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www.servicestream.com.au
www.servicestream.com.au
www.servicestream.com.au
www.servicestream.com.au
www.servicestream.com.au
w w w. s e r v i c e s t r e a m . c o m . a u
2014
2014
2014
2014
2014
2014
Annual Report
Annual Report
Annual Report
2014 Annual Report
Annual Report
Annual Report
Annual Report
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www.servicestream.com.au
www.servicestream.com.au
Annual General Meeting
The Annual General Meeting of
Service Stream Limited will be held at the
InterContinental Melbourne The Rialto
495 Collins Street, Melbourne
22 October 2014, 10.30am
Service Stream Limited
ABN 46 072 369 870
Annual financial report for the financial year ended
30 June 2014
Annual financial report
for the financial year ended
30 June 2014
Corporate governance statement
Directors’ report
Auditor’s independence declaration
Independent auditor’s report to the members of Service Stream Limited
Directors’ declaration
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Page
1
6
26
27
29
30
31
32
33
34-71
These financial statements are the consolidated financial statements of the consolidated entity consisting of Service
Stream Limited and its subsidiaries. The financial statements are presented in the Australian currency.
Service Stream Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office
and principal place of business is:
Level 4, 357 Collins Street Melbourne VIC 3000.
A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of
operations and financial performance on pages 9 to 14, which is not part of these financial statements.
The financial statements were authorised for issue by the Directors on 13 August 2014. The Directors have the power
to amend and reissue the financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press
releases, financial reports and other information are available on our website: www.servicestream.com.au
Service Stream Limited
Corporate governance statement
Corporate governance statement
This corporate governance statement summarises the main corporate governance practices of Service Stream
Limited and its subsidiaries for the financial year ended 30 June 2014.
The Board is committed to achieving and maintaining high standards of corporate governance, in line with the ASX’s
Corporate Governance Principles.
Principle 1 – Lay solid foundations for management and oversight
The Board Charter sets out the Board’s structure, along with its key roles and responsibilities.
The Board has also adopted a Reserved Powers Policy that sets out matters specifically reserved for determination by
the Board as distinct from matters delegated to executives to manage the operations of the Group. The Board’s focus
is on representing and serving the interests of shareholders by setting the strategic direction for, and policies of, the
Group and overseeing performance. Matters specifically referred to the Board for approval include Group strategy,
financial plans, major policies, issues of equity, major capital expenditure, appointment of the Managing Director and
external auditor, ASX disclosures and matters involving amounts over specified limits or with potential to have a
material impact on the financial position or reputation of the Group.
Responsibility for the Group’s day-to-day operations, administration and management is delegated by the Board to the
Managing Director.
The Board has approved a Delegation of Authorities Manual setting out the delegation of the Managing Director’s
authorities to members of the Senior Executive Team and other levels of management throughout the Group as
appropriate.
The Board receives comprehensive Board papers in advance of each monthly Board meeting which contain standing
agenda items such as safety, financial performance, operational issues and legal issues.
Performance and accountability of the Managing Director and Senior Executive Team
Upon appointment, each member of the Senior Executive Team signs a letter of engagement and is provided with an
Induction Manual containing key information about the Group and its policies. Letters of engagement include terms
and conditions in relation to duties, rights and responsibilities and termination.
Given that Leigh Mackender only commenced as Managing Director in May 2014, the Board’s review on appointment
forms the basis of his performance evaluation along with feedback as Managing Director since that date.
The performance of each Senior Executive Team member against key performance indicators and other performance
criteria has been reviewed during the reporting period. In addition, each Senior Executive Team member is also
provided with regular, informal feedback by the Managing Director and the Board.
The Remuneration and Nomination Committee considers the performance of the Managing Director and members of
the Senior Executive Team when formulating remuneration arrangements. The short-term incentive plan contains
measurable key performance indicators with respect to the financial year budget that are approved by the Board,
along with individual goals (that are specific, measurable, achievable, realistic and timely). The long-term incentive
plan contains incentive targets for the financial years to which each offer made under the plan applies.
The Board Charter is available on the Company’s website.
Principle 2 – Structure the Board to add value
The Board is comprised of a Non-Executive Independent Chairman (Peter Dempsey), two Non-Executive
Independent Directors (Stephe Wilks and Deborah Page), Executive Director (Brett Gallagher) and the Managing
Director (Leigh Mackender). An Alternate Director (Robert Grant, Chief Financial Officer) is appointed to represent
the Managing Director in his absence.
The Board believes that the current mix of Directors bring a broad range of complementary skills and experience to
their responsibility of governing the Company. Further information about the Board (and the Company Secretaries) is
set out in the Directors’ Report on pages 6-25.
1
Service Stream Limited
Corporate governance statement
Director’s independence
The Board regularly assesses whether a Director is independent including by reference to the independence and
materiality tests set out in the ASX Principles. The Board has a policy of separating the role of Chairman and
Managing Director and this policy is reflected in the Board’s current practice with Peter Dempsey in the role of
Chairman and Leigh Mackender in the role of Managing Director. The Chairman is independent and his role and
responsibilities are independent from those of the Managing Director.
Committees
The Board has established three key Committees to assist in the execution of its duties and functions:
•
•
•
Sustainability, Safety, Health and Environment Committee;
Audit and Risk Committee; and
Remuneration and Nomination Committee.
Each of the above Committees has their own Charters approved by the Board. For details of membership of and
attendance at Committee Meetings please refer to page 15 of the Directors’ Report.
The Committee Charters are available on the Company’s website.
Appointment of Directors
The Board actively and regularly considers the composition of the Board, taking into account the duration of each
Director’s tenure and the competencies required by the Company.
When nominating and appointing Directors, the Board takes into account its diversity objectives and seeks a balanced
mix of qualifications, age, skill, gender and experience to achieve the most favourable outcome for the Company and
its shareholders. Conditions relating to appointment are provided to all Directors, in writing, prior to appointment. The
Company’s Remuneration and Nomination Committee deals with the nomination and appointment of Directors, and
Board succession planning.
Apart from the role of Managing Director and any Alternate Director, all Directors are subject to re-election by rotation
at least every three years.
At the end of each financial year, the Board assesses its performance and that of its Committees and individual
members, to ensure its effectiveness in meeting shareholder expectations. In FY14 this was undertaken by a formal
internal process via questionnaire.
Principle 3 – Promote ethical and responsible decision-making
The Company is committed to being a socially responsible corporate citizen.
The Board has ultimate responsibility for resolving all matters concerning ethical and responsible decision-making,
with policies and practices designed to ensure the integrity of the Company is maintained and investor confidence is
enhanced.
The Company has a Standards of Behaviour Policy which contains a Code of Conduct that sets out the Group’s
expectations in relation to matters such as honesty, protecting the environment, relations with customers, prevention
of fraud, conflicts of interest, sexual harassment and discrimination, disputes with fellow employees and the protection
of information. The Board and the Senior Executive Team, through their own actions, promote and foster an ethical
corporate culture for the entire Group.
A Whistleblower Policy has also been established to encourage a culture of reporting matters that may cause the
Group financial loss or damage to its reputation.
Directors must keep the Board advised, on an on-going basis, of any interest that could potentially conflict with that of
the Group. Where the Board believes that a significant conflict exists, the Director concerned does not receive the
relevant Board papers and does not participate when the relevant item is considered or voted on.
Dealing in Company shares by Directors, other officers and employees
The Board has established a Securities Trading Policy which governs dealings in securities to ensure the highest
standards of corporate conduct and governance.
2
Service Stream Limited
Corporate governance statement
Diversity
The Group is comprised of men and women of varying ages, ethnicities and cultural backgrounds. The Company has
a Diversity Committee which is made up of the Senior Executive Team and is chaired by the Managing Director. The
Committee formally reports to the Remuneration and Nomination Committee on a regular basis. During FY14, the
Board established the following measurable objectives for achieving diversity within the Group:
“The Group will support the specific needs of our employees with families and provide them with helpful advice at
critical times of their lives. By June 2014, the Group will embed and further enhance the new family support project
that was implemented in FY13.”
The Group has continued to engage with SeventeenHundred, a provider of work life integration services, to further
develop the family support program offered to employees to provide practical support and services to all employees
about child care, aged care and retirement including the various government and company related benefits.
“The Group will support individual differences and recognise the importance of skills and the views of our employees,
particularly in performance development, training and recruitment and selection. By June 2014, the Group will develop
and implement revised recruitment processes that incorporate diversity requirements.”
Recruitment processes have been developed to ensure all shortlists for roles will comprise a diverse slate. A similar
approach for talent management is currently under development. Service Stream was also a finalist at the Aboriginal
Employment Industry Cluster event in November 2013.
“The Group will ensure that workplace diversity is supported and communicated to all staff. By June 2014, the Group
will increase the awareness of Diversity.”
Diversity has been an agenda item at Executive, Board and Remuneration and Nomination Committee meetings
throughout the year and initiatives have been shared through the Company’s newsletter, team meetings and
Corporate Governance training which contains a dedicated unit on Diversity. Mentoring arrangements for females in
the workplace have continued from the previous year and these will be further formalised as group programs in FY15.
Having met the objectives set for FY14, the Board has set new objectives for the year commencing 1 July 2014.
As at April 2014, women constituted 24% of the Group’s employees, 25% of the Board and 29% of the Senior
Executive Team. The Group’s annual public report which was lodged with the Workplace Gender Equality Agency on
30 May 2014 can be found on the Company’s website.
The Diversity Policy, Code of Conduct, Securities Trading Policy and Whistleblower Policy can be found on the
Company’s website.
Principle 4 – Safeguard integrity in financial reporting
The Audit and Risk Committee has been established to assist the Board in providing shareholders and regulatory
authorities with timely and reliable financial reports of the Company. The Committee is currently comprised of three
independent Non-Executive Directors. The Committee is chaired by Deborah Page who is an independent Non-
Executive Director and not Chairman of the Board.
Among other things, the Committee reviews audit scope, assesses the performance of and fees paid to the external
auditor, liaises with the external auditor to ensure that the annual audit and half-year review are conducted in an
effective, accurate and timely manner and considers whether non-audit services provided by the external auditors are
consistent with maintaining the external auditor’s independence. The Committee reports to the Board on financial and
audit matters at each relevant Board meeting.
The Company engages PricewaterhouseCoopers as its external auditor and the policy on the procedure for the
selection and appointment of external auditors and rotation of the external audit engagement partner can be found on
the Company’s website.
The Managing Director and Chief Financial Officer state in writing to the Board that the Company’s financial reports
present a true and fair view, in all material respects, of the Company’s financial position and operational results and
are in accordance with all relevant accounting standards.
Further information with respect to safeguarding the integrity of financial reporting, is provided in the Directors’ Report
on page 16.
3
Service Stream Limited
Corporate governance statement
Principle 5 – Make timely and balanced disclosure
The Company is committed to providing timely and accurate disclosure to the market of all material matters
concerning the Company. The Company has adopted a Continuous Disclosure policy which can be found on the
Company’s website.
Principle 6 – Respect the rights of shareholders
The Company respects the rights of its shareholders and facilitates the effective exercise of those rights.
The Company has a policy of effectively communicating with shareholders using various methods such as:
•
•
•
•
•
•
•
the Annual Report which is made available to shareholders;
disclosures made to the ASX;
information uploaded in the “Investors” section of the Company’s website;
notices of meeting and explanatory memoranda in relation to resolutions to be put to a vote of
shareholders;
Annual General Meetings at which shareholders are given an opportunity to ask questions about and
comment on the performance and operations of the Company and its subsidiaries and to vote on other
items of business including Director appointments and ask the external auditors questions on the financial
statements;
responding to communications from shareholders in a timely and responsive manner; and
periodic investor presentations and briefings.
Principle 7 – Recognise and manage risk
The Company has established an Audit and Risk Committee to assist the Board in identifying, assessing, monitoring
and controlling of the Group’s material business risks.
The Managing Director, the Audit and Risk Committee and the Board recognise that they have ultimate responsibility
for ensuring that the risk mitigation actions and internal control environment of the Group is fit for purpose and
adequate in terms of safeguarding shareholder value. The Company has put in place a comprehensive risk
management framework that has been developed in line with the recommendations contained within the AS/NZS ISO
31000: 2009 Risk Management - Principles and Guidelines standard.
As part of its risk management framework, the Board has adopted a Risk Management Policy to:
•
•
•
implement a standard structured Group-wide approach to risk management;
promote a culture that accepts both good and bad news, encourages personal responsibility and expects
proactive identification and management of risks and opportunities; and
monitor, address and report on risk management performance measures.
In accordance with its risk management framework, the Group has in place various processes and internal controls
designed to safeguard the Group’s assets, minimise its liabilities and to ensure the integrity of its reporting. The
identification, assessment, monitoring and management of business risks and the internal controls environment is
undertaken by the Senior Executive Team and reported to the Board on an on-going basis.
The Board has received an assurance from the Managing Director and the Chief Financial Officer that the declaration
provided in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk
management and internal control and that the system is operating effectively in all material respects in relation to
financial reporting risks.
The Risk Management Policy can be found on the Company’s website.
4
Service Stream Limited
Corporate governance statement
Principle 8 – Remunerate fairly and responsibly
The Company has established a Remuneration and Nomination Committee. The Committee has three members with
all of its members being independent Non-Executive Directors as at 30 June 2014.
The Committee has responsibility for reviewing and making recommendations to the Board in relation to
remuneration, in particular, ensuring that the Group offers remuneration which is fair and competitive, which is
appropriately linked to performance, and which motivates the Senior Executive Team to pursue the long-term growth
and success of the Group. The Committee also reviews senior management remuneration structures and succession
plans and monitors the level and nature of Directors’ remuneration to ensure it is in line with current standards. The
Committee provides recommendations to the Board which, in turn, has ultimate responsibility for fair and responsible
remuneration for Group personnel.
