel and company secretary roles, including at Symbion Health, Mayne Group, and ANZ Bank. Tim commenced his career as a solicitor in private practice and has also managed his own consulting company. He has extensive experience in major corporate transactions and litigations, both domestically and overseas.

Note: Greg Hargrave retired from the Board on 31 August 2011.


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Corporate governance statement

This Statement outlines the corporate governance framework adopted by SKILLED Group. The Board believes that its policies and practices should encompass a high standard of corporate governance in the interests of SKILLED Group and its shareholders.The corporate governance framework is based on a set of charters and policies, which are designed to identify and manage the risks of the Company’s businesses. In developing its approach to corporate governance, your Board aims to foster a culture that values and rewards our people for maintaining ethical standards, and is encouraging of diversity and respect for others.The SKILLED Group Board fully supports the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Governance Principles) and is committed to complying with those recommendations, unless it believes compliance is not in the best interests of shareholders. SKILLED Group has complied with all recommendations contained in the ASX Governance Principles throughout the 2012 year.

The BoardResponsibilities and functions of the BoardThe Board of Directors is responsible for setting the strategic direction of the Company and for overseeing and monitoring its businesses and affairs. The Board Charter sets out the principles used by the Board to manage its affairs and enable it to discharge its responsibilities. The Board Charter is available for review in the Corporate Governance section of www.skilledgroup.com.au.The functions of the Board include:

setting overall fi nancial goals for the Company; approving strategies and plans for SKILLED Group’s

businesses to achieve these goals; approving fi nancial plans and annual budgets; monitoring business performance and results; overseeing the Company’s sustainability and diversity; approving key management recommendations (such

as major capital expenditure, acquisitions, divestments, restructuring and funding);

appointing and reviewing the performance of the Chief Executive Offi cer and senior management;

reporting to shareholders on the Company’s direction and performance;

overseeing the management of occupational health and safety and environmental performance;

determining that satisfactory internal control arrangements are in place regarding the Company’s operations;

determining that satisfactory arrangements are in place for auditing and reporting the Company’s fi nancial affairs;

considering and making declarations in relation to distributions to shareholders; and

meeting statutory and regulatory requirements and overseeing the way business risks and SKILLED Group’s assets are managed.

The Board also sets policies to guide management in relation to key decisions and activities.The day-to-day management of the Company’s affairs and implementation of the approved strategy and policies are the responsibility of the Chief Executive Offi cer, who is accountable to the Board for those responsibilities. The Board has approved

clear delegated authorities throughout the group which sets limits to the authority of the management team. In addition, formal position descriptions detail key accountabilities and authorities for the Chief Executive Offi cer, the Chief Financial Offi cer and other key executives.

Composition of the Board and the appointment and re-election of DirectorsThe Board is currently comprised of six directors, being fi ve Non-Executive Directors and one executive director, Mr Mick McMahon. The Board is chaired by an independent Non-Executive Director. The roles of the Chairman and Chief Executive Offi cer are separate. The names of the directors of the Company in offi ce during the fi nancial year and their skills, experience and expertise are set out in the Directors’ Report. As noted in the Company’s 2011 Annual Report, Mr Greg Hargrave retired from the Board on 31 August 2011. In addition, following his retirement as Chief Financial Offi cer in April 2012, Mr Terry Janes retired from the Board with effect from 30 June 2012. No new directors have been appointed to the Board since the start of the 2012 fi nancial year.In searching for and selecting new directors to the Board, the Nomination Committee identifi es any gaps in the expertise, skills and diversity characteristics of the directors on the Board and then, using external consultants as appropriate, identifi es candidates with the appropriate attributes. The Nomination Committee’s Charter provides that the Committee shall take into account the Company’s Diversity Policy and its application to the composition of the Board, and consider strategies to address diversity in the composition of the Board. The mix of skills and diversity which the Committee is looking to achieve and maintain in the membership of the Board is in areas such as:

specialist skill representation relating to both functions (such as safety, industrial relations, marketing, strategy development, accounting, fi nance, economics and law) and industry backgrounds (such as resources, manufacturing, services and healthcare);

board and senior executive experience (including familiarity with formal board and governance processes and senior executive functions at organisations of signifi cant size);

diversity in general (including in particular gender diversity) and;

a commitment to the highest standards of governance and integrity.

New appointees are expected to bring independent views and judgement to Board deliberations, to add to the portfolio of skills considered necessary, and to be able to devote suffi cient time to the affairs of the Board. In accordance with the ASX Listing Rules and the Company’s Constitution, any director other than the Managing Director must retire by rotation no later than at the end of the third annual general meeting following their last election or three years, whichever is later, and are eligible to stand for re-election. At least one election or re-election of a director must be held eachyear. In accordance with these requirements, Mr Max Findlay will retire and stand for re-election at the 2012 Annual General Meeting.Before each annual general meeting, the Board assesses the performance of each director due to stand for re-election, and the Board decides whether to recommend to the shareholders that they vote in favour of the re-election of each director.Executive directors receive no additional remuneration for their service on the Board beyond their executive salary package.


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The maximum aggregate remuneration of Non-Executive Directors is determined by the shareholders. The policy on directors’ remuneration and relevant details are contained in the Remuneration Report.All directors are expected to prepare fully for all Board meetings, and to attend as many Board meetings as is reasonably practicable.

Role of the ChairmanIn relation to the role of Chairman, the Board’s Charter provides as follows:

the Chairman is an independent, Non-Executive Director; and the roles of the Chairman and the Chief Executive Offi cer

should not be exercised by the same individual.The Chairman plays an important leadership role and in particular:

chairs meetings of the Board and provides effective leadership to it;

monitors the performance of the Board and the mix of skills and effectiveness of the contributions of each director;

maintains ongoing dialogue with the Chief Executive Offi cer and provides appropriate mentoring and guidance; and

liaises with shareholders and potential investors on key issues, and chairs meetings of shareholders.

Directors’ independenceThe Board assesses each of the directors against specifi c criteria to decide if they are considered to be independent. Directors are considered to be independent if they are independent of management and free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, their ability to exercise unfettered and independent judgement. In assessing the materiality of any such relationship, the Board considers the relationship from both the perspective of the Company and from the perspective of the Director or related party. Materiality is assessed by reference to each Director’s individual circumstances, rather than by applying general materiality thresholds.Each of the fi ve current Non-Executive Directors are considered independent.The Board believes that no director has served on the Board for a period longer than what could materially affect their independence or their ability to act in the best interests of the Company. The Board’s policy Assessment of Independence of Directors is available for review in the Corporate Governance section of www.skilledgroup.com.au.

Board meetingsThe typical annual Board schedule involves at least nine face-to-face meetings each year. However, the Board will usually meet on an ad hoc basis on several other occasions, often by teleconference, in relation to specifi c matters requiring timely consideration.Of the Board’s scheduled meetings, most are held at SKILLED Group’s head offi ce in Melbourne. Typically two or three meetings each year are held in other capital cities to assist the Board to gain a better understanding of the Company’s business activities in those cities.At Board meetings the agenda will usually include:

a review of minutes of the previous meeting, and outstanding issues raised by Directors at previous meetings;

a report on safety performance and strategy across SKILLED Group;

the Chief Executive Offi cer’s report; a Finance report; a Legal and Regulatory Update; an overview of a specifi c business selected to present

to that Board meeting, including its fi nancial performance and strategies;

reports on major projects, current business issues and specifi c proposals;

reports from Chairs of Committees which have met since the last Board meeting on matters considered at those meetings;

a consideration of whether any matters reported to, or considered at, the meeting warrant disclosure to the ASX pursuant to the Company’s continuous disclosure obligations; and

a closed session scheduled at the end of each meeting where the Non-Executive Directors meet and confer in the absence of management.

The Company Secretary & Group General Counsel and the Chief Financial Offi cer are usually present at all Board meetings. Members of senior management attend Board meetings regularly to report on the businesses for which they are directly responsible or as otherwise requested by the Board.During the 2012 fi nancial year the Company commenced electronic board and committee paper distribution and paperless meetings, with a view to improving the effi ciency of the meeting processes, and to enhancing non-executive directors’ timely access to information.

Review of Board performanceThe Board’s performance is subject to regular review in line with the recommendations in the ASX Governance Principles. The Company completed a review of the Board’s effectiveness and performance in August 2011. This review included consideration of the size and composition of the Board and its committees, and the manner in which it functions. A further review of the Board’s effectiveness and performance will be conducted during the 2013 fi nancial year.The Board’s policy Directors and Board Performance Evaluation is available in the Corporate Governance section of www.skilledgroup.com.au.

Directors’ confl icts of interestDirectors’ outside interests that have the potential to confl ict with the interests of the Company are declared by the relevant director by way of standing notifi cation which is tabled at a Board meeting. At each Board meeting directors have the opportunity to notify the Board of any update or amendment to their disclosed interests. If a confl ict actually arises, the director concerned will absent himself or herself from that part of the meeting at which the issue is discussed, and will abstain from voting on the issue.

Independent professional adviceWith the prior approval of the Chairman, each director has the right to seek independent legal and other professional advice at the Company’s expense concerning any aspect of the Company’s operations or undertakings in order to fulfi l his or her duties and responsibilities as a director.


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Board committeesUnder the Constitution, the Board may delegate its powers and responsibilities to committees of the Board. This allows the Board to spend additional and more focused time on specifi c issues. During the year, there were three Board Committees:

the Audit & Risk Committee the Remuneration Committee the Nomination Committee

Audit & Risk CommitteeThe Audit & Risk Committee was constituted with effect from 1 July 2011 by way of a merger of the Audit Committee and the Risk Committee of the Board in order to provide for a more seamless oversight of the Company’s fi nancial and non-fi nancial risks.The main objective of the Audit & Risk Committee is to assist the Board to discharge its responsibility to exercise due care, diligence and skill in relation to the monitoring of:

external reporting; internal control; external audit; internal audit; and risk management.

The members of the Audit & Risk Committee as at 30 June 2012 were:

Mr Tony Cipa (Chairman of the Committee); Ms Vickki McFadden; Mr Max Findlay; and Ms Tracey Horton.

The Audit & Risk Committee met on six occasions during the year.

Remuneration CommitteeThe role of the Remuneration Committee is to review and make recommendations to the Board on remuneration packages and policies applicable to the Chief Executive Offi cer and senior executives. This role also includes responsibility for share option schemes, incentive performance packages, and retirement and termination entitlements. The Committee’s Charter outlines the principles of diversity to be adopted in the Company’s recruitment practices. Remuneration levels are competitively set to attract the most qualifi ed and experienced senior executives. The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages. The Remuneration Committee Charter is available for review in the Corporate Governance section of www.skilledgroup.com.au.The members of the Remuneration Committee as at 30 June 2012 were:

Mr Bob Herbert AM (Chairman of the Committee); Mr Max Findlay; and Ms Vickki McFadden.

The Remuneration Committee met on fi ve occasions during the year.

Nomination CommitteeThe Nomination Committee supports and advises the Board on fulfi lling its responsibilities to shareholders in ensuring

that the Board is appropriately structured and comprised of individuals who are best able to discharge the responsibilities of directors. It is also responsible for assessing the terms of appointment and remuneration arrangements for Non-Executive Directors. The Committee’s Charter outlines the principles of diversity to be adopted in structuring the composition of the Board. Details of directors’ remuneration, superannuation and retirement payments are set out in the Remuneration Report contained in this Annual Report.The Nomination Committee Charter is available for review in the Corporate Governance section of www.skilledgroup.com.au.The members of the Nomination Committee as at 30 June 2012 were:

Ms Vickki McFadden (Chairman of the Committee); and Mr Max Findlay.

Since the conclusion of the 2012 fi nancial year, Ms Tracey Horton has been appointed to the Nomination Committee. The Nomination Committee met on one occasion during the year.

Ethical standardsEthics policiesThe Company has a Code of Ethics and a Code of Conduct, which set out how all directors, managers and employees of the Company are expected to act in the following main areas:

professional conduct dealing with clients dealing with suppliers dealing with competitors dealing with other employees

The requirement to comply with the Code of Ethics and Code of Conduct is communicated to all employees. SKILLED Group’s Code of Ethics and Code of Conduct are available in the Corporate Governance section of www.skilledgroup.com.au.Employees are encouraged to report any actual or suspected breach of the Code of Ethics and Code of Conduct to their supervisor or to their human resources manager. Alternatively, employees may choose to directly contact their executive general manager or the company secretary. Any employee who reports in good faith a breach or suspected breach of legal or ethical standards can do so confi dentially and will not be subject to retaliation, or suffer any recrimination for making that report. In addition, senior fi nancial executives, as part of their employment contract, must adhere to the Group of 100’s Code of Conduct for Chief Financial Offi cers and Senior Financial Offi cers.

DiversitySKILLED Group values the diversity of our employees and the skills, background and experience they bring to work. We wish to refl ect the communities in which we operate through fostering a culture which embraces and values this diversity. As a service provider, SKILLED Group recognises leveraging a diverse workforce contributes to an enhanced service to all our stakeholders, builds a culture of high performance, improves our fi nancial position, and builds a strong reputation in the markets in which we operate.

Corporate governance statement (cont.)


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To support this commitment, the Board has a Diversity Policy with the purpose of securing the leadership, promotion and measurement of diversity across SKILLED Group.

DIVERSITY POLICY

The Diversity Policy highlights the need to: create an inclusive and supportive organisation by:

– identifying and removing barriers to diversity; – respecting the unique diversity that each individual

brings to the workplace; and – building our leadership pipeline to assist SKILLED

Group’s talent to develop the skills and experience they need to succeed;

provide the structure and frameworks to support diversity by: – developing a robust governance structure with

Board involvement; – auditing recruitment, performance, remuneration and

development processes and developing an action plan for removing systemic barriers;

– actively monitoring demographic changes, particularly in relation to gender diversity; and

– delivering staff education programs to raise awareness and challenge workplace norms.

eliminate discrimination, harassment, bullying and other inappropriate behaviours in the workplace.

WOMEN AT SKILLED GROUP

Women at SKILLED Group are represented at the highest levels of the organisation. Our focus is to ensure we support women in all roles and integrate our program for diversity, including gender diversity, into our succession planning for senior roles. As at 30 June 2012, the proportion of women employed at different levels of SKILLED Group was as follows:

two of the fi ve Non-Executive Directors at 30 June 2012 are women. Ms Vickki McFadden is Chairman of the Board and Ms Tracey Horton is a Non-Executive Director;

14% of our senior executive roles are fi lled by women; and 63% of SKILLED Group staff are women.

In addition, 37% of our management roles are fi lled by women, compared to 32% last year. SKILLED Group has set a specifi c target to increase the representation of women in management roles to 40% by 2016.The Diversity Policy is supported by SKILLED Group’s Code of Conduct, Workplace Behaviour Policy and Grievance Policy. SKILLED Group’s Diversity Policy is available for review in the Corporate Governance section of www.skilledgroup.com.au.

Risk management and controlControlling and managing risksAll business activities contain an element of risk. SKILLED Group’s philosophy on risk is to identify a risk in advance, assess the likelihood and possible impact of that risk, and for risks considered material, determine potential risk mitigation strategies and a risk response plan.The key areas of risk faced by SKILLED Group include:

risk of serious injury or fatality to our employees; operational risk, which arises from inadequate or failed internal

processes, people and systems, or from external events;

risks associated with our offshore and overseas activities; risks associated with changes to the industrial relations

landscape in Australia; contractual risk, being the nature of the performance and

indemnity requirements in contracts with customers; and fi nancial risk arising from fraud, regulatory breaches, loss

of business from key customers and bad debts.Appropriate policies and procedures are continually being developed and updated to help manage these risks. The Board is responsible for approving the Company’s risk management strategy and policies. Executive management is responsible for the implementation of the strategy and for developing policies, processes and procedures to identify and manage risks. Executive management is required to report to the Board at least annually on the effectiveness of the risk management process for the Company’s material risks.The CEO and the CFO have provided formal statements to the Board that, in all material respects:

the Company’s fi nancial statements present a true and fair view of SKILLED Group’s fi nancial position and performance; and

the risk management and internal compliance and control systems, to the extent they relate to fi nancial reporting objectives, are sound and operating effectively.

SKILLED Group’s Risk Management Policy is available for review in the Corporate Governance section of www.skilledgroup.com.au.

Internal control frameworkThe Board acknowledges that it is responsible for the overallinternal control framework, but recognises that no cost-effective internal control system will preclude all errors and irregularities. To assist in discharging this responsibility, the Board has instigated an internal control framework that can be described under the following fi ve headings.

Financial reporting: There is a comprehensive budgeting system with an annual budget approved by the directors. Monthly actual results are reported against budget and revised forecasts for the year are prepared regularly. Procedures are also in place to ensure that information is reported to the ASX in accordance with continuous disclosure requirements.

Quality and integrity of personnel: The Company has a suite of policies which specify principles, minimum standards and behaviours, which support its overall quality systems.

Internal audit: The Company has an internal audit function to review and assess key risks across the organisation. The annual program is approved and monitored by the Audit & Risk Committee. External resources are used to augment this function.

Operating unit controls: Financial controls and procedures, including information systems controls, are detailed in procedure manuals. Exception and corrective action reports highlight any departures from these procedures.

Functional speciality reporting: The Company has identifi ed a number of key areas that are subject to regular reporting to the Board, such as cash forecasts, OHS, information technology and legal matters.


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Audit independenceThe Company has issued a formal Board policy, which requires that:

the Audit & Risk Committee monitors the independence, objectivity, effectiveness and scope of the external audit and reviews the external auditor’s fi ndings and recommendations.

the Audit & Risk Committee reviews the processes governing all non-audit work undertaken by the external auditor to ensure that the independence of the external auditor is not affected by confl icts.

the lead audit partner on the SKILLED Group audit can serve in that capacity for a maximum of fi ve years.

at least three years must elapse before any retired partner or former partner of the external auditor can be permitted to serve as a director or offi cer of the Company.

Ernst & Young were appointed auditor of SKILLED Group at the Company’s 2011 Annual General Meeting. Mr Bruce Meehan is the Company’s audit engagement partner.

DisclosureShareholder communicationsSKILLED Group is committed to giving all shareholders transparent and timely information about our activities and to fulfi lling continuous disclosure obligations to the wider market. The Shareholder Communications Strategy, together with the Board policy Disclosures to the Investment Community, set out how we undertake these communications.The Shareholder Communications Strategy and the Board policy Disclosures to the Investment Community are available in the Corporate Governance section of www.skilledgroup.com.au. The audit engagement partner always attends the annual general meeting and is available to respond to questions from shareholders.

Continuous disclosure protocolThe Board is aware of its obligations for continuous disclosure of material information and embraces the principle of providing access to that information to the widest audience of investors. The Company has adopted a continuous disclosure protocol that outlines management’s reporting requirements to a nominated disclosure offi cer and ensures a system of monitoring compliance with the protocol. A Board policy, Disclosures to the Investment Community, has also been issued.The Company has a website that includes an Investor Relations section. To ensure provision of equal access to material information, all ASX announcements are also placed on this site.At the conclusion of each Board meeting consideration is given to whether any matters reported to, or considered at, the meeting warranted disclosure to the ASX pursuant to the Company’s continuous disclosure obligations.

Buying and selling of shares by Directors, Offi cers and StaffSKILLED Group has a Share Trading Policy under which:

directors, offi cers and staff who are subject to the policy (relevant persons) must not deal in SKILLED Group’s securities on a short-term trading basis.

relevant persons must not deal in SKILLED Group securities during the defi ned restricted periods, namely:

– the period from the close of trading on 30 June each year until 10am on the next trading day after the announcement to the ASX of the preliminary fi nal statement or full year results; and

– the period from the close of trading on 31 December each year until 10am on the next trading day after the announcement to the ASX of half-yearly results.

Note: In exceptional circumstances (such as fi nancial hardship or compulsion by court order) a relevant person may be granted permission to trade during a restricted period.

relevant persons may deal in SKILLED Group securities during defi ned window periods following release of the Company’s half-year and full year results and its annual general meeting, assuming that they do not possess market sensitive information which has not been publicly disclosed, on the condition that they provide the Company Secretary with notifi cation of their dealings.

during any other period, relevant persons must, in advance of any proposed dealing in SKILLED Group securities, receive approval for any proposed dealing in SKILLED Group securities.

Each director has entered into a contract with the Company to advise the Company when any interest in any securities in the Company held by the director changes and to advise the Company of the director’s interest in securities at the date of retirement. Share dealings by directors are promptly notifi ed to the ASX.SKILLED Group’s Share Trading Policy and the rules of the SKILLED Group Limited Executive Long-Term Incentive Plan prohibit any portion of an option or performance right that has not vested, to be hedged using fi nancial products designed to eliminate risk of price movement in the underlying share. A breach of this rule will result in the Board taking disciplinary action.SKILLED Group’s Share Trading Policy is available for review in the Corporate Governance section of www.skilledgroup.com.au.

Corporate governance statement (cont.)


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The directors of SKILLED Group Limited (the “Company”) present the annual fi nancial report for the consolidated entity comprising the Company and its controlled entities (collectively referred to as “SKILLED Group”) for the fi nancial year ended 30 June 2012.

Directors’The directors of the Company during the fi nancial year (or, where indicated, during part of the year only) were:

Directors Qualifi cations & experience Other Listed Company Directorships

VA McFadden

Independent Non-executive Chairman

Chairman of the Nomination Committee

Member of the Audit & Risk Committee

Member of Remuneration Committee

BComm, LLB

Director since September 2005.

Broad experience in fi nance with considerable experience in corporate fi nance transactions. Previously, a Director/Principal of Centaurus Corporate Finance and Managing Director, Investment Banking, at Merrill Lynch in Australia. Currently, a member of Takeovers Panel (since 2008), a member of the executive committee of the Australian School of Business at UNSW and a Director of Myer Family Company Holdings Pty Ltd.

–

MP McMahon

Chief Executive Offi cer and Managing Director

BEc, Harvard Business School Advanced Management Program (2009)

Director since November 2010.

