servcorp.com.au
Annual Report 2014
S
E
R
V
C
O
R
P
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
4
One World Trade Center
New York
Six Battery Road
Singapore
Gateway
Sydney
Dashwood House
London
Champs-Elysées
Paris
One Aerospace Center
Chengdu
Hilton Plaza
Osaka
Marunouchi
Trust Tower
Tokyo
2IFC
Hong Kong
Emirates Towers
Dubai
Tornado Tower
Doha
THE SUN
NEVER SETS ON
SERVCORP
SERVCORP ’S AIM
To be the world’s finest Serviced Offices, providing
IT and commercial services second to none, giving
our clients a commercial advantage, paying our people
reasonable wages and giving our shareholders an
acceptable return on the funds they invest.
07 : 00
S Y D N E Y
1 - J U L- 1 4
0 9 : 0 0
A U C K L A N D
1 - J U L- 1 4
0 5 : 0 0
H O N G K O N G
1 - J U L- 1 4
0 5 : 0 0
B E I J I N G
1 - J U L- 1 4
0 1 : 0 0
D U B A I
1 - J U L- 1 4
2 4 : 0 0
I S T A N B U L
1 - J U L- 1 4
1 7 : 0 0
N E W Y O R K
3 0 - J U N - 1 4
1 6 : 0 0
C H I C A G O
3 0 - J U N - 1 4
1 4 : 0 0
L O S A N G E L E S
3 0 - J U N - 1 4
2 3 : 0 0
P A R I S
3 0 - J U N - 1 4
2 2 : 0 0
L O N D O N
3 0 - J U N - 1 4
A t 7. 0 0 a m i n S yd n ey, w h e n t h e S u n i s r i s i n g o n o u r G l o b a l H e a d O f f i c e, we a r e p r ov i d i n g s u p p o r t t o a l l o u r c l i e nt s a r o u n d t h e w o r l d, n o m at t e r w h at t i m e i t i s , t h r o u g h o u r G l o b a l n et w o r k . T h e S u n n eve r s et s o n S e r vc o r p.
Servcorp Limited ABN 97 089 222 506
Servcorp Annual Report 2014 – The Sun never sets on Servcorp 00:2
02
2014 in review
04
Global locations
07
Chairman’s message
08
CEO’s message
1 1
Our global footprint
12
New locations
17
Green initiative
18
Community service
20
Technology
20
Total business solution
20
Awards
22
The Servcorp team
Global communications network 24
26
Corporate governance
36
Directors’ report
46
Remuneration report
59
Financial report
110
Auditor’s report
114
Shareholder information
116
Corporate information
A t 7. 0 0 a m i n S yd n ey, w h e n t h e S u n i s r i s i n g o n o u r G l o b a l H e a d O f f i c e, we a r e p r ov i d i n g s u p p o r t t o a l l o u r c l i e nt s a r o u n d t h e w o r l d, n o m at t e r w h at t i m e i t i s , t h r o u g h o u r G l o b a l n et w o r k . T h e S u n n eve r s et s o n S e r vc o r p.
Servcorp Annual Report 2014 – The Sun never sets on Servcorp 00:01
2014 IN REVIEW
NET PROFIT BEFORE TAX ($MILLIONS)
$50 million
$47.3
$39.4
$34.3
$27.6
$18.3
FY09
$2.9
FY10
$3.0
FY11
FY12
FY13
FY14
FY15
FORECAST
40
30
20
10
0
00:02
2014 IN REVIEW
12 MONTHS ENDED 30 JUNE
Revenue & other income
Net profit before tax
Net profit after tax
Net operating cash flows
Cash & investments
Net assets
Earnings per share
Dividends per share
2010
$’000
168,837
2,875
2,006
8,798
131,948
212,610
$0.022
$0.100
2011
$’000
182,056
3,036
2,493
18,788
99,993
192,612
$0.025
$0.100
2012
$’000
200,785
18,329
14,801
32,003
104,334
198,709
$0.150
$0.150
2013
$’000
207,995
27,630
21,271
27,092
99,758
207,900
$0.216
$0.150
2014
$’000
242,247
34,257
26,336
40,214
108,788
217,101
$0.268
$0.200
REVENUE ($MILLIONS)
SERVCORP FLOORS AND LOCATIONS 1
250
200
150
100
50
0
228.6
182.1
168.8
242.2
200.8
208.0
Locations
Floors
Locations forecast
Floors forecast
132
136
131
124
122
145
116
110
117
103
160
140
120
100
80
60
40
20
0
82
68
FY09
FY10
FY11
FY12
FY13
FY14
FY10
FY11
FY12
FY13
FY14
FY15
SERVCORP OFFICES 1
SERVCORP GEOGRAPHIC SPREAD (FLOORS) 1
5000
4000
3000
2000
1000
0
Offices
Offices forecast
4700
4275
3837
3645
3280
2974
FY10
FY11
FY12
FY13
FY14
FY15
Australia 28
UAE 6
New Zealand 3
United Kingdom 2
Belgium 3
France 2
Singapore 6
Malaysia 2
Thailand 4
Philippines 2
India 3
China 10
Hong Kong 3
Japan 22
United States 22
Turkey 3
Lebanon 1
Kuwait 1
Saudi Arabia 8
Qatar 3
Bahrain 2
1) At 30 June.
Servcorp Annual Report 2014 – The Sun never sets on Servcorp
00:03
SERVCORP WORLDWIDE
KINGDOM OF
SAUDI ARABIA
DAMMAM UTC +03:00
– Levels 20 & 22, Al Hugayet Tower
RIYADH UTC +03:00
– Level 6, Akaria Plaza
– Level 18, Al Faisaliah Tower
– Level 1, The Business Gate
– Level 29, Olaya Towers
JEDDAH UTC +03:00
– Level 9, Jameel Square
– Level 26, Kings Road Tower
– Level 7, Al Murjan Tower
UNITED ARAB EMIRATES
DUBAI UTC +04:00
– Level 23, Boulevard Plaza
– Levels 41 & 42, Emirates Towers
– Levels 21 & 28, Al Habtoor Business
Tower
ABU DHABI UTC +04:00
– Level 4, Al Mamoura
– Level 36, Etihad Towers
INDIA
MUMBAI UTC +05:30
– Levels 7 & 8, Vibgyor Towers
HYDERABAD UTC +05:30
– Level 7, Maximus Towers
UNITED STATES OF
AMERICA
BOSTON UTC -05:00
– Level 14, One International Place
NEW YORK CITY UTC -05:00
– Level 23, 1330 Avenue of the Americas
– Level 26, The Seagram Building
– Level 40, 17 State Street
– Level 85, One World Trade Center
PHILADELPHIA UTC -05:00
– Level 37, BNY Mellon Center
WASHINGTON D.C. UTC -05:00
– Level 10, 1717 Pennsylvania Avenue
– Level 10, 1155 F Street
MIAMI UTC -05:00
– Level 27, Southeast Financial Center
ATLANTA UTC -05:00
– Level 20, Terminus 200
– Level 36, 12th & Midtown
TYSONS CORNER UTC -05:00
– Level 15, Corporate Office Center
Tysons II
CHICAGO UTC -06:00
– Level 42, 155 North Wacker Drive
– Level 49, 300 North LaSalle
HOUSTON UTC -06:00
– Level 39, Bank of America Center
– Level 41, Williams Tower
DALLAS UTC -06:00
– Level 6, JP Morgan International Plaza III
– Level 10, Rosewood Court
– Level 3, 5500 Preston Road
IRVINE UTC -08:00
– Level 8, Irvine Towers
LOS ANGELES UTC -08:00
– Level 40, Figueroa at Wilshire
SAN FRANCISCO UTC -08:00
– Level 27, 101 California Street
– Level 49, 555 California Street
UNITED KINGDOM
LONDON UTC +00:00
– Level 17, Dashwood House
– Level 18, 40 Bank Street, Canary Wharf
– Level 30, The Leadenhall Building
– Level 1, Devonshire House,
One Mayfair Place
FRANCE
PARIS UTC +01:00
– Level 5, 101 Avenue des Champs Elysées
– Actualis, Level 2, Boulevard Haussmann
BELGIUM
BRUSSELS UTC +01:00
– Levels 20 & 21, Bastion Tower
– Level 4, European Quarter - Schuman
LEBANON
BEIRUT UTC +02:00
– Level 2, Beirut Souks
Louis Vuitton Building
TURKEY
ISTANBUL UTC +02:00
– Levels 5 & 6, Louis Vuitton Orjin Building
– Level 8, Tekfen Tower
QATAR
DOHA UTC +03:00
– Levels 14 & 15, Commercialbank Plaza
– Level 22, Tornado Tower
– Level 21, Burj Doha
KINGDOM OF BAHRAIN
MANAMA UTC +03:00
– Levels 22 & 41, West Tower
Bahrain Financial Harbour
KUWAIT
KUWAIT CITY UTC +03:00
– Level 18, Sahab Tower
SUN
1:00
-11
2:00
-10
3:00
-9
4:00
-8
5:00
-7
6:00
-6
7:00
-5
8:00
-4
9:00
-3
10:00
-2
11:00
-1
SUN
12:00
0
13:00
+1
14:00
+2
15:00
+3
16:00
+4
17:00
+5
18:00
+6
19:00
+7
20:00
+8
21:00
+9
22:00
+10
23:00
+11
SUN
24:00
+12
SUN
00:00
-12
00:04
129
LOCATIONS
21
COUNTRIES
gloBal loCaTions
15
TIME ZONES
singapore
singapore UTC +08:00
– Penthouse Level & Level 42,
Suntec Tower Three
– Level 30, Six Battery Road
– Level 39, Marina Bay Financial Centre
– Level 26, PSA Building
– Level 8, The Metropolis Tower 2
japan
Tokyo UTC +09:00
– Level 11, Aoyama Palacio Tower
– Level 14, Hibiya Central Building
– Level 20, Marunouchi Trust Tower – Main
– Level 1, Marunouchi Yusen Building
– Level 7, Wakamatsu Building
– Level 8, Nittochi Nishi-Shinjuku Building
– Level 9, Ariake Frontier Building
– Level 28, Shinagawa Intercity Tower A
– Level 32, Shinjuku Nomura Building
– Level 21, Shiodome Shibarikyu Building
– Level 27, Shiroyama Trust Tower
– Level 45, Sunshine 60
– Level 27, Tokyo Sankei Building
– Level 18, Yebisu Garden Place Tower
yokohaMa UTC +09:00
– Level 10, TOC Minato Mirai
nagoya UTC +09:00
– Level 40, Nagoya Lucent Tower
– Level 4, Nikko Shoken Building
osaka UTC +09:00
– Level 9, Edobori Center Building
– Level 19, Hilton Plaza West Office Tower
– Level 4, Cartier Building Shinsaibashi
Plaza
Fukuoka UTC +09:00
– Level 15, Fukuoka Tenjin Fukoku Seimei
Building
– Level 2, NOF Hakata Ekimae Building
Thailand
Bangkok UTC +07:00
– Levels 8 & 9, 1 Silom Road
– Level 29, The Offices at Centralworld
– Level 18, Park Ventures Ecoplex
Malaysia
kuala luMpur UTC +08:00
– Level 36, Menara Citibank
– Level 20, Menara Standard Chartered
– Level 23, NU Tower 2
philippines
Manila UTC +08:00
– Level 17, 6750 Ayala Avenue Office
Tower
– Level 22, Tower One & Exchange Plaza
China
shanghai UTC +08:00
– Level 23, Citigroup Tower
– Level 29, Shanghai Jing An Kerry Centre
– 5/F Somekh Building, Rockbund
Chengdu UTC +08:00
– Level 18, Shangri-La Office Tower
– Level 28, One Aerospace Center
Beijing UTC +08:00
– Level 24, China Central Place
– Level 19, Oriental Plaza
– Level 26, Fortune Financial Center
hangzhou UTC +08:00
– Level 3, Jiahua International Business
Center
guangzhou UTC +08:00
– Level 54, Guangzhou IFC
hong kong
CenTral UTC +08:00
– Level 19, Two International Finance
Centre
– Level 9, The Hong Kong
Club Building
kowloon UTC +08:00
– Level 12, One Peking Road
ausTralia
perTh UTC +08:00
– Levels 15 & 28, AMP Tower
– Level 18, Central Park
– Level 11, Brookfield Place
adelaide UTC +09:30
– Levels 24 & 30, Westpac House
sydney UTC +10:00
– Level 29, Chifley Tower
– Level 36, Gateway
– Levels 56 & 57, MLC Centre
– Level 26, 44 Market Street
– Level 32, 101 Miller Street
North Sydney
– Level 22, Tower Two Westfield
Bondi Junction
– Level 1, The Octagon
Parramatta
– Level 15, Deloitte Building
Parramatta
– Level 9, Avaya House
North Ryde
– Level 5, Nexus Norwest
Baulkham Hills
BrisBane UTC +10:00
– Level 36, Riparian Plaza
– Level 19, 10 Eagle Street
– Level 27, Santos Place
CanBerra UTC +10:00
– Level 1, The Realm
– Level 9, Nishi Building
MelBourne UTC +10:00
– Levels 18 & 27, 101 Collins Street
– Level 40, 140 William Street
– Level 2, 710 Collins Street
Docklands
– Level 2, Riverside Quay
Southbank
hoBarT UTC +10:00
– Level 6, Reserve Bank Building
new zealand
auCkland UTC +12:00
– Level 27, PWC Tower
– Level 31, Vero Centre
wellingTon UTC +12:00
– Level 16, Vodafone on the Quay
SUN
1:00
-11
2:00
-10
3:00
-9
4:00
-8
5:00
-7
6:00
-6
7:00
-5
8:00
-4
9:00
-3
10:00
-2
11:00
-1
13:00
+1
14:00
+2
15:00
+3
16:00
+4
17:00
+5
18:00
+6
19:00
+7
20:00
+8
21:00
+9
22:00
+10
23:00
+11
SUN
12:00
0
SUN
24:00
+12
SUN
00:00
-12
Servcorp Annual Report 2014 – The Sun never sets on Servcorp
00:05
06: 00
T O K Y O
CHAIRMAN’S MESSAGE
CHAIRMAN’S
MESSAGE
The Company’s global expansion
program, commenced in 2009, is
now creating the desired momentum
in revenue growth and improving
margins, and is also leading to an
increase in shareholder wealth.
$242.25
MILLION IN REVENUE FOR THE YEAR
20.00 cps
DIVIDENDS FOR THE YEAR
Revenue for the year was $242.25 million, an increase of
17% on 2013. Net profit before tax increased to $34.26 million,
up 24% on 2013, and increased 35% in like for like terms.
Net profit after tax increased to $26.34 million with an increase
in earnings per share to 26.8 cents, up 24% on 2013.
Revenue and profit growth was achieved across most geographic
segments. Most pleasing was our performance in the Middle East
and Japan, and the continued improvement in the USA.
Directors have declared a final dividend of 11.00 cents per share,
35% franked. The dividend per share was increased from the
anticipated 9.00 cents per share to 11.00 cents per share to partly
compensate shareholders for the lower franking level, caused by
reduced profits in Australia and resultant lower tax payments.
This final dividend brings total dividends for the year to 20.00
cents per share, resulting in a payout to shareholders of
approximately $19.69 million.
Servcorp’s financial strength underpins its success. During the
2014 financial year, the business generated strong net operating
cash surpluses of $40.21 million. Cash and investment balances
at 30 June 2014 were $108.79 million; $93.45 million of this balance
was unencumbered and the Company has negligible debt.
Directors undertook a comprehensive review of executive
remuneration during the year. The Company recorded a first
strike with respect to voting on the Remuneration Report for
the year ended 30 June 2013, and directors acknowledge that
some shareholders were obviously not happy with certain aspects
of Servcorp’s remuneration arrangements. CRA Plan Managers
Pty Ltd was engaged to review the remuneration structures
and incentive plans, and I met with a number of shareholders
and proxy advisor CGI Glass Lewis. The directors believe
Servcorp’s approach to non-executive director and executive KMP
remuneration going forward is balanced, fair and equitable and
designed to achieve an alignment of interests between executive
reward and shareholder expectations and financial return.
Notwithstanding significant levels of global political and
economic uncertainty, we anticipate our growth to continue
in 2015. We expect to grow office capacity by approximately
10% and net profit before tax to increase by no less than 15%.
Directors anticipate the level of dividends for the 2015 financial
year will be not less than 22.00 cents per share; however, future
franking levels are currently uncertain. These forecasts are
subject to currencies remaining constant, global financial markets
remaining stable and no unforeseen circumstances.
Over the last five years, we have substantially enhanced our
global footprint and, as the economy improves, we are very well
positioned to take advantage of the recovery in global business
sentiment. Our current vacancy levels give us a significant
opportunity to grow our revenues from our existing business.
On behalf of the Board, I want to acknowledge the outstanding
efforts of our CEO, Alf Moufarrige, our leadership group and all
the Servcorp team members for their dedication and commitment
during the past year. Due to their efforts we have a strong global
presence and continue to maintain our position as the world’s
premium provider of serviced and virtual office solutions.
We thank you, our shareholders, for your continuing support.
Bruce Corlett AM
Chairman
Servcorp Annual Report 2014 – The Sun never sets on Servcorp 00:07
CEO’S MESSAGE
FINALLY WE
ARE BACK…
building a sustainable…
growing…
profitable business.
$40
MILLION EXCEEDED
IN FREE CASHFLOW
27%
GROWTH IN EBITDA
TO $47 MILLION
$34.2
MILLION NPBT, UP 24%
ON LAST YEAR
Growth in sheer office numbers last year was over 10% and we expect serviced office
numbers to continue growing at approximately 1% per month.
– EBITDA growth last year rose 27% to $47 million.
– Free cashflow exceeded $40 million.
– NPBT increased to $34.2 million, up 24%.
We should continue to see Servcorp’s revenue and profit grow if the first two months
of the 2015 financial year are an indication.
NPBT growth should exceed 15% allowing us to increase our dividend from 20 cents,
to 22 cents per share, with no guarantee there will be any franking on the 2014-2015
financial year’s dividends.
It was a good year and we achieved growth in all areas, paid a dividend of 20 cents,
our cash and investment balance rose from $100 million to $109 million, and unencumbered
cash rose from $91 million to $93.5 million.
Servcorp is well positioned to perform in an improving market and continue to grow
if there is a slowing in the world markets.
We are a different business to the Servcorp that entered the global financial crisis,
with a better prepared and trained team, with great locations and a managed workspace,
IT advantage, all of which should stand us in good stead for the battles ahead.
I thank the team for their tireless efforts, together with the Board — Bruce Corlett,
Rick Holliday-Smith, Mark Vaile and Taine Moufarrige, for their valued advice.
Shi’ite, Maronite,
Orthodox, Christian, Druid,
Buddhist and Hindu –
All work in commercial
harmony within Servcorp.
A G Moufarrige
CEO
00:08
24:00
ISTANBUL
TOKYO Marunouchi Yusen Building
GUANGZHOU Guangzhou IFC
DUBAI Boulevard Plaza
BEIJING Fortune Financial Center
RIYADH Olaya Towers
SINGAPORE The Metropolis Tower 2
SYDNEY Gateway
GLOBAL FOOTPRINT
GLOBAL
FOOTPRINT
Servcorp has a strong track record
of global organic growth since its IPO
in 1999. At the time of the IPO, Servcorp
operated in 8 countries with 35 floors.
By June 2009, Servcorp operated in
14 countries, with 73 floors; in 10 years
Servcorp had doubled its size.
In 2009 the global market conditions created an opportunity to
secure leases on what was expected to be very favourable terms.
This represented an attractive opportunity for aggressive expansion.
During October and November 2009, Servcorp successfully
undertook an equity capital raising of $80 million to fund a global
expansion program.
In the five years from July 2009 to June 2014, 78 new floors
have been opened, and Servcorp’s operations have expanded into
7 new countries. The 2011 financial year was Servcorp’s biggest
expansion year in its history, with 40 floors opening in 29 cities across
12 countries. We have continued a steady pace of expansion over
the subsequent years, substantially enhancing our footprint and
establishing critical mass. With the majority of leases executed at
or near the bottom of the market, as the global economy improves,
we are well positioned to take advantage of the recovery in
global business sentiment.
At 30 June 2014, Servcorp operated 136 floors in 52 cities across
21 countries.
In the 2014 financial year, we have opened 6 new floors; in Beijing,
Dubai, Riyadh, Singapore, Sydney and Tokyo, and we have expanded
existing floors in Brisbane, Guangzhou, Hong Kong and 2 in
Singapore. Total office capacity increased by 11%.
– In Beijing, we opened our new landmark location in Fortune
Financial Center. We were honoured to have the Australian Prime
Minister, Tony Abbott, officially open the floor.
– Sydney’s new floor is on Level 36 of Gateway, one of Sydney’s
most prominent buildings, with spectacular views of Sydney Harbour
Bridge, The Opera House and the cityscape.
– In Tokyo, we opened in the Yusen Building, situated in
Japan’s most highly esteemed location, “the avenue that
leads to the Emperor”, on the Marunouchi side of the Imperial
Palace’s outer moat.
We have committed to open a further 9 floors in the 2015 financial
year. In addition, we will expand at least 3 existing floors, adding
approximately 10% to our office capacity. Our new floors in 2015
will include Level 85 of the prestigious One World Trade Center in
New York City and, in London, Devonshire House at One Mayfair
Place and The Leadenhall Building (the Cheesegrater), which will
be the tallest building by roof height in the City of London.
BEIJING Fortune Financial Center
SYDNEY Gateway
Servcorp Annual Report 2014 – The Sun never sets on Servcorp
00:11
NEW LOCATIONS
NEW LOCATIONS
4,275
TOTAL OFFICES
136
TOTAL FLOORS
122
TOTAL LOCATIONS
6
NEW FLOORS IN FY14
TOTAL OFFICES, FLOORS AND LOCATIONS AS AT 30 JUNE
Offices
Floors
Locations
2010
2011
2012
2013
2014
2015 projected
2,974
3,280
3,645
3,837
4,275
4,700
82
116
124
132
136
145
68
103
110
117
122
131
TOTAL NEW FLOORS BY REGION FOR 12 MONTHS ENDED 30 JUNE
Region
Australia & New Zealand
Southeast Asia
Greater China
Japan
Europe & United Kingdom
Middle East
United States of America
Total
2014-2015 NEW FLOORS
2010
2011
2012
2013
2014
Total
2015 (est)
Total (est)
–
–
4
3
1
3
2
13
7
2
–
3
2
7
19
40
2
1
4
–
–
2
–
9
3
2
–
–
–
4
1
10
1
1
1
1
–
2
–
6
13
6
9
7
3
18
22
78
1
1
–
–
2
4
1
9
14
7
9
7
5
22
23
87
australia
SOUTHEAST ASIA
middle east
united kingdom
london
nov-2014
jan-2015
kuala lumpur
abu dhabi
sep-2014
nov-2014
dammam
jan-2015
jeddah
DEC-2014
qatar
aug-2014
canberra
aug-2014
USA
new york
jan-2015
00:12
new LOCATIOnS
KUALA LUMPUR Level 23, NU Tower 2
ABU DHABI Level 36, Etihad Towers
LONDON Level 30, The Leadenhall Building
NEW YORK Level 85, One World Trade Center
DOHA Level 21, Burj Doha
LONDON Level 1, Devonshire House, One Mayfair Place
LONDON
RISING
London and New York City
control the financial world.
This year we link these two
commercial historic cities.
Servcorp is expanding its network of five star
Serviced Offices in London. Our new location
in The Leadenhall Building (the Cheesegrater),
122 Leadenhall Street, will further enhance
our prominent location in the City of London at
Dashwood House, 69 Old Broad Street and also
our location at 40 Bank Street in Canary Wharf.
Servcorp will also open its most prestigious
location, in Devonshire House at One Mayfair
Place, Mayfair in the City of Westminster. Mayfair
is the world’s five star benchmark.
From your Servcorp office, you have a view of
the most recognised landmarks in the world.