No Executive Director or other executive participates in any decision relating to their own remuneration. For the period
during the year that Mr Gallagher undertook an executive role, he was paid his pre-existing Director fee and a fixed
‘higher duties’ allowance. Non-Executive Directors are remunerated by way of fees and statutory superannuation.
The Senior Executive Team (including Mr Mackender and Mr Grant) is remunerated by way of fixed salary, long-term
and short-term incentives and superannuation. The remuneration report (at pages 16-24 of this annual financial
report) details the remuneration of Directors and Senior Management.
5
Service Stream Limited
Directors’ report
Directors’ report
Your Directors present their report on the consolidated entity (the Group) consisting of Service Stream Limited and entities it
controlled at the end of, or during, the year ended 30 June 2014, and in order to comply with the provisions of the
Corporations Act 2001, the Directors report as follows:
Information about the Directors and senior management
The names and particulars of the Directors of the Group during or since the end of the financial year are:
Name
Peter Dempsey
B. Tech. (Civil Eng.) (Adel)
Grad. Diploma (Bus. Admin.)
SAIT, FIEAust, MAICD.
Chairman
Particulars
Term of Office: Chairman since November 2010
Peter Dempsey was appointed Chairman of Service Stream Limited on 1 November
2010. Peter has extensive construction and development experience and has been
involved in these industries for the last 40 years. In 2003 he retired from A W
Baulderstone Pty Ltd after a 30 year career, the last five years as Managing Director.
Baulderstone undertook some of Australia’s largest building and civil infrastructure
projects with annual revenues up to $1.5b during his tenure. The company was also
involved in projects for the resources sector, with operations in all Australian mainland
states, Papua New Guinea, Indonesia and Vietnam.
Peter is Chair of the Remuneration and Nomination Committee and is a member of the
Audit and Risk Committee.
Peter is currently a Non-Executive Director of Monadelphous Limited, as well as holding
other Board roles with private construction and charitable organisations. Peter was a
Non-Executive Director of Becton Property Group Limited from July 2008 until resigning
on 26 February 2013.
Peter has no other listed company directorships and has held no other listed company
directorships in the last three years.
Leigh Mackender
Term of Office: Managing Director since May 2014
Managing Director
Brett Gallagher
FAICD
Executive Director
Leigh Mackender was appointed Managing Director of Service Stream Limited on 26
May 2014.
Leigh joined Service Stream when it acquired the AMRS Group of Companies (now
Energy and Water) in February 2008, prior to which he held various management roles
with the AMRS business since joining in 2005. Leigh was appointed to the role of
Executive General Manager of Energy and Water in April 2011.
Leigh was previously responsible for overseeing the Energy and Water business’
national operations which includes metering, asset inspection and in-home services
divisions operating across the Electricity, Gas and Water markets.
Leigh has over 14 years of extensive experience working within the industrial services
sector and held various roles in private and public businesses specialising in contract
management, financial analysis, business development and commercial negotiations.
Leigh has held no other listed company directorships in the last three years.
Leigh has recently completed the final requirements for the award of a Masters of
Business Administration from Victoria University.
Term of Office: Non-Executive Director since April 2010 Managing Director for the
period 8 April 2013 to 6 November 2013, Executive Director since May 2014
Brett Gallagher has over 20 years’ experience across the utility and facilities
management industries, and was Managing Director and a major shareholder of the
AMRS Group of Companies (now Energy and Water) from 2003 until 2008 when that
Group was acquired by Service Stream. Brett was instrumental in the growth of AMRS,
establishing it as Australia’s largest metering services provider.
6
Deborah Page AM
B Ec (Syd), FCA, MAICD
Non-Executive Director
Stephe Wilks
BSc (Macq) LLM (Syd)
Non-Executive Director
Robert Grant
BCom (Qld), FCPA
Alternate Director
and Chief Financial Officer
Service Stream Limited
Directors’ report
Brett is Chair of the Sustainability, Safety, Health and Environment Committee and was
a member of the Audit and Risk Committee until his appointment as Managing Director
and more recently Executive Director.
Brett also holds directorships and interests in a number of private businesses that
operate predominately in the utilities sector.
Brett has no other listed company directorships, and has held no other listed company
directorships in the last three years.
Term of Office: Non-Executive Director since September 2010
Deborah Page, a Chartered Accountant, has held senior executive positions with the
Commonwealth Bank, Allen, Allen & Hemsley, IBM and the Lend Lease Group and is a
former KPMG partner. She brings expertise developed from finance and operational
executive roles and from her professional background in external audit and corporate
advisory. Since 2001 she has worked exclusively as a Non-Executive Director across a
range of industries, including energy, insurance, financial services and property.
Deborah is Chairman of the Audit and Risk Committee and is a member of the
Remuneration and Nomination Committee.
Deborah is currently Chairman of Investa Listed Funds Management Limited, the
responsible entity of the ASX-listed Investa Office Fund; and is a Non-Executive
Director of Australian Renewable Fuels Limited, Brickworks Limited and BT Investment
Management Limited. She is also a Non-Executive Director of The Colonial Mutual Life
Assurance Society Limited and Commonwealth Insurance Limited, wholly owned
subsidiaries of the Commonwealth Bank.
Deborah has held no other listed company directorships in the last three years.
Term of Office: Non-Executive Director since September 2005
Stephe Wilks has over 20 years’ experience in the telecommunications industry both
within Australia and overseas. He has held senior executive positions with BT Asia
Pacific, Optus, Hong Kong Telecom, Nextgen Networks and Personal Broadband
Australia. He was also a consulting director with investment bank, NM Rothschild.
Stephe is a member of the Audit and Risk Committee, the Sustainability, Safety, Health
and Environment Committee and the Remuneration and Nomination Committee.
Stephe is currently Chair of Bulletproof Group Limited and a Non-Executive Director of
Tel.Pacific Limited, and was previously Chairman of Mooter Media Limited and Eftel
Limited, and a Non-Executive Director of People Telecom Limited and 3Q Holdings
Limited. Stephe is on the advisory board of the Network Insight Group and consults to
a number of companies in the media and technology industries.
Stephe has held no other listed company directorships in the last three years.
Term of Office: Alternate Director since December 2010 and Chief Financial Officer
since June 2010
Robert (Bob) Grant has over 20 years’ experience in providing financial leadership in
prominent Australian and multi-national companies across numerous sectors including
infrastructure services, construction, energy, downstream oil and mining. Before joining
Service Stream Bob held senior finance roles in Tenix, AGL and Shell.
Bob is an Alternate Director for Leigh Mackender, ensuring continuity of executive
representation at Board discussions and meetings where Leigh is not otherwise able to
attend. In his capacity as Chief Financial Officer, Bob is responsible for all financial
management, reporting, treasury, taxation and other finance shared services, as well as
corporate services including property, supply chain and risk management.
Bob has no other listed company directorships and has held no other listed company
directorships in the last three years.
7
Terry Sinclair
MBA, Grad dip in Management,
other tertiary qualifications
in Mining, including Surveying.
Service Stream Limited
Directors’ report
Term of Office: Managing Director from 6 November 2013 until his resignation on 26
May 2014
Terry Sinclair has significant experience in the Resources, Industrials and Services
sectors.
Terry has held leadership roles with BHP Billiton, Australia Post, and a number of joint
ventures in the Australian, Chinese, North American and European markets.
During his term of office with Service Stream, Terry was also a Non-Executive Director
of Transpacific Industries Group Limited.
Directors’ shareholdings
The following table sets out each Director’s relevant interest in shares and rights in shares of the Company or related body
corporate as at the date of this report.
Directors
P Dempsey
D Page
B Gallagher
S Wilks
L Mackender 1
R Grant 1,2
Service Stream Limited
Fully paid ordinary
shares
Performance Rights
Number
Number
673,637
152,928
10,390,679
455,001
92,637
540,855
-
-
-
-
728,571
2,193,749
1. Balances include LTIP FY14 Tranche performance rights which are subject to shareholder approval at the Company’s Annual General Meeting on 22 October
2014.
2. R Grant is an Alternate Director for the Managing Director.
Remuneration of key management personnel
Information about the remuneration of key management personnel is set out in the remuneration report of this Directors’
report, on pages 16 to 24. The term ‘key management personnel’ refers to those persons having authority and responsibility
for planning, directing and controlling the activities of the consolidated entity, directly or indirectly, including any Director
(whether executive or otherwise) of the consolidated entity.
Performance rights granted to Directors and senior management
During and since the end of the financial year, an aggregate of 6,827,387 performance rights were granted to the following
Directors and to the five highest remunerated officers of the Group as part of their remuneration:
Directors and senior
management
L Mackender 1
R Grant 1, 2
M Saloyedoff
K Smith
D Hill 3
T Sinclair 3, 4
C Orr 3
Number of rights
granted
430,556
1,241,389
409,722
245,720
-
4,500,000
-
Issuing entity
Service Stream Limited
Service Stream Limited
Service Stream Limited
Service Stream Limited
Service Stream Limited
Service Stream Limited
Service Stream Limited
Number of ordinary
shares under rights
430,556
1,241,389
409,722
245,720
-
4,500,000
-
1. As L Mackender and R Grant are Directors of the Company, the issuance of performance rights under the LTIP FY14 Tranche is subject to shareholder
approval at the Company’s Annual General Meeting on 22 October 2014.
2. R Grant is an Alternate Director for the Managing Director.
3. D Hill, T Sinclair and C Orr resigned during the year. Refer to the remuneration report on page 16-24 for further details.
4. Shareholder approval would have been required for the issuance of performance rights to T Sinclair had he not resigned and the rights forfeited.
8
Service Stream Limited
Directors’ report
Company secretary
Vicki Letcher joined Service Stream in June 2010 and was appointed Company Secretary in August 2012. Vicki holds a
Bachelor of Laws and a Bachelor of Commerce and is also a member of the Institute of Chartered Accountants and of the
Governance Institute.
Jessica Lyons joined Service Stream in September 2010 as General Counsel and was appointed Company Secretary in
November 2010. Jessica has a Bachelor of Laws and Bachelor of Arts, and is also a member of the Governance Institute.
As co-Company Secretary, both Vicki and Jessica are responsible for the corporate administration, and corporate
governance of the Group.
Principal activities
The Service Stream Group is a provider of essential network services, including access, design, build, installation and
maintenance. These services are provided across copper, fibre and wireless telecommunications networks as well as to a
range of private and public energy and water entities nationally.
Review of operations and financial performance
Financial overview
Service Stream returned to profitability in FY14 with an EBITDA result of $16.6 million and a Net Profit After Tax of $2.3
million following the losses of the previous year.
As reported at half-year, all non-NBN related activities were transferred to the Mobile Communications segment in July 2013
to assist Fixed Communications with its operational recovery. Subsequent improvements in Fixed Communications’
operational and cost effectiveness and the non-recurrence of loss contributions from the Syntheo Joint Venture has resulted
in that segment delivering an EBITDA profit for the year. Mobile Communications’ management of the transferred activities
contributed to it delivering an EBITDA of $7.7 million, an improvement of $6.8 million compared to the prior year. The
Energy and Water segment once again delivered a strong EBITDA result of $11.2 million, albeit down on the previous year
primarily due to the cessation during the year of the smart meter rollout in Victoria.
• Group revenue: down ($137.0 million) to $389.6 million
• Group earnings before interest, tax, depreciation and amortisation (EBITDA): up $30.0 million to $16.6 million
• Group net profit after tax (NPAT): up $109.4 million to $2.3 million
• Group cashflow from operating activities: up $21.7 million to $24.9 million
FY14
EBITDA
%
FY13
EBITDA
%
Net
change
Change
%
Fixed Communications
Mobile Communications
Energy & Water
Inter-company revenue
Interest received and other
Total Revenue
Fixed Communications
Mobile Communications
Energy & Water
Investment in associate1
Unallocated Corporate Services
Total EBITDA
Depreciation / Amortisation
EBIT
Goodwill impairment
Net interest expense
Income tax expense
NPAT
EPS (cents per share)
98.4
166.9
124.2
(0.8)
0.9
389.6
2.4
7.7
11.2
-
(4.8)
16.6
(9.0)
7.6
-
(5.0)
(0.3)
2.3
0.76
2.4%
4.6%
9.0%
4.3%
136.0
215.8
174.2
(0.8)
1.4
526.6
(23.0)
1.0
14.3
(0.6)
(5.1)
(13.4)
(8.3)
(21.7)
(89.8)
(2.0)
6.5
(107.1)
(37.8)
-16.9%
0.4%
8.2%
-2.5%
(37.6)
(48.9)
(50.0)
(0.0)
(0.5)
(137.0)
25.4
6.8
(3.1)
0.6
0.3
30.0
(0.7)
29.3
89.8
(2.9)
(6.8)
109.4
(26.1%)
n/a
n/a
n/a
38.5
n/a
1. The investment in Total Communications Infrastructure (Singapore) Pte Ltd was sold during the prior year. Upon sale, the cumulative amount of the exchange
differences relating to this investment has been reclassified from equity to profit and loss.