19 years with Shell both in Australia and overseas, including running the Australian retail business. Experience across national marketing, supply chain, IT and strategy roles. Managing Director of Coles Express between 2005 and 2009. Chief Operating Offi cer Coles from 2007 to 2009. Prior to joining SKILLED Group, Senior Advisor with TPG Capital engaging on current and potential investments in the energy, retail and industrial sectors in Australia and overseas.

–

AM Cipa

Independent Non-Executive Director

Chairman of the Audit & Risk Committee

BBus, Grad Dip Accounting, CPA

Director since April 2011.

20 years with CSL Limited in various senior fi nance roles, commencing prior to its fl oat on the ASX in 1990. Chief Financial Offi cer between 1994 and 2000 and Finance Director from 2000 until 2010.

CSL Limited (from August 2000 to October 2010)

MJ Findlay



Member of the Remuneration Committee

Member of the Nomination Committee

BEc

Director since March 2010.

Broad experience in services and manufacturing. 11 years with Australian Consolidated Industries, three years with Vinyl Clad (a division of Smith & Nephew) and fi ve years with James Sephton Plastics. At Programmed Maintenance Services for over 20 years and held the positions of Business Development Manager, General Manager and 18 years as Managing Director.

EVZ Limited (from April 2008 to present)

Redfl ex Holdings Limited (from November 2009 to present)

RN Herbert AM


Chairman of the Remuneration Committee

BComm

Director since November 2003.

Former CEO of Australian Industry Group. Considerable industry experience. Involved with Australian Industry Group and its predecessor organisation, Metal Trades Industry Association of Australia, since 1961, including 30 years as a Director in numerous roles. Appointed by the Federal Government in April 2010 as Water Supplier Advocate.

–

Directors’ report


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Directors Qualifi cations & experience Other Listed Company Directorships

TA Horton



Member of the Nomination Committee

BEc (Hons), MBA

Director since February 2011.

Worked in Australia and in the United States as an economist, business analyst and management consultant in both the public and private sectors including signifi cant periods at the Reserve Bank of Australia, based in Sydney and Bain & Company, based in San Francisco. Dean of The University of Western Australia Business School between February 2005 and August 2011. Extensive strategy development, performance improvement, business turnaround and leadership experience.

AHG Limited (from May 2012 to present)

Navitas Limited (from June 2012 to present)

TB Janes

(retired as a Director 30 June 2012)

BComm, FCPA, CFTP, Wharton AMP

Director between July 1998 and June 2012.

Over 20 years’ experience in a wide range of senior fi nance roles including as Chief Financial Offi cer for major operating divisions in the steel and minerals business at BHP. Chief Financial Offi cer of SKILLED Group for 14 years until his retirement from this role in April 2012.

–

GM Hargrave

(retired 31 August 2011)

Director between August 2003 and August 2011.

Joined SKILLED Group in 1998. Appointed National Marketing Manager and Business Development Manager in 2000. Appointed Chief Operating Offi cer in 2002 and was Chief Executive Offi cer between August 2003 and November 2010. Broad business background with experience in property management and private investment.

–

There have been no changes to the directors since the end of the fi nancial year.As at the date of this report, the interests of the directors in the shares and options of SKILLED Group were:

Directors Fully paid ordinary shares

Shares under option/rights

VA McFadden 126,885 –

MP McMahon 667,501 3,088,217

AM Cipa 15,544 –

MJ Findlay 35,000 –

RN Herbert AM 13,054 –

TA Horton – –

TB Janes(retired 30 June 2012) 116,667

GM Hargrave(retired 31/8/2011) 30,158,66 –

The Remuneration Report set out at pages 27 to 39 of this Report forms part of this Directors’ Report.

Directors’ report (cont.)


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Company secretaryTim Paine, BEc, LLBJoined SKILLED Group in March 2010 and has over 20 years’ experience in corporate counsel and company secretary roles, including at Symbion Health, Mayne Group, and ANZ Bank. Commenced career as a solicitor in private practice and has also managed his own consulting company. Extensive experience in major corporate transactions and litigations, both domestically and overseas.

DividendsFor the fi nancial year ended 30 June 2012, a fi nal dividend of 8.0 cents per share franked to 100% (at a corporate income tax rate of 30%) will be paid on 18 October 2012 to holders of fully paid ordinary shares. An interim dividend of 5.0 cents per share franked to 100% (at a corporate income tax rate of 30%) was paid on 17 April 2012.

Principal activitiesThe principal activities of SKILLED Group were the provision of staffi ng solutions to the public and private sectors. This included the provision of supplementary trades and professional labour, maintenance services, project management, healthcare professionals, offshore marine staffi ng services, customer contact solutions and trainee and apprenticeship management.

ResultsThe net profi t of SKILLED Group for the fi nancial year after income tax expense was $49,319,000 (2011: $3,139,000).

Review of operationsSales revenue grew by 3.9% overall, despite the ongoing challenges in the economic environment. Consistent demand for trades and skilled labour in the core Workforce Services business was underpinned by growth in the mining, resources and infrastructure sectors and was strongest in Western Australia, New South Wales and Queensland. This was offset by subdued activity levels in the manufacturing and related sectors especially in metropolitan areas and in South Eastern Australia. Technical Professionals (formerly “Other Staffi ng Services”) grew by 17.2% with Swan Contract Personnel continuing to benefi t from the ongoing activity in mining & resources and oil & gas sectors. This was supported by strong growth in higher margin telecommunication training, Indigenous employment, Workforce Management Solutions and IT&T placements. Earnings improvement in Engineering and Marine Services was supported by growth in OMS manning services, OMS International and OMSA JV, plus a strong contribution from ATIVO projects and maintenance. The overall revenue and earnings in this segment continued to be impacted by the planned exit from unprofi table vessel contracts, and the associated end of contract costs.A reduction in operating costs during the year also contributed to the improved result.Strong operating cashfl ow was a result of continued improvements in working capital management, including a 3 day reduction in average debtor days, the alignment of objectives across the business via balanced scorecards,

and back offi ce process improvements. This, along with the proceeds from non-core asset sales (Excelior and Tradeforce NZ), has resulted in a reduction in net debt to $27,406,000 as at 30 June 2012 (June 2011: $96,537,000).

Changes in state of affairsThere has been no signifi cant change in the state of affairs of the consolidated entity.

Subsequent eventsSubsequent to year end a legal dispute dating back to 2008 was adjudicated against SKILLED Group. The fi nancial impact, being an expense of $4,400,000 before income tax, has been included in the fi nancial statements as at 30 June 2012.There has been no other matter or circumstance occurring subsequent to the end of the fi nancial year that has signifi cantly affected, or may signifi cantly affect the operations, results of those operations, or the state of affairs of SKILLED Group in future fi nancial years.

Future developmentsIn the opinion of the directors, the disclosure of any additional information relating to the likely developments in the operations of SKILLED Group and the expected results of those operations could be prejudicial to the interests of SKILLED Group. Accordingly, this information has not been included in this report.

Environmental regulation and performanceThe Company’s operations are subject to various environmental regulations under both Commonwealth and State legislation. The Company has established procedures to monitor and manage compliance with existing environmental regulations and new regulations as they come into force. The Company has not been fi ned or prosecuted for, or convicted of, any signifi cant breaches of environmental regulation during the fi nancial year.

Indemnifi cation of offi cers and auditorsDuring the fi nancial year, the Company paid a premium for a contract insuring the directors of the Company (as named above), the company secretary and all executive offi cers of the Company and of any related body corporate against a liability incurred as such by a director, company secretary or executive offi cer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.SKILLED Group has entered into a Deed of Indemnity, Insurance and Access with each director of the Company and the company secretary against a liability incurred as such by the director or the company secretary, to the extent permitted by the Corporations Act 2001 and to provide funding during legal proceedings against the directors or the company secretary, where the legal proceedings arise from acting in their capacity as a director or company secretary of SKILLED Group or a subsidiary.


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The Company has not, during or since the fi nancial year, indemnifi ed or agreed to indemnify an auditor of the Company or any related body corporate against a liability incurred as such by an auditor.

Board and committee meetingsThe table below sets out the Board and committee meetings held during the fi nancial year and, where applicable, the number attended by each director.

BoardAudit & RiskCommittee

Remuneration Committee

Nomination Committee

Director Held Attended Held Attended Held Attended Held Attended

VA McFadden 10 10 6 6 5 5 1 1

MP McMahon 10 10 – – – – – –

AM Cipa 10 9(i) 6 6 – – – –

MJ Findlay 10 10 6 6 5 5 1 1

RN Herbert AM 10 10 – – 5 5 – –

TA Horton 10 10 6 6 – – – –

TB Janes (retired 30 June 2012) 10 10 – – – – – –

GM Hargrave (retired 31 August 2011) 2 0(ii) – – – – – –

(i) Mr Cipa’s absence from this meeting was due to a commitment which pre-dated his appointment as a director of the Company.

(ii) Mr Hargrave was on a leave of absence during the time these meetings were held.

Rounding of amountsThe Company is of the kind referred to in ASIC Class Order 98/100, dated 10 July 1998, and, in accordance with that Class Order, amounts in the Directors’ Report and the Financial Report has been rounded off to the nearest thousand dollars.

Non-audit servicesThe directors are satisfi ed that the provision of non-audit services, during the year, by the auditor (or by another person or fi rm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.Details of the amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 31 to the fi nancial statements.

Auditor’s independence declarationThe auditor’s independence declaration is included on page 40.

Directors’ report (cont.)


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Remuneration reportThis Remuneration report forms part of the Directors’ Report.

1. IntroductionThis Remuneration Report details remuneration information as it applies to SKILLED Group executives and non-executive directors for the year ended 30 June 2012. The remuneration practices adopted by SKILLED Group conform with the disclosure requirements under Section 300A of the Corporations Act, and the requirements of the AASB accounting standards. Our remuneration disclosures aim to maintain a high standard of clarity and transparency in communications with all stakeholders. The directors and key management personnel (“KMP”) referenced throughout this report are listed below.

Non-Executive Directors Position

Vickki McFadden Chairman, Chairman – Nomination Committee

Tony Cipa Non-Executive Director, Chairman – Audit & Risk Committee

Max Findlay Non-Executive Director

Bob Herbert AM Non-Executive Director, Chairman – Remuneration Committee

Tracey Horton Non-Executive Director

Executive directors and KMP Position

Mick McMahon Chief Executive Offi cer, Executive Director

Gary Kent(i) Chief Financial Offi cer

Paul McCormick Executive General Manager Eastern Region

David Timmel Executive General Manager Western Region

John Watkinson Chief Sales and Marketing Offi cer

Matt Caulfi eld(ii) Executive General Manager Transformation

Terry Janes(iii) Chief Financial Offi cer, Executive Director

John Kempe(iv) Chief Executive Offi cer Offshore Marine Services

Sue Healy(v) Executive General Manager Recruitment Services

(i) Mr Kent commenced with SKILLED Group on 30 April 2012.

(ii) Mr Caulfi eld was included in the category of key management personnel in the 2012 fi nancial year.

(iii) Mr Janes retired as Chief Financial Offi cer on 30 April 2012, retired from the Board of Directors on 30 June 2012 and will cease employment with SKILLED Group in July 2013.

(iv) Mr Kempe ceased employment with SKILLED Group effective 25 July 2012.

(v) Ms Healy ceased employment with SKILLED Group effective 2 July 2012.


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2. Remuneration governanceThe Board’s objective is to ensure that SKILLED Group’s remuneration strategy is aligned to the Company’s strategy, to drive performance and behaviours in the Company’s best interests and to deliver shareholder value. Most of the remuneration matters are considered by the Remuneration Committee, which is a sub-committee of the Board. Pursuant to the terms of its charter, the Remuneration Committee considers the remuneration framework, levels and performance of the Chief Executive Offi cer (“CEO”) and the CEO’s direct reports as well as the general remuneration policies and practices for all staff.In carrying out its duties, the Remuneration Committee from time to time, draws on the services of independent remuneration consultants. In the 2012 fi nancial year the Committee sought input from independent remuneration consultants on a range of matters involving executive remuneration, long-term incentives and short-term incentive plans for staff. While remuneration consultants provide information on market practice and remuneration levels, the Remuneration Committee forms its own independent decisions on executive remuneration. The overall remuneration strategy is continually reviewed by the Committee to ensure it meets the needs of the Company.

3. Our remuneration principles and policySKILLED Group’s approach to executive remuneration is to have a remuneration framework in place that enables us to attract, retain, motivate and reward high performing executives in the Company’s best interests and to deliver long-term value to shareholders. The executive remuneration principles are set by the Board and managed by the Remuneration Committee. The key principles which govern the Company’s remuneration framework are to:

ensure remuneration outcomes are aligned to the drivers of the Company’s success and the achievement of overall company and business unit objectives.

provide specifi c and measurable objectives under a balanced scorecard approach with targets set for the fi ve pillars of safety, our people, fi nancials, customers and operations.

ensure the total remuneration package is market competitive and provides the appropriate balance of fi xed and variable remuneration.

Components of the senior executives’ total remuneration for the 2012 fi nancial year are as follows:

Fixed Annual Remuneration Short-Term Incentive (STI) Long-Term Incentive (LTI)

Consists of: Fixed cash salary

Superannuation

Salary sacrifi ced benefi ts

Annual cash incentive

Targets linked to Company, business unit and individual performance outcomes

Grants of performance rights over a 3 year performance period

Performance hurdles are linked to EPS and relative TSR

Rewards for: Performance, skills and capability Performance over a 12-month period against agreed Company business unit and individual performance

Growth in the Company’s EPS over a three year period.

Relative TSR performance

The Board has discretion to provide other forms of incentive remuneration in appropriate circumstances. The chart below illustrates how the three elements of remuneration form part of senior executives’ total remuneration using the “at target” remuneration package for each group.

CEO Senior Executives (average)

Remuneration report (cont.)

50%

25%

15%

15%

25%

70%Fixed Remuneration

STI

LTI

STI

LTI

Fixed Remuneration


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A signifi cant component of the senior executives’ total remuneration is at risk in the form of short-term and long-term incentives. The Board sets clear performance targets for the senior executives directly aligned to fi ve key areas of measurement across the Company: safety, our people, fi nancials, customers and operations. These fi ve pillars are outlined in the table below.

Balanced scorecard – fi ve key pillars

Safety Safety is a core value for SKILLED Group. Targets are set for each business and the Company as a whole to reduce the all injury frequency rate and the lost time injury frequency rate.

Our People People are the foundation of our business and our greatest asset. Attracting, developing and retaining capable staff and fi eld employees to meet the needs of our clients’ will continue our success as a market leader.

Financials Financial discipline is essential to enhance shareholder value. Our targets are focused on: profi tability; ensuring our cost base is appropriate; and managing debt.

Customers As market leader SKILLED Group is committed to building its customer base and delivering outstanding service to all customers. The Company has put in place measures across each business to assess our performance in delivering superior service to all our customers.

Operations Delivering improvements to our systems and procedures is a focus of all of our operations, supported by a centralised ‘back offi ce’ model to achieve operational effi ciencies.

Achievement of targets set for each of these fi ve key pillars will deliver target remuneration and where senior executives deliver above target performance levels, they have the capacity to earn in excess of target remuneration.

4. Executive remuneration componentsThe executive remuneration components for senior executives are outlined in this section. In reviewing the remuneration components information was sought from independent remuneration consultants on the structure of the remuneration packages applying to senior executives and other levels of staff and on the level of fi xed pay increases in the market over the previous 12 months. Benchmarking is undertaken annually:

against executive remuneration practices within companies listed on the ASX with market capitalisation and revenues similar to that of the Company and/or within an industry sector in which it has operations;

with consideration for the market for organisations and positions of comparable size and complexity, sustained individual performance and competency levels, and importance to the business; and

within the Company to manage internal relativities.

FIXED REMUNERATION

The fi xed remuneration consists of cash salary, any salary sacrifi ce items and employer superannuation. Fixed remuneration is targeted at the market median for executive roles having similar scope, accountability and complexity to those being reviewed. Fixed remuneration is reviewed annually against the benchmarks with any adjustment taking into consideration the individual performance, competency levels, and importance to the business. For particular cases, high performance, value and critical skills may result in fi xed remuneration above the market median.

SHORT-TERM INCENTIVE

The SKILLED Group Executive Short-Term Incentive Plan (“ESTI Plan”) has been established to provide competitive performance-based remuneration incentives to senior executives. The ESTI Plan refl ects a strong commitment towards attracting and retaining a high performing leadership team who are committed to the on-going success of SKILLED Group and to create shareholder value.A balanced scorecard is established for each eligible senior executive at the start of the performance year with clear objectives set to refl ect each executive’s potential impact on the business. To provide consistent evaluation, individual and business performance are assessed against the same fi ve key areas of measurement being safety, our people, fi nancials, customers, and operations. Under each of these fi ve areas key performance indicators are established for each eligible executive at the start of the year, at each of the threshold, target and stretch levels. Through variable remuneration senior executives have the opportunity to earn more than target remuneration, should they achieve the stretch levels set out in the balanced scorecard.The threshold, target and stretch measures are based on the following performance levels.

Measure Performance level

Threshold Represents the minimum acceptable level of performance that needs to be achieved before any incentive payment is generated on the performance objective.

Target Represents strong performance outcomes relative to past and otherwise expected achievements.

Stretch Represents a clearly outstanding level of performance.


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Under the ESTI Plan, the Board retains discretion to increase or decrease incentive payments to take account of signifi cant events and/or other factors that were not anticipated when the targets were established. The ESTI Plan is not the exclusive method of providing incentive remuneration for employees of SKILLED Group and the Board has discretion to provide other forms of incentive remuneration in appropriate circumstances.

LONG-TERM INCENTIVE

The Executive Long-Term Incentive Plan (“ELTI Plan”) provides fl exibility in delivering long-term incentive awards to executives in the form of options, performance rights and cash or a combination of those. The ELTI Plan is designed to retain executives with key skills and to align the interests of participants with the interests of the Company and shareholders.

ELTI Plan Participants

The ELTI Plan is open to senior executives and other key individuals who make a signifi cant contribution to the success of the Company. Participation in the plan, which is approved by the Board, is based on sustained individual performance and value to the Company.

Type of Awards Under the ELTI Plan it is possible for the Board to grant options or performance rights over SKILLED Group ordinary shares, cash or a combination of these awards. The options and performance rights do not confer a right to vote. The vesting of awards is subject to performance hurdles which are outlined in Section 5.

Performance Measures

Under the ELTI Plan the vesting of awards are granted subject to performance conditions based on Earnings Per Share ("EPS") and relative Total Shareholder Return ("TSR"). These two performance measures operate independently under a 50/50 split on grant and, for the calculation of TSR, the peer group is the ASX200 excluding fi nancial institutions and including key competitors.

Prior to 2011, the grants awarded under the ELTI Plan, were subject only to EPS performance hurdles.

Performance Period

The performance period is generally three years, determined at the time of grant by the Board and if the performance hurdles are satisfi ed the awards will vest. In the case of performance rights, upon vesting the participant will be entitled to one SKILLED Group ordinary share for each performance right.

Hedging Policy SKILLED Group has a policy which prohibits any portion of a grant that has not vested to be hedged using fi nancial products designed to eliminate risk of price movement in the underlying share. Any breach of this policy can result in the Board taking disciplinary action which may result in immediate forfeiture of any portion of any grant that has not yet vested or been exercised, or other disciplinary action.

Decisions to grant options and performance rights and cash are made by the Board based on recommendations of the Remuneration Committee. For a list of share based arrangements in existence during the 2012 fi nancial year, please refer to Note 23 of the fi nancial statements. For disclosures on the equity settled share based payments issues to, exercised by and lapsed for the executive directors and KMP in the year ended 30 June 2012, please refer to Note 30 of the fi nancial statements.

5. Executive remuneration outcomesThe remuneration for senior executives for the year ended 30 June 2012 is set out below. Please refer to section 6 for further details regarding the remuneration structure for senior executives including the Chief Executive Offi cer and Chief Financial Offi cer.

FIXED REMUNERATION

The remuneration of senior executives is reviewed annually and any increase to fi xed remuneration, as a result of the review, is applied effective 1 October. Consideration is given to pay market movements for organisations and positions of comparable size and complexity, sustained individual performance and competence levels, and importance to the business. In 2012 a review of fi xed remuneration was undertaken and the Company was competitive on fi xed remuneration and as result very few increases will apply to key management personnel and other senior executives across the Company. The fi xed remuneration for both the Chief Executive Offi cer and Chief Financial Offi cer will remain unchanged in the 2013 fi nancial year.

SHORT-TERM INCENTIVES

The variable remuneration outcomes are linked with the performance of the individual and the Company against the key objectives set out in the balanced scorecard for each business unit. In the 2012 fi nancial year, SKILLED Group exceeded its target performance measures, which will result in remuneration slightly above the target levels. In particular, several business units within SKILLED Group performed well above expectations and the senior executives for these business units will receive above target performance bonuses, as outlined in the table below. For business units that have not performed as well, the bonuses are less than target or will not be paid based on the results achieved against the business unit scorecard.



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The following incentives were achieved in the 2012 fi nancial year under the ESTI Plan for the executive directors and other key management personnel.

Executive Short-Term Incentive Plan

% of Fixed Remuneration

Achieved Not achievedMaximum that

could be achieved

Mick McMahon 64% 36% 100%

Gary Kent 0% 0% 0%

Paul McCormick 32% 8% 40%

David Timmel 0% 40% 40%

Matt Caulfi eld 32% 8% 40%

John Watkinson 23% 17% 40%

Terry Janes 17% 43% 60%

John Kempe 0% 40% 40%

Sue Healy 0% 40% 40%

LONG-TERM INCENTIVES

During the 2012 fi nancial year, 1,995,316 performance rights over SKILLED Group shares have been granted under the ELTI plan to a number of executives with a performance period from 1 July 2011 through to 30 June 2014. The number of performance rights issued was calculated based on the volume weighted average share price of SKILLED Group ordinary shares for the fi ve days commencing on 25 August 2011 (being one day after the announcement of the 2011 full year results).A further 1,992,593 options and 800,605 performance rights were granted under the ELTI plan, the majority in relation to the CEO, Mr McMahon, as set out in Section 6 for the Chief Executive Offi cer.For the 2013 fi nancial year the two performance measures of EPS and relative TSR will continue to apply and the performance hurdles are outlined in the tables below.For the EPS measures the targets set are based on a compound annual growth rate over the 3 year period of 10% at threshold, 12% at target and 14% at stretch. The Board has discretion to adjust for signifi cant items (both positive and negative) when determining the EPS outcome. For the calculation of TSR, the peer group is the ASX200 excluding fi nancial institutions and including key competitors.The number of performance rights to be issued will be based on the volume weighted average share price of SKILLED Group ordinary shares for the fi ve days commencing 23 August 2012 (being one day after the announcement of the 2012 full year results). The performance hurdles are set out below.

