N N U A L R E P O
R
T
A
01
LET’S GO TO THE MOVIESSTARRING (IN ORDER OF APPEARANCE) ONE WORLD TRADE CENTER NEW YORK, ONE MAYFAIR PLACE LONDON, ETIHAD TOWERS ABU DHABI, TORNADO TOWER DOHA, AND MUCH MORE.SERVCORP.COM.AUCOMING TO A LOCATION NEAR YOUGrippingTaleAOF 2015 P R E S E N T S
TH E TA LE
of
T W O T H O U S A N D & F I F T E E N
G ’ DAY
B I G G ER T H A N B EN H U R
T H E EM P I R E
B R U C E ' S R E V I E W
A LF ’ S M AG I C
O U T STA N D I N G N E W TA L EN T
CO M I N G S O O N
P H O N E H O M E
P R OT EC T I N G T H E J U N G LE
TO T H E R E S C U E
1
2
4
7
8
11
12
14
17
18
20
CO N S I D ER I T D O N E
22
23
24
36
46
59
T H E C A ST
A N D T H E N O M I N EE S A R E . . .
CO R P O R AT E G OV ER N A N C E
D I R EC TO R S ' R EP O RT
R EM U N ER AT I O N R EP O RT
FI N A N C IA L R EP O RT
100
AU D I TO R ' S R EP O RT
102
S H A R EH O L D ER I N FO R M AT I O N
104
CO R P O R AT E I N FO R M AT I O N
T H E AWA R D S G O T O
TOKYO
JAPAN
2015
DUBAI
UAE
2015
DOHA
QATAR
2015
SYDNEY
AUSTRALIA
2015
OSAKA
JAPAN
2015
BRISBANE
AUSTRALIA
2015
ADELAIDE
AUSTRALIA
2015
S E RVC O R P ’ S A I M
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.
the
EXCELLENCE
A W A R D S
S E R V C O R P L I M I T E D • A B N 9 7 0 8 9 2 2 2 5 0 6
02
03
LET’S GO TO THE MOVIESANNUAL REPORT 2015
2 0 1 5 I N R E V I E W
i f i t k e e p s g r o w i n g i t c o u l d b e b i g g e r t h a n b e n h u r
NET PROFIT BEFORE TAX
SERVCORP GEOGRAPHIC SPREAD
(FLOORS) 1
12 MONTHS ENDED 30 JUNE
2 0 1 5 i n r e v i e w
2011
$’000
2012
$’000
2013
$’000
2014
$’000
2015
$’000
Revenue & other income
182,056
200,785
207,995
242,247
277,378
Net profit before tax
Net profit after tax
Net operating cash flows
Cash & investments
Net assets
Earnings per share
Dividends per share
REVENUE
3,036
2,493
18,788
99,993
192,612
$0.025
$0.100
18,329
14,801
32,003
104,334
198,709
$0.150
$0.150
27,630
21,271
27,092
99,758
207,900
$0.216
$0.150
34,257
26,336
40,214
108,788
217,101
$0.268
$0.200
41,211
33,141
59,928
114,451
241,898
$0.337
$0.220
$2.9
$3.0
FY09
FY10
FY11
FY12
FY13
FY14
FY15
$47.3
$18.3
$27.6
$34.3
FY16 (PROJECTED)
$41.20
$48.0
0
10
20
30
40
50
$millions
SERVCORP OFFICES 1
6000
5000
4000
3000
2000
1000
3280
3645
3837
4275
Australia
New Zealand
Singapore
Malaysia
Thailand
Philippines
India
China
Hong Kong
Japan
United States
Turkey
Lebanon
Kuwait
Saudi Arabia
Qatar
Bahrain
UAE
United Kingdom
Belgium
France
28
3
6
3
4
2
3
10
3
22
23
3
1
1
10
4
2
8
4
3
2
4920
5240
$millions
$277.4
$242.2
$200.8
$208.0
$182.1
300
250
200
150
100
50
0
FY11
FY12
FY13
FY14
FY15
SERVCORP FLOORS AND LOCATIONS 1
136
145
131
151
135
116
124
110
132
117
122
160
140
120
100
103
80
60
40
20
0
FY11
Locations
FY12
Floors
FY13
FY14
FY15
FY16
Locations forecast
Floors forecast
FY11
FY12
FY13
FY14
1) At 30 June.
04
FY15
Offices
FY16
Offices forecast
1) At 30 June.
b
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05
ANNUAL REPORT 2015LET’S GO TO THE MOVIES
O N L O C AT I O N
t h e e m p i r e
UNITED STATES
OF AMERICA
BOSTON
– Level 14, One International Place
NEW YORK CITY
– Level 23, 1330 Avenue of the
Americas
– Level 26, The Seagram Building
– Level 40, 17 State Street
– Level 85, One World Trade Center
PHILADELPHIA
– Level 37, BNY Mellon Center
WASHINGTON D.C.
– Level 10, 1717 Pennsylvania Avenue
– Level 10, 1155 F Street
MIAMI
– Level 27, Southeast Financial Center
ATLANTA
– Level 20, Terminus 200
– Level 36, 12th & Midtown
TYSONS CORNER
– Level 15, Corporate Office Center
Tysons II
CHICAGO
– Level 42, 155 North Wacker Drive
– Level 49, 300 North LaSalle
HOUSTON
– Level 39, Bank of America Center
– Level 41, Williams Tower
DALLAS
– Level 6, JP Morgan International
Plaza III
– Level 10, Rosewood Court
– Level 3, 5500 Preston Road
IRVINE
– Level 8, Irvine Towers
LOS ANGELES
– Level 40, Figueroa at Wilshire
SAN FRANCISCO
– Level 27, 101 California Street
– Level 49, 555 California Street
UNITED KINGDOM
LONDON
– 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
– Level 5, 101 Avenue des
Champs Elysées
– Level 2, 21 Boulevard Haussmann
BELGIUM
BRUSSELS
– Levels 20 & 21, Bastion Tower
– Level 4, European Quarter -
Schuman
LEBANON
BEIRUT
– Level 2, Beirut Souks
Louis Vuitton Building
TURKEY
ISTANBUL
– Levels 5 & 6,
Louis Vuitton
Orjin Building
– Level 8, Tekfen Tower
QATAR
DOHA
– Levels 14 & 15,
Commercialbank Plaza
– Level 22, Tornado Tower
– Level 21, Burj Doha
KINGDOM OF BAHRAIN
MANAMA
– Levels 22 & 41, West Tower
Bahrain Financial Harbour
KUWAIT
KUWAIT CITY
– Level 18, Sahab Tower
KINGDOM OF
SAUDI ARABIA
DAMMAM
– Levels 20 & 22,
Al Hugayet Tower
– Level 21, Al Khobar Gate Tower
RIYADH
– Level 6, Al Akaria Plaza
– Level 18, Al Faisaliah Tower
– Level 1, The Business Gate
– Level 29, Olaya Towers
JEDDAH
– Level 9, Jameel Square
– Level 26, Kings Road Tower
– Level 7, Al Murjanah Tower
UNITED ARAB EMIRATES
DUBAI
– Level 23, Boulevard Plaza
– Levels 41 & 42, Emirates Towers
– Levels 21 & 28, Al Habtoor
Business Tower
– Level 54, Almas Tower
ABU DHABI
– Level 4, Al Mamoura
– Level 36, Etihad Towers
– Level 17, World Trade Center
INDIA
MUMBAI
– Levels 7 & 8, Vibgyor Towers
HYDERABAD
– Level 7, Maximus Towers
THAILAND
BANGKOK
– Levels 8 & 9, 1 Silom Road
– Level 29, The Offices at Centralworld
– Level 18, Park Ventures Ecoplex
s
t
r
i
k
e
s
!
o n l o c a t i o n
MALAYSIA
JAPAN
AUSTRALIA
KUALA LUMPUR
– Level 36, Menara Citibank
– Level 20, Menara Standard Chartered
– Level 23, NU Tower 2
TOKYO
– Level 11, Aoyama Palacio Tower
– Level 14, Hibiya Central Building
– Level 20, Marunouchi Trust Tower
PERTH
– Levels 15 & 28, AMP Tower
– Level 18, Central Park
– Level 11, Brookfield Place
– 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
– Level 10, TOC Minato Mirai
NAGOYA
– Level 40, Nagoya Lucent Tower
– Level 4, Nikko Shoken Building
OSAKA
– Level 9, Edobori Center Building
– Levels 18 & 19 Hilton Plaza West
– Level 4, Cartier Building
Shinsaibashi Plaza
FUKUOKA
– Level 15, Fukuoka Tenjin Fukoku
Seimei Building
– Level 2, NOF Hakata Ekimae Building
ADELAIDE
– Levels 24 & 30, Westpac House
SYDNEY
– 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
– Level 36, Riparian Plaza
– Level 19, 10 Eagle Street
– Level 27, Santos Place
CANBERRA
– Level 1, The Realm
– Level 9, Nishi Building
MELBOURNE
– Levels 18 & 27, 101 Collins Street
– Level 40, 140 William Street
– Level 2, 710 Collins Street
Docklands
– Level 2, Riverside Quay
Southbank
HOBART
– Level 6, Reserve Bank Building
NEW ZEALAND
AUCKLAND
– Levels 26 & 27, PWC Tower
– Level 31, Vero Centre
WELLINGTON
– Level 16, Vodafone on the Quay
PHILIPPINES
MANILA
– Level 17, 6750 Ayala Avenue
Office Tower
– Level 22, Tower One &
Exchange Plaza
CHINA
SHANGHAI
– Level 23, Citigroup Tower
– Level 29, Shanghai Jing An Kerry
Centre
– 5/F Somekh Building, Rockbund
CHENGDU
– Level 18, Shangri-La Office Tower
– Level 28, One Aerospace Center
BEIJING
– Level 24, China Central Place
– Level 19, Oriental Plaza
– Level 26, Fortune Financial Center
HANGZHOU
– Level 3, Jiahua International
Business Center
GUANGZHOU
– Level 54, Guangzhou IFC
HONG KONG
CENTRAL
– Level 19, Two International
Finance Centre
– Level 9, The Hong Kong
Club Building
KOWLOON
– Level 12, One Peking Road
SINGAPORE
SINGAPORE
– 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
– Level 24, CapitaGreen
133
LOCATIONS
21
COUNTRIES
06
07
ANNUAL REPORT 2015LET’S GO TO THE MOVIES THE CHAIRMAN'S REVIEW
a
F I V E S T A R P E R F O R M A N C E
26%
INCREASE IN
E.P.S.
$114m
CASH &
INVESTMENTS
Your Board is pleased with Servcorp’s overall performance in 2015. The year
witnessed the opening of our new landmark locations in One World Trade Center,
New York and One Mayfair Place, London; the addition of more new offices than in
any previous year; and record revenue and cash flows from operating activities.
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
Revenue for the year was $277.38
million, an increase of 15% on 2014.
Net profit before tax was $41.21
million, an increase of 20%, and
above guidance. Net profit after
tax was $33.14 million, an increase
of 26%, with earnings per share of
33.7 cents. On a like for like basis,
revenue increased by 15% and net
profit before tax increased by 36%.
This was historically Servcorp’s
biggest year for office expansion,
with 645 offices being added,
increasing capacity by 15%.
Revenue and profit growth was
achieved across most geographic
segments. The Middle East and
Japan were again the leading
performers with the USA
continuing its improvement.
Servcorp’s financial strength
underpins its success. During the
2015 financial year the business
generated record net operating
cash surpluses of $59.93 million,
an increase of 49% on 2014. Cash
and investment balances at 30
June 2015 were $114.45 million;
$99.33 million of this balance was
unencumbered and the Company
has negligible debt.
Directors have declared a final
dividend of 11.0 cents per share,
40% franked. This final dividend
brings total dividends for the year
to 22.0 cents per share, resulting
in a payout to shareholders of
approximately $21.65 million.
In 2016, our aim is to consolidate
and bring new locations to
maturity. We project net profit
before tax to increase to $48
million, and expect to grow office
capacity by approximately 7%.
Directors anticipate the level of
dividends for the 2016 financial year
will be 22.0 cents per share (11.0
cents in each half). Future franking
levels are currently uncertain, but
are not anticipated to fall below
current franking levels. These
forecasts are subject to currencies
remaining constant, global financial
markets remaining stable and no
unforeseen circumstances.
In turbulent markets, having
unencumbered cash of $99 million
is a significant strength and will
enable us to take advantage of
opportunities should they arise.
08
09
LET’S GO TO THE MOVIES A L F ’ S M E S S AG E
b r e a k i n g b o x o f f i c e r e c o r d s
c e o ’ s m e s s a g e
$60m
IN FREE
CASH FLOW
645
NEW
OFFICES
$277m
IN
REVENUE
Building a sustainable,
growing, profitable business.
In our 2009 annual report I projected
that Servcorp would double its size
while the Global Financial Crisis
worked its way through the system.
At that time I observed there would
be strong headwinds and that would
adversely effect our bottom line; I
had hoped that our expansion and
our return on capital invested would
happen in a three year period.
Six years later, we have just completed
financial year 2015 where we have
opened more offices than in any
twelve month period in our history.
Free cash is at record levels.
In July 2015 our office sales were
also at record levels and it appears
that while we are a little late in
reaching the critical mass that I hoped
would ensure our future, we have
now arrived.
Both the World Trade Center
New York and our new London
Mayfair operation are working at
or above budget.
I think our free cash next year will
exceed 70 million. If achieved it will be
great news.