00:14
NEW LOCATIONS
Servcorp Annual Report 2014 – The Sun never sets on Servcorp
00:15
01: 00
abu dhabi
OUR ENVIRONMENTAL
COMMITMENT
GREEN INITIATIVE
Servcorp has a vested interest in
helping preserve our environment and
continues to find ways of contributing to
the reduction of the carbon footprint we
leave on the planet. A key partnership
that Servcorp has held with Greenfleet
for eight years, to date, has provided
Servcorp with the opportunity to not only
give something back to the environment,
but measure the impact this has had.
The Green Offices Project is an ongoing activity supported by
Greenfleet, whereby Servcorp plants a tree for every Virtual Office
sold online through our website. As Servcorp focuses on increasing
online sales conversions, this initiative facilitates the added
incentive of helping offset our existing carbon footprint.
Since the project began in 2007, Servcorp has planted more than
26,610 trees with an offset of 7,131 tonnes of carbon dioxide;
1,526 trees have been planted in 2014 alone, which will offset 409
tonnes of carbon dioxide from the atmosphere during their lifespan.
The Servcorp Forest covers more than 100,000 square metres
of regional land and has an environmental impact equivalent to
removing more than 1,250 cars from the road.
As a global company, we have a responsibility for taking a
leadership role amongst both team members and clients
worldwide to educate them on our values and attitude towards
the environment. We will endeavour to make everyday changes,
such as reducing paper use, recycling waste materials and using
energy efficient processes, to help make a difference. As Servcorp
continues to grow and open new locations, we choose green
buildings as another step in the right direction.
1,526
TREES PLANTED IN 2014 ALONE
409
TONNES OF CARBON DIOXIDE WILL
BE OFFSET DURING THEIR LIFESPAN
100,000
SQUARE METRES IS OCCUPIED BY
THE SERVCORP FOREST
ENVIRONMENTAL IMPACT
EQUIVILANT TO REMOVING
1,250
CARS FROM THE ROAD
Servcorp Annual Report 2014 – The Sun never sets on Servcorp
00:17
COMMUNITY SERVICE
GLOBAL AND LOCAL
COMMUNITY SERVICE
Servcorp supports and assists continuing research into the prevention
and cure of cancer and assisting young, seriously or terminally ill members
of the community.
Servcorp also contributes to many other local charitable
organisations around the world, and sponsors and supports
the Australian Chamber Orchestra and Sydney Dance Company.
Servcorp is a racially diverse company, supporting Christian,
Buddhist, Muslim and Jewish causes. We are proud of the fact
that, as a global Company, we work with our local communities
to bring about real change for good.
We’d like to thank our clients and those who contributed to the
success of our fundraising for the year.
Servcorp holds charity functions and balls, runs raffles and
undertakes donation drives all year round in all our locations.
Every dollar that is raised by our teams on the ground is
matched dollar for dollar by Servcorp. Over the last two years,
Servcorp has raised and donated in excess of $400,000 to help
the below organisations. In Australia, Youngcare continues to be
the main focus of our fundraising, and non-executive Director,
Taine Moufarrige, continues to be heavily involved
with this organisation.
The other organisations we strongly supported globally this
year included:
– Australian Red Cross
– Brisbane Special Children’s Christmas Party
– Cancer Council
– Everyday Hero
– Lifestart – Kayak for Kids
– Look Good Feel Better – Australia
– Murdoch Childrens Research Institute
– New Israel Fund Australia Foundation
– Rotary Club of Sydney
– Sydney Children’s Hospital Foundation
– Mater Lives Committee (Mater Hospital)
– The Mater Foundation
– The Salvation Army
– Al Jalila Foundation – Dubai
– Assisi Hospice – Singapore
– Breast Cancer Arabia™ Foundation (Dubai Goes Pink) – Dubai
– BurJuman Breast Cancer Awareness Program
‘Safe & Sound’ – Middle East
– Children’s Joy Foundation – Philippines
– Fundraising for victims of Typhoon Yolanda – Philippines
– Look Good Feel Better – United Kingdom
– Médecins Sans Frontières (MSF) – Hong Kong
– Persatuan Rumah Sayangan – Kuala Lumpur Orphanage Home
– Run for the Cure – Japan
– Tyler Foundation (Shine On! Kids) – Japan
00:18
22:00
LONDON
TECHNOLOGY, BUSINESS SOLUTIONS & AWARDS
INFORMATION &
COMMUNICATION TECHNOLOGY
Servcorp continues to invest in our world leading technology
services business. We have consolidated many of our voice and
data services around the world to improve flexibility and mobility
for all Servcorp’s clients. In addition to this, it improves speed to
the market and reduces operating costs.
The Servcorp development team have deployed our new
management system in some trial locations and will continue
deployment throughout the year.
The new management system greatly reduces administrative
tasks for Servcorp managers and enables clients to easily access
more services in a self-service way. It also provides Servcorp’s
clients with unparalleled transparency in billing.
We firmly believe that this new system will take Servcorp into
its next level of growth.
AUTOMATED ATTENDANT
AUTOMATED ATTENDANT
CALL DIVERSION
AUTOMATED ATTENDANT
CALL DIVERSION
CALL SCREENING
CALL SCREENING
AUTOMATED ATTENDANT
CONFERENCE CALLING
CALL DIVERSION
CALL SCREENING
CONFERENCE CALLING
CALL DIVERSION
AUTOMATED ATTENDANT
TOTAL BUSINESS SOLUTION
FIND ME FOLLOW ME
GLOBAL DIAL
CONFERENCE CALLING
FIND ME FOLLOW ME
FIND ME FOLLOW ME
FIND ME FOLLOW ME
GLOBAL DIAL
IP VIDEO PHONE
CALL SCREENING
CALL DIVERSION
IP VIDEO PHONE
GLOBAL DIAL
IT SUPPORT
IP VIDEO PHONE
IT SUPPORT
GLOBAL DIAL
WITH SERVCORP YOU WILL:
CONFERENCE CALLING
CALL SCREENING
CONFERENCE CALLING
IT SUPPORT
IP VIDEO PHONE
IT SUPPORT
AUTOMATED ATTENDANT
CONFERENCE CALLING
Have access to the most advanced global communication system
CALL SCREENING
CALL DIVERSION
LOCAL NUMBER
LOCAL NUMBER
ONE PHONE
FIND ME FOLLOW ME
GLOBAL DIAL
IP VIDEO PHONE
IT SUPPORT
LOCAL NUMBER
ONE PHONE
PROFESSIONAL PHONE
GREETINGS
ONE PHONE
LOCAL NUMBER
PROFESSIONAL PHONE
GREETINGS
VOICEMAIL &
FAX TO EMAIL
ONE PHONE
PROFESSIONAL PHONE
VOICEMAIL &
GREETINGS
FAX TO EMAIL
PROFESSIONAL PHONE
VOICEMAIL &
GREETINGS
FAX TO EMAIL
VOICEMAIL &
FAX TO EMAIL
AUTOMATED ATTENDANT
CALL DIVERSION
FIND ME FOLLOW ME
AUTOMATED ATTENDANT
CALL SCREENING
Automated
attendant
LOCAL NUMBER
CALL DIVERSION
CONFERENCE CALLING
Conference
GLOBAL DIAL
calling
ONE PHONE
VOICEMAIL TO SMS
IP video phone
IP VIDEO PHONE
CALL SCREENING
VOICEMAIL TO SMS
PROFESSIONAL PHONE
GREETINGS
CONFERENCE CALLING
WIRELESS INTERNET
Wireless
IT SUPPORT
Internet
VOICEMAIL TO SMS
WIRELESS INTERNET
VOICEMAIL &
VOICEMAIL NOTIFICATION
Voicemail and
FAX TO EMAIL
fax to email
WIRELESS INTERNET
VOICEMAIL NOTIFICATION
VOICEMAIL TO SMS
Voicemail to SMS
CALL SCREENING
WIRELESS INTERNET
VOICEMAIL NOTIFICATION
EXTENSION RINGS
CALL SCREENING
Voicemail
ON MOBILE
notification
VOICEMAIL NOTIFICATION
CALL SCREENING
EXTENSION RINGS
Extension rings
ON MOBILE
on mobile
EXTENSION RINGS
ON MOBILE
CALL SCREENING
EXTENSION RINGS
ON MOBILE
AUTOMATED ATTENDANT
CALL DIVERSION
CALL SCREENING
CONFERENCE CALLING
AUTOMATED ATTENDANT
CALL DIVERSION
AUTOMATED ATTENDANT
CALL SCREENING
CALL DIVERSION
CONFERENCE CALLING
CALL SCREENING
CONFERENCE CALLING
Never miss that
AUTOMATED ATTENDANT
important call
AUTOMATED ATTENDANT
FIND ME FOLLOW ME
CALL DIVERSION
CALL DIVERSION
AUTOMATED ATTENDANT
GLOBAL DIAL
Take your office with you
CALL SCREENING
CALL DIVERSION
anywhere you go
CALL SCREENING
IP VIDEO PHONE
CONFERENCE CALLING
CONFERENCE CALLING
CALL SCREENING
Run your business
IT SUPPORT
more efficiently
FIND ME FOLLOW ME
CONFERENCE CALLING
FIND ME FOLLOW ME
GLOBAL DIAL
LOCAL NUMBER
FIND ME FOLLOW ME
IP VIDEO PHONE
ONE PHONE
IT SUPPORT
GLOBAL DIAL
PROFESSIONAL PHONE
GREETINGS
IP VIDEO PHONE
IT SUPPORT
VOICEMAIL &
FAX TO EMAIL
VOICEMAIL TO SMS
WIRELESS INTERNET
VOICEMAIL NOTIFICATION
CALL SCREENING
EXTENSION RINGS
ON MOBILE
AUTOMATED ATTENDANT
FIND ME FOLLOW ME
GLOBAL DIAL
GLOBAL DIAL
FIND ME FOLLOW ME
FIND ME FOLLOW ME
Find Me
Follow Me
CALL DIVERSION
LOCAL NUMBER
Call
diversion
CALL SCREENING
ONE PHONE
Onefone
– VOIP
IP VIDEO PHONE
AUTOMATED ATTENDANT
CONFERENCE CALLING
PROFESSIONAL PHONE
IP VIDEO PHONE
Global dial
GLOBAL DIAL
GREETINGS
IT SUPPORT
CALL DIVERSION
IT SUPPORT
IT support
IP VIDEO PHONE
LOCAL NUMBER
CALL SCREENING
Call screening
IT SUPPORT
VOICEMAIL &
FAX TO EMAIL
LOCAL NUMBER
ONE PHONE
VOICEMAIL TO SMS
LOCAL NUMBER
PROFESSIONAL PHONE
GREETINGS
WIRELESS INTERNET
VOICEMAIL NOTIFICATION
CALL SCREENING
ONE PHONE
VOICEMAIL &
FAX TO EMAIL
PROFESSIONAL PHONE
GREETINGS
VOICEMAIL &
FAX TO EMAIL
EXTENSION RINGS
ON MOBILE
Expand your business
GLOBAL DIAL
FIND ME FOLLOW ME
with ease
IP VIDEO PHONE
GLOBAL DIAL
IT SUPPORT
IP VIDEO PHONE
IT SUPPORT
ONE PHONE
CONFERENCE CALLING
Local
LOCAL NUMBER
number
PROFESSIONAL PHONE
Professional
ONE PHONE
GREETINGS
phone greetings
PROFESSIONAL PHONE
GREETINGS
VOICEMAIL &
FAX TO EMAIL
VOICEMAIL &
FAX TO EMAIL
FIND ME FOLLOW ME
LOCAL NUMBER
VOICEMAIL TO SMS
GLOBAL DIAL
ONE PHONE
LOCAL NUMBER
WIRELESS INTERNET
IP VIDEO PHONE
ONE PHONE
LOCAL NUMBER
PROFESSIONAL PHONE
GREETINGS
PROFESSIONAL PHONE
GREETINGS
ONE PHONE
FIND ME FOLLOW ME
VOICEMAIL NOTIFICATION
IT SUPPORT
VOICEMAIL &
FAX TO EMAIL
GLOBAL DIAL
PROFESSIONAL PHONE
VOICEMAIL &
GREETINGS
FAX TO EMAIL
VOICEMAIL &
FAX TO EMAIL
CALL SCREENING
VOICEMAIL TO SMS
IP VIDEO PHONE
EXTENSION RINGS
ON MOBILE
WIRELESS INTERNET
VOICEMAIL TO SMS
IT SUPPORT
VOICEMAIL NOTIFICATION
WIRELESS INTERNET
CALL SCREENING
VOICEMAIL NOTIFICATION
EXTENSION RINGS
ON MOBILE
CALL SCREENING
EXTENSION RINGS
ON MOBILE
VOICEMAIL TO SMS
WIRELESS INTERNET
VOICEMAIL NOTIFICATION
VOICEMAIL TO SMS
WIRELESS INTERNET
CALL SCREENING
AWARDS
VOICEMAIL NOTIFICATION
EXTENSION RINGS
ON MOBILE
CALL SCREENING
EXTENSION RINGS
ON MOBILE
VOICEMAIL TO SMS
VOICEMAIL TO SMS
WIRELESS INTERNET
WIRELESS INTERNET
VOICEMAIL TO SMS
VOICEMAIL NOTIFICATION
VOICEMAIL NOTIFICATION
WIRELESS INTERNET
CALL SCREENING
LOCAL NUMBER
ONE PHONE
PROFESSIONAL PHONE
GREETINGS
LOCAL NUMBER
VOICEMAIL &
FAX TO EMAIL
CALL SCREENING
VOICEMAIL NOTIFICATION
ONE PHONE
EXTENSION RINGS
ON MOBILE
EXTENSION RINGS
ON MOBILE
PROFESSIONAL PHONE
GREETINGS
CALL SCREENING
EXTENSION RINGS
ON MOBILE
VOICEMAIL &
FAX TO EMAIL
VOICEMAIL NOTIFICATION
CEO Middle East’s 100 Most
Powerful Arab Women 2014
EXTENSION RINGS
ON MOBILE
Event Appreciation Award (Sponsor)
WIRELESS INTERNET
VOICEMAIL TO SMS
CALL SCREENING
VOICEMAIL TO SMS
International Finance
Magazine Awards 2013
Most Innovative Business
Solutions Provider
WIRELESS INTERNET
00:20
VOICEMAIL NOTIFICATION
2014 Western Sydney Awards
for Business Excellence
Appreciation Award (Sponsor)
CALL SCREENING
EXTENSION RINGS
ON MOBILE
17: 00
N E W Y O R K
CHICAGO
TYSONS CORNER
BOSTON
NEW YORK CITY
PHILADELPHIA
WASHINGTON D.C.
SAN FRANCISCO
LOS ANGELES
IRVINE
DALLAS
HOUSTON
ATLANTA
MIAMI
LONDON
PARIS
BRUSSELS
ISTANBUL
BEIRUT
KUWAIT CITY
AL KHOBAR -DAMMAM
RIYADH
JEDDAH
BEIJING
SHANGHAI
HANGZHOU
TOKYO
YOKOHAMA
NAGOYA
OSAKA
FUKUOKA
MANAMA
DUBAI
ABU DHABI
DOHA
MUMBAI
HYDERABAD
CHENGDU
GUANGZHOU
HONG KONG
BANGKOK
MANILA
KUALA LUMPUR
SINGAPORE
SUN
1:00
-11
2:00
-10
3:00
-9
4:00
-8
5:00
-7
6:00
-6
7:00
-5
8:00
-4
9:00
-3
10:00
-2
11:00
-1
13:00
+1
14:00
+2
15:00
+3
16:00
+4
17:00
+5
18:00
+6
19:00
+7
20:00
+8
21:00
+9
22:00
+10
23:00
+11
SUN
12:00
0
SUN
24:00
+12
SUN
00:00
-12
BRISBANE
SYDNEY
CANBERRA
PERTH
ADELAIDE
MELBOURNE
HOBART
AUCKLAND
WELLINGTON
THE SERVCORP TEAM
00:22
THE SERVCORP TEAM
OUR TEAM LEADERS
THE BOARD AND EXECUTIVE
Bruce Corlett – Chairman
Rick Holliday-Smith – Non-Executive Director
Mark Vaile – Non-Executive Director
Taine Moufarrige – Non-Executive Director
Alf Moufarrige – Executive Director, CEO
We asked the Servcorp team about
their favourite sunrise activities – fold
out to see what we’re up to first thing
in the morning.
Marcus Moufarrige (BCom) – Chief Operating Officer
Thomas Wallace (BBS, FCA) – Chief Financial Officer
Greg Pearce (CA, AGIA, ACIS) – Company Secretary
OPERATIONAL EXECUTIVE
Jennifer Goodwyn (BA) – Vice President / General Manager USA
Liane Gorman – General Manager Australia & New Zealand
Laudy Lahdo (BCom) – General Manager Middle East
Olga Vlietstra (BA) – General Manager Japan
Wilma Wu (BA Hons) – General Manager Hong Kong
Manami Alberto (BA) – Senior Manager Japan
Anne Guinebault (BBus, MMR) – Senior Manager Paris
Fabienne Hajjar (PharmD) – Senior Manager Qatar
Michaela Julian (BA) – Senior Manager China
Krystle Sulway – Senior Manager UK & Turkey
HEAD OFFICE EXECUTIVE
Simon Smith (MA (Cantab), MBA) – Vice President Virtual Office
Selene Ng (BCom, BA) – General Manager Serviced Offices
Warren James – Manager International Property Portfolio
Lachlan Buchanan (BCom) – International Property Project Manager
Matthew Baumgartner (BInfTech (SE), CCIE, MBA) – Chief Information Officer
Daniel Kukucka (BE, DipEngPrac) – Chief Technology Officer
Servcorp Annual Report 2014 – The Sun never sets on Servcorp 00:23
GLOBAL
COMMUNICATIONS
NETWORK
SAN FRANCISCO
LOS ANGELES
IRVINE
CHICAGO
TYSONS CORNER
DALLAS
HOUSTON
ATLANTA
MIAMI
BOSTON
NEW YORK CITY
PHILADELPHIA
WASHINGTON D.C.
LONDON
PARIS
BRUSSELS
ISTANBUL
BEIRUT
KUWAIT CITY
AL KHOBAR -DAMMAM
RIYADH
JEDDAH
BEIJING
SHANGHAI
HANGZHOU
TOKYO
YOKOHAMA
NAGOYA
OSAKA
FUKUOKA
MANAMA
DUBAI
ABU DHABI
DOHA
MUMBAI
HYDERABAD
CHENGDU
GUANGZHOU
HONG KONG
BANGKOK
MANILA
KUALA LUMPUR
SINGAPORE
2:00
-10
3:00
-9
4:00
-8
5:00
-7
6:00
-6
7:00
-5
8:00
-4
9:00
-3
10:00
-2
11:00
-1
SUN
12:00
0
13:00
+1
14:00
+2
15:00
+3
16:00
+4
17:00
+5
18:00
+6
19:00
+7
20:00
+8
21:00
+9
22:00
+10
23:00
+11
SUN
24:00
+12
SUN
00:00
-12
SUN
1:00
-11
00:24
BRISBANE
SYDNEY
CANBERRA
PERTH
ADELAIDE
MELBOURNE
HOBART
AUCKLAND
WELLINGTON
INFORMATION &
COMMUNICATION TECHNOLOGY
GLOBAL COMMUNICATIONS NETWORK
CHICAGO
TYSONS CORNER
BOSTON
NEW YORK CITY
PHILADELPHIA
WASHINGTON D.C.
SAN FRANCISCO
LOS ANGELES
IRVINE
DALLAS
HOUSTON
ATLANTA
MIAMI
LONDON
PARIS
BRUSSELS
ISTANBUL
BEIRUT
KUWAIT CITY
AL KHOBAR -DAMMAM
RIYADH
JEDDAH
BEIJING
SHANGHAI
HANGZHOU
TOKYO
YOKOHAMA
NAGOYA
OSAKA
FUKUOKA
MANAMA
DUBAI
ABU DHABI
DOHA
MUMBAI
HYDERABAD
CHENGDU
GUANGZHOU
HONG KONG
BANGKOK
MANILA
KUALA LUMPUR
SINGAPORE
SUN
1:00
-11
2:00
-10
3:00
-9
4:00
-8
5:00
-7
6:00
-6
7:00
-5
8:00
-4
9:00
-3
10:00
-2
11:00
-1
13:00
+1
14:00
+2
15:00
+3
16:00
+4
17:00
+5
18:00
+6
19:00
+7
20:00
+8
21:00
+9
22:00
+10
23:00
+11
SUN
12:00
0
SUN
24:00
+12
SUN
00:00
-12
Servcorp Annual Report 2014 – The Sun never sets on Servcorp
00:25
BRISBANE
SYDNEY
CANBERRA
PERTH
ADELAIDE
MELBOURNE
HOBART
AUCKLAND
WELLINGTON
CORPORATE GOVERNANCE
The Board has responsibility for the long term financial health and prosperity of
Servcorp. The directors are responsible to the shareholders for the performance of
the Company and the Consolidated Entity and to ensure that it is properly managed.
The Board is committed to the principles underpinning the ASX Corporate
Governance Council Principles and Recommendations. The Board is continually
working to improve the Company’s governance policies and practices, where such
practices will bring benefits or efficiencies to the Company.
Details of Servcorp’s compliance are set out below, and in the ASX principles
compliance statement on pages 30 to 34 of this annual report.
ROLE OF THE BOARD
The Board has adopted a formal statement of matters reserved for
the Board. The central role of the Board is to set the Company’s
strategic direction and to oversee the Company’s management and
business activities.
COMPOSITION OF THE BOARD
The size and composition of the Board is determined by the
Board, subject to the limits set out in Servcorp’s Constitution which
requires a minimum of three directors and a maximum of twelve
directors.
Responsibility for management of the Company’s business
activities is delegated to the CEO and management.
The Board comprises five directors (one executive and four
non-executive). Three non-executive directors are independent.
The Board’s primary responsibilities are:
– the protection and enhancement of long term shareholder value;
– ensuring Servcorp has appropriate corporate governance
structures in place;
– endorsing strategic direction;
– monitoring the Company’s performance within that strategic
direction;
– appointing the Chief Executive Officer and evaluating his
performance and remuneration;
– monitoring business performance and results;
– identifying areas of significant risk and seeking to put in
place appropriate and adequate control, monitoring and
reporting mechanisms to manage those risks;
– establishing appropriate standards of ethical behaviour
and a culture of corporate and social responsibility;
– approving senior executive remuneration policies;
– ratifying the appointment of the Chief Financial Officer and the
Company Secretary;
– monitoring compliance with continuous disclosure policy in
accordance with the Corporations Act 2001 and the Listing Rules
of the Australian Securities Exchange;
– monitoring that the Company acts lawfully and responsibly;
– reporting to shareholders;
– addressing all matters in relation to issued securities of the
Company including the declaration of dividends;
– ensuring the Board is, and remains, appropriately skilled to meet
the changing needs of the Company.
The Board Charter is available on the Company’s website;
servcorp.com.au
There has been no change to the Board since the last
annual report.
The Chairman of the Board, Mr Bruce Corlett, is an independent
non-executive director.
The non-executive directors bring to the Board an appropriate
range of skills, experience and expertise to ensure that Servcorp
is run in the best interest of all stakeholders. The skills, experience
and expertise of each director in office at the date of this annual
report are set out on pages 36 and 37 of this annual report. The
Board will continue to be made up of a majority of independent
non-executive directors. The performance of non-executive
directors was reviewed during the year.
The names of the directors of the Company in office at the
date of this annual report are set out in the table on the following
page.
DIRECTORS’ INDEPENDENCE
It is important that the Board is able to operate independently
of executive management.
The non-executive directors, with the exception of Mr Taine
Moufarrige, are considered by the Board to be independent of
management. Independence is assessed by determining whether
the director is free of any business interest or other relationship
which could materially interfere with the exercise of their unfettered
and independent judgement and their ability to act in the best
interests of Servcorp.
