BSA Limited Annual Report 2019

Plain-text annual report

APPENDIX 4E Results for Announcement to the Market and Annual Report BSA Limited 50 088 412 748 FOR THE YEAR ENDED 30 JUNE 2019 CONTENTS - APPENDIX 4E - ANNUAL REPORT RESULTS FOR ANNOUNCEMENT TO THE MARKET FOR THE PERIOD ENDED 30 JUNE 2019 PREVIOUS CORRESPONDING PERIOD 30 JUNE 2018 APPENDIX 4E Revenue from ordinary activities Profit from ordinary activities after income tax attributable to members Up Up 9.7% 21.9% Net profit for the period attributable to members Down 89.0% Basic earnings per share Diluted earnings per share Net tangible asset backing per ordinary share DIVIDENDS Interim dividend (fully franked) Final dividend (fully franked) to to to $’000 469,484 10,764 172 2018 cents 2.087 2.079 5.41 2019 cents 2.523 2.511 3.42 Franked amount per Amount per security security at 30% tax (cents) (cents) Nil 0.50 Nil 0.50 Record date for determining entitlement to dividends 30 September 2019 Payment date of dividend Total dividend payable 4 November 2019 $2,141,000 The Company’s Dividend Reinvestment Plan (DRP) will be in operation for this dividend. Holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. Shares will be allotted or transferred under the DRP for a price which is equal to the arithmetic average of the daily volume weighted average market price (rounded to the nearest whole cent) of all fully paid shares of that class sold on the ASX (excluding special crossings and other categories reasonably determined by the Directors as distorting the fair market value of the shares) during the ten trading days commencing on the second trading day following the relevant Record Date, determined by reference to such information as the Directors approve for the purpose from time to time. None of this dividend is foreign sourced. This report is based on the consolidated financial statements which have been audited by Deloitte Touche Tohmatsu, with the Independent Auditor’s Report included in the consolidated financial statements. BSA LIMITED RESULTS FOR ANNOUNCEMENT TO THE MARKET 2019 BSA LIMITED ANNUAL REPORT BSA | Maintain has been delivering services to Curtin University since July 2018. This involves the provision of preventative, corrective and reactive maintenance for the mechanical and BMS assets across all their WA campuses located in Bentley, Perth CBD and Kalgoorlie. 2 BSA LIMITED ANNUAL REPORT 2019CONTENTS Chairman’s Report - 5 Managing Director’s Report - 6 Directors’ Report - 14 Remuneration Report - 17 Auditor’s Independence Declaration - 27 Financial Report - 28 Directors’ Declaration - 89 Independent Auditor’s Report - 90 Shareholder Information - 96 Corporate Directory - 98 BSA LIMITED ANNUAL REPORT 2019 3 The 44 level office block on Mount St is one of North Sydney’s largest commercial towers. In conjunction with Laing O’Rourke, BSA | Build completed work on this project in mid 2019. It has been designed to achieve a 5-star Green Star and a 5-star NABERS energy rating. KEY HIGHLIGHTS* $469.5 million $21.8 million $10.8 million Revenue 4 EBITDA Net Profit * from Continuing Operations (refer page 13) BSA LIMITED ANNUAL REPORT 2019CHAIRMAN’S REPORT CHAIRMAN’S REPORT Michael Givoni Chairman FY2019 was a successful year for BSA Limited, with improvements During the course of FY2019, important management changes assisted noted across all key financial metrics for continuing operations. BSA Limited to realign key priorities. Our CEO, Nicholas Yates has A detailed review of these results is outlined in the Managing Director’s prioritised organic Business Development. Tim Harris was appointed Report, however the high level financial results from continuing Deputy CEO and added the finance function to his operational focus. operations are: Revenue $469.5 million (2018: $427.9 million) EBITDA $21.8 million (2018: $19.2 million) With our most senior executives having clarity on key priorities, this restructure has already begun to yield positive results. Throughout the last year your Board also approved investment in an IT systems enhancement that will automate key parts of our field service EBITDA excluding significant items $24.6 million (2018: $21.4 million) and maintenance tasks. An important by product will be increased NPAT $10.8 million (2018: $8.8 million) Operating cash inflow $18.3 million (2018: $4.7 million) Basic earnings per share of 2.52 cents (2018: 2.09 cents) Net Cash $16.3 million (2018: $7.0 million) Final dividend declared 0.5 cents per share (2018: 0.5 cents) It was pleasing to see the progress in our core business areas, particularly our annuity businesses across Connect and Maintain. The substantial reduction in legacy issues and a return to reporting results without underlying commentary and add back adjustments is a key objective of the Board heading into FY2020. In the Connect core business we are greatly encouraged by the feedback we have received from our major clients in nbn, Foxtel and Optus. It has been pleasing to see market leading KPI performance as we continue to consolidate our position as a genuine tier one Telecommunications market service provider. An extensive piece of work has been undertaken to reduce the company’s exposure to higher perceived risks in the HVAC construction sector. In this regard, on 13 August 2019 BSA | Build | HVAC Major Projects business in New South Wales and Victoria was successfully divested to Fredon Air Pty Limited. BSA will retain a Special Projects Team to support our BSA Maintain clients – we view this as an important differentiator in the self-delivery of facilities maintenance. A key driver in the divestment of HVAC Build and the right sizing of overheads is to create a sustainable platform that will generate a more predictable and higher margin portfolio of business units across BSA. New organic Business Development opportunities were unlocked in the solar and smart metering space, which included new works with Estia Aged Care. In the Maintain division, new contracts were secured including YMCA (National Multi services) and BHP Commercial offices. We are confident that our Business Development activities will ensure that we substantially replace the lost HVAC Build volume in FY2020. productivity in the field as well as greater visibility for our customers. These IT enhancements will be a key driver of the working capital improvements that both the Board and the Management Team are striving for. We also undertook a Board refresh in recent months. We welcomed David Prescott as a new Director who brings strong and relevant skills to the BSA Limited Board in Mergers & Acquisitions and Corporate communications. David is a hardworking Director who is prepared to roll up sleeves as required. Long standing Board Member, Edwin Maxwell Cowley announced his retirement from the BSA Board in February 2019. Max spent over eleven years on the BSA Limited Board during which time he contributed his wealth of knowledge in a constructive and forthright manner. On a personal note, I would like to thank Max for his sage advice and steady hand throughout his journey with BSA Limited. BSA has continued to enjoy a supportive and strong relationship with our financiers National Australia Bank in FY2019 and we appreciate the ongoing support and commitment. Finally I thank my fellow Directors for their support in what has been another challenging but fulfilling year. I wish to acknowledge and also thank management and staff for their ongoing hard work and commitment. Michael Givoni Chairman 20 August 2019 5 BSA LIMITED ANNUAL REPORT 2019MANAGING DIRECTOR’S REPORT A solar power installation at an Estia Health aged care facility, which forms part of a national roll out across the Estia portfolio. Stage 3 will be commencing in August 2019. MANAGING DIRECTOR’S REPORT OPERATIONAL AND FINANCIAL HIGHLIGHTS AND OUTLOOK A positive financial result and the achievement of key strategic outcomes has made FY2019 a successful year for BSA Limited by any measure. Group revenue from continuing operations has increased by 9.7% to $469.5 million (2018: $427.9 million) whilst EBITDA increased by 13.7% to $21.8 million (2018: $19.2 million) and net profit grew to $10.8 million (2018: $8.8 million). Operating cash inflow increased by 289.4% to $18.3 million and Net Cash at year end was $16.3 million (including $4.1 million of cash held in the BSAF Joint Operation which has been divested post year-end). BSA has rejuvenated our finance function and the refreshed financial management team has driven a keen focus on key aspects of cash management. The BSA | Connect business unit again performed well, achieving consecutive record years in terms of revenue and profit. BSA | Maintain achieved improved revenue and EBITDA results whilst streamlining operations and generating tangible cost efficiencies. Our Fire business continues to improve performance and continues to push into the burgeoning infrastructure business. As per our previously stated strategic goals we have completed the divestment of the HVAC Build business which significantly reduces our exposure to lump Nicholas Yates Managing Director and Chief Executive Officer 6 BSA LIMITED ANNUAL REPORT 2019MANAGING DIRECTOR’S REPORT “A positive financial result and the achievement of key strategic outcomes has made FY2019 a successful year for BSA Limited by any measure.” sum contracting risk and is significant in underpinning our move to recertification in ISO 14001, 9001 and ASNZS 4801 during the year. an annuity income services based business model. FY2019 saw the proportion of annuity revenue at 62% and with the sale of the HVAC Build Major Projects business, this will shift even more sharply in FY2020 to approximately 75%. During FY2019 BSA refreshed the Safety Leadership program through the Walk the Talk program. This program saw Executive and Senior Management undertake more frequent field visits to discuss practical safety approaches with our people. This supports BSA’s path to a leader FY2019 saw BSA continue in our efforts to grow and expand into new led Health and Safety culture. markets, in line with our previously announced strategic goals. We are now established as a respected operator in the metering services, new energy and solar spaces. Though outside the reporting period, we were pleased to receive recertification from the Federal Safety Commissioner in July 2019, after the completion of an extensive auditing and review process. A key focus for the business has been reorganisation of our Business The recertification extends to 26 July, 2022. Development function, to ensure maximum returns from the significant investment made in this area. This approach has begun to yield results, with a number of contracts awarded in new and existing markets throughout the year. GROWTH With the divestment of the BSA | Build HVAC business being completed post year end, the opportunities for growth in the remaining pillars of the BSA business are a key focus. Our strategic growth plans are based on genuine end-to-end service provision Looking forward to FY2020 BSA will continue to concentrate on a range of initiatives that align with our HSE vision to “Foster a collaborative working environment where the only choice that can be made at work is the safe and environmentally sustainable choice – in turn enabling our people to return home safe every day”. The key pillars of the forward Safety Strategy comprise our Systems, Risk Management (Critical Risk Control), HSE Capability, Health, Wellbeing, Leadership and Culture. A number of activities are encompassed in each of the pillars that will be delivered throughout the business. across Telecommunications and Property Asset Management. We COMMUNITY SUPPORT will be building this framework on our significant foundation through organic growth and via expansion both geographically and into adjacent markets. During the year BSA, its subsidiaries and its employees, contributed to a number of charity fundraisers including Property Industry Foundation, South Newcastle Rugby League, Everyday Hero Foundation, Rotary Our Advisory and design team continues to provide our Business Australia, Childrens Cancer institute, Balmoral Swim for Cancer, Units with innovative engineering solutions that underpin our end-to- Sydney Uni Sport, Southern Districts Rugby, Cancer Council, Australian end asset solution offering and assist in converting opportunities and Himalayan Foundation and Balcatta Football Club. We also continued providing value to their clients. This allows us to partner with our clients our long-standing support of Youngcare through the provision of through the end-to-end life cycle management of their assets, and services in kind. has enabled the provision of a multitude of technical services ranging from planning for Asset Capture/Collection and Internet of Things (“IoT”) implementation to Energy modelling, Mechanical/Fire/Electrical infrastructure upgrade designs and problem based investigations and solutions. HEALTH, SAFETY, ENVIRONMENT AND QUALITY (HSEQ) BSA has recorded a continued reduction in Total Recordable Injury Frequency Rate (TRIFR) since 2016 with current performance reported at 8.86 (June 2019) vs 14.74 (July 2016) which is indicative of a 39.9% decrease on TRIFR over the 3 year period. Unfortunately, in the FY2019 period the target of 10% reduction on the TRIFR was not achieved with the TRIFR increasing slightly. This was primarily due to an increase in medical treatment injuries to Contractors across the Group. Utilising the BSA Group Business Process Framework and individual Business Unit documentation, the BSA Group successfully achieved 7 BSA LIMITED ANNUAL REPORT 2019MANAGING DIRECTOR’S REPORT BSA | CONNECT BSA | Connect again achieved a record year in terms of revenue and profit. BSA | Connect completed over 1 million tickets in FY2019. The generated from our long-standing Foxtel contract declining 8.7% putting further pressure on margins. BSA is working collaboratively business achieved modest revenue uplift of 0.8%, which combined with Foxtel to identify and implement further improvements to what is with the successful implementation of workforce and cost optimisation considered an already best-of-breed delivery model. programs delivered an EBITDA result of $19.3 million, representing a $0.8 million or 4.3% increase on the prior year. BSA | Connect achieved significant organic revenue growth within the “smart” electricity metering field services business throughout FY2019 BSA | Connect substantially completed construction under the nbn Multi-technology Integrated Master Agreement (MIMA), resulting in the to >$5 million (199% increase) and EBITDA improvements of $0.4 million and has now established itself in this market, being awarded a reduction of year-on-year revenue generated from this project of $24.6 second contract in late FY2019, which will support continued growth million. This revenue shortfall was more than offset by a strong increase and increased market share in FY2020. in activity under the nbn Operate and Maintain (OMMA) contract, which saw revenue growth of $33.3 million (27.7%). This growth was due to the business’s ability to rapidly mobilise a significant increase in its technical workforce to meet the nbn ramp up requirements for the Hybrid Fibre Coax (HFC) rollout. This process was assisted by BSA’s strategic investment in building an internal network workforce, which was recognised by nbn with the award of network optimization and maintenance works. Softness in the subscription television market continues, as access to faster broadband to support streaming services improves, with revenue 8 As a key pillar of its People, Process and Systems strategy, BSA | Connect has embarked on a significant investment in a world-class field service management solution that enables the delivery of significantly more streamlined, scalable and efficient services and a greatly improved end-customer experience, which will provide BSA with a platform for accelerated growth. BSA implemented a successful pilot of the solution on the Optus Business platform in March 2019 with a staged rollout to be delivered progressively through FY2020. BSA LIMITED ANNUAL REPORT 2019MANAGING DIRECTOR’S REPORT KEY AREAS OF FOCUS FOR FY2020 INCLUDE: • Continue strong operational “on the ground” performance within existing core contracts to secure partnerships over the long-term as client needs evolve. • Continue the development of a highly-skilled internal technical workforce to provide BSA with a key competitive advantage. • Continue the implementation of the new field service management solution to optimise business and client outcomes plus provide a solid growth platform. • Retain and expand services to existing customers via geographic and new services opportunities. • Expansion of energy market services via geographic growth and increased diversification of the customer base. • Entry into the mobile telecommunications market in preparation for 5G opportunities. • Establishment and growth within the fixed wireless network and residential sector. • Converting opportunities within adjacent sectors for delivery of workforce management systems and resources management solutions to scale. • Increased focus on identifying and converting opportunities BSA | Connect $251.5 million Revenue [2018: $249.4 million] $19.3 million * EBITDA [2018: $18.5 million] within Government departments related to telecommunications, * Excludes Corporate Recharges energy and Internet of Things (IoT) including Smart City end- to-end opportunities. • Development of strategic partnerships enabling end-to-end design, build, operate and maintain services. BSA LIMITED ANNUAL REPORT 2019 9 MANAGING DIRECTOR’S REPORT BSA | MAINTAIN In FY2019, BSA | Maintain increased revenue by $9.8 million from $93.5 million to $103.3 million and EBITDA increased by $1.3 million from $2.9 forward, we will continue to explore and implement highly relevant technological innovations as a key part of our value-added proposition. million to $4.2 million. Advisory and energy services have also continued to build additional Throughout FY2019, BSA | Maintain continued to deliver and grow service agreements across a diverse range of industries and regions value to our national maintain clients through energy auditing and consultancy on building upgrades to assist with energy reduction resulting in a number of new contracts being secured including: strategies across their portfolios. • • • • YMCA (National Multi Services) BHP Commercial Offices (WA, VIC and QLD) Charles Darwin University (NT) GMHBA Stadium (VIC) • Woodside Karratha Housing (WA) In addition, the following key contract extensions have been secured during the financial year: • • • • INPEX LNG Plant (NT) Scentre Group (WA) Sodexo / Rio Tinto (WA) Various Government Councils Continuing in the theme of organic expansion, BSA | Maintain has extended its geographical and service offering footprint by opening offices in Geelong, Katherine and Tasmania (August 2019), and completing an expansion into electrical services from the existing Karratha branch. Expansion plans continue to evolve around organic operational delivery opportunities with plans progressing towards further expansion into regional QLD. BSA | Maintain has expanded the Building Automation division with teams now established across NSW, VIC, QLD and WA. This expansion has facilitated the exploration of technological developments in the industry including data analytics, IoT and energy management to strongly complement our existing client service offering. Looking The BSA | Maintain | Fire division continued its growth journey in the year and now has a very sound and scalable base to take advantage of the growing external market to accelerate growth. BSA | Maintain was formally recognised as Trainer of the Year in Western Australia, combined with our first qualified female tradesperson winning an award as best third year apprentice for 2018. We will continue to invest in the growth and professional development of key staff at all levels of the organisation, as we consider this to be a foundation to fulfilling our strategic objectives. A key focus for the BSA | Maintain team entering FY2020 will be to drive further growth across all BSA service platforms while capturing and leveraging the efficiencies of our size and scale. The groundwork towards positioning BSA | Maintain as an industry leader in complete asset life cycle management in every major capital city and key regional locations across Australia is well-underway. The existing geographical footprint, coupled with a breadth and depth of service offerings, strongly positions BSA | Maintain for future business growth. BSA | Maintain $103.3 million $4.2 million * Revenue [2018: $93.5 million] EBITDA [2018: $2.9 million] * Excludes Corporate Recharges 10 BSA LIMITED ANNUAL REPORT 2019 For more than 16 years, BSA | Maintain has been delivering the mechanical maintenance services across the entire WA Scentre Group portfolio including Westfield Innaloo, Westfield Whitford City and Westfield Carousel – WA’s largest shopping centre. BSA LIMITED ANNUAL REPORT 2019 11 MANAGING DIRECTOR’S REPORT BSA | BUILD BSA | Build delivered the new 9 storey Acute Services Building as part of Stage 2 of the $700 million Blacktown and Mount Druitt Hospitals Expansion Project. The BSA | Build performance improved as the strategy to refocus the business to meet the challenging external environment was successfully As previously announced, BSA Limited has secured and is delivering some of the largest Fire Protection contracts in Australia. These projects implemented. As a result of a previously announced strategic review, the business unit ceased HVAC operations in QLD and WA in the year and refocused the VIC and NSW businesses on more selective tendering represent a significant milestone for BSA and underpin not only the strategy to be the market leader in specialist fire protection services nationally, but also our strategic objective to enter the burgeoning infrastructure market. where margin and risk apportionment were appropriate for the work Our modularised solutions in NorthConnex and 60 Martin Place are being undertaken. This restructuring activity has impacted the EBITDA being lauded as significant ‘step change’ innovations which have result for the year. Significant projects completed include Blacktown Hospital, 100 Mount Street in North Sydney while the Glen Shopping Centre in Melbourne and the Calvary Hospital in Adelaide approach completion. BSA | BUILD | FIRE BSA | Build | Fire continued to establish and maintain its status as a tier 1 solution provider, with end-to-end in-house capability in the Fire construction sector. BSA | Build | Fire has continued its year on year growth targets and is well positioned to further enhance its offerings. fundamentally changed the market and provided huge benefits to our clients. We will be continuing with this integrated project delivery model which is adding great value to our clients through more robust design, less re-work and increased productivity. This innovative approach also reduces the commercial risk usually associated with these types of projects for both BSA and our clients. FY2019 has seen the successful development of BSA’s commercial solar capabilities delivering a number of projects across the health, education and retail sectors. A core, specialist team has been established and will continue to work closely with state based project teams on the national roll out of solar across Estia Health Aged Care sites and delivery of a strong pipeline of tendered projects for FY2020. 