This year we will add only about three
hundred and twenty offices to our
portfolio, but will continue to look for
premium opportunities across the 21
countries in which we work. It is also a
possibility that we may add two new
geographic locations.
We have a great global team,
supported by an efficient Head Office.
I wish to thank all of our General
Managers, Senior Managers,
Managers and the Board for their
help and advice.
Servcorp appears to have a bright
future despite the many new
competitors in this field.
A G Moufarrige
CEO
10
11
m a g i c
LET’S GO TO THE MOVIESANNUAL REPORT 2015 s e r v c o r p p r e s e n t s . . .
S E R VC O R P P R E S E N T S . . .
t h i s y e a r ’ s o u t s t a n d i n g n e w t a l e n t
LONDON THE LEADENHALL BUILDING
LONDON ONE MAYFAIR PLACE
KUALA LUMPUR NU TOWER 2
DUBAI ALMAS TOWER
JEDDAH AL MURJANAH TOWER
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 six years from July 2009 to
June 2015, 88 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 for floor
openings 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 very well positioned to take
advantage of the recovery in global
business sentiment.
At 30 June 2015, Servcorp operated
145 floors in 52 cities across
21 countries.
In the 2015 financial year ten new
floors were opened and six floors
were expanded. This was historically
Servcorp’s biggest year for office
expansion, with a net of 645 offices
being added, increasing total office
capacity by 15%.
New floors were opened in
Canberra, Qatar, Kuala Lumpur,
Abu Dhabi, New York, Dammam,
Jeddah, Dubai, and two in London.
We expanded existing floors in Los
Angeles, Boston, San Francisco,
Riyadh, Tokyo and Melbourne.
– In London we opened floors in the
Leadenhall building (the Cheese
Grater) and also one of our most
prestigious locations in the city of
Westminster, Devonshire House, at
One Mayfair Place. Mayfair is the
world’s “Five Star” bench mark.
– In New York City we opened our
landmark floor on level 85, of One
World Trade Center.
– In Abu Dhabi, Etihad Towers offers
a stunning view of the legendary
Emirates Palace, the Abu Dhabi
Corniche and the Arabian Sea.
We have committed to open
a further six floors in the 2016
financial year, adding approximately
7% to our office capacity. In
addition, we will be launching
our new Professional Coworking
concept across key locations
around the globe. Our new floors
in 2016 will include CapitaGreen in
Singapore, World Trade Center in
Abu Dhabi and the ILHAM Tower in
Kuala Lumpur.
A B U D H A B I E T I H A D TOW E R S
NEW YORK ONE WORLD TRADE CENTER
12
13
LET’S GO TO THE MOVIESANNUAL REPORT 2015 N E W L O C AT I O N S
c o m i n g s o o n
n e w l o c a t i o n s
4,920
TOTAL
OFFICES
145
TOTAL
FLOORS
131
TOTAL
LOCATIONS
10
NEW FLOORS
IN FY15
WALK OF FAME 2015-2016
TOTAL OFFICES, FLOORS AND LOCATIONS AS AT 30 JUNE
offices
floors
locations
AUCKLAND
SEP 2015
NZ
WOLLONGONG
FEB 2016
AU
KUALA LUMPUR
NOV 2015
SEA
2010
2011
2012
2013
2014
2015
2016 projected
2,974
3,280
3,645
3,837
4,275
4,920
5,240
82
116
124
132
136
145
151
68
103
110
117
122
131
135
TOTAL NEW FLOORS BY REGION FOR 12 MONTHS ENDED 30 JUNE
region
2010
2011
2012
2013
2014
2015
total
2016
(est)
total
(est)
Australia & New Zealand
Southeast Asia
Greater China
Japan
Europe & United
Kingdom
Middle East
United States of America
Total
–
–
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
1
1
-
-
2
5
1
10
14
7
9
7
5
23
23
88
2
2
–
1
-
1
-
6
16
9
9
8
5
24
23
94
O M I N G SO
O
N
C
SINGAPORE
JUL 2015
SEA
T O
A L O C AT I O N
N E A R YO U !
ABU DHABI
AUG 2015
ME
OSAKA
SEP 2015
JPN
14
15
LET’S GO TO THE MOVIESANNUAL REPORT 2015
G L O B A L C O M M U N I C AT I O N S N E T W O R K
e . t . p h o n e h o m e
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
MANAMA
DUBAI
ABU DHABI
JEDDAH
DOHA
MUMBAI
HYDERABAD
BEIJING
SHANGHAI
HANGZHOU
TOKYO
YOKOHAMA
NAGOYA
OSAKA
FUKUOKA
CHENGDU
GUANGZHOU
HONG KONG
BANGKOK
MANILA
KUALA LUMPUR
SINGAPORE
BRISBANE
SYDNEY
PERTH
ADELAIDE
CANBERRA
MELBOURNE
HOBART
AUCKLAND
WELLINGTON
SUN
1:00
-11
16
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
17
ANNUAL REPORT 2015LET’S GO TO THE MOVIES o u r e n v i r o n m e n t a l c o m m i t m e n t
O U R E N V I R O N M E N TA L
C O M M I T M E N T
p r o t e c t i n g t h e j u n g l e
1,000
TREES PLANTED
IN 2015
7,131
TON.
C02 OFFSET
100k
M2 OCCUPIED BY
SERVCORP
FOREST
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.
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.
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 which will offset 7,131
tonnes of carbon dioxide from the
atmosphere during their lifespan;
online sales in 2015 will add a
further 1,000 trees. 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.
18
19
LET’S GO TO THE MOVIESANNUAL REPORT 2015 G L O B A L A N D L O C A L C O M M U N I T Y S E R V I C E
g l o b a l a n d l o c a l c o m m u n i t y s e r v i c e
t o t h e r e s c u e
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 continues to support and
assist continuing research into the
prevention and cure of cancer and
assisting young, seriously or terminally
ill members of the community.
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 $550,000 to help with many
organisations around the world.
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:
– Persatuan Rumah Sayangan –
Kuala Lumpur Orphanage Home
– Cancer Council
– Exodus Foundation
– Fight Cancer Foundation
– Humpty Dumpty Foundation
– Ingham Health Research Institute
– Lifestart – Kayak for Kids
– Look Good Feel Better – Australia
– Mater Lives Committee
(Mater Hospital)
– The Mater Foundation
– MS Research Australia
– Murdoch Children’s Research
Institute
– Nepal Earthquake Appeal 2015
– Rotary Club of Sydney
– The Salvation Army
– St Vincent’s Private Hospital
– Sydney Children’s Hospital
Foundation
– World Vision
– Association for Persons With
Special Needs (APSN) – Singapore
– Breast Cancer Awareness Program
‘Safe & Sound’ – Middle East
– Children’s Joy Foundation –
Philippines
– Look Good Feel Better –
United Kingdom
– Run for the Cure – Japan
– Tyler Foundation
(Shine On! Kids) – Japan
– Saraburi Home for Girls
Foundation – Thailand
– Shatterproof.org
– United States of America
– The Lustgarten Foundation
– United States of America
– T–Village (Tibetan Children’s
Education Program) – China
– World Cancer Research Fund –
Hong Kong
Servcorp also contributed to many
other local charitable organisations
around the world, and sponsors and
supports the Australian Chamber
Orchestra, Art Gallery of NSW 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 Two IFC
Servcorp One Peking Road
The Peninsula Hotel
20
21
ANNUAL REPORT 2015 t o t a l b u s i n e s s s o l u t i o n
T O TA L B U S I N E S S S O L U T I O N
c o n s i d e r i t d o n e
With Servcorp you will:
HAVE ACCESS TO THE MOST ADVANCED GLOBAL COMMUNICATION SYSTEM
AUTOMATED
ATTENDANT
CONFERENCE
CALLING
IP VIDEO
PHONE
WIRELESS
INTERNET
VOICEMAIL
AND FAX TO
EMAIL
EXTENSION
RINGS
ON MOBILE
VOICEMAIL
NOTIFICATION
VOICEMAIL
TO SMS
NEVER MISS THAT IMPORTANT CALL
FIND ME
FOLLOW ME
CALL
DIVERSION
TAKE YOUR OFFICE WITH YOU ANYWHERE YOU GO
ONEFONE
– VOIP
GLOBAL
DIAL
RUN YOUR BUSINESS MORE EFFICIENTLY
IT SUPPORT
CALL
SCREENING
EXPAND YOUR BUSINESS WITH EASE
LOCAL
NUMBER
PROFESSIONAL
PHONE
GREETINGS
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.
22
23
the grand budapest set the standardANNUAL REPORT 2015 T H E S E R VC O R P T E A M
t h e c a s t
A N N U A L R E P O R T 2 0 1 5
C O R P O R AT E G OV E R N A N C E
c o r p o r a t e g o v e r n a n c e
O U R T E A M L E A D E R S
a n d t h e n o m i n e e s a r e . . .
Directors and Producers (The Board and Executive)
B R U C E CO R LET T
as
C H A I R M A N
R I C K H O LLI DAY- S M ITH
a s
N O N - E X E C U T I V E D I R E C T O R
M A R K VA I LE
a s
N O N - E X E C U T I V E D I R E C T O R
TA I N E M O U FA R R I G E
as
N O N - E X E C U T I V E D I R E C T O R
A LF M O U FA R R I G E
a s
E X E C U T I V E D I R E C T O R , C E O
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 28 to 35 of this annual report. The information in
this statement is current as at 25 August 2015 and has been approved by the Board.
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.
M A R C U S M O U FA R R I G E
( B C O M )
as
C H I E F O P E R A T I N G O F F I C E R
TH O M A S WA LL AC E
( B B S , F C A )
a s
C H I E F F I N A N C I A L O F F I C E R
G R EG P E A R C E
( C A , A G I A , A C I S )
a s
C O M P A N Y S E C R E T A R Y
The Stars (Operational Executive)
Jennifer Goodwyn (BA) ............................................................................................................................................. as General Manager USA
Responsibility for management of the Company’s business
activities is delegated to the CEO and management.
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
Liane Gorman ....................................................................................................................... as General Manager Australia & New Zealand
performance and remuneration;
Laudy Lahdo (BCom) ...................................................................................................................................as General Manager Middle East
Olga Vlietstra (BA) .................................................................................................................................................... as General Manager Japan
Wilma Wu (BA Hons) ................................................................................................................................... as General Manager Hong Kong
Anne Guinebault (BBus, MMR) ................................................................................................................................. as Senior Manager Paris
Fabienne Hajjar (PharmD) ........................................................................................................................................ as Senior Manager Qatar
Michaela Julian (BA) ................................................................................................................................................... as Senior Manager China
Krystle Sulway ...................................................................................................................................................................... as Senior Manager UK
Behind the Scenes (Head Office)
Matthew Baumgartner (BInfTech (SE), CCIE, MBA) ............................................................................. as Chief Information Officer
Lachlan Buchanan (BCom) ....................................................................................................................................... as Development Director
Warren James .......................................................................................................................... as Manager International Property Portfolio
Daniel Kukucka (BE, DipEngPrac) ................................................................................................................. as Chief Technology Officer
Selene Ng (BCom, BA) ...................................................................................................................... as General Manager Serviced Offices
Simon Smith (MA (Cantab), MBA) .................................................................................................... as General Manager Virtual Office
– 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
The Board comprises five directors (one executive and
four non-executive). Three non-executive directors are
independent.
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.
NAMES OF DIRECTORS IN OFFICE AT THE DATE OF THIS ANNUAL REPORT
FIRST APPOINTED
NON-EXECUTIVE INDEPENDENT
RETIRING
AT 2015 AGM
SEEKING
RE-ELECTION
AT 2015 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
Yes
No
No
No
N/A
Yes
N/A
N/A
N/A
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 27 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.
23
24
25
LET’S GO TO THE MOVIESANNUAL REPORT 2015LET’S GO TO THE MOVIES 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.
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.
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
TOTAL
NO.
WOMEN
%
Consolidated entity
Senior executives
Board
824
26
5
84%
54%
0%
MEN
%
16%
46%
100%
“Senior executive” are general managers, senior managers
and head office executives who report directly to the CEO
or COO.
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 2015 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
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.
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;
– assisting management in improving the quality of the
accounting 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 Committee
The Remuneration Committee members during the
year were:
– The Hon. M Vaile (Chair)
– Mr R Holliday-Smith (ceased 8 December 2014)
– Mr T Moufarrige
– Mr B Corlett (appointed 8 December 2014)
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:
– making recommendations to the Board on appropriate
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 2014 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
26
27
CORPORATE GOVERNANCEcorporate governanceLET’S GO TO THE MOVIESANNUAL REPORT 2015
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 3rd edition of the Principles and Recommendations.
Recommendation
Servcorp Board response
Principle 1
Lay solid foundations for management and oversight
Establish and disclose the respective roles and responsibilities of the board and management and how their performance is
monitored and evaluated.
Recommendation 1.1
Disclose:
(a) The respective roles and responsibilities of the board and
management; and
(b) Those matters expressly reserved to the board and those delegated
to management.
Recommendation 1.2
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 24
of this annual report.
The Board Charter is available on the Company’s website;
servcorp.com.au
(a) Undertake appropriate checks before appointing a person, or putting
forward to security holders a candidate for election, as a director; and
(a) The Board Charter requires appropriate checks be undertaken
before appointing a person as a director.
(b) Provide security holders with all material information in its possession
relevant to a decision on whether or not to elect or re-elect a director.