Mr Taine Moufarrige is the only non-executive director who has
been employed by Servcorp. Mr Taine Moufarrige resigned as
an executive of Servcorp on 31 December 2011 after 15 years of
service.
00:26
CORPORATE GOVERNANCE NAMES OF DIRECTORS IN OFFICE AT THE DATE OF THIS ANNUAL REPORT
First Appointed
Non-executive
Independent
Retiring
at 2014 AGM
Seeking re-election
at 2014 AGM
Director
B Corlett
19 October 1999
R Holliday-Smith
19 October 1999
A G Moufarrige
24 August 1999
T Moufarrige
25 November 2004
M Vaile
27 June 2011
Yes
Yes
No
Yes
Yes
Yes
Yes
No
No
Yes
No
No
No
Yes
Yes
N/A
N/A
N/A
Yes
Yes
ELECTION OF DIRECTORS
The Company’s Constitution specifies that an election of directors
must take place each year. One-third of the Board (excluding
the Managing Director and rounded down to the nearest whole
number), and any other director who has held office for three or
more years since they were last elected, must retire from office
at each annual general meeting. The directors are eligible for re-
election. Directors may be appointed by the Board during the year.
Directors appointed by the Board must retire from office at the next
annual general meeting.
Any changes to directorships will be dealt with by the full Board and
accordingly a Nomination Committee has not been established.
CONFLICT OF INTEREST
In accordance with the Corporations Act 2001 and the Company’s
Constitution, directors must keep the Board advised, on an ongoing
basis, of any interest that would potentially conflict with those of
Servcorp. Where the Board believes that an actual or potential
significant conflict exists, the director concerned, if appropriate, will
not take part in any discussions or decision making process on the
matter and will abstain from voting on the item being considered.
Details of director related entity transactions with the Company and
the Consolidated Entity are set out in Note 26 to the Consolidated
financial report.
INDEPENDENT PROFESSIONAL ADVICE
Each director has the right to seek independent professional
advice, at Servcorp’s expense, to help them carry out their
responsibilities. Prior approval of the Chairman is required, which
will not be unreasonably withheld. A copy of any written advice
received by the director is made available to all other members of
the Board.
DIRECTOR AND OFFICER DEALINGS
IN COMPANY SHARES
Servcorp policy prohibits directors, officers and senior executives
from dealing in Company shares or exercising options:
– in the six weeks prior to the announcement to the ASX of the
Company’s half-year and full-year results; or
– whilst in possession of non-public price sensitive information.
Directors must discuss proposed purchases or sales of shares
in the Company with the Chairman before proceeding. If the
Chairman proposes to purchase or sell shares in the Company, he
must receive approval from the next most senior director before
proceeding. Directors must also notify the Company Secretary
when they buy or sell shares in the Company. This is reported to
the Board.
In accordance with the provisions of the Corporations Act 2001
and the Listing Rules of the ASX, each director has entered
into an agreement with the Company that requires disclosure to
the Company of all information needed for it to comply with the
obligation to notify the ASX of directors’ holdings and interests
in its securities.
The Company’s Securities Trading Policy is available on the
Company’s website; servcorp.com.au
ETHICAL STANDARDS
All directors, managers and employees are expected to act
with the utmost integrity and objectivity, striving at all times
to enhance the reputation and performance of Servcorp.
Codes of conduct, outlining the standards of personal and
corporate behaviour to be observed, form part of Servcorp’s
management and team manuals.
Servcorp Annual Report 2014 – The Sun never sets on Servcorp
00:27
CORPORATE GOVERNANCE AUDITOR INDEPENDENCE
The Company’s auditor Deloitte Touche Tohmatsu (Deloitte) was
appointed at the annual general meeting of the Company on 6
November 2003.
Deloitte rotate their audit engagement partner every five years.
Deloitte have established policies and procedures designed
to ensure their independence, and provide the Audit and Risk
Committee with an annual confirmation as to their independence.
DIVERSITY
The Company has a culture that both embraces and achieves
diversity in its global operations.
The Company is culturally diverse in its employment practices and
has a global culture of employing the best qualified available talent
for any position regardless of gender, age or race. The Company
benefits from the diversity of its team members and has training
programs to assist with developing their skills and with career
advancement. The Company travels team members to work in its
global locations, giving them exposure to and understanding of
various differing cultures and marketplaces.
The Company has a high participation of women across all
employment levels. The proportion of women employees in the
whole organisation, senior executive positions and on the Board is
set out in the following table.
Full time employees
Consolidated entity
Senior executives
Board
Total
No.
776
22
5
Women
%
84%
55%
0%
Men
%
16%
45%
100%
Under the Workplace Gender Equality Act 2012 (WGE Act), any
employer with 100 or more employees must submit an Annual
Compliance Report detailing the composition of its workplace
profile in Australia. Servcorp has lodged its WGE Report for 2014
with the WGE Agency and has received notice that the Company is
compliant with the WGE Act.
Shareholders may access the report on the Company’s website;
servcorp.com.au
CONTINUOUS DISCLOSURE
Servcorp is committed to ensuring that all shareholders and
investors are provided with full and timely information and that all
stakeholders have equal and timely access to material information
concerning the Company. Procedures are in place to ensure that all
price sensitive information is disclosed to the ASX in accordance
with the continuous disclosure requirements of the Corporations
Act 2001 and ASX Listing Rules.
The Company Secretary has been appointed as the person
responsible for communications with the ASX.
COMMITTEES
The Board does not delegate major decisions to committees.
Committees are responsible for considering detailed issues and
making recommendations to the Board. The Board has established
two committees to assist in the implementation of its corporate
governance practices.
Audit and Risk Committee
The members of the Audit and Risk Committee during the
year were:
– Mr R Holliday-Smith (Chair)
– Mr B Corlett
– Mr T Moufarrige
All three members are non-executive directors, with two being
independent. Although Mr T Moufarrige is not an independent
director, the Board considers that his appointment adds value due
to his depth of knowledge of the Consolidated Entity’s day-to-day
operations, especially in its overseas jurisdictions.
The Chairman of the Audit and Risk Committee is independent and
is not the Chairman of the Board.
The primary function of the Audit and Risk Committee is to assist
the Board to meet its oversight responsibilities in relation to:
– ensuring the Company adopts, maintains and applies appropriate
accounting and financial reporting processes and procedures;
– reviewing and monitoring the integrity of the Company’s financial
reports and statements;
– ensuring the Company maintains an effective risk management
framework and internal control systems;
– monitoring the performance and independence of the external
audit process and addressing issues arising from the audit
process.
It is the Committee’s responsibility to maintain free and open
communication between the Committee and the external auditor
and the management of Servcorp.
The external auditors attend all meetings of the Committee. The
Chief Executive Officer, the Chief Financial Officer and other senior
management may attend Committee meetings by invitation.
00:28
CORPORATE GOVERNANCE The Audit and Risk Committee met four times during the year. The
Committee meets with the external auditors without management
being present before signing off its reports each half year. The
Committee Chairman also meets with the auditors at regular
intervals during the year.
The responsibilities of the Audit and Risk Committee, as stated
in its charter, include:
– reviewing the financial reports and other financial information
distributed externally;
– reviewing the Company’s policies and procedures for compliance
with Australian equivalents to International Financial Reporting
Standards;
– monitoring the procedures in place to ensure compliance
with the Corporations Act 2001, ASX Listing Rules and all other
regulatory requirements;
Remuneration Committee
The Remuneration Committee members during the year were:
– The Hon. M Vaile (Chair)
– Mr R Holliday-Smith
– Mr T Moufarrige
The primary function of the Remuneration Committee is to assist
the Board in adopting remuneration policy and practices that:
– supports the Board’s overall strategy and objectives;
– attracts and retains key employees;
– links total remuneration to financial performance and the
attainment of strategic objectives.
Specifically this will include:
– assisting management in improving the quality of the accounting
– making recommendations to the Board on appropriate
function;
– monitoring the internal control framework and compliance
structures and considering enhancements;
– overseeing the risk management framework;
– reviewing external audit reports to ensure that, where major
deficiencies or breakdown in controls or procedures have been
identified, appropriate and prompt remedial action is taken by
management;
– reviewing reports on any major defalcations, frauds and thefts
from the Company;
– considering the appointment and fees of the external auditor;
– reviewing and approving the terms of engagement and fees of
the external auditor at the start of each audit;
– considering and reviewing the scope of work, reports and
activities of the external auditor;
– establishing appropriate policies in regard to the independence
of the external auditor and assessing that independence;
– liaising with the external auditor to ensure that the statutory
annual audit and half-yearly review are conducted in an effective
manner;
– addressing with management any matters outstanding
with the auditors, taxation authorities, corporate regulators,
Australian Securities Exchange and financial institutions;
– monitoring the establishment of appropriate ethical standards.
The Audit and Risk Committee Charter is available on the
Company’s website; servcorp.com.au
remuneration, in relation to both the amount and its composition,
for the Chief Executive Officer and senior executives who report
to the Chief Executive Officer;
– developing and recommending to the Board short term and long
term incentive programs;
– monitoring superannuation arrangements for the Company;
– reviewing recruitment, retention and termination strategies
and procedures;
– ensuring the total remuneration policy and practices are
designed with proper consideration of accounting, legal and
regulatory requirements for both local and foreign jurisdictions;
– reviewing the Remuneration Report for the Company and
ensuring that publicly disclosed information meets all legal
requirements and is accurate.
The Remuneration Committee shall ensure the Company is
committed to the principles of accountability and transparency and
to ensuring that remuneration arrangements achieve a balance
between shareholder and executive rewards.
During the year, the Remuneration Committee undertook a
comprehensive review of the Company’s executive remuneration
structures, as detailed in the Remuneration Report on pages 46 to
57 of this annual report.
The Remuneration Committee met two times during the year.
The Chief Executive Officer may attend Committee meetings by
invitation to assist the Committee in its deliberations.
The Remuneration Committee Charter is available on the
Company’s website; servcorp.com.au
00:29
Servcorp Annual Report 2014 – The Sun never sets on ServcorpCORPORATE GOVERNANCE ASX PRINCIPLES COMPLIANCE STATEMENT
This table provides a description of the manner in which Servcorp complies with the ASX Corporate Governance Principles and
Recommendations or where applicable, an explanation of any departures from the Principles. Compliance has been measured against the
2nd edition of the Principles and Recommendations with 2010 Amendments.
Servcorp will undertake a transition to the 3rd edition of the ASX Corporate Governance Principles and Recommendations, in readiness for
when they take effect in the financial year ending 30 June 2015.
Principle 1
Lay solid foundations for management and oversight
Establish and disclose the respective roles and responsibilities of board and management.
Recommendation 1.1
Establish the functions reserved to the board and those delegated to senior executives and disclose those functions.
Servcorp Board Response
The Board has adopted a charter that sets out the responsibilities reserved for the Board and those delegated to the
Managing Director and senior executives. Primary responsibilities are set out on page 26.
Recommendation 1.2
Disclose the process for evaluating the performance of senior executives.
The Board Charter is available on the Company’s website; servcorp.com.au
Servcorp Board Response
The process for evaluating the performance of senior executives is included in the remuneration report on pages 50 to 53
of this annual report.
Recommendation 1.3
Provide the information indicated in the Guide to reporting on Principle 1.
Servcorp Board Response
All relevant information is included in the corporate governance section on pages 26 to 34 of this annual report.
Principle 2
Structure the board to add value
Have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.
Recommendation 2.1
A majority of the board should be independent directors.
Servcorp Board Response
The Board has a majority of independent directors. Three of the four currently serving non-executive directors are
independent.
Recommendation 2.2
The chair should be an independent director.
Servcorp Board Response
The Chair is an independent director.
Recommendation 2.3
The roles of chair and chief executive officer should not be exercised by the same individual.
Servcorp Board Response
The roles of Chair and Managing Director / CEO are not exercised by the same individual.
Recommendation 2.4
The board should establish a nomination committee.
Servcorp Board Response
The Board has not established a nomination committee. Given the size of the current Board, efficiencies are not
forthcoming from a separate committee structure. Selection and appointment of new directors is undertaken by the full
Board. Any director appointed by the Board must retire from office at the next annual general meeting and seek
re-election by shareholders.
A specific skills matrix has not been developed, however the current non-executive directors each bring a mix of skills
and experience to the Board. The Board has endeavoured to expand this skills mix when considering new appointments.
Recommendation 2.5
Disclose the process for evaluating the performance of the board, its committees and individual directors.
Servcorp Board Response
The Board operates under a charter and a code of conduct which recognises that strong ethical values must be at the
heart of director and Board performance. The non-executive directors evaluate individual director’s performance and also
the Board’s performance. As a tool to evaluation, a questionnaire is completed annually by the non-executive directors
with the responses assessed and discussed by the non-executive directors. There is good interaction between all
directors and with senior executives and it is considered that the non-executive directors have a solid understanding of
the culture and values of the Company.
Recommendation 2.6
Provide the information indicated in the Guide to reporting on Principle 2.
Servcorp Board Response
All relevant information is included in the corporate governance section on pages 26 to 34 of this annual report.
00:30
CORPORATE GOVERNANCE Principle 3
Promote ethical and responsible decision-making
Actively promote ethical and responsible decision-making.
Establish a code of conduct and disclose the code or a summary of the code as to:
– the practices necessary to maintain confidence in the company’s integrity;
Recommendation 3.1
– the practices necessary to take into account their legal obligations and the reasonable expectations of their
stakeholders;
– the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
The Company has established codes of conduct and ethical standards which all directors, executives and employees are
expected to uphold and promote. They guide compliance with legal requirements and ethical responsibilities, and also set
a standard for employees and directors dealing with Servcorp’s obligations to external stakeholders.
Servcorp Board Response
In regard to stakeholders, the Company:
– reports its financial performance twice a year to the Australian Securities Exchange;
– maintains a website;
– publishes external announcements to the website and maintains these announcements for at least two years;
– at general meetings, shareholders are given a reasonable opportunity to ask questions;
– briefings are held following the release of the half-year and full-year financial results.
Recommendation 3.2
Establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include
requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess
annually both the objectives and progress in achieving them.
Servcorp Board Response
The Company has not established a written policy concerning diversity. The Company has a culture that both embraces
and achieves diversity in its global operations. The establishment of a written policy with measurable objectives for
achieving gender diversity would not, in the Board’s view, bring any efficiency or greater benefit to the current
diverse culture.
Recommendation 3.3
Disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance
with the diversity policy and progress towards achieving them.
Servcorp Board Reponse
The Board has not set measurable objectives for gender diversity. The Company is culturally diverse in its employment
practices and has a global culture of employing the best qualified available talent for any position regardless of gender,
age or race. The Company benefits from the diversity of its team members and has training programs to assist with
developing their skills and with career advancement. The Company travels team members to work in its global locations,
giving them exposure to and understanding of various differing cultures and marketplaces.
Recommendation 3.4
Disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive
positions and women on the board.
Servcorp Board Reponse
The Company has a high participation of women across all employment levels, including in senior executive positions,
however there are no women on the Board. The composition of the current Board is merit based and accordingly, in the
view of Directors, is appropriate to maximise commercial returns for the benefit of shareholders.
The proportion of women employees in the Company is provided in the table on page 28 of this annual report.
Recommendation 3.5
Provide the information indicated in the Guide to reporting on Principle 3.
An explanation of departures from Recommendations 3.2 and 3.3 is included in the respective responses.
Servcorp Board Response
The relevant information is made publicly available by inclusion of the main provisions in the annual report. Complete
versions are not available on the Company’s website as they form part of manuals which are proprietary and confidential.
00:31
Servcorp Annual Report 2014 – The Sun never sets on ServcorpCORPORATE GOVERNANCE ASX PRINCIPLES COMPLIANCE STATEMENT (CONTINUED)
Principle 4
Safeguard integrity in financial reporting
Have a structure to independently verify and safeguard the integrity of the company’s financial reporting.
Recommendation 4.1
The board should establish an audit committee.
Servcorp Board Response
The Board has established an Audit and Risk Committee.
Recommendation 4.2
– consists of a majority of independent directors;
The audit committee should be structured so that it:
– consists only of non-executive directors;
– is chaired by an independent chair, who is not chair of the board;
– has at least three members.
Servcorp Board Response
All three members of the Audit and Risk Committee are non-executive directors, and two members are independent
directors. The Chair of the Committee is not the Chair of the Board.
Recommendation 4.3
The audit committee should have a formal charter.
Servcorp Board Response
Recommendation 4.4
The Audit and Risk Committee has a formal charter which sets out its specific roles and responsibilities and composition
requirements.
The Audit and Risk Committee charter is available on the Company’s website; servcorp.com.au
Provide the information indicated in the Guide to reporting on Principle 4.
– the names and qualifications of those appointed to the audit committee, and their attendance at meetings
of the committee;
– the number of meetings of the audit committee.
Servcorp Board Response
This information is provided on pages 28, and 36 to 38 of this annual report.
Recommendation 4.4
(continued)
Servcorp Board Response
Principle 5
Recommendation 5.1
Servcorp Board Response
– procedures for the selection and appointment of the external auditor, and for the rotation of external audit engagement
partners.
The external auditor, Deloitte Touche Tohmatsu (Deloitte), under the scrutiny of the Audit and Risk Committee, presently
conducts the statutory audits in return for reasonable fees. Deloitte were appointed at the annual general meeting of the
Company held on 6 November 2003. The Committee also has specific responsibility for recommending the appointment
or dismissal of external auditors and monitoring any non-audit work carried out by the external audit firm. No director has
any association, past or present, with the external auditor.
Deloitte rotate their audit engagement partner every five years.
Make timely and balanced disclosure
Promote timely and balanced disclosure of all material matters concerning the company.
Establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure
accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.
The Company has established a continuous disclosure compliance plan. The Board and management continually monitor
information and events and their obligation to report any matters. Responsibility for communications to the ASX on all
material matters rests with the Company Secretary following consultation with the Chair and Managing Director.
Recommendation 5.2
Provide the information indicated in the Guide to reporting on Principle 5.
Servcorp Board Response
There is no further information to be provided.
Principle 6
Recommendation 6.1
Respect the rights of shareholders
Respect the rights of shareholders and facilitate the effective exercise of those rights.
Design a communications policy for promoting effective communication with shareholders and encouraging their
participation at general meetings and disclose the policy or a summary of that policy.
Servcorp aims to communicate clearly and transparently with shareholders and the community. Servcorp places company
announcements on its website and also displays annual and half-year reports.
Servcorp Board Response
Shareholders are given a reasonable opportunity to ask questions at the annual general meeting.
Briefings are held following the release of annual and half-year results and the time and location of these briefings are
notified to the market.
Recommendation 6.2
Provide the information indicated in the Guide to reporting on Principle 6.
Servcorp Board Response
The information has been provided in the response to recommendation 6.1.
00:32
CORPORATE GOVERNANCE Principle 7
Recommendation 7.1
Recognise and manage risk
Establish a sound system of risk oversight and management and internal control.
Companies should establish policies for the oversight and management of material business risks and disclose a
summary of those policies.
Management has a sound and comprehensive understanding of the inherent risks of the business which have been
identified and managed through the experience of the Chief Executive Officer and long serving executives.
Servcorp Board Response
Recommendation 7.2
Management have identified and documented the key risks of the business across the spectrum of strategic, information
technology, human resources, operational, financial and legal / compliance. The Company does not have formal written
policies for all aspects of its risk oversight and management.
The Company is a globally run business where senior executives have oversight through the systems and reporting
mechanisms of all activities in all global locations. The systems infrastructure is centrally managed through a small group
of senior executives. Management’s objective is to create a culture in which all executives focus on risk as a natural part
of their day to day activities. The senior executives responsible for the day to day management of key risks have been
identified.
Many processes are documented through the Company’s manuals which are proprietary and confidential, and these are
regularly being strengthened and improved with time.
Business processes are continually improved to reduce the potential for financial loss.
The board should require management to design and implement the risk management and internal control system to
manage the company’s material business risks and report to it on whether those risks are being managed effectively. The
board should disclose that management has reported to it as to the effectiveness of the company’s management of its
material business risks.
The Board has established an Audit and Risk Committee that is comprised only of non-executive directors. The
Committee reviews the Company’s risk management strategy, its adequacy and effectiveness and the communication of
risks to the Board.
The Committee is satisfied that the Company and management have a culture of risk control and are gradually formalising
the infrastructure of this culture. Although not all policies have been formally documented, the identified risks are tightly
controlled and being managed effectively.
Servcorp Board Response
The Company is heavily reliant on financial controls and senior executive controls. Day to day responsibility is delegated
to the Chief Executive Officer and senior management. The Chief Executive Officer and senior management are
responsible for:
– identification of risk;
– monitoring risk;
– communication of risk events to the Board; and
– responding to risk events, with Board authority.
The Board defines risk to be any event that, if it occurs, will have a material impact on the ability of the Company to
achieve its objectives. Risk is considered across the financial, operational and organisational aspects of the Company’s
affairs.
The Audit and Risk Committee is working with management to ensure continuous improvement to the risk management
and internal control systems.
The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief
financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act
is founded on a sound system of risk management and internal control and that the system is operating effectively in all
material respects in relation to financial reporting risks.
Recommendation 7.3
Servcorp Board Response
The Chief Executive Officer and Chief Financial Officer provide such assurance.
Recommendation 7.4
Provide the information indicated in the Guide to reporting on Principle 7.
Servcorp Board Response
This information is provided above.
00:33
Servcorp Annual Report 2014 – The Sun never sets on ServcorpCORPORATE GOVERNANCE CORPORATE GOVERNANCE
ASX PRINCIPLES COMPLIANCE STATEMENT (CONTINUED)
Principle 8
Remunerate fairly and responsibly
Ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance
is clear.
Recommendation 8.1
The board should establish a remuneration committee.
Servcorp Board Response
The Board has established a Remuneration Committee.
Recommendation 8.2
Servcorp Board Response
The remuneration committee should be structured so that it:
– consists of a majority of independent directors;
– is chaired by an independent chair;
– has at least three members.
All three members of the Remuneration Committee are non-executive directors and two members are independent
directors.
The Chair of the Committee is an independent non-executive director.
Recommendation 8.3
Clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors
and senior executives.
Servcorp Board Response
This information is provided in the remuneration report on page 50 of this annual report.
Recommendation 8.4
Provide the information indicated in the Guide to reporting on Principle 8.
– the names of the members of the remuneration committee and their attendance at meetings of the committee.
Servcorp Board Response
This information is provided on pages 29 and 38 of this annual report.
Recommendation 8.4
(continued)
– the existence and terms of any schemes for retirement benefits, other than superannuation, for non-executive directors.
Servcorp Board Response
There are no such schemes in existence.
00:34
Servcorp Annual Report 2014 – The Sun never sets on Servcorp 00:35
DIRECTORS’ REPORT
The directors of Servcorp Limited (“the Company”) present their report together with
the Consolidated financial report of the “Consolidated Entity”, being the Company and
its controlled entities, for the financial year ended 30 June 2014.
DIRECTORS
The directors of the Company at any time during or since the end of the financial year are:
Alf Moufarrige
Managing director
Chief Executive Officer
Appointed August 1999
Alf is one of the global leaders in the
serviced office industry, with 35 years
of experience. Alf is primarily
responsible for Servcorp’s expansion,
profitability, cash generation and
currency management.
Directorships of listed entities in the last
three years:
– None.
Bruce Corlett AM
Chair
Independent
Non-executive director
BA, LLB
Member of Audit and Risk Committee
Appointed October 1999
For more than 30 years Bruce has been a
director of many public listed and unlisted
companies. He has an extensive business
background involving a range of industries
including banking, property and maritime.
Bruce is Chair of Australian Maritime
Systems Ltd and, until December 2013,
was Chair of The Trust Company Limited.
Bruce is also Chair of the Mark Tonga
Perpetual Relief Trust, Chair of Lifestart
Co-operative Limited and an Ambassador
of The Australian Indigenous Education
Foundation.