12 BSA LIMITED ANNUAL REPORT 2019MANAGING DIRECTOR’S REPORT Major contracts secured throughout the year include: DISCLOSING NON-IFRS FINANCIAL INFORMATION Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)* • • • NorthConnex - NSW Crown Casino Sydney Grafton Prison • Wynyard Commercial development Profit/(loss) for the year from continuing operations As per the introductory commentary, we have now divested the HVAC Build Major Projects business which as well as lowering the overall risk Add back will allow us to provide added focus to our attractive Special Projects Income tax expense/(benefit) and Fire businesses. Nicholas Yates Managing Director and Chief Executive Officer 20 August 2019 Finance costs Interest revenue Depreciation Amortisation expense EBITDA Total Significant Items (note 6.4) EBITDA excluding Significant Items * From continuing operations. FY2019 $’000 10,764 - 4,033 819 (11) 5,515 674 21,793 2,818 24,611 FY2018 $’000 8,827 - 4,465 604 (24) 4,619 674 19,165 2,193 21,358 BSA | Build | Fire $66.0 million Revenue [2018: $51.8 million] $5.3 million * EBITDA [2018: $4.0 million] * Excludes Corporate Recharges BSA LIMITED ANNUAL REPORT 2019 13 DIRECTORS’ REPORT THE BOARD OF DIRECTORS PRESENTS ITS REPORT The Directors of BSA Limited (‘BSA’ or the ‘Company’) present their report on the Company and its subsidiaries for the financial year ended 30 June 2019. THE BOARD OF DIRECTORS AS AT 30 JUNE 2019 MICHAEL GIVONI CHAIRMAN (NON-EXECUTIVE) Mr. Givoni has had extensive executive experience in the business-to-business (B2B) areas of commerce. His particular area of expertise is in strategy, business development and mergers and acquisitions. Michael has held senior executive roles in listed companies including Spotless Group Ltd. Prior to his executive career, Michael was a partner in a prominent Melbourne legal practice. Michael joined BSA as a Non-Executive Director on 23 March 2005 and was appointed as Chairman from 29 April 2015. Michael holds a number of other Non-Executive Director and Chair roles in significant privately owned businesses including Winslow Group, RSEA, First5Minutes and Buzz Products. NICHOLAS YATES MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER Mr. Yates graduated with a Bachelor of Engineering (Mechanical) from the University of Sydney and went on to forge an extensive career in the building services and facilities management industries. Commencing as a site engineer overseeing mechanical services installations, Nicholas then progressed through various management roles within Lend Lease and eventually moved on to become CEO of APP Corporation Pty Limited, Australia’s leading Construction Project Management consulting business. When APP was acquired by Transfield Services, Nicholas moved into a series of leadership roles within Transfield Services, most recently Chief Executive Officer, Infrastructure ANZ. Nicholas sits on the Boards of a number of private companies and was appointed Managing Director and Chief Executive Officer of BSA Limited on 13 March 2014. PAUL TEISSEIRE NON-EXECUTIVE DIRECTOR Mr. Teisseire is a professional independent Non-Executive Director. Paul spent over 20 years in private practice as a corporate lawyer specialising in business and corporate law with a special interest in corporate governance. Paul is a Non-Executive Director and Audit Committee Chairman of Drake Supermarkets Pty Ltd. Paul was appointed as a Non-Executive Director on 23 March 2005 and is currently Chair of the Audit Committee. MAX COWLEY NON-EXECUTIVE DIRECTOR Mr. Cowley practised as Principal of Chartered Accounting firm E M Cowley & Co for 47 years. Max’s years of corporate and financial experience are extensive. Max was a Director of WIN Corporation Pty Ltd, Australia’s largest regional television network and has been involved with that organisation from its commencement and over the past 37 years. Having previously served on the Board of BSA from 2 May 2006 until 27 November 2012, Max was appointed as a Non-Executive Director on 14 April 2014 and retired on 8 February 2019. GRAEME BARCLAY NON-EXECUTIVE DIRECTOR Mr. Barclay has extensive experience in executive leadership and strategic development in areas that brings valuable skills to the BSA Board and Company. Graeme successfully led all aspects of a major MARK LOWE NON-EXECUTIVE DIRECTOR Mr. Lowe was appointed as a Director of BSA on 1 August 2007 upon completion of the telecommunications group for more than a decade in the role of Group CEO with responsibility for financial performance, strategy, sales, corporate development, international expansion, operations and capital structure. acquisition of the Triple ‘M’ Group. Mark brings Graeme also has senior executive level experience within investment a wealth of knowledge to the Company from banking and chartered accounting businesses, with responsibilities his 30 years’ experience in the installation including property, investment banking, corporate finance and and maintenance of Air-Conditioning and Fire Protection Services. corporate restructuring. Mark is a former Director of Construction Information Systems Limited (NATSPEC) and a former National President of the Air-Conditioning Mechanical Contractors Association of Australia. Mark has been a Non-Executive Director since 2 March 2012. Graeme is a member of the Australian Institute of Company Directors, a Fellow of the Financial Services Institute of Australasia and is a qualified Chartered Accountant in Scotland and Australia/NZ. Graeme is currently a Non-Executive Director of Codan Limited, Non-Executive Chairman of Uniti Group Limited and CEO of Axicom Group Holdco Pty Limited. Graeme was appointed as a Non-Executive Director on 30 June 2015, and is currently Chair of the Remuneration Committee. 14 BSA LIMITED ANNUAL REPORT 2019DIRECTORS’ REPORT DAVID PRESCOTT NON-EXECUTIVE DIRECTOR Mr. Prescott is the founder and Managing Director of Lanyon Asset Management, a value-oriented equities fund manager. He has over 20 years investing and financial analysis experience working for firms in Australia and CORPORATE GOVERNANCE BSA continued to follow best practice recommendations as set out by the ASX Corporate Governance Council. Where the Company has not followed best practice for any recommendation, explanation is given in the Corporate Governance Statement which is available on the Company’s website at www.bsa.com.au/pages/about/corporate-governance.html the UK. David was previously Head of Equities at institutional fund manager, CP2 (formerly Capital Partners). David has an Economics degree from the University of Adelaide, a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia (FINSIA) and is a CFA Charterholder. David was appointed as a Non- Executive Director on 3 June 2019. REVIEW OF OPERATIONS Information relating to the operations of BSA including a description of principal activities, a review of operations, significant changes in activities and affairs during the year and likely future developments and prospects can be found in the Chairman’s Report and Managing Director’s Report on pages 5 to 13. DIRECTOR INDEPENDENCE The Board considers four of BSA’s Directors independent, as defined under the guidelines of the ASX Corporate Governance Council, being: Michael Givoni, Paul Teisseire, Mark Lowe and Graeme Barclay. In assessing the independence of Directors, the Board follows the ASX guidelines as set out in the Corporate Governance Statement on the Company’s website. PERFORMANCE OF DIRECTORS In accordance with Principle 2.5 of the ASX Corporate Governance Principles and Recommendations, the Board conducts a review of the performance of its Directors and the Board’s function as a whole each year. The evaluation of Directors is carried out in accordance with the process established by the Board, led by the Chairman of the Remuneration Committee. COMPANY SECRETARY The following person held the position of Company Secretary at the end of the financial year: Mr Graham Seppelt - Graham has had extensive experience as a contract accountant and in corporate advisory roles. He is currently also Company Secretary for Legend Corporation Limited and Erinbar Limited. ENVIRONMENTAL REGULATION AND PERFORMANCE BSA was not subject to any particular or significant environmental regulations of the Commonwealth, individual states, or territories, during the financial year. 15 BSA LIMITED ANNUAL REPORT 2019DIRECTORS’ REPORT INFORMATION ON DIRECTORS As at 30 June 2019, the following information is provided in relation to Directors: Director Special Responsibilities Ordinary Shares Options Share Rights Michael Givoni Non-Executive Director Chairman of Board Member of Remuneration Committee Member of Audit Committee Nicholas Yates Executive Director Managing Director Paul Telsseire Non-Executive Director Member of Remuneration Committee Chairman of Audit Committee Mark Lowe Non-Executive Director Member of Remuneration Committee Member of Audit Committee Graeme Barclay Non-Executive Director Chairman of Remuneration Committee Member of Audit Committee David Prescott Non-Executive Director Member of Remuneration Committee Member of Audit Committee 1,255,946 Nil Nil 2,907,625 Nil 1,259,524 680,012 Nil Nil 10,315,403 Nil Nil 155,925 Nil Nil 91,405,746* Nil Nil *David Prescott is Investment Manager of Lanyon Asset Management Pty Ltd which holds the 91,405,746 ordinary shares in BSA Limited. At the date of this Annual Report, there were no changes in the interests of Directors either for Ordinary Shares or Share Rights. DIRECTORSHIPS HELD IN OTHER LISTED ENTITIES Period of Appointment Name of Company Position Held (Non-Executive or Executive Director) Graeme Barclay Appointed 1 February 2015 Codan Limited Appointed 24 September 2018 Uniti Group Limited Non-Executive Director Non-Executive Chairman 16 BSA LIMITED ANNUAL REPORT 2019REMUNERATION REPORT REMUNERATION REPORT - AUDITED This remuneration report details the nature and amount of remuneration for each key management person of BSA Limited. The Company’s policy for determining the nature and amount of remuneration for Board members and Senior Executives of the Company is as follows and is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration Details of remuneration Service agreements Cash bonuses Share-based compensation Remuneration Consultants B. C. D. E. F. The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. A. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives, the creation of value for shareholders and conforms to market practice for how the reward is paid. The Board ensures that executives’ reward satisfies the following key criteria for good reward governance practices: In consultation with external remuneration consultants, the Group has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. Alignment to shareholders’ interests: • Has the achievement of target financial profit as a core component of performance reward; • As well as focusing each executive on key performance metrics relevant to the role; and • Attracts and retains high calibre executives. Alignment to program participants’ interests: • • • • Rewards capability and experience; Reflects competitive reward for contribution to financial performance; Provides a clear structure for earning rewards; and Provides recognition for contribution. The framework provides a mix of fixed and variable at-risk pay for executives and senior managers as well as additional long-term incentives for the most senior executives. As executives gain seniority and greater responsibility within the Group, the balance of this mix shifts to a higher proportion of at-risk rewards. The Board has established a Remuneration Committee that provides advice on remuneration and incentive policies and practices, as well as specific recommendations on remuneration packages and other terms of employment for Executive Directors, other Senior Executives and Non-Executive Directors. The Corporate Governance Statement • • • • • Competitiveness and reasonableness; provides further information on the role of this committee. Acceptability to shareholders; Performance linkage/alignment of executive compensation; Transparency; and Capital management. 17 BSA LIMITED ANNUAL REPORT 2019REMUNERATION REPORT The table below sets out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the five years to 30 June 2019: Revenue Net profit/(loss) before tax Net profit/(loss) after tax Share price at start of year Share price at end of year Final Dividend 1 Basic earnings per share Diluted earnings per share 30 June 20192 30 June 20182 30 June 2017 30 June 2016 30 June 2015 $469.5m $427.9m $492.3m $14.8m $10.8m $0.305 $0.325 $13.3m $8.8m $0.340 $0.305 0.50 cps 0.50 cps 2.52cps 2.51cps 2.09cps 2.08cps $5.6m $4.0m $0.245 $0.340 0.50 cps 0.94 cps 0.93 cps $511.9m ($3.0)m ($2.2)m $0.165 $0.245 $543.7m $5.4m $3.9m $0.100 $0.165 0.00 cps 0.00 cps (0.52) cps (0.52) cps 1.11 cps 1.10 cps 1. Declared after the end of the reporting period and not reflected in the financial statements and will be franked to 100% at 30% corporate income tax rate 2. Based on continuing operations Non-Executive Directors Fees and payments to Non-Executive Directors reflect the demands that are made on, and the responsibilities of, the Directors. The Chairman’s fees are determined independently to the fees of • • • Base pay and benefits, including superannuation; Short-term performance incentives; and Long-term incentives principally through participation in the performance rights plan. Non-Executive Directors based on the Director’s experience and The combination of these components comprises the executive’s comparative roles in the external market. The Chairman is not present total remuneration. at any discussions relating to determination of his own remuneration. Base Pay Directors’ and Chairman’s Fees Base pay is structured as a total employment cost package which may The current base remuneration for Directors was last reviewed and be delivered as a combination of cash and prescribed non-financial determined on 26 June 2012, therefore there has been no increase in the benefits at the executives’ discretion. base remuneration paid to a Director for seven years. Directors’ fees are inclusive of superannuation and include the requirement to sit on two or more Board committees for the duration of their tenure. A Director’s expected time commitment is a minimum ten hours per month. Directors are reimbursed actual expenses or paid a per diem allowance for attendance at the monthly meetings. Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for Senior Executives is reviewed annually to ensure the executive’s pay is competitive with the market and reflects the responsibilities of the position. An executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases included in the Senior Executive terms of employment. Non-Executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval Benefits by shareholders. The maximum currently stands at $600,000 per Executives receive benefits including allowances. annum and was last approved by shareholders at the Annual General Meeting (AGM) on 26 November 2007. There has been no change to Retirement Benefits the aggregate fee pool for Non-Executive Directors for approximately 11 All employees are eligible to participate in the Company’s default years. The following fees have applied during the year to 30 June 2019: superannuation fund. Consistent with the change in legislation as at 1 July 2005, employees can exercise choice as to where their superannuation Base fees Chairman Other Non-Executive Directors is paid. Short Term Incentives $167,684 $91,560 Non-Executive Directors are entitled to participate in the Non-Executive Director Fee Sacrifice Equity Plan. Retirement Allowances for Directors There are no retirement schemes or retirement benefits, other than statutory superannuation, paid to Non-Executive Directors. Executive Pay Executive remuneration packages include a bonus based on a combination of the Company achieving a predetermined profit target and certain predetermined operational targets being met. Using a profit target ensures variable at-risk reward is only available when value has been created for shareholders and when achieved profit is consistent with the business plan. Each executive and senior manager with operational responsibilities has a Short-Term Incentive (STI) depending on the accountabilities of The Executive pay and reward framework has three components: the role and impact on organisation and business unit performance. 18 BSA LIMITED ANNUAL REPORT 2019REMUNERATION REPORT The maximum target bonus opportunity is 80% of base salary. Employee Performance Rights Plan To the extent an STI bonus is earned, 50% of the bonus is paid in cash, and the other 50%, which can either be cash or performance rights, is deferred for a period of two years. For the year ended 30 June 2019, the targets under the STI plans were based on the Group and individual business unit financial objectives. The target achievement required performance in delivering an overall increase At the AGM held on 25 November 2008, shareholders approved the introduction of the BSA Employee Performance Rights Plan. This incentive plan is designed to increase the motivation of eligible key staff and to create a stronger link between increasing shareholder value and employee reward. in EBIT. The Group targets apply to the whole of the management team. To achieve its corporate objectives, the Company needs to attract The Remuneration Committee is responsible for assessing whether the targets are met. Targets are set at the beginning of each financial year and are set for the year. Short-term bonus payments are calculated in line with actual performance versus target performance levels. Because short- and retain key staff. The Board believes that awards made to selected eligible employees under this plan: • Provide an incentive for the creation of, and focus on, shareholder wealth; term targets cover several operational areas of the business as well as the • Enable the Company to recruit and retain the talented people overall Group target, a proportion of STI may be paid when business unit needed to achieve the Company’s business objectives; or other operational targets are achieved although the Group’s overall • Link the reward of key staff with the achievement of strategic target may not be met. Options The BSA Employee Option Plan was approved by shareholders at the 2004 Annual General Meeting. The last of those options expired on 30 June 2010. No Options have been granted since that date. The board of directors has resolved to cancel the Employee Option Plan. Employee Share scheme A scheme under which shares are able to be issued by the Company to employees for no cash consideration was ratified by shareholders at the 2004 AGM. All permanent employees (including Executive Directors) who were continuously employed by the consolidated entity for a period of at least one year were eligible to participate in the scheme. Employees could elect not to participate in the scheme. Since that date, no further shares have been offered to employees under the Employee Share Scheme. The board of directors has resolved to cancel the Employee Share Scheme. Executive Securities Plan The establishment of the BSA Executive Securities Plan was approved by shareholders at the 2005 AGM. The plan was established as a mechanism to provide the Company’s key executives with a direct equity interest in the Company to better align them with the shareholders. No offers were made under the Executive Securities Plan to any Directors or employees of BSA Limited during the year ended 30 June 2019. The number of shares held in escrow and the amount of the outstanding loans as at 30 June 2019 is set out in section E of this report. The board has resolved there will no further issues to or loans made to goals and the performance of the Company; • Align the financial interests of participants with those of Company shareholders; and • Ensure the remuneration packages of employees are consistent with market practice. Vesting of rights or shares under this Plan requires the achievement of appropriate performance or service hurdles to be determined by the Board: (i) Service condition of a specified period; or (ii) The Company’s performance as measured by earnings per share (EPS), being the EPS for the relevant Measurement Period as determined by the Board having regard to the financial statements. Certain growth in EPS for the shares must be attained in respect of each Measurement Period and pro-rata in respect of the initial Measurement Period. Once rights have been exercised by an eligible employee (subject to relevant service or performance conditions being met), the Company may make non-refundable contributions to either fund the purchase of a new plan share, or to acquire on the ASX existing shares and transfer these to an eligible employee. The specific terms of a particular grant, including any performance conditions, will be contained in the invitation and associated documentation sent to the eligible employee. A right granted to a participant is not transferable and may not otherwise be dealt with, except with the Board’s approval, or by operation of law on death or legal incapacity. Rights to acquire shares are not exercisable until the end of the final measurement period, and until those rights have satisfied all vesting conditions and any performance hurdles established by the Board. This is subject to a number of exceptions (including death, cessation of employment, takeovers and schemes of arrangement). The rights will have a specified life determined by the Board. All grants of rights will have a life terminating five (5) years after the grant date or such any executives under this plan and has resolved to cancel this plan once other date as determined by the Board. the remaining loans have been repaid to the Company. On or after the end of the final measurement period and provided any performance hurdle prescribed by the Board has been achieved and, where applicable, to the extent it has been achieved, the plan participant may then acquire shares by exercising the rights. 