(b) All relevant material information to make an informed decision
on whether or not to elect or re-elect a director is provided to
shareholders in the notice of meeting.
Recommendation 1.3
ASX PRINCIPLES COMPLIANCE STATEMENT (CONTINUED)
Recommendation
Servcorp Board response
Principle 1
(cont)
Lay solid foundations for management and oversight
Establish and disclose the respective roles and responsibilities of the board and management and how their performance is
monitored and evaluated.
Recommendation 1.6
(a) Have and disclose a process for periodically evaluating the
performance of the board, its committees and individual directors; and
(b) Disclose, in relation to each reporting period, whether a performance
evaluation was undertaken in the reporting period in accordance with
that process.
Recommendation 1.7
(a) Have and disclose a process for periodically evaluating the
performance of senior executives; and
(b) Disclose, in relation to each reporting period, whether a performance
evaluation was undertaken in the reporting period in accordance with
that process.
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. A review was undertaken in the current financial year.
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.
The process for evaluating the performance of senior executives
is included in the remuneration report on pages 50 to 53 of this
annual report.
Have a written agreement with each director and senior executive
setting out the terms of their appointment.
The Company has a written agreement with each non-executive
director setting out the terms of their appointment.
Principle 2
Structure the board to add value
Have a board of an appropriate size, composition, skills and commitment to enable it to discharge its duties effectively.
The Company has a written agreement with all senior executive setting
out the terms of their employment.
Recommendation 1.4
The company secretary should be accountable directly to the board,
through the chair, on all matters to do with the proper functioning
of the board.
The company secretary is accountable directly to the board, through
the chair, on all matters to do with the proper functioning of the
board, including all matters included in the commentary to this
recommendation.
Recommendation 1.5
(a) Have a diversity policy which includes requirements for the board or
a relevant committee of the board to set measurable objectives for
achieving gender diversity and to assess annually both the objectives
and the entity’s progress in achieving them;
(b) Disclose that policy or a summary of it; and
(c) Disclose as at the end of each reporting period the measurable
objectives for achieving gender diversity set by the board or a relevant
committee of the board in accordance with the entity’s diversity policy
and its progress towards achieving them, and either:
(1) the respective proportions of men and women on the board,
in senior executive positions and across the whole organisation
(including how the entity has defined “senior executive” for
these purposes); or
(2) if the entity is a “relevant employer” under the Workplace Gender
Equality Act 2012, the entity’s most recent “Gender Equality
Indicators”, as defined in and published under that Act.
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.
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.
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
respective proportion of men and women employees in the Company
is provided in the table on page 26 of this annual report. “Senior
executive” are general managers, senior managers and head office
executives who report directly to the CEO or COO.
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.
Recommendation 2.1
(a) Have a nomination committee which:
(1) has at least three members, a majority of whom are independent
directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the commitee; and
(5) as at the end of each reporting period, the number of times the
committee met throughout the period and the individual
attendances of the members at those meetings; or
(b) If it does not have a nomination committee, disclose that fact and
the processes it employs to address board succession issues and to
ensure that the board has the appropriate balance of skills, knowledge,
experience, independence and diversity to enable it to discharge its
duties and responsibilities effectively.
Recommendation 2.2
Have and disclose a board skills matrix setting out the mix of skills
and diversity that the board currently has or is looking to achieve
in its membership.
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.
28
29
CORPORATE GOVERNANCEcorporate governanceLET’S GO TO THE MOVIESANNUAL REPORT 2015 ASX PRINCIPLES COMPLIANCE STATEMENT (CONTINUED)
ASX PRINCIPLES COMPLIANCE STATEMENT (CONTINUED)
Recommendation
Servcorp Board response
Recommendation
Servcorp Board response
Principle 2
(cont)
Structure the board to add value
Have a board of an appropriate size, composition, skills and commitment to enable it to discharge its duties effectively.
Principle 3
Act ethically and responsibly
Act ethically and responsibly.
Recommendation 2.3
Disclose:
(a) The names of the directors considered by the board to be
independent directors;
(b) If a director has an interest, position association or relationship of
the type described in Box 2.3 but the board is of the opinion that it
does not compromise the independence of the director, the nature of
the interest, position, association or relationship in question and an
explanation of why the board is of that opinion; and
(c) The length of service of each director.
The names of directors considered by the board to be independent,
and the length of service of each director, is disclosed in the Directors’
Report on pages 36 and 37.
The board regularly assesses the materiality of any interest, position,
association or relationship each director has with the Company to
determine whether it may interfere with the director’s capacity to bring
independent judgement to bear on issues or to act in the best interest
of the Company and its shareholders.
- Details of related party transactions are disclosed in note 27 to the
Consolidated financial report.
- Mr T Moufarrige was an executive of the Company from 1996 to 2011,
and accordingly is not considered to be an independent director.
He is also the son of the CEO and substantial shareholder, Mr A G
Moufarrige. The board considers that these relationships do not
interfere with his capacity to bring independent judgement to bear,
or to act in the best interests of the Company and its shareholders.
- Mr B Corlett and Mr R Holliday-Smith have both been non-executive
directors since 1999. The board has assessed this length of service
and considers that Mr B Corlett and Mr R Holliday-Smith continue to
bring independent judgement to bear on all issues and to act in the
best interests of the Company and its shareholders.
Recommendation 2.4
A majority of the board should be independent directors.
The Board has a majority of independent directors. Three of the four
currently serving non-executive directors are independent.
Recommendation 2.5
The chair of the board should be an independent director and, in
particular, should not be the same person as the CEO.
The chair is an independent director. The roles of Chair and Managing
Director / CEO are not exercised by the same individual.
Recommendation 2.6
Have a program for inducting new directors and provide appropriate
professional development opportunities for directors to develop and
maintain the skills and knowledge needed to perform their role as
directors effectively.
All newly appointed directors must undertake an induction program.
The Company provides appropriate professional development
opportunities to develop and maintain the skills and knowledge
required by directors.
Recommendation 3.1
(a) Have a code of conduct for directors, senior executives and
employees; and
(b) Disclose that code or a summary of it.
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.
The Company’s codes and standards are contained in online resources
which provide continual educaion for all employees on the expected
quality of service, respect for fellow employees, commitment to the
community and the environment, responsible dealings with clients and
suppliers and upholding of the Servcorp brand.
Principle 4
Safeguard integrity in corporate reporting
Have formal and rigorous processes that independently verify and safeguard the integrity of corporate reporting.
Recommendation 4.1
(a) Have an audit committee which:
The board has established an Audit and Risk Committee.
(1) has at least three members, all of whom are non-executive
(1) all three members of the Audit and Risk Committee are non-
directors and a majority of whom are independent directors; and
executive directors, and two members are independent directors.
(2) is chaired by an independent director, who is not the chair of the
(2) the chair of the committee is not the chair of the board.
board,
and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and experience of the members of the
committee; and
(5) in relation to each reporting period, the number of times the
committee met throughout the period and the individual
attendances of the members at those meetings; or
(b) If it does not have an audit committee, disclose that fact and the
processes it employs that independently verify and safeguard the
integrity of corporate reporting, including the processes for the
appointment and removal of the external auditor and the rotation
of the audit engagement partner.
Recommendation 4.2
The board should, before it approves the entity’s financial statements
for a financial period, receive from its CEO and CFO a declaration that,
in their opinion, the financial records have been properly maintained and
that the financial statements comply with the appropriate accounting
standards and give a true and fair view of the financial position and
performance and that the opinion has been formed on the basis of
a sound system of risk management and internal control which is
operating effectively.
Recommendation 4.3
(3) the audit and risk committee charter is available on the company’s
website; servcorp.com.au
(4) the relevant qualifications and experience of the members of
the committee are provided on pages 26, 36 and 37 of this
annual report.
(5) the committee met four times during the year. Attendance at
meetings is disclosed at page 38 of this annual report.
The CEO and CFO provide such assurances.
A listed entity that has an AGM should ensure that its external auditor
attends its AGM and is available to answer questions from security
holders relevant to the audit.
The external auditor attends the AGM each year and is available to
answer questions from shareholders.
30
31
CORPORATE GOVERNANCEcorporate governanceLET’S GO TO THE MOVIESANNUAL REPORT 2015 ASX PRINCIPLES COMPLIANCE STATEMENT (CONTINUED)
ASX PRINCIPLES COMPLIANCE STATEMENT (CONTINUED)
Recommendation
Servcorp Board response
Recommendation
Servcorp Board response
Principle 5 Make timely and balanced disclosure
Make timely and balanced disclosure of all matters concerning the company that a reasonable person would expect to have a
material effect on the price or value of its securities.
Principle 7
Recognise and manage risk
Establish a sound risk management framework and periodically review the effectiveness of that framework.
Recommendation 5.1
(a) Have a written policy for complying with continuous disclosure
obligations under the Listing Rules; and
(b) Disclose that policy or a summary of it.
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.
Principle 6
Respect the rights of security holders
Respect the rights of security holders by providing them with appropriate information and facilities to allow them to exercise
those rights effectively.
Recommendation 6.1
Provide information about the company and its governance to investors
via its website.
The Company has a corporate governance page on its website.
This page includes copies of the Company’s annual reports, annual
and half-year financial reports, announcements to ASX and other
governance documents.
Recommendation 6.2
Design and implement an investor relations program to facilitate effective
two-way communication with investors.
Servcorp aims to communicate clearly and tranparently with
shareholders and the community.
Recommendation 6.3
Disclose the policies and processes in place to facilitate and encourage
participation at meetings of security holders.
Servcorp actively engages with security holders by holding briefings
following the release of annual and half-year results; the time and
location of which are notified to the market.
The Company also meets with security holders upon request and
responds to any enquiries made from time to time.
All shareholders are given a reasonable opportunity to ask questions
at the annual general meeting and are encouraged to participate. This
includes shareholders present at the meeting and those attending by
video or phone conference.
Recommendation 6.4
Give security holders the option to receive communications from, and
send communications to, the company and its security registry
electronically.
All shareholders are given the option to receive communications from,
and send communications to, the company and its security registry
electronically.
Recommendation 7.1
The board should:
The Company has a combined Audit and Risk Committee.
(a) Have a committee or committees to oversee risk, each of which:
(1) has at least three members, a majority of whom are
Responses to this recommendation have been provided for the Audit
Committee in Recommendation 4.1.
independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of times
the committee met throughout the period and the individual
attendances of the members at those meetings; or
(b) If it does not have a risk committee or committee that satisfy (a)
above, disclose that fact and the processes it employs for overseeing
the entity’s risk management framework.
Recommendation 7.2
The board or a committee of the board should:
(a) Review the entity’s risk management framework at least annually to
satisfy itself that it continues to be sound; and
(b) Disclose, in relation to each reporting period, whether such a review
has taken place.
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. Risk is considered
across the financial, operational and organisational aspects of the
Company’s affairs.
A review is undertaken at each reporting period.
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.
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 Audit and Risk Committee is working with management to
ensure continuous improvement to the risk management and internal
control systems.
32
33
CORPORATE GOVERNANCEcorporate governanceLET’S GO TO THE MOVIESANNUAL REPORT 2015
ASX PRINCIPLES COMPLIANCE STATEMENT (CONTINUED)
ASX PRINCIPLES COMPLIANCE STATEMENT (CONTINUED)
Recommendation
Servcorp Board response
Recommendation
Servcorp Board response
Principle 7
(cont)
Recognise and manage risk
Establish a sound risk management framework and periodically review the effectiveness of that framework.
Recommendation 7.3
Disclose:
(a) If the company has an internal audit function, how the function is
The Company does not have a formal internal audit function, however
the Company has:
structured and what role it performs; or
– a diversified business;
(b) If the company does not have an internal audit function, that fact and
the processes it employs for evaluating and continually improving the
effectiveness of its risk management and internal control processes.
– many individual floors run by a small team;
– tight accounting policies over those floors;
– tight cash control over the whole business;
Principle 8
(cont)
Remunerate fairly and responsibly
Pay director remuneration sufficient to attract and retain high quality directors and design executive remuneration to attract, retain
and motivate high quality senior executives and align their interests with the creation of value for security holders.
Recommendation 8.2
Separately disclose the company’s policies and practices regarding
the remuneration of non-executive directors and the remuneration of
executive directors and other senior executives.
This information is provided in the remuneration report on pages 50 to
53 of this annual report.
Recommendation 8.3
– central oversight by head office with systems in place to enable this
A company which has an equity- based remuneration scheme should:
The Company does not have an equity-based remuneration scheme.
oversight; and
– regular visits and spot checks by business and financial management
to all locations.
As such, there is a process creating a control framework without a
specified, dedicated internal control function.
(a) Have a policy on whether participants are permitted to enter into
transactions (whether through the use of derivatives or otherwise)
which limit the economic risk of participating in the scheme; and
(b) Disclose that policy or a summary of it.
Recommendation 7.4
Disclose whether the company has any material exposure to economic,
environmental and social sustainability risks and, if it does, how it
manages or intends to manage those risks.
The Board has reviewed and assessed the Company’s exposure
to economic, environmental and social sustanability risks, and the
application of materiality and risk management processes.
The Company operates in 21 countries and as such has economic
exposure to the global marketplace.
The Board considers that the Company does not have any material
exposure to economic, environmental or social sustainability risk within
the meaning of the guidelines.
Principle 8
Remunerate fairly and responsibly
Pay director remuneration sufficient to attract and retain high quality directors and design executive remuneration to attract, retain
and motivate high quality senior executives and align their interests with the creation of value for security holders.