Directorships of listed entities in the last
three years:
– The Trust Company Limited (TRU) from
October 2000 to December 2013 (Chair)
(The Trust Company was acquired by
Perpetual Limited and was removed
from the official list of ASX on
19 December 2013).
Rick Holliday-Smith
Independent
Non-executive director
BA (Hons), CA, FAICD
Chair of Audit and Risk Committee
Member of Remuneration Committee
Appointed October 1999
Rick spent over 11 years in Chicago in
the roles of Divisional President of global
trading and sales for NationsBank, N.A.
and, prior to that, Chief Executive Officer
of Chicago Research and Trading Group
Limited. Rick also spent over four years
in London as Managing Director of Hong
Kong Bank Limited, a wholly owned
merchant banking subsidiary of HSBC
Bank.
Rick is currently Chair of ASX Limited and
Cochlear Limited. Rick has a Bachelor of
Arts (Hons) from Macquarie University, is
a Chartered Accountant and is a Fellow
of the Australian Institute of Company
Directors.
Directorships of listed entities in the last
three years:
– ASX Limited (ASX) since July 2006
(Chair since March 2012);
– Cochlear Limited (COH) since February
2005 (Chair since July 2010).
00:36
DIRECTORS’ REPORT The Hon. Mark Vaile AO
Independent
Non-executive director
Taine Moufarrige
Non-executive director
BA, LLB
Member of Audit and Risk Committee
Member of Remuneration Committee
Appointed November 2004
Taine joined Servcorp in 1996 as a
Trainee Manager. Taine played a key
role in establishing Servcorp locations in
Europe, the Middle East, New Zealand and
throughout Australia, and in India through
the Company’s franchise venture.
Taine resigned from his operational role at
Servcorp effective 31 December 2011, but
remains on the Board as a non-executive
director. His experience in the Company’s
operations brings important perspective to
the Board.
Taine also still takes a role in the
philanthropic activities of Servcorp.
Directorships of listed entities in the last
three years:
– None.
Chair of Remuneration Committee
Appointed June 2011
Mark had a distinguished career as an
Australian Federal Parliamentarian from
1993 to 2008. Ministerial Portfolios held
by Mark during his five terms in Federal
Parliament include Minister for Transport
and Regional Development, Minister for
Agriculture, Fisheries and Forestry, Minister
for Trade, and Minister for Transport and
Regional Services.
Mark also served as Deputy Prime Minister
of Australia from July 2005 through to
December 2007. He was instrumental in
securing or initiating a range of free trade
agreements between Australia and the
United States, Singapore, Thailand, China,
Malaysia and the ASEAN countries.
Since leaving the Federal Parliament
in July 2008, Mark has embarked on a
career in the private sector utilising his
extensive experience across a number of
portfolio areas. His current directorships
include Virgin Australia Holdings Limited,
StamfordLand Limited and Chair of
Whitehaven Coal Limited. Mark is also Chair
of GEMS Education Regional Board and is
a director / trustee of Hostplus Superfund
Limited. Mark also provides corporate
advice to a number of Australian companies
in the international marketplace.
In November 2013, at the request of The
Hon. Julie Bishop, Mark accepted an
appointment to the Council for Australian-
Arab Relations (CAAR).
Directorships of listed entities in the last
three years:
– Aston Resources Limited (AZT) since
September 2009 (Aston Resources
merged with Whitehaven Coal and was
removed from the official list of ASX on
3 May 2012);
– CBD Energy Limited (CBD) from August
2008 to February 2013 (Chair);
– StamfordLand Corporation Ltd (SLC -
listed on SGX) since August 2009;
– Virgin Australia Holdings Limited (VAH)
since September 2008;
– Whitehaven Coal Limited (WHC) since
May 2012 (Chair).
Company Secretary
Greg Pearce
BCom, CA, AGIA, ACIS
Appointed August 1999
Greg joined Servcorp in 1996 as Financial
Controller and was appointed to his
current role of Company Secretary during
the Company’s IPO in 1999. Prior to
joining Servcorp, Greg spent 10 years
working in the information technology
business and the 11 years prior to that
working in audit and business services.
Greg is a Chartered Accountant and is an
Associate of the Governance Institute of
Australia.
00:37
Servcorp Annual Report 2014 – The Sun never sets on ServcorpDIRECTORS’ REPORT DIRECTORS’ MEETINGS HELD AND ATTENDANCES AT MEETINGS
The number of directors’ and board committee meetings held, and the number of meetings attended by each of the directors of the Company
during the financial year is set out in the following table. Only those directors who are members of the relevant committees have their
attendance recorded. Other directors do attend committee meetings from time to time.
Director
Number of meetings held
Number of meetings attended
B Corlett
R Holliday-Smith
A G Moufarrige
T Moufarrige
M Vaile
Board
Audit & Risk
Committee
Remuneration
Committee
7
7
7
7
7
6
4
4
4
4
2
2
2
2
The details of the function and membership of the committees are presented in the Corporate Governance statement on pages 28 and 29.
DIRECTORS’ INTERESTS
The relevant interest of each director in the share capital of the companies within the Consolidated Entity, as notified by the directors to the
Australian Securities Exchange in accordance with s205G (1) of the Corporations Act 2001, at the date of this report is set out in the following
table.
Ordinary shares in Servcorp Limited
Director
B Corlett
R Holliday-Smith
Direct
-
-
A G Moufarrige (i)
547,436
T Moufarrige (i)
M Vaile
-
-
Indirect
413,474
250,000
49,566,667
1,800,000
3,500
Options over
ordinary shares
-
-
-
-
-
Notes:
i. The 1.8 million shares shown as being an indirect interest of T Moufarrige are also included in the indirect interest of A G Moufarrige.
DIRECTORS’ BENEFITS
Since the end of the previous financial year, no director of the Consolidated Entity has received or become entitled to receive a benefit (other
than a benefit included in the aggregate amount of emoluments received or due and receivable by directors shown in the Consolidated
financial report, or the fixed salary of a full-time employee of the Consolidated Entity or of a related entity) by reason of a contract made by
the Consolidated Entity or a related entity with the director or with a firm of which a director is a member, or with an entity in which a director
has a substantial financial interest.
00:38
DIRECTORS’ REPORT OPTIONS GRANTED
During the year, or since the end of the financial year, the Company has not granted options over unissued ordinary shares of the Company.
OPTIONS ON ISSUE
At the date of this report, there are no unissued ordinary shares of the Company under option (2013: Nil).
OPTIONS EXPIRED
During the year, or since the end of the financial year, no options over unissued shares expired or were cancelled (2013: 140,000).
SHARES ISSUED ON THE EXERCISE OF OPTIONS
During the year, or since the end of the financial year, the Company has not issued any shares as a result of the exercise of an option over
unissued shares.
SHARE BUY-BACK
On 28 August 2012, the Company announced it was establishing an on-market buy-back program to enable the Company to repurchase
shares in itself from 11 September 2012, for a maximum period of 12 months. The program sought to buy up to 5.0 million ordinary shares
(being approximately 5% of the issued ordinary share capital).
On 27 August 2013, the Company announced it would continue the share buy-back for a further 12 month period.
On 26 August 2014, the Company announced it had finalised the share buy-back.
During the year, or since the end of the financial year, the Company has bought back the following shares:
Number of shares
Total consideration paid
Nil (2013: 8,532)
Nil (2013: $26,449)
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The constitution of the Company provides that the Company must indemnify, on a full indemnity basis and to the full extent permitted by law,
each current and former director, alternate director or executive officer against all losses or liabilities incurred in that capacity in defending
any proceedings, whether civil or criminal, in which judgement is given in their favour or in which they are acquitted or in connection with any
application in relation to any such proceedings in which relief is granted under the Corporations Act 2001.
The Company has agreed to indemnify the following current and former directors of the Company, Mr A G Moufarrige, Mr B Corlett, Mr R
Holliday-Smith, The Hon. M Vaile, Mr T Moufarrige and Mrs J King against any loss or liability that may arise from their position as directors
of the Company and its controlled entities, except where the liability arises out of conduct involving a wilful breach of duty. The agreement
stipulates that the Company will meet the full amount of any such liabilities to the extent permitted by law, including reasonable costs and
expenses.
The Company has not, during or since the financial year, indemnified or agreed to indemnify an auditor of the Company.
During the financial year the Company has paid insurance premiums in respect of directors’ and officers’ liability and legal expenses
insurance contracts, for current and former directors, secretaries and officers of the Company and its controlled entities. The insurance
policies prohibit disclosure of the nature of the liability insured against and the amount of the premiums.
CORPORATE GOVERNANCE
A statement of the Board’s governance practices is set out on pages 26 to 34 of this annual report.
00:39
Servcorp Annual Report 2014 – The Sun never sets on ServcorpDIRECTORS’ REPORT
STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Consolidated Entity during the financial year.
PRINCIPAL ACTIVITIES
The principal activities of the Consolidated Entity during the financial year were the provision of executive serviced and virtual offices and IT,
communications and secretarial services.
There were no significant changes in the nature of the activities of the Consolidated Entity during the year.
CONSOLIDATED RESULTS
Net profit after tax for the financial year was $26.34 million (2013: $21.27 million). Operating revenue was $242.25 million
(2013: $208.00 million). Basic and diluted earnings per share was 26.8 cents (2013: 21.6 cents).
Revenue & other income
Net profit before tax
Net profit after tax
Net operating cash flows
Cash & investment balances
Net assets
Earnings per share
Dividends per share
2014
$’000
2013
$’000
242,247
207,995
34,257
26,336
40,214
108,788
27,630
21,271
27,092
99,758
217,101
207,900
$0.268
$0.200
$0.216
$0.150
DIVIDENDS PAID AND DECLARED
Dividends totalling $19.69 million have been paid or declared by the Company in relation to the financial year ended 30 June 2014
(2013: $14.76 million).
Information relating to dividends in respect of the prior and current financial year, including dividends paid or declared by the Company since
the end of the previous year, is set out in the following table.
Dividend
In respect of the previous financial year: 2013
Interim Ordinary shares
Final Ordinary shares
In respect of the current financial year: 2014
Interim Ordinary shares
Final Ordinary shares
Cents
per
share
Total
amount
$’000
Date of
payment
Franked
%
7.50
7.50
9.00
11.00
7,382
7,382
4 April 2013
2 October 2013
8,859
2 April 2014
10,828
1 October 2014
100%
100%
0%
35%
Tax rate
for
franking
credit
30%
30%
30%
30%
00:40
DIRECTORS’ REPORT REVIEW OF OPERATIONS
Revenue and other income from ordinary activities for the twelve
months ended 30 June 2014 was $242.25 million, up 17% from the
twelve months ended 30 June 2013. During the year, the Australian
dollar decreased by an average of 11% against the US dollar and
15% against the Euro and increased 3% against the Japanese yen.
In constant currency terms revenue increased by 10% compared to
the 2013 year.
Net profit before tax for the twelve months to 30 June 2014 was
$34.26 million, up 24% from $27.63 million in the prior year.
When expressed in constant currency terms, net profit before tax
increased by 20% compared to the 2013 year.
Cash and investment balances were $108.79 million at 30 June
2014 (30 June 2013: $99.76 million). Of this balance, $15.34 million
has been pledged with banks as collateral for bank guarantees and
facilities, leaving an unencumbered cash and investment balance
of $93.45 million in the business as at 30 June 2014 (30 June 2013:
$90.62 million).
The business generated strong net operating cash flows during
the 2014 financial year of $40.21 million, up 48% compared to the
2013 financial year (2013: $27.09 million). Before tax payments,
the business produced cash flows of $44.81 million (2013: $37.22
million).
Like for Like Floor Performance
Servcorp has historically reported both mature floor and immature
floor performance. When a floor opens it is categorised as
immature. It reaches maturity after the earlier of cash flow break
even or after 18 months of trading. Servcorp has more than
doubled its size over the past five years, and due to the respective
size of the immature losses, it was historically appropriate to
segregate the performance of the existing mature business from
the new immature business.
Now, with more than 120 mature floors, we believe that it is more
appropriate to describe the performance of the floors in Like for
Like terms. Like for Like results will only include the results for
floors that were open in both the current and comparative reporting
periods; that is, it will exclude new floor openings since the previous
period and any floors closed during the previous period.
Directors and management believe that Like for Like reporting
provides more clarity on the performance of the business. Moving
forward we will no longer be reporting mature and immature floor
performance.
A summary of the Like for Like floor performance for the 2014
financial year compared to the 2013 financial year is as follows:
Revenue by Region ($ million)
80
60
40
20
0
78.6
77.6
59.1
19.1
ANZ/SEA North Asia EME USA
Like for Like Revenue and NPBT ($ million)
250
200
150
100
50
0
2013
2014
239.5
207.7
28.3
38.3
Revenue
NPBT
Total revenue
Net profit before tax - Like for Like Floors
Net profit before tax - floors closed 2013 financial year
Net profit before tax - new floors 2014 financial year
Statutory net profit before tax
2014
$’000
242,247
38,249
23
(4,015)
34,257
2013
$’000
207,995
28,295
(665)
-
27,630
Variance
$’000
34,252
9,954
688
(4,015)
6,627
%
17%
35%
24%
00:41
Servcorp Annual Report 2014 – The Sun never sets on ServcorpDIRECTORS’ REPORT REVIEW OF OPERATIONS (CONTINUED)
Servcorp footprint
In the 2014 financial year, the Company continued to grow the
“Servcorp footprint” in established markets. Six new floors were
opened, bringing total new floor openings to 78 floors in the 60
months to 30 June 2014. In addition, five existing floors were
expanded this year.
In total, office capacity increased by 11% in the 2014 financial year.
Expansion - 60 months to 30 June 2014
ANZ/SEA 19
16 North Asia
Australia, New Zealand and Southeast Asia
On a like for like basis, net profit before tax performance in
Australia, New Zealand and Southeast Asia was down 5% when
compared to the prior period.
In Southeast Asia, we had a complete management restructure
which negatively impacted sales and margins for both Singapore
and Malaysia. We believe that we are at the bottom of the cycle and
expect our results to improve in the 2015 financial year. Despite
continued civil unrest in Thailand, our performance remained
strong.
The Australian market in general remained competitive. The Perth
market has not recovered after the collapse in the 2013 financial
year but we do expect the margins in both Sydney and Melbourne
to improve throughout the course of the 2015 financial year.
USA 22
21 EME
Like for Like results ($ million) - ANZ / SEA
Occupancy of like for like floors open at 30 June 2014 was 79%
(30 June 2013: 78%). The number of occupied offices increased by
10% during the 2014 financial year.
We view our current vacancy levels as a significant opportunity
to improve our margins and operating results. We will continue
to focus on improving occupancy and margins across the office
business.
There are plans to open a further nine floors in the 2015 financial
year and to expand a further three existing floors, adding
approximately 10% to office capacity.
As at 30 June 2014, Servcorp operated 136 floors in 52 cities
across 21 countries.
Floors by region - 30 June 2014
13.3
12.7
20
15
10
5
0
NPBT
2013
2014
North Asia
The like for like net profit before tax growth for North Asia was
robust, reporting growth of 21%.
ANZ/SEA 45
USA 22
35 North Asia
3 India (Franchise)
Our Japanese business continues to outperform, whereas there
is still considerable upside potential in China. The performance of
Hong Kong is improving and we expect margin growth to continue
in this city.
31 EME
During the 2014 financial year, we opened our new landmark
location in Fortune Financial Centre, Beijing.
Like for Like results ($ million) - North Asia
20
15
10
5
0
11.3
13.7
NPBT
2013
2014
00:42
DIRECTORS’ REPORT Europe and the Middle East
Like for like net profit before tax growth in the Europe and Middle
East segment was 109% in the 2014 financial year. We are pleased
with this outcome and remain focused on expanding in identified
high growth areas.
Towards the end of the 2014 financial year, we consolidated our
operation in Paris by closing an ageing location. The performance
of our London floors continue to improve as office vacancies in
London decrease.
In the 2015 financial year, we will open in two of the best locations
in London, One Mayfair Place and The Leadenhall Building (The
Cheesegrater), which is the tallest building in the City of London.
We will also open Etihad Towers in Abu Dhabi, UAE.
USA
Despite ongoing challenging economic conditions in the USA,
revenue and margins continued to improve throughout the
2014 financial year. We are now close to a net profit before tax
breakeven position and we anticipate generating a modest like for
like profit in the 2015 financial year.
We continue to have confidence in our USA business model and
we are looking forward to opening one of our most prestigious
floors to date on Level 85, One World Trade Center, New York in
the second half of the 2015 financial year. We will also expand our
Boston and Los Angeles locations.
Like for Like results ($ million) - EME
Like for Like results ($ million) - USA
20
15
10
5
0
11.4
5.4
NPBT
0
(5)
(10)
(15)
(20)
(3.3)
(5.8)
NPBT
2013
2014
2013
2014
00:43
Servcorp Annual Report 2014 – The Sun never sets on ServcorpDIRECTORS’ REPORT NEW LOCATIONS
New locations opened by the Consolidated Entity during the course of the financial year are set out in the following table.
City
Tokyo
Dubai
Sydney
Singapore
Beijing
Riyadh
Location
Offices
Level 1, Marunouchi Yusen Building
Level 23, Boulevard Plaza
Level 36, Gateway
Level 8, The Metropolis Tower 2
Level 26, Fortune Financial Center
Level 29, Oyala Towers
34
47
63
41
91
45
Opened
September 2013
October 2013
October 2013
February 2014
March 2014
May 2014
In addition, the following locations were expanded by the Consolidated Entity during the course of the financial year:
City
Guangzhou
Singapore
Singapore
Hong Kong
Brisbane
Location
Additional Offices
Expanded
Level 54, Guangzhou IFC
Level 42, Suntec Tower Three
Level 39, Marina Bay Financial Centre
Level 12, One Peking Road
Level 19, 10 Eagle Street
44
11
50
33
31
September 2013
December 2013
May 2014
May 2014
June 2014
EVENTS SUBSEQUENT TO BALANCE DATE
Dividend
On 26 August 2014 the directors declared a 35% franked final dividend of 11.00 cents per share, payable on 1 October 2014.
The financial effect of the above transaction has not been brought to account in the financial statements for the year ended 30 June 2014.
The directors are not aware of any matter or circumstance, other than that referred to above or in the financial statements or notes thereto,
that has arisen since the end of the year that has significantly affected, or may significantly affect, the operations of the Consolidated Entity,
the results of those operations, or the state of affairs of the Consolidated Entity, in future financial years.
LIKELY DEVELOPMENTS
The Consolidated Entity will continue to pursue its policy of seeking to increase the profitability and market share of its major business sectors
during the next financial year.
ENVIRONMENTAL MANAGEMENT
The Consolidated Entity’s operations are not subject to any particular and significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
00:44
DIRECTORS’ REPORT ROUNDING OFF
The Company is of a kind referred to in ASIC Class Order 98/0100 dated 10 July 1998 and, in accordance with that Class Order, amounts in
the financial report and the directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.
NON-AUDIT SERVICES
During the year Deloitte Touche Tohmatsu, the Company’s auditor, has performed certain “non-audit services” in addition to their statutory
duties.
The Board of directors has considered the non-audit services provided during the year by the auditor and, in accordance with written advice
provided by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services, during the year, by the
auditor is compatible with the general standard of independence for auditors imposed by, and did not compromise the auditor independence
requirements of, the Corporations Act 2001 for the following reasons:
– Non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Audit
and Risk Committee; and
– The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants as they did not involve reviewing or auditing the auditor’s own work, acting in a management or
decision making capacity for the Company or jointly sharing risks and rewards.
A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 58 and
forms part of this report.
Details of the amounts paid or payable to the auditor of the Company, Deloitte Touche Tohmatsu and its related practices for audit and non-
audit services provided during the year are set out in Note 4 to the Consolidated financial report.
REMUNERATION REPORT
The Remuneration Report for the financial year ended 30 June 2014 is set out on pages 46 to 57 and forms part of this report.
Signed in accordance with a resolution of the directors pursuant to section 298(2) of the Corporations Act 2001.
A G Moufarrige
Managing Director and CEO
Dated at Sydney this 26th day of August 2014.
00:45
Servcorp Annual Report 2014 – The Sun never sets on ServcorpDIRECTORS’ REPORT REMUNERATION REPORT
CONTENTS
Title
Description
Page
Introduction
Describes the scope of the Remuneration Report and the key management personnel (KMP)
whose remuneration details are disclosed.
Remuneration governance
Describes the role of the Board and the Remuneration Committee, and the use of remuneration
consultants when making remuneration decisions.
Non-executive director
remuneration
Executive remuneration
Employee share scheme
and other equity incentive
information
Provides details regarding the fees paid to non-executive directors.
Outlines the principles applied to executive KMP remuneration decisions and the framework
used to deliver the various components of remuneration, including an explanation of the linkages
between Company performance and remuneration.
Provides details regarding Servcorp’s employee equity plans including that information required
by the Corporations Act 2001 and applicable accounting standards.
Employment agreements
Provides details regarding the contractual arrangements between Servcorp and the executives
whose remuneration details are disclosed.
Director remuneration table
Details of the nature and amount of each element of the remuneration of each director of
Servcorp Limited for the year ended 30 June 2014.
Executive KMP remuneration
table
Details of the nature and amount of each element of the remuneration of each executive KMP of
Servcorp Limited for the year ended 30 June 2014.
47
49
50
50
53
53
54
56
00:46
REMUNERATION REPORT INTRODUCTION
Servcorp is now a geographically diverse business. We have significantly expanded our global footprint in recent years in an effort to exploit
our brand, take advantage of new market opportunities and diversify our risk. It is acknowledged that the markets in which we operate are
subject to changing economic factors and often these may be counter cyclical to the Australian market. For the financial year ended 30 June
2014, the percentage of offshore revenue as a proportion of total revenue was 78%. Directors expect offshore revenue to continue to increase
as we consolidate and grow Servcorp’s global platform.
Skilled, experienced local management in each jurisdiction, supported by Servcorp’s market leading IT platform and proprietary product
offerings, are critical to our continued success.
The Board’s philosophy and approach to executive remuneration is to balance fair remuneration for skills and expertise with a risk and reward
framework attuned to local market conditions but that supports the growth aspirations of Servcorp as a global business.
As promised in last year’s Remuneration Report, the Board undertook a comprehensive review of executive remuneration during the 2014
financial year. This review was also considered to be necessary in response to the 44% “no” vote recorded against the Remuneration Report
for the financial year ended 30 June 2013, representing a first strike. The key initiatives implemented following this review, supported by
independent external advice, included:
– the Remuneration Report has been reformatted with expanded disclosure principles adopted;
– the targets for short term incentives (STI) have been re-evaluated. There will be STI opportunity for executive KMP with the targets aligned
to the Consolidated Entity’s global and regional earnings;
– a global gateway net profit before tax has been imposed whereby any global STI in the current and forward two year period will not be paid
unless underlying net profit before tax increases 20% compounded annually from the 2013 financial year base of $27.63 million;
– the STI opportunity for selected executive KMP has been slightly modified;
– the deferral of STI was considered but not introduced, because it is an unfamiliar concept in many of the countries in which we operate and
the costs of implementation outweigh the benefits;
– the Board has retained a limited ability to exercise discretion;
– the reintroduction of a long term incentive (LTI) scheme was considered but it was decided that the cost / benefit of offering equity in
multiple taxation and securities law jurisdictions to individual executives was unnecessarily complex and the Board is satisfied that the
Company’s existing incentive and retention strategies are appropriate;
– selected Board and executive KMP remuneration were benchmarked to relevant local market comparisons to ensure the remuneration of
these key positions meets external expectations. This remains an ongoing process;
– the Board has met with a number of shareholders and proxy advisor CGI GlassLewis, who had reported on our Remuneration Report last
year, in relation to these matters;
– directors’ fees were increased effective from 1 July 2013, as disclosed. Directors’ fees had remained fixed since 1 January 2010.
The changes adopted in the 2014 financial year will be reviewed annually.
The Board believes Servcorp’s approach to non-executive director and executive KMP remuneration is balanced, fair and equitable and
designed to achieve an alignment of interests between executive reward and shareholder expectations and wealth.