19 BSA LIMITED ANNUAL REPORT 2019REMUNERATION REPORT A right lapses if the vesting conditions are not met. The Company may impose a CHESS holding lock on Restricted Shares During the year to 30 June 2019, 1,108,741 rights were granted to executives, of which 553,301 have vested, 380,000 vest on 1 February 2020 and 175,440 vest on 30 June 2020. Fee Sacrifice Equity Plan for Individual Non-Executive Directors to ensure the participant does not sell them earlier than permitted under the Rules. The Company will advise each participant when it considers the specified disposal restrictions cease to apply. Participants must not enter an arrangement with anyone if it would have the effect of limiting their exposure to risk in relation to Deferred The establishment of the BSA Fee Sacrifice Equity Plan for Individual Rights or Restricted Shares. Non-Executive Directors was approved by shareholders at the 2017 AGM. The plan establishes a mechanism for Non-Executive Directors (NEDs) to acquire shares in the Company by electing to salary sacrifice a proportion of annual fees, on a voluntary basis, and is intended to align their interests with shareholders. All individuals holding NED roles in the Company or a subsidiary of the Company are eligible to become participants in the Plan. Participants will be treated in a manner that does not advantage or disadvantage them compared with other shareholders in the event of bonus issues, rights issues and capital reorganisation. If a participant ceases to be a NED of the Company or a subsidiary of the Company any unexercised Restricted Rights will be exercised automatically the day following cessation, and any Restricted Shares held by a Participant that are subject to Specified Disposal Restrictions The Company intends to invite each NED to voluntarily elect to apply will cease to be subject to such restrictions on the day of cessation for rights under the Plan, to be funded by salary sacrificing a proportion unless otherwise determined by the Board and notified to the of annual Board fees. While the Company intends to issue invitations Participant in the Invitation. following the half-year and full-year results announcements, the Board will determine in its sole discretion each year whether to issue invitations. Invitations will include such terms as the Board deems appropriate including the date of the invitation, the number of Deferred Rights that a participant is eligible to apply for, that the cost of each right/share is based on the 10 day VWAP post either the half or full year results announcement, the period during which disposal restrictions will apply, and such other terms and conditions as the Board determines. During the year to 30 June 2019, Non-Executive Directors elected to acquire 257,838 Deferred Rights under this Fee Sacrifice Equity Plan. B. DETAILS OF REMUNERATION Details of the remuneration of the Directors, the key management personnel of the Group (as defined in AASB 124 Related Party Disclosures) and specified executives of BSA and the BSA Group are set out in the following tables. The Key Management Personnel of the Group are the Deferred Rights granted under this Plan will be fully vested on the date following: of grant (being the date notified in a Notice of Grant). Deferred Rights will be automatically exercised 90 days after grant but may not be exercised earlier. On exercise of a right, the Board in its discretion will either: a) issue shares to Participants or b) arrange for shares to be acquired for the benefit of Participants by the trustee of the BSA Employee Share Trust. The Company will contribute such funds as needed to acquire shares either on-market or a subscription to a new issue as directed by the Board. These funds are recouped over 12 months from the Directors’ fees that have been salary sacrificed to acquire the Deferred Rights. The shares that result from the exercise of Deferred Rights are Restricted Shares. All shares acquired by Participants are subject to disposal restrictions that prevent disposal until the earlier of 15 years from the date of grant of rights and cessation of being a NED on the Board of BSA or a subsidiary of the Company (which will be specified Disposal Restrictions). During the period the Special Disposal Restrictions apply, the Restricted Shares may not be sold or otherwise disposed. (i) Chairman - Non-Executive Michael Givoni (ii) Executive Director Nicholas Yates (iii) Non-Executive Directors Paul Teisseire Max Cowley Mark Lowe Graeme Barclay David Prescott (iv) Deputy Chief Executive Officer Timothy Harris 20 BSA LIMITED ANNUAL REPORT 2019REMUNERATION REPORT Non-Executive Directors, key management personnel of the Group and other executives of the Company and the Group 2019 Short-term Benefits Post Long- term Employment Benefits Share-based payments Cash, Interest Unwind Long Name Fees Bonus Loans Superannuation Leave Benefits Rights Rights Total Related Salary & Cash on Service Termination Performance $ $ $ $ $ $ $ % $ % Non-Executive Directors Michael Givoni Paul Teisseire Max Cowley1 Mark Lowe Graeme Barclay David Prescott2 83,412 83,616 57,831 83,616 54,416 - Sub-total 362,891 Non-Executive Directors Executive Directors Nicholas Yates 649,657 - - - - - - - - Other Key Management Personnel Deputy Chief Executive Officer Timothy Harris 572,738 50,000 Total compensation 1,585,286 50,000 1. Resigned on 8 February 2019. 2. Appointed 3 June 2019. - - - - - - - - - - 14,272 7,944 5,494 7,944 7,944 - 43,598 - - - - - - - 20,343 6,478 20,531 9,960 84,472 16,438 - - - - - - - - - - 70,000 41.75 167,684 - - - - - - 29,200 31.89 - - 91,560 63,325 91,560 91,560 - 99,200 505,689 - 676,478 - - - - - - - - - - 653,229 7.65 99,200 1,835,396 21 BSA LIMITED ANNUAL REPORT 2019 REMUNERATION REPORT 2018 Short-term Benefits Long- term Post Employment Benefits Share-based payments Cash, Interest Unwind Long Name Fees Bonus Loans Superannuation Leave Benefits Rights Rights Total Related Salary & Cash on Service Termination Performance $ $ $ $ $ $ $ % $ % Non-Executive Directors Michael Givoni Paul Teisseire Max Cowley Mark Lowe * Graeme Barclay 156,557 83,616 83,616 83,616 83,616 Sub-total 491,021 Non-Executive Directors - - - - - - Executive Directors Nicholas Yates 650,692 50,000 Other Key Management Personnel Chief Financial Officer Nicholas Benson 395,030 50,000 Chief Operating Officer Timothy Harris 541,533 63,544 Total compensation 2,078,276 163,544 - - - - - - - - - - 14,272 7,944 7,944 7,944 7,944 46,048 - - - - - - - - - - - - - - - - - - - - - - - 170,829 91,560 91,560 91,560 91,560 537,069 - - - - - 19,308 6,488 - 50,000 6.44 776,488 12.88 25,000 3,355 21,494 9,417 111,850 19,260 - - - - - 473,385 10.56 95,050 13.00 731,038 21.69 145,050 2,517,980 * During FY2018 Mark Lowe was contracted to the company within the BSA | Build business unit, to assist in driving improved performance from the business unit. $24,000 of Mark Lowe’s remuneration relates to his role assisting BSA | Build during the year and was not Directors fees. Performance Income as a Proportion of Total Remuneration: Executive Directors and executives are paid performance based bonuses based on set monetary figures, rather than proportions of their salary. This has led to the proportions of remuneration related to performance varying between individuals. The Remuneration Committee has set these bonuses to encourage achievement of specific goals that have been given a high level of importance to the future growth and profitability of the consolidated Group. The Remuneration Committee will review the performance bonuses to gauge their effectiveness against achievement of the set goals, and adjust future years’ incentives as they see fit. C. SERVICE AGREEMENTS On appointment to the Board, all Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms, including compensation, relevant to the office of Director. Remuneration and other terms of employment for the Managing Director and the other key management personnel are also formalised in service agreements. Each of these agreements provide for the provision of performance-related cash bonuses, other benefits, car allowances, and participation, when eligible, in the BSA Limited Option Plan and the BSA Employee Performance Rights Plan. Other major provisions of the agreements relating to remuneration are set out below. Executives are on contracts with no fixed end date. All contracts with executives may be terminated early by either party with three to six months notice. 22 BSA LIMITED ANNUAL REPORT 2019 REMUNERATION REPORT D. CASH BONUSES Bonuses vested as per the below table during the financial year ended 30 June 2019. Key management personnel and executives are also entitled to a short-term cash incentive based on performance criteria described in section A to this Remuneration Report. Details of these FY2019 short-term incentives recognised as remuneration, forfeited or available for vesting in future financial years is outlined below. Name Other key management personnel (Group) Timothy Harris E. SHARE-BASED COMPENSATION Executive Securities Loan Set out below are summaries of Securities held in escrow: Included in Remuneration % Vested in current year % Forfeited in current year 50,000 100 - Issue Price Balance at Start During the During the Year Based on Balance in Escrow Granted Released from Escrow Amount of Loan Grant Date (cents) of the Year Year Full Loan Repayment at End of the Year provided Number Number Number Number $ Consolidated and parent entity 13 Oct 2006 19 Jul 2007 11 Sep 2007 13 Sep 2007 14 Dec 2007 10 Feb 2009 Total 0.23 0.63 0.68 0.68 0.68 0.10 450,000 850,000 150,000 - 400,000 750,000 2,600,000 - - - - - - - 50,000 250,000 - - - 400,000 92,000 600,000 378,000 150,000 102,000 - - 400,000 272,000 250,000 500,000 50,000 550,000 2,050,000 894,000 Employee Performance Rights Plan Set out below are summaries of Rights issued to key management personnel under the plan: Name Grant Date Vesting Date Expiry Date the Year the Year Year the Year Year Date $ $ Number Number Number Number Released Balance in Fair Value Balance Granted from Escrow Forfeited Escrow at per Right Aggregate at Start of During During the During End of the at Grant Fair Value Consolidated and parent entity Nicholas Yates 25 Nov 2014 30 Jun 2015 25 Nov 2019 1,116,667 Timothy Harris 29 Nov 2016 1 Sep 2017 29 Nov 2021 200,000 Nicholas Yates 28 Nov 2016 31 Jan 2018 28 Nov 2021 142,857 Timothy Harris 4 Dec 2017 4 Dec 2017 4 Dec 2022 175,391 - - - - - (200,000) - (175,391) Timothy Harris 28 Jun 2019 30 Jun 2020 1 Mar 2024 - 175,440 - - - - - - 1,116,667 0.165 184,250 - 0.325 - 142,857 - 175,440 0.350 0.371 0.285 Total 1,634,915 175,440 (375,391) - 1,434,964 Rights are granted over ordinary shares and nil is payable on exercise. 50,000 - 50,000 284,250 23 BSA LIMITED ANNUAL REPORT 2019REMUNERATION REPORT NED Fee Salary Sacrifice Plan Set out below are summaries of Deferred Rights issued to Non-Executive Directors under the plan: Name Grant Date Date Expiry Date the Year the Year Year the Year Year Date Fair Value Vesting at Start of During During the During End of the at Grant Aggregate Balance Granted from Escrow Forfeited Escrow at per Right Released Balance in Fair Value Number Number Number Number $ Consolidated and parent entity Michael Givoni 3 May 2018 3 May 2018 3 May 2033 207,838 Graeme Barclay 3 May 2018 3 May 2018 3 May 2033 50,000 - - (207,838) (50,000) Michael Givoni 28 Mar 2019 28 Mar 2019 28 Mar 2034 Graeme Barclay 28 Mar 2019 28 Mar 2019 28 Mar 2034 Total - - 251,708 (251,708) 105,000 (105,000) 257,838 356,708 (614,546) - - - - - 0.337 0.337 0.278 0.278 - - - - - $ - - - - - Deferred Rights are granted over ordinary shares for the price specified as Fair Value per Deferred Right at the date of grant, and no further amount is payable on the automatic exercise of the Right 90 days after grant. F. REMUNERATION CONSULTANTS During the year ended 30 June 2019, the Board continued to consider the advice obtained from Godfrey Remuneration Group (GRG) as independent advisor in relation to the current structure of the Executive Performance Rights Plan and to the implementation of a Fee Salary Sacrifice Plan for Non-Executive Directors. The Board implemented the Fee Salary Sacrifice Plan following its approval at the 2017 AGM. No amendments have been made to the Executive Performance Rights Plan. The continuing engagement of GRG during the year by the Chairman of the Remuneration Committee was based on an agreed set of protocols that have been followed by GRG, members of the Remuneration Committee and members of the key management personnel, governing the way in which remuneration recommendations would be developed by GRG and provided to non-executive members of the Remuneration Committee. These arrangements were implemented to ensure that GRG would be able to carry out its work, including information capture and the formation of its recommendations free from undue influence by Executive Directors or executive key management personnel about whom the recommendations may relate. The Board undertook its own inquiries and review of the processes and procedures followed by GRG and is satisfied that their remuneration recommendations were made free from such influence. The Board and Remuneration Committee confirm that GRG made remuneration recommendations within the meaning of the Corporations Act in respect of the structure of the Incentive Plans being considered. These remuneration recommendations were made in respect of elements of remuneration and were not in respect of the quantum of the incentives to be provided. The total consideration payable by the company to GRG for the provision of the remuneration recommendations in the 2019 financial year was $17,500 (2018: $18,500). End of Audited Remuneration Report 24 BSA LIMITED ANNUAL REPORT 2019DIRECTORS’ REPORT MEETINGS OF DIRECTORS The number of meetings of BSA’s Board of Directors and each Board committee held during the year ended 30 June 2019, and the number of meetings attended by each Director were: Board Meetings Audit Committee Meetings Remuneration Committee Meetings Meetings Attended Meetings Held during tenure in FY2019 Meetings Attended Meetings Held Meetings Held during tenure Meetings during tenure in in FY2019 Attended FY2019 Michael Givoni Nicholas Yates Graeme Barclay Max Cowley Paul Teisseire Mark Lowe David Prescott 16 16 14 9 15 14 1 16 16 16 9 16 16 1 2 - 2 1 2 1 - 2 - 2 2 2 2 - 4 - 3 3 4 4 - 4 - 4 4 4 4 - RETIREMENT, ELECTION AND CONTINUATION IN OFFICE OF DIRECTORS RIGHTS As at the date of this report, the unissued ordinary shares of the Directors are subject to retirement by rotation and election by Company, under right, are as follows: shareholders at a general meeting. No Director, other than the Managing Director, may remain on the Board for more than three years without re-election. Where a Director is appointed during the year, the Director will hold office until the next Annual General Meeting (AGM) and then be eligible for election. Michael Givoni and Paul Teisseire are the Directors who have been longest in office and who, being eligible, offer themselves for re-election at the 2019 Annual General Meeting. INDEMNIFYING OFFICERS OR AUDITORS During the year, the Company paid a premium for a contract insuring Grant Date Date of Expiry Exercise Price Number under Right Fair value at grant date 25 Nov 2014 25 Nov 2019 28 Nov 2017 4 Dec 2022 1 Oct 2018 1 Oct 2023 1 Feb 2019 1 Feb 2024 1 Mar 2019 1 Mar 2024 $0.00 $0.00 $0.00 $0.00 $0.00 1,116,667 142,857 553,301 380,000 175,440 2,368,265 $0.165 $0.350 $0.271 $0.283 $0.285 all Directors, secretaries, Executive officers and officers of the During the year ended 30 June 2019, 375,391 rights granted under the Company, and of each related body corporate of the Company. The BSA Limited Employee Performance Rights Plan were exercised. Since insurance does not provide cover for the independent auditors of the that date, 257,838 rights have been converted to Restricted Ordinary Company, or of a related body corporate of the Company. Shares. No amounts are unpaid on any of the shares. In accordance with usual commercial practice, the insurance contract No person entitled to exercise the right had, or has, any right by virtue of prohibits disclosure of details of the nature of the liabilities covered by the right to participate in any share issue of any other body corporate. the insurance, the limit of indemnity and the amount of the premium paid under the contract. No liability has arisen under this indemnity as at the date of this report. OPTIONS As at the date of this report, there were no unissued ordinary shares of the Company under option. During the year ended 30 June 2019, no ordinary shares of the Company were issued on the exercise of options granted under the BSA Limited Employee Option Plan. No further shares have been issued since that date. No amounts are unpaid on any of the shares. 