Recommendation 8.1
(a) Have a remuneration committee which:
The Board has established a Remuneration Committee.
(1) has at least three members, a majority of whom are independent
(1) all three members of the Remuneration Committee are non-
directors and;
executive directors and two members are independent directors.
(2) is chaired by an independent director,
(2) the Chair of the Committee is an independent non-
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of times
the committee met throughout the period and the individual
attendances of the members at those meetings; or
(b) If it does not have a remuneration committee, disclose that fact and
the processes it employs for setting the level and composition of
remuneration for directors and senior executives and ensuring that
such remuneration is appropriate and not excessive.
executive director.
(3) the remuneration committee charter is available on the company’s
website, servcorp.com.au
(4) the members of the committee are disclosed on page 27 of this
annual report.
(5) the committee met two times during the year. Attendance at
meetings is disclosed on page 38 of this annual report.
34
35
CORPORATE GOVERNANCEcorporate governanceLET’S GO TO THE MOVIESANNUAL REPORT 2015 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 2015.
Directors
The directors of the Company at any time during or since the end of the financial year are:
ALF MOUFARRIGE
BRUCE CORLETT AM
RICK HOLLIDAY-SMITH
THE HON. MARK VAILE AO
TAINE MOUFARRIGE
GREG PEARCE
MANAGING DIRECTOR
Appointed August 1999
Chief Executive Officer
Alf is one of the global leaders in the
serviced office industry, with over 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.
CHAIR
INDEPENDENT
NON-EXECUTIVE DIRECTOR
BA, LLB
Appointed October 1999
Member of Audit and Risk
Committee
Member of Remuneration
Committee (from 8 December 2014)
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 a director of Fortius
Funds Management Pty Ltd.
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).
INDEPENDENT
NON-EXECUTIVE DIRECTOR
BA (HONS), CA, FAICD
Appointed October 1999
Chair of Audit and Risk Committee
Member of Remuneration
Committee (to 8 December 2014)
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).
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointed June 2011
NON-EXECUTIVE DIRECTOR
BA, LLB
Appointed November 2004
COMPANY SECRETARY
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.
Chair of Remuneration Committee
Member of Audit and Risk Committee
Member of Remuneration Committee
Taine started his professional career
as a lawyer.
Taine joined Servcorp in 1996 as a
Trainee Manager. Taine played a key role
in establishing Servcorp locations in
Europe, the Middle East, China, Turkey,
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.
Taine is currently CEO of Nualight
ANZ. Taine is also a Board member
of the European Australian Business
Council and a Board member of
Youngcare. He sits on the Export and
Investment Advisory Panel for the
NSW Government and the Funding
and Sustainability Committee for
Lifeline. He is a patron of the Sydney
Symphony Vanguard.
Directorships of listed entities in the
last three years:
– None.
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 a director / trustee
of Hostplus Superfund Limited and
is a member of Palisade Investment
Partners Advisory Board. 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:
– 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).
36
37
DIRECTORS' REPORTdirectors' reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 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
Notes:
BOARD
AUDIT & RISK
COMMITTEE
REMUNERATION
COMMITTEE
6
6
6
6
6
6
4
4
4
4
2
1 (i)
1 (i)
2
2
i Mr B Corlett was appointed as a member of the Remuneration Committee on 8 December 2014. He replaced Mr R Holliday-Smith who ceased as a member on that date.
The attendance recorded is only for meetings held during their respective membership period.
The details of the function and membership of the committees are presented in the Corporate Governance statement on
pages 26 and 27.
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.
DIRECTOR
B Corlett
R Holliday-Smith
A G Moufarrige (i)
T Moufarrige (i)
M Vaile
Notes:
ORDINARY SHARES IN SERVCORP LIMITED
DIRECT
-
-
547,436
-
-
INDIRECT
413,474
250,000
49,598,667
1,800,000
10,400
OPTIONS OVER
ORDINARY SHARES
-
-
-
-
-
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.
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 (2014: Nil).
OPTIONS EXPIRED
During the year, or since the end of the financial year, no
options over unissued shares expired or were cancelled
(2014: Nil).
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 (2014: Nil)
Nil (2014: Nil)
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 24 to 35 of this annual report.
38
39
DIRECTORS' REPORTdirectors' reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 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 $33.14 million
(2014: $26.34 million). Operating revenue was $277.38
million (2014: $242.25 million). Basic and diluted earnings
per share was 33.7 cents (2014: 26.8 cents).
2015
$’000
2014
$’000
Revenue & other income
277,378
242,247
Net profit before tax
Net profit after tax
Net operating cash flows
Cash & investment balances
Net assets
Earnings per share
Dividends per share
41,211
33,141
59,928
114,451
241,898
$0.337
$0.220
34,257
26,336
40,214
108,788
217,101
$0.268
$0.200
DIVIDENDS PAID AND DECLARED
Dividends totalling $21.65 million have been paid or declared by the Company in relation to the financial year ended 30
June 2015 (2014: $19.69 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: 2014
Interim Ordinary shares
Final Ordinary shares
In respect of the current financial year: 2015
Interim Ordinary shares
Final Ordinary shares
CENTS
PER
SHARE
TOTAL
AMOUNT
$’000
DATE OF
PAYMENT
FRANKED
%
TAX RATE FOR
FRANKING
CREDIT
9.00
11.00
11.00
11.00
8,859
2 April 2014
10,828
1 October 2014
10,828
1 April 2015
10,828
24 September 2015
0%
35%
20%
40%
30%
30%
30%
30%
40
REVIEW OF OPERATIONS
Revenue and other income from ordinary activities for the
twelve months ended 30 June 2015 was $277.38 million, up
14.5% from the twelve months ended 30 June 2014. During
the year, the Australian dollar weakened against all major
currencies. In constant currency terms revenue increased
by 9% compared to the 2014 year.
Net profit before tax for the twelve months to 30 June
2015 was $41.21 million, up 20% from $34.26 million in the
prior year. When expressed in constant currency terms,
net profit before tax increased by 16% compared to the
2014 year.
Cash and investment balances were $114.45 million at
30 June 2015 (30 June 2014: $108.79 million). Of this
balance, $15.12 million has been pledged with banks as
collateral for bank guarantees and facilities, leaving an
unencumbered cash and investment balance of $99.33
million in the business as at 30 June 2015 (30 June 2014:
$93.45 million).
The business generated strong net operating cash flows
during the 2015 financial year of $59.93 million, up 49%
compared to the 2014 financial year (2014: $40.21 million).
Before tax payments, the business produced cash flows
of $67.92 million (2014: $44.81 million).
Like for Like Floor Performance
Directors and management believe that like for like
reporting provides more clarity on the performance of
the business.
A summary of the like for like floor performance for the
2015 financial year compared to the 2014 financial year
is provided below:
Revenue by Region ($ million)
89.4
81.3
73.4
24.8
100
80
60
40
20
0
ANZ/SEA
North Asia
EME
USA
Like for Like Revenue and NPBT ($ million)
263.8
229.8
250
200
150
100
50
0
48.2
35.3
Revenue
NPBT
2014
2015
2015
$’000
2014
$’000
VARIANCE
$’000
Total revenue - like for like Floors
263,815
229,761
34,054
Net profit before tax - like for like Floors
Net profit before tax - floors closed 2014 financial year
Net profit before tax - new floors 2015 financial year
Statutory net profit before tax
48,175
108
(7,072)
41,211
35,301
(1,044)
-
34,257
12,874
1,152
(7,072)
6,954
%
15%
36%
20%
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DIRECTORS' REPORTdirectors' reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
Europe and the Middle East
Like for like floors in the Europe and Middle East segment
produced a solid result in the 2015 financial year, up 81%
compared to 2014.
All markets performed to expectations and we are pleased
with this outcome. Over the past five years we have
established a considerable footprint in the EME region, and
over the next 12 to 24 months our aim is to consolidate our
position in these markets.
During the 2015 financial year we opened seven new
locations in Qatar, Saudi Arabia, UK and UAE. Office
sales in our new locations are performing to, or exceeding,
our projections.
Like for Like results ($ million) - EME
19.4
USA
Like for like net loss before tax for the USA reduced by
29% during the 2015 financial year.
The loss for the 2015 financial year includes net costs of
approximately $1.03 million in relation to three floors that
we expanded during the year.
In the month of June 2015, including the costs in relation
to the expansion space, the USA business (excluding One
World Trade Center) was profitable.
Our new landmark location on level 85, One World Trade
Center, New York opened in March 2015. One World Trade
Center is the most significant addition to our global office
portfolio in recent times. Office and Virtual sales have
exceeded our expectations and we are delighted to report
that occupancy at One World Trade Center has reached
70%. As previously foreshadowed, we anticipate that One
World Trade Center will be a significant catalyst to the
profitability of the USA business.
10.7
Like for Like results ($ million) - USA
2014
2015
NPBT
(3.3)
(2.3)
0
(5)
(10)
(15)
(20)
2014
2015
NPBT
20
15
10
5
0
REVIEW OF OPERATIONS (CONTINUED)
Servcorp footprint
In the 2015 financial year, the Company continued to grow
the “Servcorp footprint” in established markets. Ten new
floors were opened, bringing total new floor openings to
88 floors in the 72 months to 30 June 2015. In addition, six
existing floors were expanded this year.
During the 2015 financial year, office capacity increased
by 645 offices. This was the Consolidated Entity’s biggest
office expansion in any financial year.
In total, office capacity increased by 15% in the 2015
financial year.
Expansion - 72 months to 30 June 2015
ANZ/SEA 21
North Asia 16
EME 28
USA 23
Australia, New Zealand and Southeast Asia
On a like for like basis net profit before tax performance
in ANZ / SEA was down 17% when compared to the
prior period.
Both New Zealand and Thailand continue to produce solid
results and our floors in the Philippines are now profitable.
During the 2015 financial year the performance of Malaysia
and Singapore was impacted by the management
restructure we undertook in this market in 2014.
Performance bottomed out in July 2014 and sales and
profitability have been steadily improving since this date.
Office sales were strong during the 2015 financial year
and we have now achieved an optimal level of office
occupancy. Both Malaysia and Singapore returned to
profitability in June 2015 and we look forward to stronger
results in the 2016 financial year.
All cities in Australia improved their performance in the
2015 financial year, with the exception of Perth, which
continues to be impacted by lack of demand and over-
supply of office stock in this market.
Like for Like results ($ million) - ANZ / SEA
Occupancy of like for like floors open at 30 June 2015 was
79% (30 June 2014: 79%). The number of occupied offices
increased by 14% during the 2015 financial year.
There are plans to add approximately 7% to office capacity
in the 2016 financial year.
As at 30 June 2015, Servcorp operated 145 floors in
52 cities across 21 countries.
15
10
5
0
11.1
9.2
Floors by region - 30 June 2015
2014
2015
NPBT
ANZ/SEA 46
North Asia 35
India (Franchise) 3
USA 23
EME 38
North Asia
North Asia as a whole produced a solid result in the 2015
financial year, reporting like for like net profit before tax
growth of 46%.
Margins have improved in both Japan and Hong Kong,
however there is still potential for improvement in
mainland China. Management are currently focusing
on this region.
Like for Like results ($ million) - North Asia
20
15
10
5
0
17.6
12.0
2014
2015
NPBT
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DIRECTORS' REPORTdirectors' reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
NEW LOCATIONS
New locations opened by the Consolidated Entity during the course of the financial year are set out in the following table.
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.
CITY
Canberra
Qatar
LOCATION
Level 9, Nishi Building
Level 21, Burj Doha
Kuala Lumpur
Level 23, NU Tower 2
London
London
Abu Dhabi
New York
Dammam
Dubai
Jeddah
Level 30, The Leadenhall Building
Level 1, Devonshire House, One Mayfair Place
Level 36, Etihad Towers
Level 85, One World Trade Center
Level 21, Al Khobar Gate Tower
Level 54, Almas Tower
Level 7, Al Murjanah Tower
OFFICES
47
40
56
50
35
47
73
42
42
91
OPENED
August 2014
August 2014
September 2014
December 2014
January 2015
March 2015
March 2015
May 2015
May 2015
June 2015
In addition, the following locations were expanded by the Consolidated Entity during the course of the financial year:
CITY
Los Angeles
Boston
LOCATION
Level 40, Figueroa at Wilshire
Level 14, One International Place
San Francisco
Level 49, 555 California Street
Riyadh
Tokyo
Level 18, Al Faisaliah Tower
Level 20, Marunouchi Trust Tower
Melbourne
Level 2, Riverside Quay Southbank
ADDITIONAL
OFFICES
23
43
19
33
10
30
EXPANDED
August 2014
August 2014
November 2014
February 2015
April 2015
April 2015
EVENTS SUBSEQUENT TO BALANCE DATE
Dividend
On 25 August 2015 the directors declared a 40% franked final dividend of 11.00 cents per share, payable on
24 September 2015.
Air Office
Effective 1 July 2015, the Consolidated Entity took over the Air Office client base. No consideration was paid. The directors
consider that the client base will intergrate seamlessly under its Virtual Office offering, and will bring a positive cash and
revenue stream to the Consolidated Entity.
The financial effects of the above transactions have not been brought to account in the financial statements for the year
ended 30 June 2015.
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.
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.
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 2015 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 25th day of August 2015.
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DIRECTORS' REPORTdirectors' reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 R E M U N E R AT I O N R E P O R T
c o n t e n t s
47
49
I N T R O D U C T I O N
Describes the scope of the Remuneration Report and the key management personnel (KMP)
whose remuneration details are disclosed.
