Annual Financial Report

Management Resource Solutions PLC

Annual Report

Year Ended

30 June 2016

Company number: 8046513

Management Resource Solutions PLC

Annual report

for the year ended 30 June 2016

Officers and advisers

CEO's Statement and Strategic Report

Directors' report

Statement of directors' responsibilities

Independent auditor's report

Consolidated Statement of profit and loss and other comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flow

Notes to the consolidated financial statements

Parent company Balance Sheet

Parent company Statement of Changes in Equity

Notes to the parent company Balance Sheet

Management Resource Solutions PLC

Officers and advisers

Directors

Chris Berkefeld Chairman

Joe Clayton Chief Executive Officer

Timothy Jones Finance Director

Company secretary

Timothy Jones

Registered number

8046513

Registered office

Reading Bridge House, George Street, Reading, Berkshire, RG1 8LS

United Kingdom

Australian office

Suite 30402, 9 Lawson Street, Southport, Queensland 4215,

Australia

Nominated adviser and joint broker

Northland Capital Partners Limited, 60 Gresham Street, London, EC2V 7BB,

United Kingdom

Joint broker

Peterhouse Corporate Finance Limited, 15-17 Eldon Street, London, EC2M 7LD,

United Kingdom

Auditors

James Cowper Kreston, Reading Bridge House, George Street, Reading, Berkshire, RG1 8LSUnited Kingdom

Solicitors as to English Law

Memery Crystal LLP, 44 Southampton Buildings, London, WC2A 1AP,

United Kingdom

Solicitors as to Australian Law

McCullough Robertson, 66 Eagle St, Brisbane City, Queensland 4000,

Australia

Share registry

Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA,

United Kingdom

Website

www.mrsplc.net

Management Resource Solutions PLC

CEO's Statement and Strategic Report

Dear shareholders,

Having started as Acting CEO on 31st October 2016 then being installed as fulltime CEO and joining the MRS Plc Board on 19th December 2016, I have no personal experience of the business for FY16. The body of this report will concentrate on the business from October 2016 onwards and the steps taken to stabilise the business as a result of issues emanating from FY16.

Financial Results

FY16 results were extremely disappointing with a Net Loss After Tax of A$6.9m on Revenue of A$25.2m.

Group Restructure

Significantly underperforming business units within MRS necessitated a restructure  of the group in October/November 2016:

· The high risk underperforming contract to build aviation fuel tanks at Jackson's International Airport in Port Moresby, Papua New Guinea was put into dispute. MRS Guernsey Limited and MRS PNG Limited, the MRS entities which managed the PNG contract, were put into Voluntary Liquidation in December 2016 and February 2017 respectively to quarantine any issues that may arise from this contract.

· The other high risk underperforming contract to dismantle a Polypropylene Plant at Rosehill, Sydney was put into dispute in November 2016 and all work was ceased. MRS Pty Ltd, the company contracted to undertake this work, was placed into Voluntary Administration in February 2017, again to quarantine the group from losses and potential liquidated damages claims. Bachmann Plant Hire (BPH) and MRS Services Group (SG) were quarantined from this process..

· The oil and gas industry white collar labour hire business, which had declined through the year to the point it was unsustainable, was also closed.

· The Southport head office, which had supported the above sections of the business, was closed in October 2016 and the staff were made redundant.

The resultant MRS business now has significantly changed from the structure as at 30 June 2016. The focus has changed from oil, gas and construction industries to a strong presence in residential civil earthworks around Ipswich in Southern Queensland (Bachmann Plant Hire/BPH) and coal industry support services in the Hunter Valley of New South Wales (SubZero, now renamed MRS Services). The business strategy is built around four distinct business "pillars" of Civil Support (BPH), Mining Support (SZ), Maintenance Support (SZ) and Labour Support (SZ).

Bachmann Plant Hire Pty Ltd

At the time of my appointment as CEO the  BPH purchase process was not complete with a related party loan and a "rent to own" contract for the purchase of the BPH earthmoving equipment still to be negotiated to a form acceptable to the MRS Board. Negotiation of an agreement acceptable to both parties has taken significant good faith on both sides and is now complete. I would like to thank Greg Bachmann for his patience and understanding as we worked through the process to finalise the contractual terms. 