25 BSA LIMITED ANNUAL REPORT 2019DIRECTORS’ REPORT PROCEEDINGS ON BEHALF OF THE COMPANY AUDITOR’S REMUNERATION No person has applied to the court under section 237 of the Corporations Act 2001 (Cth) for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the FY2019 FY2018 $ $ Company for all, or part, of those proceedings. Amounts due for the financial year to Deloitte Touche Tohmatsu for: No proceedings have been brought or intervened on behalf of the Auditing or reviewing the financial report 386,060 353,390 Company with leave of the court under section 237 of the Corporations Taxation services Act 2001 (Cth). Other non-audit services 469,883 299,708 55,000 17,250 910,943 670,348 NON AUDIT SERVICES The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or Group are important. Details of the amounts paid or payable to the auditor (Deloitte Touche Tohmatsu) for audit and non-audit services during the year are set out AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2019 as required under section 307c of the Corporations Act 2001 (Cth) has been received and can be found on page 27 of this report. below. ROUNDING OF AMOUNTS The Board of Directors has considered the position and in accordance The Company is a company of the kind referred to in ASIC Corporations with the advice received from the Audit Committee, is satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 (Cth) for the following reasons: (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the Directors’ Report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated. • All non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor; and • None of the services undermine the general principles relating to auditor independence as set out in Professional Statement APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditors own work, acting in a management or a decision making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards. Signed in accordance with a resolution of the Board of Directors. Michael Givoni Chairman 20 August 2019 26 BSA LIMITED ANNUAL REPORT 2019AUDITOR’S INDEPENDENCE DECLARATION 27 BSA LIMITED ANNUAL REPORT 2019FINANCIAL REPORT BSA LIMITED ABN 50 088 412 748 29 — Consolidated Statement of Profit or Loss and Other Comprehensive Income 30 — Consolidated Statement of Financial Position 31 — Consolidated Statement of Changes in Equity 32 — Consolidated Statement of Cash Flows 33 — Notes to the Consolidated Financial Statements 89 — Directors’ Declaration 90 — Independent Auditor’s Report 96 — Shareholder Information 28 BSA LIMITEDANNUAL REPORT 2019CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 Revenue Investment revenue Other gains and losses Changes in inventories of finished goods and work in progress Subcontractor and raw materials used Employee benefits expense Depreciation expenses Amortisation expenses Occupancy expenses Finance costs Other expenses Note 5 6.1 6.1 6.3 6.2 6.2 2019 $’000 469,484 11 284 (230) (357,170) (54,424) (5,515) (674) (4,520) (819) (31,630) 2018 $’000 427,873 24 219 (633) (315,208) (59,320) (4,619) (674) (5,557) (604) (28,209) Profit from continuing operations, before tax 14,797 13,292 Income tax expense 7.1 (4,033) (4,465) Profit for the year from continuing operations, after tax 10,764 8,827 Discontinued Operations Loss from discontinued operations, after tax 18.2 (10,592) (7,263) Profit for the year 172 1,564 Other comprehensive income for the year, net of tax Items that may be reclassified subsequently to profit or loss: Net gain recognised on cash flow hedges Total comprehensive income for the year, net of tax Earnings per share for profit from continuing operations: Basic earnings per share Diluted earnings per share - 172 - 1,564 2.523 cents 2.511 cents 2.087 cents 2.079 cents The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 29 BSA LIMITED ANNUAL REPORT 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Contract assets Inventories Assets held for sale TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables Investments in Joint Ventures Property, plant & equipment Deferred tax assets Goodwill Other intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Contract liabilities Borrowings Current tax liabilities Provisions Liabilities associated with assets held for sale TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Provisions Investments in joint ventures TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses Profit reserve TOTAL EQUITY Note 2019 $’000 2018 $’000 11 12 13 14 18.2 12 19 15 7.2 16 17 21 13 22 23 18.2 22 23 19 24 25(a) 25(b) 25(c) 21,941 58,963 12,835 1,311 17,414 112,464 432 - 16,337 8,982 11,185 1,066 38,002 150,466 62,873 14,092 2,853 2,806 11,730 12,695 107,049 2,820 4,596 67 7,483 114,532 35,934 98,894 1,868 (74,032) 9,204 35,934 12,670 106,224 - 1,541 - 120,435 946 170 14,736 5,215 15,185 1,740 37,992 158,427 92,066 - 2,083 - 12,058 - 106,207 3,621 3,481 81 7,183 113,390 45,037 97,562 1,568 (65,243) 11,150 45,037 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 30 BSA LIMITEDANNUAL REPORT 2019CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 Accumulated Share-based Issued Losses Note Capital (Refer Note 2) $’000 $’000 Profit Reserve $’000 Payment Reserve $’000 Total $’000 Consolidated Balance at 1 July 2017 Profit for the year Total comprehensive income for the year Share-based payment expense Shares issued in satisfaction of performance conditions Dividends paid Balance at 30 June 2018 Opening balance adjustment on initial application of AASB 15 Opening balance adjustment on initial application of AASB 9 Balance at 1 July 2018 Profit for the year Total comprehensive profit for the year Share-based payment expense Shares issued during period Dividends paid Balance at 30 June 2019 25(d) 2.1 2.1 25(d) 25(d) 97,564 (65,243) - - - (2) - 97,562 - - - - - - - (65,243) (8,269) (520) 97,562 (74,032) - - - 1,332 - - - - - - 98,894 (74,032) 11,700 1,564 1,564 - - (2,114) 11,150 - - 11,150 172 172 - (1,245) (873) 9,204 1,423 45,444 - - 145 - - 1,568 - - 1,564 1,564 145 (2) (2,114) 45,037 (8,269) (520) 1,568 36,248 - - 299 1 - 1,868 172 172 299 88 (873) 35,934 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 31 BSA LIMITED ANNUAL REPORT 2019CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 Cash Flows From Operating Activities: Cash receipts from customers Payments to suppliers and employees Interest received Dividend received Interest and other costs of finance paid Net cash generated by/(used in) operating activities Cash Flows From Investing Activities: Proceeds from disposal of property, plant and equipment Payment for plant and equipment Net cash used in investing activities Cash Flows From Financing Activities: Payment for shares issued for vesting rights Proceeds from borrowings Repayment of borrowings Repayment of executive loans Payment of finance lease liabilities Share issue costs paid Dividends paid to owners of the Company Net cash used in financing activities Net increase/(decrease) in cash Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Note 28(a) 15 25(d) 11 2019 $'0001 641,665 (622,511) 11 - (819) 18,346 781 (7,035) (6,254) 1 2,485 (1,569) - (2,865) - (873) (2,821) 9,271 12,670 21,941 Consolidated 2018 $’0001 619,043 (613,759) 24 200 (845) 4,663 420 (6,135) (5,715) - 4,626 (4,532) 724 (1,412) (2) (2,114) (2,710) (3,762) 16,432 12,670 1 The above Consolidated Statement of Cash Flows includes both continuing and discontinued operations. Amounts related to discontinued operations are disclosed in Note 18.2. The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 32 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 1 GENERAL INFORMATION BSA Limited (the Company) is a limited company incorporated in Australia. The address of its registered office and principal places of business are disclosed in the Corporate Directory at the end of the Annual Report. The principal activities of the Company and its subsidiaries (the Group) are described in note 27. NOTE 2 APPLICATION OF NEW AND REVISED STANDARDS 2.1 New and amended accounting standards adopted by the Group The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for an accounting period that begins on or after 1 January 2018. AASB 9 Financial Instruments and related amending Standards In the current year, the Group has applied AASB 9 Financial Instruments which has come into effect 1 July 2018. AASB 9 simplifies the model for classifying and recognising financial instruments and introduces a new impairment model. The new impairment model is a move away from the previous incurred credit loss approach to the expected credit loss approach. Upon adoption of AASB 9, there were changes to the financial instrumentation and measurement practices. The effect of which, are presented throughout this report. The impact on initial application of AASB 9 is set out further below. AASB 15 Revenue from Contracts with Customers and related amending Standards In the current year, the Group has applied AASB 15 Revenue from Contracts with Customers (as amended in April 2016) which has come into effect 1 July 2018. Details of the new requirements of AASB 15 as well as the impact on the Group’s consolidated financial statements are described below. Impact on application of AASB 9 and AASB 15 The Group has applied AASB 15, using the modified approach, with the cumulative effect of initially applying the standard adjusted in the opening balance of equity and comparative figures are therefore not restated. The opening equity adjustment due to the application of the new standard is analysed by financial statement line item below. Current trade and other receivables Investments accounted using the equity method Deferred tax asset Total assets impact Net assets impact Accumulated losses Total equity impact As reported AASB 9 Transition AASB 15 Transition Opening Balance 30 June 2018 Adjustments Adjustments $'000 $'000 106,224 5,215 (65,243) (65,243) (743) 223 (520) (520) (520) (520) $'000 (11,814) 3,545 (8,269) (8,269) (8,269) (8,269) 1 July 2018 $'000 93,667 - 8,983 (74,032) (74,032) Impact on the consolidated statement of profit and loss Had AASB 15 Revenue from Contracts with Customers not been applied and the financial statements were still produced under previous guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and related interpretations, the financial report for the year ended 30 June 2019 would have been impacted as follows: • the consolidated statement of financial position as at 30 June 2019 would be impacted by adding back $8.9 million of transition adjustments to both net assets and equity; and • the impact on all line items reported in the consolidated statement of profit or loss for the year to 30 June 2019 is shown above. Accordingly there would be no additional material impact on the consolidated statement of financial position as at 30 June 2019 after adding back the transition adjustments noted above. 33 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 2 APPLICATION OF NEW AND REVISED STANDARDS (CONTINUED) 2.2 New accounting standards and interpretations not yet adopted The following standards, amendments to standards and interpretations have been identified as those which may impact the Group in the period of initial application. The Group is required to disclose known or reasonably estimable information relevant to assessing the possible impact that the application of the new accounting standards will have on the Group’s consolidated financial statements. a) AASB 16 Leases AASB 16 Leases specifies how to recognise, measure and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise right-of-use assets and lease liabilities for almost all leases. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases. AASB 16 applies to annual reporting periods beginning on or after 1 January 2019 and replaces AASB 117 Leases and the related interpretations. BSA has assessed the impact that AASB 16 would have had on its consolidated financial statements on 30 June 2019 (including discontinued operations). New lease liabilities New right of use assets Financial effect 30 June 2019 $'000 $4,650 to $4,850 $4,700 to $4,900 The net effect of the new lease liabilities and right of use assets, adjusted for deferred tax and the reversal of the existing straight line lease and incentive liability will be recognised against retained earnings. The impact predominantly relates to BSA’s property leases for commercial premises, service facilities, and support offices. The actual impact of applying AASB 16 on the consolidated financial statements in the period of initial application will depend on future economic conditions, including BSA’s borrowing rate at 1 July 2019, the composition of BSA’s lease portfolio, the extent to which BSA elects to use practical expedients and recognition exemptions, and the new accounting policies, which are subject to change until BSA presents its first consolidated financial statements that include the date of initial application. b) Other new accounting standards The following new or amended standards are not expected to have a significant impact on the Group’s consolidated financial statements: - - AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based Payment Transactions; and AASB 2017-5 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections 34 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES 3.1 Statement of compliance These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law. The financial statements comprise the consolidated financial statements of the Group. For the purpose of preparing consolidated financial statements, the Company is a for-profit entity. Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards (‘IFRS’). The consolidated financial statements were authorised for issue by the Directors on 20 August 2019. 3.2 Basis of preparation The consolidated financial statements have been prepared on the basis of historical cost, except for certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 or value in use in AASB 136. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; • Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and • Level 3 inputs are unobservable inputs for the asset or liability. The principal accounting policies are set out below. 3.3 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: • has power over the investee; • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including: • the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; • potential voting rights held by the Company, other vote holders or other parties; • rights arising from other contractual arrangements; and • any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings. 35 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non- controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. The parent entity carries its investment in subsidiaries at cost less impairment (if any). 3.4 Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that: • Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements, are recognised and measured in accordance with AASB 12 Income Taxes and AASB 19 Employee Benefits respectively; • Liabilities or equity instruments related to share-based payment arrangements of the acquiree, or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree, are measured in accordance with AASB 2 ‘Share-based Payment’ at the acquisition date (see note 3.12); and • Assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 Noncurrent Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’ s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another AASB. Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’, as appropriate, with the corresponding gain or loss being recognised in profit or loss. Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. 36 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. 3.5 Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the business (see 3.4 above) less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. The Group’s policy for goodwill arising on the acquisition of an associate and a joint venture is described at note 3.6 below. 3.6 Interests in Associates and Joint Ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with AASB 5. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group's share of losses of an associate or a joint venture exceeds the Group's interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group's share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. When it is necessary to recognise an impairment loss with respect to the Group’s investment in an associate or a joint venture, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with AASB 136 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. 37 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group's consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. 3.7 Revenue recognition Revenue is recognised when control is transferred at an amount that is highly probable that a significant reversal of revenue will not occur. 3.7.1 Construction revenue The Group provides the design and installation of building services for commercial and industrial buildings including mechanical services, air conditioning, heating and ventilation, refrigeration and fire services. Contracts entered into may be for the construction of one or several separate inter-linked pieces of large infrastructure. The construction of each individual piece of infrastructure is generally taken to be one performance obligation. Where contracts are entered for the building of several projects the total transaction price is allocated across each project based on stand-alone selling prices. The transaction price is normally fixed at the start of the project. It is normal practice for contracts to include bonus and penalty elements based on timely construction or other performance criteria known as variable consideration, discussed below. The performance obligation is fulfilled over time and as such revenue is recognised over time. As work is performed on the assets being constructed they are controlled by the customer and have no alternative use to the Group, with the Group having a right to payment for performance to date. Generally, contracts identify various inter-linked activities required in the construction process. Revenue is recognised on an input basis. Revenue earned is typically invoiced monthly or in some cases on achievement of milestones or to match major capital outlay. Invoices are paid on normal commercial terms, which may include the customer withholding a retention amount until finalisation of the construction. Certain construction projects entered into receive payment prior to work being performed in which case revenue is deferred on the consolidated statement of financial position. 3.7.2 Services revenue The Group performs installation and maintenance services for a variety of different industries. Contracts entered into can cover installation and servicing of related assets which may involve various different processes. The total transaction price is allocated across each service or performance obligation and, where linked, the construction of the relevant asset. The transaction price is allocated to each performance obligation based on contracted prices. The total transaction price may include variable consideration. 3.7.3 Installation and servicing fees Performance obligations are fulfilled at a point in time as the benefits provided to our customers under this category of work type do not transfer to the customer until the completion of the service and as such revenue is recognised upon completion. Customers are in general invoiced on a monthly basis for an amount that is calculated on either a schedule of rates or a cost plus basis that are aligned with the stand alone selling prices for each performance obligation. Payment is received following invoice on normal commercial terms. 38 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.7.4 Variable consideration It is common for contracts to include performance bonuses or penalties assessed against the timeliness or cost effectiveness of work completed or other performance related KPIs. Where consideration in respect of a contract is variable, the expected value of revenue is recognised when the uncertainty associated with the variable consideration is highly probable of being resolved (known as constraint requirements). The Group assesses the constraint requirements on a periodic basis when estimating the variable consideration to be included in the transaction price. The estimate is based on all available information including historic performance. Where modifications in design or contract requirements are entered into, the transaction price is updated to reflect these. Where the price of the modification has not been confirmed, an estimate is made of the amount of revenue to recognise whilst also considering the constraint requirement. 3.7.5 Contract fulfilment costs Costs incurred prior to the commencement of a contract may arise due to mobilisation/site setup costs, feasibility studies, environmental impact studies and preliminary design activities as these are costs incurred to fulfil a contract. Where these costs are expected to be recovered, they are capitalised and amortised over the course of the contract consistent with the transfer of service to the customer. Where the costs, or a portion of these costs, are reimbursed by the customer, the amount received is recognised as deferred revenue and allocated to the performance obligations within the contract and recognised as revenue over the course of the contract. 3.7.6 Financing components The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer is significant and therefore there aren't expected to be financing components within the contracts. As a consequence, the Group does not adjust any of the transaction prices for the time value of money. 3.7.7 Loss making contracts A provision is made for the difference between the expected cost of fulfilling a contract and the expected unearned portion of the transaction price where the forecast costs are greater than the forecast revenue. 3.7.8 Interest revenue is recognised on an accruals basis. 3.7.9 Dividend income is recognised when the dividend is declared. 3.8 Contract assets and liabilities When the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statement of financial position, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the consolidated statement of financial position under trade and other receivables. 3.9 Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. 39 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.9.1 The Group as lessee Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs (see 3.10 below). Contingent rentals are recognised as expenses in the periods in which they are incurred. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. 3.10 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 3.11 Employee benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably. Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. 3.12 Share-based payments Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 29. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve. Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. 40 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.13 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. 3.13.1 Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Consolidated Statement of Profit or Loss and Other Comprehensive Income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. 3.13.2 Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. 3.13.3 Current and deferred tax for the year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognized in other comprehensive income or directly in equity. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. 3.13.4 Tax consolidation The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 August 2007 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is BSA Limited. The members of the tax-consolidated group are identified in note 18. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from un-used tax losses and relevant tax credits of the members of the tax- consolidated group are recognised by the Company (as head entity in the tax-consolidated group). Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or received by the Company and each member of the Group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. 