AJ Lucas Group annual report 2007-08

AJ Lucas Group Limited
Annual Report 2008
a year of
milestones
a year of milestones
aa

Chairman’s Letter Page 3
The Year in Review Page 4
b
LUCAS group

50 Years of Milestones Page 16
Financial Statements Page 17
a year of milestones 1

2 LUCAS group

Chairman’s letter
What a year!
Lucas is now a very
different organisation
from two years ago.
Many positive things have happened since
our last report and your company has grown
substantially. However our core values are
unchanged: striving to deliver a quality service,
on time, on budget, and focused on our
employees’ safety and our clients’ needs. That is
what sets Lucas apart and is vital to our success.
This year we celebrate 50 years of business.
There have been many milestones along the
way, especially during the past couple of years,
as our strategy and the marketplace coincide.
In particular, our early investment in
coal seam gas assets and expertise is now
recognised by the market as this alternative
energy source has become mainstream. Our
continued investment in CSG has positioned us
strongly for the future.
While much of the economy is driven by
trends and a struggle for short-term gains,
we’ve maintained our strategic focus on
economic and societal necessities: water,
energy and resources.
A nation’s prosperity ultimately depends on
its access to these basic resources and services.
Lucas’ success and growth over the last
decade is based on this straightforward premise.
The key projects we’ve been engaged in:
Western Corridor recycled water project,
Bonaparte gas pipeline, Ivy entertainment
complex, Hyundai headquarters, creation of
Australia’s largest and only vertically-integrated
drilling business, development of the Gloucester
resource to project status—will all underpin the
lives of future generations of Australian families.
Our success is built on a deep understanding
of the economic drivers of our industries and the
technology that delivers them. It’s reinforced by
building close partnerships with our clients and
supporting our own people.
This has been the company’s most successful
year, a decisive affirmation of our strategy. Our
performance speaks for itself: revenue that’s up
96% to $424 million and an after-tax profit that’s
more than doubled to $13.5 million.
The key to it all is people. As Lucas grows, our
commitment to them increases. People’s safety
is of absolute paramount importance and is far
and away the company’s most important goal.
We are making increasing efforts in this area to
ensure that the larger Lucas workforce continues
to have a safe workplace.
We also continue to emphasise the
environment. Not only do we have a
responsibility as good corporate citizens; we
have a responsibility as excellent engineers
to minimise the environmental footprint of
infrastructure, to maximise the environmental
advantages to society with our designs, to
minimise the physical and social impact of our
projects’ construction while maximising the
long-term benefits to society.
Although there will be many more changes
as the company continues to develop, we intend
to ensure it doesn’t lose its heart and soul. On
behalf of the Board, I would like to publicly
thank all of the Lucas employees and customers
for their role in creating what has been a very
exciting and successful year.
We’re confident Lucas can keep pace with
market changes and continue to deliver for its
customers, its shareholders and the country.
Allan Campbell
Chairman & CEO
a year of milestones 3

Highlights
Turnover has nearly doubled
and profit has more than doubled
in our biggest year yet.
Group Financial Performance
Year ended 30 June
2007
$216.4m
2008
$424.3m
Change
+96%
14.9
37.4
+151%
5.9
+388%
26.0
6.4
+111%
13.5
19.0
44.5
+134%
9.6
50.1
+421%
11.9
+106%
24.5
Revenue ($ m)
EbitDA ($ m)
Ebit ($ m)
Net profit after tax
($ m)
Underlying Ebitda
($ m)
Net cash from
operations ($ m)
Earnings per share
(¢ per share)
a thank you
to andy lukas
From allan campbell,
chairman & ceo
As we celebrate the company’s 50th
anniversary, we’re also ending an
era, with Andy Lukas’ departure as
an executive director of the company
his father founded. Andy stepped
down as Lucas’ technical director in
March this year to take up his new
role as CEO of Sydney Gas.
Andy Lukas joined what was
then the family business in 1975,
with eight years of experience as
a design engineer with Transfield,
MacDonald Wagner & Priddle
and Williams Brothers, as well as
postgraduate study in the USA.
Over 20 years he contributed as
project manager, general manager
and managing director.
When I became involved in
the company in 1995, I saw
Andy’s deep technical expertise
and industry reputation as
the ideal complement to my
commercial experience. This
proved to be the case, as he
continued to innovate and drive
the company’s engineering and
build our reputation.
His uncompromising attitude to
engineering and search for new and
effective techniques has been the
bedrock of Lucas’ technical ‘world
firsts’ and is deeply inculcated in
every engineer working at Lucas.
Through his longstanding roles
with APIA and IPLOCA, he’s done
much to raise the standards of the
pipeline industry worldwide.
I’d like to formally thank
Andy for his contribution to the
company’s success and his support
as a colleague and friend. While
we miss him day to day, he’s still
contributing to the company as a
non-executive director, where his
knowledge and judgement will
continue to be of great value
to the company.
Pipelines
highlights
• Overall margin improvement 0.9%
• Employee base expanding
+ 190 people FY 08
• Acceptance of CSG as viable energy
source and continuing drought
support strong growth
• Integration with drilling
enhances growth profile
• Margin reduced by ground
conditions at Brooklyn–Lara
2007
$73.2m
2008
$218.5m
4.3
Revenue ($ m) EbitDA ($ m)
20.0
1.8
0.0
Impairments ($ m)
6.1
20.0
Underlying Ebitda
($ m)
8.3 9.1
Underlying Ebitda
margin (%)
4 LUCAS group

2.5
+220%
8.0
Construction &
infrastructure
28%
drilling and coal
seam gas
21%
Pipelines
51%
highlights
• Revenue growth of 460% over
four years from $75m to $424m
• Change in business mix
• Improved systems and
management controls
• Better contract conditions
• Balanced business growth across
different sectors
• Strong cash flow supports growth
without requirement for equity
• Drilling technology leadership
enhances demand for services
• Acquisition of Mitchell Drilling
• Rapidly maturing CSG portfolio
cash flow and
balance sheet
• Operating cash flow
increased 421% to $50m
• Interest cover very high (6.7¹)
due to strong cash generation
• Gearing ratio reduced
from 61.1% to 52.2%
• All borrowing facilities
renegotiated in August 2008 –
repayment profile extended
• Match debt finance maturity
profile with cash flow
• Coal seam gas assets
are at book value
Dividend per share
(¢ per share)
Segment revenue
Drilling
highlights
• Focus on coal & CSG, both
sectors growing strongly
• Innovative drilling techniques
leading commercialisation of CSG
• Strong market conditions
• Contract terms and duration improve
• Diversified and long-term
customer relationships
• Major focus on training
and retention of staff
• Acquisition of Mitchell Drilling
2007
$67.6m
2008
$88.4m
14.6
Revenue ($ m) EbitDA ($ m)
18.1
(2.2) 6.1
Non-recurring/
Non-operational
items ($ m)
12.4
24.2
Underlying Ebitda
($ m)
18.3
27.4
Underlying Ebitda
margin (%)
Construction & infrastructure
highlights
• Targeted change in business mix
to improve margins
• Expansion into NSW North Coast
civil and infrastructure markets
• Construction market is tight, but
civil and infrastructure opportunities
in mining and municipal work
remain strong
2007
$75.5m
2008
$117.3m
0.5
Revenue ($ m) EbitDA ($ m)
3.2
1.5 1.0
Non-recurring/
Non-operational
items ($ m)
2.0 4.2
Underlying Ebitda
($ m)
3.6
2.6
Underlying Ebitda
margin (%)
a year of milestones 5

The year in review
This has been the company’s most
successful year—overall and in
each of our divisions. A decisive
affirmation of our long-term strategy.
6 LUCAS group
Lucas’ most successful year ever has seen
revenue increase 96% to $424.3 million and
profit after tax increase 111% to $13.5 million.
We’ve been involved in some of the country’s
biggest projects in each of our sectors and our
staff has grown to over 1,000.
All sectors and activities have contributed to
this growth and affirmed our strategy.
Water & wastewater
ABARE’s August 2008 Research Report
highlighted the challenge for Australia’s urban
water systems: inflows are gradually declining
and population growth is increasing demand.
Severe water restrictions have remained in force
in most capitals and climate change has the
potential to reduce water availability and increase
its variability. So water authorities across the
country are working to increase their supply and
improve the usage of this precious resource.
On the wastewater side, many of the country’s
wastewater treatment plants are in need of
upgrading to meet tighter standards and handle
increased demand.
The largest recycled water project ever
undertaken in Australia (indeed, the country’s
second-largest civil project after the Snowy
Mountains Scheme), Queensland’s Western
Corridor Recycled Water Project will deliver
over 200 megalitres a day of purified recycled

The Brooklyn—Lara Gas Pipeline
(left) and Queensland’s Western
Corridor Recycled Water Project
(right) are two of the major
projects Lucas Pipelines has
worked on during the year.
water to south-east Queensland, supplying power
stations, farmers, industrial and domestic users.
Water that, until now, has been a waste product.
Lucas, in alliance with Transfield Services,
GHD and Sunwater, is responsible for the design,
engineering and construction of the Eastern
Pipeline section. This comprises 110 km of
pipeline and three pumping stations connecting
to three advanced wastewater treatment plants.
Working with longtime client Sydney Water,
we solved an environmental challenge for their
Upper Blue Mountains Sewer project – and set
a world record in the process – by installing two
2,400 m sewer lines using horizontal directional
drilling. This was one of three projects we
completed as part of Sydney Water’s Priority
Sewage Program Alliance.
Lucas’ water expertise and resources continue
to expand. During the year Lucas Water acquired
the Australasian licence for the patented water
treatment systems developed by Beijing Origin
Water, the firm responsible for water recycling at
the Beijing Olympics ‘Water Cube’. These systems
range from household size self-contained units,
through to reverse osmosis plants suitable for a
wide range of treatment needs.
At the very large scale, we’ve formed the
Southern SeaWater Alliance (SSWA) with
Spanish water treatment giants, Técnicas
Reunidas and Valoriza Agua, along with
international engineering company Worley
Parsons, to submit one of the two detailed
proposals requested for the 50–100 GL/year
Southern Seawater Desalination Plant by
Western Australia’s Water Corporation. The
outcome of this tender is due mid-November.
Oil & gas
Lucas’ Pipeline division worked on two major
gas pipelines for the APA Group over the year.
The $43 million Brooklyn-Lara Pipeline
travels 58 km from the Melbourne suburb of
Brooklyn to Lara, near Geelong in Victoria. This
will supplement Victoria’s gas supply to ensure
it can cope with peak winter demand.
Apart from the pipeline itself, the project
included inlet and intermediate facilities as
well as its connection to the Lara to Iona South
West Pipeline at Lara City Gate.
Construction, which runs through a mix of
industrial, rural living and open grazing land,
was challenging with four major water, two
freeway and one railway crossing.
Lucas began work on the Bonaparte
Pipeline in March 2008. This $170 million,
300 mm steel pipeline will carry up to 40
petajoules per year of natural gas 280 km
from Eni Australia’s Blacktip gas plant near
Wadeye to join the Amadeus Basin to Darwin
gas pipeline at Ban Ban Springs station. It will
deliver gas by January 2009.
“Sustaining australia”
This statement sums up the Lucas commitment.
We continue to seek better-engineered solutions
to maximise the effectiveness and minimise the
environmental impact of infrastructure development,
as well as reducing all the risks of construction.
Construction challenges include nearimpossible
access during the wet season, so
work has to be completed during the dry season
demanding absolute precision of scheduling
and execution. The pipeline passes through
national parks and Aboriginal lands, so we’ve
worked closely with land councils and park
authorities to anticipate and avoid any risks.
The Northern Territory’s chief minister
Paul Henderson described the pipeline as “an
investment in the Territory’s future that will
secure the Northern Territory’s energy supply
needs for 25 years”.
a year of milestones 7

8 LUCAS group

Left: A coal seam gas well
at Gloucester. Each well
includes a pump, water
separation, telemetry and
safety equipment.
“The pressing need to
reduce greenhouse
gas emissions, plus
the sheer value of
the resource, will make
coal seam gas a major
resource for the future.”
Lucas annual report 2000
CASCADES
Lucas HDD was again the solution
to an intractable environmental
problem. Sydney Water needed to
install two new sewer mains as
part of its Upper Blue Mountains
sewer upgrade. The trouble was,
it had to get from one side of the
Middle Cascade Dam (above) to the
other, through precious wetlands
in Blue Mountains National Park.
Conventional trenching would be
virtually impossible without drastic
environmental consequences. Lucas
HDD was able to take the two
pipelines 2.4 km to meet the main
sewer tunnel 60 m underground,
travelling directly below the dam
wall. The environmental footprint
A single small work site, now
rehabilitated. Incidentally, this
project set a new world record for
an HDD sewer installation and an
HDPE pipe installation.
Coal seam gas
The Australian coal seam gas (CSG) industry
has performed as we’ve consistently predicted
since 2000, becoming a key energy resource
for Australia. According to energy economists
EnergyQuest, Australian CSG production in the
year to 30 June 2008 was 133 petajoules—up
nearly 40% on the year before.
Confirmed CSG reserves in NSW and
Queensland have also grown dramatically,
with proved and probable (2P) reserves almost
doubling to 12,400 PJ—about ten years of
current east coast gas consumption.
The increasingly urgent need to address
Australia’s greenhouse gas emissions,
highlighted by the Garnaut Climate Change
Review, has made cleaner energy sources a
national (and international) priority.
A number of parties, including ERM Power
and Origin Energy, are planning new CSG-fired
power generation. Five consortia of Australian
and international companies are proposing
export LNG plants at Gladstone in Queensland.
These plans alone will need around 14,000
wells over the next four years. A ten-fold
increase on the current annual rate of drilling.
Lucas’ involvement in coal seam gas has two
dimensions. First, as an investor, through our
participation in the Gloucester CSG Project
and our stakes in Sydney Gas, ATP651 and
Arawn. Second, as a service provider, delivering
Australia’s most comprehensive coal seam gas
service to virtually all the major companies in
the industry.
Drilling and CSG services
Lucas is the only company in Australia that
can undertake a full CSG project from initial
exploration through field development to gas
processing and delivery to the market.
Lucas began the year as a major player in the
coal seam gas drilling industry, and Australia’s
only vertically-integrated CSG service provider.
This was expanded in August 2007 with the
acquisition of Queensland drilling company
Capricorn Weston, who quickly integrated with
our existing operations and gave us substantially
more capacity in Queensland.
Continuing growth in demand for CSG and
our strong market position encouraged us to
negotiate to acquire Mitchell Drilling, another
leading drilling and services provider to the
CSG and resources sector. This was successfully
concluded in August 2008 for $150 million,
doubling our capacity.
The acquisition consolidates Lucas’ very strong
market position as the premier CSG service
a year of milestones 9

Chilling Creek, near the Daly River
at KP175 of the Bonaparte Pipeline.
10 LUCAS group

a year of milestones 11

A wide variety of bespoke finishes
was just one of the challenges at
Merivale’s Ivy. This is Mad Cow,
home of some of Sydney’s finest
steaks and one of nine restaurants
in the complex.
provider in Australia and leaves us ideally placed
to capitalise on this fast-growing industry.
Our teams include experienced upstream
operations personnel, geologists, petroleum
and drilling engineers, project managers, safety,
environmental and quality officers as well as
experienced site crews.
With a total of 88 drilling rigs and
complementary equipment, we’re now by far
the largest CSG drilling company in Australia,
supported by a full range of services to take CSG
right to the market.
Lucas’ CSG Assets Gloucester coal seam gas
Our Gloucester CSG project’s gas reserves were
independently certified by Netherland, Sewell
& Associates Inc. in February 2008, confirming
the commercial viability of the basin’s gas. Since
then we’ve moved our focus from exploration
and testing to preparing for production.
The development of Gloucester has
progressed rapidly in the last year. We’ve
established a strong locally-based team
to manage detailed planning of the field
development, a processing facility and a pipeline
to link with the national pipeline system. The
formal development proposal was lodged with
the NSW Department of Planning in August
2008. Consultation with authorities, landowners
and other stakeholders is underway.
Sydney Gas
Lucas has had a long relationship with Sydney
Gas, as an investor and as a supplier of services.
In January 2008, the two companies made
a joint arrangement for the exploration and
commercialisation of Sydney
Gas’ Sydney Basin assets. The
arrangement comprises an
investment by Lucas in Sydney
Gas and agreements for Lucas to
provide geological, engineering,
drilling and other services.
The companies’ ties were
further strengthened with Lucas
director Andy Lukas joining
Sydney Gas as CEO and Allan
Campbell as a non-executive
director. Lucas now owns 19.99%
of Sydney Gas.
Bowen Basin (ATP651)
Lucas has a 15% interest in
ATP651, with the balance
owned by BG and Queensland
Gas Company. The prospect is located close to
Berwyndale South where substantial coal seam
gas reserves have been located. A major drilling
programme began earlier in 2008, with initial
reserves booked in July 2008.
Arawn Project, British Columbia, Canada
Lucas owns 60% of Arawn Energy, with
international CSG experts Dr Chris Cornelius
and Professor Marc Bustin owning the balance.
Arawn is our North American investment
vehicle and provides access to Marc’s and Chris’
expertise on this and other projects.
Arawn’s current focus is the Grizzly and Red
Deer Prospect in the foothills of the Rockies.
Initial core holes found 40 metres of coal with
gas content of 7–12 m 3 /t.
12 LUCAS group

Hyundai Australia’s
new HQ has an
Australian Building
Greenhouse Rating of
4.5 out of 5.
One of Lucas’ fleet of
88 drilling rigs at work
on the Gloucester Coal
Seam Gas project.
The future: geosequestration
and geothermal energy
Our drilling, HDD and pipeline expertise place us
in an ideal position to engage in two other new
technologies being driven by climate change.
Geosequestration of CO 2 —“clean coal”—has
the potential to enable the continued use of coal
without the environmental consequences, by
injecting CO 2 into geological reservoirs.
Geothermal energy—“hot rocks”—taps the
natural heat in deep geological structures as an
energy resource.
Both technologies will require drilling
expertise to succeed. Both will require pipelines.
So Lucas is already well positioned to be an early
leader and we’re maintaining a close watch as
research progresses.
Trenchless
technology
While we’ve been world leaders
in horizontal directional drilling
(HDD) for many years, we’ve had
less involvement in other trenchless
techniques. Queensland’s Western
Corridor Recycled Water Project
provided the impetus to expand our
equipment and expertise with three
microtunnelling systems by Akkerman
and Herrenknecht. These have carried
the pipes under 78 roads and railways,
solving a wide range of access
challenges for the project.
Our HDD crews spent most of the
year supporting the Pipeline teams on
their projects: at Western Corridor,
where they completed four major
crossings, including the Brisbane River; and
on the Bonaparte Pipeline in the Northern
Territory, where they crossed Green Ant Creek,
Tom Turners Crossing and the Daly River.
Early in the year, Lucas HDD set a new record
with two 2,400 m drills for Sydney Water’s Upper
Blue Mountains Sewerage Scheme as part of
the Priority Sewerage Program (PSP) Alliance.
These are the longest HDD sewer installations,
and the longest using HDPE pipe, in the world.
Two other installations were completed for
the PSP Alliance: at Mount Boyce, again in the
Blue Mountains and at Dangar Island in the
Hawkesbury River.
We also completed a 1,650 m installation of
900 mm pipe as part of Rio Tinto’s Yarwun 2
alumina refinery in Gladstone, Queensland.
a year of milestones 13

“The key to everything we do is
our people. Ensuring their safety
is far and away the company’s
most important goal.”
Allan Campbell, chairman & CEO
Construction
Lucas Stuart, our construction division, has
spent the year on a diverse range of major new
construction projects in hospitality, healthcare,
commercial, retail and defence. It’s also
contributed to our work on Queensland’s
Western Corridor.
Hospitality
The first stage of the $77 million Merivale
Group’s Ivy complex opened in December 2007,
immediately gaining a reputation as one of
Sydney’s hottest venues.
Ultimately the complex will comprise 18
bars, nine restaurants, the 509 m 2 Ivy Room
and a 1,500 m 2 retail precinct in two buildings
on George Street. The construction challenges
numerous levels, a range of bespoke finishes and
a complex back-of-house with ten cellars, nine
commercial kitchens and office spaces.
The staged handover has been carried out in
close collaboration with Merivale, giving them a
return on the project months earlier.
The building has an Australian Building
Greenhouse Rating of 4.5/5.
Lucas will also be an occupant, with our own
head office moving into one of the towers.
Retail
We’re nearing completion of Fisherman’s
Wharf at The Entrance on the NSW Central
Coast, an eco-friendly foreshore complex with
around 20 specialty retailers and restaurants.
Healthcare & medical research
Lucas Stuart has undertaken three significant
projects in the healthcare and medical research
field during the year.
An operating theatre for Castle Hill Hospital,
completed over Christmas 2007.
A research facility for the Woolcock Institute
of Medical Research, with laboratories, lecture
facility, office and support spaces.
For Catholic Healthcare, we’ve carried out
renovations and extensions to their aged care
community in Coffs Harbour.
The infrastructure Team
All divisions of Lucas are integrated to deliver the
range of skills needed for major infrastructure
projects. So, for instance, Western Corridor has
required work from our Pipelines, Construction
and Trenchless Technology teams. All working in
close coordination to deliver the project.
Commercial
Hyundai Motor Company’s new $70 million
Australian HQ at North Ryde is nearing
completion. The complex, with two office
towers above a common ground floor and
underground parking incorporates offices and
training facilities for staff and dealers including
a workshop, library, auditorium and classrooms.
Government & defence
We completed a reconstruction of the
small-bore rifle range at RAAF Richmond.
Civil infrastructure
Our biggest civil project over the year has
been the $25 million Sydney City Marine
Slipways development under Sydney’s
Anzac Bridge. This will be the largest
marine service facility on Sydney Harbour
when it’s completed later this year. The project
includes a range of construction challenges: a
marine component including eight berths for
vessels up to 60 linear metres, 800 and 100 tonne
ship lifts, 6,200 m 2 of open hardstand, 3,200 m 2
of covered hardstand for all-weather work. Apart
from the marine facilities, the project includes
restaurants, office and commercial spaces.
14 LUCAS group