EPS

Performance level

3 year EPS

1 July 2012 – 30 June 2015 % to vest

Below threshold Less than 10% Compound Annual Growth (CAGR)

0%

Threshold 10% CAGR 25%

Between threshold & target Between 10% and 12% CAGR Pro rata

Target 12% CAGR 50%

Between target & stretch Between 12% and 14% CAGR Pro rata

Stretch 14% CAGR 100% of grant assessed under EPS performance measure

Relative TSR

Performance level

3 year relative total shareholder returns (TSR)1 July 2012 – 30 June 2015 % to vest

Below threshold Below 50th Percentile 0%

Threshold 50th Percentile 50%

Between threshold & target Between 50th and 75th Percentile

Pro rata

Target 75th Percentile 100% of grant assessed under Relative TSR measure


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During the 2012 fi nancial year, ELTI grants awarded in the 2006 year expired and ELTI grants awarded in the 2007 fi nancial year did not vest as the EPS growth performance hurdles were not satisfi ed.Equity-settled share-based payments issued to, exercised by and lapsed for executive directors and key management personnel during the year ended 30 June 2012 are outlined in the table below.

2012

Balance at 1/7/2011 No.

Granted as compensation No.

Vested No.

Lapsed No.

Balance at 30/6/2012 No.

Balance vested at 30/6/2012 No.

Balance exercisable at 30/6/2012 No.

Options vested during year No.

Directors

Mick McMahon – 3,088,217 – – 3,088,217 – – –

Terry Janes 1,168,000 139,896 – (287,000) 1,020,896 81,000 81,000 –

Key management personnel

Gary Kent – – – – – – – –

Paul McCormick 501,900 80,829 (25,000) (144,000) 413,729 – – –

David Timmel – 76,684 – – 76,684 – – –

John Watkinson 244,300 81,244 (41,000) – 284,544 – – –

Matt Caulfi eld 24,000 77,202 – – 101,202 – – –

Former key management personnel

John Kempe(i) 65,000 102,383 – – 167,383 – – –

Sue Healy – 65,078 – – 65,078 – – –

Total 2,003,200 3,711,533 (66,000) (431,000) 5,217,733 81,000 81,000 –

(i) Mr Kempe ceased employment with the SKILLED Group on 25 July 2012 and all ELTI grants lapsed as a result.

The following table is a summary of key performance and shareholder wealth statistics for the consolidated entity over the past fi ve years; this includes the reported net profi t after tax (“NPAT”) and the reported earnings per share (“EPS”).

Financial year NPAT $ million

Earnings per share (cents)

Total dividends per share (cents)

Share price @ 30 June ($)

2012 49.3 21.1 13.0 2.37

2011 3.1 1.6 3.0 2.24

2010 12.7 7.3 – 1.09

2009 28.3 23.0 10.5 1.23

2008 39.3 34.5 23.0 3.00



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6. Senior executive contracts of employment The general details of the contracts for senior executives (including the Chief Executive Offi cer and Chief Financial Offi cer) are outlined below. The individual contracts may differ on occasions to suit particular needs.

Contract Item Terms

Length of contract Open ended.

Fixed Remuneration The fi xed remuneration comprises cash salary, any salary sacrifi ce items and employer superannuation. Any fringe benefi t tax liability with respect to benefi ts is borne by the employee and included as part of the fi xed remuneration.

Executive Short-Term Incentive Plan (ESTI Plan)

Eligible to participate. Incentive criteria and award opportunities vary for each executive.

Executive Long-Term Incentive Plan (ELTI Plan)

Eligible to participate. Award opportunities may vary for each executive.

If a senior executive chooses to resign from SKILLED Group, any unvested grants of options, performance rights and/or cash under the ELTI Plan will lapse. For vested options, a senior executive has up to 30 days from departure (or the original date of expiry whichever is the earliest) to exercise the options or they will lapse. Vested performance rights will convert into shares in the Company.

If the exit is involuntary, by retirement or a company initiated termination (excluding termination for cause) the unvested grant of options, performance rights and/or cash under the ELTI Plan will continue. The award of options, performance rights and/or cash continue until three years from the date of grant and then if the performance conditions are met they will vest, otherwise they will lapse. Should the options vest, the senior executive will have six months from date of vesting to exercise, otherwise they will lapse. Vested performance rights will convert into shares in the Company.

If an employee is dismissed with cause, any unvested grant of option, performance rights and/or cash under the ELTI Plan will lapse.

Refer to Section 4 for further details on the Executive Long-Term Incentive Plan.

Notice period The Chief Executive Offi cer and Chief Financial Offi cer (current and former) have a notice period up to twelve months, while senior executives have a notice period up to three months.

Resignation Employment may be terminated by giving notice consistent with the notice period.

Retirement There are no fi nancial entitlements due from the Company on the retirement of an executive. The Board does have discretion to make ex-gratia payments.

Termination on notice by the Company

The Company may terminate the employment agreement by providing notice consistent with the notice period or payment in lieu of the notice period.

Redundancy Payments for redundancy are discretionary and determined having regard to the particular circumstances. While there are no contractual commitments to pay redundancy, the Remuneration Committee has adopted Remuneration Guidelines to ensure consistent and equitable practices are applied.

Death or total and permanent disablement

Same principles as for retirement.

In addition, the Company currently has salary continuance insurance cover for senior executives. Any benefi ts paid under this policy will be provided to the executive or his/her estate.

Termination for serious misconduct

The Company may terminate the employment agreement at any time without notice, and the executive will be entitled to payment of fi xed remuneration only up to the date of termination.

Chief Executive Offi cer – Mick McMahonThe following summary provides an outline of the contract details and remuneration package for the Chief Executive Offi cer, Mr McMahon, who commenced with SKILLED Group effective 8th November 2010.

Remuneration Item Terms

Fixed Remuneration: The annual fi xed remuneration is $1,100,000 inclusive of superannuation. This is reviewed annually with any increases at the discretion of the Board. The CEO’s fi xed remuneration will not change in the 2013 fi nancial year.

Short-Term Incentives: The maximum short-term incentive payable is 100% of fi xed annual remuneration; targets are set annually by the Board for target and stretch performance measures. For the 2012 fi nancial year the CEO will receive a bonus of $572,000. This bonus was calculated taking into account both individual and company performance.


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Long-Term Incentives The CEO is eligible to participate in the ELTI Plan. The Board determines the performance and vesting criteria for each grant. As announced in November 2010, Mr McMahon’s contract of employment included the original 2010 grant of options which was approved by shareholders at the 2011 Annual General Meeting.

2010 grant:

The total value of options granted was of equal value to 100% of fi xed annual remuneration of $995,000. The exercise price of these options is $1.47 based on the volume weighted average share price of SKILLED Group ordinary shares for the fi ve days commencing on the date of announcement of Mr McMahon’s appointment. The value of each option was determined by an external consultancy fi rm based upon a Black Scholes valuation and the number of options granted was 1,842,593. If the performance hurdles are satisfi ed, the options will vest and may be exercised by Mr McMahon until the sixth anniversary of the grant date. The options will vest upon achievement of two separate performance conditions:

1. EPS – Based on the company’s EPS growth over the period 1 July 2010 to 30 June 2013 using reported EPS for the year ended 30 June 2010 as the base, the options will vest as outlined in the table below.

Average annual% EPS growth

Equivalent 3 year cumulative EPS1 July 2010 – 30 June 2013 % to vest

Below 40% Below 44.4 cps 0%

40% 44.4 cps 25%

50% 51.8 cps 50%

65% 64.5 cps 100%

Note: There is a pro-rata allocation for EPS growth between 40%-50% and 50%-65%.

2. Gearing ratio – Over the period 1 July 2011 to 30 June 2013, the Company’s debt levels must not exceed two times EBITDA.

2011 grant:

Mr McMahon was issued with 569,948 performance rights in the 2012 fi nancial year. The value of the performance rights was based on the volume weighted average share price of SKILLED Group ordinary shares over the fi ve days commencing on 25 August 2011 (being one day after the announcement of the 2011 full year results).

The rights will vest upon achievement of two separate performance conditions, EPS and relative TSR, which operate independently under a 50/50 split. For relative TSR the peer group is the ASX200 excluding fi nancial institutions and including key competitors. The applicable performance hurdles over the relevant performance period are set out in the tables below.

Performance level3 year cumulative EPS

1 July 2011 – 30 June 2014 % to vest

Below threshold Below 62 cents per share (cps) 0%

Threshold 62 cps 25%

Between threshold & target

Between 62 and 70 cps Pro rata

Target 70 cps 50%

Between target & stretch

Between 70 and 76 cps Pro rata

Stretch 76 cps 100% of grant assessed under EPS performance

measure



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Long-Term Incentives

Performance level

3 year relative total shareholder returns (TSR)1 July 2011 – 30 June 2014 % to vest



Between threshold & target

Between 50th and 75th Percentile Pro rata


Co-investment scheme: To align the Chief Executive Offi cer’s interests with those of shareholders, SKILLED Group established a CEO co-investment agreement. Pursuant to this agreement Mr McMahon purchased $1 million worth of SKILLED Group shares in November 2010.

In accordance with the terms of his employment contract, Mr McMahon was granted 675,676 performance rights (each being a right to one SKILLED Group ordinary share) and was determined by dividing the amount invested in SKILLED Group shares by the CEO by $1.48 being the fi ve day volume weighted average share price prior to (and not including) the date of announcement of appointment as Chief Executive Offi cer.

The performance rights will vest as to 50% on 30 September 2013 provided that Mr McMahon still holds the shares he purchased and that the Company’s three-year cumulative EPS from 1 July 2010 to 30 June 2013 equals, or is greater than, 51.8 cps, and as to the remaining 50% on 30 September 2014, provided that Mr McMahon still holds 50% of the shares he purchased and that the Company’s three-year cumulative EPS from 1 July 2011 to 30 June 2014 equals, or is greater than, 70.0 cps. Failure to meet the co-investment conditions, employment conditions or the performance conditions will result in the performance rights lapsing.

Chief Financial Offi cer – Gary KentMr Kent joined the Company in April 2012 as the Chief Financial Offi cer. His remuneration package is set out as follows:


Fixed Remuneration: The fi xed remuneration for Mr Kent for the period 1 July 2012 until 30 June 2013 is $580,000.

Short-Term Incentives: For the 2012 fi nancial year, Mr Kent is not eligible for a short-term incentive payment. For the 2013 fi nancial year, Mr Kent will be eligible to participate in the plan. Any bonus will take into account both individual and company performance.

Long-Term Incentives: In the 2013 fi nancial year, Mr Kent will be eligible to participate in the long-term incentive plan.

Former Chief Financial Offi cer – Terry JanesMr Janes retired as Chief Financial Offi cer on 30 April 2012, retired from the Board of Directors on 30 June 2012 and will cease employment with SKILLED Group in July 2013. Mr Janes’ remuneration disclosed in this report includes remuneration for the 2012 fi nancial year and the portion of his notice period payable in the 2013 fi nancial year. At the conclusion of Mr Janes’ service with the Company, the Board will exercise discretion on any unvested long-term incentive grants held. His remuneration package is set out as follows:


Fixed Remuneration: The fi xed remuneration for Mr Janes for the period 1 July 2011 until 30 June 2012 was $600,000.

Short-Term Incentives: For the period 1 July 2011 until 30 June 2012 Mr Janes will receive a short-term incentive cash bonus of $100,000. This bonus was calculated taking into account both individual and company performance.

Long-Term Incentives: Mr Janes has been a participant in the ELTI Plan. No further long-term incentive grants will be made to Mr Janes. At the conclusion of Mr Janes’ employment with the Company, the Board will exercise its discretion to determine the outcome of any unvested grants previously made under the ELTI Plan.

Retirement: Mr Janes retired as Chief Financial Offi cer on 30 April 2012, retired from the Board of Directors on 30 June 2012 and will cease employment with SKILLED Group in July 2013.

Directors Fees: During his service on the Board, Mr Janes did not receive any Directors’ Fees. Mr Janes retired from the Board effective 30 June 2012.


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7. Remuneration tablesThe tables below are provided as per the disclosure requirements under the Corporations Act, Section 300A and the requirement of the accounting standards AASB 124. The remuneration tables below disclose the remuneration for the executive directors and key management personnel for the 2011 and 2012 fi nancial years.Current key management personnel

Name Title Year

Short-term employee benefi ts

Super-annuation

Long-term employee benefi ts

Termi-nation

benefi ts Total

Proportion of total that is

perform-ance related Fixed(i)

Short-term incentive

Non-monetary (iI)

Other short-term

benefi t

Other long-term employee

benefi ts

Equity settled share- based payment(iii)

Mick McMahon(iii)

Chief Executive Offi cer (Executive Director)

2012 1,052,988 700,000 10,281 – 24,576 – 819,422 – 2,607,267 58%

2011 667,514 – 5,389 – 13,800 – 345,957 – 1,032,660 34%

Gary Kent(iv) Chief Financial Offi cer 2012 54,954 – 572 – 52,629 – – – 108,155 0%

2011 – – – – – – – – – –

Paul McCormick

Executive General Manager, Eastern Region

2012 342,722 124,000 – 7,500 47,775 25,691 70,235 – 617,923 36%

2011 325,761 117,000 10,291 – 47,199 2,933 27,394 – 530,578 28%

David Timmel Executive General Manager, Western Region

2012 342,443 – – 1,106 49,375 – 29,483 – 422,407 7%

2011 155,612 – – – 21,600 – – – 177,212 0%

John Watkinson

Chief Sales and Marketing Offi cer

2012 372,973 89,000 – – 15,775 23,997 76,568 – 578,313 33%

2011 357,775 – – – 15,199 3,218 42,916 – 419,108 11%

Matt Caulfi eld(v) Executive General Manager, Transformation

2012 301,797 96,000 1,080 – 15,775 12,393 44,511 – 471,556 32%

2011 – – – – – – – – – –

Total 2012 2,467,877 1,009,000 11,933 8,606 205,905 62,081 1,040,219 – 4,805,621 –

2011 1,506,662 117,000 15,680 – 97,798 6,151 416,267 – 2,159,558 –

(i) Fixed includes fi xed cash, and annual and long service leave accruals.

(ii) Non-monetary items include benefi ts provided under a salary sacrifi ce arrangement.

(iii) Mr McMahon commenced with SKILLED Group on 11 November 2010.

(iv) Mr Kent commenced with SKILLED Group on 30 April 2012.

(v) Mr Caulfi eld was included in the category of key management personnel in the 2012 fi nancial year.



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Former executive director and key management personnel(i)

Name Title Year

Short-term employee benefi ts

Super-annuation

Long-term employee benefi ts

Termi-nation

benefi ts Total

Proportion of total that is

perform-ance related Fixed(i)

Short-term incentive

Non-monetary (iI)

Other short-term

benefi t

Other long-term employee

benefi ts

Equity settled share- based payment(iii)

Terry Janes(iv)

Chief Financial Offi cer (Former)

2012 694,354 100,000 102,871 – 72,055 391,405 105,880 – 1,466,565 41%

2011 511,003 – 34,859 – 48,559 171,162 9,966 – 775,549 23%

John Kempe(v)

Chief Executive Offi cer Offshore Marine Services

2012 377,292 – 62,351 – 47,845 33,526 73,465 67,554 662,033 16%

2011 388,546 95,000 66,492 45,000 38,399 9,530 9,585 – 652,552 17%

Sue Healy(vi) Executive General Manager, Recruitment

2012 244,488 – 46,783 – 15,775 – 25,021 116,752 448,819 6%

2011 93,997 – – – 5,012 – – – 99,009 0%

Greg Hargrave(vii)

Chief Executive Offi cer and Managing Director

2011443,991 – 12,600 – 7,789 (26,167) (28,962) 629,855 1,039,106 (5)%

Damian Johnson(viii)

CEO Staffi ng Services

2011535,199 – 1,080 – 15,199 6,335 170,021 366,916 1,094,750 16%

Damian Bridge(ix)

Executive General Manager, Southern Region

2011309,186 – 29,369 – 15,176 3,424 22,891 235,380 615,426 4%

Total 2012 1,316,134 100,000 212,005 – 135,675 424,931 204,366 184,306 2,577,417

2011 2,281,922 95,000 144,400 45,000 130,134 164,284 183,501 1,232,151 4,276,392

(i) Mr Greg Hargrave, Mr Damian Johnson, Mr Damian Bridge were disclosed as key management personnel in the remuneration tables for the 2011 fi nancial year prior to their departure from the Company during the 2011 fi nancial year.

(ii) Fixed includes fi xed cash and annual and long service leave accruals.

(iii) Long-term employee benefi ts that are negative amounts refl ecting the write back of amortised ELTI Plan grants due to performance criteria no longer expected to be met.

(iv) Mr Janes retired as Chief Financial Offi cer on 30 April 2012, retired from the Board of Directors on 30 June 2012 and will cease employment with SKILLED Group in July 2013. Please refer to Section 6 for further details.

(v) Mr Kempe ceased employment with SKILLED Group effective 25 July 2012.

(vi) Ms Healy ceased employment with SKILLED Group effective 2 July 2012.

(vii) Mr Hargrave ceased employment with SKILLED Group effective 31 December 2011.

(viii) Mr Johnson ceased employment with SKILLED Group effective 30 June 2011.

(ix) Mr Bridge ceased employment with SKILLED Group effective 30 June 2011.


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8. Non-Executive Directors’ remunerationNon-executive directors’ fees are reviewed annually and are determined by the Board based on recommendations from the Remuneration Committee. In making its recommendations the Remuneration Committee considers the level of remuneration required to attract and retain non-executive directors to the SKILLED Group Board and seeks market information from independent remuneration consultants, Ernst and Young. The fees are set at levels that fairly represent the responsibilities of, and the time spent by, the non-executive directors on SKILLED Group matters. Non-executive directors’ fees are within the maximum aggregate limit of $900,000 per annum agreed to by shareholders at the Annual General Meeting held on 13 October 2007. Consistent with the minimal movement for fi xed remuneration across the key management personnel and senior executives, the non-executive directors’ fees will not be increased in the 2013 fi nancial year.The current fees paid to non-executive directors are:

Role Current fee

Chairman $200,000

Chairman of Audit & Risk Committee $120,000

Chairman of Remuneration Committee and Non-Executive Directors $100,000

Directors may elect to take all or part of their fees in cash or nominated benefi ts. Benefi ts that can be packaged by non-executive directors include novated car leases and additional superannuation contributions. The Company does not operate any equity plans for, or pay any performance based incentives to, non-executive directors. Non-executive directors are entitled to statutory superannuation. Amounts paid for statutory superannuation are included as part of the directors’ fees. There are no other schemes for retirement benefi ts for non-executive directors. This is consistent with Principle 9.3 of the Australian Stock Exchange (ASX) Corporate Governance Guidelines.Please see the Non-Executive Directors’ Remuneration tables below which disclose the remuneration for the Non-Executive Directors for the fi nancial years 2011 and 2012.



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Name Title YearNon-Executivedirector fees Superannuation Total

Non-Executive Directors

Vickki McFadden Chairman of the Board 2012 184,225 15,775 200,000

2011 128,914 11,602 140,516

Bob Herbert AM Non-Executive Director, Chairman Remuneration Committee

2012 100,000 – 100,000

2011 75,900 – 75,900

Max Findlay Non-Executive Director 2012 91,743 8,257 100,000

2011 69,600 6,300 75,900

Tony Cipa Non-Executive Director, Chairman Audit Committee

2012 110,092 9,908 120,000

2011 19,267 1,734 21,001

Tracey Horton Non-Executive Director 2012 91,743 8,257 100,000

2011 27,151 1,789 28,940

Total 2012 577,803 42,197 620,000

2011 320,832 21,425 342,257

Former Non-Executive Directors

KV Loughnan AO(i) Former Chairman of the Board 2011 125,929 (18) 125,911

KW Hughes(ii) Non-Executive Director 2011 25,300 – 25,300

PA Gregg(iii) Non-Executive Director 2011 40,619 4,700 45,319

Total 2011 191,848 4,682 196,530

(i) Mr KV Loughnan resigned as Chairman of the Board on 25 October 2010.

(ii) Mr KW Hughes resigned from the Board on 25 October 2010.

(iii) Mr PA Gregg resigned from the Board on 10 February 2011.

Signed in accordance with a resolution of the directors made pursuant to Section 298(2) of the Corporations Act 2001.

On behalf of the directors,

VA McFadden MP McMahonChairman Chief Executive Offi cer and Managing Director

Melbourne, 22 August 2012


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Auditor’s independence declaration


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Independent audit report


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Independent audit report (cont.)


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In accordance with a resolution of the directors of Skilled Group Limited (‘the Company’), we state:In the opinion of the directors:(a) the fi nancial statements and notes of Skilled Group Limited are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of its fi nancial position as at 30 June 2012 and its performance for the year ended on that date, and

(ii) compliance with Accounting Standards and Corporations Regulations 2001;(b) the fi nancial statements and notes are in compliance with International Financial Reporting Standards, as stated in note 2

to the fi nancial statements; 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.This declaration has been made after receiving the declarations required to be made to the directors in accordance with s.295A of the Corporations Act 2001.At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418 and has entered into a deed of cross guarantee as contemplated in that class order. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.In the directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order applies, as detailed in note 29 to the fi nancial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become subject, by virtue of the deed of cross guarantee.