41 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.14 Property, plant and equipment Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the consolidated statement of financial position at cost. Depreciation on buildings is recognised in profit or loss. Freehold land is not depreciated. Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised so as to write off the cost (other than freehold land) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 3.15 Intangible assets 3.15.1 Intangible assets acquired separately Intangible assets with finite lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. 3.15.2 Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. 42 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.16 Impairment of tangible and intangible assets excluding goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. 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 which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash- generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. An impairment loss recognised for goodwill is not reversed in subsequent periods. 3.17 Inventories Inventories are stated at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories by the method most appropriate to the particular class of inventory, with the majority being valued on the basis of weighted average cost. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. 3.18 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. 3.18.1 Warranties Provisions for the expected cost of warranty obligations under construction contracts are recognised at the Directors’ best estimate of the expenditure required to settle the Group’s obligation. 3.18.2 Make Good Provisions for the estimated cost of work to comply with make good provisions in certain Group property leases are recognised at the Directors’ best estimate of the expenditure to settle the Group’s obligation. 3.19 Financial Assets Financial assets are classified as either those measured at fair value, with adjustments to fair value through the change in Other Comprehensive Income (FVTOCI) or through Profit or Loss (FVTPL); and those measured at amortised cost. 43 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.19.1 Effective Interest Method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments. 3.19.2 Trade and other receivables Trade and other receivables are carried at original invoice amount, less expected credit losses provided for. Collectability of trade and other receivables is reviewed on an ongoing basis. Individual debts that are determined to be uncollectable are written off when identified. 3.19.3 Impairment of financial assets Trade and other receivables are subject to AASB 9’s Expected Credit Losses model for recognising and measuring impairment of financial assets. The simplified approach has been applied for all trade and other receivables that do not have a significant financing component. For these receivables, the age of outstanding balances have been analysed and historical default percentages adjusted for other current observable data has been applied as a means to estimate lifetime Expected Credit Losses using a provision matrix approach. For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. 3.20 Financial liabilities and equity instruments issued by the Group 3.20.1 Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. 3.20.2 Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. 3.20.3 Financial Liabilities Financial liabilities are classified as ‘other financial liabilities’. 3.20.4 Other Financial Liabilities Other financial liabilities, including borrowings and trade and other payables, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying on initial recognition. 44 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.21 Derivative financial instruments From time to time the Group enters into a variety of derivative financial instruments to manage its exposure to interest rate risk, including interest rate swaps. Further details of derivative financial instruments are disclosed in note 32. Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. 3.21.1 Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the ‘other gains and losses’ line item. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss, in the same line of the Consolidated Statement of Profit or Loss and Other Comprehensive Income as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss. 3.22 Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: i. Where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or ii. For receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are presented in the consolidated statement of cash flow on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows. 45 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. 4.1 Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 4.1.1 Contracts - estimates to complete Construction contracts are accounted for as per 3.8. Inherent in the assessment of profitability of each contract is the estimate to complete. This estimate requires the Directors to assess the conduct of the contract to date and the expected cost to complete the contract. In addition, where appropriate, Management and the Directors assess the probability of recovery of variations within the contract estimates. Variations in contract work and claims are included to the extent that the amount can be measured reliably and its receipt is considered probable. Claims and variations can be both approved and not approved by the customer. Where the claim and/or variation are not approved by the customer, estimates are made in relation to the claim and/or variation position and management assesses the recovery at each reporting period. 4.1.2 Recoverability of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. The carrying amount of goodwill at 30 June 2019 was $11,185,000 (30 June 2018: $15,185,000). See note 16 for details. 4.1.3 Payroll Tax Liability Following the settlement of the NSW Office of State Revenue (OSR), BSA has entered into a repayment plan with the NSW OSR. The provision for this matter at the end of FY2019 stands at $1,843,000 (FY2018:3,421,000). See note 23 for details. NOTE 5 REVENUE The following is an analysis of the Group's revenue from continuing operations BSA | Connect BSA | Build BSA | Maintain 2019 $’000 251,551 114,621 103,312 469,484 Consolidated 2018 $’000 249,356 85,067 93,450 427,873 46 BSA LIMITEDANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 6 PROFIT/(LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS Profit/(Loss) for the year from continuing operations has been arrived at after charging/(crediting): 6.1 Cost of sales 6.2 Depreciation and amortisation expense Depreciation of property, plant and equipment Amortisation of intangible assets Total depreciation and amortisation expense 6.3 Employee benefits expense Post employment benefits Superannuation Share-based payments (see note 25) Equity-settled share-based payments Termination benefits Other employee benefits Total employee benefits expense 6.4 Significant items Business reorganisation and restructure costs nRAH completion and commissioning costs and settlement impact Legal and professional fees relating to legacy issues Total significant items Significant items for FY2019 include $7,781,000 associated with discontinued operations (FY18: $3,571,000). Consolidated Year Ended 2019 2018 $’000 $’000 357,400 315,841 5,515 674 4,619 674 6,189 5,293 8,721 7,576 299 145 1,408 1,973 43,996 49,626 54,424 59,320 9,128 61 1,410 3,970 784 1,010 10,599 5,764 47 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 7 INCOME TAXES 7.1 Income tax recognised in profit or loss Income tax expense Current tax expense Deferred tax relating to the origination and reversal of temporary differences Consolidated Year Ended 2019 $’000 2018 $’000 2,806 1 - 909 2,807 909 Income tax is attributable to: Profit from continuing operations (as reported in the consolidated statement of 4,033 4,465 profit or loss) Loss from discontinued operations The expense for the year can be reconciled to the accounting profit as follows: Profit from continuing operations, before tax Loss from discontinued operations, before tax Profit before income tax expense Income tax expense calculated at 30% Adjusted for: Other non-deductible items Adjustments recognised in the current year in relation to the current tax of prior years: Other Income tax expense (1,226) (3,556) 2,807 909 14,797 13,292 (11,818) (10,819) 2,979 2,473 894 742 1,394 2,288 124 866 519 519 43 43 2,807 909 The tax rate used for the 2019 and 2018 reconciliations above is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. 48 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 7 INCOME TAXES (CONTINUED) 7.2 Deferred tax balances 2019 Opening balance Recognised in profit or loss AASB 9 / AASB 15 initial Closing balance application $’000 $’000 $’000 $’000 Temporary differences Finance leases Intangible assets Employee benefits Provisions (adjusted for AASB 15 and AASB 9) Expected credit losses (adjusted for AASB 9) Tax loss carried forward 2018 Temporary differences Finance leases Intangible assets Employee benefits Provisions Doubtful debts Tax loss carried forward Deferred tax balances are presented in the consolidated statement of financial position as follows: Deferred tax assets Deferred tax liabilities 188 (522) 3,649 1,040 771 89 5,215 (48) 202 495 (719) 158 (89) (1) - - - 3,545 223 - 3,768 140 (320) 4,144 3,866 1,152 - 8,982 Opening balance Recognised in profit or loss AASB 9 / AASB 15 initial Closing balance application $’000 $’000 $’000 $’000 12 (724) 3,405 1,890 543 998 6,124 - - - - - - - 176 202 244 (850) 228 (909) (909) 2019 $’000 8,982 - 8,982 188 (522) 3,649 1,040 771 89 5,215 2018 $’000 5,215 - 5,215 49 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 7 INCOME TAXES (CONTINUED) 7.3 Tax consolidation Relevance of tax consolidation to the Group The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 August 2007 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is BSA Limited. The members of the tax- consolidated group are identified in note 18. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the 'separate taxpayer within group' approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from un-used tax losses and relevant tax credits of the members of the tax-consolidated group are recognised by the Company (as head entity in the tax-consolidated group). Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or received by the Company and each member of the Group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. NOTE 8 KEY MANAGEMENT PERSONNEL The aggregate compensation made to Directors and other key management personnel of the Company and the Group is set out below: Short-term employee benefits Post-employment benefits Other long-term benefits Share-based payments 2019 $ 1,635,286 84,472 16,438 249,200 Consolidated 2018 $ 2,241,820 111,850 19,260 145,050 1,985,396 2,517,980 Further information regarding the identity of key management personnel and their compensation can be found in the Audited Remuneration Report contained in the Directors' Report on pages 17 to 24 of this Annual Report. NOTE 9 AUDITOR'S REMUNERATION Remuneration of the auditor of the Group for: - Audit and review of the Financial Report - Taxation services - Other non-audit services The auditor of BSA Limited is Deloitte Touche Tohmatsu. 50 2019 $ 386,060 469,883 55,000 Consolidated 2018 $ 353,390 299,708 17,250 910,943 670,348 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 10 EARNINGS PER SHARE (a) Profit/(loss) for the period attributable to shareholders of the parent entity used in earnings per share Continuing operations Discontinued operations 2019 $'000 10,764 (10,592) 172 Consolidated 2018 $'000 8,827 (7,263) 1,564 Number Number (b) Weighted average number of ordinary shares outstanding during the year used 426,587,199 422,933,082 in calculating basic EPS Weighted average number of options/rights outstanding 2,050,196 1,607,509 Weighted average number of ordinary shares outstanding during the year used in calculating diluted EPS 428,637,395 424,540,591 (c) Basic earnings per share Continuing operations Discontinued operations (d) Diluted earnings per share Continuing operations Discontinued operations Cents Cents 2.523 (2.483) 0.040 2.511 (2.471) 0.040 2.087 (1.717) 0.370 2.079 (1.711) 0.368 (e) Information concerning the classification of securities Options/Rights Options granted to employees under the BSA Limited Employee Option Plan and rights granted to employees under the BSA Limited Employees Performance Rights Plan are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options/rights have not been included in the determination of basic earnings per share. Details relating to the options and rights are set out in note 31. 51 BSA LIMITED ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 11 CASH AND CASH EQUIVALENTS For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents include cash on hand and in banks. Cash at bank and on hand NOTE 12 TRADE AND OTHER RECEIVABLES CURRENT Trade receivables Expected credit losses Amounts due from customers under construction contracts Executive Share Plan receivables Accrued revenue Prepayments NON-CURRENT Executive Share Plan receivables Other Receivables 2019 $’000 21,941 21,941 2019 $’000 48,323 (1,705) 46,618 - 294 10,303 1,748 12,345 58,963 432 - 432 Consolidated 2018 $’000 12,670 12,670 Consolidated 2018 $’000 62,590 (1,180) 61,410 29,577 332 13,470 1,435 44,814 106,224 582 364 946 Note 31(c) 31(c) Trade receivables Trade receivables disclosed above are measured at amortised cost. The average credit period for the Group is 38 days. No interest is charged on overdue receivables. Expected credit losses are recognised against trade receivables greater than 60 days based on estimated future irrecoverable amounts determined by reference to default experience of the counterparty. Before accepting a new customer, the Group assesses the potential customer's credit quality and defines credit limits by customer. 52 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 12 TRADE AND OTHER RECEIVABLES (CONTINUED) Age analysis of trade receivables that are past due but not impaired at the reporting date Not past due Past due [30] days Past due [30-60] days Past due [60-90] days Past due [>90] days Total 2019 Amount Amount Not Impaired Impaired $’000 6 579 278 23 819 $’000 39,717 2,831 1,822 942 1,756 Total $’000 44,063 9,951 1,849 1,646 5,081 1,705 46,618 62,590 Total $’000 39,273 3,410 2,100 965 2,575 48,323 Consolidated 2018 Amount Amount Not Impaired Impaired $’000 - 208 - - 972 1,180 $’000 44,063 9,743 1,849 1,646 4,109 61,410 As at 30 June 2019, the Group had current trade receivables of $1,705,000 (2018: $1,180,000) that were impaired. The amounts relate to customers who had not responded to final request for payment notices, customers that BSA had requested external collection agencies to collect outstanding debts or customers who have disputed invoiced amounts and adjustments to incorporate the required expected credit losses model per AASB 9. Analysis of Allowance Account Consolidated Opening Balance Expected credit losses Receivables written off during the year Closing balance NOTE 13 CONTRACT ASSETS AND LIABILITIES Contract assets Contract liabilities For comparative amounts, refer to notes 12 and 21. 2019 $’000 1,180 559 (34) 1,705 2019 $’000 12,835 (14,092) 2018 $’000 1,138 76 (34) 1,180 2018 $’000 - - 53 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 13 CONTRACT ASSETS AND LIABILITIES (CONTINUED) Contract assets primarily relate to the Group’s right to consideration for construction work completed but not invoiced at the balance sheet date. The contract assets are transferred to trade receivables when the amounts are certified by the customer. On most contracts certificates are issued by the customer on a monthly basis. The Group has taken advantage of the practical expedient in paragraph 94 of AASB 15 to immediately expense the incremental costs of obtaining contracts where the amortisation period of the assets would have been one year or less. Contract liabilities primarily relate to the advance consideration received from customers in respect of performance obligations which have not yet been fully satisfied and for which revenue has not been recognised. All contract liabilities held at 30 June 2019 are expected to satisfy performance obligations in the next 12 months. Significant changes in the contract assets and the contract liabilities during the period are as follows: 2019 2018 Contract Contract Contract Contract assets liabilities assets liabilities $'000 $'000 $'000 $'000 Opening balance Effect of change in accounting policies Reclassifications As restated Revenue recognised: performance obligations satisfied in the current year adjustments to performance obligations satisfied in previous years Cash received for performance obligations not yet satisfied - (11,814) 56,252 44,438 213,143 - - Amounts transferred to trade receivables (244,746) - - (24,110) (24,110) 9,204 814 - - Closing balance 12,835 (14,092) - - - - - - - - - - - - - - - - - - The following table includes revenue expected to be recognised in the future related to performance obligations that are unsatisfied or partially unsatisfied at the balance sheet date: Work in hand - continuing operations Work in hand includes estimates of future revenue streams for existing contracts. Final volumes may be higher or lower than present estimates. NOTE 14 INVENTORIES Future years $'000 322,686 CURRENT Inventories of finished goods and work in progress at net realisable value Consolidated 2018 $’000 1,541 1,541 2019 $’000 1,311 1,311 The cost of inventories recognised as an expense includes $642,000 (2018:$589,000) in respect of write-down of inventory to net realisable value. 54 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 15 PROPERTY, PLANT AND EQUIPMENT Plant & Equipment Under Finance Leasehold Plant & Lease & Hire Make Consolidated Assets Under Land Buildings Improvements Equipment Purchase Good Construction Total $’000 $’000 $’000 $’000 $’000 $'000 $'000 $’000 Cost Balance as at 30 June 2017 253 410 3,291 Additions Disposals Transfers * - - - - - - Balance as at 30 June 2018 253 410 Additions Disposals Reclassed as Held for Sale Transfers * - - - - - - - - Balance as at 30 June 2019 253 410 109 - 2,508 5,908 153 (355) (117) - 5,589 32,981 3,504 (796) - 11,542 4,095 (1,204) 1,250 408 (393) 673 50,400 2,522 10,638 - (2,393) - - (2,508) - 35,689 14,433 1,265 687 58,645 4,094 (1,495) (2,846) 391 35,833 526 (1,843) (1,048) - 169 (180) - - 2,330 7,272 - - (3,873) (4,011) (391) - 12,068 1,254 2,626 58,033 Accumulated depreciation and impairment Balance as at 30 June 2017 Additions Disposals Transfers * Balance as at 30 June 2018 Additions Disposals Reclassed as Held for Sale Transfers * Balance as at 30 June 2019 - - - - - - - - - - 88 17 - - 3,209 28,089 527 - - 2,782 (693) - 9,063 1,530 (1,156) - 105 3,736 30,178 9,437 16 - - - 121 672 (351) (117) - 2,498 (1,495) (2,741) - 1,857 (1,804) (1,040) - 3,940 28,440 8,450 745 429 417 (393) - 453 472 (180) - - - - - - - - - - - - 40,878 5,273 (2,242) - 43,909 5,515 (3,830) (3,898) - 41,696 Net Book Value as at 30 June 2019 Net Book Value as at 30 June 2018 253 253 289 305 1,649 2,172 7,393 5,511 3,618 4,996 509 812 2,626 16,337 687 14,736 * Transfers between categories 15.1 The following useful lives are used in the calculation of depreciation: Buildings Leasehold improvements Plant and equipment Plant and equipment under finance lease Make good 25 years 4 - 5 years 3 - 10 years 3 - 5 years Lease term 15.2 Assets held as security Fixed and floating charges over the whole of the parent entity and its subsidiaries' assets have been pledged as security for bank loans (see note 22). 