Lycopodium : Annual Financial Report 2017

ABN 83 098 556 159

Directors' report

Corporate governance statement Financial report

Consolidated statement of profit or loss and other comprehensive income Consolidated balance sheet

Consolidated statement of changes in equity Consolidated statement of cash flows

Notes to the consolidated financial statements Directors' declaration

Independent auditor's audit report to the members Shareholder information

Corporate directory

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This financial report is the consolidated financial report of the group consisting of Lycopodium Limited and its subsidiaries. The financial report is presented in the Australian currency.

Lycopodium Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Lycopodium Limited

Level 5, 1 Adelaide Terrace East Perth WA 6004

A description of the nature of the group's operations and its principal activities is included in the directors' report on page 1, which is not part of this financial report.

The financial report was authorised for issue by the Directors on 28 September 2017. The Directors have the power to amend and reissue the financial report.

Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases, financial reports and other information are available at our Shareholders' Centre on our website: www.lycopodium.com.au

Your Directors present their report on the group consisting of Lycopodium Limited and the entities it controlled at the end of, or during, the year ended 30 June 2017.

Directors

The following persons were Directors of Lycopodium Limited during the whole of the financial year and up to the date of this report:

Michael John Caratti Peter De Leo

Rodney Lloyd Leonard Robert Joseph Osmetti Lawrence William Marshall Bruno Ruggiero

Steven John Micheil Chadwick

Mr Peter Anthony Dawson was appointed as an Executive Director on 18 September 2017 and continues in office at the date of this report.

Principal activities

The principal activities of the group during the financial year consisted of engineering consulting in the mining, metallurgical, rail and manufacturing industries. There were no significant changes in the nature of the group's principal activities during the financial year.

Dividends

Dividends paid to members during the financial year were as follows:

2017 2016

$ $

Interim fully franked dividend for the year ended 30 June 2017 of 9.0 cents (2016: 1.5 cents) per fully paid share paid on 13 April 2017 (2016: 13 April 2016)

3 ,57_ 5,9_14 59_5_,_98_7_

In addition to the above dividends, since the end of the financial year the Directors have recommended the payment of a final fully franked dividend of $3,575,914 (9.0 cents per fully paid share) to be paid on 13 October 2017 out of retained earnings at 30 June 2017 (2016: $1,589,295). This brings the total dividend declared for the year ended 30 June 2017 to 18.0 cents (2016: 5.5 cents).

Review of operations

Lycopodium has had a busy year across all sectors. We have continued to execute our strategies and have seen our first class teams successfully deliver services across all sectors within which we are involved. In line with this we have achieved a good financial outcome for the year and have further strengthened our balance sheet and financial position.

In mineral resources Lycopodium was busy with the delivery of five green fields gold projects Mako (Senegal), Hounde (Burkina Faso), Natougou (Burkina Faso), Sissingue (Cote d'Ivoire) and Santa Rosa (Colombia) as well as two expansion I upgrade projects Karma (Burkina Faso) and Toka Tindung (Indonesia).

The level of activity in our infrastructure business increased materially in the second half of the financial year with a number of new briefs awarded to both the rail and asset management groups including a material package of asset management work with Energy Australia. In addition, we are actively bidding a number of packages on the Inland Rail Project in Eastern Australia, a key national infrastructure initiative.

In our process industries business we have been awarded the design and construct contract for a Cotton Seed De-linting HCI package in NSW and are seeing a modest but steady increase in the number of opportunities.

We have grown in terms of staff numbers in line with the increases levels of activity and all our projects and studies are being delivered very well across the business and as always that is a reflection of our great people and teams.

(continued)

Review of operations (continued)

Full Year Results

As per prior guidance, the Directors are pleased to report a successful outcome for the financial year ended 30 June 2017, with Lycopodium achieving revenues of $216.6 million and a net profit after tax of $10.3 million.

Basic earnings per share were 25.9 cents. The Directors have resolved to pay a final dividend of 9 cents fully franked, which aligns with our dividend policy. The total dividend for the year is 18 cents fully franked.

Corporate overview

As flagged last year we have now integrated our asset management, rail and general infrastructure activities under the Lycopodium Infrastructure banner. We consider this to have been successful in that we have worked through the integration of the businesses whilst continuing to strengthen the respective teams, we have broadened the locations in which we are providing our rail, civil infrastructure and asset management services. Our rail and asset management teams in particular have on the basis of the integration and improved market conditions also achieved improved financial performance.

Another key initiative for the year was the establishment of Mondium Pty Ltd (Mondium). This business is a standalone joint venture company owned by Lycopodium and Monadelphous Ltd, a highly respected engineering and construction company listed on the ASX. Mondium has been established to service the mineral resources market in Australia and select other regions by delivering projects on an Engineering Procurement and Construction (EPC) or Lump Sum Turnkey (LSTK) basis. Mondium has been in establishment mode for most of this financial year but has also bid a number of high profile EPC opportunities. Whilst it is yet to win work its' offering, as demonstrated in the various tenders, has been in every instance well received and well regarded.

The numbers of opportunities in the EPC market remain low and those that have presented have all been toughly contested however we have every confidence that Mondium will be successful in the near term in securing some EPC based contracts and will undoubtedly build a strong name for itself based on the excellent management team and capabilities in place.

Finally, we have also been focussing on our 'One Minerals' strategy. This initiative is about ensuring that we deliver a consistent high standard of service across all our mineral resources related offices. We have excellent capabilities and depth across the business and we have a plan in place to leverage off those capabilities efficiently and effectively for the benefit of our clients and ultimately our shareholders. Several organisational changes have been made during the year which will help build the foundations for furthering this initiative over the next 12 months.

Operational highlights

Lycopodium continued to operate positively across all its market sectors during the period.

Resources

Lycopodium Minerals (including the Perth, Brisbane, Toronto and Manila based organisations) continued building its track record as the preeminent international engineer in terms of gold projects working on study or development phase activities for projects in Colombia, Mali, Senegal, Ghana, Burkina Faso, Ethiopia, Namibia, Philippines, Cote d'Ivoire and French Guiana. Lycopodium Minerals also continued its long relationship with First Quantum Minerals Limited (FQM) with work continuing on the world class Cobre Panama Project in Panama.

ADP built on its relationship with key clients including De Beers (and its subsidiaries) whilst advancing several key studies and projects. Orway Mineral Consultants (OMC) built on the Group's strong reputation for innovation with its continued work on the Carapateena Concentrate Treatment Project for OZ Minerals.

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