14 KEY RISK FACTORS RISK FACTORS Set out below is a summary of the risks associated with investing in <strong>GR</strong> <strong>Engineering</strong>. these risk factors are not exhaustive. other risks associated with investing in <strong>GR</strong> <strong>Engineering</strong> are set out in Section 8. Potential investors should read the entire prospectus before applying for Shares under the offer. Risk Area Risks Project risk <strong>GR</strong> <strong>Engineering</strong> derives the majority of its revenue from a concentrated number of substantial contracts which may be terminated, delayed or incur unforseen costs in performance which may not be recoverable. <strong>GR</strong> <strong>Engineering</strong> is also potentially exposed to warranty claims which may expose it to re-performance of its contractual obligations or additional costs which may result in a call on, or exceed any performance guarantees provided by the company to its clients. dependence upon key personnel management of growth delay and termination of contracts competition risk concentrated Share ownership cyclical nature of the business Labour shortages Loss of a number of <strong>GR</strong> <strong>Engineering</strong>’s key personnel could adversely affect <strong>GR</strong> <strong>Engineering</strong>’s growth prospects, operating results and financial performance. further, <strong>GR</strong> <strong>Engineering</strong> may be unable to attract and hire additional personnel to facilitate the growth of the company. there is a risk that management will not be able to implement <strong>GR</strong> <strong>Engineering</strong>’s growth strategy after completion of the offer. the capacity of management to properly implement and manage the future growth of <strong>GR</strong> <strong>Engineering</strong> may affect the company’s financial performance. in most instances, clients have the power to terminate contracts entered into with <strong>GR</strong> <strong>Engineering</strong> by giving written notice. if one or more significant relationship ends, <strong>GR</strong> <strong>Engineering</strong>’s revenue and growth prospects may be adversely affected. aggressive competition by current or future competitors could result in price reductions, reduced margins and loss of market share which may, in turn, adversely affect <strong>GR</strong> <strong>Engineering</strong>’s growth prospects, operating results and financial performance. following the completion of the offer, the Existing Shareholders will together hold an interest in approximately 80% of <strong>GR</strong> <strong>Engineering</strong> and the Shares held by the Existing Shareholders will not be subject to escrow. <strong>GR</strong> <strong>Engineering</strong>’s founding directors, following completion of the offer, will together hold an interest in approximately 24% of the company and have indicated that they do not intend to sell any Shares prior to the company releasing its audited financial statements for the financial year ending 30 June 2011. the clients of the company are involved in the mining and minerals processing industry. the demand for and the prices of mineral commodities can be both cyclical and very volatile and can influence the demand for the services offered by <strong>GR</strong> <strong>Engineering</strong> to its clients. although the company has a diverse client base, the mining and minerals processing industry cycles in australia and overseas may adversely impact on the company’s financial performance. increased activity in the resources sector may lead to a shortage in the availability of skilled labour, which can create cost increases and reduce the company’s output and expansion potential. forecast risk forecasts for fY11 are dependent upon a number of factors, some of which are outside the control of the company. the occurrence of any of these factors may impact <strong>GR</strong> <strong>Engineering</strong>’s ability to achieve its forecasts. ability to win new projects contractual disputes foreign operations Remote locations General risks failure by <strong>GR</strong> <strong>Engineering</strong> to win new projects could adversely affect its growth prospects, operating results and financial performance. <strong>GR</strong> <strong>Engineering</strong> has historically generated revenue from short term contracts. the contract lead times are typically short term in nature and as such it is difficult for <strong>GR</strong> <strong>Engineering</strong> to estimate a medium to long term forecast with any reasonable degree of accuracy. disputes or litigation with contracting parties could adversely affect <strong>GR</strong> <strong>Engineering</strong>’s growth prospects, operating results and financial performance. <strong>GR</strong> <strong>Engineering</strong> may derive an increasing proportion of its revenue from operations in foreign countries. there are certain risks inherent in doing business on an international level, such as unexpected changes in regulatory requirements, taxes, difficulties in staffing and managing foreign operations, longer payment cycles, political instability, expropriation, nationalisation and war. <strong>GR</strong> <strong>Engineering</strong> undertakes projects in remote locations. this may involve logistical difficulties for plant, equipment and materials, as well as skilled personnel and general labour. Some locations may involve inherent risk to personnel. changes in legislation, general financial and economic risks and market conditions may affect <strong>GR</strong> <strong>Engineering</strong>’s operations.
DETAILS OF THE OFFER SECTION 1 <strong>GR</strong> EnGinEERinG SERvicES LimitEd PRoSPEctuS 15
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