Management Resource Solutions Regulatory News (MRS)

Management Resource Solutions PLC

("MRS" the "Company" or the "Group")

Final Results

Continued progress, well placed for future growth

Management Resource Solutions PLC, a leading Maintenance, Fabrication, Civil and Earthworks company, announces its Final Results for the year ended 30 June 2018.

Financial Highlights

• Trading performance in line with expectations

• Revenue up 32% to $69.1m (2017: $52.4m)

• EBITDA of $12.3m (2017: loss of $4.9m)

• Net profit after tax of $5.4m (2017: net loss after tax of $10.8m)

• Basic EPS of AUD3.02c (2017:AUD(12.99c))

* All references to dollars or $ relate to Australian dollars, the Group's presentational currency

Operational Highlights

• A year of progress with significant cost management initiatives put in place

• Continued investment into people and core profitable assets

• Bachmann Plant Hire operating close to full utilisation during period, continued positive momentum

• Strong first full year performance from MRS Services Group with strong end market demand for specialist services

Paul Brenton, CEO of MRS, commented:

"2018 was a busy and successful year for MRS, as the Group benefited from a number of initiatives to turn around the business and drive a strong performance. The new management team have worked hard to make the business leaner and fitter, with a disciplined focus on controlling costs and leveraging the Group's central processes in order to deliver sustainable profit and returns.

"Along with the internal measures taken to put the Company on a secure footing, we have seen strong market demand for the Group's specialist services. Record government spending on core civil infrastructure and strong growth in the construction sector has driven demand within our Bachmann Plant Hire business. As market dynamics have improved within the resources sector, our MRS Services Group business has also continued to drive growth, thanks to the breadth and depth of its sector and technical expertise.

"We have started the new year in line with management expectations and are confident about the Group's prospects and the opportunity ahead. We have an excellent management team in place, along with talented people and leading market positions, which I believe leaves MRS well placed to drive future growth and create value for all stakeholders."

Enquiries:

Notes to Editors

Management Resource Solutions PLC (MRS), through its subsidiaries Bachmann Plant Hire and MRS Services Group, offers plant hire, equipment repair, refurbishment and fabrication, mine rehabilitation, earthmoving, road construction and other support services to a wide base of private and public sector clients in Australia. MRS caters predominately for the mining, civil engineering, construction and infrastructure industries.

Further information on the Company can be found at http://www.mrsplc.info.

CHAIRMAN'S STATEMENT AND STRATEGIC REPORT

Dear Shareholders,

Financial Results and Financial Key Performance Indicators

All references to dollars or $ relate to Australian dollars, the Group's presentational currency.

I am pleased to report a strong set of results for the financial year to 30 June 2018 ('FY18' or '2018'), in line with management expectations. Net profit after tax of $5.4m (2017: net loss after tax $10.8m) on revenue of $69.1m (2017: $52.4m) reflects the restructuring and cost saving initiatives put in place during 2017 and the strong, clear direction of the Company under new management during the period.

FY18 has seen the Company deliver much improved results, with a strong revenue and profit performance as both of the Group's businesses delivered 12 month contributions. A major factor in these results was the significant cost reduction programme initiated in late 2017, which continued throughout the 2018 financial year. As Group revenue strengthened these cost savings were largely achieved through a strong focus on leveraging the Group's central processes and controlling overheads.

Net Profit / (Loss) After Tax - A$'000

Trading Review - Bachmann Plant Hire Pty Ltd

Bachmann Plant Hire Pty Ltd ("BPH") is based in Ipswich, approximately 40km west of Brisbane (Queensland), and specialises in providing bulk earthworks to the construction and infrastructure sectors, generally throughout South East Queensland. BPH delivers wet hire services (plant is accompanied with operators) which is completed through either an hourly wet hire arrangement or performed at a bulk cubic metre rate, which is often referred to as contract work.

The Ipswich Economic Development Plan 2016 to 2031, enacted by the Queensland Government, is an ambitious plan to attract 292,000 people to 20 employment and population growth areas in the vicinity of Ipswich, resulting in an additional 120,000 jobs. More than 500 new residential dwellings are required to be completed every month to achieve the plan, resulting in the fastest growing residential growth corridor in Australia.