Three pipes this size in a
trench is not a sight you’ll
see very often. Queensland’s
Western Corridor Recycled
Water Project.
a year of milestones 15

HALF A CENTURY
of LUCAS
16 LUCAS group

aj lucas group ltd
financial report
YEAR ENDED 30 JUNE 2008
18 Directors’ report
30 Income statements
31 Statements of recognised income and expense
32 Balance sheets
33 Statements of cash flows
34 Notes to the financial statements
67 Directors’ declaration
68 Independent auditor’s report
69 Australian Securities Exchange additional information
70 Directory

Directors’ report
The Board of directors have pleasure in presenting their report together with the financial report of AJ Lucas Group Limited (the Company) and the
consolidated entity, being the Company and its controlled entities (the Group), for the year ended 30 June 2008 and the auditor’s report thereon.
Directors
The Directors of AJ Lucas Group Limited at any time during or since the end of the financial year are as follows:
Allan Campbell BCom LLB
Executive chairman and CEO. Age 52. Director since 1995.
After qualifying as a lawyer, Mr Campbell worked for several leading investment banks, initially in Australia then
for ten years in London and New York. During this period he was given responsibility for corporate advisory and
recovery where he gained valuable hands-on experience in the turnaround of distressed companies.
Mr Campbell acquired Lucas in 1995, setting the Company on a path and listed it on the ASX in 1999.
Subsequently, he has been responsible for the Company’s strategic direction and has established its position as one
of the leading provider of mining and infrastructure services in Australia.
Ian Stuart-Robertson AAIQS
Executive director. Age 59. Director since 1995.
Mr Stuart-Robertson is a qualified quantity surveyor with nearly 40 years experience in civil and building
construction. He has previously served as a director of several construction companies and been responsible for the
delivery of many major projects. He also has considerable expertise in project cost reporting systems and makes a
vital contribution to the Group in his role as chairman of the tender review committee.
He is also a non-executive director of quantity surveyors, John Hollis & Partners.
Andrew Lukas be
Non-Executive director. Age 61. Director since 1995.
Mr Lukas is a qualified civil engineer. He joined Lucas in 1975 after working in the engineering and construction of
pipelines in the USA and Australia for the Williams group of companies.
He pioneered the development of horizontal directional drilling in Australia and is an authority on this
technology as well as pipelines. He is also a leading proponent of directional drilling in coal seam gas extraction.
He is an executive committee member and past president of the Australian Pipeline Industry Association (APIA) and
a director and immediate past president of the International Pipeline and Offshore Contractors Association (IPLOCA).
Mr Lukas was appointed chief executive officer of Sydney Gas Limited on 19 March 2008 following which he
ceased executive duties at the Company.
Martin Green FCA
Independent non-executive director, Chairman of audit committee.
Age 63. Director since 1999.
Mr Green is a Fellow of the Institute of Chartered Accountants and an official liquidator of the Supreme Court of
NSW. He has been in public practice for 36 years, mainly specialising in business recovery and insolvency. He has
substantial business and finance experience at senior levels.
He is currently a principal at Ferrier Green Krejci Silvia, Chartered Accountants, a former honorary director/
treasurer of the National Trust of Australia (NSW) and has served at various times in many public roles and
capacities.
Mr Green also serves as Chairman of the Company’s Audit Committee.
Garry O’Meally BSc BE
Independent non-executive director, member of audit committee.
Age 72. Director since 1999.
Mr O’Meally has over 40 years experience in the oil and gas industries, mainly with Australian Gas Light Company
where he served as general manager of AGL Gas Companies and later of AGL Petroleum. He was also general
manager of Queensland and Northern Territory for Santos Limited and has consulted to many energy companies.
He was previously president of the Australian Gas Association, councillor and Queensland chairman of the
Australian Petroleum Production and Exploration Association and an executive manager of the Australian Pipeline
Industry Association. Mr O’Meally’s knowledge of the energy industries has been vitally important in the Group’s
expansion into its coal seam gas activities.
18 LUCAS group

Company secretary
Mr Nicholas Swan MA, ACA, MBA, was appointed as company secretary
on 15 November 2001. He has also served as the company secretary
of several listed public companies as well as of a responsible entity for
managed investment schemes.
Directors’ meetings
The number of directors’ meetings (including meetings of committees
of directors) held during the financial year, during the period of each
director’s tenure, and number of such meetings attended by each of the
directors is:
Board of Directors Audit committee
Held Attended Held Attended
Allan Campbell 12 12 — —
Ian Stuart-Robertson 12 11 — —
Andrew Lukas 12 6 — —
Martin Green 12 12 2 2
Garry O’Meally 12 12 2 2
Corporate governance statement
The Board of directors is responsible for the corporate governance of the
Group. This statement outlines the main corporate governance practices.
Unless otherwise stated, these practices were in place for the entire year.
Board of directors
The directors of the Company are accountable to shareholders for the
proper management of the business and affairs of the Company.
The key responsibilities of the Board are to:
• establish and monitor the corporate strategies of the Company;
• ensure proper corporate governance;
• monitor the performance of management;
• ensure that appropriate risk management systems, internal controls,
reporting systems and compliance frameworks are in place and
operating effectively;
• monitor financial results;
• approve decisions concerning investments, acquisitions and dividends;
and
• comply with reporting and other requirements of the law.
The Board’s role and responsibilities are documented in a written Board
charter.
Composition of the Board
The constitution of the Company requires between three and ten directors.
Currently there are five with a majority non-executives.
Directors are appointed for their industry-specific expertise and
commercial acumen. The Board believes that all the directors can make,
and do make, quality and independent judgements in the best interests
of the Company. While the chairman is also the chief executive officer, his
contribution to the Company is considered vital to direct the strategy of
the Company as well as its management. The directors are able to obtain
independent advice at the expense of the Company.
There is no nomination committee. Instead, the Board assesses the
performance of individual directors and the Board as a whole.
Ethical and responsible decision making
The Company has a code of conduct to guide the directors and key
executives. It includes disclosure of conflicts of interest and use of
information not otherwise publicly known or available. Any director with
an interest in matters being considered by the Board must take no part in
decisions relating to those matters.
Trading in Company securities
The Company has a share trading policy prohibiting directors, senior
management and their associates from trading in the Company’s securities
other than in certain nominated periods (between two and thirty days
following the release of the half yearly and annual results and the annual
general meeting) and at such other times as the Board permits. Such
persons must obtain prior approval before conducting any trade.
Integrity in financial reporting
The Board has established an audit committee which provides assistance
to the Board in fulfilling its corporate governance and oversight
responsibilities in relation to the Company’s financial reporting, internal
control systems, risk management systems, regulatory compliance and
external audit.
The committee must have at least two members. All members must
be independent non-executive directors. At least one member must have
financial expertise and some members shall have an understanding of the
industry in which the Company operates.
The principal roles of the committee are to:
• assess whether the accounting methods and statutory reporting
applied by management are consistent and comply with accounting
standards and applicable laws and regulations;
• make recommendations on the appointment of the external auditors,
assess their performance and independence and ensure that
management responds to audit findings and recommendations;
• discuss the adequacy and effectiveness of the Company’s internal
control systems and policies to assess and manage business risks and
its legal and regulatory compliance programmes; and
• ensure effective monitoring of the Company’s compliance with its
codes of conduct and Board policy statements.
The audit committee meets with the external auditors at least twice a year.
The committee is authorised to seek information from any employee or
external party and obtain legal or other professional advice.
Timely and balanced disclosure
The Company has established policies and procedures designed to
ensure compliance with Australian Securities Exchange (ASX) listing rules
disclosure requirements so that investors have equal and timely access to
all material information. The Company also posts all information disclosed
to the ASX on its website.
Clear communication with shareholders
The Company has a communications strategy to promote effective
communication with shareholders. The company secretary has been
nominated as the person responsible for communications with the
ASX. This role includes responsibility for ensuring compliance with the
continuous disclosure requirements in the ASX listing rules.
Risk identification and management
The Board has established policies on risk management. The systems of
internal financial controls have been determined by senior management
and are designed to provide reasonable but not absolute protection
against fraud, material mis-statement or loss. The chief executive officer
and chief financial officer provide representation to the audit committee
and the Board on the risk management, compliance and control systems
for the Group.
a year of milestones 19

Encourage enhanced performance
The performance of committees, individual directors and key executives
is evaluated regularly by the Board.
There has been no formal performance evaluation of the Board,
directors or committees during the reporting period. The Board informally
evaluates its performance and that of the individual directors and
committees on a regular basis. The Board believes that the individuals
on the Board have made quality and independent judgements in the best
interests of the Company on all relevant issues during the reporting period.
There has been a formal performance evaluation of all key executives
(other than the executive directors) during the reporting period.
Recognise the interests of all stakeholders
The Company has established various codes of conduct to guide
compliance with legal and other obligations to stakeholders and
the community at large. These include ethical and work standards,
employment practices including occupational health and safety
and employment opportunities, and environmental protection. The
Company’s compliance and that of its employees is monitored through
internal review.
Principal activities
AJ Lucas Group is a diversified infrastructure and mining services and
construction group specialising in providing services to the water and
wastewater, oil and gas, resources and property sectors.
The Group has in excess of 1,100 employees and a client base
principally comprising State and local governments and major
corporations.
The Group is structured into three principal business segments:
Drilling: Australia’s foremost provider of drilling services to the coal
and coal seam gas industries for the degasification of coal mines and the
recovery and commercialisation of coal seam gas and associated services.
The Group is also the market leader in the trenchless installation of
conduits and pipes using horizontal directional drilling.
Pipelines: Australia’s market-leading provider for the engineering and
installation of pipelines including hydrostatic testing.
Construction and infrastructure: provision of construction and
civil engineering services together with facilities management.
Review and results of operations
Overview of the consolidated entity
The consolidated entity recorded a net profit of $13,468,000 (2007:
$6,396,000). A summary of the results is set out in the following table:
Summary of financial results
2008
$’000
2007
$’000
Total revenue 424,301 216,369
EBITDA 37,412 14,907
EBIT 25,961 5,941
Profit before tax 20,408 4,178
Net profit attributable to members 13,468 6,396
Total assets 229,899 150,948
Net assets 65,160 30,438
Basic earnings per share 24.5¢ 11.9¢
Divisional performance
Contributions from the business divisions were as follows:
Revenue
$’000
EBITDA
$’000
Margin
%
2008
Drilling 88,417 18,082 20.4
Pipelines 218,538 19,977 9.1
Construction and infrastructure 117,346 3,202 2.7
2007
Drilling 67,625 14,601 21.6
Pipelines 73,219 4,322 5.9
Construction and infrastructure 75,525 543 0.7
The Group’s business focus as an integrated service provider focusing
principally on the resources, water and wastewater and oil and gas
industries resulted in a substantial increase in revenue and earnings as
all of these sectors are experiencing increased capital expenditure. In
particular, Lucas’ integrated and complementary service offering across
all of drilling, pipelines and infrastructure has compounded the growth
opportunities in each of these divisions.
Australia’s continuing drought has led to many Federal and State
initiatives to preserve Australia’s scarce water resources and ensure
adequate water supply. AJ Lucas has benefited from this by the installation
of water pipelines and related civil works.
Similarly, environmental initiatives to reduce green house gas
emissions together with record energy prices, has driven the demand for
alternative energy sources. In Australia, with its abundant coal reserves,
this has encouraged the commercialisation of coal seam gas (CSG).
Lucas’ proprietorial drilling technology has been a major contributor to
the CSG industry commercialisation by developing techniques to enhance
gas recovery. The Group’s “surface to in-seam” drilling capability is now able
to drill up to 2.8 km in length with plans to increase this to up to 4 km.
Drilling
The Group’s drilling focus on the coal and coal seam gas industries
resulted in strong growth with revenue increasing by 30.7% to $88.4
million (2007: $67.6 million). While operating margins improved,
reflecting market conditions and the Group’s industry leadership in the
provision of these drilling services, the net divisional result declined due
to significant legal fees and dispute resolution costs incurred in respect
of the DrillTec and Minerva disputes. Both of these matters, relating to
contracts undertaken many years ago, were substantially resolved either
during the year or since balance date and such costs are not expected to
occur in future years. The result was also impacted by approximately $1.1
million due to work interruptions caused by unseasonal heavy rainfall in
Queensland at the beginning of the calendar year.
Pipelines
The pipeline division experienced increased demand for its services
during the year with revenue increasing by 198.5% to $218.5 million
(2007: $73.2 million). The Western Corridor project ($129 million) in
Brisbane accounted for most of the revenue with the Brooklyn to Lara
gas pipeline in Victoria and the Bonaparte pipeline in Northern Territory
responsible for much of the balance.
Margins also improved, however still fell short of what was expected
due to difficult ground conditions being encountered on the Brooklyn
to Lara project. Additional costs incurred here together with extra
provisions provided for the Group’s New Caledonia based project at
Goro Nickel completed early in the financial year, significantly impacted
the expected margin.
20 LUCAS group

The Group has now appointed a number of additional senior
management personnel and acquired extra specialised equipment, both of
which are expected to bolster the performance of this division in the future.
Construction and infrastructure
Turnover within the construction and infrastructure division increased
55.4% to $117.3 million (2007: $75.5 million). Margins improved but
remained disappointingly low although this was partly due to legal fees
incurred in claims made in respect of the purchase of the Mace business
completed several years ago. These have now been agreed and settled.
The business is now being repositioned to pursue projects where higher
margins are obtainable as well as an increased focus on public civil
infrastructure, particularly in water and wastewater, where clients require
specialised engineering knowledge and techniques, as well as project
management skills.
Coal Seam Gas assets
The Lucas portfolio of coal seam gas assets underwent significant change
during the year as shown by the following:
• Initial reserves certification received at PEL285 in the Gloucester
Basin amounting to 170.2 Bscf (approximately 176 PJ of proven plus
probable (2P) gas reserves and 359.2 Bscf (3P) reserves. Certified total
recoverable gas, including contingent resources of 166.2 Bscf, currently
amounts to 525 Bscf;
• Acquisition of a 17.1% shareholding in Sydney Gas Limited (SGL);
• Initial reserves certification received at ATP651 in the Surat Basin held
in conjunction with Queensland Gas Company Limited and BG Limited;
• Investment of $2.9 million in a 60% shareholding in Arawn Energy
Limited, a coal seam gas exploration company located in British Columbia
in Canada;
• Investment of $0.75 million in Cuadrilla Resources Limited.
Lucas has high expectations of its investment in SGL given its knowledge
of the Sydney Basin gained from its extensive drilling experience in the
Hunter Valley. Lucas has executed both a Drilling Services Agreement and a
Technical Services Agreement with SGL and is assisting in the development
of a drilling programme to accelerate the exploration activities being
undertaken by SGL. Since year end, Lucas has increased its shareholding in
SGL to 19.9%.
At Gloucester Basin, exploration activity continues with a number of
pilot production wells now in testing with gas flow rates recently averaging
in excess of 1 million cubic feet per day. The project has been awarded
Major Project Status in New South Wales and commercialisation initiatives
are well underway, including work on a pipeline to Hexham. Lucas expects
to be shipping gas to market by end 2009/beginning 2010.
The Lucas Group also expanded its exploration activities in
unconventional hydrocarbons overseas to Canada and Europe, through
its investments in Arawn Energy and Cuadrilla Resources. The Group has
a very positive view on the prospects for unconventional hydrocarbons,
particularly shale gas in Europe and, to this end, has taken formative steps
to position itself in this sector.
Investments for future performance
The consolidated entity acquired plant and equipment totalling
$34,818,000 (2007: $15,810,000) during the year including
$11,221,000 from the purchase of the Capricorn Weston Drilling Group.
The capital expenditure largely reflects substantial investment in additional
capacity to sustain the rapid growth of the Group’s drilling and pipeline
activities.
In August 2008, the Group completed the acquisition of Mitchell
Drilling for a purchase consideration of $150 million. Mitchell Drilling
is the largest specialist drilling company for the coal seam gas industry
in Queensland and complements Lucas Drilling’s coal seam gas market
position in New South Wales. The combined entity has 88 rigs making the
Group the largest provider of drilling services to the coal and coal seam
gas industries in Australia.
Review of financial condition
Capital structure
The Company’s capital structure is managed in a manner to maximise
the return to shareholders subject to consideration of the financing risk
of the business and the cash flows generated from operations. No shares
were issued by the Company during the year other than arising from
the conversion of convertible notes, the exercise of management rights,
and deferred consideration for the acquisition of McDermott Drilling Pty
Limited.
Subsequent to year end, the Company has purchased the business of
Mitchell Drilling for $150 million. This was funded out of an institutional
placement of $29.15 million, a $15 million equity placement to the
vendor, deferred consideration of $15 million and the balance from bank
borrowings. At the same time, all of the Group’s borrowing facilities were
renegotiated and their terms extended.
Cash flows from operations
Net cash flow generated from operations during the year amounted to
$50,070,000, a 420% increase over the previous year (2007: $9,602,000).
The increased cash flow reflects the change in business mix to a greater
proportion of higher margin drilling work and the growth in Group
consolidated revenue.
Impact of legislation and other external
requirements
There were no changes in environmental or other legislative requirements
during the year that have significantly impacted the results or operations
of the Group.
Dividends
Dividends paid or declared by the Company since the end of the previous
year were:
Declared and paid during the year 2008
Cents
per share
Total amount
$’000
Franked/
unfranked
Date of
payment
Final 2007 2.5 1,362 100% franked 28 Sept 2007
Interim 2008 3.5 1,911 100% franked 28 Mar 2008
3,273
Declared after end of year
After the balance sheet date, the directors have declared a 2008 final
ordinary dividend as follows:
Cents Total amount Franked/ Date of
per share $’000 unfranked payment
4.5 3,038 15% franked 29 Sept 2008
The financial effect of this dividend has not been brought to account
in the financial statements for the year ending 30 June 2008 and will be
recognised in the 2009 financial report.
State of affairs
In the opinion of the Directors, there were no significant changes in the state
of affairs of the Group during the financial year under review.
a year of milestones 21

Environmental regulations
and native title
As infrastructure engineers, meeting stringent environmental and land
use regulations, including native title issues, are an important element
of our work. Lucas is committed to identifying environmental risks and
engineering solutions to avoid, minimise or mitigate them. We work
closely with all levels of government, landholders, Aboriginal land
councils and other bodies to ensure our activities have minimal or no
effect on land use and areas of environmental, archaeological or cultural
importance. One of the key benefits of directional drilling is its ability to
avoid or substantially mitigate environmental impact.
Group policy requires all operations to be conducted in a manner that
will preserve and protect the environment.
At PEL285 in the Gloucester Basin, the Group holds together with its
joint venture partner, two bore licence certificates under the Water Act
1912, for the drainage of water from the production wells.
The directors are not aware of any significant environmental incidents, or
breaches of environmental regulations during or since the end of the year.
Events subsequent to reporting date
On 23 July 2008, the Company purchased the business of Mitchell
Drilling, the largest specialist drilling company for the coal seam gas
industry in Queensland. The purchase price of $150 million was funded
by a $15 million equity placement to the vendor, with the balance out
of an equity placement to institutional shareholders of $29.15 million,
deferred consideration of $15 million and increased borrowing facilities.
At the same time, the Group’s bank facilities have been renegotiated and
their terms extended.
Subsequent to year-end, the directors have declared a final ordinary
dividend of 4.5¢ per share, franked to 15%.
Other than these matters, there has not arisen in the interval between
the end of the financial year and the date of this report any item,
transaction or event of a material or unusual nature likely, in the opinion
of the directors of the Company, to affect significantly the operations of the
Group, the results of those operations, or the state of affairs of the Group,
in future financial years.
Likely developments
The Group has successfully established itself as the leading service
provider in each of its chosen activities. Its strategy of being an integrated
service provider to the resources water and wastewater, oil and gas
and property sectors presents many opportunities to leverage its service
offering.
The coal seam gas industry is expected to experience significant growth
in preparation for the proposed export of LNG through Gladstone, AJ Lucas
is the only company with the full service capability to provide technical
services, drilling and management services, well head completions,
work overs, well services, gas gathering systems through to pipelines to
market. This gives the Group a significant strategic advantage over all its
competitors. The acquisition of Mitchell Drilling strengthens this capability
through adding additional capacity, customer contacts, drilling expertise
and management depth. The Group will continue to invest in additional
plant and equipment to provide it with the extra capacity to service the
expected increase in demand from the coal seam gas producers.
The complementary nature of the Group’s activities will also be
drawn upon to undertake civil works for the infrastructure works
to be undertaken by the pipeline division. Partnering with selected
entities through joint ventures and alliances, and the development and
application of innovative technology and practices, are expected to create
opportunities to apply the Group’s civil works expertise.
The Group also intends to restructure its coal seam gas interests to
provide investor transparency to their underlying value. The form of this
restructuring is yet to be determined but will relieve the Group of any
direct funding obligation, in particular in respect to Gloucester Basin, as
the investment projects move into their commercialisation stage.
The Group will however, continue to investigate direct investment
opportunities in the water and wastewater sectors, initially based on the
water being produced from the dewatering of coal seam gas properties
where the Group is drilling. The Group will also pursue investment
opportunities in unconventional hydrocarbons (shale gas), sustainable
energies (geothermal and tidal) and other technologies being developed to
reduce green house gas emissions by carbon geosequestration.
Further information about likely developments in the operations of the
Group and the expected results of those operations in future financial years
has not been included in this report because disclosure of the information
would be likely to result in unreasonable prejudice to the Group.
Other Disclosures
Unissued shares under rights or options
At the date of this report, unissued shares of the Company under rights or
options are:
Expiry date Exercise price Number of shares
28 May 2009 — 24,000
30 June 2010 — 369,183
30 June 2010 — 369,183
26 November 2011 $1.10 550,000
31 August 2012 — 1,119,063
23 November 2012 $2.11 250,000
All rights and options expire on the earlier of their expiry date, termination
of the employee’s employment and cessation of the officer’s service.
The rights or options do not entitle the holders to participate in any
share issue of the Company.
Shares issued on exercise of rights
During or since the end of the financial year, the Company issued ordinary
shares as result of the exercise of rights:
Number of shares
Amount paid
on each share
474,333 $Nil
There were no amounts unpaid on the shares issued.
Directors’ shareholdings
and other interests
The relevant interest of each director and their director-related entities in
the shares and options over shares issued by the Company, as notified
by the directors to the Australian Securities Exchange in accordance with
Section 205G(1) of the Corporations Act 2001, at the date of this report
are:
Options issued under
Management
Ordinary Shares
Rights Plan
Allan Campbell 10,140,083 360,000
Ian Stuart-Robertson 1,386,750 220,000
Andrew Lukas 6,204,833 220,000
Martin Green 125,000 —
Garry O’Meally 219,180 —
22 LUCAS group