The Board will continue to welcome feedback from shareholders on Servcorp’s remuneration practices or on the communication of
remuneration matters in the Remuneration Report for the financial year ended 30 June 2014 and beyond.
00:47
Servcorp Annual Report 2014 – The Sun never sets on ServcorpREMUNERATION REPORT INTRODUCTION (CONTINUED)
Scope
This Remuneration Report sets out, in accordance with the relevant Corporations Act 2001 (Corporations Act) and accounting standard
requirements, the remuneration arrangements in place for KMP of Servcorp during the financial year ended 30 June 2014.
Key management personnel
Key management personnel have authority and responsibility for planning, directing and controlling the activities of Servcorp and comprise
the non-executive directors, and executive KMP (being the executive director and other senior executives named in this report). Details of the
KMP during the year are provided in the following table.
Title
Change in 2014
Non-executive directors
Bruce Corlett
Chairman
Member, Audit & Risk Committee
No change. Full year
Rick Holliday-Smith
Taine Moufarrige
Director
Chair, Audit & Risk Committee
Member, Remuneration Committee
Director
Member, Audit & Risk Committee
Member, Remuneration Committee
No change. Full year
No change. Full year
The Hon. Mark Vaile
Director
Chair, Remuneration Committee
No change. Full year
Executive director
Alf Moufarrige
Chief Executive Officer
No change. Full year
Other executive KMP
Marcus Moufarrige
Chief Operating Officer
No change. Full year
Jennifer Goodwyn
Vice President / General Manager - USA
No change. Full year
Liane Gorman
General Manager - Australia & New
Zealand
No change. Full year
Laudy Lahdo
General Manager - Middle East
No change. Full year
Olga Vlietstra
General Manager - Japan
No change. Full year
Thomas Wallace
Chief Financial Officer
No change. Full year
Susie Martin
General Manager - Southeast Asia
Ceased 16 August 2013
00:48
REMUNERATION REPORT REMUNERATION GOVERNANCE
This section explains the role of the Board and the Remuneration Committee, and use of remuneration consultants when making
remuneration decisions in respect of non-executive directors and executive KMP.
Role of the Board and the Remuneration Committee
The Board is responsible for Servcorp’s group remuneration strategy and policy. Consistent with this responsibility, the Board has established
the Remuneration Committee which comprises solely non-executive directors, with a majority being independent.
The role of the Remuneration Committee is set out in its Charter, which is reviewed annually. In summary, the Remuneration Committee’s
role includes:
– ensure that the appropriate procedures exist to assess the remuneration levels of the Chairman, other non-executive directors, executive
directors, direct reports to the CEO, Board Committees and the Board as a whole;
– ensure that Servcorp meets the requirements of ASX Corporate Governance Principles and Recommendations, and other relevant
guidelines;
– ensure that Servcorp adopts, monitors and applies appropriate remuneration policies and procedures;
– ensure that reporting disclosures related to remuneration meet the Board’s disclosure objectives and all relevant legal and accounting
standard requirements;
– develop, maintain and monitor appropriate talent management programs including succession planning, recruitment, development; and
retention and termination policies and procedures for senior management; and
– develop, maintain and monitor appropriate superannuation and other relevant pension benefit arrangements for Servcorp as required
by law.
Further information on the Remuneration Committee’s role, responsibilities and membership are contained in the Corporate Governance
section on page 29.
Use of remuneration consultants
During the 2014 financial year, remuneration consultancy contracts were entered into by Servcorp and accordingly the disclosures required
under section 300A(1)(h) of the Corporations Act are provided in the following tables.
Advisor / consultant – 2014
Services provided
Remuneration consultant for the
purpose of the Corporations Act
Ian Crichton, Remuneration
Consultant CRA Plan Managers
Pty Limited
Review of Remuneration Report for the financial year
ended 30 June 2013 and general advice on improving
executive KMP remuneration structures.
No.
Key questions regarding use of remuneration consultants
Question
Did the remuneration consultant provide remuneration
recommendations in relation to any of the executive
KMP for the 2014 financial year?
How much was the remuneration consultant paid by
Servcorp for remuneration related and other services?
Answer
No.
Remuneration services: CRA Plan Managers Pty Limited $16,545;
Other services: Boardroom Pty Limited $49,280. CRA is part of the Boardroom
Group. Boardroom Pty Limited provides the Company’s share registry and related
services.
What arrangements did Servcorp make to ensure that
the making of the remuneration recommendations
would be free from undue influence by the executive
KMP?
Servcorp maintains a protocol which governs the procedure for procuring advice
relating to KMP remuneration. The protocol includes a process for the engagement
of the remuneration consultant, the provision of information to the remuneration
consultant and the communication of remuneration recommendations.
Is the Board satisfied that the remuneration
information provided was free from any such
undue influence?
Yes, the Board is satisfied.
What are the reasons for the Board being so satisfied?
The reasons are the Chairman of the Remuneration Committee had oversight
of all requests for remuneration information, and the protocol with respect to the
procurement of remuneration related advice remains in place.
00:49
Servcorp Annual Report 2014 – The Sun never sets on ServcorpREMUNERATION REPORT NON-EXECUTIVE DIRECTOR REMUNERATION
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-
executive directors’ fees and payments are reviewed by the Board. The Board ensures non-executive directors’ fees and payments are
appropriate and in line with the market. Non-executive directors are not employed under a contract and do not receive share options or other
equity based remuneration.
Directors’ fees
Non-executive directors’ fees are determined by the Board within an aggregate directors’ fees limit approved by shareholders.
The fees limit currently stands at $500,000 per annum inclusive of payments for superannuation. This limit was approved at the 2011 annual
general meeting. No change is proposed in the 2015 financial year.
The most recent review of directors’ fees was effective 1 July 2013. Directors’ fees had not been increased since 1 January 2010. Effective
1 July 2013, non-executive directors’ fees were set as:
– Chair - $175,000 per annum including superannuation;
– Non-executive - $100,000 per annum including superannuation;
– Chair of the Audit and Risk Committee - an additional $10,000 per annum including superannuation.
Additional fees are not paid for membership of Board committees other than as referred to in the previous paragraph.
Retirement allowances for directors
Non-executive directors are not entitled to retirement allowances.
Details of remuneration
Details of the nature and amount of each element of the remuneration of each director of Servcorp Limited for the year ended 30 June 2014
are set out in the table on pages 54 and 55.
Minimum shareholding requirement
Servcorp does not have a minimum shareholding requirement for non-executive directors. It is noted, however, that all non-executive
directors are shareholders of the Company.
EXECUTIVE REMUNERATION
Remuneration philosophy and principles
The Board recognises that the Consolidated Entity’s performance is dependent on the quality and contribution of its employees, particularly
the executive KMP. To achieve its financial and operating objectives, Servcorp must be able to attract, retain and motivate appropriately
qualified and skilled executives.
The objective of the 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 Servcorp’s strategic objectives particularly its short, medium and long term
earnings.
Executive remuneration is balanced between fixed and incentive pay. In determining the appropriate balance, regular reviews are undertaken
that involve cross referencing position descriptions to reliable accessible remuneration data in the markets in which Servcorp operates.
Servcorp’s executive remuneration policy and principles are designed to ensure that the Consolidated Entity:
– provides competitive rewards that attract, retain and motivate our key executives;
– encourages loyalty and commitment to Servcorp;
– builds a structure for growth and includes appropriate succession planning;
– structures remuneration at a level that reflects the executive’s duties and accountabilities and is competitive in the markets in which it
operates;
– complies with applicable legal requirements and appropriate standards of governance.
Remuneration structure and elements
The executive KMP remuneration and reward framework at Servcorp currently has two components:
– Fixed remuneration; and
– Short term incentives.
The combination of these comprises the executive KMP total targeted remuneration opportunity.
Fixed remuneration
Fixed remuneration is reviewed each year and adjusted to changes in job role, promotion, market practice, internal relativities and
performance. Remuneration for the 2014 financial year and changes from 2013 are set out in the table on pages 56 and 57.
00:50
REMUNERATION REPORT Short term incentives
Short term incentives (STI) are awarded based on achievement against targets set at the beginning of each financial year. As stated in the
Remuneration Report for the financial year ended 30 June 2013, the basis of the STI was reviewed and changes have been made to the
scheme to apply for the 2014 financial year and beyond. It is noted that Alf Moufarrige, the CEO, founder and major shareholder, has elected
not to participate in the STI scheme.
Under the revised STI scheme, an STI dollar value is set for each executive KMP which represents the maximum STI that can be awarded
for the relevant year. The maximum STI opportunity for the 2014 financial year ranged between $45,000 and $110,000. The maximum STI
opportunity as a percentage of fixed remuneration ranged between 11.8% and 36.6% with the average being 23.1%. The maximum STI
opportunity range and percentage of fixed remuneration will be the same for the 2015 financial year.
STI targets will be set in advance each year and will be challenging. The STI targets for the 2014 financial year were determined based on
a matrix of Consolidated Entity net profit before tax (global STI target) and regional operating profit (regional STI target), where appropriate.
Where executive KMP have a direct responsibility for a region, their total STI potential was allocated between their regional STI target and the
global STI target. Their regional STI allocation did not exceed 50% of the total potential STI in any case.
A gateway consolidated net profit before tax, based on a 20% per annum compound increase over the 2013 financial year net profit before
tax, needed to be achieved before any global STI pay out. It is intended that a similar approach to STI, including the minimum 20% per annum
compound growth over the 2013 financial year net profit before tax, will be applied for at least the next two financial years. The gateway
consolidated net profit before tax is provided in the following table.
Financial year ending 30 June
2013
base
2014
gateway
2015
gateway
2016
gateway
Consolidated net profit before tax ($ million)
27.63
33.16
39.79
47.75
Global STI will be calculated as follows:
– If consolidated net profit before tax meets the global gateway - 50% of the global STI opportunity;
– If consolidated net profit before tax meets the global target – 100% of the global STI opportunity;
– If consolidated net profit before tax falls between the global gateway and target - the global STI paid will be calculated as a percentage
between 50% and 100% of global STI opportunity on an incremental basis, in the same proportion as the net profit before tax is to gateway
and target.
Regional STI will only be paid if the regional STI target is met. There will be no gateway.
Long term equity incentives
The Board, after detailed consideration, has decided not to offer long term equity incentives (LTI) to any executive KMP. The reason for this
decision is that:
– Servcorp has a small number of executive KMP in many geographic locations and the cost and complexity of offering equity to these
executive KMP outweighs the benefit to shareholders, in the Board’s opinion;
– Servcorp has a very strong culture, and most executive KMP are long serving employees. The Board does not consider offering an LTI is
necessary or desired for executive KMP to achieve the Company’s long term strategic objectives.
Termination benefits
There are no employment agreements in place for executive KMP. Any termination benefit paid to executive KMP would be limited to 12
months remuneration as required by law and in most cases would be determined based on statutory minimum requirements, years of service
and the nature of the termination.
Clawback
Servcorp has no policy on clawback but will ensure compliance with any legal or ASX requirements in this regard. There have been no
circumstances where clawback would have applied.
Minimum shareholding requirements
Servcorp does not have a minimum shareholding requirement for executive KMP. It is noted that the majority of executive KMP are
shareholders of the Company.
00:51
Servcorp Annual Report 2014 – The Sun never sets on ServcorpREMUNERATION REPORT EXECUTIVE REMUNERATION (CONTINUED)
Relationship between Servcorp performance and executive KMP remuneration
The relationship between Consolidated Entity performance and executive KMP remuneration is important to ensure that there is a clear and
appropriate correlation and alignment of interests between shareholders and executive KMP.
Key financial indicators
Servcorp’s principal activities and financial performance are explained in detail in the Review of Operations section of the Director’s Report
on pages 40 to 44.
A summary of Servcorp’s financial performance over the last five years is provided in the following table.
Financial year ended 30 June
Measure
2010
2011
2012
2013
2014
Total revenue ($million)
169
182
201
208
242
Net profit before tax ($million)
Net profit after tax ($million)
Basic earnings per share (cents)
2.9
2.0
2.2
3.0
2.5
2.5
18.3
27.6
34.3
14.8
21.3
26.3
15.0
21.6
26.8
Dividend per share (cents)
10.0
10.0
15.0
15.0
20.0
Share price as at 30 June ($)
$2.68
$2.85
$2.65
$3.21
$4.80
Offices
2,974
3,280
3,645
3,837
4,275
Number of locations
68
103
110
117
122
As previously reported, Servcorp began an aggressive expansion program in October 2009 to expand the Servcorp footprint globally. 78 new
floors representing 2,164 offices have opened between July 2009 and June 2014. The large number of immature floors as a consequence
of the expansion program had a material negative impact on profitability from the 2010 financial year through to the 2012 financial year.
Recovery of profitability which commenced in the 2012 financial year has continued through 2013 and into the 2014 financial year, showing a
year on year increase from 2013 of 24% to $26.3 million.
Despite the volatility of net profit after tax over the initial expansion period, dividends have increased due the strong underlying cash flows.
Servcorp’s share price has also been volatile over this period, but the Board is pleased to note the share price at 30 June 2014 was $4.80, up
49.5% from a year before. This represents a most pleasing total shareholder return (TSR) performance over the 2014 financial year.
00:52
REMUNERATION REPORT Executive KMP remuneration in comparison to Company performance
Despite the continuing strong growth and improvement in earnings in the 2014 financial year, global net profit before tax targets were not
achieved in full and all but one of the individual regions did not meet expectations. Accordingly, the variable pay opportunity for executive
KMP paid out represented only 36% of the maximum opportunity.
The individual ‘at risk’ rewards paid in the 2014 financial year to executive KMP and the percentage of their maximum opportunity is provided
in the following table.
Executive KMP
Marcus Moufarrige
Jennifer Goodwyn
Liane Gorman
Laudy Lahdo
Olga Vlietstra
Thomas Wallace
STI awarded
$
% of maximum
opportunity
27,500
25,000
25,000
25,000
75,000
22,500
25%
25%
25%
25%
75%
50%
Servcorp has a very strong culture. Most of the executive KMP are long-serving employees. All but one has been employed for more than
11 years and (excluding the CEO) they have on average more than 16 years’ service. All executive KMP are aware of the need to perform,
and the discretions exercised with respect to bonuses in the 2013 financial year will not be repeated. Each executive is involved in the target
setting for the business and accepts the challenging targets set.
If our forward net profit before tax targets are met, then shareholders, in the opinion of the Board, will be satisfied with the Consolidated
Entity’s performance and executive KMP will receive the maximum remuneration opportunity.
If executive KMP fail to meet their targets, the ‘at risk’ component of executive KMP remuneration will be heavily discounted. In this way the
alignment of Consolidated Entity performance and executive KMP remuneration will be in direct correlation and be unambiguous.
EMPLOYEE SHARE SCHEME AND OTHER EQUITY INCENTIVE INFORMATION
At the date of this report there are no shares, rights, options or other equity incentives held by executive KMP and subject to vesting
restrictions.
An executive share option scheme (ESOS) was introduced in 1999 and was first approved by shareholders on 19 October 1999 and subject
to various amendments until November 2008. Options were last granted under the scheme on 22 September 2008, but have since lapsed.
In the current financial year, the directors did not grant any options under ESOS or any other scheme. The Board is satisfied that executive
KMP incentive and retention strategies are satisfied through current remuneration and benefit arrangements.
Future offers under ESOS or an alternative employee share scheme may be considered by the Board in the future.
EMPLOYMENT AGREEMENTS
There are no employment agreements in place for any executive KMP.
Any termination benefits provided to a Servcorp executive KMP would be determined by reference to length of service, the reason for
cessation of employment, statutory requirements and generally accepted market practice relevant to the position’s seniority. In any event,
termination benefits would be restricted to no more than one times fixed remuneration.
00:53
Servcorp Annual Report 2014 – The Sun never sets on ServcorpREMUNERATION REPORT DIRECTORS’ REMUNERATION
Name and title
Notes
Year
Short term employee benefits
Post-employment benefits
A G Moufarrige
Chief Executive Officer
(ii)
B Corlett
Non-executive director
R Holliday-Smith
Non-executive director
T Moufarrige
Non-executive director
M Vaile
Non-executive director
Aggregate
Salary
and fees
Cash profit-
sharing and
bonuses
Non-
monetary
benefits
Other
short term
benefits
Super
benefits
$
425,418
430,947
160,183
137,615
100,687
82,569
91,533
73,395
91,533
73,395
869,354
797,921
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
$
-
-
-
-
-
-
-
-
-
-
-
-
$
$
106,054
99,802
-
-
-
-
-
-
-
-
106,054
99,802
-
-
-
-
-
-
-
-
-
-
-
-
$
27,750
27,000
14,817
12,385
9,313
7,431
8,482
6,605
8,467
6,605
68,829
60,026
Other
post-
employment
benefits
$
-
-
-
-
-
-
-
-
-
-
-
-
Notes:
i. Directors’ and officers’ indemnity insurance has not been included in the above figures since it is impractical to determine an appropriate allocation basis.
ii. The salary of A G Moufarrige includes a component paid in Yen. The decrease in the 2014 year reflects the change in foreign currency exchange rate, not a change in salary in base
currency terms.
00:54
REMUNERATION REPORT Termin-
ation
benefits
Total
payments
and
benefits
Long term
employee
benefits
Long term
incentive
plan
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
559,222
557,749
175,000
150,000
110,000
90,000
100,015
80,000
100,000
80,000
1,044,237
957,749
Short term incentive grants
Long term incentive grants
STI paid
in cash
%
STI
accrued
and not
yet due
%
STI
forfeited
%
Maximum
future
value of
vested STI
$
LTI paid
in cash
%
LTI
accrued
and
not yet due
%
LTI
forfeited
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
00:55
Servcorp Annual Report 2014 – The Sun never sets on ServcorpREMUNERATION REPORT KEY MANAGEMENT PERSONNEL REMUNERATION
Name and title
Notes
Year
Short term employee benefits
Post-employment benefits
(iii)
(iv)
(v)
(vi)
M Moufarrige
Chief Operating Officer
J Goodwyn
VP / GM USA
L Gorman
GM Australia & NZ
L Lahdo
GM Middle East
S Martin
GM Southeast Asia
O Vlietstra
GM Japan
T Wallace
Chief Financial Officer
Aggregate
Salary
and fees
$
Cash profit-
sharing and
bonuses
(i) (ii)
$
Non-
monetary
benefits
$
Other
short
term
benefits
$
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
600,000
27,500
18,528
531,002
250,494
16,941
317,898
25,000
323,450
25,000
4,174
2,022
233,906
25,000
16,094
236,777
214,709
16,245
279,684
25,000
21,863
246,640
214,709
21,378
33,426
-
10,794
260,981
214,709
40,648
343,756
75,000
29,007
347,746
214,709
31,291
348,624
22,500
348,306
178,924
-
318
2,157,294
200,000
100,460
2,294,902
1,313,254
128,843
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Super
benefits
$
55,500
47,790
3,179
4,981
23,125
22,500
31,115
54,771
-
21,240
-
-
32,248
31,376
145,167
182,658
Other
post-
employment
benefits
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes:
i. Amounts disclosed as short-term cash profit-sharing and bonuses in the 2014 year represent STI paid in August 2014 based on 2014 financial year global and regional targets.
ii Amounts disclosed as short-term cash profit-sharing and bonuses in the 2013 year represent bonuses paid in August 2013 from the executive bonus scheme pool at the discretion of
the Board.
iii. The salary of J Goodwyn is paid in USD. The decrease in the 2014 year reflects the change in foreign currency exchange rate, not a change in salary in base currency terms.
iv. The salary of L Lahdo is paid in AED. The increase in the 2014 year reflects an increase in salary in base currency terms.
v. S Martin ceased employment with Servcorp effective 16 August 2013. The amount disclosed as termination benefits represents annual leave entitlements. Under the terms of her
resignation, the Board agreed to pay her long term incentive entitlement. This is disclosed in the 2013 year.
vi. The salary of O Vlietstra is paid in JPY. The decrease in the 2014 year reflects the change in foreign currency exchange rate, not a change in salary in base currency terms.
00:56
REMUNERATION REPORT
Termin-
ation
benefits
Total
payments
and
benefits
Long term
employee
benefits
Long term
incentive
plan
STI paid
in cash
$
-
-
-
-
-
-
-
-
-
48,478
-
-
-
-
-
$
-
-
-
-
-
-
-
-
$
%
701,528
25.0%
846,227
100.0%
350,251
355,453
298,125
25.0%
26.6%
25.0%
490,231
100.0%
357,662
25.0%
537,498
100.0%
96,829
141,049
-
-
-
-
-
-
586,056
100.0%
447,763
75.0%
593,746
100.0%
403,372
50.0%
558,924
100.0%
96,829
2,699,750
36.0%
95.0%
48,478
-
3,968,135
Short term incentive grants
Long term incentive grants
STI
accrued
and not
yet due
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
STI
forfeited
%
75.0%
-
75.0%
73.4%
75.0%
-
75.0%
-
-
-
25.0%
-
50.0%
-
64.0%
5.0%
Maximum
future
value of
vested STI
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
LTI paid
in cash
%
-
-
-
-
-
-
-
-
-
100.0%
-
-
-
-
-
15.8%
LTI
accrued
and
not yet due
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
LTI
forfeited
%
-
100.0%
-
100.0%
-
100.0%
-
100.0%
-
-
-
100.0%
-
100.0%
-
84.2%
00:57
Servcorp Annual Report 2014 – The Sun never sets on ServcorpREMUNERATION REPORT AUDITOR’S INDEPENDENCE DECLARATION
00:58
2014 FINANCIAL REPORT
CONTENTS
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the Consolidated financial report
Directors’ declaration
60
61
62
63
64
109
00:59
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT STATEMENT OF COMPREHENSIVE INCOME
Servcorp Limited and its controlled entities for the financial year ended 30 June 2014
Revenue
Other income
Service expenses
Marketing expenses
Occupancy expenses
Administrative expenses
Borrowing expenses
Total expenses
Profit before income tax expense
Income tax expense
Profit for the year
Other comprehensive (loss) / income
Translation of foreign operations (Item may be reclassified
subsequently to profit or loss)
Other comprehensive (loss) / income for the period (net of tax)
Total comprehensive income for the period
Earnings per share
Basic earnings per share
Diluted earnings per share
2014
$’000
234,284
7,963
242,247
(63,598)
(14,835)
(107,140)
(22,357)
(60)
Consolidated
2013
$’000
199,341
8,654
207,995
(56,736)
(13,118)
(90,500)
(20,006)
(5)
(207,990)
(180,365)
34,257
(7,921)
26,336
(894)
(894)
27,630
(6,359)
21,271
2,713
2,713
25,442
23,984
$0.27
$0.27
$0.22
$0.22
Note
2
2
2
5
8
8
The Statement of comprehensive income is to be read in conjunction with the notes to the Consolidated financial report.
00:60
FINANCIAL REPORT STATEMENT OF FINANCIAL POSITION
Servcorp Limited and its controlled entities for the financial year ended 30 June 2014
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Current tax assets
Other
Total current assets
Non-current assets
Other financial assets
Property, plant and equipment
Deferred tax assets
Goodwill
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Other financial liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Other financial liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Equity attributable to equity holders of the parent
Total equity
Note
9
10
12
5
11
12
13
5
14
15
16
5
18
15
16
18
5
19
2014
$’000
92,482
32,243
17,159
575
12,088
154,547
25,847
91,301
21,920
14,805
153,873
308,420
32,421
25,393
2,749
4,657
65,220
21,179
3,557
668
695
26,099
91,319
217,101
154,122
(15,789)
78,768
217,101
217,101
The Statement of financial position is to be read in conjunction with the notes to the Consolidated financial report.