BPH has a 50-year history and an experienced workforce of long-term employees, and is perfectly located to exploit these opportunities. Most contracts are based on bulk earthworks within a small, well defined area of a residential or commercial sub-division to a final level finish of +/- 50mm. Although operations can be hampered by excessive rainfall, overall BPH operates in a relatively low risk contracting environment. Whilst contracts are generally relatively short (two to six months in length), there is a steady pipeline of work to complete going forward.

FY18 was another strong year for BPH, with a net profit after tax of $4.0m (FY17: NPAT from continuing business of $1.5m) on Revenue of $22.5m (FY17 $22.2m). During FY18, BPH's Plant & Equipment operated at close to full utilisation and BPH benefited as a result of having no distractions and unnecessary costs associated with the discontinued operations from FY17. This has enabled BPH to focus on minimising operating costs and leveraging the Group's central processes.

Trading Review - MRS Services Group Pty Ltd

MRS Services Group Pty Ltd (MRSSG) is strategically located in the heart of the coal mining region of the Hunter Valley in New South Wales, approximately 125km North West of the coal exporting port of Newcastle and approximately 240km north of Sydney. Some 90% of revenues are derived from blue chip mining companies including Yancoal, New Hope, BHP and Glencore. Demand for high quality coal (containing high energy content with low ash and pollutants) from the Hunter Valley remains strong, in particular for export to China and East Asia where over 1,000 new High Energy Low Emissions (HELE) Ultra-Supercritical Coal Fired Power Stations are planned or under construction.

The majority of MRSSG's work in the Hunter Valley is low risk, derived from selling trade labour at hourly rates. The fabrication and mine rehabilitation businesses are based on longer-term contracts in well-established work relationships and well understood risk profiles.

FY18 is the first full year of contribution from MRSSG to the Group. MRSSG contributed a net profit after tax of A$5.0m on revenue of A$46.2m (2017: net loss after tax $7.4m over nine months). MRSSG also benefited in FY18 from no distractions and unnecessary costs associated with the discontinued operations from FY17, enabling a focus on minimising operating costs and leveraging the Group's central processes. The business also benefited significantly from a reduction in overhead costs and from the recognition of FY17 tax losses in FY18 offsetting any tax expense.

MRS Property No1 Pty Ltd

During FY18, MRS Property No1 Pty Ltd (PN1) purchased the land and the partially completed buildings for $3.0m which MRSSG operates from in the Hunter Valley. At the time of acquisition, the land and buildings had a valuation of $4.8m. The cost to complete the building is approximately $2.0m, which is fully funded through a construction facility. The completion of the construction is progressing well and to budget. The estimated valuation per management, of the completed facility in use, is approximately $9.0m to $10.0m.

MRS Group

Property, Plant & Equipment

During FY18, the Group invested $13.7m in Property, Plant & Equipment, with a further $2.0m in Capital Work In Progress. The majority of the capital expenditure (CAPEX) has been funded through free cash flow, new debt contributed $5.0m, with $2.0m equipment finance and $3.0m property finance. The cashflow constraints of prior years' have not allowed for CAPEX. However, during FY18 the Company has focussed on ensuring CAPEX has been invested, extending the life of the capital equipment and supporting the Group's sustainable growth.

Borrowings

With the acquisition of the Muswellbrook facility, there are now five core debt facilities:

1. Debtor Finance - BPH has a $2.6m facility, and MRSSG has a $7.0m facility (this increased in May 2018);

2. Commercial Bills - The commercial bills were established with the restructure of the Group in FY17, only one commercial bill remains, amortising approx. $100k per month;

3. Equipment Finance - There are two equipment finance loans, both are amortising approx $100k per month;

4. Property Finance - $3.0m facility, amortising at approx. $100k per month; and

5. Property Construction Finance - $2.0m facility, not drawn at 30 June 2018, this loan will be used to complete the facility during FY19.

Earnings Per Share

Earnings Per Share (EPS) guidance of 2.0p per share was based on there being no tax expense for FY18, an exchange rate of AUD/GBP of 0.60 and a lower weighted average number of shares.