On behalf of the directors,

VA McFadden MP McMahonChairman Chief Executive Offi cer and Managing Director

Melbourne, 22 August 2012

Directors’ declarationFor the financial year ended 30 June 2012


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FINANCIAL STATEMENTS45 Consolidated statement of comprehensive income46 Consolidated statement of fi nancial position47 Consolidated statement of cash fl ows48 Consolidated statement of changes in equity49 Notes to the Financial Statements


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Consolidated statement of comprehensive income

For the fi nancial year ended 30 June 2012

Note 2012 $’000

2011 $’000

Continuing Operations

Revenue 4(a) 1,889,971 1,819,783

Equity-accounted income from an associate 4(b) 4,435 3,700

Other income 4(c) 405 496

Employee and sub-contractor related costs (1,672,923) (1,601,714)

Raw materials and consumables used (10,376) (11,456)

Offi ce occupancy related costs (12,342) (12,156)

Profi t/(Loss) from sale of assets 5 516 (119)

Impairment of goodwill – (10,727)

Marine vessel charter costs (15,228) (33,035)

Other expenses (97,997) (89,656)

Depreciation and amortisation expenses 4(d) (13,385) (24,702)

Finance costs 4(d) (8,475) (28,808)

Profi t from continuing operations before income tax expense 64,601 11,606

Income tax expense from continuing operations 6 (19,723) (4,485)

Profi t from continuing operations 44,878 7,121

Discontinued operations

Profi t/(loss) from discontinued operations after tax 26 4,441 (3,982)

Profi t for the year 49,319 3,139

Other comprehensive income

Gain on cash fl ow hedges taken to equity 24(b) 1,076 3,767

Income tax on items taken directly to equity (323) (1,130)

Change in foreign currency translation reserve arising on translation of foreign operations and net investment in foreign subsidiaries

24(c) (785)(566)

Other comprehensive income for the year, net of tax (32) 2,071

Total comprehensive income for the year 49,287 5,210

Profi t attributable to members of the parent entity 49,319 3,139

Total comprehensive income attributable to members of the parent entity

49,287 5,210

Earnings per share

Basic earnings per share (cents) 35 21.13 1.56

Diluted earnings per share (cents) 35 20.66 1.55

Basic earnings per share from continuing operations (cents) 35 19.23 3.54

Diluted earnings per share from continuing operations (cents) 35 18.80 3.52

Basic earnings per share from discontinuing operations (cents) 35 1.90 (1.98)

Diluted earnings per share from discontinuing operations (cents) 35 1.86 (1.97)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.


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Consolidated statement of fi nancial position

As at 30 June 2012

Note 2012 $’000

2011 $’000

Current assets

Cash and cash equivalents 32 11,216 13,931

Receivables 8 237,842 240,176

Inventories 10 534 816

Other fi nancial assets 9 20 1,193

Other assets 11 6,835 6,752

Total current assets 256,447 262,868

Non-current assets

Receivables 8 1,031 2,035

Property, plant and equipment 12 11,135 13,231

Equity accounted investments 14 10,073 5,638

Intangibles 13 389,324 391,068

Deferred tax assets 15 21,511 17,887

Total non-current assets 433,074 429,859

Total assets 689,521 692,727

Current liabilities

Payables 16 116,136 99,834

Borrowings 17 1,022 509

Current tax liabilities 18,217 1,702

Other fi nancial liabilities 18 559 1,958

Provisions 20 51,460 43,652

Total current liabilities 187,394 147,655

Non-current liabilities

Payables 16 – 7,222

Borrowings 17 37,600 109,959

Other fi nancial liabilities 18 121 623

Provisions 20 16,115 11,961

Total non-current liabilities 53,836 129,765

Total liabilities 241,230 277,420

Net assets 448,291 415,307

Equity

Issued capital 22 349,500 348,943

Reserves 24 92 (773)

Retained earnings 98,699 67,137

Total equity 448,291 415,307

The above consolidated statement of fi nancial position should be read in conjunction with the accompanying notes.


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Consolidated statement of cash fl ows


Note 2012 $’000

2011 $’000

Cash fl ows from operating activities

Profi t before taxation – continuing operations 64,601 11,606

Profi t/(loss) before taxation – discontinued operations 4,019 (4,950)

Depreciation and amortisation – continuing operations 13,385 24,702

Depreciation and amortisation – discontinued operations 662 3,027

Interest revenue 4(c) (405) (496)

Interest expense 4(d) 8,475 28,808

Earnings before interest, tax, depreciation and amortisation from continuing and discontinued operations

90,737 62,697

Non Cash Items

Share based payments 4 2,231 633

Loss/(gain) on disposal of property, plant and equipment 5 (516) 119

Loss/(gain) on divestment of businesses 26 (5,618) –

Impairment of goodwill 13 – 12,449

Non-cash equity accounted income from an associate 14 (4,435) (3,700)

82,399 72,198

Increase/Decrease in assets and liabilities excluding effects of acquisitions and divestments:

(Increase)/Decrease in receivables (2,038) 12,632

(Increase)Decrease in inventories 282 95

(Increase)/Decrease in other assets (245) 2,002

Increase/(Decrease) in payables 17,650 (16,857)

Increase/(Decrease) in provisions 11,867 8,954

Cash generated from operations 109,915 79,024

Income taxes (paid)/received (8,117) (3,288)

Net cash provided by operating activities 101,798 75,736

Cash fl ows from investing activities

Payments for property, plant and equipment (2,608) (3,634)

Payments for intangibles (5,569) (3,574)

Proceeds from the divestment of businesses (net of sale costs) 26 10,682 –

Payments for purchase of businesses 32 (10,186) (20,329)

Proceeds from sale of property, plant and equipment 1,100 151

Net cash used in investing activities (6,581) (27,386)

Cash fl ows from fi nancing activities

Proceeds from borrowings 377,038 565,328

Repayment of borrowings (448,223) (646,590)

Interest received 405 496

Interest paid (9,517) (20,658)

Net proceeds from issues of equity 352 69,191

Dividends paid 7 (18,674) –

Net cash used in fi nancing activities (98,619) (32,233)

Net Increase/(Decrease) in cash and cash equivalents (3,402) 16,117

Cash and cash equivalents at the beginning of the fi nancial year 32 13,931 (2,470)

Effects of exchange rate changes on cash held in foreign currencies 3 284

Cash and cash equivalents at the end of the fi nancial year 32 10,532 13,931

The above consolidated cash fl ow statement should be read in conjunction with the accompanying notes.SKILLED GROUP

ANNUAL REPORT 2012 47

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Consolidated statement of changes in equity


Issued capital $’000

Foreign currency translation reserve $’000

Hedging reserve $’000

Employee equity- settled benefi ts reserve $’000

Retained earnings $’000

Total $’000

2012

Balance at 1 July 2011 348,943 (1,682) (1,174) 2,083 67,137 415,307

Profi t for the year – – – – 49,319 49,319

Exchange differences arising on translation of foreign operations

– (785) – – – (785)

Net gain on cash fl ow hedges – – 1,076 – – 1,076

Income tax relating to components of other comprehensive income

– – (323) – – (323)

Total comprehensive income for the year – (785) 753 – 49,319 49,287

Issue of shares (net of costs) 557 – – – – 557

Amortisation of executive share options and performance rights

– – – 1,814 – 1,814

Lapse of Executive Long Term Incentive plan – – – (917) 917 –

Payment of dividends – – – – (18,674) (18,674)

Balance at 30 June 2012 349,500 (2,467) (421) 2,980 98,699 448,291

2011

Balance at 1 July 2010 279,129 (1,116) (3,811) 1,450 63,998 339,650

Profi t for the year – – – – 3,139 3,139

Exchange differences arising on translation of foreign operations

– (566) – – – (566)

Net gain on cash fl ow hedges – – 3,767 – – 3,767

Income tax relating to components of other comprehensive income

– – (1,130) – – (1,130)

Total comprehensive income for the year – (566) 2,637 – 3,139 5,210

Issue of shares (net of costs) 69,814 – – – – 69,814

Amortisation of executive share options and performance rights

– – – 633 – 633

Payment of dividends – – – – – –

Balance at 30 June 2011 348,943 (1,682) (1,174) 2,083 67,137 415,307

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.


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Notes to the fi nancial statementsFor the financial year ended 30 June 2012

1. Corporate informationSKILLED Group Limited (“SKILLED”) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange. The nature of the operations and principal activities of the Group are described in the directors’ report.The consolidated fi nancial statements of SKILLED Group Limited for the year ended 30 June 2012 were authorised for issue by the directors on 22 August 2012.

2. Signifi cant accounting policies

2.1 Basis of preparationThe fi nancial report is a general purpose fi nancial report prepared in accordance with the Corporations Act 2001, Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The fi nancial report includes the consolidated fi nancial statements of the consolidated entity. The fi nancial report has been prepared on the basis of historical cost, except for derivative fi nancial instruments that have been measured at fair value. The fi nancial report is presented in Australian dollars, unless otherwise noted. The accounting policies used have been consistently applied for the purposes of this fi nancial report.The Company is a company of the kind referred to in ASIC Class Order 98/100, dated 10 July 1998, and in accordance with that Class Order amounts in the fi nancial report are rounded to the nearest thousand dollars, unless otherwise noted.

2.2 Statement of complianceThe fi nancial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

2.3 New accounting standards and interpretationsThe following standards and interpretations have been adopted by SKILLED for the fi rst time during the year, which became applicable from 1 July 2011:

Reference Title

AASB 124 Related Party Disclosures

AASB 1048 Interpretation of Standards

AASB 1054 Australian Additional Disclosures

AASB 2009-12 Amendments to Australian Accounting Standards

AASB 2010-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project

AASB 2010-5 Amendments to Australian Accounting Standards

AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets

AASB 2011-1 Australian Additional Disclosures – Trans-Tasman Convergence Project


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Notes to the fi nancial statements (cont.)For the financial year ended 30 June 2012

When the consolidated entity loses control of a subsidiary, the profi t or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiaries are accounted for (i.e. reclassifi ed to profi t or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

The following signifi cant accounting policies have been adopted in the preparation and presentation of the fi nancial report:

(A) BASIS OF CONSOLIDATION

The consolidated fi nancial statements incorporate the fi nancial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. The results of subsidiaries acquired or disposed during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the fi nancial statements of the subsidiaries to bring their accounting policies into line with those used by other members of the consolidated entity. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

2. Signifi cant accounting policies (cont.)Australian Accounting Standards or International Financial Reporting Standards that have been recently issued or amended but are not yet effective have not been applied to the fi nancial report. The following amendments are not expected to have a material impact on SKILLED’S fi nancial position or performance; however, increased disclosure may be required:

Reference Title

Effective / Application date of Standard

for Group

AASB 9 Financial Instruments

Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB 2009-11 and superseded by AASB 2010-7 and 2010-10.

1 July 2015

AASB 10 Consolidated Financial Statements

Consequential amendments were also made to other standards via AASB 2011-7

1 July 2013

AASB 11 Joint Arrangements

Consequential amendments were also made to other standards via AASB 2011-7 and amendments to AASB 128.

1 July 2013

AASB 12 Disclosure of Interests in Other Entities 1 July 2013

AASB 13 Fair Value Measurement

Consequential amendments were also made to other standards via AASB 2011-8.

1 July 2013

AASB 119 Employee Benefi ts

Consequential amendments were also made to other standards via AASB 2011-10.

1 July 2013

2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets

1 July 2012

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements

1 July 2013

AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Other Comprehensive Income

1 July 2012

AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities

1 July 2013

AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities

1 July 2015

AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle

1 July 2013


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(D) BORROWING COSTS

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specifi c borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profi t or loss in the period in which they are incurred.

(E) CASH AND CASH EQUIVALENTS

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash which are subject to an insignifi cant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

(F) DERIVATIVE FINANCIAL INSTRUMENTS

The consolidated entity enters into derivative fi nancial instruments to manage its exposure to interest rate and foreign exchange rate risk. Further details of derivative fi nancial instruments are disclosed in note 33 to the fi nancial statements.Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profi t or loss immediately unless the derivative is designated and effective as a hedge instrument, in which event, the timing of the recognition in profi t or loss depends on the nature of the hedge relationship. The consolidated entity designates derivatives as hedges of highly probable forecast transactions (cash fl ow hedges). The fair value of hedging derivatives is classifi ed as a non-current asset or a non-current liability if the remaining term of the hedge relationship is more than 12 months and as a current asset or current liability if the remaining term of the hedge relationship is less than 12 months.

Hedge accountingThe consolidated entity designates certain derivative instruments as cash fl ow hedges. At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the consolidated entity documents whether the hedging instrument that is used in the hedging relationship is highly effective in offsetting changes in fair values or cash fl ows of the hedged item. Note 33 contains details of the fair values of the derivative instruments used for hedging purposes. Movements in the hedging reserve in equity are also disclosed in note 24.

(B) BUSINESS COMBINATIONS

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the consolidated entity in exchange for control of the acquiree. Acquisition related costs are recognised in profi t and loss as incurred.Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration agreement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration are recorded in the Statement of Comprehensive Income.Where a business combination is achieved in stages, the consolidated entity’s previously held interests in the acquired entity are remeasured at fair value at the acquisition date (i.e. the date the consolidated entity attains control) and the resulting gain or loss, if any, is recognised in profi t and loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassifi ed to profi t and loss, where such treatment would be appropriate if that interest was disposed of.The aquiree’s identifi able assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 are recognised at their fair value at the acquisition date. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the consolidated entity reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to refl ect new information obtained about the facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the date of acquisition to the date the consolidated entity obtains complete information about facts and circumstances that existed as of acquisition date – and is subject to a maximum of one year.

(C) INVESTMENT IN AN ASSOCIATE

Jointly controlled entitiesInterests in jointly controlled entities in which the consolidated entity is a venturer (and so has joint control) are accounted for under the equity method in the consolidated fi nancial statements.Investments in jointly controlled entities where the consolidated entity is an investor but does not have joint control over that entity are accounted for as an available-for-sale fi nancial asset or, if the consolidated entity has signifi cant infl uence, by using the equity method.


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(I) INCOME TAX

Tax consolidationThe Company and all its wholly owned Australian resident entities are part of a tax-consolidated entity under Australian taxation law. SKILLED Group Limited is the head entity in the tax-consolidated group. Tax expense, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate fi nancial statements of the members of the tax-consolidated group using a ‘stand-alone taxpayer’ approach by reference to the carrying amounts in the separate fi nancial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by SKILLED Group Limited (as head entity in the tax-consolidated group).Due to the existence of tax-funding arrangements between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the Company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangements. Further information about the tax-funding arrangements is detailed in note 6 to the fi nancial statements. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

Current taxCurrent tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profi t or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred taxDeferred tax is accounted for using the balance sheet method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the fi nancial statements and the corresponding tax base of those items.In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that suffi cient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profi t. Deferred tax liabilities are recognised in respect of relevant fi nite life intangible assets at acquisition.This approach considers the future tax consequences of recovering the underlying asset through use and through ultimate disposal. The deferred tax liability is reduced as the assets are amortised. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

2. Signifi cant accounting policies (cont.)

Cash fl ow hedgeThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profi t or loss as part of other expenses or other income. Amounts deferred in equity are recycled in profi t or loss in the periods when the hedged item is recognised in profi t or loss. However, when the forecast transaction that is hedged results in the recognition of a non-fi nancial asset or a non-fi nancial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Hedge accounting is discontinued when the consolidated entity revokes the hedging relationship, the hedging instrument is sold, terminated or exercised, or no longer qualifi es for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profi t and loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profi t or loss.

(G) ACQUISITION OF ASSETS

Assets acquired are recorded at the cost of acquisition, being the purchase consideration determined as at the date of acquisition. In the event that settlement of all or part of the cash consideration given in the acquisition of an asset is deferred the fair value of the purchase consideration is determined by discounting the amounts payable in the future to their present value at the date of acquisition.

(H) REVENUE RECOGNITION

Sale of goods and disposal of assetsRevenue from the sale of goods and disposal of other assets is recognised when the consolidated entity has transferred the signifi cant risks and rewards of ownership of the goods to the buyer.

Rendering of servicesRevenue from a contract to provide services is recognised by reference to the stage of completion of the contract. Revenue from time and material contracts is recognised at the contractual rate as labour hours are delivered and direct expenses are incurred. Where the outcome of a contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims, contract exit costs and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

Interest incomeInterest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.


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The following estimated useful lives are used in the calculation of depreciation:Leasehold improvements 1 – 10 years Plant and equipment 4 – 5 years Assets under fi nance lease 2 – 8 years The estimated useful lives, residual values and depreciation methods are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.

(M) LEASED ASSETS

Leased assets classifi ed as fi nance leases are recognised as assets. The amount initially brought to account is the fair value of the assets, or if lower, the present value of minimum lease payments, each determined at the inception of the lease.A fi nance lease is one that effectively transfers from the lessor to the lessee substantially all the risks and rewards incidental to ownership of the leased asset. All other leases are classifi ed as operating leases. Finance leased assets are amortised on a straight-line basis over the estimated useful life of the asset. Finance lease payments are allocated between interest expense and reduction of lease liability over the term of the lease. The interest expense is determined by applying the interest rate implicit in the lease to the outstanding lease liability at the beginning of each lease payment period.Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefi ts from the leased asset are consumed.

Lease incentivesIn the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefi ts of incentives are recognised as a reduction of rental expense on a straight-line basis.

(N) IMPAIRMENT OF ASSETS

At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash fl ows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.Goodwill, intangible assets with indefi nite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired.The recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset for which the estimates of future cash fl ows have not been adjusted.If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profi t or loss immediately.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be suffi cient taxable profi ts against which to utilise the benefi ts of the temporary differences and they are expected to reverse in the foreseeable future.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/consolidated entity intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the periodCurrent and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess of purchase price over net asset(s) acquired.

(J) INVENTORIES

Inventories are valued at the lower of cost and net realisable value.Consumables are recorded at cost and written off over the life of the contract to which they relate.

(K) FINANCIAL ASSETS

Trade receivables, loans, and other receivables that have fi xed or determinable payments that are not quoted in an active market, are classifi ed as ‘loans and receivables’.Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired when there is objective evidence that as a result of one or more events that occurred after the initial recognition of the fi nancial asset the estimated future cash fl ows of the investment have been impacted.

(L) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at their cost of acquisition less accumulated depreciation and any impairment write down.Depreciation is provided on property, plant and equipment. Depreciation is calculated on a straight-line basis so as to write-off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life whichever is shorter, using the straight-line method.


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Other brand names are amortised on a straight-line basis over their estimated useful lives. The estimated useful lives are reviewed at the end of each annual reporting period, with any changes being recognised as a change in the accounting estimate. Other trademarks and brand names are recorded at cost less accumulated amortisation, and are amortised over periods ranging from one to fi ve years.

DatabasesDatabases are acquired and are recorded at cost less accumulated amortisation and any impairment write down, and amortised over a maximum of 10 years on a straight-line basis.

Software and licencesCosts associated with the development of computer systems are acquired and are capitalised and then expensed over the future periods to which the economic benefi ts of the expenditure are expected to be recoverable. Computer software is recorded at cost less accumulated amortisation, and amortised over periods ranging from three to 12 years on a straight-line basis.

Other acquired intangibles – Non-compete agreements, contracts and bareboat chartersNon-compete agreements, contracts and bareboat charters arising as a result of a business acquisition, recognised separately from goodwill, are valued at the time of the acquisition and amortised over the life of the agreement/contract/charter on a straight-line basis.

(Q) BORROWINGS

Bank loans and other loans are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profi t and loss over the period of the borrowing using the effective interest rate method except where capitalised in accordance with note 2(D). Bills of exchange are recorded at an amount equal to the net proceeds received, with the discount amortised over the period to maturity. Interest expense is recognised on an effective yield basis.

(R) FINANCIAL INSTRUMENTS ISSUED BY THE CONSOLIDATED ENTITY

Debt and equity instrumentsDebt and equity instruments are classifi ed as either liabilities or as equity in accordance with the substance of the contractual arrangement.

Transaction costs on the issue of equity instrumentsTransaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

Interest and dividendsInterest and dividends are classifi ed as expenses or as distributions of profi t consistent with the balance sheet classifi cation of the related debt or equity instruments or component parts of compound instruments.


Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash – generating unit) in prior years. A reversal of an impairment loss is recognised in profi t or loss immediately.

(O) GOODWILL

Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifi able assets acquired and the liabilities assumed.If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifi able net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profi t or loss as a bargain purchase gain.Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefi t from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated fi rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profi t or loss on disposal.

(P) OTHER INTANGIBLES

All potential intangible assets acquired in a business combination are identifi ed and recognised separately from goodwill where they satisfy the defi nition of an intangible asset and their fair value can be measured reliably.Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of indefi nite life intangibles, annually, either individually or at the cash-generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

Trademarks and brand namesTrademarks and brand names have been acquired and are recorded at cost less any impairment write down. The Company is committed to continue to actively use and promote the SKILLED trademark and brand name in its business. The directors believe the SKILLED trademark and brand name has an indefi nite life and no amortisation is therefore required.


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(U) GOODS AND SERVICES TAX

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:(i) where the amount of GST incurred is not recoverable from

the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

(ii) for receivables and payables which are recognised inclusive of GST.

The amount of GST recoverable from the taxation authority is included as part of receivables and the amount of GST payable to the taxation authority is included as part of payables.Cash fl ows are included in the cash fl ow statement on a gross basis. The GST component of cash fl ows arising from investing and fi nancing activities which is recoverable from, or payable to, the taxation authority is classifi ed as operating cash fl ows.

(V) PROVISIONS

Provisions are recognised when the consolidated entity has a present obligation, the future sacrifi ce of economic benefi ts is probable and the amount of the provision can be measured reliably. When some or all of the economic benefi ts required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash fl ows estimated to settle the present obligation, its carrying amount is the present value of those cash fl ows.