Consolidated
2013
$’000
99,758
22,960
3,712
1,138
10,679
138,247
24,183
84,921
24,129
14,805
148,038
286,285
34,519
21,653
2,006
4,629
62,807
14,398
-
655
525
15,578
78,385
207,900
154,122
(14,750)
68,528
207,900
207,900
00:61
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT STATEMENT OF CHANGES IN EQUITY
Servcorp Limited and its controlled entities for the financial year ended 30 June 2014
Balance at 1 July 2012
Profit for the period
Translation of foreign operations (net of tax)
Total comprehensive gain for the period
Share buy-back
Payment of dividends
Issued
capital
$’000
154,149
-
-
-
(27)
-
$’000
(17,608)
-
2,713
2,713
-
-
Balance at 30 June 2013
154,122
(14,895)
Balance at 1 July 2013
Profit for the period
Translation of foreign operations (net of tax)
Total comprehensive gain for the period
Options expired
Payment of dividends
154,122
(14,895)
-
-
-
-
-
-
(894)
(894)
-
-
Balance at 30 June 2014
154,122
(15,789)
Foreign
currency
translation
reserve
Employee
equity settled
benefits
reserve
Retained
earnings
Total
$’000
145
-
-
-
-
-
145
145
-
-
-
(145)
-
-
$’000
62,023
21,271
-
21,271
-
(14,766)
68,528
68,528
26,336
-
26,336
145
(16,241)
78,768
$’000
198,709
21,271
2,713
23,984
(27)
(14,766)
207,900
207,900
26,336
(894)
25,442
-
(16,241)
217,101
The Statement of changes in equity is to be read in conjunction with the notes to the Consolidated financial report.
00:62
FINANCIAL REPORT STATEMENT OF CASH FLOWS
Servcorp Limited and its controlled entities for the financial year ended 30 June 2014
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Franchise fees received
Income tax paid
Interest and other items of similar nature received
Interest and other costs of finance paid
Net operating cash flows
Cash flows from investing activities
Payments for variable rate bonds
Payments for property, plant and equipment
Payments for lease deposits
Proceeds from sale of property, plant and equipment
Proceeds from sale of fixed rate securities
Proceeds from refund of lease deposits
Net investing cash flows
Cash flows from financing activities
Payment for share buy-back
Dividends paid
Borrowings
Landlord capital incentives received
Net financing cash flows
Note
25(b)
2014
$’000
238,009
(196,908)
603
(4,591)
3,161
(60)
40,214
(13,959)
(24,251)
(2,465)
41
998
151
(39,485)
-
(16,241)
4,059
4,393
(7,789)
Consolidated
2013
$’000
208,762
(176,743)
587
(10,131)
4,622
(5)
27,092
(2,997)
(21,059)
(760)
(6)
-
3,433
(21,389)
(26)
(14,766)
-
2,375
(12,417)
Net decrease in cash and cash equivalents
(7,060)
(6,714)
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash transactions
in foreign currencies
Cash and cash equivalents at the end of the financial year
25(a)
The Statement of cash flows is to be read in conjunction with the notes to the Consolidated financial report.
99,758
(216)
92,482
104,334
2,138
99,758
00:63
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
CONTENTS OF THE NOTES TO THE CONSOLIDATED FINANCIAL REPORT
Significant accounting policies
Profit from operations
Significant transactions
Remuneration of auditors
Income taxes
Segment information
Dividends
Earnings per share
Cash and cash equivalents
Trade and other receivables
Other assets
Other financial assets
Property, plant and equipment
Goodwill
Trade and other payables
Other financial liabilities
Financing arrangements
Provisions
Issued capital
Financial instruments
Employee benefits
Commitments for expenditure
Subsidiaries
Formation / deregistration of controlled entities
Notes to Statement of cash flows
Related party disclosures
Parent entity disclosures
Subsequent events
Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Note 10.
Note 11.
Note 12.
Note 13.
Note 14.
Note 15.
Note 16.
Note 17.
Note 18.
Note 19.
Note 20.
Note 21.
Note 22.
Note 23.
Note 24.
Note 25.
Note 26.
Note 27.
Note 28.
00:64
65
75
76
76
77
80
81
82
82
83
84
84
85
86
87
87
88
89
90
91
97
98
99
103
104
105
107
108
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting
Standards and Interpretations, and complies with other requirements of the law.
The financial report comprises the consolidated financial statements of Servcorp Limited and its controlled entities (‘Group’ or ‘Consolidated
Entity’). For the purposes of preparing the consolidated financial statements, the company is a for-profit entity.
Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS
ensures that the financial statements and notes of the Group comply with International Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the directors on 26 August 2014.
Basis of preparation
The financial report has been prepared on the basis of historical cost, except for financial instruments that are measured at their fair value as
explained below. Cost is based on the fair value of the consideration given in exchange for assets. All amounts are presented in Australian
dollars, unless otherwise noted.
The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class
Order, amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.
Adoption of new and revised Accounting Standards
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board (AASB) that are relevant to its operations and effective for the current annual reporting period. The adoption of these new
accounting standards did not have any material impact.
At the date of authorisation of the financial report, the following Standards and Interpretations relevant to the Group were on issue but not yet
effective:
– AASB 9 ‘Financial Instruments’ AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9. Effective for annual
reporting periods beginning 1 January 2015.
– AASB 13 ‘Fair Value Measurement’ and AASB 2011-8 ‘Amendments to Australian Accounting Standards arising from AASB 13’.
– IFRS 15 ‘Revenue from Contracts with Customers’. Effective for annual reporting periods beginning 1 January 2017.
The directors anticipate that the adoption of these Standards and Interpretations on issue but not yet effective in future periods will have no
material financial impact on the financial statements of the Consolidated Entity.
00:65
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following significant accounting policies have been adopted in the preparation and presentation of the financial report:
a. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries). Control is achieved when the Company has the power, rights to variable returns and the ability to use its power to affect the
amount of the returns. A list of subsidiaries appears in Note 23 to the financial statements. Consistent accounting policies are employed in
the preparation and presentation of the consolidated financial statements.
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any
excess in the cost of acquisition over the fair value of the identifiable net assets acquired is recognised as goodwill. If after reassessment, the
fair value of the identifiable net assets acquired exceeds the cost of acquisition the difference is credited to the Statement of comprehensive
income in the period of acquisition.
The consolidated financial statements include the information and results of each subsidiary from the date on which the Company obtains
control, and until such time as the Company ceases to control an entity.
In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the
Consolidated Entity are eliminated in full.
b. Goodwill
Goodwill arising on acquisition is recognised as an asset and initially recognised at cost, representing the excess of the cost of acquisition
over the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is not amortised, but is tested for
impairment at each reporting date and whenever there is an indication that goodwill may be impaired. Any impairment of goodwill is
recognised immediately in the Statement of comprehensive income and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (CGUs), or groups of CGUs,
expected to benefit from the synergies of the business combination. CGUs (or groups of CGUs) to which goodwill has been allocated are
tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.
If the recoverable amount of the CGU (or group of CGUs) is less than the carrying amount of the CGU, the impairment loss is allocated to
reduce the carrying amount of any goodwill allocated to the CGU (or group of CGUs) and then to the other assets of the CGUs pro-rata on
the basis of the carrying amount of each asset in the CGU (or group of CGUs). An impairment loss for goodwill is immediately recognised
in profit or loss and is not reversed in a subsequent period. On disposal of an operation within a CGU, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal of the operation.
00:66
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c. Impairment of tangible and intangible assets excluding goodwill
At each reporting date, the Consolidated Entity reviews the carrying values 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 the asset does not generate cash flows that are independent
from other assets, the Consolidated Entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at each reporting date
and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash
flows are discounted to their present value by using a pre-tax discount rate that reflects 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 CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is
reduced to its recoverable amount.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its
recoverable amount, but only to the extent 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 CGU) in prior years. A reversal of the impairment loss is recognised in
the Statement of comprehensive income immediately.
d. Revenue recognition
Services revenue
Services revenue comprises revenue earned net of the amount of goods and services tax from the provision of services to entities outside the
Consolidated Entity. Rental, telephone and services revenue are typically invoiced in advance and are recognised in the period in which the
services are provided.
e. Other income / expense
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Disposal of assets
The profit and loss on disposal of assets is brought to account when the significant risks and rewards of ownership are passed to a party
external to the Consolidated Entity.
f. Foreign currency
Transactions
Foreign currency transactions are translated to Australian currency at the rates of exchange ruling at the dates of the transactions. Amounts
receivable and payable in foreign currencies at balance date are translated at the rates of exchange ruling on that date.
Foreign currency monetary items at reporting date are translated at the exchange rates existing at reporting date. Non-monetary assets and
liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value
was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.
Exchange differences are recognised in profit and loss in the period in which they arise except exchange differences on monetary items
receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the net
investment in a foreign operation. Such exchange differences are recognised in the foreign currency translation reserve and in the profit and
loss on disposal of the net investment.
00:67
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
f. Foreign currency (continued)
Translation of controlled foreign entities
The individual financial statements of each group entity are presented in its functional currency being the currency of the primary economic
environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of
each entity are expressed in Australian dollars, which is the functional currency of Servcorp Limited and the presentation currency for the
consolidated financial statements.
The assets and liabilities of overseas operations are translated at the rates of exchange ruling at the balance sheet date.
Income and expense items are translated at the average exchange rate for the period. Exchange differences arising on translation are taken
directly to the foreign currency translation reserve.
The balance of the foreign currency translation reserve relating to an overseas operation that is disposed of is recognised in the profit and
loss in the period of disposal.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to A-IFRS are treated as
assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date. Goodwill arising on acquisitions
before the date of transition to A-IFRS is treated as an Australian dollar denominated asset.
g. Borrowing costs
Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings, and amortisation of ancillary costs using
the effective interest rate method in connection with the arrangement of borrowings. Borrowing costs are expensed to the Statement of
comprehensive income as incurred.
h. Taxation
Current tax
Current tax is calculated by reference to the amount of income tax payable or recoverable in respect of the taxable profit or loss for the
period. Income tax is calculated using tax rates and tax laws that have been enacted or substantively enacted by the reporting date. Current
tax for current and prior periods is recognised as a liability or asset to the extent that it is unpaid or refundable.
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that
it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax
offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arises
from the initial recognition of assets and liabilities, other than as a result of a business combination, which affects neither taxable income nor
accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches and associates
except where the Consolidated Entity is able to control the reversal of the temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these
investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise benefits of
the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the assets and liabilities giving
rise to them are realised or settled, based on tax rates and tax laws that have been enacted or substantially enacted by the reporting date.
00:68
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h. Taxation (continued)
Deferred tax (continued)
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the
Consolidated Entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Consolidated
Entity intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the Statement of comprehensive income, except when it relates to items
credited or debited directly to equity, in which case the deferred tax is also recognised in equity.
Tax consolidation
The Company and all its wholly-owned Australian resident entities are part of a tax consolidated group under Australian taxation law.
Servcorp Limited is the head entity in the tax consolidated group. 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 tax payer within group’ approach. Current tax liabilities and assets and deferred
tax assets arising from unused tax losses and tax credits of the members of the tax consolidated group are recognised by the Company.
Under this method, each entity is subject to tax as part of the tax consolidated group.
Due to the existence of a tax funding arrangement between entities in the tax consolidated group, amounts are recognised as payable to
or receivable by the Company, and each member of the tax consolidated 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. Where the tax
contribution amount recognised by each member of the tax consolidated group for a particular period is different to the aggregate of the
current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference
is recognised as a contribution from (or distribution to) equity participants.
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST
incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of expense.
Receivables and payables are stated inclusive of GST.
The net amount of GST recoverable from or payable to the ATO is included as a current asset or liability in the Statement of financial position.
Cash flows are included in the Statement of cash flows on a gross basis. The GST components of cash flows arising from investing and
financing activities which are recoverable from or payable to the ATO are classified as operating cash flows.
i. Receivables
Trade debtors to be settled within 30 days are carried at amounts due. The collectability of debts is assessed at balance sheet date and a
specific allowance is made for any doubtful amounts.
j. Derivative financial instruments
The Consolidated Entity enters into derivative financial instruments to manage its exposure to fluctuations in foreign exchange rates. Further
details of derivative financial instruments are disclosed in Note 20 to the Consolidated financial report.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair
value at each reporting date. The resulting gain or loss is recognised immediately in the profit or loss.
00:69
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
k. Share based payments
The Board may grant options to eligible executives in accordance with the Servcorp Executive Share Option Scheme. These equity-settled-
share-based payments are non-market based and have earnings per share performance hurdles for the vesting of options.
Equity-settled share-based payments with employees are measured at the fair value of the equity instrument at the grant date. Fair value is
measured by use of a Binomial Tree model. The expected life used in the model has been adjusted, based on management’s best estimate
for the effects of non-transferability, exercise restrictions, and behavioural considerations. Further details on how the fair value of equity-
settled share-based transactions has been determined can be found in Note 21.
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 each reporting date, the Group revises its estimate of the number of equity instruments that are expected to vest. The impact of the
revision of the original estimates, if any, is recognised in profit or loss, with a corresponding adjustment to the equity-settled employee
benefits reserve.
l. Financial assets
Subsequent to initial recognition, Servcorp Limited’s investments in subsidiaries are measured at cost.
The classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial
recognition. Other financial assets are classified into the following specified categories:
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are
classified as ‘Loans and receivables’. Loans and receivables are measured at amortised costs using the effective interest method less
impairment.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flow
of the investment have been impacted.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the
relevant period. The effective interest rate is the rate that will exactly discount estimated future cash receipts (including all fees 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 financial asset or, where appropriate, a shorter period.
00:70
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
m. Property, plant and equipment
Acquisition
Items of property, plant and equipment acquired are capitalised when it is probable that the future economic benefits associated with the
item will flow to the entity and the cost can be measured reliably. Where these costs represent separate components of a complex asset,
they are accounted for as separate assets and are separately depreciated over their useful lives. Rent incurred in bringing floors to a state of
operational readiness is capitalised to leasehold improvements and depreciated over the useful life of the asset.
Costs incurred on property, plant and equipment, which does not meet the criteria for capitalisation are expensed as incurred.
Property, plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated
depreciation, less impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the item.
Depreciation
Items of property, plant and equipment, including buildings and leasehold property but excluding freehold land, are depreciated using the
straight line method over their estimated useful lives. Leasehold improvements are depreciated over the useful life of the asset using the
straight line method.
The estimated useful lives used for each class of asset are as follows:
Buildings
Leasehold improvements
Office furniture and fittings
Office equipment
Software
Motor vehicles
40 years
Useful life of the asset
7.7 years
3-4 years
3.7 years
6.7 years
Depreciation rates and methods are reviewed annually and, where changed, are accounted for as a change in accounting estimate. Where
depreciation rates or methods are changed, the net written down value of the asset is depreciated from the date of the change in accordance
with the new depreciation rate or method.
Assets are depreciated from the date of acquisition from the time an asset is completed and ready for use.
n. Leased assets
Finance leases
Leased plant and equipment
Leases of plant and equipment under which the Company or its controlled entities assume substantially all the risks and benefits of
ownership are classified as finance leases. Other leases are classified as operating leases.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest
on the remaining balance of the liability.
Lease liabilities are reduced by repayments of principal. The interest components of the lease payments are charged to the Statement of
comprehensive income.
Operating leases
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.
Lease incentives
Floor rental is expensed on a straight line basis over the period of the lease term in accordance with lease agreements entered into with
landlords. Where a rent free period or other lease incentives exist under the terms of a lease agreement, the aggregate rent payable over the
lease term is calculated and a charge is made to the profit and loss on a straight line basis over the term of the lease. 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.
00:71
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
o. Payables
Liabilities are recognised for amounts payable in the future for goods or services received, whether or not billed to the Consolidated Entity.
Trade accounts payable are normally settled within 60 days.
p. Borrowing costs
Borrowings are recorded initially at fair value, net of transaction costs. Any difference between the initial recognised amount and the
redemption value is recognised in the Statement of comprehensive income over the life of the borrowings using the effective interest rate
method.
q. Provisions
Provisions are recognised when the Consolidated Entity has a present obligation (legal or constructive) as a result of a past event, the future
sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is
recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date,
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.
Make good costs
A provision for restoration and rehabilitation is recognised when there is a present obligation as a result of development activities undertaken,
it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured
reliably. The estimated future obligations include the costs of restoring the affected areas.
The provision for future restoration costs is the best estimate of the present value of the expenditure required to settle the restoration
obligation at the reporting date, based on current legal requirements. Future restoration costs are reviewed annually and any changes in the
estimate are reflected in the present value of the restoration provision at each reporting date.
Onerous contracts
An onerous contract is considered to exist where the Consolidated Entity has a contract under which the unavoidable costs of meeting the
contractual obligations exceed the economic benefits estimated to be received. Present obligations arising under onerous contracts are
recognised as a provision to the extent that the present obligation exceeds the economic benefits estimated to be received.
00:72
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
r. Employee benefits
Wages, salaries and annual leave
The provisions for employee benefits in respect of wages, salaries and annual leave represents the amount which the Consolidated Entity
has a present obligation to pay resulting from employees’ services provided up to the reporting date. Provisions made in respect of employee
benefits expected to be settled within twelve months, are measured at their nominal values using the remuneration rate expected to apply at
the time of settlement.
Long service leave
The provision for employee benefits in respect of long service leave represents the present value of the estimated future cash outflows to be
made by the Consolidated Entity resulting from employees’ services provided up to the reporting date.
Provisions for employee benefits which are not expected to be settled within twelve months are discounted using the rates attaching to
national government securities at the reporting date which most closely match the terms of maturity of the related liabilities.
In determining the provision for employee benefits, consideration has been given to future increases in wage and salary rates, and the
Consolidated Entity’s experience with staff departures. Related on-costs have also been included in the liability.
Contributions to Australian superannuation funds
The Company and other Australian controlled entities contribute to defined contribution superannuation plans. Contributions are charged to
the Statement of comprehensive income as they are incurred. Further information is set out in Note 21. Contributions to defined contribution
superannuation plans are expensed as incurred.
s. Earnings per share (EPS)
Basic earnings per share
Basic EPS is calculated by dividing the net profit attributable to members of the Consolidated Entity for the reporting period by the weighted
average number of ordinary shares of the Company.
Diluted earnings per share
Diluted EPS is calculated by adjusting the basic EPS earnings by the effect of conversion to ordinary shares of the associated dilutive
potential ordinary shares. The notional earnings on the funds that would have been received by the entity had the potential ordinary shares
been converted are not included.
The diluted EPS weighted average number of shares includes the number of shares assumed to be issued for no consideration in relation to
dilutive potential ordinary shares.
The identification of dilutive potential ordinary shares is based on net profit or loss from continuing ordinary operations and is applied on a
cumulative basis, taking into account the incremental earnings and incremental number of shares for each series of potential ordinary share.
t. Debt and equity instruments
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement.
00:73
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
u. Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to
known amounts of cash, which are subject to an insignificant risk of changes in value and have a maturity of six months or less.
v. Critical accounting issues
In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about carrying
values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the
basis of making the judgments. Actual results may differ from these estimates.
These 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.
The following are the critical judgments that management has made in the process of applying the Group’s accounting policies and that have
the most significant effect on the amounts recognised in the financial statements:
Impairment 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 entity 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. Further information on goodwill impairment is set out in Note 14.
Useful lives of property, plant and equipment
As described in Note 1(m), the Group reviews the estimated useful lives of property, plant and equipment at each reporting period.
Make good provisions
At each reporting date, management reviews leases that are expected to terminate to determine the present obligation in relation to floor
closure costs including make good, which is set out in Note 3.
Tax losses
Deferred tax assets for the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profits will
be available against which the unused tax losses and unused tax credits can be utilised. This is assessed at each reporting date. Further
information is set out in Note 5.
00:74
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
2. PROFIT FROM OPERATIONS
a. Revenue
Revenue from continuing operations consisted of the following:
Revenue from the rendering of services
Franchise fee income
b. Other income
Interest income - bank deposits
Net foreign exchange gain
Other income
Total other income
c. Profit before income tax
Profit before income tax was arrived at after charging / (crediting) the following from / (to)
continuing operations:
Borrowing expenses:
Interest on bank overdrafts and loans
Depreciation of leasehold improvements
Depreciation of property, plant and equipment
Loss / (gains) on disposal of property, plant and equipment
Change in fair value of financial assets classified as fair value through the profit and loss
Bad debts written off
Operating lease payments
2014
$’000
233,681
603
234,284
3,254
2,079
2,630
7,963
60
9,257
6,642
274
332
1,484
89,663
Consolidated
2013
$’000
198,754
587
199,341
3,827
3,348
1,479
8,654
5
7,890
6,348
(63)
203
691
76,056
00:75
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
3. SIGNIFICANT TRANSACTIONS
Individually significant transactions included in profit from ordinary activities before income tax
expense:
Floor closure costs
4. REMUNERATION OF AUDITORS
a. Auditor of the parent entity
(Deloitte Touche Tohmatsu Australia (DTT))
Audit and review of financial reports
Other services - tax
b. Other auditors
(DTT International Associates)
Audit and review of financial reports
Other services - tax
Other services - financial statements preparation
2014
$’000
270
270
2014
$
576,640
98,823
675,463
500,012
106,272
108,012
714,296
Consolidated
2013
$’000
90
90
Consolidated
2013
$
543,385
83,700
627,085
464,025
158,921
96,905
719,851
The auditor of Servcorp Limited is Deloitte Touche Tohmatsu.
1,389,759
1,346,936
00:76
FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
5. INCOME TAXES
a. Income tax recognised in the income statement
Tax expense comprises:
Current tax expense
Over provision in prior years - current tax
Under provision in prior years - deferred tax
Deferred tax income relating to the origination and reversal of temporary differences and
previously unrecognised tax losses
Income tax expense
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to
the income tax expense in the financial statements as follows:
Profit before income tax expense
Income tax expense calculated at 30%
Deductible local taxes
Effect of different tax rates of subsidiaries operating in other jurisdictions
Other deductible items
Tax losses of controlled entities recovered
Income tax over provision in prior years
Unused tax losses and tax offsets not recognised as deferred tax assets
Income tax expense
The tax rate used in the above reconciliation is the Australian corporate tax rate of 30% (2013: 30%).
b. Current tax assets and liabilities
Current tax assets
Tax refunds receivable
Current tax payables
Income tax attributable to:
Parent entity
Subsidiaries
2014
$’000
6,034
(149)
11
2,025
7,921
34,257
10,277
(272)
(2,437)
(578)
(2)
(138)
1,071
7,921
Consolidated
2013
$’000
5,998
(705)
238
828
6,359
27,630
8,289
(69)
(1,361)
(212)
(148)
(467)
327
6,359
575
1,138
-
2,749
2,749
824
1,182
2,006
00:77
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
5. INCOME TAXES (CONTINUED)
c. Deferred tax balances
Deferred tax assets comprises:
Tax losses - revenue
Temporary differences
Deferred tax liabilities comprises:
Temporary differences
Net deferred tax assets
The gross movement of the deferred tax accounts are as follows:
Balance at the beginning of the financial year
Movements in foreign exchange rates
Statement of comprehensive income (credit)
Balance at the end of the financial year
Deferred tax assets
Movements in temporary differences:
Accruals not currently deductible
Doubtful debts
Depreciable and amortisable assets
Tax losses
Foreign exchange
Deferred rent incentive
Other
Deferred tax assets
Balance at the beginning of the financial year
Movements in foreign exchange rates
Statement of comprehensive income (credit)
Balance at the end of the financial year
Deferred tax liabilities
Movements in temporary differences:
Depreciable and amortisable assets
Accruals and provisions not currently deductible
Other
Deferred tax liabilities
Balance at the beginning of the financial year
Movements in foreign exchange rates
Statement of comprehensive income charge/ (credit)
Balance at the end of the financial year
00:78
2014
$’000
14,522
7,398
21,920
(695)
21,225
23,604
(343)
(2,036)
21,225
(384)
4
(148)
(759)
(415)
(175)
12
(1,865)
24,129
(344)
(1,865)
21,920
52
1
118
171
525
(1)
171
695
Consolidated
2013
$’000
15,281
8,848
24,129
(525)
23,604
24,134
536
(1,066)
23,604
(1,209)
(117)
(577)
2,071
(1,504)
(191)
186
(1,341)
24,874
596
(1,341)
24,129
(81)
(288)
94
(275)
740
60
(275)
525
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
5. INCOME TAXES (CONTINUED)
d. Unrecognised deferred tax balances
The following deferred tax assets have not been brought to account as assets:
Temporary differences
Tax losses - capital
Tax losses - revenue
2014
$’000
-
1,422
3,234
4,656
Consolidated
2013
$’000
37
2,086
1,720
3,843
Tax losses carried forward
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through
future taxable profits is probable. The Consolidated Entity recognised deferred income tax assets of $14,521,738 (2013: $15,280,959) in
respect to losses that can be carried forward against future taxable income.