9
Service Stream Limited
Directors’ report
Revenue
Revenue of $389.6 million decreased by ($137.0 million) compared to prior comparative period driven by:
•
Fixed Communications revenue was down by ($37.6 million) primarily due to there being no contribution from the
Syntheo Joint Venture (FY13: $26.7 million). The balance of the reduction was due to the cessation of the Fujitsu New
Estates contract and various miscellaneous works (including payphones, pre-provision, subcontracting to the Syntheo
Joint Venture and DSL activities), partially offset by additional volume under the New Developments, Field Service
Delivery and Network Augmentation & Restoration Activities contracts with NBN Co and under the Telstra pipe and pipe
remediation program.
• Mobile Communications revenue was down by ($48.9 million) primarily due to ($41.5 million) lower revenue from the
non-NBN related activities that were transferred from Fixed Communications. The balance of the reduction was due to
lower volume of wireless site acquisition and design services, partially offset by an increase in wireless construction
activity.
• Energy and Water revenue was down by ($50.0 million) primarily due to fewer residential solar PV system installations
being completed, along with lower revenue from the AMI smart meter program in Victoria which ceased during the year.
2,626 residential solar PV installations (totalling 8.7 gigawatts) were completed in FY14 compared to 9,552 installations
(totalling 26.1 gigawatts) in the prior year.
Earnings before interest, tax, depreciation and amortisation
The Group’s EBITDA of $16.6 million for the year was favourable to the prior year by $30.0 million.
•
Fixed Communications achieved an EBITDA of $2.4 million for FY14 which, excluding the impact of Syntheo discussed
below, represents an improvement of $5.5 million compared to the prior year. Improved performance on all contracts
and reduced overheads contributed to this improvement.
• Within the Fixed Communications segment, the Syntheo Joint Venture (“Syntheo”) in which the Group has a 50%
interest, recognised a loss of ($19.9 million) in the prior financial year. No subsequent losses were or will be recognised
in relation to Syntheo.
• Mobile Communications recorded EBITDA of $7.7 million for FY14. This is an improvement of $6.8 million compared to
the prior year which had been impacted by operational difficulties and demobilisation costs in the activities that were
then managed under Fixed Communications.
• Energy & Water reported an EBITDA of $11.2 million for FY14, a decrease compared to the prior year of ($3.1 million)
in line with reduced revenue as detailed above.
Net interest expense & finance costs
• Net interest expense and finance costs of $5.0 million were ($2.9 million) higher than the prior period reflecting the
higher fees and interest rates arising from the refinancing completed in August 2013, together with higher levels of
borrowings and bank guarantee utilisation during the year.
Tax
• An income tax expense of $0.3 million was recorded for the period. The current year income tax expense has benefited
from an adjustment related to prior period Research and Development expenditure.
Depreciation and amortisation
• A depreciation and amortisation charge of $9.0 million was recorded for the period. This was slightly higher than the
prior year‘s charge of $8.3 million with a full year’s depreciation of the increased FY13 capital expenditure being brought
to account this year.
Capital raise
•
Following approval at an Extraordinary General Meeting of shareholders on 19 March 2014, a fully-underwritten capital
raise was undertaken to raise net proceeds of $18.9 million.
o A placement of 42.5 million shares at an issue price of $0.22 per share was concluded on 24 March 2014 to
raise $9.4 million. The major participants in the placement were Thorney International Pty Ltd (9.1 million
shares), Thorney Opportunities Ltd (27.3 million shares) and other sophisticated investors (6.1 million shares).
o A 2-for-11 rights issue of 59.4 million shares at an issue price of $0.18 per share was concluded on 1 May
2014 to raise $10.7 million. Shareholder take-up of the rights issue was 82.6%, with the shortfall taken up by
oversubscription requests from current shareholders.
o Transaction costs totalled $1.2 million.
o Following the capital raise, Thorney International Pty Ltd and Thorney Opportunities Ltd collectively held 92.9
million shares representing 28.4% of the voting rights in the Company.
10
Service Stream Limited
Directors’ report
Cashflow
Key movements in cashflow compared to the prior period are as follows:
• Net cashflow from operations was $24.9 million, an improvement of $21.7 million over the prior period due to:
o Service Stream operations (before Syntheo) generated $50.7 million in operating cashflow before interest and
tax for the year compared to $5.6 million in the prior period, on the back of substantial reductions in working
capital.
$20.4 million was paid as contributions to Syntheo during the year to extinguish all liabilities associated with
that joint venture. These payments are ($8.3 million) unfavourable to the Syntheo cashflows reported in the
prior period.
o
o Net interest and other finance costs paid of $5.5 million were ($3.2 million) higher than prior year,
predominately due to higher fees, interest rates and facility utilisation.
o There were no tax payments nor refunds during the year, compared to a refund of $12.0 million in the prior
period.
• Net investing cash outflows decreased by $13.6 million to $2.1 million due to tight restrictions on capital expenditure
during the year.
• A net financing activities outflow of $24.6 million was the result of a net inflow from the capital raising ($18.9 million)
offset by the repayment of $43.4 million of borrowings during the year.
Financial position
The financial position of the Group improved during the year with Net Assets increasing by $21.9 million, predominately due
to the impact of the capital raise ($19.2 million tax effected) and the profit achieved over the period ($2.3m). At 30 June
2014, Net Assets totalled $179.6 million, with Current Assets exceeding Current Liabilities by $58.3 million.
Debt and financing facilities
• Net debt decreased by $41.6 million over the year on the back of the capital raise and the business’ generation of
cashflow from operations. The Group had net debt of ($10.4 million) at 30 June 2014 compared to ($52.0 million) at
June 2013.
The net debt at June 2014 comprised ($17.0 million) of borrowings offset by $6.6 million of cash on hand.
•
• Borrowings have been classified as a current liability since the Group’s banking facilities had less than 12 months of
remaining term at balance date.
• Bank guarantee utilisation reduced substantially over the year with a balance at June 2014 of ($11.6 million).
•
Leverage Ratio (Gross Debt + Bank Guarantees / Adjusted EBITDA) under the Group’s financing facilities was 1.63x at 30 June
2014 compared to the covenant of <3.00x.
The Group reduced the size of its financing facilities over the course of the year from $140.0 million to $62.0 million.
The financing facilities at 30 June 2014 comprised cash advance lines totalling $32.0 million, bank guarantee facilities
totalling $25.0 million and overdraft facilities totalling $5.0 million.
•
• Since balance date, the Group has received credit-approved term sheets from a number of leading Australian and
International financial institutions, that each provide the commercial terms of offers for participation in a banking facility
to 30 September 2016 commencing upon the expiry of the Group’s existing banking facilities on 31 August 2014. Each
such term-sheet is for a 50% participation in a multi-option facility under the Group’s existing Syndicated Facilities
Agreement and Security Arrangements and comprises cash advance, overdraft and bank guarantee facilities with an
initial total limit of $60.0 million. The offers contain improved terms and conditions relative to the Group’s existing
banking facilities. The Board and Management are in the final stages of assessing the offers and finalising
documentation.
Other Balance Sheet
Other key balance sheet movements during the year included:
•
The net liability to the Syntheo Joint Venture (2013: $19.5 million) was fully extinguished during the year, ahead of
schedule and all bank guarantees securing the liability have been returned by Lend Lease and retired with the issuing
banks.
• Service Stream working capital at 30 June 2014 was a net asset position of $61.7 million and reflected a decrease over
•
•
the prior year’s closing balance (excluding Syntheo) of ($33.5 million).
Trade and other receivables of $38.8 million was ($22.8 million) down on prior year due to a combination of strong cash
collection, lower volumes, and collection of prior year-end amounts owing from Fujitsu and Syntheo. The balance at 30
June 2014 comprised Fixed Communications $8.1 million (2013: $16.5 million), Mobile Communications $18.0 million
(2013: $27.9 million), Energy & Water $12.1 million (2013: $17.0 million) and Other $0.6 million (2013: $0.2 million).
Inventories have reduced by ($4.0 million) during the year with the reduction due to the wind back of solar PV
installations leading to reduced stock holdings and the continued strong management of inventory holdings.
• Accrued revenue of $71.6 million was ($13.2 million) down on prior year due to a combination of strong billing overall,
11
Service Stream Limited
Directors’ report
cessation of the smart meter program in Energy & Water, and billing of prior year-end balances relating to Fujitsu,
Telstra A&AS and Syntheo. The balance at 30 June 2014 comprised Fixed Communications $35.2 million (2013: $32.3
million), Mobile Communications $34.0 million (2013: $40.8 million), Energy & Water $2.4 million (2013: $11.6 million).
• A Lease Incentive liability of ($4.9 million) relating to the lease of office accommodation in Melbourne CBD and St.
Leonards in Sydney has been recognised on the balance sheet. The corresponding balance in the prior year was ($5.4
million).
Trade and other payables of ($43.1 million) has decreased by $4.9 million with the bulk of the decrease relating to lower
year-end accounts payable balances.
•
• Provisions have decreased by $3.2 million to ($9.5 million) during the year with the decrease predominately due to a
reduction of employee leave entitlements.
• Property, plant & equipment at 30 June 2014 was $10.7 million compared to $15.3 million at June 2013 and reflects the
annual deprecation charge substantially exceeding the minor additional leasehold improvements and plant and
equipment purchases for the year.
Business activities and outlook
Fixed Communications
Fixed Communications provides a wide range of design, construction, maintenance and customer connection services to the
owners of telecommunications network infrastructure and to telecommunications retail service providers in connection with
the roll-out of the National Broadband Network in Australia.
•
Fixed Communications’ financial performance in FY14 significantly improved over the prior year in accordance with
expectations, delivering an EBITDA of $2.4 million on revenue of $98.4 million (2.4% margin).
o During the year, Fixed Communications was successful in renewing its contract with NBN Co for the design
and construction of the fibre network to Greenfield New Developments Housing Estates. The renewal is
effective from 19 May 2014 and runs for two years, with two one-year extension options. In addition to the
existing locations under the contract of New South Wales, Western Australia, South Australia and the Northern
Territory, Service Stream may now also be awarded work in other regions. The agreement is expected to
generate an estimated $70 million in revenue across the initial two-year term with the potential for additional
revenue from other regions, with a further $70 million potentially arising from the two one-year extension
options.
o On 12 June 2014 Fixed Communications announced the renewal of its Field Services Delivery contract with
NBN Co for home and business premises connections. The renewal is for a two-year period with two one-year
extension options. Under this contract, Service Stream performs the physical cable connections between the
street network and the outside of the buildings, and the installation of the NBN connection box and power
supply units within the premises. These tasks will continue to be performed across five states and territories –
Victoria, NSW, Western Australia, the Northern Territory and South Australia. It is estimated that the work
from this contract will generate revenue of approximately $140 million across the initial two-year term.
Fixed Communications delivered solid results for the year under each of its contracts, being the two contracts referred to
above as well as the Telstra Remediation and NBN NARA contracts. At the end of the year Fixed Communications
underwent a change in leadership, with the resignation of Chad Orr in May and the appointment (in an acting capacity) of
Kevin Smith.
As mentioned above, all non-NBN related activities were transferred to the Mobile Communications division during the year.
Mobile Communications
Mobile Communications provides program management and turnkey services for infrastructure projects across Australia,
principally in the telecommunications sector. Service capability covers site acquisition, town planning, design, and
management of construction projects requiring specialist skill sets in wireless and fixed line telecommunications, signalling
and power.
• Mobile Communications’ financial performance in FY14 saw significant improvement with EBITDA of $7.7 million on
revenue of $166.9 million (4.6% margin) compared with EBITDA of $1.0 million on revenue of $215.8 million (0.4%
margin) in the prior year.
• During the year, Mobile Communications was successful in securing a two-year extension of its contract with Telstra for
the provision of wireless construction services. Under this contract, Mobile Communications provides services on a
national basis relating to the upgrade of existing base stations and the construction of new base stations for the Telstra
wireless network.
Energy & Water
Energy & Water provides a range of specialist metering and environmental services to utilities and government authorities
nationally, and through the Customer Care business, provides contact centre services and end-to-end customer support for
key contracts.
12
Service Stream Limited
Directors’ report
• Energy & Water’s financial performance in FY14 was solid with EBITDA of $11.2 million on revenue of $124.2 million
(9.0% margin) compared with EBITDA of $14.3 million on revenue of $174.2 million (8.2%) in the prior year.
• During the year, Energy and Water was successful in renewing several contracts including:
o Western Power – Meter reading and meter replacement services (WA) for a three-year term with a potential for
two one-year extension options to 2019.
o APA Gas – Meter Reading and Field Services (QLD, VIC, SA) for a five-year term to 2019.
• Subsequent to year-end, Energy and Water was awarded a five-year Meter Reading and Field Services Contract with
SA Power Networks (SAPN). The new contract term will see Service Stream continue to provide meter reading and
field services to SAPN until mid-2019.
Overall Group strategy, prospects and risks
The financial performance of the Group improved during the year in line with the Board’s expectation.
The Board appointed Terry Sinclair as Managing Director in November 2013 after an extensive executive search and
subsequently reviewed and approved a strategic plan developed by management that will see the Group focus on:
• Unlocking value from existing core businesses; strengthening customer relationships, mitigating contract risk, and
maximizing volume through delivery excellence;
• Re-configuring the operating model; the reduction of indirect costs, implementation of common processes and
platforms, and increasing capabilities in a number of areas; and
• Extending the reach of the business model; identifying and securing growth opportunities to reduce concentration risk.
Mr. Sinclair tendered his resignation in May 2014 after being unable to agree with the Board on the approach to implement
the strategic direction of the Group in coming years. The Board was pleased to subsequently appoint Leigh Mackender
from within the business as replacement Managing Director to lead the Group going forward and with Non-Executive
Director Brett Gallagher agreeing to take on a part-time executive role for the near term to provide support to Leigh as he
settles into his new role.