55 BSA LIMITED ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 16 NON-CURRENT ASSETS - GOODWILL $'000 Cost Closing carrying value 2019 2018 BSA | Connect BSA | Build BSA | Maintain Consolidated - - 11,185 15,185 - - 11,185 15,185 The recoverable amount of each cash generating unit is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a three year period with the period extending beyond three years extrapolated using an estimated growth rate of 3.0% for BSA | Build | Fire. The cash flows are discounted using the weighted average cost of capital with mid-year discounting. At 30 June 2019 the company has assessed both internal and external indicators of impairment, including completing the value-in-use models, and did not identify any indicators of impairment. Due to the decision to divest BSA | Build | HVAC, $4,000,000 of goodwill has been reclassified to Assets held for sale in FY2019. The key assumptions used in the value-in-use calculations as at 30 June 2019 and 30 June 2018 were as follows: - growth rate used to extrapolate cash flows beyond the forecast period: 3.0% for BSA | Build | Fire (2018: 3.0%); - post-tax discount rate: 12.5% (2018: 12.5%); and - divisional Revenue, EBIT, working capital adjustments and maintenance capital expenditure.. Impact of possible changes to the key assumptions The key assumptions in the impairment model are the discount rate, terminal growth rate percentage and EBITDA margin percentage. Below is set out the assumptions used in the impairment model. Key Assumptions Discount rate % Terminal growth % EBITDA Margin % FY 2019 12.5% 3.0% 6.1% 56 BSA LIMITEDANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 17 NON-CURRENT ASSETS - OTHER INTANGIBLE ASSETS Intangible assets, other than goodwill, have finite lives. The current amortisation for intangible assets is included under depreciation and amortisation expense per the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Cost Balance as at 30 June 2017 Acquisitions through business combinations Balance at 30 June 2018 Acquisitions through business combinations Balance at 30 June 2019 Accumulated amortisation and impairment Balance as at 30 June 2017 Amortisation expense Balance at 30 June 2018 Amortisation expense Balance at 30 June 2019 Order Backlog $’000 10,079 - 10,079 - 10,079 (7,665) (674) (8,339) (674) (9,013) Total $’000 10,079 - 10,079 - 10,079 (7,665) (674) (8,339) (674) (9,013) Net Book Value as at 30 June 2019 1,066 1,066 Net Book Value as at 30 June 2018 1,740 1,740 57 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 18 OTHER FINANCIAL ASSETS (a) Shares in subsidiaries Details of Group Companies Parent Entity: BSA Limited Ultimate Parent Entity: BSA Limited Name of Subsidiary Mr Broadband Pty Limited Allstaff Airconditioning Holdings Pty Limited Allstaff Airconditioning (VIC) Pty Limited Allstaff Airconditioning (NSW) Pty Limited Allstaff Airconditioning (ACT) Pty Limited Complex Airconditioning Pty Limited ACN 085 921 615 Pty Ltd Satellite Receiving Systems (QLD) Pty Limited BSA Equity Plans Pty Limited (Formerly ACN 066 496 893 Pty Ltd) MEC Services Pty Limited BSA Transmission Solutions Pty Limited 066 059 809 Pty Limited Triple M Group Pty Limited Triple M Mechanical Services Pty Limited Triple M Mechanical Services (Qld) Pty Limited Triple M Fire Pty Limited Triple M Mechanical Services (Administration) Pty Limited BSA Networks Pty Limited BurkeAir Pty Limited (b) Deed of Cross Guarantee: Principal Activity Place of incorporation 2019 2018 Percentage owned (%) Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia - - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% BSA | Build BSA | Build BSA | Build BSA | Build BSA | Maintain BSA | Maintain BSA | Connect BSA | Connect BSA | Connect BSA | Maintain BSA | Connect BSA | Connect BSA | Build BSA | Build BSA | Build BSA | Build BSA | Build BSA | Connect BSA | Maintain All Controlled Entities are parties to the Deed of Cross Guarantee, where relief is obtained from preparing individual financial reports under ASIC Corporations (wholly owned companies) instrument 2016/785, and are members of the Closed Group. Under the Deed, BSA Limited agrees to support the liabilities and obligations of the Controlled Entities. (c) Tax Consolidation All the controlled entities are members of the Tax Consolidated Group under Australian Tax Law. BSA Limited is the head entity within the Tax Consolidated Group. 58 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 18 OTHER FINANCIAL ASSETS (CONTINUED) 18.1 Composition of the Group Information about the composition of the Group at the end of the reporting period is as follows: Principal Activity BSA | Connect BSA | Build BSA | Maintain 18.2 Discontinued operations BSA | Build | HVAC Place of incorporation Number of wholly-owned subsidiaries and operation 2019 2018 Australia Australia Australia 6 9 4 19 6 9 4 19 The Group has decided to exit the BSA | Build | HVAC business. Consequently, the BSA | Build | HVAC business is classified as a discontinued operation. During the financial year, the following events have occurred: - non-binding discussions with parties identified as having a potential interest in acquiring the BSA | Build | HVAC business were held; - preparations for the formation of the disposal assets have occurred with detailed plans and indicative timetables established; - advisory partners to the sale were engaged to help facilitate the disposal of the BSA | Build | HVAC business during the 2020 financial year; and - an assessment of the fair value (less costs to sell) of the BSA | Build | HVAC operations was undertaken by the Directors. Analysis of loss for the period from discontinued operations BSA | Build | HVAC Revenue Expenses Loss before interest and tax Net financing cost Loss before tax Income tax benefit Loss for the period from discontinued operation Cash flows from / (used in) discontinued operations BSA | Build | HVAC Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities Net cash inflow/(outflow) from financing activities 2019 $’000 100,817 (112,602) (11,785) (33) (11,818) 1,226 (10,592) 2019 $’000 (7,129) (133) (33) (7,295) 2018 $’000 134,499 (145,277) (10,778) (41) (10,819) 3,556 (7,263) 2018 $’000 (10,994) (564) (41) (11,598) 59 BSA LIMITED ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 18 OTHER FINANCIAL ASSETS (CONTINUED) Assets held for sale BSA | Build | HVAC At 30 June 2019, the assets and liabilities relating to the BSA | Build | HVAC business have been classified as held for sale. Property Plant and Equipment Other assets Total assets classified as held for sale Total liabilities directly associated with assets held for sale NOTE 19 DETAILS OF JOINT VENTURES 2019 $’000 113 17,301 17,414 12,695 2018 $’000 - - - - Details of the Group’s joint ventures and joint operations at the end of the reporting period is as follows: Name of Joint Venture/Operation Principal Activity Place of incorporation and principal place of business Triple M and Premier Fire JV Co Limited Installation of fire services BSAF Joint Operation Installation of fire services Australia Australia Proportion of ownership interest and voting power held by the group 2019 50% 50% 2018 50% 50% The Triple M and Premier Fire JV Co Limited incorporated joint venture was accounted for using the equity method in these consolidated financial statements. The BSAF Joint Operation was accounted for using the proportional consolidation method in these consolidated financial statements. Summarised financial information in respect of the Group's material joint ventures are set out below. The summarised financial information below represents amounts shown in the joint ventures financial statements prepared in accordance with AASBs (adjusted by the Group for equity accounting purposes). Triple M and Premier Fire JV Co Limited Current Assets Current Liabilities Non-current liabilities The above amounts of assets and liabilities include the following: Cash and cash equivalents Current financial liabilities (excluding trade and other payables and provisions) Non-current financial liabilities (excluding trade and other payables and provisions) 60 2019 $’000 603 (738) - 439 - - 2018 $’000 681 (843) - 225 - - BSA LIMITEDANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 19 DETAILS OF JOINT VENTURES (CONTINUED) Triple M and Premier Fire JV Co Limited Revenue Profit or loss from continuing operations Profit/(loss) for the year Other comprehensive income for the year Total comprehensive income for the year Dividends received from the joint venture during the year The above profit/(loss) for the year include the following: Depreciation and amortisation Interest income Income tax expense (income) 2019 $’000 321 - - - - (200) - - 51 Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in the consolidated financial statements: Triple M and Premier Fire JV Co Limited Net assets of the joint venture Proportion of the Group's ownership interest in the joint venture Goodwill Other adjustments Carrying amount of the Group's interest in the joint venture BSAF Joint Operation Current Assets Non-current assets Current Liabilities Non-current liabilities The above amounts of assets and liabilities include the following: Cash and cash equivalents Current financial liabilities (excluding trade and other payables and provisions) Non-current financial liabilities (excluding trade and other payables and provisions) 2019 $’000 (135) 50% - - (67) 2019 $’000 16,509 - (14,512) - 8,141 - - 2018 $’000 4,161 - - - - (200) - - 86 2018 $’000 (162) 50% - - (81) 2018 $’000 1,974 - (1,634) - 2 - - 61 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 19 DETAILS OF JOINT VENTURES (CONTINUED) BSAF Joint Operation Revenue Profit or loss from continuing operations Profit/(loss) for the year Other comprehensive income for the year Total comprehensive income for the year Dividends received from the joint venture during the year The above profit for the year include the following: Depreciation and amortisation Interest income Interest expenses Income tax expense (income) 2019 $’000 29,377 3,856 3,856 - 3,856 (1,000) - - - - Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint operation recognised in the consolidated financial statements: BSAF Joint Operation Net assets of the joint operation Proportion of the Group's ownership interest in the joint operation Carrying amount of the Group's interest in the joint operation1 1 Included in Assets held for sale in FY2019 2019 $’000 1,997 50% 999 2018 $’000 1,795 142 142 - 142 - - - - - 2018 $’000 340 50% 170 62 BSA LIMITEDANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 20 PARENT ENTITY DISCLOSURES (a) Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Accumulated losses Profit Reserve Reserves Share-based payments reserve Total equity (b) Financial Performance (Loss) / Profit for the year Other comprehensive (Loss) / income for the year, net of tax Items that may be reclassified subsequently to profit or loss: Gain recognised on cash flow hedges Total comprehensive (Loss) / income for the year, net of tax 2019 $’000 58,487 35,618 94,105 51,572 6,599 58,171 35,934 98,894 (77,546) 12,718 1,868 35,934 (10,539) - (10,539) 2018 $’000 39,486 43,625 83,111 31,781 4,375 36,156 46,955 97,562 (77,546) 25,371 1,568 46,955 4,348 - 4,348 (c) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries BSA Limited has entered into a cross guarantee with its wholly owned subsidiaries. 57,164 57,164 (d) Contingent Liabilities Under the above cross guarantee, BSA Limited, as the parent entity, guarantees all contingent liabilities of the wholly owned subsidiaries. Guarantees established in favour of National Australia Bank Limited and Swiss Re International SE for Guarantees issued to various clients for satisfactory contract performance, secured by cross guarantees from all wholly owned group members amounting to $5,047,000 (2018: $9,333,000) directly relating to the parent. Guarantees secured by cross guarantee by all group members amounted to $38,409,000 (2018:$41,242,000). 63 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 21 TRADE AND OTHER PAYABLES Trade payables Other payables Amounts due to customers under construction contracts Total Payables NOTE 22 BORROWINGS CURRENT Secured liabilities at amortised cost: Hire purchase liabilities Lease liabilities Bank loans Other Total current borrowings NON-CURRENT Secured liabilities at amortised cost: Hire purchase liabilities Lease liabilities Total non-current borrowings 2019 $’000 32,808 30,065 - 62,873 2018 $’000 37,573 30,383 24,110 92,066 Note 2019 $’000 Consolidated 2018 $’000 (a), 26(iii) (a), 26(ii) (a), 26(iii) (a), 26(ii) 480 607 - 1,766 2,853 936 1,884 2,820 714 626 - 743 2,083 1,158 2,463 3,621 The Group has Banking Facilities amounting to $54,500,000 which have an expiry date of 31 December 2020 and Banking Facilities amounting to $12,500,000 which have an expiry date of 31 July 2020. The covenants within the bank borrowings have the following ratios as at 30 June 2019: Quarterly interest cover ratio greater than 3.5 times. Quarterly total leverage ratio less than 2.25 times. Covenants on borrowings were met as at 30 June 2019. 64 BSA LIMITEDANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 22 BORROWINGS (CONTINUED) Total assets pledged as security CURRENT Cash and cash equivalents Trade and other receivables Assets held for sale Inventories NON-CURRENT Trade and other receivables Investments in Joint Ventures Property, plant & equipment Deferred tax assets Goodwill Other intangible assets 2019 $’000 21,941 71,798 17,414 1,311 112,464 432 - 16,337 8,982 11,185 1,066 38,002 150,466 Consolidated 2018 $’000 12,670 106,224 - 1,541 120,435 946 170 14,736 5,215 15,185 1,740 37,992 158,427 (a) Lease liabilities and hire purchase liabilities are effectively secured as the rights to the assets recognised in the consolidated financial statements revert to the financier in the event of default. Actual interest rates for hire purchase liabilities outstanding during the year ranged between 4.47% and 5.31%. Actual interest rates for lease liabilities outstanding during the year ranged between 4.93% and 5.97%. There were no defaults or breaches of any loan agreements during the current year. Reconciliation of liabilities arising from financing activities. (b) (c) The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group's consolidated statement of cash flows as cash from financing activities. Hire purchase and finance lease liabilities Other borrowings Non-cash changes Financing New finance cash flows leases 1 July 2018 (i) (note 28(b)) 30 June 2019 $’000 $’000 $’000 $’000 4,961 743 5,704 (2,865) 916 (1,949) 1,811 107 1,918 3,907 1,766 5,673 (i) The cash flows from other borrowings make up the net amount of proceeds from borrowings and repayment of borrowings in the consolidated statement of cash flows. 65 BSA LIMITED ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 23 PROVISIONS Employee benefits Other provisions (see below) CURRENT NON-CURRENT Note (i) 2019 $’000 8,664 7,662 16,326 11,730 4,596 16,326 Consolidated 2018 $’000 10,152 5,387 15,539 12,058 3,481 15,539 Other Provisions Revenue (ii) Make Good (iii) Leases (iv) Provisions (v) Total Office of State Contract Balance at 1 Jul 2018 Additional provisions recognised Provisions reversed Paid Balance at 30 June 2019 3,421 1,333 - - (1,578) 1,843 - 2,540 - - 633 5,387 1,300 3,853 - - - (1,578) 13 - - 1,346 2,540 1,933 7,662 (i) The provision for employee benefits represents annual leave and vested and non-vested long service leave entitlements accrued. (ii) The provision for Office of State Revenue ("OSR") primarily relates to the following: Following the settlement of the NSW OSR issue, BSA has entered into a repayment plan with the NSW OSR. The provision for this matter at the end of FY2019 stands at $1,843,000 (FY2018: $3,421,000). (iii) The provision for make good represents the estimated cost of work to comply with make good obligations in certain Group property leases. (iv) The provision relates to onerous leases. (v) The provision for project provisions represents the expected cost of obligations under construction contracts recognised at the Directors' best estimate of the expenditure to settle the Group's obligation. 66 BSA LIMITEDANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 24 ISSUED CAPITAL (a) Share capital Ordinary shares - fully paid (b) Movements in ordinary share capital Date Details Note (c) Parent Entity 2019 2018 Number of Number of Shares Shares 428,241,404 422,997,668 Number of Shares $’000 1 July 2018 Opening Balance 422,997,668 97,562 27 July 2018 Exercise of Non-Executive Director Rights 21 September 2018 Exercise of Performance Rights 2 November 2018 Dividend Reinvestment Plan 30 June 2019 Balance 257,838 375,391 4,610,507 428,241,404 87 - 1,245 98,894 Changes to the Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore the Company does not have a limited amount of authorised capital and issued shares do not have a par value. (c) Ordinary Shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (d) Options At 30 June 2019 no options were held over ordinary shares of the Company. Share options granted under the Share Option Plan carry no rights to dividends and no voting rights. Further information relating to the BSA Limited Employee Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in Note 29. (e) Executive Securities Plan The Company has established an Executive Securities Plan as a mechanism to provide the Company’s key Executives with a direct equity involvement and incentive in the Company which aligns them with the shareholders. (f) Dividend Reinvestment Plan The Company has established a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. (g) Employee Performance Rights Plan Information relating to the BSA Limited Employee Performance Rights Plan, including details of rights issued, exercised and lapsed during the financial year and rights outstanding at the end of the financial year, is set out in Note 29. (h) Fee Sacrifice Equity Plan Information relating to the BSA Limited Fee Sacrifice Equity Plan, including details of rights issued, exercised and lapsed during the financial year and rights outstanding at the end of the financial year, is set out in Note 29. 67 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 25 RESERVES AND ACCUMULATED LOSSES (a) Reserves Share-based payments reserve Share-based payments reserve Opening balance Rights expense Shares issued in satisfaction of performance conditions Closing balance Consolidated 2019 $’000 2018 $’000 1,868 1,868 1,568 299 1 1,868 1,568 1,568 1,423 145 - 1,568 The share-based payments reserve relates to share options and share rights granted to employees under the Employee Share Option Plan and the Employee Performance Rights Plan. Further information about share-based payments to employees is set out in note 29. The share-based payments reserve records items recognised as expenses on valuation of employee share options and rights. (65,243) (65,243) (8,269) (520) - - (74,032) (65,243) - - (74,032) (65,243) 11,150 10,764 (10,592) (2,118) 9,204 11,700 8,827 (7,263) (2,114) 11,150 (b) Accumulated losses Movements in accumulated losses were as follows: Balance at beginning of year Opening balance adjustment AASB 15 application Opening balance adjustment AASB 9 application As restated Net loss for the year Balance at end of year (c) Profit Reserve Movements in profit reserve were as follows: Balance at beginning of year Net profit after tax for the year, continuing operations Net loss after tax, discontinued operations Dividends Balance at end of year 68 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 25 RESERVES AND ACCUMULATED LOSSES (CONTINUED) (d) Dividends on equity instruments Recognised amounts Fully paid ordinary shares Interim dividend: Final fully franked dividend of 0.5 (2018: 0.5) cents per fully paid ordinary share franked at the rate of 30% paid Year 2019 Year 2018 Cents per share Total $‘000 Cents per share Total $‘000 - - - - 2 November 2018 0.50 2,118 0.50 2,114 Unrecognised amounts Fully paid ordinary shares Final dividend 0.50 2,141 0.50 2,115 On 20 August 2019 the Directors declared a fully franked dividend of 0.50 cent per share to the holders of fully paid ordinary shares in respect of the financial year ended 30 June 2019, to be paid to shareholders on 4 November 2019. This dividend has not been included as a liability in these consolidated financial statements. The dividend will be paid to all shareholders on the Register of Members on 30 September 2019. The total estimated dividend to be paid is $2,141,000. The Group has a Dividend Reinvestment Plan (DRP) in place. The DRP was in place for the distribution made in November 2018. The distribution resulted in $873,000 being paid in cash and $1,245,000 being raised by the DRP through the issue of 4.610 million securities at $0.27 in November 2018. (e) Franking credits Franking account balance as at 30 June Franking credits that will arise from the payment of income tax payable as at the reporting date Franking credits that will attach to the payment of dividends proposed or declared before the financial report was authorised for issue but not recognised as a distribution to equity holders during the period. Net franking credits available Consolidated 2018 $’000 15,464 - 2019 $’000 14,558 255 (908) 13,905 (906) 14,558 69 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 26 CAPITAL AND LEASING COMMITMENTS Note 2019 $’000 Consolidated 2018 $’000 (i) Operating Lease Commitments The Group leases various offices and warehouses under non-cancellable operating leases expiring within one to five years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years 3,636 5,880 - 9,516 3,951 5,771 - 9,722 (ii) Finance Lease Commitments The Group leases various plant and equipment with a carrying amount of $2,886,000 (2018: $3,718,000) under finance leases expiring within one to four years. Under the terms of the leases, the Group has the option to acquire the leased assets after paying the residual amount on expiry of the leases. Commitments in relation to finance leases are payable as follows: Within one year Later than one year but not later than five years Later than five years Minimum lease payments Less future finance charges Total Lease Liability Represented by: Current liability Non-current liability 730 2,108 - 2,838 (347) 2,491 607 1,884 2,491 725 2,729 - 3,454 (365) 3,089 626 2,463 3,089 22 22 (iii) Hire Purchase Commitments The Group has purchased various plant and equipment with a carrying amount of $732,000 (2018: $1,278,000) under hire purchase agreements expiring within one to four years. Under the terms of the agreements, the Group has the option to acquire the assets after paying the residual amount on expiry of the agreements. Commitments in relation to hire purchase agreements are payable as follows: Within one year Later than one year but not later than five years Later than five years Minimum payments Less future finance charges Total Hire Purchase Liability Represented by: Current liability Non-current liability 70 649 923 - 1,572 (156) 1,416 480 936 1,416 771 1,261 - 2,032 (160) 1,872 714 1,158 1,872 22 22 BSA LIMITEDANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 27 SEGMENT INFORMATION (a) AASB 8 Operating Segments AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. (b) Products and services from which reportable segments derive their revenues The Group is organised into the following reportable segments: BSA | Connect BSA | Connect provides contracting services to the telecommunications, subscription television and communication industries. The contracting services include the delivery of bundled services over fixed line multi-technology services and networks and the installation of subscription television. BSA | Build BSA | Build provides the design and installation of building services for commercial and industrial buildings and infrastructure including: Mechanical and Fire services. BSA | Maintain BSA | Maintain provides the maintenance of building services for commercial and industrial buildings including: Mechanical Services, Air Conditioning, Heating and Ventilation, Refrigeration and Fire services. (c) Segment revenues and results The following is an analysis of the Group’s revenue and results by reportable operating segment: Continuing operations BSA | Connect BSA | Build BSA | Maintain Other Revenue Year Ended Segment Profit/Loss Year Ended 30 Jun 19 $’000 30 Jun 18 $’000 30 Jun 19 $’000 30 Jun 18 $’000 251,551 114,621 103,312 295 469,779 249,356 85,067 93,450 243 428,116 16,878 4,134 2,244 11 23,267 16,442 3,985 1,228 24 21,679 Corporate costs including acquisition, legal and advisory (7,651) (7,783) Finance costs Profit before tax from continuing operations (819) 14,797 (604) 13,292 Segment revenue reported above represents revenue generated from external customers. The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment profit/loss represents the profit/loss earned by each segment without allocation of central administration costs and Directors’ salaries, investment income, gains and losses, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. 