00:79
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
6. SEGMENT INFORMATION
Servcorp Serviced Offices are fully-managed, fully-furnished CBD office suites in prime locations, with a receptionist, meeting rooms, IT
infrastructure and support services available. Servcorp Virtual Office provides the services, facilities and IT to businesses without the cost of
a physical office.
The Group’s information reported to the Board of Directors is based on each segment manager directly responsible for the functioning of
the operating segment. The segment manager has regular contact with members of the Board of Directors to discuss operating activities,
forecasts and financial results. Segment managers are also responsible for disseminating management planning materials as directed by
the Chief Operating Decision Maker. The segment manager motivates and rewards team members who meet or exceed sales targets. Four
reportable operating segments have been identified: Australia, New Zealand and Southeast Asia (ANZ/SEA); USA; Europe and Middle East
(EME); North Asia and other which reflect the segment requirements under AASB 8.
The Group’s reportable operating segments under AASB 8 are presented below. The accounting policies of the reportable operating
segments are the same as the Group’s accounting policies.
The following is an analysis of the Group’s revenue and results by reportable operating segment for the periods under audit:
Segment revenue
Segment profit / (loss)
30 June 2014
$’000
30 June 2013
$’000
30 June 2014
$’000
30 June 2013
$’000
Continuing operations
Australia, New Zealand and Southeast Asia
USA
Europe and Middle East
North Asia
Other
Finance costs
Interest revenue
Foreign exchange gains / (losses)
Centralised unrecovered head office overheads
Franchise fee income
Unallocated
Profit before tax
Income tax expense
78,597
19,088
59,145
77,564
933
74,601
12,357
43,209
69,383
1,007
235,327
200,557
-
3,254
2,079
-
603
984
-
3,827
3,348
-
587
(324)
Consolidated segment revenue and profit for the period
242,247
207,995
11,054
(3,255)
10,726
12,017
353
30,895
(60)
3,254
2,079
13,336
(5,792)
5,436
10,671
195
23,846
(5)
3,827
3,348
(3,302)
(4,571)
603
788
34,257
(7,921)
26,336
614
571
27,630
(6,359)
21,271
The revenue reported above represents revenue generated from external customers. Intersegment sales were eliminated in full. For the
12 months ended 30 June 2014, the Group’s Virtual Office revenue and Serviced Office revenue were $64,289,000 and $171,038,000
respectively (2013: $56,366,000 and $144,191,000, respectively).
00:80
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
7. DIVIDENDS
Dividends proposed (unrecognised) or paid (recognised) by the Company are:
Recognised amounts
2013
Final
Fully paid ordinary shares
Interim Fully paid ordinary shares
2014
Final
Fully paid ordinary shares
Interim Fully paid ordinary shares
Unrecognised amounts
Cents
per share
Total
amount
$’000
Date of
payment
Tax rate
for franking
credit
Percentage
franked
7.50
7.50
7.50
9.00
7,383
7,382
4 Oct 2012
4 Apr 2013
7,382
8,859
2 Oct 2013
2 Apr 2014
30%
30%
30%
30%
85%
100%
100%
0%
Since the end of the financial year, the directors have declared the following dividend:
Final
Fully paid ordinary shares
11.00
10,828
1 Oct 2014
30%
35%
In determining the level of future dividends, the directors will seek to balance growth objectives and rewarding shareholders with income.
This policy is subject to the cash flow requirements of the Company and its investment in new opportunities aimed at growing earnings. The
directors cannot give any assurances concerning the extent of future dividends, or the franking of such dividends, as they are dependent on
future profits, the financial and taxation position of the Company and the impact of taxation legislation.
Dividend franking account
30% franking credit available
Impact on franking account balance of dividends not recognised
2014
$’000
400
1,624
2013
$’000
2,048
3,164
The balance of the franking account has been adjusted for franking credits that will arise from the payment of income tax provided for in the
financial statements, and for franking debits that will arise from the payment of dividends recognised as a liability at reporting date.
00:81
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
8. EARNINGS PER SHARE
Earnings reconciliation
Net profit
Earnings used in the calculation of basic and diluted EPS
Weighted average number of ordinary shares used in the calculation of basic EPS
Weighted average number of ordinary shares used in the calculation of diluted EPS
Basic earnings per share
Diluted earnings per share
Options outstanding as at 30 June 2014 and 30 June 2013 were anti-dilutive.
9. CASH AND CASH EQUIVALENTS
Cash (i) (ii)
Bank short term deposits (ii) (iii)
Note
20
2014
$’000
26,336
26,336
No.
98,432,275
98,432,275
$0.27
$0.27
2014
$’000
23,972
68,510
92,482
Consolidated
2013
$’000
21,271
21,271
No.
98,434,168
98,434,168
$0.22
$0.22
Consolidated
2013
$’000
17,559
82,199
99,758
Notes:
i. Australia and France have Nil (2013: $5,000,000) and $1,505,000 (2013: $4,142,000), respectively, in cash which is encumbered.
ii. Servcorp’s unencumbered cash and investment balance is $93,452,000 as at 30 June 2014 (2013: $90,616,000).
iii. Bank short term deposits mature within an average of 158 days (2013: 178 days). These deposits and the interest earning portion of the cash balance earn interest at a
weighted average rate of 3.52% (2013: 3.97%).
00:82
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
10. TRADE AND OTHER RECEIVABLES
Current
At amortised cost
Trade receivables (i)
Less: allowance for doubtful debts
Other debtors
2014
$’000
22,679
(690)
10,254
32,243
Consolidated
2013
$’000
19,924
(356)
3,392
22,960
Notes:
i. The average credit period allowed on rendering of services is 7 days. An allowance has been made for estimated unrecoverable trade receivable amounts arising from
the past rendering of services, determined by reference to past default experience. The Group has fully reviewed all receivables over 90 days. Receivables are assessed for
impairment at each reporting date and, where there is an indication of impairment, a provision is raised.
Aging of trade receivables past due but not impaired
1 - 30 days
31 - 60 days
60 + days
Total
20,103
1,813
763
22,679
17,902
1,548
474
19,924
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the
date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and
unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
00:83
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
11. OTHER ASSETS
Current
Prepayments
Other
12. OTHER FINANCIAL ASSETS
Current
At fair value through profit or loss
Forward foreign currency exchange contracts
Investment in variable rate securities (i)
At amortised cost
Lease deposits
Non-current
At fair value through profit or loss
Forward foreign currency exchange contracts
At amortised cost
Lease deposits
Other
Notes:
i. Australia has $13,831,000 in securities which is encumbered (2013: Nil).
2014
$’000
7,742
4,346
12,088
321
16,306
532
17,159
Consolidated
2013
$’000
6,100
4,579
10,679
619
2,981
112
3,712
391
-
25,397
59
25,847
24,121
62
24,183
00:84
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
13. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
at cost
Lease-
hold
improve-
ments
owned
at cost
Lease-
hold
improve-
ments
at cost
Office
furniture
& fittings
owned
at cost
Office
furniture
& fittings
leased
at cost
Office
equip-
ment &
software
owned
at cost
Consolidated
Total
Office
equip-
ment
leased
at cost
Motor
vehicles
owned
at cost
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Gross carrying amounts
Balance at
30 June 2013
Additions
Disposals
Transfers (to) / from other
class of asset
Effect of foreign currency
exchange differences
Balance at
30 June 2014
Accumulated depreciation
Balance at
30 June 2013
Depreciation expense
Disposals
Transfers (to) / from other
class of asset
Effect of foreign currency
exchange differences
Balance at
30 June 2014
Net book value
Balance at
30 June 2014
Balance at
30 June 2013
5,166
125,156
1,048
18,577
121
32,888
105
804
183,865
4,828
-
-
14,585
(3,973)
-
-
-
-
2,743
(429)
-
-
-
-
2,095
(775)
-
(34)
(1,592)
(44)
(220)
(5)
(382)
9,960
134,176
1,004
20,671
116
33,826
-
-
-
(4)
101
-
24,251
(75)
(5,252)
-
-
(8)
(2,289)
721
200,575
61,123
1,002
11,069
121
24,352
104
491
98,944
682
155
-
-
9,257
(3,098)
(16)
-
-
-
1,992
(402)
-
-
-
-
4,381
(706)
(5)
(4)
(891)
(44)
(142)
(5)
(217)
833
66,375
958
12,517
116
27,805
9,127
67,801
4,484
64,033
46
46
8,154
7,508
-
-
6,021
8,536
-
-
-
(4)
100
1
1
114
(30)
15,899
(4,236)
-
(21)
(5)
(1,312)
570
109,274
151
91,301
313
84,921
This note is to be read in conjunction with Note 1 Significant accounting policies “Useful lives of property, plant and equipment”.
00:85
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
14. GOODWILL
Gross carrying amount and net book value
Balance at the beginning of the financial year
Balance at the end of the financial year
Allocation of goodwill to cash-generating units
The following twenty countries are cash-generating units:
2014
$’000
14,805
14,805
Consolidated
2013
$’000
14,805
14,805
Japan, Australia, New Zealand, China, Hong Kong, Malaysia, Singapore, Thailand, Belgium, United Arab Emirates, Bahrain, Qatar, Saudi
Arabia, Philippines, Lebanon, Turkey, France, United States of America, Kuwait and United Kingdom.
Goodwill was allocated to the countries in which goodwill arose.
The carrying amounts of goodwill relating to each cash-generating unit as at 30 June 2014 was as follows:
Japan
France
Australia
New Zealand
Singapore
Thailand
China
2014
$’000
9,161
1,030
2,636
785
706
326
161
14,805
Consolidated
2013
$’000
9,161
1,030
2,636
785
706
326
161
14,805
The recoverable amount of goodwill relating to each cash-generating unit was determined based on value in use calculations, which use
cash flow projections, covering a five year period and terminal value. For the year ended 30 June 2014, the discount rate applied to the above
countries, inclusive of country risk premium, was as follows: Japan 14.7%, France 14.4%, Australia 13.8%, New Zealand 13.8%, Singapore
13.8%, Thailand 16.2% and China 14.7% (2013: Japan 14.8%, France 15%, Australia 14.2%, New Zealand 13.9%, Singapore 13.9%,
Thailand 15% and China 14.4%).
00:86
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
15. TRADE AND OTHER PAYABLES
Current
At amortised cost
Trade creditors
Deferred income
Deferred lease incentive
Other creditors and accruals
Non-current
At amortised cost
Deferred lease incentive
16. OTHER FINANCIAL LIABILITIES
Current
At amortised cost
Security deposits
External borrowings (i)
Non-current
At amortised cost
External borrowings (i)
Notes:
i. On 21 November 2013 Japan borrowed JPY240,000,000 at 2.42% p.a. fixed for 5 years.
2014
$’000
5,888
16,695
3,943
5,895
32,421
21,179
21,179
24,887
506
25,393
3,557
3,557
Consolidated
2013
$’000
5,691
16,059
5,204
7,565
34,519
14,398
14,398
21,653
-
21,653
-
-
00:87
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
17. FINANCING ARRANGEMENTS
The Consolidated Entity has access to the following lines of credit:
Total facilities available
Bank guarantees (i)
Bank overdrafts and loans (iii)
Bill acceptance / payroll / other facilities (ii)
Facilities utilised at balance sheet date
Bank guarantees (i)
Bank overdrafts and loans (iii)
Facilities not utilised at balance sheet date
Bank guarantees (i)
Bank overdrafts and loans (iii)
Bill acceptance / payroll / other facilities (ii)
2014
$’000
35,575
1,322
4,150
41,047
27,531
-
27,531
8,044
1,322
4,150
13,516
Consolidated
2013
$’000
19,690
1,218
4,510
25,418
16,571
-
16,571
3,119
1,218
4,510
8,847
The Group has access to financing facilities at reporting date as indicated above. The Group expects to meet its other obligations from
operating cash flows and proceeds.
Notes:
i. Bank guarantees have been issued to secure rental bonds over premises. A guarantee has also been established to secure an overdraft limit in the form of a term
deposit.
ii. Bill acceptance, payroll and other facilities have been established to facilitate the encashment of cheques, and to accommodate direct entry payroll and direct entry
supplier payments.
iii. Bank overdraft limits have been established to fund working capital as required. All bank overdraft facilities are unsecured and payable at call, including any credit card
facility utilised.
00:88
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
18. PROVISIONS
Current
Employee benefits (i)
Other
Non-current
Employee benefits
2014
$’000
4,456
201
4,657
668
668
Consolidated
2013
$’000
4,413
216
4,629
655
655
Notes:
i. The current provision for employee benefits includes $3,982,308 of annual leave and vested long service leave entitlements accrued (2013: $3,877,997).
00:89
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
19. ISSUED CAPITAL
Fully paid ordinary shares 98,432,275 (2013: 98,432,275)
Movements in issued capital
Balance at the beginning of the financial year
Share buy-back
Balance at the end of the financial year
2014
$’000
154,122
154,122
-
154,122
Consolidated
2013
$’000
154,122
154,149
(27)
154,122
00:90
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
20. FINANCIAL INSTRUMENTS
The Group’s Audit and Risk Committee oversees the establishment of the capital and financial risk management system which identifies,
evaluates, classifies, monitors, qualifies and reports significant risks to the Board of Directors. All controlled entities in the Servcorp Group
apply this risk management system to manage their own risks.
a. Financial risk management objectives
The financial risks that result from Servcorp’s activities are credit risk and market risk (interest rate risk and foreign exchange risk).
The Consolidated Entity’s corporate treasury function provides services to the business, co-ordinates access to domestic and international
financial markets, and manages the financial risks relating to the operations of the Consolidated Entity.
The Consolidated Entity does not enter into or trade financial instruments for speculative purposes. The Consolidated Entity does not apply
hedge accounting. The use of financial derivatives is governed by the Consolidated Entity’s policies approved by the Board of Directors.
The Consolidated Entity’s corporate treasury function reports to the Group’s Audit and Risk Committee, an independent body that monitors
risks and policies implemented to mitigate risk exposures.
b. Capital management
Servcorp’s objective when managing capital is to ensure that entities within the Group will be able to continue as a going concern while
maximising the return to stakeholders.
The Group’s overall strategy remains unchanged from 2013. The capital structure of Servcorp consists of equity attributable to equity holders
of the parent, company issued capital, reserves and retained earnings.
Servcorp operates globally, primarily through subsidiary companies established in the markets in which Servcorp operates. Operating cash
flows are used to maintain and expand Servcorp, as well as to make routine outflows of tax and dividend payments.
c. Market risk
Servcorp’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group enters into forward
foreign currency exchange contracts to economically hedge anticipated transactions.
i. Foreign exchange risk
Servcorp operates internationally and is exposed to foreign exchange risk arising from various currency exposures.
Servcorp’s foreign exchange risk arises primarily from:
– risk of fluctuations in foreign exchange rates to the Australian dollar (the reporting currency);
– firm commitments of receipts and payments settled in foreign currencies or with prices dependent on foreign currencies;
– investments in foreign operations; and
– loans and trading accounts to foreign operations.
Foreign currency assets and liabilities
For accounting purposes, net foreign operations are revalued at the end of each reporting period with the movement reflected as a movement
in the foreign currency translation reserve. Borrowings and forward exchange contracts not forming part of the net investment in foreign
operations are revalued at the end of each reporting period with the fair value movement reflected in the Statement of comprehensive income
as exchange gains or losses.
00:91
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
20. FINANCIAL INSTRUMENTS (CONTINUED)
c. Market risk (continued)
i. Foreign exchange risk (continued)
Foreign currency sensitivity analysis
The following table summarises the material sensitivity of financial instruments held at balance date to movements in the exchange rate
of the Australian dollar to foreign exchange rates, with all other variables held constant. The sensitivity is based on reasonably possible
changes, over a financial year, using the observed range of actual historical rates for the preceding five year period.
Pre-tax gain / (loss)
AUD/USD (i) +9% (2013: +12%)
AUD/USD (i) -9% (2013: -12%)
AUD/JPY +9% (2013: +13%)
AUD/JPY -9% (2013: -13%)
AUD/EUR +10% (2013: +10%)
AUD/EUR -10% (2013: -10%)
AUD/RMB +9% (2013: +12%)
AUD/RMB -9% (2013: -12%)
AUD/SGD +5% (2013: +7%)
AUD/SGD -5% (2013: -7%)
AUD/HKD +9% (2013: +12%)
AUD/HKD -9% (2013: -12%)
Impact on profit
Impact on equity
Consolidated
Consolidated
2014
$’000
99
576
2,363
1,561
(92)
75
(201)
875
(205)
172
417
(299)
2013
$’000
158
1,456
2,976
(2,262)
(158)
65
(128)
1,117
12
(21)
340
(399)
2014
$’000
(1,524)
4,508
(975)
1,162
(888)
(663)
(75)
235
(189)
208
-
-
2013
$’000
(995)
4,991
(1,125)
1,473
(1,320)
(373)
(116)
567
(515)
591
-
-
Notes:
i. Servcorp is exposed to Dirhams (Dubai), Dinars (Bahrain), Rials (Qatar), Riyals (Saudi Arabia), Pounds (Lebanon) and Hong Kong Dollars (Hong Kong).
These currencies are pegged to the USD.
00:92
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
20. FINANCIAL INSTRUMENTS (CONTINUED)
c. Market risk (continued)
i. Foreign exchange risk (continued)
Forward foreign currency exchange contracts
The following table sets out the details of forward foreign currency exchange contracts in place as at 30 June 2014. These are Level 2 fair
value measurements derived from inputs as defined in Note 20(e).
Average exchange rate
Foreign currency
2014
2013
2014
million
2013
million
2014
$’000
Fair value
2013
$’000
Outstanding contracts
Consolidated
Sell JPY
Not later than one year
Later than one year and not later than five
years
87.27
85.55
78.21
84.43
Sell USD
Not later than one year
-
0.90
Sell EUR
Later than one year and not later than five
years
0.73
0.73
475
900
-
1
450
950
1
1
(321)
(519)
(612)
90
-
(7)
127
149
ii. Interest rate risk
Interest rate risk on cash or short term deposits is not considered to be a material risk due to the short term nature of these financial
instruments.
The following table summarises the sensitivity of the financial instruments held at balance date, following a movement to interest rates, with
all other variables held constant. The sensitivity is based on reasonably possible changes over a financial year, using
the observed range of actual historical rates.
Pre tax (loss) / gain
AUD balances
125 basis point increase
125 basis point decrease
Other balances
250 basis point increase
250 basis point decrease
Impact on profit
Consolidated
2013
$’000
1,000
(987)
156
(137)
2014
$’000
(740)
(1,796)
(52)
(121)
00:93
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
20. FINANCIAL INSTRUMENTS (CONTINUED)
c. Market risk (continued)
iii. Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management
framework for the management of the Consolidated Entity’s short, medium and long term funding. The Consolidated Entity manages liquidity
risk by maintaining adequate reserves, banking facilities and borrowing facilities.
The following table details the Consolidated Entity’s expected maturity for its financial assets. The table below was drawn up based on the
undiscounted contractual maturities of the financial assets including interest that will be earned.
Less than
1 month
1 to 3
months
3 months
to
1 year
1 to 5
years
5 +
years
Total
$’000
$’000
$’000
$’000
$’000
$’000
Weighted
average
effective
interest
rate
%
23,972
32,243
-
-
5,861
16,306
78,382
17,559
22,960
1,273
-
-
-
3,881
-
-
-
5,467
5,421
-
-
13,739
11,844
25,535
37,347
-
-
-
-
-
-
2,289
-
-
-
23,972
32,243
25,376
17,265
68,743
16,306
3.52%
6.77%
29,416
48,235
25,583
2,289
183,905
-
-
2,040
-
-
-
3,670
6,794
-
-
15,765
12,499
-
-
1,849
-
-
-
17,559
22,960
24,597
19,293
84,267
2,981
4.02%
6.77%
6,136
2,981
914
-
77,217
-
-
-
50,909
2,954
87,681
28,264
1,849
171,657
Consolidated
2014
Non-interest bearing
Cash and cash equivalents
Receivables
Lease deposits
Forward foreign currency exchange contracts
Interest bearing
Cash and cash equivalents (i)
Variable rate securities
2013
Non-interest bearing
Cash and cash equivalents
Receivables
Lease deposits
Forward foreign currency exchange contracts
Interest bearing
Cash and cash equivalents (i)
Variable rate securities
Notes:
i. Fixed interest rate instruments.
00:94
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
20. FINANCIAL INSTRUMENTS (CONTINUED)
c. Market risk (continued)
iii. Liquidity risk (continued)
The following table details the Consolidated Entity’s remaining contractual maturity for its financial liabilities. The table is based on the
earliest date on which undiscounted cash flows of financial liabilities are contractually to be paid. The table includes both principal and
interest cash flows.
Less than
1 month
1 to 3
months
3 months
to
1 year
1 to 5
years
5+
years
Total
$’000
$’000
$’000
$’000
$’000
$’000
5,888
6,369
-
-
-
-
-
24,887
4,964
-
-
10,850
131
6,019
10
422
6,379
30,273
2,213
13,063
5,691
13,303
-
-
-
-
-
-
-
21,653
5,989
-
-
11,776
-
-
5,691
13,303
27,642
11,776
-
-
-
-
-
-
-
-
-
-
12,257
24,887
15,814
2,776
55,734
18,994
21,653
17,765
-
58,412
Consolidated
2014
Non-interest bearing
Payables
Security deposits (i)
Forward foreign currency exchange contracts
Interest bearing
Bank loans (i)
2013
Non-interest bearing
Payables
Security deposits (i)
Forward foreign currency exchange contracts
Interest bearing
Bank loans (i)
Notes:
i. Fixed interest rate instruments.
Weighted
average
effective
interest
rate
%
2.42%
00:95
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
20. FINANCIAL INSTRUMENTS (CONTINUED)
d. Credit risk
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Consolidated Entity.
The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a
means of mitigating the risk of financial loss from defaults.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit
evaluation is performed on the financial condition of accounts receivable. The Group does not have any significant credit risk exposure to any
single counterparty or any group of any counterparties having similar characteristics. Details of credit enhancements in the form of serviced
office security deposits retained from customers are further disclosed in Note 16.
Credit risk on cash and short term fixed deposits is limited because counterparties are banks with high credit ratings assigned by international
credit rating agencies. These liquid funds are managed centrally by Servcorp’s senior management on a daily basis.
e. Fair value of financial instruments
The directors consider that the carrying amount of financial assets and financial liabilities approximate their fair value other than in respect of
Servcorp Limited’s investment in subsidiaries.
Financial instruments are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair
value is observable:
– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e as prices) or indirectly (i.e derived from prices).
– Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
00:96
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
21. EMPLOYEE BENEFITS
Defined contribution fund
Contributions to defined contribution superannuation plans are expensed when employees have rendered services entitling them to the
contributions. The Company’s controlled entities are legally obliged to contribute to employee nominated defined contribution superannuation
plans.
Details of contributions to funds during the year ended 30 June 2014 are as follows:
Employer contributions
As at 30 June 2014, there were no outstanding employer contributions payable to other funds.
Options granted to employees
Share option scheme
Balance at the beginning of the financial year
Options lapsed during the financial year
Balance at the end of the financial year
2014
$’000
1,882
2014
No.
-
-
-
Consolidated
2013
$’000
1,726
Consolidated
2013
No.