The Board is also pleased to have concluded a number of other significant initiatives during the year and since year end
including:
•
•
•
•
•
substantially improving the Group’s balance sheet with a capital raise and very strong cashflow generation;
nearing finalisation of refinance of its banking facilities on substantially improved terms for a further two years;
fully extinguishing the liability to the Syntheo Joint Venture ahead of schedule;
renewing many of the Group’s most significant contracts; and
securing key members of the management team.
The Board believes that the Group is now significantly better placed to take advantage of growth opportunities as they
present and to maximize shareholders returns.
Service Stream believes that demand for essential network services will remain strong in the medium term.
•
•
The Australian government’s investment in the National Broadband Network will continue to drive opportunities for
Fixed Communications on the back of NBN Co’s mixed technology strategy as well as in the areas of its proven
competence such as New Estates and Customer Connections.
In Mobile Communications, increasing demand for mobile data will continue to drive the development and augmentation
of the necessary supporting infrastructure.
• Energy network owners, retailers and governments will continue to pursue better demand side management, use of
consumption data and distributed generation presenting significant opportunities in smart metering, in-home services
and asset maintenance.
The achievement of the Group’s business objectives in the near term may be impacted by the following risks:
Customer
concentration
Management and the Board are conscious of the Group’s exposure to a small number of key
customers and infrastructure programs as a source of revenue and profitability, but accepts that
concentration to customers such as NBN Co, Telstra and Vodafone Hutchison Australia is a natural
consequence of operating in the telecommunications sector in Australia.
In that context, Management and the Board remain alert to factors that could disrupt or delay the flow
of work from those customers, and implement strategies to actively pursue the diversification of
income streams both within and separate to those customers by developing and offering a broad
range of services and geographic coverage.
13
Customer demand Many of the Group’s customer contracts do not contain volume commitments and are therefore
dependent on the customer’s demand requirements. Whilst Management and the Board take a
balanced view on the level of customer demand that is expected to arise under each of these
contracts in forecasting financial performance, there is a risk that the level of customer demand may
be less than forecasted.
Service Stream Limited
Directors’ report
In addition, the potential variability in that customer demand presents operational challenges to the
Group. In this regard, Management and the Board are conscious of the need to maximize the
variability of the business’ cost base and structures through the use of sub-contractors wherever
possible. Processes are therefore established and maintained to attract, mobilise and retain key sub-
contractor resources to ensure that they are available at the right time and right place to match
customer’s forecasts of volume as they change over time.
Contract
management
effectiveness
Given that Service Stream’s operating model is premised on the provision of infrastructure services
to customers under periodically renewed contracts, Management and the Board are conscious of the
risks that can arise through the acceptance of sub-optimal conditions in customer contracts and
through the ineffective commercial administration of these contracts over their term. Management
and the Board are therefore focused on ensuring that appropriate contract management disciplines
are effectively embedded in the organisation to manage contract risk and to maximize contract
entitlements.
Renewal of
customer contracts
Whilst the Group has successfully renewed and extended many of its key customer contracts during
FY14, the renewal of contracts remains a risk that Management and the Board continues to actively
monitor and manage.
A number of contracts with key customers in the Fixed and Mobile Communications business units
expire during FY15. Discussions are underway between Management and these customers in
relation to the renewal of these contracts.
Service Stream operates in a limited number of market segments in which there are relatively few
competitors. Management and the Board are therefore particularly conscious of the risks related to
the loss of business to competitors either through their leverage of potentially more cost effective
business platforms or as a consequence of their potential adoption of loss-leading strategies to
maintain market share.
Retention of key
personnel and
sourcing of sub-
contractors
The talents of a relatively small number of key personnel contribute significantly to the Group’s
operational effectiveness. Management and the Board have implemented strategies to retain those
personnel, including participation in appropriate incentive arrangements, and are currently finalising
a talent identification and succession program for deployment across the business in early FY15.
Access to an appropriately skilled and resourced pool of sub-contractors across Australia is also
critical to Service Stream’s ability to successfully undertake and complete work for its customers.
Management and the Board have implemented strategies to attract and retain those sub-contractors,
and are currently in the final stages of implementing a new Workforce Management System to
enhance its effectiveness in that regard.
14
Service Stream Limited
Directors’ report
Dividends
No interim nor final dividend has been declared by the Board for the year ended 30 June 2014 (2013: Interim one cent per
fully paid share, Final nil).
Significant changes in state of affairs
Except for as stated in the Review of Operations and Financial Performance, there was no significant change in the state of
affairs of the Group during the financial year.
Matters subsequent to the end of financial year
Since balance date, the Group has received credit-approved term sheets from a number of banking institutions for a
refinance of its banking facilities to 30 September 2016. The Board and Management are in the final stages of assessing the
offers and finalising documentation.
Except for as stated above, there has not been any matter or circumstance occurring subsequent to the end of the financial
year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or
the state of affairs of the Group in future financial years.
Environmental regulation
Other than compliance with general obligations under Federal and State environmental laws and regulations, the Group’s
operations are not subject to any particular or significant environmental regulation under a Commonwealth, State or Territory
law.
Shares under performance rights
Details of unissued shares under performance rights at the date of this report are:
Issuing entity
LTIP Series
Class of
shares
Exercise price
of right
Vesting date
Service Stream Limited
Service Stream Limited
Service Stream Limited
FY12 Tranche
FY13 Tranche
FY14 Tranche
Ordinary
Ordinary
Ordinary
$0.0000
$0.0000
$0.0000
30 June 2014
30 June 2015
30 June 2016
Number of
shares under
rights
1,071,819
1,836,210
4,722,515
7,630,544
The holders of these rights do not have the right, by virtue of the performance right, to participate in any share issue or
interest issue of the Company or of any other body corporate or registered scheme. No further share rights have been issued
during or since the end of the financial year.
In accordance with the Employee Share Ownership Plan the shares relating to the FY12 Tranche which vested on 30 June
2014 will be issued to participants who have met the vesting criteria following final calculations of the Relative TSR vesting
criteria after release of the FY14 financial statements.
Directors’ meetings
The following table sets out the number of Directors’ meetings (including meetings of Committees of Directors) held during
the financial year and the number of meetings attended by each Director (while they were a Director or Committee member).
Board of Directors
Audit and Risk
Committee
Remuneration and
Nomination
Committee
Sustainability,
Safety, Health and
Environment
Committee
Held
Attended
Held
Attended
Held
Attended
Held
Attended
P Dempsey
D Page
S Wilks
B Gallagher3
R Grant
T Sinclair1
L Mackender2
35
35
35
35
35
35
35
32
32
35
34
35
20
2
9
9
9
9
9
9
9
9
9
9
3 + 5*
9*
4*
-
5
5
5
5
5
5
5
5
5
5
4*
5*
4*
-
5
5
5
5
5
5
5
5*
4*
5
5
4*
2
1
* Attended as a Standing Invitee
1. Appointed to the position of Managing Director on 6 November 2013. Resigned from the position of Managing Director on 26 May 2014.
2. Appointed to the position of Managing Director on 26 May 2014.
3. During the period that Mr Gallagher was acting as either Managing Director or Executive Director he attended the Audit and Risk Committee as a Standing
Attendee.
15
Service Stream Limited
Directors’ report
Indemnification of officers and auditors
During the financial year, the Group paid a premium in respect of a contract insuring the Directors of the Company (as
named above), the Company Secretaries, and all officers of the Group and any related body corporate against a liability
necessarily incurred as such a Director, Secretary or officer to the extent permitted under the Corporations Act 2001.
The contract of insurance prohibits the general disclosure of the terms and conditions, nature of the liability insured or the
amount of the deductible or premium paid for the contract.
The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified
or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability necessarily
incurred as such an officer or auditor.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of
the Corporations Act 2001.
Non-audit services
Details of any amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are
outlined in note 29 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the year by the auditor (or by another person or firm
on the auditor’s behalf) are compatible with the general standard of independence of auditors imposed by the Corporations
Act 2001.
The Directors are of the opinion that the services disclosed in note 29 to the financial statements do not compromise the
external auditor’s independence, based on advice received from the Audit and Risk Committee, for the following reasons:
•
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of
the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in the Code of
Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical
Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making
capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
•
Auditor’s independence declaration
The auditor’s independence declaration is included on page 26 of the annual financial report.
Rounding off of amounts
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 Directors’ report and the financial statements are rounded off to the nearest thousand dollars, unless
otherwise indicated.
Remuneration report
This remuneration report, which forms part of the Directors’ report, sets out information about the remuneration of Service
Stream Limited’s Directors and its key management personnel for the financial year ended 30 June 2014. The term ‘key
management personnel’ refers to those persons having authority and responsibility for planning, directing and controlling the
activities of the consolidated entity, directly or indirectly, including any Director (whether executive or otherwise) of the
consolidated entity. The prescribed details of each person covered by this report are detailed below under the following
headings:
• Director and key management personnel details;
•
•
•
•
•
•
•
•
•
remuneration policy;
use of remuneration consultants;
relationship between remuneration policy and Group performance;
non-executive Directors remuneration policy;
remuneration of Directors and key management personnel;
voting and comments made at the Company’s 2013 Annual General Meeting;
key terms of employment contracts;
share-based payments granted as compensation; and
remuneration outcomes.
16
Service Stream Limited
Directors’ report
Director and key management personnel details
The following persons acted as Directors of the Company during or since the end of the financial year:
P Dempsey (Chairman)
L Mackender (Managing Director – appointed 26 May 2014)
B Gallagher (Managing Director to 6 November 2013, Non-Executive Director from 7 November 2013 until 25 May 2014,
Executive Director since 26 May 2014)
D Page AM (Non-Executive Director)
S Wilks (Non-Executive Director)
R Grant (Alternate Director, Chief Financial Officer)
T Sinclair (Managing Director from 6 November 2013 until 26 May 2014)
The following key management personnel held their current position for the whole of the financial year and since the end of
the financial year, except as noted below:
L Mackender (Executive General Manager, Energy and Water)
M Saloyedoff (Executive General Manager, Mobile Communications – appointed 18 October 2013)
K Smith (Executive General Manager, Fixed Communications – appointed 12 June 2014)
D Hill (Executive General Manager, Mobile Communications – until 18 October 2013)
C Orr (Executive General Manager, Fixed Communications – until 12 June 2014)
Remuneration policy
The Board, through the Remuneration and Nomination Committee, reviews the remuneration packages of all Directors and
key management personnel on an annual basis. Remuneration packages are reviewed and determined with due regard to
current market rates and are benchmarked against comparable industry salaries, adjusted by a performance factor to reflect
changes in the performance of the Group.
To retain and attract executives of sufficient calibre to facilitate the efficient and effective management of the Group’s
operations, the Board may seek the advice of external advisers in connection with the structure of remuneration packages as
the Board considers necessary.
The Group’s remuneration framework is based on the concept of Total Employee Reward (“TER”). This encompasses three
components:
1. fixed remuneration;
2. variable remuneration (at risk remuneration); and
3. reward and recognition.
1. Fixed remuneration
The Group’s principal remuneration strategy is to maintain equitable and affordable rates of pay for all employees, based on
their performance and the market in which the Group operates. Fixed remuneration is expressed as Total Fixed
Remuneration (“TFR”). TFR includes salary, superannuation entitlements and salary sacrifice elections and is used as the
basis for remuneration review, leave payments, and termination and redundancy payments. Benefits such as mobile phones,
incentive payments and work vehicles are excluded from this figure.
The range of remuneration for each position is established by reference to the complexity of the position (determined by
reference to a job evaluation methodology) and general market remuneration data. From time to time, where a need arises,
other more specific market data may be used for certain positions.
2. Variable remuneration
Variable Remuneration is currently comprised of the Short Term Incentive Plan and the Long Term Incentive Plan.
Short Term Incentive Plan (“STIP”)
Employees invited to participate in the STIP have the opportunity to earn an annual lump sum incentive payment through the
achievement of Group and individual goals agreed with the Remuneration and Nomination Committee (RNC) and their line
manager respectively at the beginning of each financial year.
Payment of STIP-related bonuses is dependent on the achievement of at least 90% of the Group’s EBITDA target for the
financial year for all participants, regardless of their personal performance. Once this criteria is satisfied, bonus payments are
based equally on Group performance and achievement of individual goals as illustrated below.
17
Service Stream Limited
Directors’ report
50% Group Financial Performance
50% Individual Performance
Performance to
Budget
Percentage Paid out
KPI Quadrant - individual
goals
Example percentage
allocation
90-100%
Pro-rata between 50% and
100% at RNC discretion
Financial
100%
100%
Market & Customer
Safety & People
Risk & Governance
50%
20%
20%
10%
Individual goals are tied directly to the annual objectives of the Group, which are linked directly to the overall Group strategy
categorized into the four quadrants of Financial, Market & Customer, Safety & People and Risk & Governance. The
weighting applied to each of these quadrants varies depending on the role and responsibilities.
Long Term Incentive Plan (“LTIP”)
From time to time employees in senior management roles and Directors may be invited, with approval from the Board, to
participate in the LTIP. The LTIP operates within the shareholder-approved Employee Share Ownership Plan (“ESOP”),
under the administration of the Remuneration and Nomination Committee. The extent of individual participation and the
associated number of performance rights offered is recommended by the Managing Director and reviewed by the
Remuneration and Nomination Committee, which will then make recommendations to the Board, and to shareholders at the
Annual General Meeting in the case of Directors, for approval.