71 BSA LIMITED ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 27 SEGMENT INFORMATION (CONTINUED) (d) Segment assets and liabilities Segment assets BSA | Connect BSA | Build BSA | Maintain Consolidated assets Segment liabilities BSA | Connect BSA | Build BSA | Maintain Consolidated liabilities Year Ended 30 Jun 19 $’000 75,724 30,261 27,067 133,052 55,346 33,510 12,981 101,837 30 Jun 18 $’000 48,082 78,823 31,522 158,427 39,239 53,089 21,062 113,390 For the purposes of monitoring segment performance and allocating resources between segments. All assets, except cash, are allocated to reportable segments. In 2019 and 2018, cash is allocated to BSA | Connect. Goodwill is allocated to reportable segments as described in note 16. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments; and All liabilities are allocated to reportable segments. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets. (e) Other segment information Continuing operations BSA | Connect BSA | Build BSA | Maintain Depreciation and amortisation Additions to non-current assets Year Ended Year Ended 30 Jun 19 $’000 30 Jun 18 $’000 30 Jun 19 $’000 30 Jun 18 $’000 4,485 120 1,584 6,189 3,463 123 1,707 5,293 6,110 133 1,029 7,272 9,345 564 729 10,638 72 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 27 SEGMENT INFORMATION (CONTINUED) (f) Geographical information The Group only operates in Australia. The Group’s revenue from continuing operations from external customers and information about its non-current assets by geographical location are detailed below: Australia Revenue from external customers Non-current assets Year ended Year Ended 30 Jun 19 $’000 469,779 469,779 30 Jun 18 $’000 428,116 428,116 30 Jun 19 $’000 38,002 38,002 30 Jun 18 $’000 37,992 37,922 (g) Information about major customers The Group has a number of customers to whom it provides both products and services. The Group supplies a single external customer in the BSA | Connect segment who accounts for 28% of gross external revenue (2018: 24%). NOTE 28 CASH FLOW INFORMATION FOR THE PERIOD (a) Reconciliation of profit to net cash flows from operating activities for the year Profit for the year Depreciation Amortisation Share-based payment expense Net profit on sale of non-current assets Change in operating assets and liabilities Decrease in trade receivables Decrease in inventories (Increase)/decrease in deferred tax asset Decrease/(increase) in other operating assets Decrease in trade payables increase in other operating liabilities Increase in tax provision Increase/(decrease) in provisions Net cash generated by operating activities 2019 $’000 172 5,515 674 299 (307) 6,976 230 (3,767) 3,057 (4,766) 6,669 2,807 787 18,346 Consolidated 2018 $’000 1,564 5,273 674 145 (269) 512 633 909 (7,115) (4,198) 7,369 - (834) 4,663 73 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 28 CASH FLOW INFORMATION FOR THE PERIOD (CONTINUED) (b) Non-cash transactions During the year the consolidated entity acquired plant and equipment with an aggregate value of $848,000 (2018:$4,095,000) by means of finance leases. These acquisitions are not reflected in the consolidated statement of cash flows. (c) Credit Standby Arrangements with Banks Credit facility Amount utilised Unused credit facility This facility is summarised as follows: A Working Capital Facility which covers the financial requirements of the day to day operations of the Group. (d) Credit Standby Arrangements with Banks Credit facility Amount utilised Unused credit facility 2019 $’000 20,000 - 20,000 12,500 - 12,500 This facility is summarised as follows: A Corporate Receivables Facility which covers the financial requirements of the day to day operations of the Group. (e) Master Asset Finance Facilities Total asset finance facility Amount utilised Total unused Master Asset Finance Facility 8,000 (3,907) 4,093 Consolidated 2018 $’000 20,000 - 20,000 12,500 - 12,500 8,000 (4,961) 3,039 Finance will be provided under the facility provided the Company and the consolidated entity has not breached any borrowing requirements and the required financial ratios are met. During the year, the Company and the consolidated entity have not breached any borrowing requirements. (f) Loan Facilities Loan facilities Amount utilised Unused loan facility (g) Guarantees - - - - - - Guarantees to the value of $18,440,000 were utilised at 30 June 2019 (2018: $24,902,000), and are secured by fixed and floating charge to the bank over the assets of the Company together with guarantees in favour of the parent given by all controlled entities. (h) Surety Bonds Surety Bonds of which $19,969,000 were utilised at 30 June 2019 (2018: $16,341,000), are unsecured. 74 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 29 SHARE-BASED PAYMENTS (a) Employee Option Plan The establishment of the BSA Limited Employee Option Plan was approved by shareholders at the 2004 AGM. Staff eligible to participate are those who are full time or permanent part-time employees of any company in the Group, including an Executive Director and Non-Executive Director of the company and whom the Board of Directors has sole discretion to determine to be eligible to participate but does not include a person who has a relevant interest in greater than 5% of the issued ordinary share capital of the Company. The exercise price and exercise period applicable to any options to be offered under the Option Plan will, at or before the time of issuing an invitation to eligible employees to subscribe for options, be determined by the Board in its absolute discretion. Subject to any restrictions in the Listing Rules or the Corporations Act 2001, the Board may in its absolute discretion impose on the options such other terms as it considers appropriate. As soon as practicable after receipt of a valid notice of exercise of an option together with the exercise price the Company will allot the appropriate number of ordinary shares. Any shares issued on the exercise of the options granted pursuant to the resolution will be officially quoted and will rank equally with all other shares on issue in the Company and all the rights and entitlements of the holders in respect of those shares will be identical to the rights and entitlements of the holders of the currently issued shares in the Company. Options can only be exercised after three years if the employee remains in the employment of the Company and the option will then expire two years after this date. If the employee terminates their employment within the three years, the option is exercisable for twelve months from the date after termination. If the Company is subject to a takeover the option will vest and be exercisable for a period of three months. Options may not be transferred, though prior to issue a nominee may be advised for consideration by the Board. There were no options outstanding at 30 June 2019 (2018: Nil). Fair value of options granted There have been no options granted since 25 November 2004. There is no employee benefits expense in the Consolidated Statement of Profit or Loss and Other Comprehensive Income (2018: Nil), which relates, to equity-settled share-based payment transactions under the Employee Option Plan. (b) Employee Share Scheme A scheme under which shares were issued by the Company to employees for no cash consideration was ratified by shareholders at the 2004 AGM. All permanent employees (including Executive Directors) who were continuously employed by the consolidated entity for a period of at least one year were eligible to participate in the scheme. Employees could elect not to participate in the scheme. Under the scheme, eligible employees were offered $1,000 worth of fully-paid ordinary shares in BSA Limited for the Year Ended 30 June 2004 for no cash consideration. The market value of shares issued under the scheme, measured as the weighted average market price on the day of issue of the shares, was recognised in the Consolidated Statement of Financial Position as share capital and as part of employee benefit cost. Offers under the scheme are at the discretion of the Company. No offers were made during year the ended 30 June 2019 (2018: Nil). Shares under the scheme may not be sold until the earlier of three years after issue or cessation of employment with the consolidated entity. In all other aspects the shares rank equally with other fully-paid ordinary shares on issue (see note 24 (c)). The number of shares issued to participants in the scheme is the offered amount divided by the weighted average price at which the Company's shares are traded on the Australian Stock Exchange during the five trading days immediately before the date of the offer. (c) Executive Securities Plan The establishment of the BSA Executive Securities Plan was approved by shareholders at the 2005 AGM. The Plan was established as a mechanism to provide the Company's key executives with a direct equity involvement and incentive in the Company which aligns them with the shareholders. The number of securities to be offered and the time at which securities may be offered from time to time to executives and the price and terms of payment, shall be determined by the Board in its discretion. The Board may at such times as it determines invite any executive to be a member of the Plan. If an Executive to whom an invitation has been issued forwards to the Company a duly completed Loan Application and the Transfer Documents together with their acceptance, and where appropriate their Application for Shares, then the Company shall, in accordance with the terms of the Loan Agreement, lend to the Executive such amount as the Executive has applied for in the Loan Application. The maximum amount of any Loan shall be the total subscription price for the shares applied for. No interest is payable by the borrower under the Loan Agreement. An Executive shall not sell, mortgage, charge, assign or otherwise dispose of or encumber any shares before payment or repayment of any amount outstanding to the Company in respect thereof. 75 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 29 SHARE-BASED PAYMENTS (CONTINUED) Subject to the above restriction and to the terms of the Loan Agreement (if any) deemed to be entered into by the Executive, an Executive shall from the Date of Allotment, be the absolute beneficial owner of the shares. Unless the Directors of the Company otherwise provide in the terms of any Invitation, all Plan Shares shall rank for dividends declared on or after the Date of Allotment and shall in all respects rank equally with and have the same rights and entitlements as all other fully paid ordinary shares of the Company. Under the Loan Agreement, the borrower shall repay the balance outstanding of the Outstanding Principal when the borrower ceases to be an employee or Director of the Lender. BSA Limited has adopted the policy of having a rolling three year maturity date for all Executives who do not have a termed employment contract. Set out below are summaries of securities accepted under the plan: Consolidated and parent entity Issue Price Balance at Start Granted During Released from Escrow Balance in Escrow Grant Date Expiry Date (cents) of the Year 13 Oct 2006 19 Jul 2007 11 Sep 2007 13 Sep 2007 14 Dec 2007 10 Feb 2009 Total n/a n/a n/a n/a n/a n/a 0.23 0.63 0.68 0.68 0.68 0.10 Number 450,000 850,000 150,000 - 400,000 750,000 2,600,000 the Year Number - - - - - - - During the Year at End of the Year Number 50,000 250,000 - - - 250,000 550,000 Number 400,000 600,000 150,000 - 400,000 500,000 2,050,000 (d) Employee Performance Rights Plan The establishment of the BSA Employee Performance Rights Plan was approved by shareholders at the 2008 AGM. The Plan was established to reward selected eligible employees and to: • • • • • Provide an incentive for the creation of, and focus on, shareholder wealth; Enable the Company to recruit and retain the talented people needed to achieve the Company’s business objectives; Link the reward of key staff with the achievement of strategic goals and the performance of the Company; Align the financial interests of participants with those of Company shareholders; and Ensure the remuneration packages of employees are consistent with market practice. Securities may be offered under the Plan and the Board has discretion to determine who is offered the opportunity to participate. Generally, securities are subject to a holding restriction and cannot be traded unless certain performance conditions are met or as otherwise specified at the time of the relevant award after acquisition by the participant. Rights to acquire shares will not be exercisable until the end of the final measurement period, and until those rights have satisfied all vesting conditions and all performance hurdles established by the Board. This is subject to a number of exceptions (including death, cessation of employment, takeovers and schemes of arrangement). The rights have a specified life determined by the Board. The initial grant of rights (the Grant Date) will have a life terminating five years after the Grant Date or such other date as determined by the Board (the Expiry Date). Rights granted to certain participants in the initial grant will be at zero vesting value and will be subject to the following performance conditions as determined by the Board: (i) Service conditions as determined by the Board. (ii) The Company's performance as measured by earnings per share ("EPS") being the EPS for the relevant Measurement Period as determined by the Board having regard to the financial statements. Certain growth in EPS for the shares must be attained in respect of each Measurement Period and pro rata in respect of each Measurement Period and service condition of three years. 76 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 29 SHARE-BASED PAYMENTS (CONTINUED) The Board will prescribe the date when performance under the hurdle is measured for each tranche. On or after the end of the final measurement period and provided any performance hurdle prescribed by the Board has been achieved and, where applicable, to the extent it has been achieved, the Plan Participant may then acquire shares by exercising the rights. A right lapses if it is not exercised by the Expiry Date. The Exercise Price (if any) will be an amount determined by the Board from time to time, fixed at the date of grant or determined by application of methodology approved by the Board. Once Rights have been exercised by an Eligible Employee (subject to certain Performance Conditions being met), the Company may make non- refundable contributions to the Plan Company to either: • • fund the purchase of a new Plan Share; or the acquisition on the ASX of an existing share and transfer to the participant of that share, to which the Participant is entitled under the rights. The current plan company is BSA Limited ACN 088 412 748 or any other Company that the Board may approve from time to time. After rights are exercised, the plan company will subscribe for new shares or acquire shares in the ordinary course of trading on the ASX for participants, as directed from time to time by the Board. Consolidated and parent entity Grant Date Exercise Date Expiry Date Exercise Price (cents) Balance at Start of the Year Under Right Granted During the Year Under Right Exercised During the Year Under Right Cancelled During the Year Under Right Balance in Escrow at End of the Year Under Right Number Number Number Number Number 25 Nov 14 30 Jun 15 25 Nov 19 29 Nov 16 6 Feb 17 29 Nov 21 29 Nov 16 1 Sep 17 29 Nov 21 28 Nov 17 4 Dec 17 4 Dec 22 4 Dec 17 4 Dec 17 4 Dec 22 1 Oct 18 1 Oct 18 1 Oct 23 1 Feb 19 1 Feb 19 1 Feb 24 1 Mar 19 1 Mar 19 1 Mar 24 Total - - - - - - - - 1,116,667 - 200,000 142,857 175,391 - - - 1,634,915 - - - - - 553,301 380,000 175,440 1,108,741 - - (200,000) - (175,391) - - - (375,391) - - - - - - - - - 1,116,667 - - 142,857 - 553,301 380,000 175,440 2,368,265 Fee Sacrifice Equity Plan to Individual Non-Executive Directors The establishment of the BSA Fee Sacrifice Equity Plan to Individual Non-Executive Directors was approved by shareholders at the 2017 AGM. The plan is to establish a mechanism for Non-Executive Directors (NEDS) to acquire shares in the Company by electing to salary sacrifice a proportion of annual fees, on a voluntary basis that will align their interests with shareholders and does not create any financial or governance concerns for shareholders. All individuals holding NED roles in the Company or a subsidiary of the Company are eligible to become participants in the Plan. Each year, the Company intends to invite each NED to voluntarily elect to apply for rights under the Plan, to be funded by salary sacrificing a proportion of Annual Board fees. While the Company intends to issue invitations annually, the Board will determine at its sole discretion each year whether to issue an invitation. Invitations will include such terms as the Board deems appropriate including the date of the invitation, the number of Deferred Rights that a participant is eligible to apply for, that the price of a Deferred Right shall be nil (ignoring the amount of the fee sacrificed), that the exercise price shall be nil, the period during which disposal restrictions will apply, and such other terms and conditions as the Board determines. Deferred Rights granted under this Plan will be fully vested on the date of grant (being the date notified in a Notice of Grant). 77 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 29 SHARE-BASED PAYMENTS (CONTINUED) Deferred Rights will be automatically exercised 90 days after grant but may not be exercised earlier. On exercise of a right, the Board in its discretion will either: a) issue shares to Participants or b) arrange for shares to be acquired for the benefit of Participants by the trustee of the BSA Employee Share Trust. The Company will contribute such funds as needed to acquire shares either on-market or a subscription to a new issue as directed by the Board. The shares that result from the exercise of Deferred Rights are Restricted Shares. All shares acquired by Participants are subject to disposal restrictions that prevent disposal until the earlier of 15 years from the date of grant of rights and cessation of being a NED on the Board of BSA or a subsidiary of the Company (which will be specified Disposal Restrictions). During the period the Special Disposal Restrictions apply, the Restricted Shares may not be sold or otherwise disposed. The Company may impose a CHESS holding lock on Restricted Shares to ensure the participant does not sell them earlier than permitted under the Rules. The Company will advise each participant when it considers the specified disposal restrictions cease to apply. Participants must not enter an arrangement with anyone if it would have the effect of limiting their exposure to risk in relation to Deferred Rights or Restricted Shares. Participants will be treated in a manner that does not advantage or disadvantage them compared with other shareholders in the event of bonus issues, rights issues and capital reorganisation. If a participant ceases to be a NED of the Company or a subsidiary of the Company any unexercised Deferred Rights will be exercised automatically the day following cessation, and any Restricted Shares held by a Participant that are subject to Specified Disposal Restrictions will cease to be subject to such restrictions on the day of cessation unless otherwise determined by the Board and notified to the Participant in the Invitation. Grant Date Exercise Date Expiry Date Exercise Price (cents) Balance at Start of the Year Under Right Granted During the Year Under Right Exercised During the Year Under Right Cancelled During the Year Under Right Balance in Escrow at End of the Year Under Right Number Number Number Number Number 3 May 17 3 May 18 3 May 33 28 Mar 19 28 Mar 19 28 Mar 34 - - 257,838 - (257,838) - 356,708 (356,708) Total 257,838 356,708 (614,546) - - - - - - NOTE 30 EVENTS OCCURRING AFTER THE BALANCE DATE On 13 August 2019, BSA Limited agreed to sell its HVAC Build Major Projects Business in New South Wales and Victoria to Fredon Air Pty Limited (Fredon) for gross proceeds of $5,500,000 (comprising cash of $4,400,000 and $1,100,000 of net liabilities transferred to Fredon). Under the agreement, BSA retained three near complete HVAC Build Major Projects and did not include the HVAC Build Minor Projects nor the Fire Build businesses. Economic ownership of the HVAC Build Major Projects transferred to Fredon effective 1 July 2019 although completion of the sale shall occur on 30 August 2019. The sale to Fredon and the completion of the three retained HVAC Build Major Projects results in a complete exit from the HVAC Major Project construction market by BSA. On 16 August 2019 the receivables finance facility with NAB ($12,500,000) was extended to have an expiry date of 31 July 2020. On 20 August 2019, the Director's declared a dividend of 0.50 cents per share. Other than as detailed above, the Directors are not aware of any significant events since the end of the reporting period. 