Indemnification and insurance
of officers and auditors
Indemnification
The Company has agreed to indemnify all directors and officers of the
Company against all liabilities including expenses to another person or
entity (other than the Company or a related body corporate) that may arise
from their position as directors or officers of the Group, except where the
liability arises out of conduct involving a lack of good faith.
No indemnity has been provided to the auditors of the Company.
Insurance premiums
Since the end of the previous financial year, the Company has paid premiums
in respect of Directors’ and Officers’ liability and legal expenses insurance
contracts for the year ended 30 June 2008 and, since the end of the
financial year, the Company has paid or agreed to pay premiums in respect
of Directors’ and Officers’ insurance for the year ending 30 June 2009.
Non-audit services
During the year, KPMG, the Company’s auditor, has performed certain
other services in addition to their statutory duties.
The Board has considered the non-audit services provided during the
year by the auditor and in accordance with written advice provided by
resolution of the audit committee, is satisfied that the provision of those
non-audit services during the year by the auditor is compatible with,
and did not compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
• all non-audit services were subject to the corporate governance
procedures adopted by the Company and have been reviewed by
the audit committee to ensure they do not impact the integrity and
objectivity of the auditor; and
• the non-audit services provided do not undermine the general
principles relating to auditor independence as set out in APES 110
‘Code of Ethics for Professional Accountants’, as they did not involve
reviewing or auditing the auditor’s own work, acting in a management
or decision-making capacity for the Company, acting as an advocate
for the Company or jointly sharing risks and rewards.
Payments to the auditor of the Company, KPMG, and its related practices for
non-audit services provided during the year, as set out in note 5 in the notes
to the financial statements, amounted to $353,701 (2007: $92,939).
Lead auditor’s independence declaration
The Lead auditor’s independence declaration is set out on page 29 and forms
part of the Directors’ Report for the financial year ended 30 June 2008.
Rounding off
The Company is of a kind referred to in ASIC 98/100 dated 10 July 1998
and, in accordance with that Class Order, amounts in the Directors’ Report
and the financial report are rounded off to the nearest thousand dollars,
unless otherwise stated.
Remuneration report - audited
This remuneration report, which forms part of the Directors’ Report,
outlines the remuneration policy for directors and senior management of
the Company and the Group.
Remuneration philosophy
The key principle of the Company’s executive remuneration policy is
to set remuneration at a level that will attract and retain qualified and
experienced personnel and motivate and reward them to achieve strategic
objectives and improve business results.
Remuneration is structured to reward employees for increasing
shareholder value. This is achieved by providing a fixed remuneration
component together with short and long term performance-based
incentives.
Through creating goal congruence between directors, executives and
shareholders, it is hoped to maximise shareholder value.
AJ Lucas aims to set fixed annual remuneration at market median
levels for jobs of comparable size and responsibility using established job
evaluation methods and to provide incentives to enable top performers
to be remunerated at the upper end of the market, subject always to the
performance of the Group.
The aim of the incentive plans is to drive performance to successfully
implement annual business plans and increase shareholder value.
The remuneration for executives and staff is reviewed annually,
using a formal performance appraisal process and market data derived
from independent surveys of people with similar competencies and
responsibilities.
Remuneration structure
Remuneration packages include a mix of fixed and variable remuneration
and short and long-term incentives.
Fixed remuneration
Fixed remuneration consists of base remuneration which is calculated
on a total cost basis and includes any fringe benefit tax charges related
to employee benefits including motor vehicles as well as employer
contributions to superannuation.
Incentive based remuneration
Incentive based remuneration includes short-term and long-term incentives
and is designed to reward executive directors and senior executives for
meeting or exceeding their financial objectives.
All incentive remuneration is subject to the Group achieving certain
performance criteria including most importantly a minimum level of profit.
Subject to these performance criteria being met, the short-term incentives
(STI) may be received as cash or ordinary shares in the Company subject to
a minimum percentage being taken in shares. The STI shares vest in equal
tranches at the end of each of the first and second year after being granted.
The long-term incentive (LTI) is only available to be taken in ordinary
shares and vests after three years subject to the recipient still being
employed by the Group at that time.
Relationship of remuneration
to company performance
In considering the Group’s performance and benefits for shareholder
wealth, executive management has regard to the following indices in
respect of the current financial year and the previous two financial years.
30 Jun 2008 30 Jun 2007 30 Jun 2006
Revenue ($’000) $424,301 $216,369 $171,232
Net profit attributable
to equity holders of the $13,468 $6,396 $3,030
Company ($’000)
Earnings per share 24.5¢ 11.9¢ 5.9¢
Dividend per share 6.0¢ 0.0¢ 0.0¢
Share price at balance date $6.27 $2.00 $0.87
Share price appreciation 314% 230% (32.6)%
The overall level of key management personnel compensation takes into
account the performance of the Group over a number of years. Over the
past four years, the Group’s profit from ordinary activity after income tax
has grown at an average rate per annum of over 79%. During the same
period, the average increase in key management’s compensation has
grown by approximately 12% per annum.
a year of milestones 23

Details of the nature and amount of each major element of remuneration of each director of the Company and each of the five named highest paid
executives of the Company and Group and other key management personnel are as per the table set out below:
Salary/
fees
$
Short-term
Cash
Bonus
$
Non-monetary
benefits (1)
Total
$
Post
employment
Superannuation
benefits
$
Share based
payments
Value of options
and rights (2)
$
$
Executive directors
2008 425,000 — — 425,000 — 58,483
Allan Campbell
2007 393,883 — — 393,883 — 12,476
2008 336,711 — — 336,711 20,271 36,455
Ian Stuart-Robertson
2007 252,554 — 12,138 264,692 20,271 7,486
Non-executive directors
2008 172,915 — 23,972 196,887 12,176 36,455
Andrew Lukas (3) 2007 254,255 — 4,440 258,695 21,345 7,486
2008 45,000 — — 45,000 — —
Martin Green
2007 45,000 — — 45,000 — 40,500
2008 45,000 — — 45,000 — —
Garry O’Meally
2007 45,000 — — 45,000 — 40,500
Executive officers
Ian Redfern
2008 303,183 — — 303,183 26,143 132,823
General Manager Construction 2007 249,327 — 5,693 255,020 12,686 10,000
Kevin Lester
2008 286,020 — 24,021 310,041 19,782 85,674
General Manager Pipelines
2007 268,665 111,167 968 380,800 18,620 —
Mark Summergreene (4) 2008 232,737 — — 232,737 21,906 78,822
Chief Financial Officer 2007 219,914 37,381 6,629 263,924 16,503 —
Brian Burden
2008 228,211 — — 228,211 18,021 77,108
Chief Estimator
2007 203,252 — 2,257 205,509 17,062 —
Brett Tredinnick 2008 199,057 — 7,978 207,035 17,810 70,185
General Manager, Drilling
Mark Tonkin
General Manager
Former
Tim Herlihy (4)
Chief Financial Officer
2008 218,548 — — 218,548 17,223 50,341
2007 181,355 — 1,844 183,199 16,200 —
2007 104,415 — 20,261 124,676 10,000 —
Other benefits
The remuneration policy provides that directors and senior executives may
obtain loans from the Group. All such loans are made at commercial rates
and therefore do not represent a benefit to the recipient or attract fringe
benefit tax. No loan amounts have been written down as the balances are
considered fully collectible.
Service agreements
All executive directors and senior executives are employed under a
standard AJ Lucas contract. The service contract outlines the components
of remuneration but does not prescribe how remunerations levels are
modified year to year. Remuneration levels are reviewed every year to
take into account cost of living changes, any change in the scope of the
role performed and any changes required to meet the principles of the
remuneration policy.
The service contracts are unlimited in term. All contracts can be
terminated without notice by the Company with compensation, if any,
payable to the employee in accordance with the law or by negotiated
agreement.
Non-executive directors
The remuneration of the non-executive directors, currently each $45,000
per annum, is determined by the Board within the aggregate amount
approved by shareholders. No additional remuneration is paid for serving
on any sub-committee of the Board.
In recognition that the amount of the individual fees paid to nonexecutive
directors is less than generally paid to persons in such roles in
comparable sized companies, the Company has in the past periodically
awarded them shares under its Deferred Share Plan. Such shares vest from
the date of issue but cannot be disposed of until the earlier of 10 years
from the date of issue or the date their service with AJ Lucas ceases.
24 LUCAS group

Total
$
Proportion of
remuneration
performance
related
%
Value of options
and rights as
proportion of
remuneration
%
483,483 — 12.1
406,359 — 3.1
393,437 — 9.3
292,449 — 2.6
245,518 14.8
287,526 — 2.6
45,000 — —
85,500 — 47.4
45,000 — —
85,500 — 47.4
462,149 21.8 28.7
277,706 — 3.6
415,498 14.6 20.6
399,420 27.8 —
333,465 16.7 23.6
280,427 13.3 —
323,340 16.7 23.7
222,571 — —
295,030 16.8 23.8
286,112 11.1 17.6
199,399 — —
Amounts disclosed for remuneration of key management persons exclude insurance
premiums of $18,595 (2007: $22,884) paid by the Group in respect of directors’
and officers’ liability insurance contracts which cover current and former directors and
officers of the Company and its controlled entities, This amount has not been allocated
to the individuals covered by the insurance policy as the directors believe that no
reasonable basis for such allocation exists.
(1) Non-monetary benefits comprise benefits subject to FBT.
(2) The fair value of the options has been calculated using a Black-Scholes pricing
model and allocated to each reporting period evenly over the period from grant
date to vesting date. The value disclosed is the portion of the fair value of the rights
allocated to this reporting period.
The following factors and assumptions were used in determining the fair value of
options and rights issued during the year on grant date:
Grant date 24 Nov 2006 31 Aug 2007 23 Nov 2007
Expiry date 24 Nov 2011 31 Aug 2012 23 Nov 2012
Share price on grant date $1.08 $2.11 $3.40
Exercise price $1.10 — $2.11
Volatility 44% 49% - 56% 51%
Risk free interest rate 5.7% 6.2% - 6.3% 6.4%
Dividend yield 4.8% 2.8% 2.2%
Fair value per options or rights $0.25 $1.88 - $2.05 $1.70
(3) Mr Lukas ceased to serve as an executive of the Company on 19 March 2008 and
became a non-executive director from that date.
(4) Mr Herlihy resigned on 31 December 2006.
Mr Summergreene was appointed Chief Financial Officer in his place from
1 January 2007.
134,676 — —
a year of milestones 25

Rights and options over equity instruments granted as compensation
Details of rights and options that were granted to each key management person that vested during the reporting period are as follows:
Number of
options or
rights granted
during 2008
Fair value
per option or
right at
grant date
$
Exercise price
per option
or right
$ Expiry date
Number of
options or rights
vested during
2008
Grant date
Directors
AS Campbell 23 Nov 2007 110,000 1.70 2.11 23 Nov 2012 110,000
I Stuart-Robertson 23 Nov 2007 70,000 1.70 2.11 23 Nov 2012 70,000
AJ Lukas 23 Nov 2007 70,000 1.70 2.11 23 Nov 2012 70,000
Executives
I Redfern 31 Aug 2007 34,239 2.05 — 30 Jun 2010 34,239
31 Aug 2007 34,239 1.97 — 30 Jun 2011 —
31 Aug 2007 61,333 1.88 — 31 Aug 2012 —
K Lester 31 Aug 2007 20,543 2.05 — 30 Jun 2010 20,543
31 Aug 2007 20,543 1.97 — 30 Jun 2011 —
31 Aug 2007 48,271 1.88 — 31 Aug 2012 —
M Summergreene 31 Aug 2007 18,900 2.05 — 30 Jun 2010 18,900
31 Aug 2007 18,900 1.97 — 30 Jun 2011 —
31 Aug 2007 44,409 1.88 — 31 Aug 2012 —
B Burden 31 Aug 2007 18,489 2.05 — 30 Jun 2010 18,489
31 Aug 2007 18,489 1.97 — 30 Jun 2011 —
31 Aug 2007 43,444 1.88 — 31 Aug 2012 —
B Tredinnick 31 Aug 2007 16,829 2.05 — 30 Jun 2010 16,289
31 Aug 2007 16,829 1.97 — 30 Jun 2011 —
31 Aug 2007 39,544 1.88 — 31 Aug 2012 —
M Tonkin 31 Aug 2007 10,742 2.05 — 30 Jun 2010 10,742
31 Aug 2007 10,742 1.97 — 30 Jun 2011 —
31 Aug 2007 35,869 1.88 — 31 Aug 2012 —
Number of
options granted
during 2007
Fair value
per option at
grant date
$
Exercise price
per options
$ Expiry date
Number of
options vested
during 2007
Grant date
Directors
AS Campbell 24 Nov 2006 250,000 0.25 1.10 24 Nov 2011 —
AJ Lukas 24 Nov 2006 150,000 0.25 1.10 24 Nov 2011 —
I Stuart-Robertson 24 Nov 2006 150,000 0.25 1.10 24 Nov 2011 —
During the financial year, 250,000 options over unissued ordinary shares in the Company were issued to the executive directors as approved by
shareholders at the 2007 Annual General Meeting. These options vest immediately on grant but may not be exercised prior to the third anniversary of
the grant date. No options or rights have been granted since the end of the financial year.
Exercise of rights and options granted as compensation
During the reporting period, the following shares were issued on the exercise of rights and options previously granted as compensation to key
management persons:
Number
of shares
2008 2007
Amount paid Number
$/share of shares
Amount paid
$/share
Directors
AS Campbell — — 83,333 —
AJ Lukas — — 83,333 —
Executives
K Lester 180,000 — — —
There are no amounts unpaid on the shares issued as a result of the exercise of the rights or options.
26 LUCAS group

Analysis of share-based payments granted as remuneration
Details of the vesting profile of the options and rights granted as remuneration to each director of the Company and each of the named executives is
detailed below:
Financial years
Options and rights
Forfeited in which
granted
Vested
in options or Value yet to vest
Directors
Number Date in year
%
year 1
%
rights vest Min 2 $
Max 3
$
AS Campbell 250,000 24 Nov 2006 — — 2010 — 1,292,500
110,000 23 Nov 2007 100 — 2008 — —
I Stuart-Robertson 150,000 24 Nov 2006 — — 2010 — 775,500
70,000 23 Nov 2007 100 — 2008 — —
AJ Lukas 150,000 24 Nov 2006 — — 2010 — 775,500
70,000 23 Nov 2007 100 — 2008 — —
Company and consolidated entity executives
I Redfern 34,239 31 Aug 2007 100 — 2008 — —
34,239 31 Aug 2007 — — 2009 — 214,679
61,333 31 Aug 2007 — — 2010 — 384,558
K Lester 20,543 31 Aug 2007 100 — 2008 — —
20,543 31 Aug 2007 — — 2009 — 128,805
48,271 31 Aug 2007 — — 2010 — 302,659
M Summergreene 18,900 31 Aug 2007 100 — 2008 — —
18,900 31 Aug 2007 — — 2009 — 118,503
44,409 31 Aug 2007 — — 2010 — 278,444
B Burden 18,489 31 Aug 2007 100 — 2008 — —
18,489 31 Aug 2007 — — 2009 — 115,926
43,444 31 Aug 2007 — — 2010 — 272,394
B Tredinnick 16,829 31 Aug 2007 100 — 2008 — —
16,829 31 Aug 2007 — — 2009 — 105,518
39,544 31 Aug 2007 — — 2010 — 241,671
M Tonkin 10,742 31 Aug 2007 100 — 2008 — —
10,742 31 Aug 2007 — — 2009 — 67,352
35,869 31 Aug 2007 — — 2010 — 224,899
(1) The % forfeited in the year represents the reduction from the maximum number of options available to vest due to the performance hurdle not
being achieved.
(2) The minimum value of options and rights yet to vest is $nil as the performance criteria may not be met and consequently the right may not vest.
(3) The maximum value of options and rights yet to vest is not determinable as it depends on the market price of shares of AJ Lucas Group on the ASX
on the date the option or rights is exercised. The maximum values presented above are based on the closing share price at 30 June 2008 of $6.27
less the exercise price.
a year of milestones 27

Analysis of movements in options and rights
The movement during the reporting period, by value, of options and rights over ordinary shares of the Company held by each Company director and
each of the named executives is detailed below:
(i)
Granted
in year
$
(ii)
Value of
options and rights
exercised in year
$
(iii)
Lapsed
in year
$
Directors
AS Campbell 187,000 — —
I Stuart-Robertson 119,000 — —
AJ Lukas 119,000 — —
— —
Executive
I Redfern 252,947 — —
K Lester 173,332 360,000 —
M Summergreene 159,467 — —
B Burden 156,001 — —
B Tredinnick 141,995 — —
M Tonkin 110,617 — —
(i) The value of options and rights is their fair value calculated at grant date using a Black-Scholes pricing model. The total value of the options and
rights is included in the table above. This amount is allocated to remuneration over the vesting period.
(ii) The value of the options and rights is calculated as the market price of the Company’s shares on the Australian Securities Exchange as at close of
trading on the date the options or rights were exercised after deducting the price paid to exercise the options and rights.
(iii) The value of the options and rights that lapsed during the year represents the benefits foregone and is calculated at the date of the option or right
lapses using a Black-Scholes pricing model assuming the performance hurdle has not been met. No options or rights lapsed in the year.
Signed in accordance with a resolution of the directors pursuant to s.298 (2) of the Corporations Act 2001.
Allan Campbell, Director
Dated at Sydney, this 25th day of September 2008.
28 LUCAS group

Lead auditor’s independence declaration
under Section 307C of the Corporations Act 2001
To the directors of AJ Lucas Group Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2008 there have been:
• no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
• no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Neil Cameron Smith
Partner
Sydney
25 September 2008
a year of milestones 29

AJ Lucas Group Limited
and its controlled entities
INCOME STATEMENTS
for the year ended 30 june 2008
The accompanying notes are an integral part of these consolidated
financial statements.
Consolidated
Company
Note
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Revenue 2 424,301 216,369 1,500 —
Total revenue 424,301 216,369 1,500 —
Material costs (124,587) (65,779) — —
Sub-contractor costs (116,734) (75,272) — —
Employee expenses (80,627) (34,707) — —
Plant and other construction costs (55,404) (16,380) — —
Depreciation and amortisation expenses 4 (11,451) (8,966) — —
Debt recovery and legal costs (6,500) (3,615) — —
Impairment of assets 4 — (3,422) — (1,786)
Profit on acquisition of business 30 — 2,723 — —
Other expenses (3,037) (5,010) (93) (620)
Results from operating activities 25,961 5,941 1,407 (2,406)
Financial income 3 1,322 781 6,591 386
Financial expenses 3 (6,875) (2,544) (5,078) (1,055)
Net financing (costs)/income 3 (5,553) (1,763) 1,513 (669)
Profit/(loss) before income tax 20,408 4,178 2,920 (3,075)
Income tax (expense)/benefit 6 (6,940) 2,218 799 1,866
Profit/(loss) attributable to equity holders of the company 24 13,468 6,396 3,719 (1,209)
Earnings per share:
Basic earnings per share (cents) 7 24.5 11.9
Diluted earnings per share (cents) 7 24.0 11.8
30 LUCAS group

Statements of recognised income and expense
for the year ended 30 June 2008
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated
Company
Note
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Exchange differences on translation of foreign operations 24 274 306 — —
Income and expense recognised directly in equity 274 306 — —
Profit/(loss) for the year 24 13,468 6,396 3,719 (1,209)
Total recognised income and expense for the year 24 13,742 6,702 3,719 (1,209)
a year of milestones 31