In accordance with the provision of the ESOP and consistent with the prior year, Directors and employees in senior
management roles were invited to participate in the LTIP which entitled them to receive a number of performance rights in
respect of the year ending 30 June 2014 (“FY14 Tranche”). Each performance right converts into one ordinary share of
Service Stream Limited on vesting. No amounts are paid or payable by the participant on receipt of the performance rights,
and the performance rights carry neither rights to dividends nor voting rights. The number of performance rights granted is
based on the employee’s long term incentive participation rate, which is expressed as a percentage of the participant’s TFR,
and the volume-weighted average market price of the Company’s shares over a prescribed period of time or other issue price
as deemed appropriate by the Board.
The FY14 Tranche performance rights are subject to service and performance criteria being:
o The participant must be an employee at the vesting date;
o
50% of the performance rights granted will each vest where:
o The Group’s earnings per share (“EPS”) achieves the following targets:
FY14 Tranche (vesting 30 June 2016)
Year 1
Year 2
Year 3
Average
EPS Target (cents per share)
2.81
3.09
3.40
3.10
Subject to the following proportional vesting:
Percentage of performance rights that vest
0%
40%
EPS Target
Below 75%
At 75%
Proportional vesting
Greater than 75% and less than 100%
100%
100% and above
o The Group’s total shareholder return (“TSR”) over the performance period is such that it would rank at or above
the 75th percentile (full achievement) or the 50th percentile (pro-rata achievement) of a relevant peer group of
companies being those comprising the ASX 200 Industrials index, as detailed below:
18
Percentage of performance rights that vest
0%
50%
Proportional vesting
100%
TSR ranking
Below the 50th percentile
At the 50th percentile
Above the 50th percentile but below the
75th percentile
75th percentile or above (top quartile)
Service Stream Limited
Directors’ report
Performance rights will vest to the extent that the participant remains employed by the Company on the vesting date and to
the extent that the Company’s performance over the relevant period satisfies the vesting conditions.
In contrast to the criteria set out above for the FY14 Tranche, performance rights issued in previous years were subject to the
following EPS performance criteria:
o The Group’s earnings per share (“EPS”) achieves annual growth of 10% or more (full achievement) or 7.5% (pro-
rata achievement) over the performance period from an agreed base EPS, as detailed below:
FY12 Tranche
FY13 Tranche
Performance period
3 years
3 years
Vesting date
30 June 2014
30 June 2015
EPS base (cents per share)
5.80
6.60
The service and TSR performance criteria is consistent across all tranches.
Securities Trading Policy
The trading of shares issued to participants under any of the Company’s Employee Share Plans is subject to, and conditional
upon, compliance with the Company’s Securities Trading Policy (which can be found on the Company’s website). The
Securities Trading Policy lists the prohibited conduct of officers and employees which includes insider trading, margin
lending, speculative trading, short selling and entering into any hedging arrangements. Any non-compliance will be regarded
as serious misconduct which may result in the termination of their employment.
3. Reward and recognition
From time to time an employee or a team of employees may work beyond the call of duty to meet a challenging objective, or
may substantially exceed expectations. The Group encourages recognition and reward for such behaviours, and may choose
to recognise high performance via a discretionary bonus.
Use of remuneration consultants
The Remuneration and Nomination Committee did not engage the services of remuneration consultants during the year.
Relationship between remuneration policy and Group performance
Each element of the remuneration framework is linked to the Group’s financial performance. Changes to fixed remuneration
are determined by an employee’s performance and by the Group’s capacity to fund any changes.
The Remuneration and Nomination Committee reviews the remuneration packages of all Directors and executive officers on
an annual basis and makes recommendations to the Board. Remuneration packages are reviewed with due regard to
performance, data on remuneration paid by comparable companies and where appropriate, the Remuneration and
Nomination Committee receives expert independent advice regarding remuneration levels required to attract and
compensate Directors and executives, given the nature of their work and responsibilities.
In considering the Group’s performance, the Remuneration and Nomination Committee have regard to a number of
measures including the following:
19
2014
$’000
2013
$’000
Results
2012
$’000
2011
$’000
2010
$’000
2014
%
2013
%
Service Stream Limited
Directors’ report
Change
2012
%
2011
%
2010
%
Total Executive Remuneration
2,585
2,662
3,719
5,274
3,727
(2.9%)
(28.4%)
(29.5%)
41.5%
(23.0%)
Revenue
EBITDA 1
389,574
526,593
592,216
633,290
520,781
(26.0%)
(11.1%)
(6.5%)
21.6%
(6.7%)
16,560
(13,392)
38,041
34,584
6,401
(223.7%)
(135.2%)
10.0%
440.3%
(78.8%)
Net profit/(loss) before tax
2,598
(113,581)
26,643
22,631
(7,315)
(102.3%)
(526.3%)
17.7%
(409.4%)
(147.8%)
Net profit/(loss) after tax
Share price at end of year
Interim dividend 2
Final dividend 2 & 3
2,309
(107,054)
18,716
16,452
(2,555)
(102.2%)
(672.0%)
13.8%
(743.9%)
(123.0%)
0.19
0.14
0.35
0.49
0.23
32.1%
(60.0%)
(28.6%)
113.0%
(43.9%)
-
1.00 cps
1.00 cps
-
-
1.00 cps
-
-
-
-
(100.0%)
-
-
(100.0%)
n/a
n/a
-
-
(100.0%)
-
Basic earnings per share
0.76 cps
-37.77 cps
6.60 cps
5.80 cps
-0.99 cps
(102.0%)
(672.3%)
13.8%
(685.9%)
(116.7%)
Diluted earnings per share
0.75 cps
-37.77 cps
6.54 cps
5.80 cps
-0.99 cps
(102.0%)
(677.5%)
12.8%
(685.9%)
(116.7%)
1. Earnings before interest, tax, depreciation and amortisation.
2. Franked to 100% at 30% corporate income tax rate.
3. Declared after the balance date and not reflected in the financial statements of that year.
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
-5
-10
-15
)
I
A
D
T
B
E
&
R
E
T
(
s
n
o
i
l
l
i
m
$
2010
2011
2012
2013
2014
24.0
21.0
18.0
15.0
12.0
9.0
6.0
3.0
0.0
-3.0
-6.0
-9.0
)
I
P
T
S
(
s
n
o
i
l
l
i
m
$
Total Executive Remuneration - left axis
EBITDA - left axis
Total STIP - right axis
The overall level of key management personnel compensation takes into account the size, complexity, financial
performance and growth prospects of the Group.
Non-Executive Directors remuneration policy
Non-Executive Directors are remunerated by way of fees and statutory superannuation (where applicable). During the time
Mr Gallagher acted as Managing or Executive Director he was paid his pre-existing fixed Directors fee and a fixed higher
duties allowance. The Non-Executive Directors and the Executive Director (Mr Gallagher) do not receive performance-
based pay.
Fees are reviewed annually taking into account comparable roles and market data provided by the Board’s independent
remuneration adviser. The Directors have not had a fee increase in the past four years apart from the statutory increase in
superannuation. The Remuneration Report (at pages 16-24 of this annual financial report) details the remuneration of
Directors.
The maximum annual aggregate Directors’ fee pool limit is $500,000. The following fees have applied:
20
2014
2013
Chair
Other Members
Chair
Other Members
Fees
No.
Fees
No.
Fees
No.
Fees
No.
Service Stream Limited
Directors’ report
Board Fees
$ 100,000
1
$ 75,000
3
$ 100,000
1
$ 75,000
3
Committee Fees:
- Audit & Risk
$ 25,000
- Remuneration & Nomination
$ 15,000
- Sustainability, Safety, Health
and Environment
$ 15,000
plus statutory superannuation
9.25%
Aggregate
$480,700
1
1
1
$ 12,500
$ 7,500
$ 7,500
3
2
1
$ 25,000
$ 15,000
$ 15,000
1
1
1
$ 12,500
$ 7,500
$ 7,500
3
2
1
9.00%
$479,600
During periods where Mr Gallagher has acted in an executive role, he has stood down as a member of the Audit & Risk
Committee.
Remuneration of Directors and key management personnel
Short-term employee benefits
Post-
employment
benefits
Long-term
employee
benefits
Share-based
payment
Total
Salary &
fees
Short term
incentives 9
Non-
monetary
Superannu-
ation
Long Service
Leave
Performance
rights 10
2014
$
Non-Executive Directors
P Dempsey
S Wilks 1
D Page
127,500
111,981
107,500
Executives
L Mackender 3
B Gallagher 2
R Grant
M Saloyedoff 4
K Smith 5
D Hill 6
T Sinclair 7
C Orr 8
283,513
244,871
420,669
198,288
13,754
83,513
381,219
314,965
$
-
-
-
25,500
-
-
-
-
-
-
-
$
-
-
-
-
-
-
2,745
-
-
-
-
$
11,794
-
9,944
19,256
17,775
26,231
12,429
917
5,410
11,638
16,898
$
-
-
-
10,841
-
9,609
10,595
898
-
-
$
-
-
-
29,501
-
91,983
10,580
957
(13,299)
-
7,247
(22,062)
$
139,294
111,981
117,444
368,611
262,646
548,492
234,637
16,526
75,624
392,857
317,048
1. S Wilks’ remuneration is paid to High Expectations Pty Ltd, a company in which Mr Wilks has a beneficial interest.
2. B Gallagher was Managing Director to 6 November 2013, Non-Executive Director from 7 November 2013 until 25 May 2014 and Executive Director since
26 May 2014.
3. L Mackender was appointed Managing Director on 26 May 2014 and in addition performed the duties of Executive General Manager, Energy and Water
for the full year.
4. M Saloyedoff was appointed to the position of Executive General Manager, Mobile Communications on 18 October 2013.
5. K Smith was appointed to the position of Acting Executive General Manager, Fixed Communications on 12 June 2014.
6. D Hill held the position of Executive General Manager, Mobile Communications until 18 October 2013.
7. T Sinclair was appointed as Managing Director on 6 November 2013 and held this position until his resignation on 26 May 2014. Under the terms agreed
with Mr Sinclair, his employment will be terminated upon the expiry of his 6 months paid notice period on 18 November 2014. Mr Sinclair has agreed not
to work for a competitor of Service Stream for the duration of the notice period.
8. C Orr held the position of Executive General Manager, Fixed Communications until 12 June 2014.
9. Due to the failure of the Group to meet the required performance targets, there are no short term incentives payable for the year ended 30 June 2014.
The amounts included above represent variances between the 30 June 2013 estimation as included in the remuneration report for the year ended 30
June 2013 and the amount subsequently paid.
10.The fair value of performance rights issued under the Long Term Incentive Plan, allocated on a pro-rata basis to the current financial year. Where
previously disclosed rights have been subsequently forfeited due to resignation the relevant remuneration disclosure will be negative.
21
Short-term employee benefits
Post-
employment
benefits
Long-term
employee
benefits
Share-based
payment
Total
Salary &
fees
Short term
incentives 6
Non-
monetary
Superannu-
ation
Long Service
Leave
Performance
rights 7
Service Stream Limited
Directors’ report
2013
$
Non-Executive Directors
P Dempsey
S Wilks 1
D Page
127,500
111,725
107,500
Executives
B Gallagher 2
G Sumner 3
R Grant
D Hill
L Mackender
C Orr 4
S Ellich 5
152,298
552,251
417,392
270,642
262,530
28,143
319,376
$
-
-
-
-
-
-
-
(2,146)
-
24,311
$
-
-
-
-
38,471
-
-
6,698
374
46,875
$
11,475
-
9,675
13,334
40,198
25,695
24,358
16,470
1,721
23,342
$
-
-
-
-
13,485
8,355
14,577
12,152
656
9,104
$
-
-
-
-
(82,388)
60,923
18,228
18,610
3,907
(45,500)
$
138,975
111,725
117,175
165,632
562,017
512,365
327,805
314,314
34,801
377,508
1. S Wilks’ remuneration is paid to High Expectations Pty Ltd, a company in which Mr Wilks has a beneficial interest.
2. B Gallagher was a Non-Executive Director until 8 April 2013 at which time he become Managing Director.
3. G Sumner held the position of Managing Director until 8 April 2013 and left the employment of the Group on 1 July 2013. Due to Graeme's cessation of
employment his performance rights were forfeited, effective as at his date of resignation. Remuneration shown in the above table relates only to the period of
time which Graeme was considered to be key management personnel.
4. C Orr was appointed to the position of Executive General Manager, Fixed Communications on 28 May 2013. Remuneration shown in the above table relates
only to the period of time which Chad was considered to be key management personnel.
5. S Ellich held the position of Executive General Manager, Fixed Communications until 28 May 2013 and left the employment of the Group on 1 July 2013.
Due to Stephen's cessation of employment his performance rights were forfeited, effective as at his date of resignation. Remuneration shown in the above
table relates only to the period of time which Stephen was considered to be key management personnel.
6. Due to the failure of the Group to meet the required performance targets, there are no short term incentives payable for the year ended 30 June 2013. The
amounts included above represent variances between the 30 June 2012 estimation as included in the remuneration report for the year ended 30 June 2012
and the amount subsequently paid.
7. The fair value of performance rights issued under the Long Term Incentive Plan, allocated on a pro-rata basis to the current financial year. Where previously
disclosed rights have been subsequently forfeited due to resignation the relevant remuneration disclosure will be negative.
No Director or member of the key management personnel who were appointed during the period received a payment as
part of his or her consideration for agreeing to hold the position.