78 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 31 RELATED PARTY TRANSACTIONS Transactions between related parties are on normal commercial terms and conditions no more favourable than those to other parties unless otherwise stated. (a) Transactions with related parties: Rent was paid to The Day Street Unit Trust in which M Lowe, a Director, has a beneficial interest 2019 $ 74,170 Consolidated Entity 2018 $ 173,604 Outstanding balances arising from purchases of services The following balances are outstanding at the reporting date in relation to transactions with related parties: Purchase of services Rent payable for premises from Director 2019 $ Consolidated Entity 2018 $ 14,875 14,875 (b) Equity instrument disclosures relating to Key Management Personnel (i) Rights holdings The numbers of rights over ordinary shares in the Company held during the financial year by each Director of BSA Limited and other key management personnel of the Group, including their personally related parties, are set out below. Balance at Net Balance the start of Granted as Rights Change at End of Vested but Not Vested Vesting and During Rights 2019 the year Compensation Exercised Other Year Exercisable Exercisable Year Nicholas Yates Timothy Harris Michael Givoni Graeme Barclay 1,259,524 - - 375,391 175,440 (375,391) 207,838 251,708 (459,546) 50,000 105,000 (155,000) 1,892,753 532,148 (989,937) - - - - - 1,259,524 175,440 - - 1,434,964 - - - - - 1,259,524 - - - - - 251,708 105,000 1,259,524 356,708 79 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 31 RELATED PARTY TRANSACTIONS (CONTINUED) Balance at Net Balance the start of Granted as Rights Change at End of Vested but Not Vested Vesting and During Rights 2018 the year Compensation Exercised Other Year Exercisable Exercisable Year Nicholas Yates Nicholas Benson Timothy Harris Michael Givoni Graeme Barclay 1,116,667 142,857 - 90,322 - ( 90,322) 200,000 175,391 - - 207,838 50,000 - - - - - - - - 1,259,524 - 375,391 207,838 50,000 1,406,989 576,086 ( 90,322) - 1,892,753 - - - - - - 1,259,524 142,857 - - 375,391 175,391 207,838 207,838 50,000 50,000 1,892,753 576,086 Further details of schemes can be found in the Directors’ Report. (ii) Share holdings The numbers of shares in the Company held during the year by each Director of BSA Limited and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation. Balance at the start of Rights the year Exercised Other Changes During the Year Balance at the End of the Year Balance Held Nominally 2019 Directors of BSA Limited Ordinary Shares Mark Lowe Paul Teisseire Michael Givoni Graeme Barclay Nicholas Yates David Prescott1 Max Cowley2 10,115,403 680,012 - - 796,400 459,546 - 155,000 2,854,760 - - - - - - Ordinary Shares - Escrowed Mark Lowe 200,000 Key Management Personnel Ordinary Shares Timothy Harris - 14,646,575 375,391 989,937 - - - - 52,865 - - - - 52,865 10,115,403 680,012 1,255,946 155,000 2,907,625 - - 200,000 375,391 15,689,377 - - - - - - - - - - 1. David Prescott is Investment Manager of Lanyon Asset Management Pty Ltd which holds 91,405,746 ordinary shares in BSA Limited. 2. Max Cowley is a nominee director of Birketu Pty Ltd and is also a director of Birketu Pty Ltd. Birketu Pty Ltd holds shares in BSA Limited of 72,000,000 (2018: 67,204,000). Max Cowley has no beneficial interest in Birketu Pty Ltd. 80 BSA LIMITEDANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 31 RELATED PARTY TRANSACTIONS (CONTINUED) 2018 the year Exercised During the Year End of the Year Held Nominally Balance at the start of Rights Other Changes Balance at the Balance Directors of BSA Limited Ordinary Shares Mark Lowe Paul Teisseire Michael Givoni Graeme Barclay Nicholas Yates Ordinary Shares - Escrowed Mark Lowe Key Management Personnel Ordinary Shares Nicholas Benson Timothy Harris (c) Executive Securities Loans Opening Balance $000 914 1,661 1,734 1,705 1,473 1,473 1,477 2,552 2,656 2,487 2,437 1,029 833 807 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 10,115,403 680,012 796,400 - 2,727,273 200,000 1,363,636 - 15,882,724 - - - - - - - - - - - - - 10,115,403 680,012 796,400 - 127,487 2,854,760 - 200,000 90,322 - 217,809 1,453,958 - 16,100,533 - - - - - - - - - Balance at Notional Notional Interest Provision for End of Year Interest Charged Not Charged Impairment Number of Individuals $000 $000 $000 $000 726 914 1,661 1,734 1,705 1,473 1,473 1,477 2,552 2,656 2,487 2,437 1,029 833 7 (13) 1 29 232 90 90 93 44 334 171 148 63 26 - - - - - - - - - - - - - - 28 74 74 - - - - - - - - - - - 6 8 11 11 11 11 11 11 13 13 13 13 6 1 81 BSA LIMITED ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 31 RELATED PARTY TRANSACTIONS (CONTINUED) Individuals with loans above $100,000 in reporting period Opening Notional Interest Charged Using Balance at End 2019 Balance Effective Interest Rate Method Ray Larkin Leaston Paull Bryce Wood Peter Tripodi * Younis Tehfe $ 220,507 220,507 186,770 142,500 129,319 $ 1,737 1,737 1,473 - 1,000 * Balance at year end stated at actual date to the terms of the loans of Year $ 222,244 222,244 - 142,500 130,319 Opening Notional Interest Charged Using Balance at End 2018 Balance Effective Interest Rate Method Brendan Foley * Ray Larkin Leaston Paull Bryce Wood Peter Tripodi * Younis Tehfe $ 590,412 227,362 227,362 193,032 143,750 135,453 $ 3,087 ( 6,855) ( 6,855) ( 6,262) - ( 6,134) of Year $ 30,755 220,507 220,507 186,770 142,500 129,319 Highest Balance During Period $ 222,244 222,244 186,770 142,500 130,319 Highest Balance During Period $ 590,412 227,362 227,362 193,032 143,750 135,453 * Balance at year end stated at actual date to the terms of the loans The above current loans represent unsecured loans to purchase shares in BSA Limited which was passed at a meeting of members held on 12 December 2005. The shares were issued between 13 October 2006 and 10 February 2009 at values ranging from 10.0 cents per share to 68.0 cents per share. The loans are repayable on the termination of each individual from the Company and do not bear interest. These loans have been booked into the accounts at net present value on a rolling three year basis. At the discretion of the Board, the above loan to Peter Tripodi was not repaid at the termination date. The outstanding principal is now due and receivable and actions to recover are under way. 82 BSA LIMITEDANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 32 FINANCIAL INSTRUMENTS Fair value of financial instruments carried at amortised cost. The Directors consider that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the financial statements approximate their fair values. Financial Assets Cash and cash equivalents Loans and receivables Trade and other receivables 2019 $’000 Consolidated 2018 $’000 21,941 12,670 57,647 105,735 Financial Assets at amortised cost 79,588 118,405 Financial liabilities Financial liabilities held at amortised cost Trade and other payables Borrowings 54,209 5,673 81,914 5,704 Financial liabilities at amortised cost 59,882 87,618 NOTE 33 FINANCIAL RISK MANAGEMENT (a) General objectives, policies and processes In common with all other businesses, the Group is exposed to financial risks that arise. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. The principal financial instruments from which financial instrument risk arises are: - Trade receivables; - Cash at bank; - Bank overdrafts; - Trade and other payables; and - Borrowings. The Board has overall responsibility for the determination of the Group’s risk management objectives and polices and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The Group's risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the results of the Group where such impacts may be material. The Board receives monthly reports from the Finance Department through which it reviews the effectiveness of the processes put in place and the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below. 83 BSA LIMITED ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 33 FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit Risk Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the Group incurring a financial loss. This usually occurs when debtors fail to settle their obligations owing to the Group. Trade receivables consist of a large number of customers. The Group does not have significant credit risk exposure to any single counterparty or group of counterparties having similar characteristics. The Group defines counterparties as having similar characteristics if they are related entities. Concentration of credit risk to the largest counterparty did not exceed 4% of gross monetary assets at balance date. Concentration of credit risk to any other counterparty did not exceed 7% of gross monetary assets at balance date. The maximum exposure to credit risk at balance date is as follows: Trade and other receivables 2019 $’000 59,395 59,395 Consolidated 2018 $’000 107,170 107,170 Included in trade and other receivables, the most significant customer accounts for 16.5% of trade receivables at 30 June 2019 (2018: 6.6%). The maximum exposure to credit risk at balance date by country is as follows: Australia 2019 $’000 59,395 59,395 The maximum exposure to credit risk for cash and trade receivables at balance date by type of customer is as follows: BSA | Connect BSA | Build BSA | Maintain 2019 $’000 31,278 6,811 21,306 59,395 All major customers are credit worthy, as detailed above. The Group has significant concentration of credit risk as all loans and lease liabilities are with the one financial institution. Consolidated 2018 $’000 107,170 107,170 Consolidated 2018 $’000 29,408 51,204 26,558 107,170 84 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 33 FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Liquidity risk Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The table below sets out details of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk. Financing arrangements The following financing facilities were available at balance date: Credit stand-by arrangements Total facilities: Corporate Market Loan Debtor Finance Facility Used at balance date: Corporate Market Loan Debtor Finance Facility Unused at balance date: Corporate Market Loan Debtor Finance Facility Master Asset Finance Facility Total facilities: Used at balance date Unused at balance date Total unused Facilities at balance date 2019 $’000 20,000 12,500 32,500 - - - - 20,000 12,500 32,500 8,000 3,907 4,093 36,593 Consolidated 2018 $’000 20,000 12,500 32,500 - - - 20,000 12,500 32,500 8,000 4,961 3,039 35,539 In addition to the above arrangements the consolidated entity has a bank guarantee facility of $26,500,000 (2018: $26,500,000) which was utilised to $18,440,000 (2018: $24,902,000). In addition to the above facilities the consolidated entity has a surety bond facility with Swiss Re International SE of $30,000,000 (2018: $30,000,000) which was utilised to $19,969,000 (2018: $16,341,000). Refer Note 22 (a) for details of terms of financing arrangements. 85 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 33 FINANCIAL RISK MANAGEMENT (CONTINUED) Maturity Analysis - Group The following table details the Group's remaining contractual maturity for its financial liabilities with agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are at floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group may be required to pay. The table below includes the weighted average effective interest rate and a reconciliation to the carrying amount in the consolidated statement of financial position as an example of summary quantitative data about exposure to interest rates at the end of the reporting period that an entity may provide internally to management personnel. Financial Liabilities 30 June 2019 Other Trade payables Other payables Finance lease and hire purchase liabilities TOTAL Financial Liabilities 30 June 2018 Other Trade payables Other payables Finance lease and hire purchase liabilities TOTAL Carrying Contractual Cash Amount $’000 1,766 32,808 46,391 3,907 84,872 Flows $’000 1,766 32,808 46,391 4,410 85,375 Carrying Contractual Cash Amount $’000 743 37,573 70,032 4,961 113,309 Flows $’000 743 37,573 70,032 5,486 113,834 < 6 mths $’000 1,766 32,808 46,391 690 81,655 < 6 mths $’000 743 37,573 70,032 748 109,096 6- 12 mths $’000 - - - 690 690 6- 12 mths $’000 - - - 748 748 1-3 years $’000 - - - 3,031 3,031 1-3 years $’000 - - - 3,990 3,990 > 3 years $’000 - - - - - > 3 years $’000 - - - - - The following table details the Group's expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group's liquidity risk management as the liquidity is managed on a net asset and liability basis. Carrying Contractual Cash Amount $’000 46,618 25,612 72,230 Flows $’000 48,323 25,613 73,936 Carrying Contractual Cash Amount $’000 5,986 101,184 107,170 Flows $’000 6,338 102,013 108,351 < 6 mths $’000 48,323 24,887 73,210 < 6 mths $’000 6,338 100,734 107,072 6- 12 mths $’000 - - - 6- 12 mths $’000 - 85 85 1-3 years $’000 - - - 1-3 years $’000 - - - > 3 years $’000 - 726 726 > 3 years $’000 - 1,194 1,194 Financial Assets 30 June 2019 Trade receivables Other receivables TOTAL Financial Assets 30 June 2018 Trade receivables Other receivables TOTAL 86 BSA LIMITEDANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 33 FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Market Risk 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. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied. NOTE 34 CAPITAL AND LEASING COMMITMENTS In managing its capital, the Group’s primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders through a combination of capital growth and distributions. In order to achieve this objective, the Group seeks to maintain a gearing ratio that balances risks and returns at an acceptable level and also to maintain a sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend policy, new share issues or the reduction of debt, the Group considers not only its short-term position but also its long-term operational and strategic objectives. It is the Group’s policy to review its gearing ratio to ensure adequate funds are available to meet its obligations. The Group’s gearing ratio at the balance sheet date is shown below : Gearing ratios Net (cash) / debt Total equity Total Gearing Ratio 2019 $’000 (16,268) 35,934 (45.27%) Consolidated 2018 $’000 (6,966) 45,037 (15.47%) Gearing levels were maintained at a healthy position at 30 June 2019. It is the Board's intention to monitor gearing levels going forward to ensure flexibility. There have been no changes to the Group's capital management objectives, policies and processes in the year nor has there been any change in what the Group considers to be its capital. 87 BSA LIMITED ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTE 35 CONTINGENT LIABILITIES (i) Guarantees established in favour of National Australia Bank Limited and Swiss Re International SE for guarantees issued to various clients for satisfactory contract performance, secured by cross guarantees from all wholly owned group members amounting to $38,409,000 (2018:$41,242,000) (ii) Following the settlement of the NSW OSR issue, BSA is currently working with other State Revenue Authorities on outstanding matters. NOTE 36 CORPORATE INFORMATION The Financial Report of BSA Limited for the year ended 30 June 2019 was authorised for issue in accordance with a resolution of the Directors on 20 August 2019 and covers the consolidated entity consisting of BSA Limited and its subsidiaries as required by the Corporations Act 2001. BSA Limited is a company limited by shares incorporated in Australia and whose shares are publicly traded on the Australian Securities Exchange. The Financial Report is presented in Australian currency. The address of the registered office and principal place of business is: Level 7, 3 Thomas Holt Drive Macquarie Park NSW 2113 88 BSA LIMITEDANNUAL REPORT 2019DIRECTORS’ DECLARATION The Directors declare that: (a) In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; (b) in the Directors’ opinion, the attached consolidated financial statements are in compliance with International Financial Reporting Standards, as stated in note 3.1 to the consolidated financial statements; (c) In the Directors’ opinion, the attached consolidated financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity; and (d) The Directors have been given the declarations required by s.295A of the Corporations Act 2001. At the date of this declaration, the Company is within the class of companies affected by ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, dated 28 September 2016. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee. In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 applies, as detailed in note 18 to the consolidated financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee. Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the Directors. Michael Givoni Chairman Sydney 20 August 2019 89 BSA LIMITED ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT 90 BSA LIMITEDANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT 91 BSA LIMITED ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT 92 BSA LIMITEDANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT 93 BSA LIMITED ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT 94 BSA LIMITEDANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT 95 BSA LIMITED ANNUAL REPORT 2019SHAREHOLDER INFORMATION THE SHAREHOLDER INFORMATION SET OUT BELOW WAS APPLICABLE AS AT 31 JULY 2019 A. DISTRIBUTION OF EQUITY SECURITIES Analysis of numbers of equity security holders by size of holding: Number of Holders Ordinary Shares Number of Holders Options of Holders Rights Number Performance 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and above 180 475 261 688 215 1,819 64,385 1,485,442 2,018,679 29,471,567 395,558,039 428,598,112 - - - - - - - - - - - - 3 - - - 3 6 380.000 - - - 1,988,285 2,368,265 There were 221 (2018: 194) holders of less than a marketable parcel of ordinary shares. B. EQUITY SECURITY HOLDERS Twenty largest quoted equity security holders The names of the twenty largest holders of quoted equity securities are listed below: Name of Holder HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED NATIONAL NOMINEES LIMITED BIRKETU PTY LTD SANDHURST TRUSTEES LTD HGT INVESTMENTS PTY LTD SAMLOWE PTY LTD MR GREG MULLANE J P MORGAN NOMINEES AUSTRALIA PTY LIMITED FF OKRAM PTY LTD EMELWIN PTY LTD EDINGTON PTY LIMITED TALOOMBI PTY LTD CTSF PTY LTD MISS YAN LI MR NICHOLAS JOHN BENSON NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> VANWARD INVESTMENTS LIMITED MR RICHARD EWAN BROMLEY MEWS MR GRAEME LESLIE HERRING + MRS JOAN HERRING MS SUE ELIZABETH MCGREGOR Top 20 Shareholders 96 Ordinary Shares Number Percentage Held of Issued 110,727,006 84,814,853 73,175,760 21,581,723 14,870,544 10,115,403 7,548,743 6,916,806 6,132,908 2,907,625 1,769,376 1,721,257 1,675,945 1,495,000 1,480,883 1,260,949 1,194,807 1,162,949 1,090,656 1,000,000 25.83% 19.79% 17.07% 5.04% 3.47% 2.36% 1.76% 1.61% 1.43% 0.68% 0.41% 0.40% 0.39% 0.35% 0.35% 0.29% 0.28% 0.27% 0.25% 0.23% 352,643,193 82.28% BSA LIMITEDANNUAL REPORT 2019SHAREHOLDER INFORMATION THE SHAREHOLDER INFORMATION SET OUT BELOW WAS APPLICABLE AS AT 31 JULY 2019 C. SUBSTANTIAL SHAREHOLDERS Substantial shareholders in the Company are set out below: Ordinary Shares Number Held Percentage THE TRUST COMPANY LIMITED NAOS ASSET MANAGEMENT LIMITED BIRKETU PTY LTD SANDHURST TRUSTEES LIMITED D. VOTING RIGHTS The voting rights attaching to each class of equity securities are set out below: 87,382,061 83,730,628 73,175,760 21,581,723 20.39% 19.54% 17.07% 5.04% (a) Ordinary shares On a show of hands every member present at a meeting in person, or by proxy, shall have one vote and upon a poll each share shall have one vote. (b) Option over an ordinary share No voting rights. (c) Rights over an ordinary share No voting rights. 97 BSA LIMITED ANNUAL REPORT 2019CORPORATE DIRECTORY BSA Limited - Corporate BSA | Build Registered Office (Sydney) Level 7, 3 Thomas Holt Drive Macquarie Park NSW 2113 P F E W +61 2 8748 2400 +61 2 8748 2577 corporate@bsa.com.au www.bsa.com.au Head Office (Sydney) Level 7, 3 Thomas Holt Drive Macquarie Park NSW 2113 P F +61 2 9763 6200 +61 2 9763 6201 BSA | Connect Head Office (Sydney) Level 7, 3 Thomas Holt Drive Macquarie Park NSW 2113 P F +61 2 8748 2400 +61 2 8748 2577 BSA | Maintain Head Office (Sydney) Level 7, 3 Thomas Holt Drive Macquarie Park NSW 2113 P F +61 2 9763 6200 +61 2 9763 6201 Share Registry Computershare Investor Services GPO Box 2975 Melbourne VIC 3001 Australia P P F 1300 85 05 05 +61 3 9415 4000 +61 3 9473 2500 Auditor Deloitte Touche Tohmatsu 225 George Street Sydney NSW 2000 Banker National Australia Bank 255 George Street Sydney NSW 2000 98 www.bsa.com.au BSA LIMITEDANNUAL REPORT 2019

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