Restoration provisionPresent obligations arising from restoration are recognised and measured as a provision. A restoration provision is considered to exist where the consolidated entity has entered into a contract where future costs are expected to meet the obligations under the contract. Such contracts include property leaseholds and vessel charters.

(W) WORKERS COMPENSATION – SELF INSURANCE

Outstanding claimsA liability for outstanding claims for self insurance in relation to workers compensation is provided for in respect of claims incurred but not yet paid, claims incurred but not yet reported and the anticipated direct and indirect costs associated with those claims. The liability for outstanding claims has been measured on the basis of an independently prepared actuarial assessment of the cost of claims, including the anticipated effects of infl ation, discounted to a present value at balance date.The nature of the provision estimated and the data upon which the provision is based are such that it is likely the outcome will be different from the current estimate.

Claims recoveriesClaims recoveries are recorded on claims paid under self insurance in relation to workers compensation. The recoveries are recognised in profi t or loss and are based on actuarial assessment of the expected recovery, which includes claims paid and claims reported but not yet paid to the extent that the nature of the costs incurred are recoverable, in a manner similar to the measurement of the outstanding claim liability and discounted to a present value at balance date.

Financial guarantee contract liabilitiesFinancial guarantee contract liabilities are measured at their fair values and subsequently at the higher of the amount recognised as a provision and the amount initially recognised, less accumulated amortisation.

(S) EMPLOYEE BENEFITS

Provision is made for benefi ts accruing to employees in respect of wages and salaries, rostered days off, annual leave, long-service leave, contracted severances and incentives when it is probable that settlement will be required and they are capable of being measured reliably.Provisions made with respect to employee benefi ts expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Provisions made with respect to employee benefi ts that are not expected to be settled within 12 months are measured at the present value of the estimated future cash outfl ows to be made by the consolidated entity with respect to services provided by employees up to the reporting date.

(T) FOREIGN CURRENCY

The individual fi nancial statements of each entity are presented in its functional currency being the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated fi nancial statements, the results and fi nancial position of each entity are expressed in Australian dollars, which is the functional currency of SKILLED Group Limited and the presentation currency of the fi nancial statements.In preparing the fi nancial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rate of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that time.Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.Exchange differences are recognised in profi t or loss in the period in which they arise, except for:

exchange differences on transactions entered into in order to hedge certain foreign currency risks (refer note 2(F));

exchange differences on monetary items receivable or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognized in profi t or loss on disposal of the net investment.

On consolidation, the assets and liabilities of foreign controlled entities are translated into Australian dollars at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rate for the period unless exchange rates fl uctuate signifi cantly. Exchange differences are taken directly to the foreign currency translation reserve and recognised in the income statement on disposal of the foreign operation.


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(B) KEY SOURCES OF ESTIMATION UNCERTAINTY

Below are the key assumptions concerning the future, and other key sources of estimation uncertainty at balance sheet date, that have signifi cant risk of causing material adjustment to the carrying amount of assets and liabilities within the next fi nancial year:

Employee Benefi tsThe provision recognised for long service leave includes estimates of employees length of tenure, the timing of future leave payments and the anticipated effects of salary and wage increases, which are discounted to a present value at balance date.

Goodwill impairment testingDetermining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which goodwill has been allocated. The value-in-use calculation requires the consolidated entity to estimate the future cash fl ows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.The carrying amount of goodwill at the balance sheet date was $335,632,000 (2011: $334,671,000). Further details of the impairment testing are provided in note 13.


(X) SHARE-BASED PAYMENTS

Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. The fair value determined, by an external valuation, at the grant date(s) of the equity-settled share-based payments are expensed on a straight-line basis over the vesting period, based on an estimate of the number of shares that will eventually vest.

3. Critical accounting judgments and key sources of uncertainty(A) JUDGMENTS AND ESTIMATES

In the application of the consolidated entity’s accounting policies, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates. The 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 if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.Judgments made by management in the application of the consolidated entity’s accounting policies that have signifi cant effects on the fi nancial statements and estimates with a signifi cant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the fi nancial statements.Accounting policies are selected and applied in a manner that ensures the resulting fi nancial information satisfi es the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.


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4. Profi t from continuing operationsThe profi t from continuing operations, before income tax, includes the following items of revenue and expense:

2012 $’000

2011 $’000

(A) REVENUE

Sales revenue:

Rendering of services 1,889,971 1,819,783

(B) EQUITY-ACCOUNTED INCOME FROM AN ASSOCIATE

Income from OMS Alliance joint venture 4,435 3,700

(C) OTHER INCOME

Interest income 405 496

(D) EXPENSES

Depreciation and amortisation:

Depreciation:

Plant and equipment 2,819 3,593

Leasehold improvements 2,575 2,677

Assets under fi nance lease 343 536

5,737 6,806

Amortisation:

Databases – 7,997

Software and licences 6,607 7,358

Brand names 563 721

Other acquired intangibles 478 1,820

7,648 17,896

Total depreciation and amortisation expense 13,385 24,702

Finance costs:

Interest and other costs paid to other entities 7,845 27,491

Finance lease charges 158 295

Notional interest on deferred acquisition payments 472 1,022

8,475 28,808

Net bad and doubtful debts expense 1,300 1,296

Operating lease rental expenses:

Properties 10,374 12,969

Computer equipment 1,726 1,373

Marine vessels under bareboat charter 15,228 33,035

Other 466 98

27,794 47,475

Equity-settled share-based payments (amortisation of executive share options and performance rights)

2,231 633


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5. Sale of assets

2012 $’000

2011 $’000

Sale of assets in the ordinary course of business have given rise to the following:

Net profi t/(loss) on disposal of property, plant and equipment 516 (119)

6. Income taxThe prima facie income tax expense on pre-tax accounting profi t reconciles to the income tax expense in the fi nancial statements as follows:

2012 $’000

2011 $’000

The income tax expense/(benefi t) for the year can be reconciled to the accounting profi t/(loss) as follows:

Profi t before tax from continuing operations 64,601 11,606

Profi t/(loss) before tax from discontinued operations 4,019 (4,950)

Profi t from operations 68,620 6,656

Income tax expense calculated at 30% 20,586 1,997

Non-deductible items including entertainment, notional interest on deferred acquisition payments and amortisation of executive share options and performance rights

1,098 734

Foreign income tax rate differential (1,726) (1,476)

Research and development concession – (237)

Equity-accounted income from joint venture (1,331) (1,110)

Goodwill impairment – 3,735

Non-assessable profi t on divestment of businesses (1,627) –

Restatement of deferred tax balances 1,177 –

Tax-consolidation amendments 1,406 –

Other (194) (166)

Under/(Over) provision of income tax in previous year (88) 40

Income tax expense 19,301 3,517

Income tax expense comprises:

Current tax expense 25,194 10,444

Adjustments recognised in the current year in relation to the current tax of prior years

(184) (1,573)

Deferred tax expense relating to the origination and reversal of temporary differences

(5,709) (5,354)

Total tax expense 19,301 3,517

Continuing operations 19,723 4,485

Discontinued operations (note 26) (422) (968)

19,301 3,517

Tax-consolidation systemThe company and all its wholly owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. SKILLED Group Limited is the head entity in the tax-consolidated group.


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Nature of tax-funding arrangements and tax-sharing agreementsEntities within the tax-consolidated group have entered into a tax-funding arrangement and a tax-sharing agreement with the head entity. Under the terms of the tax-funding arrangement, SKILLED Group Limited and each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to, or from, the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are refl ected in amounts receivable from, or payable to, other entities in the tax-consolidated group.The tax-sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the fi nancial statements in respect of this agreement, as payment of any amounts under the tax-sharing agreement is considered remote.

7. Dividends2012

Centsper share

2012Total

$’000

2011Cents

per share

2011 Total $’000

(A) RECOGNISED AMOUNTS

Final 2011 dividend fully franked at a tax rate of 30% 3.0 6,997

Interim 2012 dividend fully franked at a tax rate of 30% 5.0 11,677

Final 2010 dividend fully franked at a tax rate of 30% – –

Interim 2011 dividend fully franked at a tax rate of 30% – –

8.0 18,674 – –

(B) UNRECOGNISED AMOUNTS



8.0 18,679 3.0 6,997

2012 $’000

2011 $’000

Franking account balance 63,470 65,000

The impact on the franking account of a dividend not yet recognised as a liability at year end, will be a reduction in the franking account of $8,005,000 (2011: $2,999,000).

8. Receivables 2012 $’000

2011 $’000

Current

Trade receivables(i) 236,064 239,568

Allowance for doubtful debts (6,074) (5,040)

229,990 234,528

Goods and services tax receivable 2,769 1,765

Other receivables(ii) 5,083 3,883

237,842 240,176

Non-Current

Claims recoveries 843 1,758

Other receivables 188 277

1,031 2,035

(i) Trade receivables are non-interest bearing and are on a variety of trading terms that average approximately 32 days from the date of billing.

(ii) Other receivables do not contain any individually signifi cant balances and there are no signifi cant concentrations of credit risk. At 30 June 2012 no amounts are considered past due or impaired (2011: $nil).


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8. Receivables (cont.)Movement in the allowance for doubtful debts:

2012 $’000

2011 $’000

Balance at the beginning of the year (5,040) (3,814)

Amounts written off during the year 230 372

Increase in allowance recognised in profi t or loss (1,264) (1,598)

Balance at end of the year (6,074) (5,040)

Ageing of trade receivables:

2012 $’000 Gross

2012 $’000 Allowance

2011 $’000 Gross

2011 $’000 Allowance

Not past due 204,312 – 207,360 (27)

Past due 1 – 30 days 15,298 – 13,957 (62)

Past due 31 – 60 days 7,716 – 4,102 (62)

Past due 61 – 90 days 1,036 (2) 601 (5)

Past due 91 days 7,702 (6,072) 13,548 (4,884)

Total 236,064 (6,074) 239,568 (5,040)

In determining the recoverability of a trade receivable, the consolidated entity considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts. All of the trade receivables included in the allowance for doubtful debts have been individually reviewed for impairment. These trade receivables are considered impaired as the balances are either subject to liquidation, administration, legal or other dispute. The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of the expected recoveries. The consolidated entity does not hold any collateral over these balances.

9. Other fi nancial assets 2012 $’000

2011 $’000

Derivatives designated and effective as hedging instruments carried at fair value:

Foreign currency forward contracts 20 1,193

Disclosed in the fi nancial statements as:

Current 20 1,193

Non-Current – –

20 1,193

10. Inventories 2012 $’000

2011 $’000

Raw materials and stores at cost 534 816

11. Other assets

2012 $’000

2011 $’000

Prepayments 6,835 6,752


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12. Property, plant and equipment

Land & buildings $’000

Leasehold improvements $’000

Plant & equipment $’000

Assets under fi nance lease $’000

Total $’000

Gross carrying amount

Balance as at 30 June 2011 4 19,265 31,694 7,403 58,366

Additions – 1,415 3,466 664 5,545

Disposals – (3,484) (4,133) (4,610) (12,227)

Divestment of businesses – (5,897) (2,686) – (8,583)

Other (i) – 1,745 1,336 (1,600) 1,481


Accumulated depreciation and impairment

Balance as at 30 June 2011 (4) (15,168) (25,962) (4,001) (45,135)

Disposals – 3,432 4,088 3,984 11,504

Divestment of businesses – 4,473 1,738 – 6,211

Depreciation expense (ii) – (2,865) (3,092) (343) (6,300)

Other – 251 22 – 273

Balance as at 30 June 2012 (4) (9,877) (23,206) (360) (33,447)

Net book value

As at 30 June 2011 – 4,097 5,732 3,402 13,231

As at 30 June 2012 – 3,167 6,471 1,497 11,135



Additions – 1,128 2,506 1,112 4,746

Disposals – (803) (3,903) – (4,706)

Other – 146 (640) – (494)


Accumulated depreciation and impairment


Disposals – 697 3,746 – 4,443

Depreciation expense (ii) – (3,419) (5,739) (536) (9,694)

Other – 75 744 – 819


Net book value

As at 30 June 2010 – 6,273 9,018 2,826 18,117

As at 30 June 2011 – 4,097 5,732 3,402 13,231

(i) Other represents restoration assets recognised, the impact of foreign exchange translation and transfers between asset classes.

(ii) Depreciation expense in relation to continuing operations (2012: $5,737,000, 2011: $6,806,000) is included in the line item ‘depreciation and amortisation expense’ in the Statement of Comprehensive Income (refer also note 4). Deprecation in relation to discontinued operations (2012: $563,000, 2011: $2,888,000) is included within Expenses in note 26 Divestment of Businesses.


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13. Intangibles

Goodwill $’000

Databases $’000

Software and licences $’000

Trademarks and brand names $’000

Other acquiredintangibles(ii)

$’000 Total $’000


Balance as at 30 June 2011 348,777 17,850 78,226 23,951 9,237 478,041

Additions – – 5,569 – – 5,569

Adjustment for change in deferred consideration

2,496 – – – – 2,496

Disposals – – (13) – – (13)

Divestment of businesses (3,379) – (1,335) (42) – (4,756)

Other (1,535) – (23) (17) – (1,575)


Accumulated amortisation

Balance as at 30 June 2011 (14,106) (17,850) (36,966) (9,316) (8,735) (86,973)

Disposals – – 13 – – 13

Divestment of businesses 3,379 – 653 42 – 4,074

Impairment losses – – – – – –

Amortisation expense(i) – – (6,706) (563) (478) (7,747)

Other – – 184 11 – 195


Net book value

As at 30 June 2011 334,671 – 41,260 14,635 502 391,068

As at 30 June 2012 335,632 – 39,602 14,066 24 389,324



Additions – – 3,574 – – 3,574

Adjustment for change in deferred consideration

5,741 – – – – 5,741

Disposals – – (20) – – (20)

Net foreign currency exchange differences (2,472) – – – – (2,472)

Other – – 2 (39) (4) (41)


Accumulated amortisation


Disposals – – 13 – – 13

Impairment losses (12,449) – – – – (12,449)

Amortisation expense(i) – (7,997) (7,497) (721) (1,820) (18,035)

Other – – – 31 2 33


Net book value

As at 30 June 2010 343,851 7,997 45,188 15,364 2,324 414,724

As at 30 June 2011 334,671 – 41,260 14,635 502 391,068

(i) Amortisation expense in relation to continuing operations (2012: $7,648,000, 2011: $17,896,000) is included in the line item ‘depreciation and amortisation expense’ in the Statement of Comprehensive Income (refer also note 4). Deprecation in relation to discontinued operations (2012: $99,000, 2011: $139,000) is included within Expenses in note 26 Divestment of Businesses.

(ii) Other acquired intangibles include customer contracts, bareboat charters and restraints.


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Indefi nite life intangibles of $14,000,000 (2011: $14,000,000) consist of the SKILLED trademark and brand name. The trademark and brand name were acquired externally and are protected by legal rights that are renewable at an insignifi cant cost.

Allocation of goodwill to cash-generating unitsIn response to ongoing integration of acquired businesses and other business restructures undertaken during the year, the consolidated entity has reallocated goodwill of $4,500,000 from the Origin Healthcare cash-generating unit to the OMS Australia/OMS New Zealand cash generating unit. The reallocation was determined using the relative values approach. The cash-generating units are aligned to the Board reporting structure, the structure for which budgets and strategic plans are prepared, the day-to-day management of the business and the level at which goodwill is monitored. The carrying amount of goodwill allocated to cash-generating units that are signifi cant individually, or in aggregate, is as follows:

2012 $’000

2011 $’000

Workforce Services Western 12,552 12,552

Workforce Services Eastern 43,365 43,365

Unallocated Workforce Services 46,632 46,632

Mosaic 9,729 9,729

Technology Solutions 477 477

Origin Healthcare 14,096 18,596

Swan Contract Personnel 36,820 36,820

Ativo 8,465 8,465

OMS Australia/OMS New Zealand 137,077 132,401

OMS International/UK 26,419 25,634

Total Goodwill 335,632 334,671

Allocation of other intangibles to cash-generating unitsThe carrying amount of indefi nite life ‘Other Intangibles’ allocated to cash-generating units that are signifi cant individually, or in aggregate, are as follows:

2012 $’000

2011 $’000

SKILLED Group 14,000 14,000

Impairment losses recognised in the yearDuring the previous reporting period, the consolidated entity assessed the recoverable amount of goodwill and determined that goodwill associated with the following businesses was impaired:

2012 $’000

2011 $’000

Workforce Services New Zealand – 1,722

Workforce Services Eastern (Longhill) – 2,733

Workforce Services Western (Extraman) – 7,994

Key assumptionsThe key assumptions used in the value-in-use calculations for the various signifi cant cash-generating units are as follows:The recoverable amount of the cash-generating units is determined based on a value-in-use calculation which uses cash fl ow projections based on fi nancial forecasts approved by management covering a three-year period, then a constant growth rate of 2.5% (2011: 2.5%) for two years, then 2.5% (2011: 2.5%) into perpetuity and an average pre-tax discount rate of 14.22% (2011: 14.22%).

Impact of possible changes in key assumptionsManagement believes that any reasonably possible change in the key assumptions on which the recoverable amount is based, would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of these cash-generating units, with the exception of the Origin Healthcare CGU where a reduction in cash fl ow projections to a level representing 0% growth may result in an impairment.


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14. Equity accounted investments 2012 $’000

2011 $’000

Investment in Offshore Marine Services Alliance Pty Ltd 10,073 5,638

The consolidated entity has a 33.3% shareholding, with equivalent voting rights, in Offshore Marine Services Alliance Pty Ltd, a joint venture established in Australia. A capital contribution of $100 was made on formation of the joint venture, representing 100 shares. A performance guarantee has been provided by the consolidated entity to third parties in respect of the operations of the joint venture. There were no contingent liabilities or commitments for expenditure at 30 June 2012.The summarised fi nancial information of the joint venture representing the consolidated entity’s share is as follows:

2012 $’000

2011 $’000

Assets and liabilities

Current assets 22,555 26,543

Non-current assets 1,794 939

Current liabilities 11,122 20,635

Non-current liabilities 3,035 2,000

Results

Revenue 85,122 70,469

Expenses 80,687 66,769

15. Deferred tax assets and liabilities

2012 $’000

2011 $’000

RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets comprise:

Temporary differences 21,511 17,887

The deferred tax asset has been reduced by the provision for deferred income tax attributable to temporary differences

3,788 6,326

Taxable and temporary differences comprise the following:

2012

Opening balance $’000

Charged to income $’000

Charged to equity $’000

Other $’000

Closing balance $’000

Gross deferred tax liabilities

Intangible and other assets (6,326) 2,852 – – (3,474)

Property, plant and equipment 3,348 (3,662) – – (314)

(2,978) (810) – – (3,788)

Gross deferred tax assets

Provisions and accruals 17,371 4,463 – – 21,834

Doubtful debts 1,486 335 – – 1,821

Other 2,008 (41) (323) – 1,644

20,865 4,757 (323) – 25,299

17,887 3,947 (323) – 21,511


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2011

Opening balance $’000

Charged to income $’000

Charged to equity $’000

Other $’000

Closing balance $’000

Gross deferred tax liabilities

Intangible and other assets (8,791) 2,476 – (11) (6,326)

Gross deferred tax assets

Provisions and accruals 13,443 3,928 – – 17,371

Doubtful debts 1,130 356 – – 1,486

Property, plant and equipment 3,091 257 – – 3,348

Other 4,057 (1,700) (344) (5) 2,008

21,721 2,841 (344) (5) 24,213

12,930 5,317 (344) (16) 17,887

Unrecognised deferred tax assetsUnused tax losses for which no deferred tax assets have been recognised are attributable to the following:

2012 $’000

2011 $’000

Tax losses (revenue in nature) 126 151

Tax losses (capital in nature) – 119

126 270

16. Payables 2012 $’000

2011 $’000

Current

Trade payables and accruals 88,297 75,794

Deferred purchase consideration 9,508 9,692

Goods and services tax payable 18,331 14,348

116,136 99,834

Non-Current

Deferred purchase consideration – 7,222


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17. Borrowings 2012 $’000

2011 $’000

Current

Bank overdraft(i) 684 –

Finance lease liabilities(iii) (note 21) 338 509

1,022 509

Non-Current

Bank debt facilities(ii) 36,418 109,075

Finance lease liabilities(iii) (note 21) 1,182 884

37,600 109,959

(i) Secured by fi xed and fl oating charge over all the assets of the consolidated entity, or standby letter of credit.

(ii) Secured by fi xed and fl oating charge over all the assets of the consolidated entity.

(iii) Secured over the assets leased, the current market value of which exceeds the value of the fi nance lease liability

18. Other fi nancial liabilities 2012 $’000

2011 $’000

Derivatives that are designated and effective as hedging instruments carried at fair value

Foreign currency forward contracts – 467

Interest rate swaps 602 2,074

602 2,541

Financial liabilities carried at fair value through profi t or loss (FVTPL)

Held for trading derivatives that are not designated in hedge accounting relationships

Foreign currency forward contracts 22 40

Interest rate swaps 56 –

680 2,581


Current 559 1,958

Non-current 121 623

680 2,581

19. Assets pledged as securityIn accordance with the security arrangements of borrowings, as disclosed in note 17, the consolidated entity’s syndicated bank debt facilities are secured by a fi xed and fl oating charge over all the rights, property and undertakings of the consolidated entity. The consolidated entity’s fi nance lease arrangements are secured by a fi xed charge over the specifi c asset fi nanced.