The Civil Support pillar of MRS (BPH) is based in Ipswich, the centre of the Ipswich Economic Development Plan 2016 to 2031, enacted by the Queensland Government. Based around 20 employment and population growth areas in the vicinity of Ipswich, it is an ambitious plan to attract 292,000 people to the area requiring an additional 120,000 jobs. Conservatively 500 new residential dwellings are completed every month to achieve the plan.

Our Civil Support arm is supported by an experienced workforce of long term employees and is perfectly located to exploit the opportunities within the fastest growing residential growth corridor in Australia. 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. A low risk contracting environment.

MRS Services Group

The purchase agreement for Subzero included the vendor retaining all receivables as at 30 September 2016. A capital raise was undertaken by MRS to raise A$4.5m of working capital to help cover the working capital gap for the first 3 months of operation. As outlined in an RNS, AUD$2.1m of the capital raising was used in other areas

Management Resource Solutions PLC

CEO's Statement and Strategic Report (continued)

of the business, which together with the bad debts from the two consulting contracts mentioned earlier, left SG significantly low on working capital which has significantly constrained business performance. A debt financing facility had to be implemented with Hermes Capital in December 2016. This was an expensive solution but the only alternative available in a short timeframe to stabilise cashflow.

Shareholders should be aware of the assumptions behind the going concern basis of preparation of these accounts, set out in full on page 16. The Board of Directors is aware, having prepared a cashflow forecast, of the Company's working capital requirements and the need to access additional equity funding or asset divestment if required within the next 12 months.

Due to the lack of working capital SG has been significantly hindered which has resulted in missed opportunities to grow the business in an optimistic coal sector.

Towards the end of the SubZero Receivership two major contracts were lost and the Harness Master business and the Moranbah Joint Venture were sold separately which resulted in monthly revenue dropping from A$5.5m per month to $3m per month at the acquisition date. Low revenue and cash constraints has impacted the performance of the business. SG has implemented an overhead reduction program and is in the process of implementing operating cost savings with installation of bulk oil, gas and fuel to the workshops and implementing consumable kiosks with resulting savings in consumable and inventory costs. Every facet of the business is under review to streamline costs as we rebuild revenue

The business has underperformed on expectations to date but the program of cost cuts, undertaking a fund raise to bolster working capital and increasing monthly revenue will bring MRSSG back into a sustainable position.

The acquisition of the business on 1st October 2016 could not have been timed better due to the coal industry being on the verge of a supply driven upswing in the price of coal. December 2016 was a record month for coal exports through the Port of Newcastle, the world's largest exporter of coal.

The Mining Council of Australia recently published: "In east Asia alone, there are more than 725 High Energy Low Emissions (HELE) [Coal Fired Power Station] units already in operation, with another 1100 under construction or planned." HELE Ultra-Supercritical coal fired power stations produce up to 40% less GHG emissions than conventional coal fired power technology. To achieve the best results predominantly Hunter Valley type high energy and quality feedstock is required. Due to higher moisture and ash and lower energy, Chinese and Indonesian coal can only make up small portions of the feedstock for these plants. When the extra power plants come on line it will change the dynamics of the market to demand driven but specifically for Hunter Valley type coal.

MRS revenue in the Hunter Valley is 90% derived from blue chip miners in Rio Tinto, BHP and Glencore. Rio Tinto has been on a divestment drive in the Hunter Valley and last year sold its 40% share in Bengalla Mining to New Hope, its development project, Mt Pleasant, to the Indonesian Salim Group and most recently their Mt Thorley Warkworth and Hunter Valley Operations to Yancoal, a subsidiary of Yanzhou China. On the back of this deal Yancoal will become the largest producer of coal in Australia. The A$3.5b generated from these sales graphically shows the confidence international mining houses have in the future of the Hunter Valley coal industry.