R EM U N ER AT I O N G OV ER N A N C E
Describes the role of the Board and the Remuneration Committee, and the use of
remuneration consultants when making remuneration decisions.
50 N O N - E X EC U T IV E D I R EC TO R R EM U N ER AT I O N
Provides details regarding the fees paid to non-executive directors.
50
53
53
54
56
E X EC U T IV E R EM U N ER AT I O N
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.
E M P LOY EE S H A R E S C H EM E A N D OT H ER EQ U I T Y I N C EN T I V E I N FO R M AT I O N
Provides details regarding Servcorp’s employee equity plans including that information
required by the Corporations Act 2001 and applicable accounting standards.
EM P LOY M EN T AG R EEM EN T S
Provides details regarding the contractual arrangements between Servcorp and the
executives whose remuneration details are disclosed.
D I R EC TO R R EM U N ER AT I O N TA B L E
Provides details of the nature and amount of each element of the remuneration of each
director of Servcorp Limited for the year ended 30 June 2015.
E XEC U T IV E K M P R EM U N ER AT I O N TA B LE
Provides 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 2015.
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 2015, the percentage of
offshore revenue as a proportion of total revenue was 80%.
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.
The Board undertook a comprehensive review of
executive remuneration during the 2014 financial year.
This review was 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 was reformatted with
expanded disclosure principles adopted;
– the targets for short term incentives (STI) were re-
evaluated. There are 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 2014 to 2016
financial years 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 was
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 met with a number of shareholders and
proxy advisor CGI GlassLewis, who had reported on
our Remuneration Report in the 2013 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 response from shareholders to the
comprehensive review has been positive.
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 2015 and beyond.
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REMUNERATION REPORTremuneration reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
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 2015.
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.
NON-EXECUTIVE DIRECTORS
Bruce Corlett
Rick Holliday-Smith
Taine Moufarrige
The Hon. Mark Vaile
EXECUTIVE DIRECTOR
TITLE
CHANGE IN 2015
Chairman
Member, Audit & Risk Committee
Member, Remuneration Committee
Director
Chair, Audit & Risk Committee
Member, Remuneration Committee
Director
Member, Audit & Risk Committee
Member, Remuneration Committee
Director
Chair, Remuneration Committee
Full year.
Appointed to Remuneration Committee
on 8/12/2014
Full year.
Ceased as member of Remuneration
Committee on 8/12/2014
No change. Full year
No change. Full year
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
Laudy Lahdo
Olga Vlietstra
General Manager -
Australia & New Zealand
No change. Full year
General Manager - Middle East
No change. Full year
General Manager - Japan
No change. Full year
Thomas Wallace
Chief Financial Officer
No change. Full year
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 global
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 27.
Use of remuneration consultants
During the 2015 financial year, no remuneration
consultancy contracts were entered into by Servcorp.
During the 2014 financial year, remuneration consultancy
contracts were entered into by Servcorp and accordingly
the disclosures required under section 300A(1)(h) of th
Corporations Act 2001 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?
What arrangements did Servcorp make to
ensure that the making of the remuneration
recommendations would be free from undue
influence by the executive KMP?
Is the Board satisfied that the remuneration
information provided was free from any such
undue influence?
What are the reasons for the Board being
so satisfied?
ANSWER
No.
Remuneration services: CRA Plan Managers Pty Limited $16,545;
Other services: Boardroom Pty Limited $49,280. CRA was part of the
Boardroom Group. Boardroom Pty Limited provides the Company’s share
registry and related services.
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.
Yes, the Board is 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.
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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 2016 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
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;
$10,000 per annum including superannuation.
– builds a structure for growth and includes appropriate
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 2015 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.
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 2015
financial year and changes from 2014 are set out in the
table on pages 56 and 57.
Region STI will only be paid if the region STI target is met.
There will be no gateway.
In 2016 an additional STI opportunity will be introduced to
provide incentive for executive KMP to outperform their
targets. Executive KMP with a region target will receive
an extra $20,000 if they outperform their region target
by in excess of $2.0 million. Further, if the global target is
exceeded by more than 11.5% executive KMP will receive an
extra STI of $20,000. The total additional STI opportunity
if all executive KMP outperform is $200,000.
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.
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 2014, the basis of
the STI was reviewed and changes were 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 achieving target for the
relevant year. The maximum STI opportunity for the 2015
financial year ranged between $65,000 and $110,000.
The maximum STI opportunity as a percentage of fixed
remuneration ranged between 16.3% and 35.2% with the
average being 21.4%. The maximum STI opportunity range
for achieving target and percentage of fixed remuneration
will be the same for the 2016 financial year.
STI targets will be set in advance each year and will be
challenging. The STI targets for the 2015 financial year
were determined based on a matrix of Consolidated
Entity net profit before tax (global STI target) and region
operating profit (region STI target), where appropriate.
Where executive KMP have a direct responsibility for a
region, their total STI potential was allocated between their
region STI target and the global STI target. Their region
STI allocation did not exceed 50% of the total potential
STI in any case.
A gateway consolidated net profit before tax, based
on a 20% per annum compound increase over the 2013
financial year net profit before tax, needed to be achieved
before any global STI pay out. It is intended that a similar
approach to STI, including the minimum 20% per annum
compound growth over the 2013 financial year net profit
before tax, will be applied for the 2016 financial year. The
gateway consolidated net profit before tax is provided in
the following table.
FINANCIAL YEAR
ENDING 30 JUNE
2013
BASE
2014
GATEWAY
2015
GATEWAY
2016
GATEWAY
Consolidated net profit
before tax ($ 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.
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REMUNERATION REPORTremuneration reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
EXECUTIVE REMUNERATION (CONTINUED)
Relationship between Consolidated Entity 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
Directors' Report on pages 40 to 44.
A summary of Servcorp’s financial performance over the last five years is provided in the following table.
MEASURE
Total revenue ($million)
Net profit before tax ($million)
Net profit after tax ($million)
Basic earnings per share (cents)
Dividend per share (cents)
Share price as at 30 June ($)
Offices
Number of locations
FINANCIAL YEAR ENDED 30 JUNE
2011
182
3.0
2.5
2.5
10.0
$2.85
3,280
103
2012
201
18.3
14.8
15.0
15.0
$2.65
3,645
110
2013
208
27.6
21.3
21.6
15.0
$3.21
3,837
117
2014
242
34.3
26.3
26.8
20.0
2015
277
41.2
33.1
33.7
22.0
$4.80
$5.84
4,275
4,920
122
131
As previously reported, Servcorp began an aggressive expansion program in October 2009 to expand the Servcorp
footprint globally. 88 new floors representing 2,871 offices have opened between July 2009 and June 2015. 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, 2014 and into the 2015 financial year, showing a year on year increase from
2014 of 26% to $33.1 million.
Despite the volatility of net profit after tax over the initial expansion period, dividends have increased due to 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 2015 was $5.84, up 21.6% from a year before. This represents a most pleasing total shareholder
return (TSR) performance over the 2015 financial year.
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 the 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 the 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.
Executive KMP remuneration in comparison to
Company performance
With the continuing strong growth and improvement
in earnings in the 2015 financial year, global net profit
before tax targets were achieved in full, and all but one
of the individual regions met expectations. Accordingly,
the variable pay opportunity for executive KMP paid out
represents 94.5% of the maximum opportunity.
The individual ‘at risk’ rewards paid in the 2015 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
105,000
50,000
100,000
100,000
100,000
65,000
95.5%
66.7%
100%
100%
100%
100%
Servcorp has a very strong culture focussing on sales and
generation of shareholder wealth. Most of the executive
KMP are long-serving employees. All but one has been
employed for more than 12 years and (excluding the CEO)
they have on average more than 17 years’ service. All
executive KMP are aware of the need to perform. 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.
52
53
REMUNERATION REPORTremuneration reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
DIRECTORS’ REMUNERATION
NAME AND TITLE
NOTES
YEAR
SHORT TERM EMPLOYEE
BENEFITS
POST-EMPLOYMENT
BENEFITS
SALARY
AND FEES
$
427,768
425,418
159,818
160,183
100,457
100,687
91,325
91,533
91,325
91,533
870,693
869,354
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
CASH
PROFIT-
SHARING
AND
BONUSES
$
–
–
–
–
–
–
–
–
–
–
–
–
NON-
MONETARY
BENEFITS
OTHER
SHORT
TERM
BENEFITS
SUPER
BENEFITS
OTHER
POST-
EMPLOYMENT
BENEFITS
$
81,420
106,054
–
–
–
–
–
–
–
–
81,420
106,054
$
–
–
–
–
–
–
–
–
–
–
–
–
$
28,500
27,750
15,182
14,817
9,543
9,313
8,675
8,482
8,675
8,467
70,575
68,829
$
–
–
–
–
–
–
–
–
–
–
–
–
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
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 increase in the 2015 year reflects the change in foreign currency exchange rate, not a change
in salary in base currency terms.
54
LONG TERM
EMPLOYEE
BENEFITS
TERMI-
NATION
BENEFITS
LONG TERM
INCENTIVE
PLAN
TOTAL
PAYMENTS
AND
BENEFITS
SHORT TERM INCENTIVE
GRANTS
LONG TERM INCENTIVE
GRANTS
STI PAID
IN CASH
STI
FORFEITED
STI
ACCRUED
AND NOT
YET DUE
MAXIMUM
FUTURE
VALUE OF
VESTED STI
LTI PAID
IN CASH
LTI
FORFEITED
LTI
ACCRUED
AND NOT
YET DUE
$
–
–
–
–
–
–
–
–
–
–
–
–
$
$
%
%
%
–
–
–
–
–
–
–
–
–
–
–
–
537,688
559,222
175,000
175,000
110,000
110,000
100,000
100,015
100,000
100,000
1,022,688
1,044,237
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
%
%
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
55
REMUNERATION REPORTremuneration reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
KEY MANAGEMENT PERSONNEL REMUNERATION
NAME AND TITLE
NOTES
YEAR
SHORT TERM EMPLOYEE
BENEFITS
POST-EMPLOYMENT
BENEFITS
SALARY
AND
FEES
$
CASH
PROFIT-
SHARING
AND
BONUSES
$
NON-
MONETARY
BENEFITS
OTHER
SHORT
TERM
BENEFITS
SUPER
BENEFITS
OTHER
POST-
EMPLOYMENT
BENEFITS
$
$
$
M Moufarrige
Chief Operating Officer
J Goodwyn
VP / GM USA
L Gorman
GM Australia & NZ
L Lahdo
GM Middle East
S Martin GM SEA
O Vlietstra
GM Japan
T Wallace
Chief Financial Officer
Aggregate
2015
600,000
105,000
2014
600,000
27,500
(iii)
2015
390,625
50,000
2014
317,898
25,000
2015
249,399
100,000
16,566
18,528
5,138
4,174
9,976
2014
233,906
25,000
16,094
(iv)
2015
353,435
100,000
2014
279,684
25,000
(v)
(vi)
2014
33,426
–
2015
384,182
100,000
29,124
21,863
10,794
34,616
2014
343,756
75,000
29,007
2015
348,624
65,000
2014
348,624
22,500
–
–
2015
2,326,265
520,000
95,420
2014
2,157,294
200,000
100,460
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57,000
55,500
4,883
3,179
24,641
23,125
29,453
31,115
–
–
–
33,119
32,248
149,096
145,167
Notes:
i Amounts disclosed as short-term cash profit-sharing and bonuses in the 2015 year represent STI paid in August 2015 based on 2015 financial year global and
region targets.
ii 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
region targets.
iii The salary of J Goodwyn is paid in USD. The increase in the 2015 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 2015 year reflects the change in foreign currency exchange rate, not a change 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.
vi The salary of O Vlietstra is paid in JPY. The increase in the 2015 year reflects an increase in salary in base currency terms.
56
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
LONG TERM
EMPLOYEE
BENEFITS
TERMI-
NATION
BENEFITS
TOTAL
PAYMENTS
AND
BENEFITS
LONG TERM
INCENTIVE
PLAN
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
$
–
–
–
–
–
–
–
–
$
778,566
701,528
450,646
350,251
384,016
%
95.5%
25.0%
67.7%
25.0%
100%
298,125
25.0%
512,012
100%
357,662
25.0%
96,829
141,049
518,798
447,763
446,743
3,090,781
96,829
2,699,750
–
–
–
–
–
–
100%
75.0%
100%
94.5%
36.0%
403,372
50.0%
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
%
4.5%
75.0%
33.3%
75.0%
0.0%
75.0%
–
75.0%
–
–
25.0%
–
50.0%
5.5%
64.0%
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
%
%
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57
REMUNERATION REPORTremuneration reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 A U D I T O R ’ S I N D E P E N D E N C E D E C L A R AT I O N
F I N A N C I A L R E P O R T
c o n t e n t s
60
STAT EM EN T O F CO M P R EH EN S IV E I N CO M E
61
STAT EM EN T O F FI N A N C IA L P O S I T I O N
62
STAT EM EN T O F C H A N G E S I N EQ U I T Y
63
STAT EM EN T O F C A S H FLOWS
64
N OT E S TO T H E CO N S O LI DAT ED FI N A N C IA L R EP O RT
99
D I R EC TO R S ' D EC L A R AT I O N
58
59
financial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Statement of comprehensive income
Servcorp Limited and its controlled entities for the financial year ended 30 June 2015
Statement of financial position
Servcorp Limited and its controlled entities as at 30 June 2015
CONSOLIDATED
CONSOLIDATED
Revenue
Other income
Service expenses
Marketing expenses
Occupancy expenses
Rent - fixed annual impact
Administrative expenses
Share of losses of joint venture
Borrowing expenses
Total expenses
Profit before income tax expense
Income tax expense
Profit for the year
OTHER COMPREHENSIVE INCOME/(LOSS)
Translation of foreign operations (Item may be reclassified
subsequently to profit or loss)
Other comprehensive income/ (loss)for the period (net of tax)
Total comprehensive income for the period
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
NOTE
2
2
2
2
5
8
8
2015
$’000
269,157
8,221
277,378
(68,760)
(16,354)
(122,807)
(2,268)
(25,569)
(245)
(164)
2014
$’000
234,284
7,963
242,247
(63,074)
(14,835)
(107,140)
(524)
(22,357)
-
(60)
(236,167)
(207,990)
41,211
(8,070)
33,141
13,312
13,312
34,257
(7,921)
26,336
(894)
(894)
46,453
25,442
$0.34
$0.34
$0.27
$0.27
The Statement of comprehensive income is to be read in conjunction with the notes to the Consolidated financial report.