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20. Provisions 2012 $’000

2011 $’000

Current

Employee benefi ts 41,553 36,060

Litigation 4,031 915

Workers compensation self insurance 1,740 2,935

Provision for restoration 3,167 2,184

Other 969 1,558

51,460 43,652

Non-Current

Employee benefi ts 5,366 4,004

Workers compensation self insurance 7,184 5,318

Provision for restoration 2,903 1,179

Other 662 1,460

16,115 11,961

Employee benefi ts

$’000Litigation(i)

$’000

Workers Comp-

ensation$’000

Provision for restoration

$’000Other$’000

Total$’000

Balance as at 30 June 2011 40,064 915 8,253 3,363 3,018 55,613

Divestment of businesses (1,806) – – – – (1,806)

Additional provisions recognised 20,861 4,236 3,412 4,684 1,213 34,406

Reductions arising from payments/ other sacrifi ces of future economic benefi ts

(12,200) (698) (2,741) (1,977) – (17,616)

Changes resulting from the re-measurement of the estimated future sacrifi ce of the settlement of the provision without cost to the consolidated entity

– (422) – – (2,600) (3,022)


Included in the fi nancial statements as:

Current 41,553 4,031 1,740 3,167 1,569 52,060

Non-current 5,366 – 7,184 2,903 62 15,515

46,919 4,031 8,924 6,070 1,631 67,575

(i) The provision for litigation represents the directors’ best estimate of the future sacrifi ce of economic benefi ts that will be required for the consolidated entity to meet all obligations under litigation proceedings. The estimate has been made on the basis of known legal actions, the probability of success and the likelihood of eventual future economic sacrifi ce.


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21. Leases 2012 $’000

2011 $’000

(A) FINANCE LEASES(i)

Finance lease commitments:

Not later than 1 year 464 578

Later than 1 year and not later than 5 years 1,295 1,001

Minimum fi nance lease payments 1,759 1,579

Deduct future fi nance charges (239) (186)

Present value of fi nance lease liabilities 1,520 1,393


Borrowings:

Current (note 17) 338 509

Non-current (note 17) 1,182 884

1,520 1,393

(i) Leasing arrangements: The fi nance lease agreements are for periods between two and fi ve years. The consolidated entity has options to purchase the equipment at its residual value at the conclusion of the lease agreements.

2012 $’000

2011 $’000

(B) OPERATING LEASES(ii)

Non-cancellable operating leases:

Not later than 1 year 15,850 15,814

Later than 1 year but not later than 5 years 23,905 15,057

Later than 5 years 14,876 526

54,631 31,397

(ii) Leasing arrangements: The consolidated entity leases its offi ce premises. The rental period of each individual lease agreement varies between one and 10 years with renewal options ranging from one to fi ve years. The majority of lease agreements are subject to rental adjustments in line with movements in the Consumer Price Index or market rentals.

The consolidated entity leases the majority of its computer equipment from external suppliers over a lease period of three to fi ve years with payments being quarterly in advance. At the end of the lease period the consolidated entity has a number of options available with respect to the equipment, none of which include penalty charges.

The consolidated entity enters into bareboat charter arrangements for marine vessels in relation to its Offshore Marine Services operations in Australia. The vessels are chartered on individual lease agreements that vary between periods of up to fi ve years with renewable options pursuant to the underlying contracts.


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22. Issued capital 2012 $’000

2011 $’000

233,487,276 fully paid ordinary shares (2011: 233,089,776) 349,500 348,943

(A) FULLY PAID ORDINARY SHARES

2011 No. ’000

2011 $’000

2010 No. ’000

2010 $’000

Balance at the beginning of the fi nancial year 233,089 348,943 190,738 279,129

Issue of shares under Employee Share Acquisition Plan(i) 84 141 126 228

Issue of shares under share placement and share purchase plan(ii) – – 42,225 69,586

Issue of shares under long-term incentive plan 314 416 – –

Balance at the end of the fi nancial year 233,487 349,500 233,089 348,943

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

(i) Net of issuance costs of $6,051 (2011: $13,962).

(ii) Net of issuance costs of $1,695,260 (net of tax) in 2011.

(B) SHARES HELD BY SUBSIDIARIES

Allskills Pty Ltd, a fully owned subsidiary, held 418,500 (2011: 418,500) shares in SKILLED Group Limited at 30 June 2012. These shares were held for the benefi t of the SKILLED Group Limited Employee Share Acquisition Plan.

23. Share-based paymentsThe Executive Long-Term Incentive Plan (‘ELTI Plan’) provides fl exibility in delivering long-term incentive awards to executives in the form of options, performance rights and cash or a combination of those. The ELTI Plan is a method of retaining key skills and aligning the interests of participants with the interests of the Company and shareholders. The vesting of awards granted under the ELTI Plan in 2009 and 2010 were subject to performance conditions based on Earnings per Share (‘EPS’). In the 2011 grant year, a second independent performance measure relative Total Shareholder Return (‘TSR’) was introduced to enhance the performance conditions used in the ELTI Plan. The two performance measures – EPS and relative TSR – will operate independently under a 50/50 split. Relative TSR was favoured as it provides a comparison of relative performance in a range of market conditions with other listed companies. The peer group for the TSR measure is the ASX200 excluding fi nancial institutions and including key competitors. Granted at the discretion of the Board, the shares, under option or rights, will vest three years from the grant date contingent upon achieving the performance criteria outlined below. Once vested, the options may be exercised at any time over the following three years (six years after the date granted). Each option or right converts to one SKILLED Group Limited ordinary share on exercise. The options will lapse if not exercised before the last permitted exercise date.In the 2011 grant year the Board granted retention performance rights which vest three years from grant date should the executive remain employed by the Company at this time.

ELTI Plan 2011For the FY12 grant the two performance measures – EPS and relative TSR – will operate independently under a 50/50 split. For relative TSR the peer group is the ASX200 excluding fi nancial institutions and including key competitors. In FY12, the number of performance rights to be issued is based on the volume weighted average share price of SKILLED Group ordinary shares for the fi ve days commencing on 25 August 2011 (being one day after the announcement of the 2011 full year results).


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23. Share-based payments (cont.)

Performance level3 year cumulative EPS

1 July 2011 – 30 June 2014 % to vest

Below threshold Below 62 cents per share (cps) 0%

Threshold 62 cps 25%

Between threshold & target Between 62 and 70 cps Pro rata

Target 70 cps 50%

Between target & stretch Between 70 and 76 cps Pro rata

Stretch 76 cps 100% of grant assessed under EPS performance measure

Performance level

3 year relative total shareholder returns (TSR) 1 July 2011 – 30 June 2014 % to vest



Between threshold & target Between 50th and 75th Percentile

Pro rata


The number of options and performance rights granted in prior years under the ELTI Plans are subject to a performance based formula approved by the Board.

Valuation methodology for share options and performance rightsOptions and rights granted during the year were valued using the Black-Scholes option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions, and behavioural considerations. Expected volatility is based on the historical share price volatility over the past four years.

Inputs into the model:

Share options

23/11/10(ii) 19/11/09 21/10/08(i) 02/11/07 15/11/06 05/04/06

Grant date share price ($) 1.66 2.38 2.47 5.28 5.50 4.80

Exercise price ($) 1.47 2.28 2.52 5.29 5.81 4.92

Expected volatility (%) 40 40 40 34 37 30

Option life (years) 6 6 6 6 6 6

Dividend yield (%) 4.0 4.0 4.0 4.0 3.4 3.7

Risk free interest rate (%) 5.24 5.08 4.80 6.60 5.77 5.43

(i) Additional options issued under this plan on 12/08/2011

(ii) Additional options issued under this plan on 20/10/2011


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Performance rights

22/12/11(iv) 14/10/11(iii) 23/11/10(ii) 23/11/10(i) 01/07/10 19/11/09

Grant date share price ($) 1.74 1.80 1.66 1.66 1.07 2.38

Exercise price ($) – – – – – –

Expected volatility (%) 37.5 37.5 40 40 40 40

Right life (years) 3 3 3 1 1 3

Dividend yield (%) 4.5 4.5 4.0 3.5 3.0 4.0

Risk free interest rate (%) 3.10 3.80 5.10 4.72 4.44 5.08

(i) Additional rights issued under this plan on 12/08/2011

(ii) Additional rights issued under this plan on 12/08/2011 and 20/10/2011 including 337,838 rights in relation to the CEO co-investment scheme.

(iii) Additional rights issued under this plan on 20/10/2011

(iv) Additional rights issued under this plan on 23/02/2012 and 20/10/2011 including 337,838 rights in relation to the CEO co-investment scheme.

2012 2011

Share options

No. of shares under

option/right

Weighted average exercise

price $

No. of shares under

option/right

Weighted average exercise

price $

Balance at the beginning of the fi nancial year(I) 5,988,000 2.92 10,150,000 3.50

Granted during the fi nancial year(II) 1,992,593 1.52 527,000 1.47

Exercised during the fi nancial year(III) – – – –

Lapsed during the fi nancial year(IV) (3,522,000) 3.07 (4,689,000) 4.38

Balance at the end of the fi nancial year(V) 4,458,593 2.18 5,988,000 2.92

Performance rights

Balance at the beginning of the fi nancial year(I) 1,301,600 – 472,500 –

Granted during the fi nancial year(II) 2,795,921 – 1,118,000 –

Vested during the fi nancial year(III) (160,000) – (154,000) –

Lapsed during the fi nancial year(IV) (100,155) – (134,900) –

Balance at the end of the fi nancial year(V) 3,837,366 – 1,301,600 –

Notes (I) – (V): Refer following pages


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23. Share-based payments (cont.)(I) BALANCE AT THE BEGINNING OF THE FINANCIAL YEAR

Grant date No. of shares under option Expiry date

Exercise price $

Fair value $

Share options

2012

05/04/2006 263,000 04/04/2012 4.92 1.18

15/11/2006 81,000 14/11/2012 5.81 1.62

15/11/2006 393,000 14/11/2012 5.81 1.62

02/11/2007 309,000 01/11/2013 5.29 1.47

21/10/2008 4,069,000 20/10/2014 2.52 0.71

19/11/2009 346,000 18/11/2015 2.28 0.72

23/11/2010 527,000 23/11/2016 1.47 0.54

5,988,000

2011

05/04/2006 398,000 04/04/2012 4.92 1.18

15/11/2006 327,000 14/11/2012 5.81 1.62

15/11/2006 1,265,000 14/11/2012 5.81 1.62

02/11/2007 2,049,000 01/11/2013 5.29 1.47

21/10/2008 5,387,000 20/10/2014 2.52 0.71

19/11/2009 724,000 18/11/2015 2.28 0.72

10,150,000

Grant date

No. of sharesunder PR Vested No.

Unvested No. Expiry date

Exercise price $

Fair value $

Performance rights

2012

19/11/2009 374,600 – 374,600 18/11/2012 – 2.11

23/11/2010 768,000 – 768,000 23/11/2013 – 1.47

23/11/2010 159,000 – 159,000 23/11/2011 – 1.60

1,301,600 1,301,600

2011

19/11/2009 472,500 – 472,500 18/11/2012 – 2.11


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(II) GRANTED DURING THE FINANCIAL YEAR

Grant date No. of shares under PR Expiry date

Exercise price $

Fair value $

Share options

2012

12/08/2011 50,000 20/10/2014 2.52 0.71

12/08/2011 50,000 18/11/2015 2.28 0.72

12/08/2011 50,000 23/11/2016 1.47 0.54

20/10/2011 1,842,593 23/11/2016 1.47 0.54

1,992,593

2011

23/11/2010 527,000 23/11/2016 1.47 0.54

Performance rights

2012

12/08/2011 103,929 23/11/2013 – 1.47

12/08/2011 21,000 23/11/2011 – 1.60

20/10/2011 337,838 30/09/2013 – 1.47

20/10/2011 337,838 30/09/2014 – 1.47

20/10/2011 54,404 20/10/2014 – 1.60

22/12/2011 948,969 22/12/2014 – 1.54

22/12/2011 948,969 22/12/2014 – 0.89(i)

23/02/2012 21,487 22/12/2014 – 1.54

23/02/2012 21,487 22/12/2014 – 0.89(i)

2,795,921

2011

01/07/2010 154,000 30/06/2011 – 1.04

23/11/2010 805,000 23/11/2013 – 1.47

23/11/2010 159,000 23/11/2011 – 1.60

1,118,000

(i) Grants relate to performance rights measured against relative total shareholder return, which is a market based measure. All other grants are measured against non-market based measures, either earnings per share or employee retention.


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23. Share-based payments (cont.)(III) EXERCISED/VESTED DURING THE FINANCIAL YEAR

Share optionsThere were no share options exercised during the fi nancial year (2011:nil).

Performance rights

Grant date No. of shares under PR Expiry date

Exercise price $

Fair value $

2012

23/11/2010 139,000 23/11/2011 – 1.60

12/08/2011 21,000 23/11/2011 – 1.60

160,000

2011

01/07/2010 154,000 30/06/2011 – 1.04

(IV) EXPIRED DURING THE FINANCIAL YEAR

Share options

Grant date

2012 No. of sharesunder option

2011 No. of sharesunder option

Exercise price $

Fair value $

05/04/2006 263,000 135,000 4.92 1.18

15/11/2006 – 246,000 5.81 1.62

15/11/2006 393,000 872,000 5.81 1.62

02/11/2007 – 1,740,000 5.29 1.47

21/10/2008 2,816,000 1,318,000 2.52 0.71

19/11/2009 – 378,000 2.28 0.72

12/08/2011 50,000 – 2.52 0.71

3,522,000 4,689,000

Performance rights

Grant date

2012 No. of shares

under PR

2011 No. of shares

under PR Exercise price $

Fair value $

19/11/2009 – 97,900 – 2.11

23/11/2010 30,000 37,000 – 1.47

23/11/2010 20,000 – – 1.60

22/12/2011 25,078 – – 1.54

22/12/2011 25,077 – – 0.89

100,155 134,900


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(V) BALANCE AT THE END OF THE FINANCIAL YEAR

Share options

Grant date No. of shares under PR Vested No. Unvested No. Expiry date

Exercise price $

Fair value $

2012

05/04/2006 – – – 04/04/2012 4.92 1.18

15/11/2006 81,000 81,000 – 14/11/2012 5.81 1.62

15/11/2006 – – – 14/11/2012 5.81 1.62

02/11/2007 309,000 – 309,000 01/11/2013 5.29 1.47

21/10/2008 1,253,000 – 1,253,000 20/10/2014 2.52 0.71

19/11/2009 346,000 – 346,000 18/11/2015 2.28 0.72

23/11/2010 527,000 – 527,000 23/11/2016 1.47 0.54

12/08/2011 50,000 – 50,000 18/11/2015 2.28 0.72

12/08/2011 50,000 – 50,000 23/11/2016 1.47 0.54

20/10/2011 1,842,593 – 1,842,593 23/11/2016 1.47 0.54

4,458,593 81,000 4,377,593

2011

05/04/2006 263,000 263,000 – 04/04/2012 4.92 1.18

15/11/2006 81,000 81,000 – 14/11/2012 5.81 1.62

15/11/2006 393,000 – 393,000 14/11/2012 5.81 1.62

02/11/2007 309,000 – 309,000 01/11/2013 5.29 1.47

21/10/2008 4,069,000 – 4,069,000 20/10/2014 2.52 0.71

19/11/2009 346,000 – 346,000 18/11/2015 2.28 0.72

23/11/2010 527,000 – 527,000 18/11/2016 1.47 0.54

5,988,000 344,000 5,644,000


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23. Share-based payments (cont.)Performance rights

Grant date No. of shares under PR Vested No. Unvested No. Expiry date

Exercise price $

Fair value $

2012

19/11/2009 374,600 – 374,600 18/11/2012 – 2.11

23/11/2010 738,000 – 738,000 23/11/2013 – 1.47

23/11/2010 – – – 23/11/2011 – 1.60

12/08/2011 103,929 – 103,929 23/11/2013 – 1.47

20/10/2011 337,838 – 337,838 30/09/2013 – 1.47

20/10/2011 337,838 – 337,838 30/09/2014 – 1.47

20/10/2011 54,404 – 54,404 20/10/2014 – 1.60

22/12/2011 923,891 – 923,891 22/12/2014 – 1.54

22/12/2011 923,892 – 923,892 22/12/2014 – 0.89(i)

22/12/2011 21,487 – 21,487 22/12/2014 – 1.54

22/12/2011 21,487 – 21,487 22/12/2014 – 0.89(i)

3,837,366 3,837,366

2011

19/11/2009 374,600 – 374,600 18/11/2012 – 2.11

23/11/2010 768,000 – 768,000 23/11/2013 – 1.47

23/11/2010 159,000 – 159,000 23/11/2013 – 1.60

1,301,600 1,301,600

(i) Grants relate to performance rights measured against relative total shareholder return, which is a market based measure. All other grants are measured against non-market based measures, either earnings per share or employee retention.

The fair value of options and performance rights at grant date adjusted for the expected number to vest has been amortised over the vesting period and recognised in the profi t and loss in the fi nancial statements.The remuneration of directors and other key management personnel includes the value of share options granted under the Executive Share Option Plan calculated as the value at grant date allocated equally over the period from the date of grant to date of vesting.Consideration received on the exercise of executive share options and performance rights is recognised in issued capital. During the fi nancial year $416,000 (2011: $nil) was recognised in issued capital arising from the exercise of executive options and performance rights.


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24. Reserves 2012 $’000

2011 $’000

Employee equity-settled benefi ts reserve 2,980 2,083

Hedging reserve (421) (1,174)

Foreign currency translation reserve (2,467) (1,682)

92 (773)

(A) EMPLOYEE EQUITY-SETTLED BENEFITS RESERVE

2012 $’000

2011 $’000

Balance at the beginning of the fi nancial year 2,083 1,450

Share-based payments – amortisation of executive share options and performance rights 897 633

Balance at the end of the fi nancial year 2,980 2,083

The employee equity-settled benefi ts reserve is used to recognise the fair value of options and rights issued but not yet exercised.

(B) HEDGING RESERVE

2012 $’000

2011 $’000

Balance at the beginning of the fi nancial year (1,174) (3,811)

Foreign currency forward contracts (396) 546

Interest rate swaps 1,416 3,532

Income tax related to gains/losses recognised in equity (306) (1,223)

Transferred to profi t or loss:

Forward exchange contracts – (311)

Interest rate swaps 56 –

Income tax related to amounts transferred to profi t or loss (17) 93

Balance at the end of the fi nancial year (421) (1,174)

The hedging reserve represents hedging gains and losses recognised on the effective portion of cash fl ow hedges. The cumulative deferred gain or loss on the hedge is recognised in profi t or loss when the hedged transaction impacts the profi t and loss, or is included as a basis adjustment to the non-fi nancial hedged item. Refer note 2(F) to the fi nancial statements.


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24. Reserves (cont.)(C) FOREIGN CURRENCY TRANSLATION RESERVE

2012 $’000

2011 $’000

Balance at the beginning of the fi nancial year (1,682) (1,116)

Translation of foreign operations (785) (566)

Balance at the end of the fi nancial year (2,467) (1,682)

Exchange differences relating to foreign currency monetary items forming part of the net investment in foreign operations and the translation of foreign controlled entities are brought to account by entries made directly to the foreign currency translation reserve. Refer note 2(T) to the fi nancial statements.

25. Contingent liabilities 2012 $’000

2011 $’000

Bank guarantees for various contracts 29,000 14,337

Other contingent liabilitiesA number of legal claims exist where the outcome is uncertain. Where practicable, provision has been made in the fi nancial statements to recognise the estimated cost to settle the claims based on best estimate assumptions and legal advice where relevant. The actual amounts settled in relation to the outstanding matters may differ to those estimated.Contractual obligations exist in relation to permanent fi eld employees in the event certain customer labour and maintenance services contracts end, such as termination payments in the event employees cannot be re-deployed. No provision is recognised in the fi nancial statements until such time as there is a present obligation to make a termination payment to the employee.

26. Divestment of BusinessesOn 31 October 2011, SKILLED sold its contact centre business, Excelior Pty Ltd (“Excelior”). Cash proceeds of $8,511,000 were received as well as the opportunity to receive an additional amount of up to $5,000,000 through an earn-out arrangement subject to revenue targets. The divestment resulted in a net profi t before tax of $3,805,000, which includes an estimated $1,200,000 deferred settlement from the earn-out arrangement. On 30 January 2012, SKILLED completed the sale of its New Zealand based blue collar labour hire business, Tradeforce NZ. Cash proceeds of $3,365,000 were received. The divestment resulted in a net profi t before tax of $1,813,000.The results of the discontinued operations which have been included in the consolidated statement of comprehensive income are as follows. The 2011 fi nancial period profi t and cash fl ows from discontinued operations have been represented to include those operations classifi ed as discontinued in the current period.


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2012 $’000

2011 $’000

Financial Performance

Revenue 22,856 56,472

Expenses (24,455) (61,422)

Loss before income tax (1,599) (4,950)

Attributable income tax benefi t 480 968

Loss after income tax (1,119) (3,982)

Gain on divestment of businesses 5,618 –

Attributable income tax (58) –

Gain on divestment of businesses after income tax 5,560 –

Profi t/(loss) from discontinued operations 4,441 (3,982)

Cash fl ows

Net cash from operating activities (226) (466)

Net cash from investing activities (812) (1,720)

Net cash from fi nancing activities – –

Total net cash fl ows (1,038) (2,186)

Disposal Consideration:

Cash 11,876 –

Deferred settlement 1,200 –

13,076

Book value of net assets sold:

Receivables 6,364 –

Other assets 162 –

Deferred tax assets 1,457 –

Plant and equipment 2,372 –

Intangible assets 682 –

Payables (2,977) –

Provisions and accruals (1,796) –

Net assets disposed 6,264 –

Less costs of disposal (1,194) –

Net gain on disposal 5,618 –

Earnings per share – cents per share:

Basic from discontinued operations (cents) 1.90 (1.98)

Diluted from discontinued operations (cents) 1.86 (1.97)


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27. Superannuation contributions 2012 $’000

2011 $’000

Superannuation contributions provided for employees via the following superannuation funds:

Complying superannuation funds(i) 107,805 104,733

(i) The consolidated entity makes contributions to superannuation plans in accordance with the greater of the Superannuation Guarantee Charge legislation, or the terms of applicable industrial awards. Each of the plans are structured using external superannuation fund managers, with the result that the consolidated entity is not liable to meet any additional liability in the event of termination of any fund member. The funds are of the accumulation type.