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

MRS Outlook

The focus for the first half of FY17 for MRS has been consolidating the four "pillars" of the business and developing a business strategy and framework to drive the performance of the Group. A restructure of the business (including savings in the Hunter Valley operations of A$1.5m in overhead salaries and $950k from relocating two workshops and renegotiating rent on the main workshop) will optimise the accountability and the leadership strengths of the business and strengthen the second half results.

When recovered from the current cash constraints the business will be in a very good position to take advantage of the coal industry upturn in the Hunter Valley and the residential growth in Southern Queensland.

Management Resource Solutions PLC

CEO's Statement and Strategic Report (continued)

MRS is a mature, well established business poised to take advantage of the recent upswings in our targeted markets. The principal risks are described in the Director's Report.

So far this year has been a very testing time for investors with the difficulties and challenges created as a result of the FY16 underperformance and the losses emanating from the two consulting contracts. On behalf of the Board, I would like to thank the MRS employees, clients, suppliers and shareholders for maintaining the belief in the Company in difficult times.

GW (Joe) Clayton

Chief Executive Officer

Management Resource Solutions PLC

Directors' report

for the year ended 30 June 2016

The Directors present their report and the audited financial statements for the year ended 30 June 2016.

Principal activities

The principal activities of the Group during the year were supply of technical and strategic services to external organisations in Project Management, HSEQ and Engineering, and Plant Hire.

Issue of Shares

Details of Ordinary Shares issued during the year are set out in notes 21 and 22 to the Financial Statements

Share based payments

Share based payments are detailed in note 23 to the Financial Statements.

Results and dividends

The results for the year are set out on page 12.

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 $25.2 million (2015 - $17.1 million) and the loss before tax for the period amounted to $6.9 million (2015 - loss of $1.7 million).

At 30 June 2016, the Group had net liabilities of $5.2 million (2015 - net assets of $1.1 million), of which cash amounted to $1.0 million (2015 - $0.9 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 building revenue, and expanding our diverse client base. Relevant information is reported in the CEO's Statement. Success is also measured by the identification and acquisition of suitable companies which will allow MRS not only to expand its services but also to increase its profits. This is highlighted in the CEO's Statement.

Management Resource Solutions PLC

Directors' report

for the year ended 30 June 2016 (continued)

Principal risks

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 risks and uncertainties facing the Group at its present stage of development:

1 General risks

Reliance on key management

The responsibility of overseeing the day-to-day operations and the strategic management of MRS depends substantially on its senior management and its key personnel. There can be no assurance given that there will be no detrimental impact on MRS if one or more of these employees cease their employment.

2. Risks relating to MRS's Businesses

2.1 General

2.1.1 Operating risks

The Group's business planning is carried out on the basis of expected future work. The Group is reliant upon securing new contracts. There is a risk that expected contracts will not be won. The directors mitigate this risk by monitoring the pipeline of future contracts.

The operations of MRS may be affected by various factors, including operational and technical difficulties encountered in resources; difficulties in commissioning and operating plant and equipment; mechanical failure or plant breakdown; adverse weather conditions; industrial and environmental accidents; industrial disputes; and unexpected shortages or increases in the costs of consumables, spare parts, or plant and equipment.

2.1.2 Additional requirements for capital

MRS's capital requirements depend on numerous factors. To fully realise its Growth Plan MRS will require further financing in addition to amounts raised under a Prospectus. Any additional equity financing will dilute shareholdings. Any debt financing, if available, may involve restrictions on financing and operating activities. If MRS is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations and scale back projects as the case may be.

2.2 Specific

2.2.1 Personnel subject to workplace safety on client sites

The Company's personnel deliver services on site. Consequently, personnel may be subjected to risks to their health and safety through the actions, inactions and negligence of third parties. Numerous losses may stem from injury or death to personnel in such a scenario and such losses may have an adverse effect on MRS's profits, its results, its balance sheet and its financial position.