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
11
5
12
11
13
5
14
15
16
5
18
15
16
18
5
19
2015
$’000
97,837
39,159
17,764
272
16,666
171,698
28,732
125,805
30,149
14,805
199,491
371,189
50,147
32,518
6,903
5,691
95,259
24,279
7,710
690
1,353
34,032
129,291
241,898
154,122
(2,478)
90,254
241,898
241,898
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
60
61
The Statement of financial position is to be read in conjunction with the notes to the Consolidated financial report.
financial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Statement of changes in equity
Servcorp Limited and its controlled entities for the financial year ended 30 June 2015
Statement of cash flows
Servcorp Limited and its controlled entities for the financial year ended 30 June 2015
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
Balance at 30 June 2014
Balance at 1 July 2014
Profit for the period
Translation of foreign operations (net of tax)
Total comprehensive gain for the period
Payment of dividends
Balance at 30 June 2015
ISSUED
CAPITAL
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’000
154,122
-
-
-
-
-
$’000
(14,895)
-
(894)
(894)
-
-
154,122
(15,789)
154,122
(15,789)
-
-
-
-
-
13,312
13,312
-
154,122
(2,477)
EMPLOYEE
EQUITY
SETTLED
BENEFITS
RESERVE
$’000
145
-
-
-
(145)
-
-
-
-
-
-
-
-
RETAINED
EARNINGS
TOTAL
$’000
68,528
26,336
-
26,336
145
(16,241)
78,768
78,768
33,141
-
33,141
(21,656)
90,253
$’000
207,900
26,336
(894)
25,442
-
(16,241)
217,101
217,101
33,141
13,312
46,453
(21,656)
241,898
The Statement of changes in equity is to be read in conjunction with the notes to the Consolidated financial report.
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
Dividends paid
Borrowings
Landlord capital incentives received
Net financing cash flows
CONSOLIDATED
NOTE
2015
$’000
2014
$’000
289,016
(225,200)
238,009
(196,908)
26(b)
442
(7,995)
3,829
(164)
59,928
(3,033)
(39,768)
(2,508)
1
1,559
1,167
603
(4,591)
3,161
(60)
40,214
(13,959)
(24,251)
(2,465)
41
998
151
(42,582)
(39,485)
(21,656)
3,829
1,955
(15,872)
(16,241)
4,059
4,393
(7,789)
Net increase/ (decrease) in cash and cash equivalents
1,474
(7,060)
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
26(a)
92,482
3,881
97,837
99,758
(216)
92,482
The Statement of cash flows is to be read in conjunction with the notes to the Consolidated financial report.
62
63
financial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Contents of the notes to the Consolidated financial report
NOTE 1.
NOTE 2.
NOTE 3.
NOTE 4.
NOTE 5.
NOTE 6.
NOTE 7.
NOTE 8.
NOTE 9.
Significant accounting policies
Profit from operations
Significant transactions
Remuneration of auditors
Income taxes
Dividends
Segment information
Earnings per share
Cash and cash equivalents
NOTE 10.
Trade and other receivables
NOTE 11.
Other financial assets
NOTE 12.
Other assets
NOTE 13.
Property, plant and equipment
NOTE 14.
Goodwill
NOTE 15.
Trade and other payables
NOTE 16.
Other financial liabilities
NOTE 17.
Financing arrangements
NOTE 18.
Provisions
NOTE 19.
Issued capital
NOTE 20.
Financial instruments
NOTE 21.
Employee benefits
NOTE 22.
Commitments for expenditure
NOTE 23.
Subsidiaries
NOTE 24.
Joint venture
NOTE 25.
Formation / deregistration of controlled entities
NOTE 26.
Notes to Statement of cash flows
NOTE 27.
Related party disclosures
NOTE 28.
Parent entity disclosures
NOTE 29.
Subsequent events
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 25 August 2015.
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.
– IFRS 15 ‘Revenue from Contracts with Customers’.
Effective for annual reporting periods beginning
1 January 2018.
– AASB 2014-4 ‘Amendments to Australian Accounting
Standards - Clarification of Acceptable Methods of
Depreciation and Amortisation’. Effective for annual
reporting periods beginning on or after January 1 2016.
– AASB 2015-2 ‘Amendments to Australian Accounting
Standards - Disclosure Initiative: Amendments to AASB
101'. Effective for annual reporting periods beginning on
or after January 1 2016.
The directors are currently in the process of assessing the
future period impact of IFRS 15 ‘Revenue from Contracts
with Customers’ on the financial statements. The remaining
Standards and Interpretations on issue not yet effective
will not have a material impact on the financial statements
of the entity.
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.
65
72
73
73
74
76
77
78
78
78
79
79
80
81
81
82
82
83
83
83
89
89
90
93
94
95
96
98
98
64
65
financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
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.
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.
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h. Taxation (continued)
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.
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.
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.
Financial assets at fair value through profit or loss are
stated at fair value, with any gains or losses arising on
remeasurement recognised in profit or loss. The net gain or
loss recognised in profit or loss incorporates any dividend
or interest earned on the financial asset. Fair value is
determined in the manner described in Note 20e.
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.
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
l. Financial assets (continued)
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.
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:
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.
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.
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
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.
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
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.
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.
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.
r. Employee benefits
Wages, salaries and annual leave
The provision 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.
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.
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 1m, 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.
w. Investment in joint venture
A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights
to the net assets of the joint arrangement. Joint control
is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties
sharing control.
The results and assets and liabilities of a joint venture is
incorporated in these consolidated financial statements
using the equity method of accounting. Under the
equity method, an investment in a joint venture is initially
recognised in the consolidated statement of financial
position at cost and adjusted thereafter to recognise the
Group’s share of profit or loss and other comprehensive
income of the joint venture.
An investment in a joint venture is accounted for using the
equity method of accounting from the date on which the
investee becomes a joint venture.
The requirements of AASB139 ‘Financial Instruments:
Recognition and Measurement’ are applied to determine
whether it is necessary to recognise any impairment
loss with respect to the Group’s investment in a joint
venture. When necessary, the entire carrying amount of
the investment is tested for impairment in accordance
with AASB136 ‘Impairment of Assets’ as a single asset by
comparing its recoverable amount (higher of value in use
and fair value less costs to sell) with its carrying amount.
Any impairment loss recognised forms part of the carrying
amount of the investment. Any reversal of that impairment
loss is recognised in accordance with AASB136 to the
extent that the recoverable amount of the investment
substantially increases.
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
2. PROFIT FROM OPERATIONS
3. SIGNIFICANT TRANSACTIONS
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. EXPENSES
Rent - fixed annual impact (i)
D. 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
Notes:
CONSOLIDATED
2015
$’000
2014
$’000
268,715
442
269,157
3,872
3,536
813
8,221
233,681
603
234,284
3,254
2,079
2,630
7,963
2,268
524
164
12,283
6,062
(52)
(766)
1,414
103,410
60
9,257
6,642
274
332
1,484
89,663
i The rent fixed annual impact represents the straight-lining of fixed annual increases ranging between 3% and 4.25% per annum (2014: 2.75% and 4.25% per
annum) in accordance with AASB117.
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
2015
$’000
345
345
2015
$
575,491
93,789
669,280
626,732
93,177
120,235
840,144
CONSOLIDATED
2014
$’000
270
270
CONSOLIDATED
2014
$
576,640
98,823
675,463
500,012
106,272
108,012
714,296
The auditor of Servcorp Limited is Deloitte Touche Tohmatsu.
1,509,424
1,389,759
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
5. INCOME TAXES
5. INCOME TAXES (CONTINUED)
CONSOLIDATED
CONSOLIDATED
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
2015
$’000
11,461
695
(971)
(3,115)
8,070
2014
$’000
6,034
(149)
11
2,025
7,921
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
41,211
34,257
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
12,363
(535)
(3,139)
(189)
(263)
(276)
109
8,070
10,277
(272)
(2,437)
(578)
(2)
(138)
1,071
7,921
The tax rate used in the above reconciliation is the Australian corporate tax rate of 30% (2014: 30%).
B. CURRENT TAX ASSETS AND LIABILITIES
Current tax assets
Tax refunds receivable
Current tax payables
Income tax attributable to:
Parent entity
Subsidiaries
272
575
1,653
5,250
6,903
-
2,749
2,749
74
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 charge/ (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 charge/ (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
2015
$’000
13,416
16,733
30,149
(1,353)
28,796
21,225
3,484
4,087
28,796
993
303
1,170
(1,107)
(3,198)
6,491
79
4,731
21,920
3,498
4,731
30,149
(26)
1
670
645
695
14
644
1,353
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
75
financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
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
2015
$’000
-
1,422
1,851
3,273
CONSOLIDATED
2014
$’000
-
1,422
3,234
4,656
E. 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 $13,415,067
(2014: $14,521,738) in respect to losses that can be carried forward against future taxable income.
6. DIVIDENDS
Dividends proposed (unrecognised) or paid (recognised) by the Company are:
CENTS
PER SHARE
TOTAL
AMOUNT
$’000
DATE OF
PAYMENT
TAX RATE
FOR
FRANKING
CREDIT
PERCENTAGE
FRANKED
RECOGNISED AMOUNTS
2014
Final
Interim
2015
Final
Interim
Fully paid ordinary shares
Fully paid ordinary shares
Fully paid ordinary shares
Fully paid ordinary shares
7.50
9.00
11.00
11.00
7,382
2 Oct 2013
8,859
2 Apr 2014
10,828
1 Oct 2014
10,828
1 Apr 2015
30%
30%
30%
30%
100%
0%
35%
20%
UNRECOGNISED AMOUNTS
Since the end of the financial year, the directors have declared the following dividend:
Final
Fully paid ordinary shares
11.00
10,828
24 Sep 2015
30%
40%
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
2015
$’000
2,338
1,856
2014
$’000
400
1,624
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.
7. 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)
NOTE
30 JUNE 2015
$’000
30 JUNE 2014
$’000
30 JUNE 2015
$’000
30 JUNE 2014
$’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
Rent - fixed rent increase
Share of losses of joint venture
Unallocated
Profit before tax
Income tax expense
81,250
24,795
73,414
89,363
931
78,597
19,088
59,145
77,564
933
269,753
235,327
3,872
3,536
3,254
2,079
442
603
(225)
984
2
Consolidated segment revenue and profit for the period
277,378
242,247
8,753
11,054
(4,955)
(3,255)
15,545
17,564
225
37,132
(164)
3,872
3,536
10,726
12,017
353
30,895
(60)
3,254
2,079
(1,542)
(3,302)
442
(2,268)
(245)
448
41,211
(8,070)
33,141
603
(524)
–
1,312
34,257
(7,921)
26,336
The revenue reported above represents revenue generated from external customers. Intersegment sales were eliminated
in full. For the 12 months ended 30 June 2015, the Group’s Virtual Office revenue and Serviced Office revenue were
$69,712,000 and $200,041,000 respectively (2014: $64,289,000 and $171,038,000, respectively).
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
8. EARNINGS PER SHARE
11. OTHER FINANCIAL ASSETS
CURRENT
At fair value through profit or loss
Forward foreign currency exchange contracts
Investment in bank hybrid 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 $13,888,000 in securities which is encumbered (2014: $13,831,000).
12. OTHER ASSETS
CURRENT
Prepayments
Other
2015
$’000
238
16,614
912
17,764
CONSOLIDATED
2014
$’000
321
16,306
532
17,159
–
391
28,672
60
28,732
10,910
5,756
16,666
25,397
59
25,847
7,742
4,346
12,088
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
9. CASH AND CASH EQUIVALENTS
Cash (i) (ii)
Bank short term deposits (ii) (iii)
Notes:
2015
$’000
33,141
33,141
NO.
98,432,275
98,432,275
$0.34
$0.34
CONSOLIDATED
2014
$’000
26,336
26,336
NO.
98,432,275
98,432,275
$0.27
$0.27
NOTE
20
2015
$’000
24,157
73,680
97,837
CONSOLIDATED
2014
$’000
23,972
68,510
92,482
i Australia and France have Nil (2014: Nil) and $903,000 (2014: $1,505,000), respectively, in cash which is encumbered.
ii Servcorp’s unencumbered cash and investment balance is $99,335,000 as at 30 June 2015 (2014: $93,452,000).
iii Bank short term deposits mature within an average of 189 days (2014: 158 days). These deposits and the interest earning portion of the cash balance earn interest at
a weighted average rate of 1.73% (2014: 3.52%).