Comparison of a normalised EPS calculation to the original guidance results in MRS generating an EPS of 2.07 pence per share, which is 4% above guidance. However, the effects of a higher than expected weighted average number of shares, decline in the exchange rate and $0.6m of tax expense, resulted in an EPS of 1.74 pence per share.

Management Resource Solutions PLC and Holdings (MRS) Pty Ltd

The combined continuing operating loss for the Group's "holding" companies for 2018 was $3.5m (2017: loss $1.6m). The increase in the loss is mainly due to HMRS having a tax expense of $1.1m in 2018, and a full year of operating and interest expense in 2018 (in 2017 HMRS operated from February 2018).

Management Resource Solutions Pty Ltd, MRS Guernsey Limited and MRS PNG Limited

Management Resource Solutions Pty Ltd, MRS Guernsey Limited and MRS PNG Ltd were placed into voluntary administration during FY17. MRS Guernsey Limited and MRS PNG Limited have been deregistered, and Management Resource Solutions Pty Ltd is in the process of being deregistered. There were no costs incurred in relation to these entities during FY18.

MRS Group Outlook

The markets which BPH and MRSSG service are the strongest they have been in years and trading during the early part of our 2019 financial year has been in line with expectations. BPH is currently working close to full capacity and has a strong pipeline of work to complete. MRSSG is experiencing strong end market demand. The Hunter Valley thermal coal price has been strong and stable providing confidence for the coal mines to commit to repairs and maintenance.

Our core management team, led by our CEO Paul Brenton, continues to perform at a very high level. The success of the Group will owe much to the consistency of leadership and the management team's dedication to delivering the Company's goals, and we are looking forward to another strong performance for FY19.

2018 has been a successful year and on behalf of the Board, I'd like to thank all employees for their continued commitment to working safely and to all stakeholders of MRS including our customers, suppliers, funders and shareholders for maintaining their support of the Company.

John Zorbas

Chairman

7 December 2018

DIRECTORS' REPORT

The Directors present their report and the audited financial statements for the year ended 30 June 2018.

Principal activities

The principal activities of the Group during the year were plant hire, equipment repair, refurbishment and fabrication, mine rehabilitation, earthmoving, road construction and other support services to a wide base of private and public-sector clients in Australia. The Group caters predominately for the mining, civil, engineering, construction and infrastructure industries.

Issue of Shares

Details of Ordinary Shares issued during the year are set out in notes 24 to 26 of the Financial Statements.

Share based payments

Share based payments are detailed in note 26 of the Financial Statements.

Results and dividends

The results for the year are set out on page 17.

The Directors do not recommend the payment of a dividend.

Business and financial review

All references to dollars or $ relate to Australian dollars, the Group's presentational currency.

A review of the business and future developments is given in the CEO's Statement and Strategic Report on page 2.

Revenue for the period amounted to $69.1 million (2017: $52.4 million).

Net profit after tax for the period amounted to $5.4 million (2017: loss of $10.8 million).

At 30 June 2018, the Group had net assets of $10.3 million (2017: $3.7 million).

Going concern

The financial statements have been prepared on the going concern basis as, in the opinion of the Directors, at the time of approving the financial statements, there is a reasonable expectation that the Group will continue in operational existence for the foreseeable future.

In order to arrive at this opinion, the Directors have prepared detailed cash flow forecasts for the Group, which demonstrate that it will be able to meet its liabilities as they fall due for a period of at least twelve months from the date of approval of the financial statements.

Further information on the going concern assumption is provided in note 1 to the consolidated financial statements.

Key performance indicators

The Group's current key performance indicators are safety, building revenue and profitability, and expanding our diverse client base. Relevant information is reported in the Chairman's Statement and Strategic Report.

Principal risks and uncertainties

There are risks associated with the Group's business. The Board regularly reviews the risks to which the Group is exposed and has in place a strategy to mitigate these risks as far as possible. The following summary, which is not exhaustive, outlines some of the key risks and uncertainties facing the Group at its present stage of development:

The Directors regularly monitor such risks and will take actions as appropriate to mitigate them. The Group manages its risks by seeking to ensure it is in compliance with the terms of its agreements, and through the application of appropriate policies and procedures, and via the recruitment and retention of a team of skilled and experienced professionals.