AJ Lucas Group Limited
and its controlled entities
Balance Sheets
As at 30 june 2008
The accompanying notes are an integral part of these
consolidated financial statements.
Note
Consolidated
2008
$’000
2007
$’000
2008
$’000
Company
Current assets
Cash and cash equivalents 8 16,612 18,222 5,519 13,512
Trade and other receivables 9 56,912 28,261 6,064 4,189
Construction work in progress 10 40,685 53,418 — —
Other 11 1,717 435 184 —
Total current assets 115,926 100,336 11,767 17,701
2007
$’000
Non-current assets
Trade and other receivables 9 — — 49,889 31,795
Property, plant and equipment 12 55,986 30,921 — —
Investments 13 26,156 63 26,879 1,260
Exploration assets 14 4,100 6,175 — —
Intangible development assets 15 15,452 1,046 — —
Other intangible assets 16 12,279 6,805 2,061 2,061
Deferred tax assets 17 — 5,602 8,405 10,126
Total non-current assets 113,973 50,612 87,234 45,242
Total assets 229,899 150,948 99,001 62,943
Current liabilities
Trade and other payables 18 83,074 66,319 632 84
Interest-bearing loans and borrowings 19 19,996 10,706 4,500 —
Income tax payable 20 114 75 — —
Provisions 21 8,550 2,702 — —
Total current liabilities 111,734 79,802 5,132 84
Non-current liabilities
Trade and other payables 18 — — 29,361 16,217
Interest-bearing loans and borrowings 19 51,036 37,181 18,226 24,188
Deferred tax liabilities 17 1,221 — — —
Provisions 21 748 3,527 — —
Total non-current liabilities 53,005 40,708 47,587 40,405
Total liabilities 164,739 120,510 52,719 40,489
Net assets 65,160 30,438 46,282 22,454
Equity
Issued capital 24 54,037 30,655 54,118 30,736
Reserves 24 2,236 1,091 — —
Retained earnings/(accumulated losses) 24 8,887 (1,308) (7,836) (8,282)
Total equity 24 65,160 30,438 46,282 22,454
32 LUCAS group

statements of cash flows
for the year ended 30 june 2008
The accompanying notes are an integral part of these
consolidated financial statements.
Note
Consolidated
2008
$’000
2007
$’000
2008
$’000
Company
Cash flows from operating activities
Cash receipts from customers 450,877 200,553 66 —
Cash payments to suppliers and employees (394,407) (187,970) (277) (100)
Cash generated from operations 56,470 12,583 (211) (100)
Interest received 547 60 465 —
Income taxes paid (72) (497) — —
Interest and other costs of finance paid (6,875) (2,544) (4,112) (1,172)
Net cash from operating activities 29(b) 50,070 9,602 (3,858) (1,272)
2007
$’000
Cash flows from investing activities
Proceeds from sale of plant and equipment 1,018 457 — —
Payment for investment in other entities (27,858) — (25,243) —
Loans to controlled entities — — (8,574) —
Repayment of loans by controlled entities — — — 5,532
Payments for plant and equipment (21,472) (5,953) — —
Exploration and evaluation expenditure (12,513) (2,676) — —
Loans to related entity (1,578) (1,608) (1,578) (1,608)
Repayment of loan to related entity 292 — 263 —
Acquisition of subsidiary net of cash acquired (9,993) (3,198) — —
Net cash from investing activities (72,104) (12,978) (35,132) 3,924
Cash flows from financing activities
Proceeds of borrowings -other 41,690 4,004 22,626 —
Repayment of borrowings - other (6,413) (147) — —
Loans from controlled entities — — 13,144 —
Deferred payment for acquisition (625) _ — —
Dividends paid (3,273) _ (3,273) —
Proceeds from issue of convertible notes — 24,188 — 24,188
Repayment of convertible notes (1,500) (10,000) (1,500) (10,000)
Payment of finance lease liabilities (4,659) (3,521) — —
Net cash from financing activities 25,220 14,524 30,997 14,188
Net increase/(decrease) in cash and cash equivalents 3,186 11,148 (7,993) 16,840
Cash and cash equivalents at beginning of the year 12,559 1,411 13,512 (3,328)
Cash and cash equivalents at end of the year 29(a) 15,745 12,559 5,519 13,512
a year of milestones 33

notes to the
financial statements
Page Note Content
34 1 Significant accounting policies
40 2 Segment reporting
41 3 Financial income and expense
41 4 Other expenses
41 5 Auditor’s remuneration
42 6 Income tax
42 7 Earnings per share
43 8 Cash and cash equivalents
43 9 Trade and other receivables
43 10 Construction work in progress
43 11 Other current assets
44 12 Property, plant and equipment
44 13 Investments
44 14 Exploration assets
45 15 Intangible development assets
45 16 Other intangible assets
46 17 Deferred tax assets and liabilities
48 18 Trade and other payables
48 19 Interest-bearing loans and liabilities
50 20 Current tax liabilities
51 21 Provisions
51 22 Operating leases
51 23 Employee benefits
53 24 Capital and reserves
54 25 Financial instruments
59 26 Interests in joint ventures
60 27 Consolidated entities
60 28 Contingencies
61 29 Reconciliation of cash flows from operating activities
62 30 Acquisition of subsidiary
63 31 Key management personnel disclosures
65 32 Non-key management personnel disclosures
66 33 Deed of cross guarantee
66 34 Events subsequent to balance date
1. SIGNIFICANT ACCOUNTING POLICIES
AJ Lucas Group Limited (the ‘Company’) is a company domiciled in
Australia. The address of the Company’s registered office is 157 Church
Street Ryde, NSW 2112. The consolidated financial report of the Company
for the financial year ended 30 June 2008 comprises the Company and
its subsidiaries (together referred to as the ‘Group’) and the Group’s
interest in associates and jointly controlled entities. The Group is primarily
involved in construction, civil engineering and commercialisation of coal
seam gas reserves (see note 2).
The accounting policies set out below have been applied consistently
to all periods presented in these consolidated financial statements, and
have been applied consistently by all entities in the Group.
Certain comparative amounts have been reclassified to conform with
the current year’s presentation.
Statement of compliance
The financial report is a general purpose financial report which has
been prepared in accordance with Australian Accounting Standards
(‘AASBs’) (including Australian Interpretations) adopted by the Australian
Accounting Standards Board (‘AASB’) and the Corporations Act 2001. The
consolidated financial report of the Group and the financial report of the
Company comply with International Financial Reporting Standards (‘IFRSs’)
and interpretations adopted by the International Accounting Standards
Board (‘IASB’).
The financial statements were approved by the Board of Directors on
25 September 2008.
Basis of measurement
The consolidated financial statements have been prepared on the
historical cost basis.
Functional and presentation currency
The financial report is presented in Australian dollars which is the
Company’s functional currency and the functional currency of the majority
of the Group. The Company is of a kind referred to in ASIC Class Order
98/100 dated 10 July 1998 (updated by CO 05/641 effective 28 July
2005 and CO 06/51 effective 31 January 2006) and in accordance with
that Class Order, amounts in the financial report and Director’s Report have
been rounded off to the nearest thousand dollars, unless otherwise stated.
Use of estimates and judgments
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amount of assets, liabilities, income
and expenses. Actual results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate
is revised and in any future periods affected.
In particular, information about significant areas of estimation
uncertainty and critical judgements in applying accounting policies that
have the most significant effect on the amount recognised in the financial
statements are described in the following notes:
• Note 10 – construction work in progress
• Note 15 - intangible development assets
• Note 16 – other intangible assets
• Note 21 – provisions
Basis of consolidation
Associates: Associates are those entities in which the Group has
significant influence, but not control, over the financial and operating
34 LUCAS group

policies. Significant influence is presumed to exist when the Group holds
between 20 and 50 percent of the voting power of another entity.
Associates are accounted for using the equity method (equity
accounted investees) and are initially recognised at cost. The Group’s
investment includes goodwill identified on acquisition, net of any
accumulated impairment losses. The consolidated financial statements
include the Group’s share of income and expenses and equity movements
of equity accounted investees, after adjustments to align the accounting
policies with those of the Group, from the date that significant influence
commences to the date that significant influence ceases. Where the
Group’s share of losses exceeds its interest in an equity accounted
investee, the carrying amount of that interest (including any long-term
investments) is reduced to nil and the recognition of further losses is
discontinued except to the extent that the Group has an obligation or has
made payments on behalf of the investee.
Subsidiaries: Subsidiaries are entities controlled by the Group.
Control exists when the Company has the power, directly or indirectly, to
govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, potential voting rights that
presently are exercisable or convertible are taken into account. The financial
statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control
ceases. The accounting policies of subsidiaries have been changed when
necessary to align them with the policies adopted by the Group.
Jointly controlled operations, assets and entities:
The interest of the Company and of the Group in joint ventures and jointly
controlled assets are brought to account by recognising in its financial
statements the assets it controls, the liabilities that it incurs, the expenses
it incurs and its share of income that it earns from the sale of goods or
services by the joint venture.
Transactions eliminated on consolidation: Intragroup
balances, and any unrealised gains and losses or income and expenses
arising from intragroup transactions, are eliminated in preparing
the consolidated financial statements. Unrealised gains arising from
transactions with equity accounted investees are eliminated against the
investment to the extent of the Group’s interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
Foreign currency
Foreign currency transactions: Transactions in foreign
currencies are translated to the respective functional currencies of the
Group’s entities at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the
reporting date are retranslated to the functional currency at the foreign
exchange rate at that date. The foreign currency gain or loss on monetary
items is the difference between amortised cost in the functional currency
at the beginning of the period, adjusted for effective interest and payments
during the period, and the amortised cost in foreign currency translated
at the exchange rate at the end of the period. Non-monetary assets and
liabilities denominated in foreign currencies that are measured at fair
value are retranslated to the functional currency at the exchange rate at
the date that the fair value was determined. Foreign currency differences
arising on retranslation are recognised in profit or loss.
Foreign operations: The assets and liabilities of foreign operations
are translated to Australian dollars at exchange rates at the reporting date.
The income and expenses of foreign operations are translated to Australian
dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised directly in equity. Since 1
January 2004, the Group’s date of transition to AASBs, such differences
have been recognised in the foreign currency translation reserve (‘FCTR’).
When a foreign operation is disposed of, in part or in full, the relevant
amount in the FCTR is transferred to profit or loss.
Foreign exchange gains and losses arising from a monetary item
receivable from or payable to a foreign operation, the settlement of which
is neither planned nor likely in the foreseeable future, are considered to
form part of the net investment in a foreign operation and are recognised
directly in equity in the FCTR.
Financial instruments
Non-derivative financial instruments: Non-derivative
financial instruments comprise trade and other receivables, cash and cash
equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair
value plus, for instruments not at fair value through profit or loss, any
directly attributable transaction costs. Subsequent to initial recognition,
non-derivative financial instruments are measured as described below.
A financial instrument is recognised if the Group becomes a party
to the contractual provisions of the instrument. Financial assets are
derecognised if the Group’s contractual rights to the cash flows from
the financial assets expire or if the Group transfers the financial asset
to another party without retaining control or substantially all risks and
rewards of the asset. Regular way purchases and sales of financial assets
are accounted for at trade date, i.e., the date that the Group commits itself
to purchase or sell the asset. Financial liabilities are derecognised if the
Group’s obligations specified in the contract expire or are discharged or
cancelled.
Cash and cash equivalents comprise cash balances and call deposits.
Bank overdrafts that are repayable on demand and form an integral part of
the Group’s cash management are included as a component of cash and
cash equivalents for the purpose of the statement of cash flows.
Non-derivative financial instruments are measured at amortised cost
using the effective interest method, less any impairment losses.
Available-for-sale financial assets
The Group’s investments in equity securities are classified as availablefor-sale
financial assets. Subsequent to initial recognition, they are
measured at fair value and changes therein, other than impairment
losses are recognised directly in a separate component of equity. When
an investment is derecognised, the cumulative gain or loss in equity is
transferred to profit or loss.
Compound financial instruments: Compound financial
instruments issued by the Group comprise convertible notes that can be
converted to share capital at the option of the holder, and the number of
shares to be issued does not vary with changes in their fair value.
The liability component of a compound financial instrument is
recognised initially at the fair value of a similar liability that does not
have an equity conversion option. The equity component is recognised
initially at the difference between the fair value of the compound financial
instrument as a whole and the fair value of the liability component. Any
directly attributable transaction costs are allocated to the liability and
equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a
compound financial instrument is measured at amortised cost using the
effective interest method, unless it is designated at fair value through profit
or loss. The equity component of a compound financial instrument is not
remeasured subsequent to initial recognition.
a year of milestones 35

Interest, dividends, losses and gains relating to the financial liability
are recognised in the profit or loss. Distributions to the equity holders are
recognised against equity, net of any tax benefit.
Share capital
Ordinary shares: Incremental costs directly attributable to issue of
ordinary shares and share options are recognised as a deduction from
equity, net of any related income tax benefit.
Dividends: Dividends are recognised as a liability in the period in
which they are declared.
Leased assets
Leases in terms of which the Group assumes substantially all the risks
and rewards of ownership are classified as finance leases. Upon initial
recognition, the leased asset is measured at an amount equal to the lower
of its fair value and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for in accordance
with the accounting policy applicable to that asset.
Other leases are operating leases and the leased assets are not
recognised on the Group’s balance sheet.
Revenue
Services rendered: Revenue from services rendered is recognised
in the income statement in proportion to the stage of completion of the
transaction at the balance sheet date. The stage of completion is assessed
by reference to surveys of work performed.
Construction contracts: Contract revenue includes the initial
amount agreed in the contract plus any variations in contract work, claims
and incentive payments to the extent that it is probable that they will
result in revenue and can be measured reliably. As soon as the outcome
of a construction contract can be estimated reliably, contract revenue and
expenses are recognised in the income statement in proportion to the
stage of completion of the contract.
The stage of completion is assessed by reference to an assessment
of total labour hours and other costs incurred to date as a percentage of
estimated total costs for each contract, unless an alternative measurement
method provides a more accurate indication of the stage of completion.
When the outcome of a construction contract cannot be estimated
reliably, contract revenue is recognised only to the extent of contract costs
incurred that are likely to be recoverable. An expected loss on a contract is
recognised immediately in the income statement.
Asset sales: The net proceeds of asset sales are recognised at the
date an unconditional contract of sale is signed.
The gain or loss on disposal is calculated as the difference between the
carrying amount of the asset at the time of disposal and the net proceeds
on disposal and is recognised in other income.
Lease payments
Payments made under operating leases are recognised in the income
statement on a straight-line basis over the term of the lease.
Minimum lease payments made under finance leases are apportioned
between the finance expense and the reduction of the outstanding liability.
The finance expense is allocated to each period during the lease term so
as to produce a constant periodic rate of interest on the remaining balance
of the liability.
Finance income and expenses
Finance income comprises interest income on funds invested, dividend
income and foreign currency gains that are recognised in the income
statement. Interest income is recognised as it accrues, using the effective
interest method. Dividend income is recognised in profit or loss on the
date that the Group’s right to receive payment is established, which in the
case of quoted securities is the ex-dividend date.
Finance expenses comprise interest expense on borrowings, unwinding
of the discount on provisions and deferred consideration, foreign currency
losses and impairment losses recognised on financial assets that are
recognised in the income statement. All borrowing costs are recognised in
the income statement using the effective interest method.
Income tax
Income tax in the income statement comprises current and deferred tax.
Income tax is recognised in the income statement except to the extent
that it relates to items recognised directly in equity, in which case it is
recognised in equity.
Current tax is the expected tax payable on the taxable income for the
year, using tax rates enacted or substantially enacted at the balance sheet
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet liability method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are
not provided for: the initial recognition of goodwill and other assets or
liabilities that affect neither accounting nor taxable profit, and differences
relating to investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future. Deferred tax is measured at the tax
rates that are expected to be applied to the temporary differences when
they reverse, based on the laws that have been enacted or substantially
enacted by the reporting date. Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same authority on the
same taxable entity, or on different tax entities, but they intend to settle
current tax liabilities and assets on a net basis or their tax assets and
liabilities will be realised simultaneously.
A deferred tax asset is recognised only to the extent that it is probable
that future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends
are recognised at the same time as the liability to pay the related dividend
is recognised.
Tax consolidation: The Company and its wholly-owned Australian
resident entities have formed a tax-consolidated group and are therefore
taxed as a single entity. The head entity within the tax-consolidated group
is AJ Lucas Group Limited.
Current tax expense/income, deferred tax liabilities and deferred tax
assets arising from temporary differences of the members of the taxconsolidated
group are recognised in the separate financial statements
of the members of the tax-consolidated group using the group allocation
approach.
Any current tax liabilities (or assets) and deferred tax assets arising
from unused tax losses of the subsidiaries is assumed by the head
entity in the tax-consolidated group and are recognised by the Company
as amounts payable (receivable) to/(from) other entities in the taxconsolidated
group in conjunction with any tax funding arrangement
amounts (refer below). Any difference between these amounts is
recognised by the Company as an equity contribution or distribution.
The Company recognises deferred tax assets arising from unused
tax losses of the tax-consolidated group to the extent that it is probable
that future taxable profits of the tax-consolidated group will be available
against which the asset can be utilised.
36 LUCAS group

Any subsequent period adjustments to deferred tax assets arising from
unused tax losses as a result of revised assessments of the probability of
recoverability is recognised by the head entity only.
Nature of tax funding arrangements and tax sharing
arrangements: The head entity, in conjunction with other members
of the tax-consolidated group, has entered into a tax funding arrangement
which sets out the funding obligations of members of the tax-consolidated
group in respect of tax amounts. The tax funding arrangements require
payments to/from the head entity equal to the current tax liability (asset)
assumed by the head entity and any tax-loss deferred tax asset assumed
by the head entity, resulting in the head entity recognising an inter-entity
receivable (payable) equal in amount to the tax liability (asset) assumed.
The inter-entity receivable (payable) are at call.
Contributions to fund the current tax liabilities are payable as per
the tax funding arrangement and reflect the timing of the head entity’s
obligation to make payments for tax liabilities to the relevant tax
authorities.
The head entity in conjunction with other members of the taxconsolidated
group, has also entered into a tax sharing agreement. The
tax sharing agreement provides for the determination of the allocation of
income tax liabilities between the entities should the head entity default
on its tax payment obligations. No amounts have been recognised in
the financial statements in respect of this agreement as payment of any
amounts under the tax sharing agreement is considered remote.
Earnings per share
The Group presents basic and diluted earnings per share (‘EPS’) data for
its ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted
average number of ordinary shares outstanding during the period. Diluted
EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares
outstanding for the effects of all dilutive potential ordinary shares, which
comprise convertible notes and share options granted to employees.
Segment reporting
A segment is a distinguishable component of the Group that is engaged
either in providing related products or services (business segment), or in
providing products or services within a particular economic environment
(geographical segment), which is subject to risks and rewards that are
different from those of other segments. The Group’s primary format for
segment reporting is based on business segments. The business segments
are determined based on the Group’s management and internal reporting
structure.
Segment results, assets and liabilities include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
Construction work in progress
Construction work in progress represents the gross unbilled amount
expected to be collected from customers for contract work performed to
date. It is measured at cost plus profit recognised to date less progress
billings and recognised losses. Cost includes all expenditure related
directly to specific projects and an allocation of fixed and variable
overheads incurred in the Group’s contract activities based on normal
operating capacity.
If payments received from customers exceed the income recognised,
then the difference is presented as deferred income in the balance sheet.
Investments
Investments in controlled entities are carried at cost. Cost includes the
purchase price of the entity as well as directly attributable costs associated
with the acquisition. Directly attributable costs are capitalised only once
there is written agreement to acquire the entity.
Property, plant and equipment
Recognition and measurement: Items of property, plant and
equipment are measured at cost less accumulated depreciation and
impairment losses. The cost of property, plant and equipment at 1 January
2004, the date of transition to AASBs, was determined by reference to its
fair value at that date.
Cost includes expenditures that are directly attributable to the
acquisition of the asset. The cost of self-constructed assets includes the
cost of materials, direct labour, the initial estimate, where relevant, of
the costs of dismantling and removing the items and restoring the site on
which they are located, an appropriate proportion of production overheads
and any other costs directly attributable to bringing the asset to a working
condition for its intended use. Purchased software that is integral to
the functionality of the related equipment is capitalised as part of that
equipment. Borrowing costs related to the acquisition or construction of
qualifying assets are recognised in profit or loss as incurred.
When parts of an item of property, plant and equipment have different
useful lives, they are accounted for as separate items (major components)
of property, plant and equipment.
Leased assets: Leases in terms of which the Group assumes
substantially all the risks and rewards of ownership are classified as
finance leases. Finance leases are stated at an amount equal to the
lower of fair value and the present value of minimum lease payments at
inception of the lease, less accumulated depreciation and impairment
losses.
Sale of non-current assets: The net gain or loss on disposal is
included in the income statement at the date control of the asset passes to
the buyer, usually when an unconditional contract for sale is signed.
The gain or loss on disposal is calculated as the difference between the
carrying amount of the asset at the time of disposal and the net proceeds
on disposal (including incidental costs).
Subsequent costs: The cost of replacing part of an item of
property, plant and equipment is recognised in the carrying amount of the
item if it is probable that the future economic benefits embodied within
the part will flow to the Group and its cost can be measured reliably. The
costs of the day-to-day servicing of property, plant and equipment are
recognised in profit or loss as incurred.
Depreciation
Depreciation is charged to the income statement on a straight-line basis
over the estimated useful lives of each part of an item of plant and
equipment commencing from the time the asset is ready for use.
The estimated useful lives in the current and comparative periods are
as follows:
Plant and equipment
years
Plant and equipment 4-10
Motor vehicles 7
Office equipment 4-8
Computer equipment 3-4
Leased plant and equipment 4-10
The residual value, the useful life and the depreciation method applied
to an asset are reassessed at least annually.
a year of milestones 37