28. Compensation of directors and other key management personnelFor details of compensation of directors and other key management personnel refer to note 30.

29. SubsidiariesOwnership interest

Name of entity NoteCountry of

incorporation2012

%2011

%

Parent entity

SKILLED Group Limited (a) Australia

Controlled entities

Allskills Pty Ltd (b) Australia 100 100

Ativo Pty Ltd (b) Australia 100 100

Catalyst Recruitment Systems Pty Ltd (c) Australia 100 100

ACN 101 075 512 Pty Ltd (b) Australia 100 100

Catalyst Quality Service Pty Ltd (b) Australia 100 100

Jet Tasmania Pty Ltd (b) Australia 100 100

Mosaic Recruitment Pty Ltd (c) Australia 100 100

The Green & Green Group Pty Ltd (b) Australia 100 100

Excelior Pty Ltd (c) Australia – 100

Extra Group Pty Ltd (c) Australia 100 100

Extraman (NT) Pty Ltd (b) Australia 100 100

Extraman (HR) Pty Ltd (b) Australia 100 100

Offshore Marine Services Pty Ltd (e) Australia 100 100

Australia Offshore Marine Services Pte Ltd

(a) Singapore 100 100

Origin Healthcare Holdings Pty Ltd (c) Australia 100 100

Nursing Australia Pty Ltd (b) Australia 100 100

HR Link No. 2 Pty Ltd (b) Australia 100 100

HR Link No. 1 Pty Ltd (b) Australia 100 100

Locumitis Pty Ltd (b) Australia 100 100

Mantech Systems Pty Ltd (c) Australia 100 100

Medistaff Pty Ltd (b) Australia 100 100

Nursing (Australia) Holdings Pty Ltd (b) Australia 100 100

Origin Education Services Pty Ltd (b) Australia 100 100

Origin Health Support Services Pty Ltd (b) Australia 100 100

Origin Healthcare Pty Ltd (c) Australia 100 100

ProSafe Personnel Pty Ltd (b) Australia 100 100


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Ownership interest

Name of entity NoteCountry of

incorporation 2012 %

2011 %

PeopleCo. Pty Ltd (c) Australia 100 100

SKILLED Group International Pty Ltd (c) Australia 100 100

Offshore Marine Services Ltd (e) Malaysia 100 100

OMS DMCEST (e) Dubai 100 100

Offshore Marine Holdings (Malta) Limited (e) Malta 100 100

Offshore Marine Services (Malta) Limited

(e) Malta 100 100

SKILLED Group NZ Holdings Limited (a) New Zealand 100 100

SKILLED Group NZ Limited (d) New Zealand – 100

Offshore Marine Services (NZ) Ltd (a) New Zealand 100 100

SKILLED International Sourcing Pty Ltd (b) Australia 100 100

SKILLED Group UK Ltd (e) United Kingdom 100 100

Offshore Marine Services UK Ltd (e) United Kingdom 100 100

SKILLED Maritime Services Pty Ltd (b) Australia 100 100

SKILLED Quest Personnel Pty Ltd (b) Australia 100 100

SKILLED Rail Services Pty Ltd (a) Australia 100 100

SKILLED Resources Pty Ltd (b) Australia 100 100

SKILLED Offshore Pty Ltd (b) Australia 100 100

SKILLED Workforce Solutions (NSW) Pty Ltd

(b) Australia 100 100

Swan Contract Personnel Pty Ltd (c) Australia 100 100

TESA Group Pty Ltd (c) Australia 100 100

TESA Mining (QLD) Pty Limited (b) Australia 100 100

TESA Mining (NSW) Pty Limited (c) Australia 100 100

TESA Mining (U/G) Pty Limited (b) Australia 100 100

Damstra Mining Services Pty Ltd (b) Australia 100 100

HVA (Qld) Pty Limited (b) Australia 100 100

HVA Support Services Pty Limited (b) Australia 100 100

HVA Technical Services Pty Limited (b) Australia 100 100

Waycon Services Pty Limited (c) Australia 100 100

Workforce Solutions (No 1) Pty Ltd (b) Australia 100 100

All controlled entities carry on business only in the country of formation or incorporation. Allskills Pty Ltd is the trustee of the SKILLED Group Limited Share Plan Trust.Swan Contract Personnel Pty Ltd is the trustee of the Swan Drafting Unit Trust. Legend:

(a) Audited by Ernst & Young

(b) These controlled entities are classifi ed as small proprietary companies and in accordance with the Corporations Act 2001 are relieved from the requirement to prepare, audit and lodge fi nancial reports.

(c) These wholly-owned controlled entities have entered into a deed of cross guarantee with SKILLED Group Limited, pursuant to ASIC Class Order 98/1418 and have been relieved from the requirement to prepare and lodge an audited fi nancial report.

(d) Entity in liquidation

(e) Audited by Ernst & Young International.


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29. Subsidiaries (cont.)The consolidated income statement and balance sheet of the entities, which are party to the deed of cross-guarantee and are part of the closed group are as follows:

2012 $’000

2011 $’000

Income statement

Revenue 1,504,514 1,434,623

Other revenue 163 1,412

Dividends Received 55,739 –

Gain/(loss) on sale of businesses and fi xed assets 3,968 (125)

Employee and sub-contractor related costs (1,368,459) (1,300,872)

Raw materials and consumables used (8,340) (10,336)

Offi ce occupancy related costs (12,046) (14,338)

Depreciation and amortisation expense (9,024) (13,564)

Impairment – (10,727)

Finance costs (7,683) (27,236)

Other expenses (93,485) (74,478)

Profi t/(loss) before income tax expense 65,347 (15,641)

Income tax (expense)/benefi t (20,839) 4,384

Profi t/(loss) attributable to members of the parent entity 44,508 (11,257)

2012 $’000

2011 $’000

Balance sheet

Current assets

Cash and cash equivalents 4,860 7,502

Trade and other receivables 162,332 144,899

Other fi nancial assets 20 1,193

Inventories 120 264

Other 3,943 4,079

Total current assets 171,275 157,937

Non-current assets

Trade and other receivables 1,030 2,035

Other fi nancial assets 166,290 166,000

Property, plant and equipment 6,990 10,757

Goodwill 166,313 176,032

Other intangibles 51,813 52,605

Deferred tax assets 13,166 12,014

Total non-current assets 405,602 419,443

Total assets 576,877 577,380


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2012 $’000

2011 $’000

Current liabilities

Trade and other payables (i) 128,800 104,382

Current tax liabilities 15,445 1,702

Borrowings 338 509

Other fi nancial liabilities 559 1,958

Provisions 35,463 33,850

Total current liabilities 180,605 142,401

Non-current liabilities

Trade and other payables 2,960 5,885

Borrowings 26,709 90,638

Other fi nancial liabilities 121 623

Provisions 9,621 10,697

Total non-current liabilities 39,411 107,843


Net assets 356,861 327,136

Equity

Issued capital 349,500 348,943

Reserves 2,559 (773)

Retained earnings (i) 4,802 (21,034)

Total equity 356,861 327,136

Retained earnings

Balance at the beginning of the fi nancial year (i) (21,034) (9,275)

Net profi t 44,508 (11,257)

Dividends provided for or paid (18,672) (502)

Balance at the end of the fi nancial year 4,802 (21,034)

(i) Prior period balances have been corrected with the effect of decreasing net assets by $32,643,000 and decreasing retained earnings by $32,643,000 in the 2011 year. There is no impact of this adjustment on the Skilled Group Ltd consolidated entity.


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30. Related party disclosures(A) EQUITY INTERESTS IN SUBSIDIARIES

Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 29 to the fi nancial statements.

(B) KEY MANAGEMENT PERSONNEL COMPENSATION (INCLUDING DIRECTORS)

2012 $’000

2011 $’000

Short-term employee benefi ts 5,703,358 4,718,344

Post-employment benefi ts 383,777 254,039

Share-based payments 1,244,585 599,768

Termination benefi ts 184,306 1,232,151

Other long-term employee benefi ts 487,012 170,435

8,003,038 6,974,737

(C) DIRECTORS’ AND OTHER KEY MANAGEMENT PERSONNEL EQUITY HOLDINGS

(i) Fully paid ordinary shares issued by SKILLED Group Limited held by directors and other key management personnel including their personally related parties:

2012

Balance

1/7/2011No.

Granted as compen-

sationNo.

Received on exercise of options/

rightsNo.

Net other change

No.

Balance at 30/6/2012

No.

Balance held nominally

No.

Directors

MP McMahon 667,501 – – – 667,501 –

VA McFadden 126,885 – – – 126,885 –

RN Herbert AM 13,054 – – – 13,054 –

MJ Findlay 35,000 – – – 35,000 –

AM Cipa – – – 15,544 15,544 –

TA Horton – – – – – –

TB Janes (retired 30/06/2012) (i) 146,992 – – (30,325) 116,667 –

GM Hargrave (resigned 31/08/2011) 55,303,305 – – (55,303,305) – –

56,292,737 – – (55,318,086) 974,651 –

Other key management personnel

G Kent – – – 20,000 20,000 –

PR McCormick 2,754 – 25,000 – 27,754 –

D Timmel – – – – – –

J Watkinson – – 41,000 – 41,000 –

M Caulfi eld 65,757 – – – 65,757 –

J Kempe (i) 1,000 – – 1,000 2,000 –

S Healy (i) – – – – – –

69,511 – 66,000 21,000 156,511 –


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2011

Balance

1/7/2010No.

Granted as compen-

sationNo.

Received on exercise of options/

rightsNo.

Net other change

No.


No.

Balance held nominally

No.

Directors

MP McMahon (appointed 8/11/2010) – – – 667,501 667,501 –

TB Janes 125,992 – – 21,000 146,992 –

VA McFadden – – – 126,885 126,885 –

RN Herbert AM 11,189 – – 1,865 13,054 –

MJ Findlay – – – 35,000 35,000 –

AM Cipa (appointed 04/04/2011) – – – – – –

TA Horton (appointed 10/02/2011) – – – – – –

GM Hargrave (resigned 31/08/2011) 57,807,305 – – (2,504,000) 55,303,305 –

KV Loughnan AO (resigned 25/10/2010) 264,032 – – (264,032) – –

KW Hughes (resigned 25/10/2010) 16,643 – – (16,643) – –

PA Gregg (resigned 10/02/2011) 20,000 – – (20,000) – –

58,245,161 – – (1,952,424) 56,292,737 –


J Kempe – – – 1,000 1,000 –

PR McCormick – – – 2,754 2,754 –

D Timmel – – – – – –

S Healy – – – – – –

J Watkinson – – – – – –

DW Johnson (ii) – – – – – –

DJ Bridge (ii) – – – – – –

– – – 3,754 3,754 –

(i) These employees ceased to be key management personnel during 2012.

(ii) These employees ceased to be key management personnel during 2011.


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30. Related party disclosures (cont.)(ii) Executive share options and performance rights issued by SKILLED Group Limited

2012

Balance at 1/7/2011

No.

Granted as compen-

sation No.

Vested No.

Other changes

No.


No.

Balance vested at

30/6/2012No.

Balance exercisable

at 30/6/2012No.

Options vested

during year.

Directors

MP McMahon (i) – 3,088,217 – – 3,088,217 – – –

TB Janes (retired 30/06/2012) (ii)

1,168,000 139,896 – (287,000) 1,020,896 – – –

Total 1,168,000 3,228,113 – (287,000) 4,109,113 – – –


G Kent – – – – – – – –

PR McCormick 501,900 80,829 (25,000) (144,000) 413,729 – – –

D Timmel – 76,684 – – 76,684 – – –

J Watkinson 244,300 81,244 (41,000) – 284,544 – – –

M Caulfi eld 24,000 77,202 – – 101,202 – – –

J Kempe (ii) 65,000 102,383 – – 167,383 – – –

S Healy (ii) – 65,078 – – 65,078 – – –

Total 835,200 483,420 (66,000) (144,000) 1,108,620 – – –

2011

Balance at 1/7/2010

No.

Granted as compen-

sation No.

Vested No.

Other changes

No.


No.

Balance vested at

30/6/2011No.

Balance exercisable

at 30/6/2011No.

Options vested

during yearNo.

Directors

MP McMahon (i)

– – – – – – – –

TB Janes 961,000 207,000 – – 1,168,000 81,000 81,000 –

GM Hargrave (resigned 31/08/2011)

1,763,000 – – (1,763,000) – – – –

Total 2,724,000 207,000 – (1,763,000) 1,168,000 81,000 81,000 –

Other key management personnel (i)

J Kempe – 65,000 – – 65,000 – – –

PR McCormick

– 75,000 – 426,900 501,900 73,000 73,000 –

D Timmel – – – – – – – –

S Healy – – – – – – – –

J Watkinson – 87,000 – 157,300 244,300 – – –

DW Johnson (iii) 92,000 343,000 (281,000) – – – –

DJ Bridge (iii) – 46,000 – (46,000) – – – –

Total 92,000 616,000 (154,000) 257,200 811,200 73,000 73,000 –

(i) During the period, Mr McMahon was granted 1,842,593 options under the 2010 long-term incentive plan, a total of 569,948 performance rights under the 2011 long-term incentive plan and 675,676 performance rights under the CEO co-investment scheme, as approved by shareholders at the 2011 Annual General Meeting.

(ii) These employees ceased to be key management personnel during 2012.

(iii) These employees ceased to be key management personnel during 2011.


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All executive share options and performance rights issued during the fi nancial year were made in accordance with the provisions of the Executive Long-Term Incentive Plan. No amounts are paid or payable by the recipient on receipt of the option or right. Each executive share option and performance right converts to one SKILLED Group Limited ordinary share on exercise.During the fi nancial year $416,000 (2011: $nil) was recognised in issued capital arising from the exercise of options or vesting of performance rights by directors and other key management personnel of the consolidated entity. Further details of the options and performance rights granted during the year are contained in note 23 to the fi nancial statements.

(D) TRANSACTIONS WITH DIRECTORS AND THEIR PERSONALLY RELATED ENTITIES:

Related party Type of transaction 2012 2011 Class of related party2012

$2011

$

Larkfi eld PropertyHoldings Pty Ltd

Payment for rental of offi ce accommodation

Normal commercial terms and conditions


Company of which Mr GM Hargrave is the sole director

1,032,731 998,376

Hughes EngineeringServices Pty Ltd

Consulting services Normal commercial terms and conditions


Company of which Mr KW Hughes is a director

– 60,000

(E) TRANSACTIONS WITH OTHER RELATED PARTIES:

Related party Type of transaction 2012 2011 Class of related party2012

$2011

$

Offshore Marine Services Alliance Pty Ltd

Offshore marine staffi ng Normal commercial terms and conditions


Joint Venture 56,800,000 40,500,000


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31. Remuneration of auditors 2012 $’000

2011 $’000

Amounts received or due and receivable by Ernst & Young (Australia)

Audit and review of the fi nancial report 486,646 –

Other assurance services – –

Income, indirect and employment-related tax services 251,413 –

738,059 –

Amounts received or due and receivable by Ernst & Young (International)

Audit and review of the fi nancial report 43,354 –

Other assurance services 8,892 –

Income, indirect and employment-related tax services – –

52,246 –

Amounts received or due and receivable by Deloitte Touche Tohmatsu Australia

Audit and review of the fi nancial report – 635,663

Other assurance and advisory services – 59,407

Income, indirect and employment-related tax services – 176,352

– 871,422

Amounts received or due and receivable by Deloitte Touche Tohmatsu International fi rms

Audit and review of the fi nancial report – 58,484

Other assurance and advisory services – 1,623

Income, indirect and employment-related tax services – 26,556

– 86,663


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32. Notes to the cash fl ow statement(A) RECONCILIATION OF CASH

For the purposes of the cash fl ow statement, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the fi nancial year as shown in the cash fl ow statement is reconciled to the related items in the Balance Sheet as follows:

2012 $’000

2011 $’000

Cash 11,216 13,931

Bank overdraft (684) –

Cash assets/(liabilities) 10,532 13,931

(B) NON-CASH FINANCING AND INVESTING ACTIVITIES

During the fi nancial year, the consolidated entity:

(i) Acquired plant and equipment under fi nance lease with an aggregate value of $664,000 (2011: $1,112,000).

(ii) Acquired plant and equipment and leasehold improvements with an aggregate value of $2,272,000 (2011: nil) which did not generate a cash fl ow in the 2012 year and were included within current payable as at 30 June 2012.

(C) FINANCING FACILITIES

2012 $’000

2011 $’000

Bank overdraft facility, payable at call:

Amount used 684 –

Amount unused 9,618 6,747

10,302 6,747

Syndicated bank debt facility and market rate advance facility subject to periodic roll-over:

Amount used 36,418 109,331

Amount unused 143,582 60,669

180,000 170,000

The bank overdraft, syndicated bank debt facility and market rate advance facility are secured by a fi xed and fl oating charge over the assets of the consolidated entity. The bank overdraft and market rate advance facility are subject to annual review. At 30 June 2012, the syndicated bank debt facility was $160 million in total comprising two tranches, being $60 million (maturing in August 2013) and $100 million (maturing in August 2014). The market rate advance facility is $20 million (maturing in August 2014).

(D) BUSINESSES ACQUIRED

During the fi nancial year, the consolidated entity did not make any acquisitions (2011: nil).

2012 $’000

2011 $’000

Net outfl ow of cash for prior year acquisitions

Payment of deferred consideration 10,186 20,329

During the fi nancial year deferred consideration payments were made in respect of the prior period’s acquisitions of OMS International and OMS UK.


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33. Financial instruments

Capital risk managementThe consolidated entity manages its capital to ensure that it will be able to continue as a going concern whilst maximising the return to stakeholders through an optimal balance of debt and equity. The consolidated entity’s overall strategy relating to capital risk is to operate at a lower level of gearing than in the recent past.The capital structure of the consolidated entity consists of debt, which includes the borrowings disclosed in note 17, the cash and cash equivalents disclosed in note 32, and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the statement of changes in equity and notes 22 and 24.The Board regularly reviews its capital structure and considers market conditions, industry peers and stakeholder expectations in setting its capital structure. The effi cacy and suitability of the consolidated entity’s capital structure is regularly measured and includes a consideration of the (a) committed debt levels, (b) leverage (debt to EBITDA), (c) interest cover (EBITDA to interest expense) and (d) gearing (net debt to net debt plus equity).The consolidated entity’s key capital structure fi nancial metrics as at reporting date were as follows:

2012 $’000

2011 $’000

Leverage

(Net debt/EBITDA (i)) 0.3 1.2

Interest cover

(EBITDA (i)/Net interest expense (i)) 12.2 3.5

Gearing

(Net debt/Net debt + equity) 6% 19%

(i) EBITDA and net interest expense is based on continuing operations as disclosed in note 36 Segment Reporting

In order to manage the optimal balance of debt and equity the consolidated entity may: raise, refi nance or retire debt; issue or buy-back shares; adjust the level of dividend payout ratio and the level of dividends to be paid; and/or offer a Dividend Reinvestment Plan.

Financial risk managementThe consolidated entity’s fi nancial risks include market risk (including interest rate risk and foreign exchange risk), credit risk and liquidity risk. The consolidated entity’s overall strategy relating to fi nancial risk management remains unchanged from 2011.The carrying amount of the consolidated entity’s fi nancial assets and fi nancial liabilities at the reporting date are as follows:

2012 $’000

2011 $’000

Financial assets

Cash and cash equivalents 11,216 13,931

Current and non-current receivables 238,873 242,211

Derivatives held for trading 20 19

Derivatives in hedge relationships – 1,174

2012 $’000

2011 $’000

Financial liabilities

Loans and payables 154,759 217,524

Derivatives held for trading 78 40

Derivatives in hedge relationships 602 2,541

The consolidated entity manages these risks in accordance with specifi c Board-approved policies and directives. Each of these risks is discussed in further detail in the following notes.


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Interest rate riskInterest rate risk is the effect on either the fi nancial performance or capital value of the consolidated entity arising from movements in interest rates. The consolidated entity is exposed to interest rate risk as entities within the consolidated entity borrow funds at both fi xed and fl oating rates.The consolidated entity manages its interest rate risk in accordance with Board approved policy. This policy is designed to mitigate the fi nancial risk arising from movements in interest rates to:

meet stakeholder expectations in respect of earnings and interest expense; and protect the fi nancial undertakings under the consolidated entity’s debt facilities.

In the 2011 fi nancial year, the Board approved certain changes to the interest rate risk management policy as follows: no additional interest rate hedging to be entered into for the time being although the existing interest rate hedge book

will be allowed to run to maturity; and no minimum level of fi xed rate debt is prescribed.

The policy employed during the 2012 fi nancial year was unchanged from 2011.The consolidated entity’s non-derivative exposure to interest rate risk as at 30 June 2012 is as follows:

Cash (weighted average interest rate 2.5-3.5%). Refer Consolidated Statement of Financial Position. Bank overdraft (weighted average interest rate 4.0-5.0%). Refer note 17. Bank loans (weighted average interest rate 4.0-8.0%). Refer note 17. Lease liabilities (weighted average interest rate 10.0-11.0%). Refer note 17.

Interest rate sensitivityThe consolidated entity’s sensitivity to a 200 basis point increase or decrease in interest rates is less than $400,000 (2011: $500,000). This level represents management’s assessment of the possible changes in interest rates.