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Non-Executive Directors
Fixed Remuneration
At risk - STI
At risk - LTI
2014
2013
2014
2013
2014
2013
P Dempsey
S Wilks
D Page
Executives
L Mackender
B Gallagher
R Grant
M Saloyedoff
K Smith
D Hill
T Sinclair
C Orr
100.0%
100.0%
100.0%
64.5%
100.0%
50.0%
64.5%
66.7%
64.5%
80.0%
57.1%
100.0%
100.0%
100.0%
64.5%
100.0%
50.0%
64.5%
66.7%
64.5%
80.0%
57.1%
0.0%
0.0%
0.0%
19.4%
0.0%
25.0%
19.4%
20.0%
19.4%
0.0%
28.6%
0.0%
0.0%
0.0%
19.4%
0.0%
25.0%
19.4%
20.0%
19.4%
0.0%
28.6%
0.0%
0.0%
0.0%
16.1%
0.0%
25.0%
16.1%
13.3%
16.1%
20.0%
14.3%
0.0%
0.0%
0.0%
16.1%
0.0%
25.0%
16.1%
13.3%
16.1%
20.0%
14.3%
22
Service Stream Limited
Directors’ report
Voting and comments made at the Company’s 2013 Annual General Meeting
The Company received more than 96% of “yes” votes on its Remuneration Report for the 2013 financial year. The
Company did not receive any specific feedback at the AGM on its remuneration practices.
Key terms of employment contracts
Employment contracts for key management personnel provide for the following elements:
Fixed remuneration including base salary and superannuation.
•
• Payment of a short term bonus if and to the extent that the criteria for Company wide targets are met and personal goals
are achieved.
• Mutual three month notice period for termination of service, with the exception of Mr Leigh Mackender and Mr Robert
Grant where there is a mutual six month notice period for termination.
Robert Grant
Robert Grant’s contract specifies his eligibility to be invited to participate in the LTIP.
Brett Gallagher
In addition to his directors fees, Brett Gallagher has received a higher duties allowance for the period in which he held the
position of either Managing or Executive Director. During this period, Brett does not accrue entitlements such as annual
leave, sick leave and long service leave and during planned absences the higher duties allowance does not apply.
Furthermore, Brett is ineligible to participate in either the STIP or LTIP schemes.
Share-based payments granted as compensation
Long Term Incentive Plan (“LTIP”)
The Group operates a LTIP whereby employees in senior management roles are granted performance rights subject to
service and performance criteria. As at balance date, the following LTIP arrangements were in existence:
LTIP Series
Num ber
Grant date
Grant date fair value
Vesting date Perform ance
period start
date
FY12 tranche
1,071,819
25 November 2011 Relative TSR hurdle - $0.160 30 June 2014
1 July 2011
EPS grow th hurdle - $0.250
FY13 tranche
1,836,210
30 November 2012 Relative TSR hurdle - $0.190 30 June 2015
1 July 2012
FY14 tranche 1
4,722,515
31 July 2014
Relative TSR hurdle - $0.101 30 June 2016
1 July 2013
EPS grow th hurdle - $0.290
EPS hurdle - $0.154
1. As the grant date for the FY14 Tranche is 31 July 2014, the grant date fair values for this Tranche have been estimated for the purposes of year-end
reporting.
Remuneration outcomes
The achievement of the EPS and TSR targets are measured each year and performance rights can vest if the targets are
met in any individual year. Performance is also measured over the 3 year period.
The FY12 Tranche LTIP vested at the conclusion of the current financial year (vesting date: 30 June 2014). The table
below details the vesting of the performance rights under this tranche. On vesting, each right converts to one ordinary
share in Service Stream Limited.
FY12 Tranche
EPS growth hurdle (base 5.80 cps)
Relative TSR hurdle
Year 1
Year 2
Year 3
Three-year Period
Outcome
Vested
13.9%
n/a
n/a
n/a
Yes
No
No
No
Outcome
4th Quartile
4th Quartile
TBA
TBA
Vested
No
No
TBA1
TBA1
1. Measurement of the Relative TSR for Year 3 and the three-year period will not be completed until after the release of FY14 results.
The FY11 Tranche LTIP vested on 30 June 2013. The table below details the vesting of the performance rights under this
tranche.
23
FY11 Tranche
EPS growth hurdle (base 3.85 cps)
Relative TSR hurdle
Year 1
Year 2
Year 3
Three-year Period
Outcome
Vested
50.8%
13.8%
n/a
n/a
Yes
Yes
No
No
Outcome
1st Quartile
4th Quartile
4th Quartile
4th Quartile
Vested
Yes
No
No
No
Service Stream Limited
Directors’ report
The following table outlines:
•
•
the performance rights issued under the LTIP to Directors and key management personnel in the current financial year,
and
for each cash bonus and grant of performance rights included in the tables on pages 21-24, the percentage of the
available bonus or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited
because either the service or performance criteria was not met.
Name
STIP
L Mackender 2
Awarded
%4
0%
R Grant 2
0%
M Saloyedoff
0%
K Smith
0%
D Hill
T Sinclair 3
C Orr
0%
n/a
0%
Tranche
Vesting date
FY11
FY12
FY13
FY14
FY11
FY12
FY13
FY14
FY11
FY12
FY13
FY14
FY11
FY12
FY13
FY14
FY11
FY12
FY13
FY14
FY11
FY12
FY13
FY14
FY11
FY12
FY13
FY14
30-Jun-13
30-Jun-14
30-Jun-15
30-Jun-16
30-Jun-13
30-Jun-14
30-Jun-15
30-Jun-16
30-Jun-13
30-Jun-14
30-Jun-15
30-Jun-16
30-Jun-13
30-Jun-14
30-Jun-15
30-Jun-16
30-Jun-13
30-Jun-14
30-Jun-15
30-Jun-16
30-Jun-13
30-Jun-14
30-Jun-15
30-Jun-16
30-Jun-13
30-Jun-14
30-Jun-15
30-Jun-16
No.
Granted
82,006
133,577
164,438
430,556
626,959
430,063
522,297
1,241,389
-
-
102,690
409,722
97,806
89,453
104,047
245,720
87,789
82,035
173,868
n/a
n/a
n/a
n/a
4,500,000
256,270
175,788
205,458
n/a
LTIP
No.
Vested 1
41,003
-
-
-
313,480
-
-
-
-
-
-
-
48,903
-
-
-
43,895
-
-
-
-
-
-
-
128,135
-
-
-
No.
Forfeited
41,003
-
-
-
313,480
-
-
-
-
-
-
-
48,903
-
-
-
43,895
82,035
173,868
-
-
-
-
4,500,000
128,135
175,788
205,458
-
Balance
held
-
133,577
164,438
430,556
-
430,063
522,297
1,241,389
-
-
102,690
409,722
-
89,453
104,047
245,720
-
-
-
-
-
-
-
-
-
-
-
-
Vested % Forfeited
50.0%
0.0%
0.0%
0.0%
50.0%
0.0%
0.0%
0.0%
n/a
n/a
0.0%
0.0%
50.0%
0.0%
0.0%
0.0%
50.0%
0.0%
0.0%
n/a
n/a
n/a
n/a
0.0%
50.0%
0.0%
0.0%
n/a
%
50.0%
0.0%
0.0%
0.0%
50.0%
0.0%
0.0%
0.0%
n/a
n/a
0.0%
0.0%
50.0%
0.0%
0.0%
0.0%
50.0%
100.0%
100.0%
n/a
n/a
n/a
n/a
100.0%
50.0%
100.0%
100.0%
n/a
1. Although the vesting date of the FY12 Tranche is 30 June 2014, the number of rights that will vest cannot be determined until the release of the results, and
the determination of the achievement or otherwise of the TSR hurdle.
2. As L Mackender and R Grant are Directors of the Company, the issuance of the FY14 Tranche performance rights are subject to shareholder approval at the
Company’s Annual General Meeting on 22 October 2014.
3. Shareholder approval would have been required had T Sinclair not resigned and rights had not been forfeited.
4. Awarded as a percentage of maximum eligibility.
24
The Directors’ report is signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the
Corporations Act 2001.
Service Stream Limited
Directors’ report
On behalf of the Directors
P Dempsey
Chairman
13 August 2014
L Mackender
Managing Director
13 August 2014
25
Auditor’s Independence Declaration
As lead auditor for the audit of Service Stream Limited for the year ended 30 June 2014, I declare that
to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Service Stream Limited and the entities it controlled during the period.
Andrew Cronin
Partner
PricewaterhouseCoopers
Melbourne
13 August 2014
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Independent auditor’s report to the members of Service
Stream Limited
Report on the financial report
We have audited the accompanying financial report of Service Stream Limited (the company), which
comprises the balance sheet as at 30 June 2014, the statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year ended on that date, a summary of significant
accounting policies, other explanatory notes and the directors’ declaration for the Service Stream
Limited group (the consolidated entity). The consolidated entity comprises the company and the
entities it controlled at year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 33, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
.
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Auditor’s opinion
In our opinion:
(a)
the financial report of Service Stream Limited is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at 30 June
2014 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(b)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 33.
Report on the Remuneration Report
We have audited the remuneration report included in pages 16 to 24 of the directors’ report for the
year ended 30 June 2014. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Service Stream Limited for the year ended 30 June 2014
complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Andrew Cronin
Partner
Melbourne
13 August 2014
Service Stream Limited
Directors’ declaration
Directors’ declaration
In the directors’ opinion:
(a)
the financial statements and notes thereto are in accordance with the Corporations Act 2001, including:
i.
ii.
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its
performance for the financial year ended on that date, and
(b)
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable;
at the date of this declaration, there are reasonable grounds to believe that the members of the extended
closed Group identified in note 22 will be able to meet any obligations or liabilities to which they are, or may
become, subject by virtue of the deed of cross guarantee described in note 23.
Note 33 confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The directors have been given the declarations by the chief executive officer and chief financial officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
P Dempsey
Chairman
13 August 2014
L Mackender
Managing Director
13 August 2014
29
Service Stream Limited
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
for the financial year ended 30 June 2014
Revenue from continuing operations
Revenue from the rendering of services
Other income
Expenses
Employee salaries and benefits
Subcontractor fees
Site and construction costs
Raw materials and consumables used
Consulting and temporary staff fees
Company administration and insurance expenses
Occupancy expenses
Technology and communication services
Motor vehicle expenses
Other expenses
Loss on onerous contracts
Write back of currency translation differences
Share of losses of investment in associate
Depreciation and amortisation
Goodwill impairment
Interest expense and other finance costs
Profit / (loss) before tax
Income tax (expense) / benefit
Profit / (loss) for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translating foreign investment
Cash flow hedges
Total comprehensive income for the year
Note
3A
3B
5.1
11
4
6
2014
$’000
2013
$’000
388,735
839
526,600
(7)
389,574
526,593
(123,128)
(92,052)
(88,461)
(33,936)
(4,984)
(5,134)
(8,241)
(7,375)
(8,938)
(448)
-
-
-
(8,996)
-
(5,283)
(163,222)
(153,083)
(91,752)
(57,980)
(12,065)
(11,305)
(10,702)
(7,852)
(10,768)
(6,167)
(12,824)
(576)
(48)
(8,345)
(89,800)
(3,685)
2,598
(289)
(113,581)
6,527
2,309
(107,054)
-
181
576
(203)
2,490
(106,681)
Profit / (loss) attributable to the equity holders of the parent
2,309
(107,054)
Total comprehensive income attributable to equity holders of the parent
2,490
(106,681)
Earnings per share
Basic (cents per share)
Diluted (cents per share)
18
18
0.76
0.75
(37.77)
(37.77)
Notes to the financial statements are included on pages 34 to 71
30
Consolidated balance sheet as at 30 June 2014
Service Stream Limited
Consolidated statement of changes in equity
Note
2014
$’000
2013
$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Accrued revenue
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Derivatives
Provisions
Other
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Deferred tax liability
Other
Derivatives
Total non-current liabilities
Total liabilities
Net assets
Equity
Capital and reserves
Issued Capital
Reserves
Retained earnings/ (accumulated losses)
Total equity
Notes to the financial statements are included on pages 34 to 71
24.1
7
9
12
10
11
13
14
25.2
15
16
13
15
6.2
16
25.2
17
6,590
38,753
6,891
71,606
1,976
13,398
61,617
17,545
88,338
5,258
125,816
186,156
10,738
120,637
131,375
15,291
123,869
139,160
257,191
325,316
43,146
16,556
39
6,740
1,024
67,505
-
2,745
3,385
3,921
-
69,824
65,231
-
10,483
1,339
146,877
9,500
2,731
4,177
4,094
203
10,051
20,705
77,556
167,582
179,635
157,734
247,647
2,888
(70,900)
228,416
2,527
(73,209)
179,635
157,734
31
Service Stream Limited
Consolidated statement of changes in equity
Consolidated statement of changes in equity
for the financial year ended 30 June 2014
Note
Share
capital
Employee
equity-
settled
benefits
reserve
Hedging
reserve
Foreign
currency
translation
reserve
Retained
earnings /
(accumulat
ed losses)
Total
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2012
228,416
3,008
Loss for the period
Write back of currency translation reserve
on sale of investment
Other comprehensive income
Total comprehensive income for the
year
Equity settled share based payment
Dividends paid
19
-
-
-
-
-
-
(278)
-
-
-
-
-
-
(636)
39,573
270,361
-
636
(107,054)
(60)
(107,054)
576
(203)
-
-
(203)
(203)
636
(107,114)
(106,681)
-
-
-
-
Balance at 30 June 2013
228,416
2,730
(203)
Profit for the period
Other comprehensive income
Total comprehensive income for the
year
-
-
-
-
-
-
Contributions of equity
Equity settled share based payment
17
19,231
-
-
180
-
181
181
-
-
Balance at 30 June 2014
247,647
2,910
(22)
Notes to the financial statements are included on pages 34 to 71.