Intangible assets
Goodwill: Goodwill and negative goodwill arise on the acquisition of
subsidiaries and joint ventures.
Acquisitions: Goodwill represents the excess of the cost of the
acquisition over the Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the acquiree. When the excess
is negative (negative goodwill), it is recognised immediately in the income
statement.
Subsequent measurement: Following initial recognition, goodwill
stated at cost less any accumulated impairment losses. In respect of equity
accounted investees, the carrying amount of goodwill is included in the
carrying amount of the investment.
Research and development: Expenditure on research activities,
undertaken with the prospect of gaining new scientific or technical
knowledge and understanding, is recognised in the income statement as
an expense as incurred.
Development activities involve a plan or design for the production
of new or substantially improved products or processes. Development
expenditure is capitalised only if development costs can be measured
reliably, the product or process is technically and commercially feasible,
future economic benefits are probable and the Group intends to and has
sufficient resources to complete development and to use or sell the asset.
The expenditure capitalised includes the cost of materials, direct labour
and overhead costs that are directly attributable to preparing the asset for
its intended use. Borrowing costs related to the development of qualifying
assets are recognised in profit or loss as incurred. Other development
expenditure is recognised in profit or loss as incurred.
Capitalised development expenditure is stated at cost less accumulated
amortisation and impairment losses.
Customer relationships and customer contracts:
Customer relationship and customer contracts intangibles that are
acquired by the Group that have finite lives are measured at cost less
accumulated amortisation and impairment losses.
Other intangible assets: Other intangible assets that are
acquired by the Group are stated at cost less accumulated amortisation
and impairment losses.
Subsequent expenditure: Subsequent expenditure on capitalised
intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other
expenditure is recognised in the income statement as incurred.
Amortisation: Amortisation is charged to the income statement
on a systematic basis over the estimated useful lives of intangible assets
unless such lives are indefinite. Goodwill and intangible assets with an
indefinite useful life are systematically tested for impairment at each
balance sheet date. Other intangible assets are amortised from the date
they are available for use. The estimated useful lives in the current and
comparative periods are as follows:
Years
Other development costs 5
Customer intangibles 5
Exploration and evaluation assets
Exploration and evaluation costs, including the costs of acquiring licences,
are capitalised as exploration and evaluation assets on an area of interest
basis. Costs incurred before the Group has obtained legal rights to explore
an area are recognised in the income statement.
Exploration and evaluation assets are only recognised if the rights of
the area of interest are current and either:
(i) the expenditures are expected to be recouped through successful
development and exploitation of the area of interest; or
(ii) activities in the area of interest have not at the reporting date, reached
a stage which permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves and active and significant
operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets are assessed for impairment if:
(i) sufficient data exists to determine technical feasibility and commercial
viability; and
(ii) facts and circumstances suggest that the carrying amount exceeds
the recoverable amount. For the purposes of impairment testing,
exploration and evaluation assets are allocated to cash-generating
units to which the exploration activity relates. The cash generating unit
shall not be larger than the area of interest.
When the area of interest enters the development phase, the
accumulated exploration and evaluation is transferred to gas assets in
development.
Gas assets
Assets in development: When the technical and commercial
feasibility of an undeveloped gas field in an area of interest has been
demonstrated, the field enters the development phase. The costs of the
area of interest field assets in the development phase are separately
accounted for as assets and include past exploration and evaluation
costs, development drilling and other surface and subsurface expenditure,
surface plant and equipment and any associated land and buildings.
When commercial operations commences, the accumulated costs are
transferred to gas producing assets.
Producing assets: The costs of gas assets in production are
separately accounted for as assets and include past exploration and
evaluation costs, pre-production development costs and ongoing costs of
continuing to develop resources for production and to expand or replace
plant and equipment and any associated land and buildings. These costs
will be subject to depreciation and depletion and also tested annually for
impairment.
Impairment
Financial assets: A financial asset is assessed at each reporting
date to determine whether there is any objective evidence that it is
impaired. A financial asset is considered to be impaired if objective
evidence indicates that one or more events have had a negative effect on
the estimated future cash flows of that asset.
Individually significant financial assets are tested for impairment on a
individual basis. The remaining financial assets are assessed collectively in
groups that share similar credit risk characteristics.
All impairment losses are recognised in the income statement. An
impairment loss is reversed if the reversal can be related objectively to an
event occurring after the impairment loss was recognised.
Non-financial assets: The carrying amounts of the Group’s nonfinancial
assets, other than construction work in progress and deferred tax
assets, are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists; then the asset’s
recoverable amount is estimated. For goodwill and intangible assets that
have indefinite lives or that are not yet available for use, recoverable
amount is estimated at each reporting date.
38 LUCAS group

The recoverable amount of an asset or cash-generating unit is the
greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
For the purpose of impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or
groups of assets (“the cash generating unit”). The goodwill acquired in a
business combination, for the purpose of impairment testing, is allocated
to cash generating units that are expected to benefit from the synergies of
the combination.
An impairment loss is recognised if the carrying amount of an asset or
its cash-generating unit exceeds its recoverable amount. A cash-generating
unit is the smallest identifiable asset group that generates cash flows that
largely are independent from other assets and groups. Impairment losses
are recognised in profit or loss. Impairment losses recognised in respect
of cash-generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the units and then to reduce the carrying
amount of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of
other assets, impairment losses recognised in prior periods are assessed at
each reporting date for any indications that the loss has decreased or no
longer exists. An impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset’s carrying amount does
not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
Employee benefits
Defined contribution superannuation funds: Obligations
for contributions to defined contribution superannuation funds are
recognised as an expense in profit or loss when they are due.
Other long-term employee benefits: The Group’s net
obligation in respect of long-term employee benefits is the amount of
future benefit that employees have earned in return for their service
in the current and prior periods plus related on costs; that benefit is
discounted to determine its present value. The discount rate is the yield
at the reporting date on AA credit-rated bonds that have maturity dates
approximating the terms of the Group’s obligations. The calculation is
performed using the projected unit credit method. Any actuarial gains or
losses are recognised in the income statement in the period in which they
arise.
Short-term benefits: Liabilities for employee benefits for wages,
salaries, annual leave and sick leave represent present obligations
resulting from employees’ services provided to reporting date and are
calculated at undiscounted amounts based on remuneration wage and
salary rates that the Group expects to pay as at reporting date including
related on-costs, such as workers compensation insurance and payroll tax.
Non-accumulating non-monetary benefits, such as medical care, housing,
cars and free or subsidised goods and services, are expensed based on the
net marginal cost to the Group as the benefits are taken by the employees.
Share-based payment transactions: The grant date fair value
of options granted to employees is recognised as an employee expense, with
a corresponding increase in equity, over the period in which the employees
become unconditionally entitled to the options. The amount recognised is
adjusted to reflect the actual number of share options that vest, except for
those that fail to vest due to market conditions not being met.
The fair value of the amount payable to employees in respect of share
appreciation rights, which are settled in cash, is recognised as an expense,
with a corresponding increase in liabilities, over the period in which the
employees become unconditionally entitled to payment. The liability is
re-measured at each reporting date and at settlement date. Any changes in
the fair value of the liability are recognised as personnel expense in profit
or loss.
Provisions: A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits
will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks
specific to the liability.
Goods and services tax: Revenue, expenses and assets are
recognised net of the amount of goods and services tax (GST), except
where the amount of GST incurred is not recoverable from the taxation
authority. In these circumstances, the GST is recognised as part of the cost
of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the ATO is
included as a current asset or liability in the balance sheet.
Cash flows are included in the statement of cash flows on a gross
basis. The GST components of cash flows arising from investing and
financing activities which are recoverable from, or payable to, the ATO are
classified as operating cash flows.
New standards and interpretations not yet adopted:
The following standards, amendments to standards and interpretations
have been identified as those which may impact the entity in the period of
initial application. They are available for early adoption at 30 June 2008,
but have not been applied in preparing this financial report:
• Revised AASB 3 Business Combinations changes the application of
acquisition accounting for business combinations and the accounting
for non-controlling (minority) interests. Key changes include: the
immediate expensing of all transaction costs; measurement of
contingent consideration at acquisition date with subsequent changes
through the income statement; measurement of non-controlling
(minority) interests at full fair value or the proportionate share of
the fair value of the underlying net assets; guidance on issues such
as reacquired rights and vendor indemnities; and the inclusion of
combinations by contract alone and those involving mutuals. The
revised standard becomes mandatory for the Group’s 30 June 2010
financial statements. The Group has not yet determined the potential
effect of the revised standard on the Group’s financial report.
• AASB 8 Operating Segments introduces the “management approach”
to segment reporting. AASB 8, which becomes mandatory for the
Group’s 30 June 2010 financial statements, will require the disclosure
of segment information based on the internal reports regularly
reviewed by the Group’s Chief Operating Decision Maker in order to
assess each segment’s performance and to allocate resources to them.
Currently the Group presents segment information in respect of its
business and geographical segments (see note 2).
• Revised AASB 101 Presentation of Financial Statements introduces as
a financial statement (formerly “primary” statement) the “statement
of comprehensive income”. The revised standard does not change the
recognition, measurement or disclosure of transactions and events
that are required by other AASBs. The revised AASB 101 will become
mandatory for the Group’s 30 June 2010 financial statements.
a year of milestones 39

The Group has not yet determined the potential effect of the revised
standard on the Group’s disclosures.
• Revised AASB 123 Borrowing Costs removes the option to expense
borrowing costs and requires that an entity capitalise borrowing costs
directly attributable to the acquisition, construction or production
of a qualifying asset as part of the cost of that asset. The revised
AASB 123 will become mandatory for the Group’s 30 June 2010
financial statements and will constitute a change in accounting policy
for the Group. In accordance with the transitional provisions the
Group will apply the revised AASB 123 to qualifying assets for which
capitalisation of borrowing costs commences on or after the effective
date. The Group has not yet determined the potential effect of the
revised standard on future earnings.
• Revised AASB 127 Consolidated and Separate Financial Statements
changes the accounting for investments in subsidiaries. Key changes
include: the remeasurement to fair value of any previous/retained
investment when control is obtained/lost, with any resulting gain or
loss being recognised in profit or loss; and the treatment of increases
in ownership interest after control is obtained as transactions with
equity holders in their capacity as equity holders. The revised
standard will become mandatory for the Group’s 30 June 2010
financial statements. The Group has not yet determined the potential
effect of the revised standard on the Group’s financial report.
• AASB 2008-1 Amendments to Australian Accounting Standard - Sharebased
Payment: Vesting Conditions and Cancellations changes the
measurement of share-based payments that contain non-vesting
conditions. AASB 2008-1 becomes mandatory for the Group’s 30 June
2010 financial statements. The Group has not yet determined the
potential effect of the amending standard on the Group’s financial report.
2. SEGMENT REPORTING
Segment information is presented in respect of the Group’s business and geographical segments. The primary format, business segment, is based on the
Group’s management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items mainly comprise interest-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and
expenses. Inter-segment pricing is determined on an arms length basis.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one
period.
Business segments
The Group comprises the following main business segments based on the Group’s reporting system:
Drilling
Drilling services for degasification of underground coal mines, recovery and commercialisation
of coal seam gas and associated services and trenchless installation of pipes and conduits.
Pipelines
Construction and installation of pipelines including hydrostatic testing.
Construction and infrastructure Construction and civil engineering, together with facilities management.
2008
$’000
Drilling
2007
$’000
2008
$’000
Pipelines
2007
$’000
Construction &
infrastructure
2008
$’000
2007
$’000
Consolidated
Total segment revenue 88,417 67,625 218,538 73,219 117,346 75,525 424,301 216,369
Segment result 7,112 6,121 19,591 3,965 3,107 414 29,810 10,500
Unallocated expenses (3,849) (4,559)
Results from operating activities 25,961 5,941
Net finance costs (5,553) (1,763)
Profit before tax 20,408 4,178
Income tax (expense)/benefit (6,940) 2,218
Net profit for the year 13,468 6,396
Depreciation and amortisation 10,970 8,480 386 357 95 129 11,451 8,966
Impairment of plant and equipment — 500 — — — — — 500
Impairment of intangibles — — — 1,786 — 993 — 2,779
Assets
Segment assets 134,233 65,995 59,489 50,586 29,282 28,662 223,004 145,243
Unallocated assets 6,895 5,705
Total Assets 229,899 150,948
Liabilities
Segment liabilities 115,903 61,816 25,913 35,203 18,055 22,307 159,871 119,326
Unallocated liabilities 4,868 1,184
Total Liabilities 164,739 120,510
Acquisitions of non-current assets 80,082 22,716 644 202 762 3 81,488 22,921
2008
$’000
2007
$’000
40 LUCAS group

Secondary reporting—geographical segments
Geographical segment revenue and assets are based on the respective geographical location of customers and assets.
Australia Asia/Pacific Consolidated
2008 2007 2008 2007 2008 2007
$’000 $’000 $’000 $’000 $’000 $’000
Revenue from customers 421,421 190,333 2,880 26,034 424,301 216,367
Other revenue — 2 — — — 2
Total revenue 421,421 190,335 2,880 26,034 424,301 216,369
Assets 226,902 148,939 2,997 2,009 229,899 150,948
Acquisitions of non-current assets 79,271 22,921 2,217 — 81,488 22,921
3. Financial income and expense
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Interest income 1,173 446 1,091 386
Dividend income — — 5,500 —
Net foreign exchange gain 149 335 — —
Financial income 1,322 781 6,591 386
Interest expense 6,875 2,544 5,076 1,055
Net foreign exchange loss — — 2 —
Financial expenses 6,875 2,544 5,078 1,055
Net financing (costs)/income (5,553) (1,763) 1,513 (669)
4. Other expenses
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Profit before income tax has been arrived at after charging the following items:
Depreciation of property, plant and equipment 6,074 4,838 — —
Amortisation of: —
Leased plant and equipment 2,605 2,121 — —
Development expenditure 182 222 — —
Contracts and customer relationships 2,590 1,785 — —
5,377 4,128 — —
Total depreciation and amortisation 11,451 8,966 — —
Movement in provision for doubtful debts — 143 — —
Impairment of plant and equipment — 500 — —
Impairment of intangible assets
Goodwill — 993 — —
Impairment of pipeline rights — 1,786 — 1,786
Total impairment expense — 3,422 — 1,786
5. Auditor’s Remuneration
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
Audit services
Auditors of the Company—KPMG
Audit and review of financial reports
Australia 347,990 244,850 17,500 17,500
Overseas 7,120 4,866 — —
355,110 249,716 17,500 17,500
Other services
Auditors of the Company—KPMG
Taxation services 51,605 75,939 — —
Other professional services 302,096 17,000 — —
353,701 92,939 — —
a year of milestones 41

6. INCOME TAX
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Recognised in the income statement
Current tax expense/(benefit)
Current year 940 (2,731) (561) (242)
Foreign tax losses not recognised in current year 1,019 — — —
Prior years adjustments 75 (347) — (2)
2,034 (3,078) (561) (244)
Deferred tax expense/(benefit)
Origination and reversal of temporary differences 4,906 2,664 (238) 182
Utilisation of previously unrecognised tax losses — (1,804) — (1,804)
4,906 860 (238) (1,622)
Total income tax expense/(benefit) in income statement 6,940 (2,218) (799) (1,866)
Numerical reconciliation between tax benefit and pre-tax net profit/(loss)
Profit/(loss) before tax 20,408 4,178 2,920 (3,075)
Prima facie income tax expense/(benefit) calculated at 30% (2007:30%) 6,122 1,253 876 (923)
Equity settled share based payments 446 — — —
Non-deductible accounting interest on deferred purchase 99 — — —
Non-deductible expenses 43 140 — 24
Amortisation of customer contracts - non deductible 411 — — —
Impairment of intangibles — 298 — —
Impairment of pipeline rights — 536 — 536
Foreign income taxable in Australia — — 257 226
Expenses deductible in foreign country only at lower tax rate 323 49 — —
Write-off of non-collectible intercompany loans — — — 77
Foreign tax loss not carried forward 1,020 49 — —
Research and development allowance (1,317) (1,576) — —
Gain on acquisition — (816) — —
Dividend received from subsidiaries not assessable — — (1,650) —
Acquisition cost deductible for tax purposes (282) — (282) —
Recognition of previously unrecognised tax losses — (1,804) — (1,804)
6,865 (1,871) (799) (1,864)
Income tax under/(over) provided in prior year 75 (347) — (2)
Income tax expense/(benefit) attributable to operating profit 6,940 (2,218) (799) (1,866)
7. EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share at 30 June 2008 was based on the profit attributable to ordinary shareholders of $13,468,000
(2007: $6,396,000) and a weighted average number of shares outstanding of 54,892,487 calculated as follows:
Consolidated
2008
Number
2007
Number
Weighted average number of ordinary shares (basic)
Issued ordinary shares at 1 July 54,200,536 51,981,937
Effect of shares issued 520,679 1,519,239
Effect of exercise of management rights 171,272 169,291
Weighted average number of ordinary shares (basic) at 30 June 54,892,487 53,670,467
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2008 was based on the profit attributable to ordinary shareholders of $15,655,000
(2007: $6,396,000) and a weighted average number of shares outstanding of 65,195,367 calculated as follows:
Consolidated
Profit attributable to ordinary shareholders (diluted)
Profit attributable to ordinary shareholders 13,468 6,396
Interest expense on convertible notes, net of tax 2,187 —
Profit attributable to ordinary shareholders (diluted) for the year ended 30 June 15,655 6,396
2008
$’000
2007
$’000
42 LUCAS group

2008
Number
2007
Number
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares (basic) 54,892,487 53,670,467
Effect of conversion of convertible notes 7,732,764 —
Effect of share options on issue 2,570,116 646,993
Weighted average number of ordinary shares (diluted) at 30 June 65,195,367 54,317,460
The average market value of the Company’s shares for the purposes of calculating the dilutive effect of convertible notes was based on quoted market
prices for the period that the notes were outstanding.
8. CASH AND CASH EQUIVALENTS
Consolidated
2008
$’000
2007
$’000
Company
2008
$’000
Bank balances 16,612 18,222 5,519 13,512
2007
$’000
9. TRADE AND OTHER RECEIVABLES
Consolidated
Company
2008 2007 2008 2007
Note
$’000 $’000 $’000 $’000
Current
Trade debtors (net of impairment losses) 24 50,158 22,954 — 66
Retentions 66 — — —
Other receivables 163 755 — —
Other loans 6,789 6,789 — —
Impairment loss on other loans (6,789) (6,789) _ —
Sundry debtors 461 429 _ —
Loan to related entity 31 6,064 4,123 6,064 4,123
56,912 28,261 6,064 4,189
Non-current
Loans to controlled entities 32 — — 49,889 31,795
The amounts receivable from wholly owned entities are unsecured, interest free and payable on demand. The loan to the related party comprises a loan
made to Mr Campbell, the Company’s Chairman of the Board of Directors and Chief Executive Officer (see note 31).
10. Construction Work In Progress
Consolidated
2008
$’000
2007
$’000
Company
2008
$’000
Construction work in progress 40,685 53,418 — —
Construction work in progress comprises:
Contract costs incurred to date 585,528 296,367 — —
Profit recognised to date 61,218 38,570 — —
646,746 334,937 — —
Less: progress billings (606,061) (281,519) — —
Net construction work in progress 40,685 53,418 — —
2007
$’000
11. OTHER CURRENT ASSETS
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Prepayments 1,717 435 184 —
a year of milestones 43

12. Property, PLANT AND EQUIPMENT
Leasehold
improvements
$’000
Land &
buildings
$’000
Plant &
equipment
$’000
Leased plant
& equipment
$’000
Capital works
in progress
$’000
Consolidated 2008
At cost 24 4,306 45,316 31,235 2,750 83,631
Accumulated depreciation/amortisation (10) (18) (18,678) (8,939) ‐ (27,645)
14 4,288 26,638 22,296 2,750 55,986
Consolidated 2007
At cost 105 — 32,284 18,850 2 51,241
Accumulated depreciation/amortisation (81) — (13,704) (6,535) — (20,320)
24 — 18,580 12,315 2 30,921
Total
$’000
Reconciliations
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below.
Leasehold
improvements
$’000
Land &
buildings
$’000
Plant &
equipment
$’000
Leased plant
& equipment
$’000
Capital works
in progress
$’000
Consolidated 2008
Carrying amount at 1 July 2007 24 — 18,580 12,315 2 30,921
Additions 749 4,306 7,273 8,521 2,748 23,597
Acquisitions through subsidiaries acquired — — 7,057 4,164 — 11,221
Disposals (743) — (232) (99) — (1,074)
Depreciation (16) (18) (6,040) — — (6,074)
Amortisation — — — (2,605) — (2,605)
Carrying amount at 30 June 2008 14 4,288 26,638 22,296 2,750 55,986
Total
$’000
Consolidated 2007
Carrying amount at 1 July 2006 35 — 11,036 9,841 198 21,110
Additions — — 3,773 2,376 (196) 5,953
Acquisitions through subsidiaries acquired — — 9,236 621 — 9,857
Disposals — — (354) (14) — (368)
Depreciation (11) — (4,827) — — (4,838)
Amortisation — — — (2,121) — (2,121)
Impairment — — (500) — — (500)
Transfer from non-current assets held for sale — — 216 1,612 — 1,828
Carrying amount at 30 June 2007 24 — 18,580 12,315 2 30,921
13. INVESTMENTS
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Investments - listed entities 24,875 — 24,875 —
Investments - other 1,240 22 2,004 1,260
Deferred expenditure 41 41 — —
26,156 63 26,879 1,260
The investment in listed entities comprises an investment in Sydney Gas Limited, a company listed on the Australian Securities Exchange.
14. Exploration assets
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Cost
Balance at 1 July 6,175 3,819 — —
Acquisitions 12,387 2,356 — —
Transferred to development assets (14,462) — — —
Balance at 30 June 4,100 6,175 — —
44 LUCAS group

15. Intangible Development assets
Gas assets
$’000
Consolidated
Cost
Balance at 30 June 2006 — 2,276 2,276
Acquisitions — 92 92
Balance at 30 June 2007 — 2,368 2,368
Acquisitions — 126 126
Transferred from exploration assets 14,462 — 14,462
Balance at 30 June 2008 14,462 2,494 16,956
Amortisation and impairment losses
Balance at 30 June 2006 — 1,140 1,140
Amortisation for the year — 182 182
Balance at 30 June 2007 — 1,322 1,322
Amortisation for the year — 182 182
Balance at 30 June 2008 — 1,504 1,504
Carrying amounts
At 1 July 2006 — 1,136 1,136
At 30 June 2007 — 1,046 1,046
At 1 July 2007 — 1,046 1,046
At 30 June 2008 14,462 990 15,452
Other
$’000
Total
$’000
16. Other INTANGIBLE ASSETS
Customer
Relationships
$’000
Goodwill
$’000
Consolidated
Pipeline
rights
$’000
Cost
Balance at 1 July 2006 — 5,432 1,786 7,218
Acquisitions—through business combinations 4,758 — — 4,758
Balance at 30 June 2007 4,758 5,432 1,786 11,976
Acquisitions—through business combinations 5,505 2,559 — 8,064
Balance at 30 June 2008 10,263 7,991 1,786 20,040
Amortisation and impairment losses
Balance at 1 July 2006 — 607 — 607
Amortisation for the year 1,785 — — 1,785
Impairment loss — 993 1,786 2,779
Balance 30 June 2007 1,785 1,600 1,786 5,171
Amortisation for the year 2,590 — — 2,590
Balance at 30 June 2008 4,375 1,600 1,786 7,761
Carrying amounts
At 1 July 2006 — 4,825 1,786 6,611
At 30 June 2007 2,973 3,832 — 6,805
At 1 July 2007 2,973 3,832 — 6,805
At 30 June 2008 5,888 6,391 — 12,279
Total
$’000
a year of milestones 45