2.2.2 Professional services liability

Professional services liability, in a number of different forms, attaches to the services offered by the Company. A client's reliance on the services provided by the Consultant Business may cause loss or damage to the client. If such losses are proved to be in excess of the insurance policy held by the Company, or are outside the terms of such policy,

Management Resource Solutions PLC

Directors' report

for the year ended 30 June 2016 (continued)

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 and the remuneration, excluding pension contributions, they received were as follows:

Paul Morffew was removed as a director on 28 October 2016.

Chris Berkefeld was not reappointed at the Annual General Meeting on 19 December 2016. He was reappointed on 17 March 2017.

Joe Clayton was appointed as a director on 19 December 2016.

Murray d'Almeida resigned as a director on 17 March 2017.

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 23 for details of share based payment arrangements):

Management Resource Solutions PLC

Directors' report

for the year ended 30 June 2016 (continued)

Substantial Shareholdings

At 27 March 2017, the Company was aware of the following interests in 3% or more of the issued share capital of the Company:

%

Family interests of Paul Morffew 8.9

URU Metals Limited 8.8

Macquarie Bank Limited 7.9

Daniela Athan 5.7

Karrabin Investments Pty Ltd 4.8

Financial instruments

Details regarding the Group's use of financial instruments and their associated risks are given in note 17 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 of 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 29 March 2017 and signed on behalf of the board

Timothy Jones

Secretary

Management Resource Solutions PLC

Statement of directors' responsibilities

for the year ended 30 June 2016

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. 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.

· 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 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.

Management Resource Solutions PLC

Independent auditor's report

to the members of Management Resource Solutions PLC

We were engaged to audit the financial statements of Management Resource Solutions plc for the year ended 30 June 2016 which comprise the group statement of comprehensive income, the group and parent company balance sheets, the group and parent company statements of changes in equity, the group cash flow statement and the related notes.

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework applied in preparing the parent company financial statements is applicable law and United Kingdom Accounting Standards including Financial Reporting Standard 102 (United Kingdom Generally Accepted Accounting Principles).

This report is made solely to the company's members, 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 members those matters we are required to state to them in an auditor's 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.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/apb/scope/private.cfm

Basis for disclaimer of audit opinion

The audit evidence available to us was limited because significant elements of the group's accounting and other records have been lost or destroyed and management have, to date, been unable to recover or reproduce those records. Accordingly, we were unable to obtain sufficient appropriate audit evidence over multiple material elements of the financial statements including revenues and costs (and therefore the loss for the year), receivables, payables, provisions, taxation, and certain disclosures as reported in the financial statements.

Further, the directors have concluded that it remains appropriate to prepare the financial statements on a going concern basis, despite the reported losses, net liabilities and the fact that the group requires ongoing support from its existing funders as well additional equity or debt funding, in order to continue to trade and meet its liabilities as they fall due for the foreseeable future. We have been unable to obtain sufficient, appropriate evidence on which to base an opinion as to whether or not that conclusion is reasonable in the circumstances.

Disclaimer of opinion

Because of the significance of the matters described in the basis for disclaimer of audit opinion paragraphs above, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements.

Management Resource Solutions PLC

Independent auditor's report

to the members of Management Resource Solutions PLC (continued)

Disagreement regarding accounting treatment

Notwithstanding the above disclaimer of audit opinion, we report that the consolidated balance sheet includes a provision for future maintenance costs amounting to $890,000 which, in our opinion, ought not to be included.

Opinion on other matter prescribed by the Companies Act 2006

Notwithstanding our disclaimer of an opinion on the financial statements, in our opinion the information given in the strategic report and the directors' report is consistent with the financial statements.

Matters on which we are required to report by exception

As explained in the basis for disclaimer of audit opinion paragraph above, we have not received all the information and explanations we require for our audit.

Aside from that, we have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you, if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made.

Alan Poole BA (Hons) FCA (senior statutory auditor)

For and on behalf of James Cowper Kreston, statutory auditor

Reading, UK

29 March 2017

Management Resource Solutions PLC

Consolidated Statement of profit and loss and other comprehensive Income

for the year ended 30 June 2016

There was no other comprehensive income for the year (2015-nil).