Directors

The Directors of the Company during the period were as follows:

Paul Brenton (appointed 21 December 2017)

Timothy Jones

John Zorbas

Joe Clayton (resigned 21 August 2017)

Trevor Brown (resigned 31 December 2017)

Nigel Burton (resigned 31 March 2018)

Details of the Director's remuneration are given in note 8 to the financial statements.

Directors' Interests, including family interests, in Ordinary Shares of the Company and in options and warrants to subscribe for Ordinary Shares were as follows (see note 24 - 26 for details of share based payment arrangements):

Substantial Shareholdings

At 7 December 2018, the Company was aware of the following interests in 3% or more of the issued share capital of the Company:

Financial instruments

Details regarding the Group's use of financial instruments and their associated risks are given in note 23 to the consolidated financial statements.

Indemnity Provision for Directors

MRS has insurances to cover Directors' and Officers' liabilities for an amount of £10,000,000 which the Directors believe to be sufficient for the business.

 Statement as to disclosure of information to auditors

All the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company's Auditors for the purposes of their audit and to establish that the Auditors are aware of that information. The Directors are not aware of any relevant audit information of which the Auditors are unaware.

Auditors

James Cowper Kreston have expressed their willingness to continue in office and a resolution to re‑appoint them will be proposed at the annual general meeting.

Approved by the Board of Directors on 7 December 2018 and signed on behalf of the Board by:

John Zorbas

Chairman

7 December 2018

DIRECTOR'S RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2018

The Directors are responsible for preparing the strategic report, the directors' report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and to prepare the parent company accounts in accordance with UK accounting standards including FRS 101 "Reduced Disclosure Framework". Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

In preparing these financial statements, the Directors are required to:

· Select suitable accounting policies and then apply them consistently;

· Make judgements and accounting estimates that are reasonable and prudent;

· State whether the group accounts have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements;

· State whether the parent company accounts have been prepared in accordance with applicable UK accounting standards, subject to any material departures disclosed and explained in the financial statements; and

· Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website www.mrsplc.info in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MANAGEMENT RESOURCE SOLUTIONS PLC

Opinion

We have audited the financial statements of Management Resource Solutions plc (the 'Company') for the year ended 30 June 2018 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated and Parent Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the consolidated financial statements is applicable law and International Financial Reporting Standards as adopted by the European Union. The financial reporting framework applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 "Reduced Disclosure Framework" (United Kingdom Generally Accepted Accounting Practice).

In our opinion, the financial statements:

· Give a true and fair view of the state of the Group and Parent Company's affairs as at 30 June 2018 and of the Group's profit for the year then ended;

· Have been properly prepared in accordance with the financial reporting frameworks as outlined above; and

· Have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for Opinion

We conducted our audit in accordance with International Standards of Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further discussed in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standards as applied to listed entities, and we have fulfilled our ethical responsibilities with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you were:

· The directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; and

· The directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

An overview of the scope of our audit

Our audit was scoped by obtaining an understanding of the Group and its environment, assessing the risks of material misstatement in the financial statements and planning and performing appropriate audit procedures in response to those risks.

All of the group's operations, management and accounting function reside in Australia. Accordingly, the majority of the audit work was undertaken by a local firm of auditors. We directed, supervised, and reviewed their work appropriately to enable us to form an opinion on the financial statements.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we not provide a separate opinion on these matters.

Revenue Recognition

Risk description

There is an inherent risk of misstatement of revenue in most trading business, whether amounting from fraud or error.

How the scope of our audit responded to the riskTo assess the appropriateness and completeness of revenue recognised in the year the following procedures were performed:

· Examined a sample of revenue transactions by reference to underlying contractual terms;

· Examined a sample of items of accrued revenue on incomplete projects by reference to contractual terms, stage of completeness and subsequent invoices;

· Considered the appropriateness and application of the company's accounting policy for revenue recognition; and

· Considered the disclosures in the financial statements regarding revenue.

Key observations

The results of our testing were satisfactory and we consider the disclosure surrounding revenue to be appropriate.