16. Other INTANGIBLE ASSETS (cont)
Goodwill
$’000
Company
Pipeline rights
$’000
Cost
Balance at 1 July 2006 2,061 1,786 3,847
Balance at 30 June 2007 2,061 1,786 3,847
Balance at 30 June 2008 2,061 1,786 3,847
Amortisation and impairment losses
Balance at 1 July 2006 — — —
Impairment loss — 1,786 1,786
Balance at 30 June 2007 — 1,786 1,786
Balance at 30 June 2008 — 1,786 1,786
Carrying amounts
At 1 July 2006 2,061 1,786 3,847
At 30 June 2007 2,061 — 2,061
At 1 July 2007 2,061 — 2,061
At 30 June 2008 2,061 — 2,061
Total
$’000
Impairment tests for cash generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s operating divisions which represent the lowest level within the Group at
which the goodwill is monitored for internal management purposes.
The aggregate carrying amounts allocated to each unit are:
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Drilling 2,559 — — —
Construction and infrastructure 3,832 3,832 2,061 2,061
6,391 3,832 2,061 2,061
The recoverable amount of the cash generating unit is based on value in use calculations using cash flow projections based on the following year’s budget
and plan extended over a period of 5 years. A pre-tax discount rate of 12.5% is applied adjusted for the risk of the industry in which each unit operates.
17. DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities Net
2008
$’000
2007
$’000
2008
$’000
2007
$’000
2008
$’000
Consolidated
Construction work in progress — — (9,502) (6,110) (9,502) (6,110)
Intangibles — — (266) (631) (266) (631)
Intangible development costs — — (254) (274) (254) (274)
Exploration, evaluation and development expenditure — — (5,118) (2,082) (5,118) (2,082)
Convertible note issue cost — — (5) (244) (5) (244)
Property, plant and equipment — 15 — — — 15
Impairment of trade debtors 2,180 2,177 — — 2,180 2,177
Provisions for employee benefits 1,650 974 — — 1,650 974
Trade creditors 1,225 971 — — 1,225 971
Other creditors and accruals 224 192 — — 224 192
Unrealised foreign exchange differences 301 310 — — 301 310
Tax value of loss carry-forwards recognised 8,344 10,304 — — 8,344 10,304
Tax assets/(liabilities) 13,924 14,943 (15,145) (9,341) (1,221) 5,602
Set off of tax (13,924) (9,341) 13,924 9,341 — —
Net tax assets/(liabilities) — 5,602 (1,221) — (1,221) 5,602
2007
$’000
46 LUCAS group

Assets Liabilities Net
2008
$’000
2007
$’000
2008
$’000
2007
$’000
2008
$’000
Company
Convertible note issue cost — — (5) (244) (5) (244)
Unrealised foreign exchange differences 276 276 — — 276 276
Tax value of loss carry-forwards recognised 8,134 10,094 — — 8,134 10,094
Tax assets/(liabilities) 8,410 10,370 (5) (244) 8,405 10,126
Set off of tax (5) (244) 5 244 — —
Net tax assets/(liabilities 8,405 10,126 — — 8,405 10,126
2007
$’000
Movement in temporary differences during the year:
Balance
01 Jul 07
$’000
Recognised
in income
$’000
Consolidated
Utilisation
of c/f tax
losses
$’000
Balance
30 Jun 08
$’000
Balance
01 Jul 07
$’000
Recognised
in income
$’000
Company
Utilisation
of c/f tax
losses
$’000
Balance
30 Jun 08
$’000
2008
Construction work in progress (6,110) (3,392) — (9,502) — — — —
Intangibles (631) 365 — (266) — — — —
Intangible development costs (274) 20 — (254) — — —
Exploration, evaluation and
development expenditure
(2,082) (3,036) — (5,118) — — — —
Convertible note issue cost (244) 239 — (5) (244) 239 — (5)
Property, plant and equipment 15 (15) — — — — — —
Doubtful debts impairment recognised 2,177 3 — 2,180 — — — —
Provisions for employee benefits 974 676 — 1,650 — — — —
Trade creditors 971 254 — 1,225 — — — —
Other creditors and accruals 192 32 — 224 — — — —
Unrealised foreign exchange differences 310 (9) — 301 276 — — 276
Value of carried forward income tax
losses recognised
10,304 — (1,960) 8,344 10,094 — (1,960) 8,134
5,602 (4,863) (1,960) (1,221) 10,126 239 (1,960) 8,405
Balance
01 Jul 06
$’000
Acquired
in business
combinations
$’000
Consolidated
Recognised
in income
$’000
Balance
30 Jun 07
$’000
Balance
01 Jul 06
$’000
Company
Recognised
in income
$’000
Balance
30 Jun 07
$’000
2007
Construction work in progress (3,679) — (2,431) (6,110) — — —
Intangibles — (1,167) 536 (631) — — —
Intangible development costs (314) — 40 (274) — — —
Exploration, evaluation and development
(962) — (1,120) (2,082) — — —
expenditure
Convertible note issue cost (61) — (183) (244) (61) (183) (244)
Plant and equipment 392 — (377) 15 — — —
Doubtful debts impairment recognised 2,137 — 40 2,177 — — —
Provisions for employee benefits 584 — 390 974 — — —
Trade creditors 795 — 176 971 — — —
Other creditors and accruals 58 — 134 192 — — —
Unrealised foreign exchange differences 452 — (142) 310 276 — 276
Tax value of loss carry-forwards recognised 5,199 — 5,105 10,304 4,989 5,105 10,094
4,601 (1,167) 2,168 5,602 5,204 4,922 10,126
Unrecognised deferred tax assets
As at 30 June 2008, the Group had not recognised deferred tax assets of $1,117,811 (2007: $116,565) in relation to foreign income tax losses.
The Company did not have any unrecognised deferred tax assets.
a year of milestones 47

18. TRADE AND OTHER PAYABLES
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Current
Trade payables 60,048 31,506 376 —
Other payables and accruals 23,026 34,813 256 84
83,074 66,319 632 84
Non-current
Other loans—controlled entities — — 29,361 16,217
Other than the loan from the Company’s Hong Kong subsidiary, the loans payable to controlled entities were interest free, unsecured and repayable on
demand.
19. INTEREST-BEARING LOANS AND liabilities
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Current
Bank overdraft—secured 867 5,663 — —
Other borrowings—unsecured 716 277 — —
Other borrowings—secured 1,779 836 — —
Deferred subsidiary acquisition consideration 3,250 1,250 — —
Bank loans—secured 9,200 — 4,500 —
Lease liabilities—secured 4,184 2,680 — —
19,996 10,706 4,500 —
Non-current
Lease liabilities—secured 13,760 6,727 — —
Other borrowings—secured 2,582 3,516 — —
Deferred subsidiary acquisition consideration 5,476 2,750 — —
Bank loans—secured 28,492 — 17,500 —
Convertible notes—unsecured 726 24,188 726 24,188
51,036 37,181 18,226 24,188
Financing facilities
(a) The Group has access to the following lines of credit and bank guarantees
Bank overdraft—secured 8,500 5,500 8,500 5,500
Other borrowings—secured 4,361 4,352 — —
Lease liabilities—secured 29,501 11,546 — —
Bank loan—secured 37,692 — 22,000 —
80,054 21,398 30,500 5,500
Total facilities utilised at balance date:
Bank overdraft—secured 867 5,663 — —
Less: Right of set off (867) (5,519) — —
Net overdraft — 144 — —
Other borrowings—secured 4,361 4,352 — —
Lease liabilities—secured 17,944 9,407 — —
Bank loan—secured 37,692 — 22,000 —
59,997 13,759 22,000 —
Total facilities not utilised at balance date:
Bank overdraft—secured 8,500 5,356 8,500 5,500
Other borrowings—secured — — — —
Lease liabilities—secured 11,557 2,139 — —
Bank loan—secured — — — —
20,057 7,495 8,500 5,500
48 LUCAS group

(b) Bond facilities provided by surety entities
Consolidated
2008
$’000
2007
$’000
Company
2008
$’000
Bank facilities in aggregate 50,000 40,000 — —
Amount utilised 30,788 13,935 — —
Unused bond facilities 19,212 26,065 — —
Bank indemnity guarantee 5,084 3,084 3,557 1,557
Amount utilised 4,381 2,123 — —
Unused bond facilities 703 961 3,557 1,557
2007
$’000
Bank standby letter of credit 2,900 2,900 2,900 2,900
Amount utilised 2,900 — 2,900 —
Unused bond facilities — 2,900 — 2,900
Of the bonds utilised, $26,931,133 (2007: $9,660,573) are on projects which are yet to achieve practical completion.
Loans and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
Nominal
interest rate
%
Finanical
year of
maturity
Consolidated
Bank overdraft 11.75 2009 867 5,663
Secured bank loan 7.47 2009—2013 8,842 —
Secured bank loan 7.35 2009 - 2013 4,550 —
Secured bank loan 7.94 2009 - 2010 20,000 —
Secured bank loan 7.82 2009 2,000 —
Secured bank loan 10.85 2009 2,300 —
Other borrowings—secured 10.25 2009 - 2012 4,265 4,004
Other borrowings—secured 8.50 2009 96 252
Other borrowings—unsecured 2.97 2009 716 277
Deferred subsidiary acquisition consideration — 2009 - 2011 5,976 —
Deferred subsidiary acquisition consideration 10.50 2009 - 2010 2,750 4,000
Convertible notes 10.00 2010 726 24,188
Financial lease liabilities Ave 9.50 2009 - 2012 17,944 9,407
71,032 47,791
Company
Secured bank loan 7.94 2009 - 2010 20,000 —
Secured bank loan 7.82 2009 2,000 —
Convertible notes 10.00 2010 726 24,188
22,726 24,188
All loans are denominated in Australian dollars.
Bank facilities
The bank overdraft, bank loans, indemnity guarantee and standby letter of credit are all secured by a registered fixed and floating charge over all the
assets of the Group.
Subsequent to year-end, the Group’s bank facilities have been renegotiated as part of the acquisition of Mitchell Drilling. Refer to note 34 for further
information.
2008
$’000
2007
$’000
a year of milestones 49

19. INTEREST-BEARING LOANS AND liabilities (cont)
Finance lease facilities
The Group’s lease liabilities are secured by the leased assets of $22,256,000 (2007: $12,315,000) which, in the event of default, revert to the lessor.
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Finance lease liabilities
Payments
Within one year 5,518 3,304 — —
Between one and five years 15,509 7,273 — —
21,027 10,577 — —
Less: interest
Within one year (1,334) (624) — —
Between one and five years (1,749) (546) — —
(3,083) (1,170) — —
Total lease liabilities 17,944 9,407 — —
Lease liabilities provided for in the financial statements:
Current 4,184 2,680 — —
Non-current 13,760 6,727 — —
Total lease liabilities 17,944 9,407 — —
The Group leases plant and equipment under finance leases expiring from one to four years. At the end of the lease terms, the Group has the option to
purchase the plant and equipment.
Convertible notes
In June 2007, the Company issued 25,000,000 $1.00 unsecured redeemable convertible notes. The notes carry a fixed coupon of 10.0% per annum
and have a term of three years unless converted or redeemed beforehand. Interest is cumulative in the event that an interest payment is not made.
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Carrying amount at beginning of year 24,188 9,923 24,188 9,923
Accreted interest capitalised — 77 — 77
Redemption of notes (1,500) (10,000) (1,500) (10,000)
Conversion of notes (22,756) — (22,756) —
Proceeds of issue of convertible notes — 25,000 — 25,000
Transaction costs 794 (812) 794 (812)
Carrying amount at end of year 726 24,188 726 24,188
From 2 June 2008, note holders have the right to convert the notes into ordinary shares at a 15% discount to the volume weighted average sale price
of the shares over the 30 day period prior to conversion. Alternatively, if the Company decides to spin off and list its equity interests in coal seam gas
assets including the Gloucester Basin project, the notes are convertible into ordinary shares in the new company at a 15% discount to the Initial Public
Offering issue price. During the year, $22,756,459 of the notes were converted into ordinary shares at an average conversion price of $5.02 per share
and $1,500,000 of the notes were redeemed at a premium of 1.75%. The notes mature on 28 June 2010.
On or after 28 June 2008, the Company may redeem up to 50% of the notes. The Company’s right of redemption prevails over the conversion rights
of the holder. The notes carry no voting rights.
20. CURRENT TAX LIABILITies
The current tax liability for the Group of $114,000 (2007: $75,000) represents the amount of income tax payable in respect of current and prior
financial periods.
50 LUCAS group

21. PROVISIONS
Consolidated
Company
2008 2007 2008 2007
Note
$’000 $’000 $’000 $’000
Current
Employee benefits 23 4,751 2,702 — —
Provision for contractual dispute 3,799 — — —
8,550 2,702 — —
Non-current
Employee benefits 23 748 586 — —
Provision for contractual dispute — 2,941 — —
748 3,527 — —
The provision for contractual dispute relates to a contract undertaken in Hong Kong in 2000 and 2001 and has been settled since year end.
22. OPERATING LEASES
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Non-cancellable operating lease rentals are payable as follows:
Less than one year 985 532 — —
Between one and five years 1,164 226 — —
2,149 758 — —
The Group leases property under non-cancellable operating leases expiring from one to three years. The leases generally provide the Group with a right of
renewal. During the financial year, $1,109,000 (2007: $839,000) was recognised as an expense in the income statement in respect of operating leases.
23. EMPLOYEE BENEFITS
Consolidated
Company
2008 2007 2008 2007
Note
$’000 $’000 $’000 $’000
Provision for employee benefits, including on-costs:
Current 21 4,751 2,702 — —
Non-current 21 748 586 — —
5,499 3,288 — —
Superannuation plans
Benefits provided under the superannuation funds to which the Group contributes are based on accumulated contributions and earnings for each
employee. The Group has a legal obligation to contribute to the funds in accordance with the Superannuation Guarantee Charge legislation. The amount
recognised as an expense for the financial year was $4,375,341 (2007: $1,968,683).
Employee share plan
The Company has three employee incentive schemes approved by shareholders at the 2001, 2006 and 2007 annual general meetings. Total securities
granted but unissued under these schemes cannot exceed 15% of the total number of shares on issue.
a) Management rights plan: The management rights plan (MRP) is available to employees, non-executive directors and other persons at
the discretion of the Board. Nominated persons are granted rights to acquire shares in the Company. The issue of these rights can take the form of the
award of shares for no monetary consideration, traditional priced options or performance rights (which have no exercise price).
Each right is convertible to one ordinary share. There are no voting or dividend rights attaching to the rights nor are there voting rights attaching to
the unissued ordinary shares.
During the year, 250,000 (2007: 550,000) options were granted to the executive directors as approved by shareholders at the annual general
meeting held in November 2007. The options vest immediately but cannot be exercised for 3 years. The fair value of services received in return for the
share options granted was calculated using a Black-Scholes pricing model with the following inputs:
Grant date 23 Nov 2007 Expected volatility 51%
Expiry date 23 Nov 2012 Risk free interest rate 6.4%
Share price on grant date $3.40 Expected dividend yield 2.2%
Exercise price $2.11 Fair Value at grant date $1.70
a year of milestones 51

23. EMPLOYEE BENEFITS (cont)
Share based payments
The Company also issued rights to employees during the year under the terms of the Management Rights Plan. The rights were issued subject to the
Group achieving minimum performance criteria and the recipients complying with employment conditions. Generally, these rights vest in three tranches
commencing between one and three years after grant date and expiring two years after they vest. The fair value of the rights granted during the year were:
Grant date 31 Aug 2007
Expiry date 31 Aug 2012
Share price on grant date $2.11
Exercise price —
Expected volatility 49% - 56%
Risk free interest rate 6.2% - 6.3%
Expected dividend yield 2.8%
Fair value per right $1.88 - $2.05
During the year ended 30 June 2008, the Group recognised as an expense $1,494,000 (2007: $108,000) in relation to share based payments.
The fair value of the rights granted in previous years has been calculated using a Black-Scholes pricing model and allocated to each reporting period
evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the rights allocated to this reporting period.
The following factors and assumptions were used in determining the fair value of rights on grant date, for those share based payments granted in
previous years:
Grant date Nov 2006 June 2005 May 2004
Expiry date Nov 2011 May 2009 May 2009
Share price on grant date $1.08 $1.52 $1.66
Exercise price $1.10 Nil Nil
Expected volatility 44% 39% 38%
Risk free interest rate 5.7% 5.1% 5.6%
Expected dividend yield 4.8% 5.6% 5.4%
Fair value per right $0.25 $1.20 $1.29
Details of rights in aggregate over unissued ordinary shares at the beginning and ending of the reporting period and movements during the year are set
out below.
Grant date
Exercise date
on or after
Expiry date
Number of
rights at
beginning
of year
Rights
issued
Rights
exercised
Rights
cancelled
Number of rights
at end of year
On issue
Consolidated & Company 2007
28 May 2004 30 Jun 2004 28 May 2009 222,000 — (132,000) — 90,000 90,000
28 May 2004 30 Jun 2005 28 May 2009 162,333 — (100,333) — 62,000 62,000
28 May 2004 30 Jun 2006 28 May 2009 24,000 — (2,000) — 22,000 22,000
27 June 2005 30 Jun 2005 28 May 2009 30,000 — — — 30,000 30,000
27 June 2005 30 Jun 2006 28 May 2009 30,000 — — — 30,000 30,000
27 June 2005 30 Jun 2007 28 May 2009 30,000 — — — 30,000 30,000
24 Nov 2006 24 Nov 2009 24 Nov 2011 550,000 — — — 550,000 —
31 Aug 2007 30 June 2010 30 June 2010 — 369,183 — — 369,183 369,183
31 Aug 2007 30 June 2011 30 June 2011 — 369,183 — — 369,183 —
31 Aug 2007 30 June 2012 31 Aug 2012 — 1,119,063 — — 1,119,063 —
23 Nov 2007 23 Nov 2010 23 Nov 2012 — 250,000 — — 250,000 250,000
1,048,333 2,107,429 (234,333) — 2,921,429 883,183
Vested
b) Deferred share plan: The deferred share plan (DSP) is available to chosen directors, including non-executives, and employees to allow
them to take a part of their annual remuneration in the form of shares in the Company. Shares vest from the date of issue but cannot be disposed of
until the earlier of 10 years from the date of issue or the date their employment or service with the Group ceases. No shares (2007: 100,000) were
issued during the year.
52 LUCAS group

c) Employee share acquisition plan: The employee share acquisition plan (ESAP) is available to all eligible employees to acquire
ordinary shares in the Company for no consideration as a bonus component of their remuneration. The ESAP complies with current Australian tax
legislation, enabling permanent employees to have up to $1,000 of free shares per annum, in respect of an employee share scheme, excluded from
their assessable income.
Employees must have been employed by any entity within the Group for a minimum period of one year to be eligible. Shares issued under the ESAP
rank equally with other fully paid ordinary shares including full voting and dividend rights from the date they vest. No consideration for the shares is
receivable from the employees.
Shares are issued in the name of the participating employee and vest from the date of issue. However, they cannot be disposed of until the earlier of
3 years from the date of issue or the date their employment with the Group ceases. The Board has the discretion to vary this restriction. The ESAP has
no conditions that could result in a recipient forfeiting ownership of shares.
No shares were issued under this plan in either of the last two years and all shares previously issued under this plan were released from escrow in
previous years.
24. CAPITAL AND RESERVES
Reconciliation of movement in capital and reserves attributable to equity holders of the parent.
Employee equity
benefit reserve
$’000
Translation
reserve
$’000
Share capital
$’000
Retained
earnings/
(accumulated
losses)
$’000
Total equity
$’000
Consolidated
Balance at 1 July 2006 704 — 29,236 (7,704) 22,236
Total recognised income and expense — 306 — 6,396 6,702
Issue of ordinary shares — — 1,419 — 1,419
Equity settled share based payments 81 — — — 81
Balance at 30 June 2007 785 306 30,655 (1,308) 30,438
Balance at 1 July 2007 785 306 30,655 (1,308) 30,438
Total recognised income and expense — 274 — 13,468 13,742
Dividends to equity holders — — — (3,273) (3,273)
Issue of ordinary shares — — 23,382 — 23,382
Equity settled share based payments 871 — — — 871
Balance at 30 June 2008 1,656 580 54,037 8,887 65,160
Company
Balance at 1 July 2006 — — 29,236 (7,073) 22,163
Total recognised income and expense — — — (1,209) (1,209)
Issue of ordinary shares — — 1,419 — 1,419
Equity settled share based payments — — 81 — 81
Balance at 30 June 2007 — — 30,736 (8,282) 22,454
Balance at 1 July 2007 — — 30,736 (8,282) 22,454
Total recognised income and expense — — — 3,719 3,719
Dividends to equity holders — — — (3,273) (3,273)
Issue of ordinary shares — — 23,382 — 23,382
Balance at 30 June 2008 — — 54,118 (7,836) 46,282
Nature and purpose of reserves
Employee equity benefits reserve: The employee equity benefits reserve represents expense associated with equity settled compensation
under the employee management rights plan.
Translation reserve: The translation reserve comprises all foreign currency differences arising from the translation of the financial statements
of foreign operations.
a year of milestones 53