10. TRADE AND OTHER RECEIVABLES
CURRENT
At amortised cost
Trade receivables (i)
Less: allowance for doubtful debts
Other debtors
Notes:
31,870
(982)
8,271
39,159
22,679
(690)
10,254
32,243
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
26,264
3,139
2,467
31,870
20,103
1,813
763
22,679
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.
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
13. PROPERTY, PLANT AND EQUIPMENT
14. GOODWILL
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
$’000
$’000
$’000
$’000
$’000
CONSOLIDATED
OFFICE
EQUIP-
MENT
LEASED
AT COST
MOTOR
VEHICLES
OWNED
AT COST
TOTAL
$’000
$’000
$’000
OFFICE
EQUIP-
MENT &
SOFT-
WARE
OWNED
AT COST
$’000
GROSS CARRYING AMOUNTS
Balance at 30 June 2014
9,960
134,176
1,004
20,671
116
33,826
101
Additions
Disposals
Transfers (to) / from
other class of asset
Effect of foreign
currency exchange
differences
–
–
–
33,440
(57)
–
–
–
–
3,311
(54)
(54)
105
19,070
19
2,389
–
–
–
2
2,936
(439)
54
3,191
–
–
–
1
721
81
(51)
–
200,575
39,768
(601)
–
64
24,841
Balance at 30 June 2015
10,065
186,629
1,023
26,263
118
39,568
102
815
264,583
ACCUMULATED DEPRECIATION
Balance at 30 June 2014
Depreciation expense
833
222
66,375
12,283
Disposals
Transfers (to) / from
other class of asset
Effect of foreign
currency exchange
differences
–
–
4
958
–
–
–
12,517
2,182
(54)
–
(30)
(19)
7,684
19
1,276
116
27,805
100
570
109,274
–
–
–
2
3,591
(423)
–
2,702
–
–
–
2
67
18,345
(38)
(545)
–
(19)
34
11,723
Balance at 30 June 2015
1,059
86,293
977
15,921
118
33,675
102
633
138,778
NET BOOK VALUE
Balance at 30 June 2015
9,006
100,336
Balance at 30 June 2014
9,127
67,801
46
46
10,342
8,154
–
–
5,893
6,021
–
1
182
151
125,805
91,301
This note is to be read in conjunction with Note 1v Significant accounting policies “Useful lives of property, plant and
equipment”.
80
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:
2015
$’000
14,805
14,805
CONSOLIDATED
2014
$’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 2015 was as follows:
Japan
France
Australia
New Zealand
Singapore
Thailand
China
9,161
1,030
2,636
785
706
326
161
9,161
1,030
2,636
785
706
326
161
14,805
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
2015, the discount rate applied to the above countries, inclusive of country risk premium, was as follows: Japan 14.3%,
France 13.8%, Australia 13.2%, New Zealand 13.2%, Singapore 13.2%, Thailand 15.6% and China 14.1% (2014: Japan 14.7%,
France 14.4%, Australia 13.8%, New Zealand 13.8%, Singapore 13.8% Thailand 16.2% and China 14.7%).
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
5,989
21,971
9,559
12,628
50,147
24,279
24,279
5,888
16,695
3,943
5,895
32,421
21,179
21,179
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
16. OTHER FINANCIAL LIABILITIES
CURRENT
At amortised cost
Security deposits
External borrowings (i)
NON-CURRENT
At fair value through profit or loss
Forward foreign currency exchange contracts
At amortised cost
External borrowings (i), (ii)
CONSOLIDATED
2015
$’000
2014
$’000
32,005
513
32,518
291
7,419
7,710
24,887
506
25,393
–
3,557
3,557
35,575
1,322
4,150
41,047
27,531
–
27,531
8,044
1,322
4,150
13,516
Notes:
i On 21 November 2013 Japan borrowed JPY240,000,000 at 2.42% p.a. fixed for 5 years.
ii During the financial year ended 30 June 2015 Servcorp borrowed a total of GBP3,000,000 for a term of two years at variable interest rates.
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)
38,935
8,929
4,150
52,014
33,751
6,141
39,892
5,184
2,788
4,150
12,122
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.
18. PROVISIONS
CURRENT
Employee benefits (i)
Other
NON-CURRENT
Employee benefits
Notes:
2015
$’000
5,502
189
5,691
690
690
CONSOLIDATED
2014
$’000
4,456
201
4,657
668
668
i The current provision for employee benefits includes $4,696,456 of annual leave and vested long service leave entitlements accrued (2014: $3,982,308).
19. ISSUED CAPITAL
Fully paid ordinary shares 98,432,275 (2014: 98,432,275)
154,122
154,122
MOVEMENTS IN ISSUED CAPITAL
Balance at the beginning of the financial year
Balance at the end of the financial year
154,122
154,122
154,122
154,122
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 2014. 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.
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
20. FINANCIAL INSTRUMENTS (CONTINUED)
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.
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) +11% (2014: +9%)
AUD/USD (i) -11% (2014: -9%)
AUD/JPY +9% (2014: +9%)
AUD/JPY -9% (2014: -9%)
AUD/EUR +6% (2014: +10%)
AUD/EUR -6% (2014: -10%)
AUD/RMB +11% (2014: +9%)
AUD/RMB -11% (2014: -9%)
AUD/SGD +7% (2014: +5%)
AUD/SGD -7% (2014: -5%)
AUD/HKD +11% (2014: +9%)
AUD/HKD -11% (2014: -9%)
Notes:
IMPACT ON PROFIT
CONSOLIDATED
IMPACT ON EQUITY
CONSOLIDATED
2015
$’000
2014
$’000
2015
$’000
295
(83)
3,211
(2,356)
266
(261)
(528)
658
(356)
408
(2,099)
2,643
99
576
2,363
1,561
(92)
75
(201)
875
(205)
172
417
(299)
3,247
(4,084)
1,438
(1,716)
266
(297)
170
(211)
254
(79)
–
–
2014
$’000
(1,524)
4,508
(975)
1,162
(888)
(663)
(75)
235
(189)
208
–
–
i Servcorp is exposed to Dirhams (Dubai), Dinars (Bahrain and Kuwait), Rials (Qatar), Riyals (Saudi Arabia), Pounds (Lebanon) and Hong Kong Dollars (Hong Kong).
These currencies are pegged to the USD.
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 2015.
These are Level 2 fair value measurements derived from inputs as defined in Note 20(e).
AVERAGE EXCHANGE RATE
FOREIGN CURRENCY
FAIR VALUE
2015
2014
2015
MILLION
2014
MILLION
2015
$’000
2014
$’000
Outstanding contracts
CONSOLIDATED
Sell JPY
Not later than one year
Later than one year and not later than
five years
84.52
87.27
86.95
85.55
600
750
475
(609)
900
(156)
Sell USD
Not later than one year
Later than one year and not later than
five years
0.8156
0.8475
–
–
Sell EUR
Not later than one year
ii. Interest rate risk
0.71
0.73
4
3
2
–
–
1
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 gain / (loss)
AUD balances
125 basis point increase
125 basis point decrease
Other balances
250 basis point increase
250 basis point decrease
IMPACT ON PROFIT
CONSOLIDATED
2015
$’000
2014
$’000
927
(915)
194
(109)
740
(1,796)
52
(121)
(321)
(519)
–
–
258
447
113
127
84
85
financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
20. FINANCIAL INSTRUMENTS (CONTINUED)
c. Market risk (continued)
iii. Liquidity risk
20. FINANCIAL INSTRUMENTS (CONTINUED)
c. Market risk (continued)
iii. Liquidity risk (continued)
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
%
CONSOLIDATED
2015
NON-INTEREST BEARING
Cash and cash equivalents
Receivables
Lease deposits
24,157
39,159
1,051
–
–
–
–
–
–
–
–
24,157
39,159
2.56%
1,536
7,004
16,692
2,656
28,939
Forward foreign currency exchange
contracts
1,596
434
11,059
13,461
INTEREST BEARING
Cash and cash equivalents (i)
9,411
17,196
50,899
–
–
19,166
68,962
30,153
2,656
212,925
–
–
–
26,550
77,506
16,614
1.73%
5.57%
23,972
32,243
25,376
17,265
68,743
16,306
3.52%
6.77%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,881
5,467
13,739
2,289
–
5,421
11,844
Variable rate securities
2014
NON–INTEREST BEARING
Cash and cash equivalents
Receivables
Lease deposits
Forward foreign currency exchange
contracts
INTEREST BEARING
16,614
91,988
23,972
32,243
–
–
Variable rate securities
Notes:
i Fixed interest rate instruments.
16,306
78,382
Cash and cash equivalents (i)
5,861
25,535
37,347
–
–
29,416
48,235
25,583
2,289
183,905
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
WEIGHTED
AVERAGE
EFFECTIVE
INTEREST
RATE
%
CONSOLIDATED
2015
NON–INTEREST BEARING
Payables
Security deposits (i)
Forward foreign currency exchange
contracts
INTEREST BEARING
Bank loans (i)
Bank overdrafts (ii)
2014
NON–INTEREST BEARING
Payables
Security deposits (i)
Forward foreign currency exchange
contracts
INTEREST BEARING
Bank loans (i)
Notes:
i Fixed interest rate instruments.
ii Variable interest rate instruments at LIBOR + 2%.
5,989
13,438
–
–
–
32,005
–
–
1,653
488
10,568
13,075
133
–
10
–
368
–
2,254
6,351
7,775
13,936
42,941
21,680
5,888
6,369
–
–
–
–
–
24,887
4,964
10,850
–
–
131
6,019
10
422
2,213
6,379
30,273
13,063
–
–
–
–
–
–
–
–
–
–
–
19,427
32,005
25,784
2,765
6,351
86,332
12,257
24,887
15,814
2,776
55,734
2.42%
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.
86
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
20. FINANCIAL INSTRUMENTS (CONTINUED)
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
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 2015 are as follows:
Employer contributions
2015
$’000
1,892
CONSOLIDATED
2014
$’000
1,882
that are not based on observable market data (unobservable inputs).
As at 30 June 2015, there were no outstanding employer contributions payable to other funds.
30 JUNE 2015
Bank hybrid variable rate
securities
Forward foreign currency
exchange contracts
30 JUNE 2014
Bank hybrid variable rate
securities
Forward foreign currency
exchange contracts
LEVEL 1
$’000
LEVEL 2
$’000
CONSOLIDATED
LEVEL 3
$’000
22. COMMITMENTS FOR EXPENDITURE
CAPITAL EXPENDITURE COMMITMENTS - PROPERTY, PLANT AND EQUIPMENT
16,614
–
16,614
16,306
–
16,306
–
(53)
(53)
–
712
712
–
–
–
–
–
–
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
8,047
21,422
-
-
-
-
8,047
21,422
118,951
282,595
190,758
592,304
83,763
170,220
73,652
327,635
Some of the Group’s financial assets are measured at fair value at the end of each reporting period. The following
table gives information about how the fair values of these financial assets are determined (in particular, the valuation
technique(s) and inputs used).
FINANCIAL ASSETS
Bank hybrid variable rate
securities
Forward foreign currency
exchange contracts
FAIR VALUE AS AT
30 JUNE 2015
$’000
FAIR VALUE AS AT
30 JUNE 2014
$’000
FAIR VALUE
HIERACHY
16,614
(53)
16,306
712
1
2
VALUATION
TECHNIQUE(S)
AND KEY INPUT(S)
Quoted prices in an
active market
Future cash flows are
estimated based on
observable forward
exchange rates
The Consolidated Entity leases property under operating leases expiring from 1 to 15 years. Liabilities in respect of lease
incentives are disclosed in Note 15 to the Consolidated financial report.
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.
88
89
financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
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 Barangaroo Pty Ltd (iii)
(formerly Servcorp Brisbane George Street Pty Ltd)
Servcorp Brisbane Pty Ltd
Servcorp Workspaces 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
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
90
OWNERSHIP INTEREST
COUNTRY OF
INCORPORATION
2015
%
2014
%
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
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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
23. SUBSIDIARIES (CONTINUED)
NAME OF ENTITY
CONTROLLED ENTITIES (CONTINUED)
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 Queen Street Limited (iii)
(formerly 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
Servcorp Hottdesk Singapore Pte Ltd
Servcorp Square Pte Ltd
Servcorp SR Pte Ltd
Servcorp Hong Kong Limited
Servcorp Communications Limited (iv)
Servcorp HK Central Limited
Servcorp Business Service (Shanghai) Co. Ltd
Servcorp Business Service (Beijing) Co. Ltd
Chengdu Servcorp Business Service Co. Ltd
Beijing Servcorp Sihui Business Service Co. Ltd
Guangzhou Servcorp Business Service Co. Ltd
Chengdu Servcorp (OAC) 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
PT Servcorp Jakarta Selatan
OWNERSHIP INTEREST
COUNTRY OF
INCORPORATION
2015
%
2014
%
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
China
China
China
China
China
China
China
Malaysia
Malaysia
Philippines
Thailand
Thailand
Thailand
Indonesia
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
100
100
100
100
100
100
100
100
100
100
100
100
-
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financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
23. SUBSIDIARIES (CONTINUED)
NAME OF ENTITY
Servcorp Japan KK
Servcorp Tokyo KK
Servcorp Shinagawa KK
Servcorp Co-working GK
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)
Servcorp Level 54 DMCC
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
Servcorp Fulton Street LLC (iii)
(formerly Servcorp Liberty Street LLC)
Notes:
OWNERSHIP INTEREST
COUNTRY OF
INCORPORATION
2015
%
Japan
Japan
Japan
Japan
France
France
Belgium
United Kingdom
United Kingdom
United Kingdom
UAE
UAE
UAE
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
United States
100
100
100
100
100
100
100
100
80
100
49
49
100
100
100
49
49
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2014
%
100
100
100
-
100
100
100
100
80
100
49
49
-
100
100
49
49
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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 Brisbane George Street Pty Ltd changed its name to Servcorp Barangaroo Pty Ltd on 25 September 2014.
b) Servcorp Christchurch Limited changed its name to Servcorp Queen Street Limited on 18 March 2015.
c) Servcorp Liberty Street LLC changed its name to Servcorp Fulton Street LLC on 22 August 2014.
iv The entity was deregistered during the financial year (refer to Note 25).