Property, plant and equipment

Risk description

The group holds a material amount of property, plant and equipment (PPE) which are held in various physical locations. There are various risks associated including existence, valuation and impairment risk.

How the scope of our audit responded to the risk

Testing was performed on a sample basis to obtain assurance that assets existed and were recorded at an appropriate value.

Key observations

The results of our testing were satisfactory.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decision of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgements we determined materiality for the financial statements as a whole to be $400,000 (2017: $800,000). The key driver for the materiality calculation was profit before taxation but we also considered the appropriateness of this figure in the context of the reported revenue for the year, and the balance sheet.

We agreed with the directors that we would report all audit difference in excess of $20,000 (2017: $40,000) as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report on disclosure matters that we identified when assessing the overall presentation of the financial statements.

Other information included in the annual report

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially misstated. If we identify such material inconsistencies or apparent material misstatement, we are required to determine whether there is a material misstatement in the financial statement or a material misstatement in the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

· The information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared are consistent with the financial statements; and

· The strategic report and the directors' report have been prepared in accordance with the applicable legal requirements.

Matter on which we are required to report by exception

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to the financial statements which the Companies Act 2006 require to report to you if, in our opinion:

· Adequate accounting records have not been kept, or returns adequate for the audit have not been received from branches not visited by us; or

· The financial statements are not in agreement with the accounting records and returns; or

· Certain disclosures of directors' remuneration specified by law are not made; or

· We have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 12 the directors' are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors' either intend to liquidate the Company or to cease operating, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatements whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decision of users taken on the basis of these financial statements.

A further description of our responsibility for the audit of the financial statements is located on the Financial Reporting Council's website at: frc.org.uk. This description forms part of our auditors' report.

Use of our report

This report is made solely to the Company's member, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's member those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Alan Poole BA (Hons) FCA (Senior Statutory Auditor)

For and on behalf of

James Cowper Kreston

Statutory Auditors

Reading

7 December 2018

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018

CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 30 JUNE 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018

CONSOLIDATED STATEMENT OF CASH FLOW FOR THE YEAR ENDED 30 JUNE 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018

1. Accounting policies

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to the periods presented, unless otherwise stated.

These financial statements have been prepared on the historical cost basis, on the basis of going concern and in line with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations issued by the International Accounting Standards Board ("IASB") adopted by the European Union and in accordance with applicable UK law.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. See note 2 for more details.

Going concern

The financial statements have been prepared on the going concern basis as, in the opinion of the Directors, at the time of approving the financial statements, there is a reasonable expectation that the Group will continue in operational existence for the foreseeable future.

The Directors note, that as at 30 June 2018, current liabilities of $32.1m exceed current assets of $18.7m by $13.4m. Notwithstanding this deficiency, the Directors are confident that the Group will be able to pay its debts as and when they all due and payable upon consideration of:

· the operating cash flows forecast to be generated by the Company over the next twelve months from the date of signing the annual report; and

· the composition of the current liabilities and likelihood of the company being required to repay them over the next twelve months.

Based on the above, the Directors consider there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable, and therefore the going concern basis of preparation is considered to be appropriate for the financial report for the year ended 30 June 2018 (as indicated in the Chairman's Report).

The Group enjoys a strong relationship with its financiers, and the Directors believe they would be able to undertake a combination of the following courses of action should additional funding be required:

· Continue the close relationship with the bank and restructure existing financial obligations;

· Negotiate alternate financing arrangements; and

· Access additional equity funding.

The Directors believe that the Group will be successful in managing the above matters and accordingly, they have prepared the financial report on a going concern basis.

Basis of consolidation

Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the following elements are present: power over an investee, exposure to variable returns from the investee, and the ability of the investor to use its power of affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Subsidiaries are fully consolidated from the date that control commences until the date that control ceases. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

Business combinations

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair value at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained.

The Company was incorporated on 26 April 2012 for the purpose of acquiring the entire issued share capital of Management Resource Solutions Pty Ltd, which was previously the ultimate parent company of the Group. This acquisition took place on 24 August 2012 by the issue of the entire ordinary share capital of the Company to the shareholders of Management Resource Solutions Pty Ltd in exchange for their shareholdings in the Company.