24. CAPITAL AND RESERVES (cont)
Share capital - ordinary shares
2008
No. of
Shares
Company
2007
No. of
Shares
Movements during the year
Balance at beginning of year 54,200,536 51,981,937
Shares issued for business acquisition 285,550 1,333,333
Exercise of rights under the Management Rights Plan 234,333 343,666
Equity settled share based payments — 100,000
Payment of fees and costs — 441,600
Conversion of convertible notes 4,536,715 —
Balance at end of year 59,257,134 54,200,536
Holders of ordinary shares are entitled to receive dividends and, in the event of a winding up of the Company, to any proceeds of liquidation after all
creditors and other stockholders.
On a show of hands, every holder of ordinary shares present at a shareholder meeting in person or by proxy is entitled to one vote and upon a poll,
each share is entitled to one vote.
Subsequent event: In July 2008, the Company issued 109,266 shares at $5.72 per share as the second instalment for the deferred
consideration for the acquisition of McDermott Drilling Pty Limited purchased in July 2006.
Also in July 2008, the Company issued 5,500,000 shares at $5.30 per share for cash to partially fund the acquisition of the business of Mitchell
Drilling. In August 2008, the Company issued 2,645,503 shares to the vendors of Mitchell Drilling at an issue price of $5.67 per share on settlement of
the acquisition.
In September 2008, the Company issued 240,000 shares for nil consideration following the exercise of management rights by employees.
Dividends
Dividends recognised by the Company during the current year are:
Cents
per share
Total amount
$’000
Franked/
unfranked Date of payment
Final 2007 2.5 1,362 100% franked 28 September 2007
Interim 2008 3.5 1,911 100% franked 28 March 2008
3,273
Dividend not recognised at year end
Since the year end, the directors have recommended of a final dividend of 4.5 cents (2007: 2.5 cents) per share franked to 15% payable on 29
September 2008. The declaration and subsequent payment of the dividend has no income tax consequences.
The financial effect of this dividend has not been brought to account in the financial statements for the financial year ended 30 June 2008 and will
be recognised in subsequent financial reports.
Dividend franking account
After the payment of the dividend referred to above, the balance of franking credits available to shareholders of the Company for subsequent financial
years is $48,312 (2007: $1,738,000).
25. FINANCIAL INSTRUMENTs
Overview
The Group’s activities expose it to the following risks from their use of financial instruments:
• Credit risk;
• Liquidity risk; and
• Market risk (including currency and interest rate risks).
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board has established
the Risk Management Committee, which is responsible for developing and monitoring risk management policies. The committee reports regularly to the
Board of Directors on its activities.
54 LUCAS group

Risk management policies are established to identify and analyse the risks faced by the Company and Group, to set appropriate risk limits and
controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Company’s and Group’s activities. The Company and Group, through their training and management standards and procedures, aim
to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Audit Committee oversees how management monitors compliance with the Company’s and Group’s risk management policies and procedures
and reviews the adequacy of the risk management framework in relation to the risks faced by the Company and Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or the counterparty to a financial instrument fails to meet its contractual obligations,
and arises principally from the Group’s receivables from customers. For the Company, it arises principally from receivables due from subsidiaries. The
maximum exposure to credit risk is the carrying amount of the financial assets.
Trade and other receivables: The Company’s and Group’s exposure to credit risk is influenced mainly by the individual characteristics of
each customer. The Group’s customer base consists of mainly government, semi-government and major public company customers. The demographics of
the Group’s customer base, including the default risk of the industry and location in which the customers operate, has less of an influence on credit risk.
New customers are analysed individually for creditworthiness, taking into account credit ratings where available, financial position, past experience
and other factors. This includes all major contracts and tenders approved by the Group Tender Committee.
In monitoring customer credit risk, customers are grouped by business segment, and then by their debtor aging profile. Monitoring of receivable
balances on an ongoing basis minimises the exposure to bad debts. There are no significant concentrations of credit risk within the Group.
A provision for impairment is recognised when there is objective evidence that a individual trade receivable is impaired.
Exposure to credit risk: The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit
risk at the reporting date was:
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Trade and other receivables 56,912 28,262 6,064 4,189
Bank balances 16,612 18,222 5,519 13,512
Loans to controlled entities — — 49,889 31,795
73,524 46,484 61,472 49,496
Maximum exposure to credit risk for trade and other receivables at the reporting date
by business segment was:
Drilling 15,853 13,515 — —
Pipelines 25,711 3,684 — —
Construction and infrastructure 8,594 5,756 — —
Unallocated 6,754 5,307 6,064 4,189
56,912 28,262 6,064 4,189
Impairment losses: The ageing of the Group and Company’s trade receivables at the reporting date was:
Gross
2008
$’000
Impairment
2008
$’000
Consolidated
Gross
2007
$’000
Impairment
2007
$’000
The ageing of trade receivables at the reporting date was:
Not past due 38,135 — 14,463 —
Past due up to 30 days 7,826 — 4,094 —
Past due 31 to 120 days 2,953 — 4,248 —
Past due 121 days to one year 1,253 (9) 156 (7)
More than one year 7,187 (7,187) 7,189 (7,189)
57,354 (7,196) 30,150 (7,196)
There was nil movement in the allowance for impairment in respect of trade receivables during the year for the Group, as such the balance as at
30 June 2008 was $7,196,000 (2007: $7,196,000).
a year of milestones 55

25. FINANCIAL INSTRUMENTs (cont)
Impairment allowance: Based on historic default rates, the Group believe that no impairment allowance is required for trade receivables not
past due.
The impairment allowance related to specific customers, identified as being in trading difficulties, or where specific debts are in dispute. The
impairment allowance does not include debts past due relating to customers with a good credit history, or where payments of amounts due under a
contract for such customers are delayed due to works in dispute and previous experience indicated that the amount will be paid in due course.
When the Group is satisfied that no recovery of the amount owing is possible, the amounts considered irrecoverable are written off against the
financial asset directly. At 30 June 2008, the Group has collective impairments on its trade receivables of $7,196,000 (2007: $7,196,000).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Liquidity is managed to ensure, as far as
possible, that sufficient funds are available to meet liabilities when they fall due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation.
The Group ensures that it has sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations, by
maintaining excess committed credit facilities of at least $5 million. The Group aims at maintaining flexibility in funding by keeping committed credit
lines available with a variety of counterparties, with a weighted average duration of at least three years. Refer Note 19 for details of lines of credit
available.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting
arrangements:
Carrying
amount
Total
6 months
or less
Contractual cash flows
6-12
months
1-2
years
2-5
years
More than
5 years
2008 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Consolidated
Trade and other payables—unsecured 83,074 (83,074) (83,074) — — — —
Bank overdraft—secured 867 (867) (867) — — — —
Other borrowings—unsecured 716 (716) (716) — — — —
Other borrowings—secured 4,361 (4,736) (2,013) (691) (1,383) (648) —
Deferred subsidiary acquisition consideration 8,726 (9,250) (3,250) — (3,500) (2,500) —
Bank loans—secured 37,692 (43,295) (2,376) (9,523) (21,725) (9,671) —
Lease liabilities—secured 17,944 (21,027) (2,873) (2,645) (6,377) (9,132) —
Convertible notes—unsecured 726 (892) (37) (37) (818) — —
154,106 (163,857) (95,206) (12,896) (33,803) (21,951) —
2008
Company
Trade and other payables—unsecured 632 (632) (632) — — — —
Bank loans—secured 22,000 (24,609) (732) (5,327) (18,550) — —
Loans from subsidiaries—unsecured 29,361 (29,361) — — — — (29,361)
Convertible notes—unsecured 726 (892) (37) (37) (818) — —
52,719 (55,494) (1,401) (5,364) (19,368) — (29,361)
Carrying
amount
Total
6 months
or less
Contractual cash flows
6-12
months
1-2
years
2-5
years
More than
5 years
2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Consolidated
Trade and other payables—unsecured 66,319 (66,319) (66,319) — — — —
Bank overdraft—secured 5,663 (5,663) (5,663) — — — —
Other borrowings—unsecured 277 (277) (277) — — — —
Other borrowings—secured 4,352 (5,876) (1,027) (941) (1,165) (2,743) —
Deferred subsidiary acquisition consideration 4,000 (4,000) (1,250) — (1,250) (1,500) —
Lease liabilities—secured 9,407 (10,577) (1,751) (1,553) (3,091) (4,182) —
Convertible notes—unsecured 24,188 (32,589) (1,288) (1,260) (2,527) (27,514) —
114,206 (125,301) (77,575) (3,754) (8,033) (35,939) —
2007
Company
Trade and other payables—unsecured 84 (84) (84) — — — —
Convertible notes—unsecured 24,188 (32,589) (1,288) (1,260) (2,527) (27,514) —
Loans from subsidiaries—unsecured 16,217 (16,217) — — — — (16,217)
40,489 (48,890) (1,372) (1,260) (2,527) (27,514) (16,217)
56 LUCAS group

Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income
or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
Currency risk: The Group and the Company operate internationally and are exposed to currency risk on sales, purchases and borrowings that are
denominated in a currency other than the respective functional currencies of Group entities, primarily with respect to the US dollar, Euro, Hong Kong
dollar and Pacific francs.
The Group’s major foreign currency exposure relates to sales of services and purchases of raw materials, consumables and equipment. The Group
has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net
assets of the Group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.
Exposure to currency risk
The Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts in Australian dollars (in thousands):
Euro USD XPF NZD HKD
2008
Consolidated
Trade receivables — 9 — — —
Trade payables (4,956) (724) (64) (12) —
Net balance sheet exposure (4,956) (715) (64) (12) —
2007
Consolidated
Trade receivables — 15 — 1 1,840
Trade payables (4,002) (1,637) (5,256) — (3)
Net balance sheet exposure (4,002) (1,622) (5,256) 1 1,837
Sensitivity analysis
At 30 June 2008, had the Australian dollar weakened/strengthen by 10% against the respective foreign currencies with all other variables held
constant, the Group post-tax profit and equity would have been $575,000 higher/$575,000 lower had the Australian dollar weakened/strengthened
against the respective currencies. The Company had no exposure to foreign currency risk at balance date.
The following significant exchange rates applied during the year:
Average Rate
Reporting date spot rate
2008 2007 2008 2007
Euro 0.6102 0.6017 0.6055 0.6301
USD 0.8968 0.7857 0.9583 0.8505
XPF 70.36 68.08 71.6165 70.4302
HKD 6.9897 6.1256 7.4380 6.6477
NZD 1.1678 1.1476 1.2569 1.1001
Interest rate risk: The Group’s main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group
to cash flow interest rate risk. Borrowings at fixed rates expose the group to fair value interest rate risk.
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Fixed rate instruments
Financial assets 6,064 4,123 6,064 4,123
Financial liabilities (17,420) (33,595) (726) (24,188)
(11,356) (29,472) 5,338 (20,065)
Variable rate instruments
Financial assets 16,612 18,222 5,519 13,512
Financial liabilities (50,862) (10,292) (22,000) —
(34,250) 7,930 (16,481) 13,512
a year of milestones 57

25. FINANCIAL INSTRUMENTs (cont)
At reporting date the Group and the Company had the following variable rate borrowings:
Weighted
average
interest rate
%
30 June 2008 30 June 2007
Balance
$’000
Weighted
average
interest rate
%
Balance
$’000
Consolidated
Bank overdraft 11.75 (867) 10.10 (5,663)
Other borrowings 10.25 (5,077) 9.16 (4,629)
Deferred subsidiary acquisition consideration 10.50 (7,226) — —
Bank loans 7.93 (37,692) — —
Net exposure to cash flow interest rate risk (50,862) (10,292)
Company
Bank loans 7.93 (22,000) — —
Net exposure to cash flow interest rate risk (22,000) —
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a change in interest rates at the
reporting date would not effect profit or loss for the Group or the Company.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by $859,704 for the
Group (2007: $221,415) and $331,000 for the Company (2007: $nil). This analysis assumes that all other variables, in particular foreign currency
rates, remain constant. The analysis is performed consistently from year to year.
Other market price risk: Equity price risk arises from available-for-sale equity securities held in a quoted corporation. The Group’s investment
is managed on an individual basis and all buy and sell decisions are approved by the Risk Management Committee.
Fair values
Fair values versus carrying amounts: The fair values of financial assets and liabilities, together with the carrying amounts shown in the
balance sheet, are as follows:
Carrying
amount
$’000
Consolidated
Fair value
$’000
Carrying
amount
$’000
Company
Fair value
$’000
2008
Bank balances 16,612 16,612 5,519 5,519
Trade and other receivables 56,912 56,912 6,064 6,064
Investments 26,156 29,020 26,879 29,743
Trade and other payables (83,074) (83,074) (632) (632)
Bank overdraft (867) (867) — —
Other borrowings (5,077) (5,077) — —
Deferred subsidiary acquisition consideration (8,726) (8,726) — —
Bank loans (37,692) (37,692) (22,000) (22,000)
Lease liabilities (17,944) (17,944) — —
Convertible notes (726) (726) (726) (726)
Loans from subsidiaries — — (29,361) (29,361)
(54,426) (51,562) (14,257) (11,393)
58 LUCAS group

Carrying
amount
$’000
Consolidated
Fair value
$’000
Carrying
amount
$’000
Company
Fair value
$’000
2007
Bank balances 18,222 18,222 13,512 13,512
Trade and other receivables 30,906 30,906 66 66
Investments 63 63 1,260 1,260
Trade and other payables (66,319) (66,319) (84) (84)
Bank overdraft (5,663) (5,663) — —
Other borrowings (4,629) (4,629) — —
Deferred subsidiary acquisition consideration (4,000) (4,000) — —
Bank loans — — — —
Lease liabilities (9,407) (9,407) — —
Convertible notes (24,188) (24,188) (24,188) (24,188)
Loans from subsidiaries — — (16,217) (16,217)
(65,015) (65,015) (25,651) (25,651)
The following methods and assumptions are used in estimating the fair values of financial instruments:
• Loans and borrowings, and finance leases—present value of future principal and interest cash flow, discounted at the market rate of interest at the
reporting date
• Trade and other receivables and payables—carrying amount equals fair value
26. INTERESTS IN JOINT VENTURES
Contribution to
Joint venture name Principal activities
Participation
interest
operating results of the
Group
2008
%
2007
%
2008
$’000
2007
$’000
Amec Spie Capag Lucas Engineering, design, procurement & construction of pipeline 50 50 121 157
Lucas Molopo Exploration for methane gas 70 70 — —
Eastern Pipeline Alliance Pipe laying and related construction activities 46.8 47.5 16,340 4,848
Included in the assets and liabilities of the Group are the following assets and liabilities employed in the joint ventures.
Consolidated
2008
$’000
2007
$’000
Company
2008
$’000
Assets
Current assets
Cash and cash equivalents 3,270 493 — —
Trade and other receivables 15,079 40 — —
Other 131 — — —
Construction work in progress 5,615 28,791 — —
Total current assets 24,095 29,324 — —
Non-current assets
Exploration assets 1,582 6,175 — —
Intangible development assets 14,462 — — —
Total assets 40,139 35,499 — —
Liabilities
Current liabilities
Trade and other payables 16,018 24,068 — —
Total liabilities 16,018 24,068 — —
2007
$’000
The exploration and intangible development assets relates to the Group’s interests in the Gloucester and Surat Basins. The recoverability of their carrying
amounts is dependent of the successful development and commercial exploitation or sale of the respective area of interest.
a year of milestones 59

27. CONSOLIDATED ENTITIES
The financial statements at 30 June 2008 include the following controlled entities. The financial years of all the controlled entities are the same as that
of the parent entity.
Ownership interest
Name of entity
Country of
incorporation
Parent entity
AJ Lucas Group Limited
Controlled entities
AJ Lucas Operations Pty Limited Australia 100 100
AJ Lucas Plant & Equipment Pty Limited Australia 100 100
AJ Lucas Drilling Pty Limited Australia 100 100
AJ Lucas Pipelines Pty Limited Australia 100 100
AJ Lucas Testing Pty Limited Australia 100 100
Smart Electrical & Power Services Pty Limited Australia 100 100
AJ Lucas Joint Ventures Pty Limited Australia 100 100
Coastal Sand Technologies Pty Limited Australia 100 100
AJ Lucas (Hong Kong) Limited Hong Kong 100 100
Lucas Energy Pty Limited Australia 100 100
AJ Lucas Coal Technologies Pty Limited Australia 100 100
AJ Lucas (USA) Inc. USA 100 100
Lucas Contract Drilling Pty Ltd Australia 100 100
Wholly owned subsidiary of Lucas Contract Drilling Pty Ltd
McDermott Drilling Pty Ltd Australia 100 100
Lucas Stuart Pty Limited Australia 100 100
Wholly owned subsidiaries of Lucas Stuart Pty Ltd
Ketrim Pty Limited Australia 100 100
Stuart Painting Services Pty Ltd Australia 100 100
Lucas Stuart Projects Pty Ltd Australia 100 100
Jaceco Drilling Pty Ltd Australia 100 —
Geosearch Drilling Service Pty Ltd Australia 100 —
Arawn Energy Ltd Canada 60 —
Lucas Energy (UK) Limited England 99 —
257 Clarence Street Pty Limited Australia 100 —
Lucas SARL New Caledonia 100 100
2008
%
2007
%
28. CONTINGENCIES
Details of contingent liabilities and contingent assets where the probability of future payments/receipts is not considered remote are set out below, as
well as details of contingent liabilities and contingent assets, which although considered remote, the directors consider should be disclosed.
The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic
benefits will be required or the amount is not capable of reliable measurement.
Contingent liabilities not considered remote
The Group has received a claim from a customer in relation to a construction contract which was completed by the Group in 2001. While liability is not
admitted, if defence against the claim is unsuccessful, claims could amount to $2,098,000 plus legal and rectification costs. Based on legal advice, the
directors do not expect the outcome of the action to have a material impact on the Group’s financial position.
Contingent assets not considered remote
The Group has claimed amounts from a previous customer in relation to works on a construction contract which was completed in 2003. Subsequent
to year-end, the Group was awarded contract sums, plus interest and costs in relation to the claim. Amounts recognised by the Group as being
receivable in relation to the claim are materially consistent with the contract sums and interest awarded. No amounts have been recognised by the
Group in relation to recovery of costs as the quantum is subject to court determination.
Joint ventures
Under the joint venture agreements (see note 26) the relevant AJ Lucas Group company is jointly and severally liable for all the liabilities incurred by
the joint ventures. As at 30 June 2008, the assets of the joint venture were sufficient to meet such liabilities. The liabilities of the joint ventures not
included in the consolidated financial statements amounted to $18,187,000 (2007: $26,593,000).
60 LUCAS group

Guarantees and surety bonds
Bank guarantees and surety bonds are issued to third parties arising out of dealings in the normal course of business by controlled entities (see note 19).
Indemnities
Indemnities have been provided to directors and certain executive officers of the Company in respect of liabilities to third parties arising from their
positions, except where the liability arises out of conduct involving a lack of good faith. No monetary limit applies under these indemnities. There is no
known current exposure under these indemnities.
Consolidated
Company
2008 2007 2008 2007
$’000 $’000 $’000 $’000
Total estimated contingent liabilities 39,198 15,769 39,198 15,769
29. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated
Company
2008 2007 2008 2007
Notes $’000 $’000 $’000 $’000
(a) Reconciliation of cash
For the purposes of the statements of cash flows, cash includes cash at
bank and on hand. Cash as at the end of the financial year as shown in the
statements of cash flows is reconciled to the related items in the balance
sheet as follows:
Cash assets 8 16,612 18,222 5,519 13,512
Bank overdraft 19 (867) (5,663) — —
Total cash 15,745 12,559 5,519 13,512
(b) Cash flows from operating activities
Profit/(loss) for the year 13,468 6,396 3,719 (1,209)
Adjustments for: —
Interest on capitalised leases 1,193 767 — —
Gain on sale of non-current assets (24) (87) — —
Interest income receivable (626) — (626)
Depreciation of plant and equipment 6,074 4,838 — —
Impairment of plant and equipment — 500 — —
Impairment of intangible assets — 2,779 — 1,786
Impairment losses — 144 — —
Amortisation of:
Leased assets 2,605 2,121 — —
Intangibles 2,590 1,785 — —
Development expenditure 182 222 — —
Borrowing cost for issue of convertible notes 794 — 794 —
Share based payments — 473 — 339
Discount on acquisition of subsidiary — (2,723) — —
Operating profit/(loss) before changes in working capital and provisions 26,256 17,215 3,887 916
Change in receivables (25,222) (6,453) 66 (66)
Change in other current assets (655) 74 (184) 204
Change in construction work in progress 12,733 (27,848) — —
Change in payables 18,856 26,604 172 (180)
Change in other liabilities 7,897 — — —
Change in provisions for employee entitlements 2,211 1,339 — —
Change in other provisions 858 (405) — —
Change in loans to controlled entities — — (9,520) 2,776
Change in tax balances 6,862 (924) 1,721 (4,922)
Change in reserves 274 — — —
Net cash from operating activities 50,070 9,602 (3,858) (1,272)
(c) Non-cash financing and investment activities
During the year, the Group acquired plant and equipment with an aggregate fair value of $8,521,000 (2007: $2,376,000) by means of finance leases.
These purchases are not reflected in the Statements of Cash Flows.
(d) Financing arrangements
Refer note 19.
a year of milestones 61