140,000
(140,000)
-
The Consolidated Entity has an ownership-based remuneration scheme for key management personnel (including executive directors).
Each key management personnel’s share option converts into one ordinary share of Servcorp Limited when exercised. No amounts are paid
or payable by the recipient of the option. The options carry neither rights to dividends or voting rights.
00:97
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
22. COMMITMENTS FOR EXPENDITURE
Capital expenditure commitments - property, plant and equipment
Contracted but not provided for and payable:
Not later than one year
Later than one year but not later than five years
Later than five years
Non-cancellable operating lease commitments
Future operating lease rentals not provided for in the financial statements and payable:
Not later than one year
Later than one year but not later than five years
Later than five years
2014
$’000
21,422
-
-
21,422
83,763
170,220
73,652
327,635
Consolidated
2013
$’000
9,822
-
-
9,822
85,094
162,885
45,874
293,853
The Consolidated Entity leases property under operating leases expiring from 1 to 10 years. Liabilities in respect of lease incentives are
disclosed in Note 15 to the Consolidated financial statements.
Operating leases
Leasing arrangements
Operating leases have been entered into to operate serviced office floors. The Consolidated Entity does not have an option to purchase the
leased asset at the expiry of the lease period.
00:98
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
23. SUBSIDIARIES
Name of entity
Parent entity
Servcorp Limited (i)
Controlled entities
Servcorp Australian Holdings Pty Ltd
Servcorp Offshore Holdings Pty Ltd
Servcorp Exchange Square Pty Ltd
Servcorp (Miller Street) Pty Ltd
Servcorp (North Ryde) Pty Ltd
Servcorp Smart Office Pty Ltd
Servcorp Smart Homes Pty Ltd
Servcorp Business Service (Beijing) Pty Ltd
Servcorp Virtual Pty Ltd
Servcorp Holdings Pty Ltd
Servcorp Administration Pty Ltd
Servcorp Adelaide Pty Ltd
Servcorp Brisbane George Street Pty Ltd
Servcorp Brisbane Pty Ltd
Servcorp Workspaces Pty Ltd (iii)
(formerly Servcorp Castlereagh Street Pty Ltd)
Servcorp Gateway Pty Ltd
Servcorp Chifley 29 Pty Ltd
Servcorp Communications Pty Ltd
Servcorp IT Pty Ltd
Servcorp Melbourne Virtual Pty Ltd
Servcorp MLC Centre Pty Ltd
Servcorp Melbourne 27 Pty Ltd
Servcorp Sydney Virtual Pty Ltd
Servcorp William Street Pty Ltd
Servcorp Melbourne 18 Pty Ltd
Servcorp Perth Pty Ltd
Servcorp Brisbane Riverside Pty Ltd
Servcorp Market Street Pty Ltd
Office Squared Pty Ltd
Servcorp WA Pty Ltd
Country of incorporation
Ownership interest
2014
%
2013
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
00:99
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
23. SUBSIDIARIES (CONTINUED)
Name of entity
Country of incorporation
Ownership interest
2014
%
2013
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Hong Kong
Hong Kong
Hong Kong
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
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
Controlled entities (continued)
Servcorp Parramatta Pty Ltd
Servcorp Sydney 56 Pty Ltd
Servcorp Norwest Pty Ltd
Servcorp Level 12 Pty Ltd
Servcorp Western Australia Pty Ltd
Office Squared (Nexus) Pty Ltd
Servcorp SA 30 Pty Ltd
Servcorp City Square Pty Ltd
Servcorp North Sydney 32 Pty Ltd
Servcorp Docklands Pty Ltd
Servcorp Sydney 22 Pty Ltd
Servcorp Hobart Pty Ltd
Servcorp Brisbane 400 Pty Ltd
Servcorp Southbank Pty Ltd
Office Squared (Atlas) Pty Ltd
Gnee Pty Ltd
Beechreef (New Zealand) Limited
Servcorp New Zealand Limited
Company Headquarters Limited
Servcorp Wellington Limited
Servcorp Christchurch Limited
Servcorp Serviced Offices Pte Ltd
Servcorp Battery Road Pte Ltd
Servcorp Marina Pte Ltd
Servcorp Franchising Pte Ltd
Servcorp Singapore Holdings Pte Ltd
Servcorp Metropolis Pte Ltd (iii)
(formerly Office Squared Pte Ltd)
Servcorp Hottdesk Singapore Pte Ltd
Servcorp Square Pte Ltd
Servcorp SR Pte Ltd
Servcorp Hong Kong Limited
Servcorp Communications Limited
Servcorp HK Central Limited
00:100
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
23. SUBSIDIARIES (CONTINUED)
Name of entity
Country of incorporation
Ownership interest
2014
%
2013
%
Controlled entities (continued)
Servcorp Business Services (Shanghai) Co. Ltd
Servcorp Business Service (Beijing) Co. Ltd
Chengdu Servcorp Business Service Co. Ltd
Beijing Servcorp Sihui Business Services Co. Ltd
Office Squared Network Technology Services (Hangzhou) Co. Ltd (iv)
Guangzhou Servcorp Business Service Co. Ltd
Chengdu Servcorp Aerospace Business Service Co. Ltd
Hangzhou Servcorp Business Consulting Co. Ltd
Amalthea Nominees (Malaysia) Sdn Bhd
Office Squared Malaysia Sdn Bhd
Servcorp Manila, Inc
Servcorp Thai Holdings Limited
Servcorp Company Limited
Headquarters Co. Limited
Servcorp Japan KK
Servcorp Tokyo KK
Servcorp Nippon International KK (iv)
Servcorp Marunouchi KK (iv)
Servcorp Ginza KK (iv)
Servcorp Shinagawa KK
Servcorp Nagoya KK (iv)
Servcorp Fukuoka KK (iv)
Call Centre Enterprises KK (iv)
Servcorp Seoul LLC (iv)
Servcorp Paris SARL
Servcorp Edouard VII SARL
Servcorp Brussels SPRL
Servcorp UK Limited
Servcorp Leadenhall Limited
Servcorp Mayfair Limited
Servcorp LLC (ii)
Servcorp Administration Services WLL (ii)
China
China
China
China
China
China
China
China
Malaysia
Malaysia
Philippines
Thailand
Thailand
Thailand
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Korea
France
France
Belgium
United Kingdom
United Kingdom
United Kingdom
UAE
UAE
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
-
-
-
100
-
-
-
-
100
100
100
100
80
100
49
49
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
-
-
49
49
00:101
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
23. SUBSIDIARIES (CONTINUED)
Name of entity
Controlled entities (continued)
Servcorp Business Centres Operation Limited Liability Partnership
Servcorp BFH WLL
Servcorp Qatar LLC (ii)
Servcorp Aswad Real Estate Company WLL (ii)
Servcorp Phoenicia SAL
Jeddah Branch of Servcorp Square Pte Ltd
Servcorp US Holdings, Inc.
Servcorp America LLC
Servcorp Atlanta LLC
Servcorp Boston LLC
Servcorp New York LLC
Servcorp Washington LLC
Servcorp Philadelphia LLC
Servcorp Dallas LLC
Servcorp Houston LLC
Servcorp Los Angeles LLC
Servcorp Denver LLC
Servcorp Miami LLC
Servcorp San Francisco LLC
Servcorp State Street LLC
Ownership interest
Country of
incorporation
2014
%
2013
%
Turkey
Bahrain
Qatar
Kuwait
Lebanon
Saudi Arabia
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
100
100
49
49
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
49
49
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Notes:
i. Servcorp Limited is the head entity within the Australian tax consolidated group.
ii. A Company in the Consolidated Entity exercises control over Servcorp LLC, Servcorp Administration Services WLL, Servcorp Qatar LLC and Servcorp Aswad Real
Estate Company WLL despite owning 49% of the issued capital. Arrangements are in place that entitle the Company or its controlled entities to all the benefits and risks
of ownership notwithstanding that the majority shareholding may be vested in another party.
iii. a. Servcorp Workspaces Pty Ltd changed its name from Servcorp Castlereagh Street Pty Ltd on 2 April 2014.
b. Servcorp Metropolis Pte Ltd changed its name from Office Squared Pte Ltd on 26 February 2014.
iv. The entity was deregistered during the financial year (refer to Note 24).
00:102
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
24. FORMATION / DEREGISTRATION OF CONTROLLED ENTITIES
Formations 2014
Servcorp Leadenhall Limited
The entity was formed on 31 October 2013
Servcorp Mayfair Limited
The entity was formed on 12 May 2014
Formations 2013
There were no new entities formed during the financial year
Deregistrations 2014
Office Squared Network Technology Services (Hangzhou) Co. Ltd
The entity was deregistered on 16 July 2013
Servcorp Nippon International KK
The entity was deregistered on 1 February 2014
Servcorp Marunouchi KK
The entity was deregistered on 17 July 2013
Servcorp Ginza KK
The entity was deregistered on 1 February 2014
Servcorp Nagoya KK
The entity was deregistered on 1 February 2014
Servcorp Fukuoka KK
The entity was deregistered on 17 July 2013
Call Centre Enterprises KK
The entity was deregistered on 1 February 2014
Servcorp Seoul LLC
The entity was deregistered on 2 June 2014
Deregistrations 2013
Nil
Consideration
$’000
The Consolidated
Entity’s interest
%
-
-
80%
100%
Country of incorporation
China
Japan
Japan
Japan
Japan
Japan
Japan
Korea
00:103
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
25. NOTES TO STATEMENT OF CASH FLOWS
a. Reconciliation of cash and cash equivalents
For the purpose of the Statement of cash flows, cash and cash equivalents includes cash on hand and at
bank, and short term deposits at call, net of outstanding bank overdrafts. Cash and cash equivalents at the
end of the financial year as shown in the Statement of cash flows are reconciled to the related items in the
Statement of financial position as follows:
Cash at bank
Short term deposits
Cash and cash equivalents
b. Reconciliation of profit for the period to net cash flows from operating activities
Profit after income tax
Add / (less) non-cash items:
Movements in provisions
Depreciation of non-current assets
Loss / (gain) on disposal of non-current assets
Increase / (decrease) in current tax liability
Decrease / (increase) in deferred tax balances
Unrealised foreign exchange (gain)
Changes in net assets and liabilities during the financial period:
Increase in prepayments and receivables
Increase in trade debtors
Increase in current assets
Increase in deferred income
Increase in client security deposits
Increase in accounts payable
Net cash provided from operating activities
2014
$’000
Consolidated
2013
$’000
23,972
68,510
92,482
17,559
82,199
99,758
26,336
21,271
41
15,899
274
1,306
2,379
(2,450)
(1,642)
(9,283)
(562)
636
3,234
4,046
40,214
1,120
14,238
(64)
(6,359)
(530)
(1,400)
(2,938)
(1,087)
(433)
917
1,818
539
27,092
00:104
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
26. RELATED PARTY DISCLOSURES
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 23 to the financial statements.
Other transactions with the Company and its controlled entities
From time to time directors of the Company and its controlled entities, or their director-related entities, may purchase goods from or
provide services to the Consolidated Entity. These purchases or sales are on the same terms and conditions as those entered into by other
employees, suppliers or customers of the Consolidated Entity and are trivial or domestic in nature. All transactions with director-related
entities are disclosed to the Board and reviewed to ensure they bring a benefit to the Consolidated Entity.
A director of the Company, Mr A G Moufarrige, has an interest in and is a director of Tekfon Pty Ltd. The Consolidated Entity has a lease on
arm’s length terms with Tekfon Pty Ltd for the use of Tekfon’s premises for storage. The Board, with Mr A G Moufarrige absent, reviews the
lease with Tekfon Pty Ltd on an annual basis to ensure that the terms are at market rate or better.
A relative of a director of the Company, Mr A G Moufarrige, has an interest in Enideb Pty Ltd. Mr A G Moufarrige has no interest in the affairs
of Enideb Pty Ltd. Enideb Pty Ltd operates the Servcorp franchise in Canberra on arm’s length terms.
A director of the Company, Mr A G Moufarrige, has an interest in and is a director of Air Office Pty Ltd. Air Office Pty Ltd is provided IT
services by the Consolidated Entity, which are reimbursed at arm’s length terms. Last year, Air Office Pty Ltd provided IT services to
The Consolidated Entity. At various times during the year, Air Office Pty Ltd was also a client of Servcorp in Adelaide, Brisbane, Hobart,
Melbourne and Sydney.
A director of the Company, Mr A G Moufarrige, has an interest in and is a director of Sovori Pty Ltd. Mr T Moufarrige, a director of the
Company, is also a director of Sovori Pty Ltd.
A director of the Company, Mr A G Moufarrige, has an interest in Thru, Inc. A director of the Company, Mr R Holliday-Smith, has an interest in
and is a director of Thru, Inc. Thru, Inc. provides IT services to Servcorp on arm’s length terms. Mr A G Moufarrige and Mr R Holliday-Smith
did not have any involvement in the negotiation of the terms of the arrangement with Thru, Inc. Thru, Inc is also a client of Servcorp in Sydney.
A director of the Company, Mr T Moufarrige, has an interest in and is the CEO of Light Energy Australia Pty Ltd. Light Energy Australia Pty Ltd
is a client of Servcorp in Sydney and in Beijing. Light Energy Australia Pty Ltd also provides lighting products to the Consolidated Entity on
arm’s length terms.
A director of the Company, Mr T Moufarrige, was a consultant to Cutting Edge Post Pty Ltd. Cutting Edge Post Pty Ltd provides advice on
online training programs to the Consolidated Entity on arm’s length terms. Mr T Moufarrige ceased acting as a consultant to Cutting Edge
Post Pty Ltd in August 2013.
A director of the Company, Mr T Moufarrige, has an interest in and is a director of Spigoli Pty Ltd. Mr T Moufarrige and Spigoli Pty Ltd are
clients of Servcorp in Sydney.
A relative of a director of the Company, Mr B Corlett, has an interest in TDM Asset Management Pty Ltd. TDM Asset Management Pty Ltd
was a client of Servcorp in Sydney and is a client in New York. Mr Corlett has no interest in the affairs of TDM Asset Management Pty Ltd nor
any involvement in the negotiation of the terms of the arrangement with TDM Asset Management Pty Ltd.
A director of the Company, Mr B Corlett, has an interest in and is the Chairman of Australian Maritime Systems Limited. Australian Maritime
Systems Limited is a client of Servcorp in Perth. Mr Corlett did not have any involvement in the negotiation of the terms of the arrangement
with Australian Maritime Systems Limited.
A director of the Company, Mr B Corlett, had an interest in and was the Chairman of The Trust Company Limited. The Trust Company Limited
was a client of Servcorp in Perth. Mr Corlett did not have any involvement in the negotiation of the terms of the arrangement with The Trust
Company Limited.
The terms and conditions of the transactions with directors and their director-related entities were no more favourable than those available, or
which might reasonably be expected to be available, on similar transactions to non-director-related entities on an arm’s length basis.
00:105
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
26. RELATED PARTY DISCLOSURES (CONTINUED)
Other transactions with the Company and its controlled entities (continued)
The value of the transactions during the year with directors and their director-related entities were as follows:
Director
Director-related entity
A G Moufarrige
Tekfon Pty Ltd
A G Moufarrige
Enideb Pty Ltd
A G Moufarrige
Air Office Pty Ltd
A G Moufarrige
Air Office Pty Ltd
A G Moufarrige
Air Office Pty Ltd
A G Moufarrige,
T Moufarrige
A G Moufarrige,
R Holliday-Smith
A G Moufarrige,
R Holliday-Smith
Sovori Pty Ltd
Thru, Inc.
Thru, Inc.
T Moufarrige
Light Energy Australia Pty Ltd
T Moufarrige
Light Energy Australia Pty Ltd
T Moufarrige
Cutting Egde Post Pty Ltd
T Moufarrige
Spigoli Pty Ltd
Transaction
Premises rental
Franchisee
IT services
Client
Reimbursements
Reimbursements
IT services
Client
Client
Supplier
Supplier
Client
T Moufarrige
Taine Moufarrige
Reimbursements
B Corlett
B Corlett
B Corlett
TDM Asset Management Pty Ltd
Australian Maritime Systems Limited
The Trust Company Limited
Client
Client
Client
2014
$
84,712
737,381
-
2,254
42,806
250,434
116,972
9,559
6,699
371,229
27,929
8,041
9,072
23,955
36,870
92,930
Consolidated
2013
$
82,916
767,888
49,500
-
1,938
214,717
116,693
-
18,006
61,746
96,737
37,059
-
-
102,621
115,961
Amounts receivable from and payable to directors and their director-related entities at balance sheet date arising from these transactions
were as follows:
Current receivable
Enideb Pty Ltd
Air Office Pty Ltd
Thru, Inc
Light Energy Australia Pty Ltd
Spigoli Pty Ltd
Taine Moufarrige
TDM Asset Management Pty Ltd
Australian Maritime Systems Limited
The Trust Company Limited
Current payable
Enideb Pty Ltd
Thru, Inc
Light Energy Australia Pty Ltd
Cutting Edge Post Pty Ltd
00:106
78,020
564
799
403
1,076
9,072
3,671
638
658
25,455
2,075
94,297
-
113,232
1,938
-
389
697
-
-
8,499
12,646
6,848
-
-
94
FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
27. PARENT ENTITY DISCLOSURES
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Equity
Issued capital
Retained earnings
Reserves
Equity settled employee benefits
Financial performance
Profit for the year
Total comprehensive income
2014
$’000
184,435
20,696
205,131
32,753
32,753
154,122
18,256
-
172,378
11,584
11,584
The Company
2013
$’000
169,222
19,296
188,518
11,482
11,482
154,122
22,768
146
177,036
18,464
18,464
As at 30 June 2014:
i. Servcorp Limited guaranteed Company Headquarters Limited (a subsidiary) as part of a New Zealand lease negotiated in 2002.
ii. On 3 June 2014 Servcorp Limited renewed a Corporate Guarantee and Indemnity with the Australian and New Zealand Banking Group Limited, pursuant to which the
bank agreed to make available to the Consolidated Entity a $33,000,000 interchangeable facility for general corporate purposes. The liability under the deed by and
between the Australian and New Zealand companies is limited to $43,831,000. As at 30 June 2014 the fair value of these commitments was Nil (2013: Nil).
iii. There were no contingent liabilities of the parent entity.
iv. There were no commitments for the acquisition of property, plant and equipment by the parent entity.
00:107
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL REPORT
for the financial year ended 30 June 2014
28. SUBSEQUENT EVENTS
Other than the matters noted below, there has not arisen in the interval between reporting date and the date of this Financial Report, any
item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the
operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in future financial years.
Dividend
On 26 August 2014 the directors declared a final dividend of 11.00 cents per share, franked to 35%, payable on 1 October 2014.
The financial effect of the above transaction has not been brought to account in the financial statements for the year ended 30 June 2014.
00:108
FINANCIAL REPORT DIRECTORS’ 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. the attached financial statements, set out on pages 59 to 108 are in compliance with International Financial Reporting Standards, as stated
in Note 1 to the Consolidated financial report;
c. in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including:
i. compliance with accounting standards; and
ii. giving a true and fair view of the financial position and performance of the Consolidated Entity;
d. the directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors pursuant to section 295(5) of the Corporations Act 2001.
A G Moufarrige
Managing Director and CEO
Dated at Sydney this 26th day of August 2014.
00:109
Servcorp Annual Report 2014 – The Sun never sets on ServcorpFINANCIAL REPORT
AUDITOR’S REPORT
00:110
AUDITOR’S REPORT
00:111
Servcorp Annual Report 2014 – The Sun never sets on Servcorp 00:113
Servcorp Annual Report 2014 – The Sun never sets on Servcorp SHAREHOLDER INFORMATION
SHAREHOLDER INFORMATION
The shareholder information set out below is provided in accordance with the Listing
Rules and was applicable as at 3 September 2014.
CLASS OF SHARES AND VOTING RIGHTS
Ordinary shares
There were 1,948 holders of the ordinary shares of the Company.
At a general meeting:
– On a show of hands, every member present in person or by direct vote, proxy, attorney or representative has one vote;
– On a poll, every member present has one vote for each fully paid share held.
Options
There were no holders of options over unissued ordinary shares of the Company.
ON-MARKET BUY-BACK
There is no current on-market buy-back.
The share buy-back that commenced on 11 September 2012 was finalised on 26 August 2014.
DISTRIBUTION OF SHAREHOLDERS
Size
of holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Totals
Number
of holders
543
951
256
171
27
1,948
Number
of shares
289,607
2,472,210
1,899,870
4,185,575
89,585,013
98,432,275
%
of shares
0.30%
2.51%
1.93%
4.25%
91.01%
100.00%
There were 57 holders of ordinary shares holding less than a marketable parcel, based on the closing market price at the specified date.
SUBSTANTIAL SHAREHOLDERS
The following organisations have given a substantial shareholder notice to Servcorp.
Number
of shares
49,812,927
8,459,005
5,502,967
% of voting
power
51.19%
8.59%
5.59%
Name
Sovori Pty Ltd
Acorn Capital Limited
Perpetual Limited
00:114
TWENTY LARGEST SHAREHOLDERS
Holder name
BNP Paribas Nominees Pty Ltd (DRP)
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Eniat Pty Ltd
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited (Nt-Comnweallth Super Corp A/C)
JP Morgan Nominees Australia Limited
MFLE Pty Ltd
Moufarrige, Alfred George
National Nominees Limited
Omnioffices Pty Limited
Otterpaw Pty Ltd (Penguin A/C)
RBC Investor Services Australia Nominees Pty Limited (Bkcust A/C)
RBC Investor Services Australia Nominees Pty Limited (Piselect)
Sandhurst Trustees Ltd (Wentworth Williamson A/C)
Sidekick No 2 Pty Limited (R Holliday-Smith Super Fund Account)
Sovori Pty Ltd
UBS Nominees Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Uvira Superannuation Pty Limited (Uvira Holdings Employees Super Fund Account)
Totals for Top 20
SHAREHOLDER INFORMATION
Number of
ordinary shares
held
Percentage
of capital
held
2,021,579
6,383,047
720,132
1,800,000
8,176,290
1,340,904
5,747,922
1,800,000
547,436
9,657,827
302,808
165,046
1,575,214
263,463
259,777
250,000
42,063,859
5,153,132
592,966
413,474
89,234,876
2.05%
6.48%
0.73%
1.83%
8.31%
1.36%
5.84%
1.83%
0.56%
9.81%
0.31%
0.17%
1.60%
0.27%
0.26%
0.25%
42.73%
5.24%
0.60%
0.42%
90.65%
00:115
Servcorp Annual Report 2014 – The Sun never sets on Servcorp CORPORATE INFORMATION
CORPORATE INFORMATION
DIRECTORS
Bruce Corlett
Rick Holliday-Smith
Alf Moufarrige
Taine Moufarrige
Mark Vaile
Chairman & non-executive director, independent
Non-executive director, independent
CEO & Managing director
Non-executive director
Non-executive director, independent
COMPANY SECRETARY
Greg Pearce
REGISTERED OFFICE AND PRINCIPAL OFFICE
Level 63, MLC Centre
19 Martin Place
Sydney NSW 2000
Telephone:
Facsimile:
+ 61 (2) 9231 7500
+ 61 (2) 9231 7665
AUDITOR
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
SHARE REGISTRY
Boardroom Pty Limited
Level 7
207 Kent Street
Sydney NSW 2000
GPO Box 3993
Sydney NSW 2001
Telephone:
Facsimile:
Email:
1300 737 760
+ 61 (2) 9290 9600
1300 653 459
+ 61 (2) 9279 0664
enquiries@boardroomlimited.com.au
STOCK EXCHANGE
Servcorp Limited shares are quoted on the Australian Securities Exchange under the code SRV.
The Home Exchange is Sydney.
ANNUAL GENERAL MEETING
The annual general meeting of Servcorp Limited will be held at 5.00pm on Thursday, 13 November 2014 at:
The Westin
Level 6, Barnet Room
1 Martin Place
Sydney NSW 2000
00:116
servcorp.com.au
Annual Report 2014
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