This reconstruction is accounted for as an acquisition under common control. Accordingly, the financial statements present the Group results as a continuation of the results of the Group previously headed by Management Resource Solutions Pty Ltd.

Corporate Income Tax

The income tax expense for the year comprises current income tax expense and deferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on taxable income. Current tax liabilities are measured at the amounts expected to be paid to the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense is charged or credited outside the profit and loss when the tax relates to items that are recognised outside the profit and loss.

Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. When an investment property that is depreciable is held by the Company in a business model whose objective is to consume substantially all of the economic benefits embodies in the property through use over time (rather than through sale), the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of such property will be recovered entirely through use.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Discontinued operations

Discontinued operations represent cash generating units that have been placed into voluntary administration and ceased operating. The post-tax profit or loss of the discontinued operation is presented as a single line on the face of the consolidated income statement. The presentation of discontinued operations within prior periods is restated to reflect consistent classification of discontinued operations across all periods presented.

Operating segments

IFRS 8 "Operating Segments" requires the disclosure of segmental information for the Group on the basis of information reported internally to the chief operating decision-maker for decision-making purposes. The Group considers that the role of chief operating decision-maker is performed collectively by the Board of Directors.

Management Resource Solutions plc is a holding company that operates two businesses in Australia, Plant Hire and Mining Contracting. Its customers are based in Australia.

Financial information (including revenue and profit before tax and intra-group charges) is reported to the Board on a segmental basis. Segment revenue comprises sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the Board represents the profit earned by each segment before tax and intra-group charges. For the purposes of assessing segment performance and for determining the allocation of resources between segments, the Board reviews the non-current assets attributable to each segment as well as the financial resources available. All assets are allocated to reportable segments. Assets that are used jointly by segments are allocated to the individual segments on a basis of revenues earned.

All liabilities are allocated to individual segments. Information is reported to the Board of directors on a segmental basis as management believes that each segment exposes the Group to differing levels of risk and rewards due to their varying business life cycles. The segment profit or loss, segment assets and segment liabilities are measured on the same basis as amounts recognised in the financial statements. Each segment is managed separately.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities, where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Property, Plant and Equipment

Property, plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than its estimated recoverable amount, the carrying amount is written down immediately to its estimated recoverable amount and impairment losses recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset.

Goodwill 

Goodwill arising on the acquisition of a subsidiary represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate potential impairment. The carrying value of goodwill is compared with the recoverable amount, which is the higher of the value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense, separately disclosed in the intangible fixed asset note to the financial statements, and is not subsequently reversed.

Where the fair value of the identifiable net assets acquired exceeds the fair value of the consideration given, the excess is recognised as a gain in the Consolidated Statement of Profit & Loss.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised lease assets is depreciated on a straight-line basis over the asset's useful life to the Consolidated Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

Leases

Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset - but not the legal ownership - are transferred to entities in the consolidated group, are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses on a straight-line basis over the lease term.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

Financial Instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. For financial assets this is equivalent to the date that the Group commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified 'at fair value through profit or loss' in which case transaction costs are expensed to profit or loss immediately.

Impairment

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include considering external sources of information and internal sources of information. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use to the asset's carrying amount. Any excess of the asset's carrying amount over its recoverable amount is recognised immediately in profit or loss.

Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each Group entity is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the functional currency for most of the group, and the presentational currency.

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items are translated at the year - end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is directly recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss.

Employee Benefits

An accrual is made for the Group's liability for employee benefits in relation to the Group's unpaid contribution to defined contribution schemes. The Group's obligations in respect of defined contribution pension schemes are recognised as a cost in the consolidated statement of profit and loss.

Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.

Revenue and Other Income

Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at the end of the reporting period and where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed, based on surveys of work performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable.

All revenue is stated net of VAT and similar taxes.

Trade and other receivables

Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets.

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to note 2 for further discussion on the determination of impairment losses.

Inventories

Raw materials, stores, and work in progress are stated at the lower of cost and net realisable value. Cost comprises direct materials, and direct labour. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Trade and Other Payables

Trade and other payables represent the liabilities for goods and services received by the Group that remain unpaid at the end of the reporting period.