Interest rate derivativesThe consolidated entity manages its interest rate risk in accordance with Board-approved policy. The policy relating to interest rate risk management employed during the 2012 fi nancial year was unchanged from 2011. This policy required hedging a proportion of the consolidated entity’s fl oating interest rate exposure throughout a rolling fi ve-year period using interest rate swap contracts.Under interest rate swap contracts, the consolidated entity agrees to exchange the difference between fi xed and fl oating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the consolidated entity to mitigate the risk of fl uctuating interest rates on the cash fl ow exposure under its variable rate borrowings by exchanging fl oating rate amounts for the fi xed rate amounts. The interest rate swap contracts settle on a quarterly basis based upon the difference between the fi xed rate under each contract and Australian Dollar (bank bill swap rate) BBSY. These differences are settled on a net basis.Hedging activities are reviewed regularly to align with the consolidated entity’s interest rate risk management policy and are reported to the Board. The consolidated entity adopts the hedge accounting provisions of AASB 139 in respect of its interest rate hedges and does not enter into or trade derivative fi nancial instruments for speculative purposes.The following table details the interest rate swap contracts outstanding as at reporting date:

Maturity

Average contracted fi xed interest rate

Notional principal amount

Fair value

2012%

2011%

2012$’000

2011$’000

2012$’000

2011$’000

Less than 1 year 8.0% 7.8% 40,000 30,000 (27) (233)

1 to 5 years 8.0% 8.0% 10,000 60,000 (631) (1,841)

The fair value of interest rate swaps and forward rate agreement contracts is included in the balance of other fi nancial assets and other fi nancial liabilities (refer notes 9 and 18).


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33. Financial instruments (cont.)

Foreign exchange riskForeign exchange risk is the effect on either the fi nancial performance or capital value of the consolidated entity arising from movements in foreign exchange rates. The consolidated entity manages its foreign exchange risk in accordance with Board-approved policy and its overall strategy relating to foreign exchange risk management remains unchanged from 2011.The consolidated entity is principally exposed to US Dollars (USD), Euro (EUR) and Great British Pounds (GBP), through its overseas operations. From time-to-time the consolidated entity holds cash and may have overdraft balances in each of these currencies, and undertakes transactions denominated in these foreign currencies. As a consequence, exposures to exchange rate fl uctuations arise.The foreign currency exposure is not greater than A$500,000 (2011: A$3,000,000) for any one currency or $700,000 in aggregate (2011: $5,500,000)

Liquidity risk managementLiquidity risk is the risk that the consolidated entity will not have suffi cient funds available to meet its fi nancial commitments as and when they fall due. The consolidated entity manages its liquidity risk in accordance with Board-approved policy and its overall strategy relating to liquidity risk management remains unchanged from 2011.The consolidated entity manages its liquidity risk through frequent and periodic cash fl ow forecasting, reporting and analysis. Liquidity support is provided through maintaining a liquidity buffer in committed debt facilities and accessing other uncommitted facilities.The following tables detail the consolidated entity’s expected maturity at balance date for non-derivative fi nancial liabilities. The tables are based upon the undiscounted cash fl ows of fi nancial liabilities based upon their assumed debt rollover patterns and interest payments.

Weighted average

interest rate %

0-1 year$’000

1-2 years$’000

3-5 years$’000

Total

$’000

2012

Bank loans – A$ 4.6% 589 636 10,239 11,464

Bank loans – NZD (in A$) 4.3% 418 498 7,967 8,883

Bank loans – EUR (in A$) 2.9% 628 722 16,076 17,426

Bank loans – GBP (in A$) 2.6% 99 128 3,094 3,321

Finance lease liabilities 10.0% 853 652 281 1,786

2011

Bank loans – A$ 6.9% 5,608 5,541 82,783 93,932

Bank loans – NZD (in A$) 6.3% 911 926 19,557 21,394

Bank loans – EUR (in A$) 4.7% 383 418 10,699 11,500

Bank loans – GBP (in A$) 3.5% 46 51 1,566 1,663

Finance lease liabilities 11.1% 571 483 526 1,580

Credit riskCredit risk refers to the risk that a counter-party will default on its contractual obligations resulting in fi nancial loss to the consolidated entity. The consolidated entity’s overall credit risk management strategy of only dealing with creditworthy counter-parties, remains unchanged from 2011. The consolidated entity measures credit risk on a fair value basis. The consolidated entity limits credit risk on liquid funds and derivative instruments by only dealing with banks that have high credit-ratings assigned by international credit-rating agencies.Trade accounts receivable consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the counter-parties and, in certain instances, trade credit insurance cover is purchased.The carrying amount of fi nancial assets recorded in the fi nancial statements, net of any provisions for losses, represents the consolidated entity’s maximum exposure to credit risk without taking account of the value of any collateral or other security obtained.The consolidated entity does not have any signifi cant credit risk exposure to any single counter-party or any group of counter-parties having similar characteristics.The ageing profi le of trade receivables is disclosed in note 8. The single major exposure for receivables past due by 91 days or more is for $5,800,000 which has been fully provided as at 30 June 2012.


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Fair valueThe fair value of fi nancial assets and fi nancial liabilities referred to below in this disclosure note has been derived as follows:

fi nancial assets and fi nancial liabilities with standard terms and conditions that are traded on active liquid markets are determined with reference to quoted market prices; and

the value of all other fi nancial assets and fi nancial liabilities are determined in accordance with generally accepted pricing models based on discounted cash fl ow analysis using prices from observable current market transactions.

The fair value of foreign currency forward contracts are derived using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts.The fair value of interest rate swap and forward rate agreement contracts are derived at the present value of future cash fl ows estimated and discounted based on the applicable yield curves derived from quoted interest rates.The directors consider that the carrying amount of fi nancial assets and fi nancial liabilities recorded at amortised cost in the fi nancial statements approximates their fair values.Fair value measurements recognised in the statement of fi nancial positions are categorised as:

level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets and liabilities.

level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The consolidated entity records all its derivative fi nancial instruments at fair value, measured using the techniques outlined in level 2.

34. Commitments for expenditureFinance lease liabilities and non-cancellable operating lease commitments are disclosed in note 21 to the fi nancial statements. There are no other commitments for expenditure, at the end of the fi nancial year, other than those disclosed in the fi nancial statements.

35. Earnings per share 2012 $’000

2011 $’000

Basic earnings per share 21.13 1.56

Diluted earnings per share 20.66 1.55

Basic earnings per share from continuing operations 19.23 3.54

Diluted earnings per share from continuing operations 18.80 3.52

Basic earnings per share from discontinuing operations 1.90 (1.98)

Diluted earnings per share from discontinuing operations 1.86 (1.97)

Basic earnings per shareThe earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

2012 $’000

2011 $’000

Earnings 49,319 3,139

Earnings from continuing operations 44,878 7,121

Earnings from discontinuing operations 4,441 (3,982)

2012 No ’000

2011 No ’000

Weighted average number of shares 233,357 201,111


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35. Earnings per share (cont.)

Diluted earnings per shareThe earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:

2012 $’000

2011 $’000

Earnings 49,319 3,139

Earnings from continuing operations 44,878 7,121

Earnings from discontinuing operations 4,441 (3,982)

2012 $’000

2011 $’000

Weighted average number of shares(i) 238,696 202,360

Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows:

Weighted average number of shares used in the calculation of basic earnings per share

233,357 201,111

Shares deemed to be issued for no consideration in respect of:

Executive share options and performance rights(ii) 5,339 1,249

238,696 202,360

(i) Weighted average number of converted, lapsed or cancelled potential ordinary shares used in the calculation of diluted earnings per share

(ii) Executive share options and performance rights are considered to be potential ordinary shares and are therefore excluded from the weighted average number of ordinary shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary shares are included in the calculation of diluted earnings per share.

2012 $’000

2011 $’000

Executive share options and performance rights – –

36. Segment reporting

Segment descriptionsThe consolidated entity has identifi ed the following four segments: Workforce Services, Technical Professionals (formerly Other Staffi ng Services), Engineering and Marine services and Business Services (now discontinued).

Workforce Services Provision of specialised workforce solutions. Revenue from this segment is earned predominantly from the provision of blue-collar labour hire to clients in the industrial, mining and resources sectors. Brands in this segment include SKILLED and TESA.

Technical Professionals (formerly Other Staffi ng Services)

Provision of engineering and technical professional, white collar, and nursing staff. Brands in this segment include Swan, Skilled Technical Professionals, Mosaic, PeopleCo, Damstra Mining Services and Origin Healthcare.

Engineering and Marine Services Provision of contract maintenance and engineering services and offshore marine staffi ng and vessel chartering and management services. Brands in this segment include ATIVO and Offshore Marine Services.

Business Services As detailed in note 26 the business relating to the provision of customer contact solutions for third-party clients provided through our Excelior brand was sold during the period and is now classifi ed as a discontinued operation.

Other disclosures The consolidated entity predominantly operates in one geographical segment, being Australia. Inter-segment pricing is on a normal commercial basis.


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Segment revenues and results

Workforce Services

Technical Professionals

Engi-neering

& MarineServices

Business Services

Unallocated& elimina-

tions Total

2012 Segment result $’000 $’000 $’000 $’000 $’000 $’000

Revenue 933,457 507,369 452,060 – (2,915) 1,889,971

Other income – – 4,435 – 405 4,840

EBITDA 46,162 29,068 36,524 – (18,700) 93,054

Depreciation and amortisation (5,664) (4,086) (1,808) – (786) (12,344)

Earnings before interest and tax 40,498 24,982 34,716 – (19,486) 80,710

Net interest expense (7,598) (7,598)

Profi t before tax before reconciling items 73,112

Reconciliation of profi t

Redundancy and branch closure costs (2,598)

Legal settlement (4,400)

Amortisation of acquired intangibles (1,041)

Notional Interest on earn outs (472)

Profi t before tax 64,601

Income tax expense (19,723)

Profi t for the period from continuing operations 44,878

Segment assets and liabilities

Assets 258,867 126,850 269,495 – 34,309 689,521

Liabilities 73,296 34,184 76,231 – 57,519 241,230

Other segment information

Loss from discontinued operations after tax (1,747) – – (2,694) – (4,441)

Share of profi t of jointly controlled entities – – 4,435 – – 4,435

Carrying value of investments accounted for using the equity method

– – 10,073 – – 10,073

Acquisition of segment assets 4,658 2,722 2,947 787 – 11,114

During the year, the Other Staffi ng Services segment has been renamed Technical Professionals. Other than the changes noted below, there has been no change in the businesses reported in this segment.The following transactions and restructures have occurred in the 2012 fi nancial year which has resulted in the reclassifi cation of certain business segments:

1. Sale of the Excelior contact centre business in October 2011. This business, previously reported in Business Services segment, has been classifi ed as a discontinued business.

2. Transfer of the GTO Training Services business. This business, previously reported in the Business Services segment, will now be reported in the Technical Professionals segment.

3. Sale of the New Zealand based blue collar labour hire business Tradeforce NZ in January 2012. This business, previously reported in the Workforce Services segment, has been classifi ed as a discontinued business.


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36. Segment reporting (cont.)

Segment revenues and resultsThe 2011 comparatives have been updated to refl ect the changes from restructuring and business divestments.

Workforce Services

Technical Professionals

Engi-neering

& MarineServices

Business Services

Unallocated& elimina-

tions Total

2011 Segment result $’000 $’000 $’000 $’000 $’000 $’000

Revenue 928,657 433,020 461,267 – (3,161) 1,819,783

Other income – – 3,700 – 496 4,196

EBITDA 42,267 22,501 33,699 – (16,154) 82,313

Depreciation and amortisation (6,259) (11,754) (2,199) – (1,949) (22,161)

Earnings before interest and tax 36,008 10,747 31,500 – (18,103) 60,152

Net interest expense (23,194) (23,194)

Profi t before tax before reconciling items 36,958

Reconciliation of profi t

Redundancy and branch closure costs (6,027)

Swan sale costs (939)

Goodwill Impairment (10,727)

Amortisation of acquired intangibles (2,541)

Notional Interest on earn outs (1,022)

Bank establishment fees write-off (4,096)

Profi t before tax 11,606

Income tax expense (4,485)

Profi t for the period from continuing operations 7,121

Segment assets and liabilities

Assets 256,911 120,811 269,826 10,544 34,635 692,727

Liabilities 66,815 21,926 69,676 4,253 114,750 277,420

Other segment information

Loss from discontinued operations after tax (1,699) – – (2,283) – (3,982)

Share of profi t of jointly controlled entities – – 3,700 – – 3,700

Carrying value of investments accounted for using the equity method

– – 5,638 – – 5,638

Acquisition of segment assets 3,190 1,366 2,070 1,694 – 8,320


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37. Parent company disclosures 2012 $’000

2011(i)

$’000

Current assets 125,612 97,793

Total assets 531,570 502,194

Current liabilities 96,951 88,624


Net assets 343,327 323,080

Equity

Issued capital 349,500 348,943

Hedge reserve (421) (1,174)

Foreign currency translation reserve – (9)

Employee equity-settled benefi ts reserve 2,980 2,083

Retained earnings (8,732) (26,763)

Total equity 343,327 323,080

Profi t/(loss) for the year 36,702 (19,077)

Other comprehensive income 753 2,637

Total comprehensive income 37,455 (16,440)

Contingent liabilities

Bank guarantees for various contracts 28,249 12,893

As detailed in note 29, the Company has entered into a deed of cross guarantee with certain wholly owned controlled entities. The extent to which an outfl ow of funds will be required is dependent on the future operations of the entities that are party to the deed of cross guarantee being more or less favourable than currently expected. The deed of cross guarantee will continue to operate indefi nitely.

Total liabilities of these wholly owned entities (excluding amounts owed to the Company)

30,216 38,488

58,465 51,381

(i) Prior period balances have been corrected with the effect of decreasing current assets by $31,373,000 and decreasing retained earnings by $31,373,000 in the 2011 year. There is no impact of this adjustment on the Skilled Group Limited consolidated entity.

Commitments for expenditureThere are no other commitments for expenditure, at the end of the fi nancial year, other than those disclosed in the fi nancial statements.

38. Subsequent eventsSubsequent to year end a legal dispute dating back to 2008 was adjudicated against the consolidated entity. The fi nancial impact, being an expense of $4,400,000 before income tax, has been included in the fi nancial statements as at 30 June 2012.There has been no other matter or circumstance occurring subsequent to the end of the fi nancial year that has signifi cantly affected, or may signifi cantly affect the operations of the consolidated entity, results of those operations, or the state of affairs of the consolidated entity in future fi nancial years.


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Shareholder information

Number of shareholdersAs at 31 August 2012, 5,701 shareholders held the Company’s 233,487,276 fully paid ordinary shares.

Voting rights of ordinary sharesThe Company’s Constitution provides for votes to be cast:

on show of hands – 1 vote for each shareholder; and on a poll – 1 vote for each fully paid ordinary share held.

Substantial shareholdersThe names of substantial holders in the Company, and the number of shares in which each substantial holder and the substantial holder’s associates have a relevant interest, as disclosed in substantial holding notices given to the Company as at 31 August 2012, are as follows:

Date of notice Fully paid ordinary shares

Mr Gregory MacKenzie Hargrave 05/06/2012 30,158,636

Thorney Holdings Pty Ltd 18/05/2012 21,700,000

Allan Gray Australia Pty Ltd 24/08/2012 12,699,275

Invesco Australia Limited 08/09/2010 9,573,714

20 Largest holders of ordinary shares as at 31 August 2012 Fully paid ordinary shares

Name Number of shares Percentage

J P Morgan Nominees Australia Limited 39,637,926 16.98%

National Nominees Limited 36,088,212 15.46%

HSBC Custody Nominees (Australia) Limited 34,926,756 14.96%

Hedonsax Pty Ltd 21,010,000 9.00%

Citicorp Nominees Pty Limited 12,610,883 5.40%

Thorney Holdings Pty Ltd 11,321,902 4.85%

Larkfi eld Nominees Pty Ltd 9,144,796 3.92%

BNP Paribas Nominees Pty Ltd 7,710,170 3.30%

RBC Investor Services Australia Nominees Pty Limited 3,662,692 1.57%

UBS Nominees Pty Ltd 3,534,553 1.51%

Junere Holdings Pty Ltd 3,510,000 1.50%

Smallco Investment Manager Ltd 2,255,561 0.97%

Bond Street Custodians Limited 1,824,467 0.78%

R A T Investments Pty Ltd 1,679,001 0.72%

AMP Life Limited 1,626,845 0.70%

Brispot Nominees Pty Ltd 1,196,106 0.51%

QIC Limited 1,161,834 0.50%

Rixi Pty Ltd 1,010,000 0.43%

Goldman Sachs Australia Pty Ltd 671,056 0.29%

Mr Michael Peter McMahon 667,501 0.29%

195,250,261 83.64%


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OptionsAs at 31 August 2012, 13 individual option holders held 4,458,593 options.

Distribution of holdings as at 31 August 2012No. of holders

Range Ordinary shares Options

1 – 1000 1,656 –

1,001 – 5,000 2,361 –

5,001 – 10,000 782 –

10,001 – 100,000 841 1

100,001 to max 61 12

Total: 5,701 13

As at 31 August 2012, there were 381 holdings of ordinary shares of less than a marketable parcel.


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Five-year fi nancial summary

Income statement

2008

$’000

2009

$’000

2010

$’000

2011

$’000

2012

$’000

Continuing Operations(i)

Revenue 1,929,530 1,943,258 1,697,994 1,819,783 1,889,971

Other income 8,181 335 2,323 4,196 4,840

Total revenue and other income 1,937,711 1,943,593 1,700,317 1,823,979 1,894,811

EBITDA 101,114 86,083 62,125 64,620 86,056

Depreciation and amortisation 19,885 21,477 21,829 24,702 13,385

EBIT 81,229 64,606 40,296 39,918 72,671

Net interest expense 23,038 27,122 26,469 28,312 8,070

Profi t from continuing operations before income tax 58,191 37,484 13,827 11,606 64,601

Income tax expense 18,863 9,230 1,126 4,485 19,723

Profi t for the period from continuing operations 39,328 28,254 12,701 7,121 44,878

Discontinued Operations

Profi t/(loss) from discontinued operations after tax – – – (3,982) 4,441

Profi t/(loss) for the period 39,328 28,254 12,701 3,139 49,319

EBITDA margin 5.2% 4.4% 3.7% 3.5% 4.5%

EPS (undiluted): cents per share 34.5 23.0 7.3 1.6 21.1

Dividend per share:

Interim 9.0 9.0 – – 5.0

Final 14.0 1.5 – 3.0 8.0

Total 23.0 10.5 – 3.0 13.0

Gearing (Net debt / Net debt + equity) 51% 53% 35% 19% 6%

Interest cover (EBITDA / Interest expense)(ii) 4.8 3.4 2.9 3.5 12.2

Return on equity (NPAT/ Average Equity) 22% 12% 4% 1% 11%

(i) Results for the 2011 and 2012 fi nancial years are stated on the basis of continuing operations. The 2011 Income Statement has been restated to refl ect the sale of the Excelior and Tradeforce NZ businesses in the 2012 fi nancial year.

(ii) Interest cover is based on EBITDA and net interest expense from continuing operations as disclosed in note 36 Segment Reporting


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Balance statement

2008

$’000

2009

$’000

2010

$’000

2011

$’000

2012

$’000

Cash assets – 4,202 2,577 13,931 11,216

Receivables 285,344 210,345 253,326 240,176 237,842

Other fi nancial assets 59 – 503 1,193 20

Inventories 1,141 1,168 911 816 534

Current tax assets – 6,112 3,829 – –

Other 9,062 12,447 8,754 6,752 6,835

Total current assets 295,606 234,274 269,900 262,868 256,447

Receivables 3,986 1,521 1,687 2,035 1,031

Equity accounted investments – – 1,938 5,638 10,073

Other fi nancial assets 1,177 – 64 – –

Property, plant and equipment 27,102 26,420 18,117 13,231 11,135

Intangibles 422,986 427,887 414,724 391,068 389,324

Deferred tax assets 10,048 13,466 12,930 17,887 21,511

Total non-current assets 465,299 469,274 449,460 429,859 433,074

Total assets 760,905 703,548 719,360 692,727 689,521

Payables 177,130 120,124 128,115 99,834 116,136

Borrowings 17,891 2,150 17,861 509 1,022

Other fi nancial liabilities 47 6,602 3,441 1,958 559

Current tax liabilities 3,423 – – 1,702 18,217

Provisions 34,377 28,185 36,770 43,652 51,460

Total current liabilities 232,868 157,061 186,187 147,655 187,394

Payables 49,359 37,121 11,946 7,222 –

Other fi nancial liabilities 657 5,089 2,600 623 121

Borrowings 226,982 260,709 169,088 109,959 37,600

Provisions 16,357 16,037 9,889 11,961 16,115

Total non-current liabilities 293,355 318,956 193,523 129,765 53,836

Total liabilities 526,223 476,017 379,710 277,420 241,230

Net assets 234,682 227,531 339,650 415,307 448,291

Issued capital 176,368 180,170 279,129 348,943 349,500

Reserves 4,273 (6,792) (3,477) (773) 92

Retained profi ts 54,041 54,153 63,998 67,137 98,699

Total equity 234,682 227,531 339,650 415,307 448,291


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DirectorsVA McFadden MP McMahon AM Cipa MJ Findlay RN Herbert AMTA Horton

SecretaryTA Paine

Registered offi ceSKILLED Group Limited2 Luton LaneHawthorn Victoria 3122ACN 005 585 811ABN 66 005 585 811

Telephone 61 3 8646 6444Facsimile 61 3 8646 6441

Share registryComputershare Investor Services Pty Ltd

Yarra Falls, 452 Johnston StreetAbbotsford Victoria 3067Shareholders enquiries: 1300 850 505

AuditorsErnst & Young8 Exhibition StreetMelbourne Victoria 3000

BankersAustralia and New Zealand Banking Group Limited100 Queen StreetMelbourne Victoria 3000

National Australia Bank Limited500 Bourke StreetMelbourne Victoria 3000

Westpac Banking Corporation360 Collins StreetMelbourne Victoria 3000

Commonwealth Bank of Australia385 Bourke StreetMelbourne Victoria 3000

Exchange on which shares are listedAustralian Securities ExchangeLevel 4, North Tower, Rialto525 Collins StreetMelbourne Victoria 3000

www.skilledgroup.com.au

2012 Corporate Directory


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www.colliercreative.com.au #SKI0001

PRINTER TO SUPPLY CORRECT FSC LOGO

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2 Luton LaneHawthorn Victoria 3122

Telephone 61 3 8646 6444Facsimile 61 3 8646 6441

www.skilledgroup.com.au

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Delivering shareholder value For personal use only · reflected in the reduction of debt from the...

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