Management Resource Solutions PLC

Consolidated Balance Sheet

at 30 June 2016

The financial statements were approved by the board of Directors and authorised for issue on 29 March 2017

and were signed on its behalf by:

Management Resource Solutions PLC

Consolidated Statement of Changes in Equity

for the year ended 30 June 2016

The following describes the nature and purpose of each reserve within owners' equity.

Share capital - amount subscribed for share capital at nominal value.

Share premium - amount subscribed for share capital in excess of nominal value.

Issue costs reserve - directly attributable share issue costs

Reorganisation reserve - amounts resulting from acquisitions under common control.

Retained earnings - cumulative net gains and losses, share option charges and distributions made.

Management Resource Solutions PLC

Consolidated Statement of Cash Flow

for the year ended 30 June 2016

Management Resource Solutions PLC

Notes to the consolidated financial statements

for the year ended 30 June 2016

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 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. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in the period of revision and future periods if the revision affects both current and future periods.

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.

Closure of the former consulting business has brought major cost savings and the Group has recently secured further finance facilities. Based on these developments and on the Company's ability to modify expenditure outlays further if required, and to source additional funds, the Directors consider there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and therefore the going concern basis of preparation is considered to be appropriate for the financial report for the year ended 30 June 2016. The Board of Directors are aware, having prepared a cashflow forecast, of the Company's working capital requirements and the need to access additional equity funding or asset divestment if required within the next 12 months.

In the event that the Company is not able to continue as a going concern, it may be required to realise assets and extinguish liabilities other than in the normal course of business and perhaps at amounts different to those stated in its financial report.

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.

Management Resource Solutions PLC

Notes to the consolidated financial statements

for the year ended 30 June 2016

(continued)

1 Accounting policies (continued)

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 (income) for the year comprises current income tax expense (income) 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 (assets) are measured at the amounts expected to be paid to (recovered from) 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 (income) 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, excluding a business combination, 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.

Management Resource Solutions PLC

Notes to the consolidated financial statements

for the year ended 30 June 2016

(continued)

1 Accounting policies (continued)

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.

Management Resource Solutions PLC

Notes to the consolidated financial statements

for the year ended 30 June 2016

(continued)

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) Purchase consideration - Bachmann Plant Hire Pty Ltd ('BPH')

Under the term of the acquisition, deferred payments will become due to the vendors computed by reference to earnings achieved by BPH in future periods. The total consideration has been computed on the assumption that the earnings targets specified will be achieved but not exceeded.

(iv) Losses on termination of contracts

Following the decision to terminate these contracts, full provision has been made for all contract costs incurred and it has been assumed that no further amounts will be received in respect of the outstanding sales invoices at 30 June 2016.

(v) Going concern

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

Management Resource Solutions PLC

Notes to the consolidated financial statements

for the year ended 30 June 2016

(continued)

Revenue represents amounts invoices to customers for services provided, exclusive of Value Added Tax 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:

Management Resource Solutions PLC

Notes to the consolidated Balance Sheet

for the year ended 30 June 2016

(continued)

5 Administrative expenses

Acquisition expenses of $876,000 (2015-$1,421,000) represent the professional fees and other associated costs incurred in the acquisition of Bachmann Plant Hire Pty. Ltd. and, in 2015, in the listing of the Company's share capital on AIM together with fees and other costs incurred in the abortive pursuit of a corporate acquisition.

Amounts written off on terminated contracts of $6,588,000 (2015-Nil) represent accounts receivable at 30 June 2016 relating to two terminated contracts within the former consulting business, now considered uncollectible and accordingly written off.

Details of the share based payments charge are set out in note 23.

Management Resource Solutions PLC

Notes to the consolidated financial statements

for the year ended 30 June 2016

(continued)

The remuneration, of the highest paid director was $458,322 (2015 - $391,362).

The key management personnel of the Group are considered to be the Directors

9 Staff numbers

The average monthly number of employees (including directors) during the year was as follows:

Management Resource Solutions PLC

Notes to the consolidated financial statements

for the year ended 30 June 2016

(continued)