30. ACQUISITION OF SUBSIDIARY
2008
On 10 August 2007, the Company acquired 100% of the issued capital of each of Jaceco Drilling Pty Limited and Geosearch Drilling Service Pty Limited
trading as a partnership known as Capricorn Weston Drilling Group, a Queensland based drilling group, for a purchase consideration of $21.0 million
including assumption of existing debt of $4.6 million. The consideration is payable in instalments with $10.0 million paid at settlement and the
balance payable over three years in annual instalments. The initial consideration was paid entirely out of borrowings. Deferred consideration has been
discounted using a market rate of interest for similar securities.
In the period to 30 June 2008, Capricorn Weston Drilling Group contributed net profit before interest and tax of $6.2 million. If the acquisition had
occurred on 1 July 2007, management estimates that consolidated revenue would have been $426.0 million and net profit before interest and tax
would have been $26.6 million.
The acquisition had the following effect on the Group’s assets and liabilities on acquisition date:
Recognised values
on acquisition
$’000
Fair value
adjustments
$’000
Pre-acquisition
carrying amounts
$’000
Cash and cash equivalents 277 — 277
Trade and other receivables 1,516 — 1,516
Plant and equipment 11,221 1,567 9,654
Other assets 627 — 627
Intangibles 5,505 5,505 —
Trade and other payables (479) — (479)
Other financial liabilities (4,763) — (4,763)
Provisions (216) — (216)
Net identifiable assets and liabilities 13,688 7,072 6,616
Goodwill on acquisition 2,559
Consideration 16,247
Less deferred consideration payable (5,977)
Less debt funding (9,993)
Net cash inflow 277
The consideration above includes acquisition costs of $182,000.
The Company commissioned an independent expert to conduct an analysis of the fair value of the plant and equipment and identifiable intangible
assets of Capricorn Weston Drilling Group on its acquisition. Following this analysis, the Company has determined a carrying value of $5.5 million for
customer contracts and relationships.
The goodwill recognised on the acquisition is attributable mainly to the skills and technical talent of the workforce of the acquired business and the
synergies expected to be achieved from integrating the company into the Group’s existing drilling business.
2007
On 31 July 2006, the Company acquired McDermott Drilling Pty Limited, a New South Wales based drilling company, for a consideration of $8.0 million
of which $4.0 million was deferred and is payable in equal instalments on the first three anniversary dates after the date of acquisition. The initial
consideration was funded as to $1.0 million through the issue of 1,333,333 shares at an issue price of $0.75 cents per share, being a discount of 2.5%
to their market price at the date of purchase, with the balance by a combination of the Group’s resources and debt. The first two instalments of the
deferred consideration were paid on 31 July 2008. The final instalment is payable on 31 July 2009.
The acquisition had the following effect on the consolidated entity’s assets and liabilities on acquisition date:
Recognised values
on acquisition
$’000
Fair value
adjustments
$’000
Pre-acquisition
carrying amounts
$’000
Trade and other receivables 3,595 — 3,595
Plant and equipment 9,858 4,981 4,877
Other assets 1,628 — 1,628
Intangibles 4,757 4,757 —
Trade and other payables (1,063) — (1,063)
Other financial liabilities (4,989) — (4,989)
Deferred tax liability (1,167) (1,167) —
Provisions (1,041) — (1,041)
Net identifiable assets and liabilities 11,578 8,571 3,007
Discount on acquisition (2,723)
Consideration 8,855
Less deferred consideration payable (4,000)
Less consideration satisfied by the issue of shares (1,027)
Less debt funding and other finance (3,499)
Net cash inflow 329
The consideration above includes acquisition costs of $855,000.
The Company has determined a carrying value of $4,757,000 for customer contracts and relationships based on an independent expert’s report.
62 LUCAS group

31. KEY MANAGEMENT PERSONNEL DISCLOSURES
The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated were key
management personnel for the entire period.
Executive directors
• Allan Campbell (Chairman and Chief Executive Officer)
• Ian Stuart-Robertson
Non-executive directors
• Andrew Lukas
• Martin Green
• Garry O’Meally
Mr Lukas was an Executive Director of the Group until 19 March 2008 when he was appointed Chief Executive Officer of Sydney Gas Limited following
which he became a Non-Executive Director.
Executives
• Ian Redfern (Chief Operating Officer)
• Kevin Lester (General Manager - Pipelines)
• Mark Summergreene (Chief Financial Officer)
• Brian Burden (General Manager - Construction and Infrastructure)
• Brett Tredinnick (General Manager - Drilling)
• Mark Tonkin (General Manager - Strategy and Planning)
Key management personnel compensation
The key management personnel compensation is:
Consolidated
2008
$
2007
$
Short-term employee benefits 2,548,353 2,420,398
Other long term benefits — —
Post-employment benefits 153,332 132,687
Share based payments 626,346 118,448
3,328,031 2,617,533
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation is provided in the Remuneration Report section of the Directors’ Report on
pages 23 to 28.
Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the Group since the end of the
previous financial year and there were no material contracts involving directors’ interests existing at year-end.
Loans to key management personnel and their related parties (consolidated)
Details regarding loans outstanding at the reporting date to key management personnel and their related parties, where the individual’s aggregate loan
balance exceeds $100,000 at any time in the reporting period, are as follows:
Interest
Balance
1 July 2007
$
Balance
30 June 2008
$
payable in
the reporting
period
$
Highest
balance
in period
$
Allan Campbell 4,122,759 6,063,617 625,886 6,063,617
The loan is due for repayment by 30 June 2009 and is secured by a Deed of Guarantee and Indemnity. Interest is payable at 12.5% per annum.
a year of milestones 63

31. KEY MANAGEMENT PERSONNEL DISCLOSURES (cont)
Other key management personnel transactions with the Company or its controlled entities
A number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence
over the financial or operating policies of those entities. A number of these entities transacted with the Company or its subsidiaries in the reporting
period. The terms and conditions of the transactions with management persons and their related parties were no more favourable than those available,
or which might reasonably be expected to be available, on similar transactions to unrelated entities on an arm’s length basis.
The aggregate amounts recognised during the year relating to key management personnel and their related parties, were as follows:
Key management persons Transaction Note
2008
$
2007
$
Allan Campbell Executive director services (i) 483,483 406,359
Ian Stuart-Robertson Quantity surveyors (ii) 190,036 143,907
Garry O'Meally Business expenses (iii) 8,214 16,967
(i) Mr Campbell’s services are provided through Argyll Capital Partners Pty Limited. Such services were provided in the ordinary course of business and
on normal terms and conditions. The amount payable for these services is shown in the Remuneration Report.
(ii) Mr Stuart-Robertson is a director of John Hollis & Partners which provided quantity surveying services. Amounts were charged at normal market
rates for such services and were due and payable under normal payment terms.
(iii) Mr O’Meally was reimbursed for expenses incurred conducting business on behalf of the Group.
Equity holdings and transactions
The movement during the reporting period in the number of ordinary shares of the Company held directly, indirectly or beneficially by each key
management person, including their related parties, is as follows:
Held at
1 July 2007
Received on
exercise of
rights
Received
as part of
compensation
Net other
change
Held at
30 June 2008
2008
Directors
Allan Campbell 10,140,083 — — — 10,140,083
Ian Stuart-Robertson 1,386,750 — — — 1,386,750
Andrew Lukas 6,204,833 — — — 6,204,833
Martin Green 125,000 — — — 125,000
Garry O’Meally 189,180 — — 30,000 219,180
Executives
Ian Redfern — — — — —
Kevin Lester 570 180,000 — — 180,570
Mark Summergreene — — — — —
Brian Burden 570 — — — 570
Brett Tredinnick 60,570 — — 19,000 79,570
Mark Tonkin 120,000 — — 218,317 338,317
2007
Held at
1 July 2006
Received on
exercise of
rights
Received
as part of
Compensation
Purchases
Held at
30 June 2007
Directors
Allan Campbell 10,056,750 83,333 — — 10,140,083
Ian Stuart-Robertson 1,386,750 — — — 1,386,750
Andrew Lukas 6,121,500 83,333 — — 6,204,833
Martin Green 75,000 — 50,000 — 125,000
Garry O’Meally 139,180 — 50,000 — 189,180
Executives
Tim Herlihy (resigned 31/12/06) 100,000 — — — 100,000
Kevin Lester 570 — — — 570
Brian Burden 570 — — — 570
Mark Tonkin 120,000 — — — 120,000
64 LUCAS group

Options and rights over equity instruments granted as compensation
The movement during the reporting period in the number of rights or options over ordinary shares in the Company held directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2007 Cancelled Exercised
Granted as
compensation
Held at
30 June 2008
Vested
during
the year
Vested and
exercisable at
30 June 2008
2008
Directors
Allan Campbell 250,000 — — 110,000 360,000 110,000 110,000
Ian Stuart-Robertson 150,000 — — 70,000 220,000 70,000 70,000
Andrew Lukas 150,000 — — 70,000 220,000 70,000 70,000
Executives
Ian Redfern 75,000 — — 129,811 204,811 34,239 109,239
Kevin Lester 180,000 — (180,000) 89,357 89,357 20,543 20,543
Mark Summergreene — — — 82,209 82,209 18,900 18,900
Brian Burden 30,000 — — 80,422 110,422 18,489 48,489
Brett Tredinnick — — — 73,202 73,202 16,829 16,829
Mark Tonkin — — — 57,353 57,353 10,742 10,742
Held at
1 July 2006 Cancelled Exercised
Granted as
compensation
Held at
30 June 2007
Vested
during
the year
Vested and
exercisable at
30 June 2007
2007
Directors
Allan Campbell 250,000 (166,667) (83,333) 250,000 250,000 — —
Ian Stuart-Robertson — — — 150,000 150,000 — —
Andrew Lukas 250,000 (166,667) (83,333) 150,000 150,000 — —
Executives
Ian Redfern 75,000 — — — 75,000 25,000 75,000
Kevin Lester 180,000 — — — 180,000 — 180,000
Brian Burden 30,000 — — — 30,000 — 30,000
32. NON-KEY MANAGEMENT PERSONNEL DISCLOSURES
The Group has a related party relationship with its subsidiaries (see note 27) and joint ventures (see note 26). These entities trade with each other from
time to time on normal commercial terms.
Other than amounts owing to AJ Lucas (Hong Kong) Limited, on which interest is paid at 7.0% per annum, no interest is payable on inter-company
balances. The aggregate amounts included in the profit from ordinary activities before income tax that resulted from transactions between entities in the
Group are:
2008 2007
$’000 $’000
Interest expense 857 749
Receivables:
Aggregated amount receivable from wholly owned entities of the Company:
Coastal Sand Technologies Pty Limited 55 55
Less: Provision for doubtful loan (55) (55)
— —
AJ Lucas Joint Ventures Pty Limited 3,910 3,940
AJ Lucas Operations Pty Limited 24,314 14,386
Lucas Energy Pty Limited 15,047 4,552
AJ Lucas Coal Technologies Pty Limited 4,731 7,669
McDermott Drilling Pty Limited 1,846 1,207
Smart Electrical & Power Services Pty Limited 14 14
AJ Lucas (USA) Inc. 27 27
49,889 31,795
Payables:
Aggregate amount payable to wholly owned entities of the Company:
Lucas Stuart Pty Limited 14,643 5,537
AJ Lucas (Hong Kong) Limited 12,337 10,680
Geosearch Drilling Service Pty Limited 2,381 —
29,361 16,217
a year of milestones 65

33. Deed of cross guarantee
On 16 June 2008, several of the entities in the Group entered into a Deed
of Cross Guarantee. Pursuant to ASIC Class Order 98/1418 (as amended)
dated 13 August 1998, the Group’s subsidiaries entering into the Deed
are relieved from the Corporations Act 2001 requirements to prepare,
have audited and lodge financial reports, and directors’ reports.
The effect of the Deed is that the Company guarantees to each creditor
payment in full of any debt in the event of winding up of any of the
subsidiaries under certain provisions of the Corporations Act 2001. If a
winding up occurs under other provisions of the Act, the Company will
only be liable in the event that after six months any creditor has not been
paid in full. The subsidiaries have also given similar guarantees in the
event that the Company is wound up.
The subsidiaries subject to the Deed are:
Name of entity
AJ Lucas Operations Pty Limited
AJ Lucas Plant & Equipment Pty Limited
AJ Lucas Drilling Pty Limited
AJ Lucas Pipelines Pty Limited
AJ Lucas Testing Pty Limited
Smart Electrical & Power Services Pty Limited
AJ Lucas Joint Ventures Pty Limited
Coastal Sand Technologies Pty Limited
Lucas Energy Pty Limited
AJ Lucas Coal Technologies Pty Limited
Lucas Contract Drilling Pty Ltd
McDermott Drilling Pty Ltd
Lucas Stuart Pty Limited
Ketrim Pty Limited
Stuart Painting Services Pty Ltd
Lucas Stuart Projects Pty Ltd
Jaceco Drilling Pty Ltd
Geosearch Drilling Service Pty Ltd
A consolidated summarised income statement and consolidated balance
sheet, comprising the Company and controlled entities which are a party
to the Deed, after eliminating all transactions between parties to the Deed
of Cross Guarantee, at 30 June 2008 are set out as follows:
Summarised income statement and retained profits
Consolidated
2008
$
Profit before tax 21,793
Income tax expense (6,940)
Profit after tax 14,853
Retained loss at beginning of the year (10,699)
Dividends recognised during the year (3,273)
Retained profits at end of year 881
Attributable to:
Equity holders of the company 14,853
Profit for the period 14,853
Balance Sheet
Consolidated
2008
$
Current assets
Cash and cash equivalents 16,448
Trade and other receivables 56,847
Construction work in progress 40,685
Other 1,263
Total current assets 115,243
Non-current assets
Development assets 15,452
Exploration assets 4,750
Investments 26,117
Intangible assets 12,279
Property, plant and equipment 53,861
Total non-current assets 112,459
Total assets 227,702
Current liabilities
Trade and other payables 79,273
Interest-bearing loans and borrowings 17,696
Income tax payable 115
Provisions 8,550
Total current liabilities 105,634
Non-current liabilities
Trade and other payables 12,399
Interest-bearing loans and borrowings 51,036
Deferred tax liabilities 1,311
Provisions 748
Total non-current liabilities 65,494
Total liabilities 171,128
Net assets 56,574
Equity
Issued capital 54,118
Reserves 1,575
Retained earnings 881
Total equity 56,574
34. EVENTS SUBSEQUENT TO BALANCE DATE
On 23 July 2008, the Company purchased the business of Mitchell Drilling,
the largest specialist drilling company for the coal seam gas industry in
Queensland. The purchase price of $150 million was funded by a $15 million
equity placement to the vendor, with the balance out of an equity placement
to institutional shareholders of $29.15 million, deferred consideration of $15
million and increased borrowing facilities. At the same time, the Group’s bank
facilities have been renegotiated and their terms extended.
Subsequent to year-end, the directors have declared a final ordinary
dividend of 4.5¢ per share, franked to 15%.
Other than these matters, there has not arisen in the interval between the
end of the financial year and the date of this report any item, transaction or
event of a material or unusual nature likely, in the opinion of the directors of
the Company, to affect significantly the operations of the Group, the results of
those operations, or the state of affairs of the Group, in future financial years.
66 LUCAS group

DIRECTORS’ DECLARATION
157 Church Street
PO Box 675
Ryde NSW 1680
Australia
Tel +61 29809 6866
Fax +61 29807 6088
www.lucas.com.au
1 In the opinion of the directors of AJ Lucas Group Limited (the Company):
(a) the financial statements and notes, set out on pages 30 to 66 and the Remuneration Report included in the Directors’
Report, set out on pages 23 to 28, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2008 and of their
performance for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
2 There are reasonable grounds to believe that the Company and the group entities identified in Note 33 will be able to meet
any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the
Company and those group entities pursuant to ASIC Class Order 98/1418.
3 The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer for the financial year ended 30 June 2008.
Signed in accordance with a resolution of the directors:
Allan Campbell
Director
25 September 2008
a year of milestones 67

Independent auditor’s report to the members of aj lucas group limited
Report on the financial report
We have audited the accompanying financial report of AJ Lucas Group
Limited (the Company), which comprises the balance sheets as at 30 June
2008, and the income statements, statements of recognised income and
expense and cash flow statements for the year ended on that date, a
description of significant accounting policies and other explanatory notes
1 to 34 set out on pages 30 to 66 and the Directors’ Declaration set
out on page 67 of the Group comprising the Company and the entities it
controlled at year end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation and
fair presentation of the financial report in accordance with Australian
Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Act 2001. This responsibility includes establishing
and maintaining internal control relevant to the preparation and fair
presentation of the financial report that is free from material misstatement,
whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable
in the circumstances. In note 1, the directors also state, in accordance
with Australian Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial report, comprising the financial statements
and notes, complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based
on our audit. We conducted our audit in accordance with Australian
Auditing Standards. These Auditing Standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance whether the financial
report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial report. The procedures
selected depend on the auditor’s judgement, including the assessment
of the risks of material misstatement of the financial report, whether due
to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation
of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material
respects the financial report presents fairly, in accordance with the
Corporations Act 2001 and Australian Accounting Standards (including the
Australian Accounting Interpretations), a view which is consistent with our
understanding of the Company’s and the Group’s financial position and of
their performance.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence
requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the financial report of AJ Lucas Group Limited is in accordance with
the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and the Group’s
financial position as at 30 June 2008 and of their performance
for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the
Australian Accounting Interpretations) and the Corporations
Regulations 2001
(b) the financial report also complies with International Financial
Reporting Standards as disclosed in note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included within the Directors’
Report set out on pages 23 to 28 for the year ended 30 June 2008.
The directors of the Company are responsible for the preparation and
presentation of the Remuneration Report in accordance with Section 300A
of the Corporations Act 2001. Our responsibility is to express an opinion
on the Remuneration Report, based on our audit conducted in accordance
with auditing standards.
Auditor’s opinion
In our opinion, the Remuneration Report of AJ Lucas Group Limited
for the year ended 30 June 2008, complies with Section 300A of the
Corporations Act 2001.
KPMG
Neil Cameron Smith
Partner
Sydney,
25 September 2008
68 LUCAS group

AUSTRALIAN Securities EXCHANGE ADDITIONAL INFORMATION
a) Distribution of ordinary shareholders (as at 31 August 2008)
Number of Security Holders
Redeemable
Securities held
Ordinary Shares convertible notes
1 - 1,000 870 —
1,001 - 5,000 1,482 —
5,001 - 10,000 500 —
10,001 - 100,000 434 —
100,001 and over 55 2
Total 3,341 2
32 shareholders held less than a marketable parcel of ordinary shares.
b) Twenty largest ordinary shareholders
Name
Number of Ordinary
Shares held
% of
Issued Shares
Andial Holdings Pty Limited 13,990,000 20.72
HSBC Custody Nominees (Australia) Limited 8,149,250 12.07
National Nominees Limited 4,292,879 6.36
Mitchell Drilling Contractors Pty Limited Trustee of Tanson Account 2,645,503 3.92
Amalgamated Dairies Limited 2,154,000 3.19
Forty Traders Limited 1,976,348 2.93
Citicorp Nominees Pty Limited 1,453,617 2.15
Viewjet Pty Limited 952,100 1.41
Citycorp Nominees Pty Limited CFS Future Leaders Fund A/C 949,810 1.41
Michael & Beverley McDermott 939,166 1.39
Gwynvill Trading Pty Limited 809,363 1.20
JP Morgan Nominees Australia Limited 779,082 1.18
MLEQ Nominees Pty Limited Unpaid1 A/C 558,152 0.83
Morgan Stanley Australia Securities (Nominee) Pty Limited No.1 A/C 504,546 0.75
ANZ Nominees Limited 479,635 0.71
Bond Street Custodians Limited Macquarie Smaller Companies A/C 456,695 0.68
UBS Wealth Management Australia Nominees Pty Limited 395,390 0.59
Fortis Clearing Nominees Pty Limited Settlement A/C 317,792 0.47
Aust Executor Trustees NSW Limited Patriot Aust Share Fund A/C 300,000 0.44
NZ Guardian Trust Company Limited 01035700 A/C 290,950 0.43
Total 42,394,278 62.83
c) Substantial shareholders
Name
Number of Ordinary
Shares held
% of
Issued Shares
Andial Holdings Pty Limited 17,490,000 25.91
Amalgamated Dairies Group 4,230,438 6.27
On-market buy back
There is no current on-market buy back.
Unquoted equity securities
As at 31 August 2008, there were 2,921,429 rights over unissued ordinary shares in the Company.
Redeemable convertible notes
The following entities hold more than 20% of the redeemable convertible notes on issue.
Name
Number of
Notes held
% of
Notes
Auckland Medical Research Foundation 593,541 79.8
C&N Hoffman 150,000 20.2
Voting rights
Ordinary shares - Refer to Note 24.
Redeemable convertible notes - Refer to Note 19.
Options and rights - Refer to Note 23.
a year of milestones 69

Directory
Company secretary
Nicholas Swan MA, ACA, MBA
Registered office
157 Church Street
RYDE NSW 2112
Tel +61 2 9809 6866
Fax +61 2 9807 6088
Share registry
Computershare Investor Services Pty Limited
Level 5, 115 Grenfell Street
ADELAIDE SA 5000
GPO Box 1903
ADELAIDE SA 5001
Enquiries within Australia: 1300 556 161
Enquiries outside Australia: +61 3 9615 5970
Email: web.queries@computershare.com.au
Website: www.computershare.com
Stock exchange
The Company is listed on the Australian Securities Exchange with
the code ‘AJL’. The Home Exchange is Sydney.
Auditors
KPMG
10 Shelley Street
Sydney NSW 2000
Bankers
ANZ Bank
20 Martin Place
Sydney NSW 2000
Quality certifiers (AS/NZS ISO 9001:2000)
Bureau Veritas
Australian business number
12 060 309 104
Other information
AJ Lucas Group Limited, incorporated and domiciled in Australia,
is a publicly listed company limited by shares.
70 LUCAS group

a year of milestones 71

The Gloucester Valley.
72 LUCAS group

credits
Writing & management
Ad Verbum Pty Ltd
Design & production
de Luxe & Associates
Photography
Richard Glover Photography, except
Karl Schwerdtfeger
Chairman’s photo page 2
Chris Lee Photography
Western Corridor pages 7 and 15
Pipeline Publications
Brooklyn–Lara Pipeline page 7
Murray Fredericks Photography
Ivy page 12
Tim Lumsdaine
Hyundai HQ page 13 and some
of the people on the timeline

www.lucas.com.au