-
-
-
-
-
-
-
-
-
-
(5,668)
(278)
(5,668)
(73,209)
157,734
2,309
-
2,309
2,309
181
2,490
-
-
19,231
180
(70,900)
179,635
32
Service Stream Limited
Consolidated statement of cash flows
Consolidated statement of cash flows
for the financial year ended 30 June 2014
Cash flows from operating activities
Receipts from customers (including GST)
Payments to suppliers and employees (including GST)
Cash generated from / (used in) operations before interest and tax
Interest received
Interest and other finance costs paid
Income taxes paid / (refunded)
Note
2014
$’000
2013
$’000
483,892
(453,580)
598,987
(605,531)
30,312
317
(5,775)
-
(6,544)
1,394
(3,655)
11,991
Net cash provided by operating activities
24.2
24,854
3,186
Cash flows from investing activities
Payments for plant and equipment
Proceeds from sale of plant and equipment
Payment for intangible assets
Proceeds from sale of investment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of shares
Proceeds from borrowings
Repayment of borrowings
Dividends paid
(969)
522
(1,682)
-
(10,821)
175
(5,317)
282
(2,129)
(15,681)
18,881
-
(43,444)
-
-
42,327
(36,652)
(5,668)
Net cash (used) / provided by financing activities
(24,563)
7
Net decrease in cash and cash equivalents
(1,838)
(12,488)
Cash and cash equivalents at the beginning of the financial year
8,428
20,916
Cash and cash equivalents at the end of the financial year
24.1
6,590
8,428
Notes to the financial statements are included on pages 34 to 71.
33
Service Stream Limited
Notes to the financial statements
Notes to the financial statements
for the financial year ended 30 June 2014
1. General information
Service Stream Limited (“the Company”) is a limited company incorporated in Australia and listed on the
Australian Securities Exchange (ASX: SSM).
Service Stream Limited’s registered office and its principal place of business are as follows:
Level 4, 357 Collins Street
Melbourne, Victoria 3000
The principal activities of the Company and its subsidiaries (“the Group”) are described in note 2.
2. Segment information
2.1 Products and services from which reportable segments derive their revenues
The Group has identified its segments based on the internal reports that are used and reviewed by the chief
operating decision maker in assessing performance and determining the allocation of resources.
The Group’s operating segments are determined based on the nature of the business activities undertaken by
the Group. Unallocated costs include the costs of certain head office functions that are not considered
appropriate to be allocated to the Group’s operating businesses.
Due to the previously reported operational issues within Fixed Communications, a review was undertaken of
the activities performed by this segment. Based on the outcome of this review the decision was made to
transfer all non-NBN related activities
the Mobile
Communications segment. The relevant prior period comparatives reflect these transfers.
the Fixed Communications segment
from
to
The principal products and services of each of these segments are as follows:
Fixed Communications
Mobile Communications
Fixed Communications provides a wide range of design, construction,
maintenance and customer connection services to the owners of
telecommunications network infrastructure and to telecommunications
retail service providers in connection with the roll-out of the National
Broadband Network in Australia.
Mobile Communications provides program management and turnkey
services for infrastructure projects across Australia, principally in the
telecommunications sector. Service capability covers site acquisition,
town planning, design, and management of construction projects
requiring specialist skill sets
line
telecommunications, signalling and power.
in wireless and
fixed
Energy & Water
Energy & Water provides a range of specialist metering and
environmental services to utilities and government authorities across
Australia; and through the Customer Care business, provides contact
centre services and end-to-end customer support for key contracts.
The accounting policies of the reportable segments are the same as the Group’s accounting policies.
Information regarding these segments is presented below:
34
2. Segment information (continued)
2.2 Segment revenues and results
Fixed Communications1
Mobile Communications1
Energy & Water
Total of all segments
Eliminations
Investment in associate2
Unallocated
Earnings before interest, tax, depreciation and
amortisation
Net interest received/(paid)
Depreciation/Amortisation
Goodwill impairment
Total revenue
Profit / (loss) before income tax expense
Income tax expense
Profit / (loss) for the period
Service Stream Limited
Notes to the financial statements
Segment revenue
Segment result
2014
$’000
2013
$’000
98,400
136,020
166,899
215,846
2014
$’000
2013
$’000
2,386
7,736
(22,969)
953
124,223
174,158
11,192
14,276
389,522
526,024
21,314
(7,740)
(840)
(825)
575
317
1,394
389,574
526,593
-
-
-
(576)
(4,754)
(5,076)
16,560
(13,392)
(4,966)
(8,996)
(2,044)
(8,345)
-
(89,800)
2,598
(113,581)
(289)
6,527
2,309
(107,054)
1. In accordance with AASB 8 Operating Segments, the segment result of the previous financial year have been restated by transferring revenue
of $91,118,000 and EBITDA of $9,001,000 loss from Fixed Communication to Mobile Communications to reflect the changes in the operational
structure.
2. The investment in Total Communications Infrastructure (Singapore) Pte Ltd was sold during the prior reporting period. Upon sale, the
cumulative amount of the exchange differences relating to this investment has been reclassified from equity to profit and loss.
2.3 Segment assets and liabilities
Fixed Communications
Mobile Communications
Energy & Water
Total of all segments
Unallocated
Consolidated
Segment assets
Segment liabilities
2014
$’000
2013
$’000
69,692
113,116
111,265
112,610
57,678
75,200
238,635
300,926
18,556
24,390
2014
$’000
2013
$’000
12,051
26,523
10,721
49,295
28,261
51,506
20,558
15,708
87,772
79,810
257,191
325,316
77,556
167,582
35
2. Segment information (continued)
2.4 Other segment information
Fixed Communications
Mobile Communications
Energy & Water
Total of all segments
Unallocated
Consolidated
Service Stream Limited
Notes to the financial statements
Depreciation and
amortisation
Additions to non-
current assets
2014
$’000
2013
$’000
2014
$’000
2013
$’000
1,253
1,607
2,169
5,029
3,967
8,996
1,563
1,624
2,778
5,965
2,380
8,345
479
95
111
685
1,378
2,063
3,325
1,197
871
5,393
10,366
15,759
2.5 Information about major customers
In the current reporting period there were two customers (2013: three customers) which each contributed more
than 10% of the Group’s revenue. The relevant revenue by segment is shown below:
Largest customer
2014: Fixed and Mobile Communications $144.4 million (2013: Fixed and
Mobile Communications $198.5 million).
Second largest customer
2014: Fixed Communications $80.7 million (2013: Energy & Water $65.2
million).
Third largest customer
2014: nil (2013: Fixed Communications $59.7 million).
No other single customer contributed 10% or more of the Group’s total revenue in 2014 and 2013.
3A Revenue
Revenue from the rendering of services
Interest revenue
3B Other income
Gain/(loss) on disposal of plant, equipment and intangible assets
R&D tax incentives
4. Finance costs
Interest on bank overdrafts and loans
Interest on obligations under finance leases
Other interest expense
Total interest expense
Facility costs
Interest expense and other finance costs
2014
$’000
2013
$’000
388,418
317
525,206
1,394
388,735
526,600
264
575
839
2,036
5
1,583
3,624
1,659
5,283
(7)
-
(7)
2,341
45
1,052
3,438
247
3,685
36
5. Other expense items
5.1 Depreciation and amortisation expense
Depreciation of non current assets
Amortisation of intangible assets
5.2 Operating lease rental expenses
Minimum lease payments
5.3 Employee benefit expense
Post employment benefits: Defined contribution plans
Equity settled share-based payments
6.
Income taxes
6.1 Income tax recognised in profit or loss
Tax expense comprises:
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the tax of prior years
Deferred tax expense/(income) relating to the origination and
reversal of temporary differences
Total tax expense relating to continuing operations
The tax expense for the year can be reconciled to accounting profit as follows:
Profit from continuing activities
Income tax expense calculated at 30%
Effect of expenses that are not deductible in determining taxable profit:
Goodwill impairment
R&D rebates
Other
Adjustments recognised in the current year in relation to the tax of prior years
Service Stream Limited
Notes to the financial statements
2014
$’000
2013
$’000
4,865
4,131
8,996
6,447
6,447
9,064
180
9,244
4,502
3,843
8,345
5,178
5,178
11,358
(278)
11,080
2014
$’000
2013
$’000
(1,285)
(1,510)
(337)
175
(1,622)
(1,335)
1,911
1,911
289
(5,192)
(5,192)
(6,527)
2,598
(113,581)
779
(34,074)
-
(173)
20
26,940
-
432
626
(6,702)
(337)
175
289
(6,527)
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate
entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when
compared with the previous reporting period.
37
6.
Income taxes (continued)
6.2 Deferred tax balances
Deferred tax balances expected to be recovered within 12 months
Deferred tax balances expected to be recovered after more than 12 months
Deferred tax balances arise from the following:
Service Stream Limited
Notes to the financial statements
2014
$’000
2013
$’000
1,946
(5,331)
(3,385)
7,534
(11,711)
(4,177)
Opening
balance
Charged to
income
Timing
difference
related to
prior
periods
Carried
forward
losses
Charged
to equity
Closing
balance
2014
$’000
$’000
$’000
$’000
$’000
$’000
Temporary differences
Tax Losses
Trade and other receivables
Accrued revenue
Trade, other payables and provisions
Share issue costs
Employee Benefits
Property, plant and equipment
Other
6,318
38
(23,025)
7,496
324
4,045
(832)
1,459
(4,177)
-
4,837
1,500
152
1,428
(335)
(284)
(747)
454
(2,579)
(1,911)
-
1,041
(5,405)
-
-
(895)
1,276
854
-
-
-
-
349
-
-
-
12,655
190
(20,556)
1,756
389
3,298
(1,273)
156
-
-
-
-
-
-
-
1,500
349
(3,385)
Deferred tax balances are presented in the statement of financial position as follows:
Deferred tax liability
(3,385)
(3,385)
Opening
balance
Charged to
income
Timing
difference
related to
prior
periods
Carried
forward
losses
Charged
to equity
Closing
balance
2013
$’000
$’000
$’000
$’000
$’000
$’000
Temporary differences
Tax Losses
Trade and other receivables
Accrued revenue
Trade, other payables and provisions
Share issue costs
Employee Benefits
Property, plant and equipment
Other
-
27
(2,106)
3,440
199
4,699
(82)
-
6,177
-
11
(279)
3,394
125
314
168
1,459
4,808
-
(20,640)
662
-
(968)
(918)
-
1,510
-
-
-
-
-
-
-
5,192
(17,056)
1,510
-
-
-
-
-
-
-
-
-
Deferred tax balances are presented in the statement of financial position as follows:
Deferred tax liability
Deferred tax assets and liabilities have been set off by the Company.
6,318
38
(23,025)
7,496
324
4,045
(832)
1,459
(4,177)
(4,177)
(4,177)
38
Service Stream Limited
Notes to the financial statements
6.
Income taxes (continued)
6.3 Tax consolidation
Relevance of tax consolidation to the Group
The Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under
Australian taxation law. Service Stream Limited is the head entity in the tax-consolidated group. The members of
the tax-consolidated group are identified in note 22. A tax funding arrangement and a tax sharing agreement has
been entered into between the entities. As such a notional current and deferred tax calculation for each entity as
if it were a taxpayer in its own right (except that unrealised profits, distributions made and received and capital
gains and losses and similar items arising on transactions within the tax-consolidated group are treated as
having no tax consequences) has been performed. 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 (as head entity in the tax consolidated group).
Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing
agreement with the head entity. Under the terms of the tax funding arrangement, Service Stream Limited and
each of the other entities in the tax-consolidated group has agreed to pay or receive a tax-equivalent payment to
or from the head entity, based on the current tax liability or current tax asset of the entity.
7. Current trade and other receivables
Trade receivables
Allowance for doubtful debts
Other
2014
$’000
2013
$’000
36,205
(640)
35,565
3,188
38,753
60,626
(132)
60,494
1,123
61,617
The ageing of trade receivables as at 30 June 2014 and 30 June 2013 respectively are detailed below:
Not past due
Past due 0–30 days
Past due 31–60 days
Past due 61–90 days
Past 90 days
2014
2013
Gross
$’000
Allowance
$’000
Gross
$’000
Allowance
$’000
28,377
5,826
646
402
954
36,205
-
-
-
-
(640)
(640)
46,054
12,036
1,287
109
1,140
60,626
-
-
-
-
(132)
(132)
The movement in the allowance for doubtful debts in respect of trade receivables is detailed below:
Balance at the beginning of the year
Impairment losses recognised on receivables
Amounts written-off during the year as uncollectible
Balance at the end of the year
2014
$’000
2013
$’000
(132)
(577)
69
(640)
(91)
(80)
39
(132)
39
Service Stream Limited
Notes to the financial statements
7. Current trade and other receivables (continued)
All new customers are subject to credit checks using external credit reporting agency information to ascertain
their risk profile against both internal and industry benchmarks and are used in determination of appropriate
credit limits. Standard payment terms on sale of goods and services is 30 days from date of invoice.
Included in the Group’s trade receivables balance was debtors with a carrying amount of $7.2 million (2013:
$14.4 million) which were past due dates as at reporting date. Based on the credit history of these trade
receivables, they are considered recoverable.
Approximately 90% of the Group receivables balance is held with high credit worthy listed companies,
commonwealth agencies, state utilities or multinational companies. Of the trade receivables balance at reporting
date; $15 million (2013: $22 million) was due from Telstra Corporation Ltd, $4 million (2013: $2 million) from NBN
Co Ltd, $2 million (2013: $5 million) from Jemena Asset Management Pty Ltd, $2 million (2013: $4 million) from
Vodafone Hutchison Australia Pty Ltd, $3 million from Origin Energy Ltd (2013: $4 million) and $2 million (2013:
$1 million) from Western Power.