92
24. JOINT VENTURE
NAME OF JOINT VENTURE
PRINCIPAL
ACTIVITY
COUNTRY OF
INCORPORATION
Etihad Towers Service Offices LLC
Serviced offices
and virtual offices
UAE
2015
%
49
2014
%
–
On 13 March 2014, a company in the Consolidated group entered into a joint venture with Emirates Consortium LLC.
The name of the joint venture is Etihad Towers Service Offices LLC.
The above joint venture is accounted for using the equity method in these consolidated financial statements.
Summarised financial information in respect of the Group’s material joint venture is set out below. The summarised
financial information below represents amounts shown in the joint venture’s financial statements prepared in accordance
with AASBs (adjusted by the Group for equity and accounting purposes).
THE COMPANY
2014
$’000
FINANCIAL POSITION
ASSETS
Current assets
Non–current assets
Total assets
LIABILITIES
Current liabilities
Non– current liabilities
Total liabilities
Net assets
FINANCIAL PERFORMANCE
Revenue
Loss for the year
Other comprehensive loss for the period
Total comprehensive loss for the period
2015
$’000
592
2,305
2,897
3,341
–
3,341
(444)
168
(490)
–
(490)
Reconciliation of the above summarised information to the carrying amount of the interest in the joint venture recognised in the
consolidated financial statements:
Share of net assets in joint venture
Share of losses in joint venture
(222)
(245)
The share of losses in the joint venture consist of share capital totalling $26,903 invested by Servcorp and $218,040 of
losses recognised against Servcorp’s contributions during the financial year ended 30 June 2015 totalling $1,368,354.
–
–
–
–
–
–
–
–
–
–
–
–
–
93
financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015 Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
25. FORMATION / DEREGISTRATION OF CONTROLLED ENTITIES
26. NOTES TO STATEMENT OF CASH FLOWS
CONSIDERATION
$’000
COUNTRY OF
INCORPORATION
THE CONSOLIDATED
ENTITY’S INTEREST
%
FORMATIONS 2015
PT Servcorp Jakarta Selatan
The entity was formed on 25 May 2015
Servcorp Co-working GK
The entity was formed on 8 June 2015
Servcorp Level 54 DMCC
The entity was formed on 21 December 2014
FORMATIONS 2014
Servcorp Leadenhall Limited
The entity was formed on 31 October 2013
Servcorp Mayfair Limited
The entity was formed on 12 May 2014
Servcorp Liberty Street LLC
The entity was formed on 4 October 2013
–
–
–
–
–
–
Indonesia
Japan
UAE
United Kingdom
United Kingdom
United States
DEREGISTRATIONS 2015
Servcorp Communications Limited
The entity was deregistered on 9 January 2015
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
100
100
100
80
100
100
COUNTRY OF
INCORPORATION
Hong Kong
China
Japan
Japan
Japan
Japan
Japan
Japan
Korea
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
Share of losses of joint venture
(Gain) / loss on disposal of non-current assets
Increase / (decrease) in current tax liability
(Increase) / decrease 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
CONSOLIDATED
2015
$’000
2014
$’000
24,157
73,680
97,837
23,972
68,510
92,482
33,141
26,336
1,056
18,345
(245)
(52)
4,457
(7,571)
(5,653)
(3,168)
(6,916)
(1,410)
5,276
7,118
15,550
59,928
41
15,899
–
274
1,306
2,379
(2,450)
(1,642)
(9,283)
(562)
636
3,234
4,046
40,214
94
95
financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
27. 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 report.
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. At various times during
the year, Air Office Pty Ltd was also a client of Servcorp in
Adelaide, Brisbane, Hobart, Melbourne and Sydney. Effective
1 July 2015, the Consolidated Entity took over the Air Office
client base. No consideration was paid. The directors consider
that the client base will integrate seamlessly under its Virtual
Office offering, and will bring a positive cash and revenue
stream to the Consolidated Entity.
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 Nualight AUSNZ Pty Ltd. Nualight
AUSNZ Pty Ltd is a client of Servcorp in Sydney, Melbourne,
Wellington and in Beijing. Nualight AUSNZ Pty Ltd also
provides lighting products to the Consolidated Entity on
arm’s length terms.
A director of the Company, Mr T Moufarrige, had an interest
in and was the CEO of Light Energy Australia Pty Ltd. Light
Energy Australia Pty Ltd was a client of Servcorp in Sydney
and in Beijing. Light Energy Australia Pty Ltd also provided
lighting products to the Consolidated Entity on arm’s length
terms. Light Energy Australia Pty Ltd stopped trading in
March 2015.
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 B 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 B Corlett did not have any involvement in the
negotiation of the terms of the arrangement with Australian
Maritime Systems Limited.
A relative of a director of the Company, Mr B Corlett, has
an interest in Highbury Partnership. Highbury Partnership
is a client of Servcorp in Sydney. Mr B Corlett did not have
any involvement in the negotiation of the terms of the
arrangement with Highbury Partnership.
A director of the Company, Mr B Corlett, is a director of
Fortius Funds Management Pty Ltd, a related company
of Fortius Global Real Estate Securities. Fortius Global
Real Estate Securities is a client of Servcorp in Singapore.
Mr B Corlett did not have any involvement in the negotiation
of the terms of the arrangement with Fortius Global Real
Estate Securities
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.
Mr B Corlett's relationship with The Trust Company Limited
ceased in December 2013.
A director of the Company, Mr R Holliday-Smith, has
an interest in and is the Chairman of ASX Limited. ASX
Operations Pty Ltd, a subsidiary company of ASX Limited, is
a client of Servcorp in London. Mr R Holliday-Smith did not
have any involvement in the negotiation of the terms of the
arrangement with ASX Operations Pty Ltd.
96
27. RELATED PARTY DISCLOSURES (CONTINUED)
Other transactions with the Company and its controlled entities (continued)
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.
The value of the transactions during the year with directors and their director-related entities were as follows:
CONSOLIDATED
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
TRANSACTION
Premises rental
Franchisee
Client
Reimbursements
2015
$
86,445
1,002,858
4,404
20,707
Sovori Pty Ltd
Reimbursements
320,740
A G Moufarrige,
T Moufarrige
A G Moufarrige,
R Holliday–Smith
Thru, Inc.
T Moufarrige
Nualight AUSNZ Pty Ltd
T Moufarrige
Nualight AUSNZ Pty Ltd
T Moufarrige
Light Energy Australia Pty Ltd
T Moufarrige
Light Energy Australia Pty Ltd
T Moufarrige
Cutting Edge Post Pty Ltd
T Moufarrige
Spigoli Pty Ltd
IT services
Client
Client
Supplier
Client
Supplier
Supplier
Client
T Moufarrige
Taine Moufarrige
Reimbursements
B Corlett
B Corlett
B Corlett
B Corlett
B Corlett
TDM Asset Management Pty Ltd
Australian Maritime Systems Limited
Highbury Partnership
Fortius Global Real Estate Securities
The Trust Company Limited
R Holliday–Smith
ASX Operations Pty Ltd
Client
Client
Client
Client
Client
Client
109,719
5,116
7,169
38,337
–
202,982
24,937
5,499
2,889
37,653
8,112
87,186
6,433
–
32,650
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
–
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 / (payable)
Enideb Pty Ltd
Enideb Pty Ltd
Air Office Pty Ltd
Sovori Pty Ltd
Thru, Inc
Thru, Inc
Nualight AUSNZ Pty Ltd
Light Energy Australia Pty Ltd
Spigoli Pty Ltd
Taine Moufarrige
TDM Asset Management Pty Ltd
Australian Maritime Systems Limited
Highbury Partnership
Fortius Global Real Estate Securities
The Trust Company Limited
ASX Operations Pty Ltd
73,905
(26,398)
1,851
12,323
–
(3,007)
511
–
484
924
466
683
7,291
230
–
4,403
78,020
(25,455)
564
–
799
(2,075)
–
(93,894)
1,076
9,072
3,671
638
–
–
658
–
97
financial reportfinancial reportLET’S GO TO THE MOVIESANNUAL REPORT 2015
Notes to the Consolidated financial report
for the financial year ended 30 June 2015
Directors' Declaration
28. PARENT ENTITY DISCLOSURES
The directors declare that:
FINANCIAL POSITION
ASSETS
Current assets
Non-current assets
Total assets
LIABILITIES
Current liabilities
Total liabilities
EQUITY
Issued capital
Retained earnings
Total equity
FINANCIAL PERFORMANCE
Profit for the year
Total comprehensive income
As at 30 June 2015:
2015
$’000
215,622
22,393
238,015
60,432
60,432
154,122
23,461
177,583
26,859
26,859
THE COMPANY
2014
$’000
184,435
20,696
205,131
32,753
32,753
154,122
18,256
172,378
11,584
11,584
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 98 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 25th day of August 2015.
i Servcorp Limited guaranteed Company Headquarters Limited (a subsidiary) as part of a New Zealand lease negotiated in 2002.
ii On 24 March 2015 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 $37,000,000 interchangeable facility for general corporate purposes. The liability under the deed by and
between the Australian and New Zealand companies is limited to $52,000,000. As at 30 June 2015 the fair value of these commitments was Nil (2014: 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.
29. 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 25 August 2015 the directors declared a final dividend of 11.00 cents per share, franked to 40%, payable on
24 September 2015.
Air Office
Effective 1 July 2015, the Consolidated Entity took over the Air Office client base. No consideration was paid. The directors
consider that the client base will intergrate seamlessly under its Virtual Office offering, and will bring a positive cash and
revenue stream to the Consolidated Entity.
The financial effects of the above transactions have not been brought to account in the financial statements for the year
ended 30 June 2015.
98
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A U D I T O R ’ S R E P O R T
100
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The shareholder information set out below is provided in accordance with the
Listing Rules and was applicable as at 02 September 2015.
TWENTY LARGEST SHAREHOLDERS
CLASS OF SHARES AND VOTING RIGHTS
Ordinary shares
There were 2,296 holders of the ordinary shares of the Company.
At a general meeting:
HOLDER NAME
BNP Paribas Nominees Pty Ltd (DRP)
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
– On a show of hands, every member present in person or by direct vote, proxy, attorney or representative has one vote;
Eniat Pty Ltd
– 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
726
1,081
273
188
28
2,296
NUMBER
OF SHARES
360,880
2,850,408
2,066,899
4,682,664
88,471,424
98,432,275
%
OF SHARES
0.37%
2.90%
2.10%
4.75%
89.88%
100.00%
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited (Nt-Commonweallth Super Corp A/C)
JP Morgan Nominees Australia Limited
MFLE Pty Ltd
Moufarrige, Alfred George
National Nominees Limited
Omnioffices Pty Limited
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 Nominees Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Uvira Superannuation Pty Limited (Uvira Holdings Employees Super Fund Account)
There were 70 holders of ordinary shares holding less than a marketable parcel, based on the closing market price at the
specified date.
Totals for Top 20
SUBSTANTIAL SHAREHOLDERS
The following organisations have given a substantial shareholder notice to Servcorp.
NAME
Sovori Pty Ltd
Perpetual Limited
NUMBER
OF SHARES
49,812,927
12,885,221
% OF VOTING
POWER
50.61%
13.09%
s h a r e h o l d e r i n f o r m a t i o n
NUMBER OF
ORDINARY
SHARES
HELD
PERCENTAGE
OF CAPITAL
HELD
700,874
5,582,506
788,577
1,800,000
7,563,747
607,635
4,815,472
1,800,000
547,436
8,350,469
302,808
503,214
258,834
253,777
250,000
42,095,859
6,419,199
4,275,580
445,238
413,474
87,774,699
0.71%
5.67%
0.80%
1.83%
7.68%
0.62%
4.89%
1.83%
0.56%
8.48%
0.31%
0.51%
0.26%
0.26%
0.25%
42.77%
6.52%
4.34%
0.45%
0.42%
89.17%
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LET’S GO TO THE MOVIESANNUAL REPORT 2015 C O R P O R AT E I N F O R M AT I O N
Directors
Bruce Corlett
Rick Holliday-Smith
Alf Moufarrige
Taine Moufarrige
Mark Vaile
Company secretary
Greg Pearce
Chairman & non-executive director, independent
Non-executive director, independent
CEO & Managing director
Non-executive director
Non-executive director, independent
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 12
Grosvenor Place
225 George 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 4.30pm on
Wednesday, 11 November 2015 at:
The Westin
Level 6, Barnet Room
1 Martin Place
Sydney NSW 2000
104
105
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