Borrowing Costs

Borrowing costs are recognised in the consolidated statement of profit and loss for the period in which they are incurred.

Goods and Services Tax (GST), Value Added Tax (VAT) and equivalent taxes

Revenues, expenses and assets are recognised net of the amount of GST and VAT, except where the amount of GST or VAT incurred is not recoverable GST or VAT.

Rounding

Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.

Recent accounting developments, new standards, amendments and Interpretations

(a) Standards, amendments and interpretations effective in 2018 and applied by the Group:

The Company has adopted the following revisions and amendments to IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Company's financial statements for the period beginning 1 July 2017:

· IFRS 2 Share‐based Payment ‐ Definitions of vesting conditions;

· IFRS 5 Non‐current Assets Held for Sale and Discontinued Operations ‐ Changes in methods of disposal;

· IFRS 7 Financial Instruments: Disclosures ‐ Servicing contracts;

· IFRS 7 Financial Instruments: Disclosures ‐ Applicability of the offsetting disclosures to condensed interim financial statements;

· IFRS 8 Operating Segments ‐ Aggregation of operating segments;

· IFRS 8 Operating Segments ‐ Reconciliation of the total of the reportable segments' assets to the entity's assets;

· IFRS 11 Accounting for Acquisitions of Interests in Joint Operations - Amendments to IFRS 11;

· IFRS 12 Disclosure of Interests in Other Entities ‐ Clarification of the scope of the disclosure requirements in IFRS 12;

· IFRS 14 Regulatory Deferral Accounts;

· IAS 1 Disclosure Initiative Amendments to IAS 1;

· IAS 7 Disclosure Initiatives - Amendments to IAS 7;

· IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12;

· IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation; Amendments to IAS 16 and IAS 38;

· IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets ‐ Revaluation method ‐ proportionate restatement of accumulated depreciation/amortisation;

· IAS 19 Employee Benefits ‐ Discount rate: regional market issue;

· IAS 24 Related Party Disclosures ‐ Key management personnel;

· IAS 27 ‐ Equity Method in Separate Financial Statements ‐ Amendments to IAS 27; and

· IAS 34 Interim Financial Reporting - Disclosure of information elsewhere in the interim financial report.

The Directors have assessed that the adoption of these revisions and amendments did not have an impact on the financial position or performance of the Group and Company.

(b) Standards, amendments and interpretations that are not yet effective and have not been early adopted:

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

Effective date - periods beginning on or after 1 January 2018 (except IFRS 16 Effective 1 January 2019).

· IFRS 2 Classification and Measurement of Share based Payment Transactions ‐ Amendments to IFRS 2;

· IFRS 9 Financial Instruments;

· IFRS 15 Revenue from Contracts with Customers;

· IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration;

· AIP IFRS 1 First‐time Adoption of International Financial Reporting Standards ‐ Deletion of short‐term exemptions for first‐time adopters;

· AIP IAS 28 Investments in Associates and Joint Ventures ‐ clarification that measuring investees at fair value through profit or loss is an investment ‐ by ‐ investment choice; and

· IFRS 16 Leases.

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group and Company.

2. Critical Accounting Estimates and Judgements

The Directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.

Key estimates and judgements

(I) Impairment

The Group assesses impairment at the end of each reporting period by evaluation of conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations, which incorporate various key assumptions.

(II) Revenue recognition

Revenue on long-term contracts requires estimates to be made of the degree of completion and accordingly the amount of revenue and direct costs to recognise at accounting dates.

(III) Going concern

As explained in the accounting policy set out in note 1, the financial statements have been prepared on a going concern basis which assumes that the Group will continue in operational existence for the foreseeable future.

3. Revenue

Revenue represents amounts invoiced to customers for services provided, exclusive of VAT and similar taxes.

4. Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board of Directors.

Segmental information is as follows:

Revenues from transactions with customers exceeding 10% of total revenue were as follows:

All revenue is generated in Australia.

5. Administrative expenses

Details of the share based payments charge are set out in note 26.

6. Operating profit