8. Joint operations
The Syntheo Joint Venture (“Syntheo”) is an unincorporated joint venture entity between Service Stream Limited
and Lend Lease Project Management & Construction (Australia) Pty Ltd (the “Parties”) established in January
2011 for the purposes of undertaking certain works for NBN Co Limited (“NBN Co”).
In July 2013, the Parties executed a variation to the Syntheo Joint Venture Agreement under which Lend Lease
would assume control of Syntheo and the Parties agreed that Service Stream’s share of any losses incurred by
the joint venture shall be $19.5 million. These losses were brought to account during the previous financial year
and all liabilities relating to the Syntheo Joint Venture have since been extinguished. As there is no longer joint
control of this arrangement, it is no longer appropriate to account for the Syntheo Joint Venture using
proportionate consolidation.
Financial position:
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Financial performance:
Income
Expenses
Profit/(loss) for the year
2014
$’000
2013
$’000
-
-
-
-
-
-
-
-
-
11,341
586
11,927
31,427
31,427
(19,500)
26,741
(46,597)
(19,856)
40
9. Accrued revenue
Accrued revenue
Service Stream Limited
Notes to the financial statements
2014
$’000
2013
$’000
71,606
71,606
88,338
88,338
The accrued revenue balance of $71.6 million (2013: $88.3 million) represents revenue which has yet to be
invoiced to customers at year-end, due to either the invoicing process not being finalised or work not yet reaching
a stage where it can be invoiced. Many of the Group’s customers require payment claims to be submitted and
approved prior to invoices being issued. Although this extends the time revenue is held as accrued, historically it
does result in high level of recoverability of trade debtors. Where work has not yet reached a stage where it can
be invoiced, revenue is accrued in line with the Group’s accounting policies as outlined at notes 33.7 revenue
recognition and 33.8 construction contracts.
10. Plant and equipment
Leasehold
improve-
ments at
cost
Plant and
equipment
at cost
Equipment
under
finance
lease at
cost
Motor
Vehicles at
cost
Total
Motor
Vehicles
under
finance
lease at
cost
$’000
$’000
$’000
$’000
$’000
$’000
Gross carrying amount
Balance at 1 July 2012
Additions
Transfers 1
Disposals
Balance at 1 July 2013
Additions
Derecognised 2
Disposals
6,611
5,293
(78)
(477)
11,349
424
(203)
(6)
16,664
4,592
1,049
(548)
21,757
347
(37)
(894)
Balance at 30 June 2014
11,564
21,173
Accumulated depreciation
Balance at 1 July 2012
Transfers 1
Disposals
Depreciation expense
Balance at 1 July 2013
Transfers 1
Derecognised 2
Disposals
Depreciation expense
(4,449)
(34)
454
(925)
(4,954)
-
21
8
(1,335)
(11,287)
(238)
436
(2,780)
(13,869)
(30)
2
721
(3,087)
Balance at 30 June 2014
(6,260)
(16,263)
Net book value
As at 30 June 2013
As at 30 June 2014
6,395
5,304
7,888
4,910
683
-
(683)
-
-
-
-
-
-
(238)
238
-
-
-
-
-
-
-
-
-
-
4,787
151
2,407
(640)
6,705
17
-
(1,374)
5,348
(4,223)
(1,269)
592
(797)
(5,697)
30
-
1,286
(443)
(4,824)
1,008
524
2,773
-
(2,773)
-
-
-
-
-
-
(1,269)
1,269
-
-
-
-
-
-
-
-
-
-
31,518
10,036
(78)
(1,665)
39,811
788
(240)
(2,274)
38,085
(21,466)
(34)
1,482
(4,502)
(24,520)
-
23
2,015
(4,865)
(27,347)
15,291
10,738
1. Transfers between categories primarily relate to the reclassification of assets no longer held under finance lease arrangements.
2. In light of the variation executed to the Syntheo Joint Venture Agreement in July 2013, Service Stream has derecognised the cost and
accumulated depreciation of Syntheo related assets effective as at the signing date of the agreement.
41
11.
Intangible Assets
Gross carrying amount
Balance at 1 July 2012
Additions
Transfers 1
Balance at 1 July 2013
Additions
Transfers 1
Disposals
Derecognised 2
Balance at 30 June 2014
Accumulated amortisation
Balance at 1 July 2012
Transfers 1
Goodwill impairment
Amortisation expense
Balance at 1 July 2013
Derecognised 2
Transfers 1
Amortisation expense
Balance at 30 June 2014
Net book value
As at 30 June 2013
As at 30 June 2014
Service Stream Limited
Notes to the financial statements
Software
Software
under finance
lease
Goodwill
Total
$’000
$’000
$’000
$’000
11,628
5,723
78
17,429
1,275
2,649
(7)
(423)
20,923
(6,374)
(312)
-
(2,960)
(9,646)
54
(2,584)
(3,672)
2,649
-
-
2,649
-
(2,649)
-
-
205,362
-
-
205,362
-
-
-
-
219,639
5,723
78
225,440
1,275
-
(7)
(423)
-
205,362
226,285
(1,588)
346
-
(883)
(2,125)
-
2,584
(459)
-
-
(89,800)
-
(89,800)
-
-
-
(7,962)
34
(89,800)
(3,843)
(101,571)
54
-
(4,131)
(15,848)
-
(89,800)
(105,648)
7,783
5,075
524
-
115,562
115,562
123,869
120,637
1. Transfers between categories primarily relate to the reclassification of assets no longer held under finance lease arrangements.
2. In light of the variation executed to the Syntheo Joint Venture Agreement in July 2013, Service Stream has derecognised the cost and
accumulated amortisation of Syntheo related assets effective as at the signing date of the agreement.
(a)
Impairment tests for goodwill
Goodwill is monitored by management at the reportable segment level. Management is committed to
ensuring that any changes in its operating environment are assessed in a prudent and timely manner.
For the purpose of impairment testing, goodwill is allocated as follows:
•
Fixed Communications – provides a wide range of design, construction, maintenance and customer
to
connection services
telecommunications retail service providers in connection with the roll-out of the National Broadband
Network in Australia – $18.0 million1 (2013: $27.7 million).
telecommunications network
infrastructure and
the owners of
to
• Mobile Communications – provides program management and turnkey services for infrastructure
projects across Australia, principally in the telecommunications sector. Service capability covers site
acquisition, town planning, design, and management of construction projects requiring specialist skill
sets in wireless and fixed line telecommunications, signalling and power – $55.6 million1 (2013: $45.9
million).
• Energy and Water – provides a range of specialist metering and environmental services to utilities
and government authorities across Australia; and through the Customer Care business, provides
contact centre services and end-to-end customer support for key contracts – $42.0 million (2013:
$42.0 million).
1. As at 1 July 2013, the following businesses changed reporting lines, from Fixed Communications to Mobile Communications: Telstra
Minor Works, Recoverable Works and SEQUD. The carrying amounts of goodwill shown above for Fixed Communications and Mobile
Communications reflect this, with $9.7m of goodwill transferred from Fixed to Mobile.
42
Service Stream Limited
Notes to the financial statements
11.
Intangible assets (continued)
(b) Key assumptions used for value-in-use calculations
The recoverable amount of the cash-generating units is determined based on a value-in-use calculation
which uses cash flow projections based on financial budgets and long-term strategic plans approved by the
Board. These forecasts are based on a combination of historical performance combined with
management’s expectations of future performance based on prevailing and anticipated market factors.
Cash flows beyond the five-year period have been extrapolated using a 0% per annum real growth rate. A
pre-tax discount rate of 14.1% (2013: 16.4%) has been applied in order to discount expected future cash
flows into present-day values.
(c)
Impact of possible changes in key assumptions
Fixed Communications
The recoverable amount of the Fixed Communications CGU is estimated to be $96.0m (2013: $74.9m).
This exceeds the carrying amount of the CGU by $38.1m (2013: $0.0m).
If the cash flows used in the value-in-use calculations of the Fixed Communications CGU had been 39.1%
lower than management’s estimates, the recoverable amount of the CGU would equal its carrying amount.
Mobile Communications
The recoverable amount of the Mobile Communications CGU is estimated to be $102.6m (2013: $101.9m).
This exceeds the carrying amount of the CGU by $14.7m (2013: $19.8m).
If the pre-tax discount rate applied to the cash flow projections of the Mobile Communications CGU was
16.4% instead of 14.1%, the recoverable amount of the CGU would equal its carrying amount. If the cash
flows used in the value-in-use calculations of the Mobile Communications CGU had been 14.3% lower than
management’s estimates, the recoverable amount of the CGU would equal its carrying amount.
Energy and Water
The recoverable amount of the Energy and Water CGU is estimated to be $63.1m (2013: $73.3m). This
exceeds the carrying amount of the CGU by $15.4m (2013: $12.3m).
If the cash flows used in the value-in-use calculations of the Energy and Water CGU had been 24.4%
lower than management’s estimates, the recoverable amount of the CGU would equal its carrying amount.
12. Other assets
Current
Work in progress
Prepayments
Other
2014
$’000
2013
$’000
263
1,314
399
1,976
2,584
2,498
176
5,258
43
13. Trade and other payables
Current
Trade creditors1
Sundry creditors and accruals
Goods and services tax payable
Income in advance
Non-current
Sundry creditors and accruals
Service Stream Limited
Notes to the financial statements
2014
$’000
2013
$’000
16,696
22,222
1,707
2,521
43,146
21,182
38,988
1,858
7,796
69,824
-
-
9,500
9,500
1. Typically no interest is charged by trade creditors for the first 30 days from the date of the invoice. The Group has financial risk management
policies in place to ensure that all payables are paid within the credit timeframe.
14. Borrowings
Current
Bank overdrafts
Cash Advance
Finance lease liabilities (note 20.2)
Transaction costs
2014
$’000
2013
$’000
-
17,000
-
(444)
16,556
4,970
60,000
444
(183)
65,231
A fixed and floating mortgage charge exists over all assets and uncalled capital of the Group as security for all
borrowings under its various bank debt and finance facilities
Since balance date, the Group has received credit-approved term sheets from a number of banking institutions
for a refinance of its banking facilities to 30 September 2016. The Board and Management are in the final stages
of assessing the offers and finalising documentation.
44
15. Provisions
Current
Employee benefits1
Warranty provision2
Non-current
Employee benefits1
Service Stream Limited
Notes to the financial statements
2014
$’000
2013
$’000
6,481
259
6,740
2,745
2,745
9,703
780
10,483
2,731
2,731
9,485
13,214
1. The provision for employee benefits represents annual leave and long service leave entitlements.
2. The provision for warranty claims represents the present value of the best estimate of the future outflow of economic benefits that will be
required under the Group’s obligation for warranties.
The movement in each class of provision during the financial year, other than employee benefits, is set out
below:
2014
Carrying amount at start of year
Charged / (credited) to profit or loss
Additional provisions recognised
Unused amounts reversed
Carrying amount at end of year
16. Other
Current
Lease incentives
Non-current
Lease incentives
Warranty provisions
2013
2014
$’000
$’000
780
828
-
(521)
259
205
(253)
780
2014
$’000
2013
$’000
1,024
1,024
3,921
3,921
1,339
1,339
4,094
4,094
4,945
5,433
45
17.
Issued capital
386,389,873 fully paid ordinary shares
(2013: 283,418,867)
17.1 Fully paid ordinary shares
Balance at 1 July 2012
Balance 30 June 2013
Capital raising
Less: transaction costs arising on share issue (net of tax)
Issue of shares under the Long Term Incentive Plan
Balance at 30 June 2014
Service Stream Limited
Notes to the financial statements
2014
$’000
2013
$’000
247,647
228,416
Number of
shares
’000
Share
capital
$’000
283,419
283,419
101,946
-
1,025
386,390
228,416
228,416
20,050
(819)
-
247,647
17.2 Performance Rights
As at 30 June 2014, employees have 7,630,544 performance rights issued under the Long Term Incentive Plan
(“LTIP”) in respect of the FY12 Tranche, the FY13 Tranche and the FY14 Tranche (2013: 5,909,474, FY11,
FY12 and FY13 tranches). In accordance with the Employee Share Ownership Plan the shares relating to the
FY12 Tranche which vested on 30 June 2014 will be issued to participants to the extent of that vesting criteria
have been satisfied following final calculations of the Relative TSR measure after release of the FY14 financial
statements. The remaining rights are due to vest on 30 June 2015 (for the FY13 Tranche) and 30 June 2016 (for
the FY14 Tranche). Each performance right converts into one ordinary share, subject to satisfaction of vesting
criteria. Performance rights carry no rights to dividends and no voting rights. Further details of the LTIP are
contained in notes 33.11 and 26.
18. Earnings per share
Basic earnings per share:
Total basic earnings per share
Diluted earnings per share:
Total diluted earnings per share 1
Basic and diluted earnings per share
2014
2013
Cents per
share
Cents per
share
0.76
(37.77)
0.75
(37.77)
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per
share are as follows:
Profit / (loss) for the year attributable to owners of the Company
Earnings used in the calculation of basic EPS
Weighted average number of ordinary shares for the purposes of
basic earnings per share
2014
$’000
2013
$’000
2,309
2,309
(107,054)
(107,054)
2014
No.’000
2013
No.’000
305,493
283,419
46
18. Earnings per share (continued)
Weighted average number of ordinary shares for the purposes of
basic earnings per share
Shares deemed to be issued for no consideration in respect of:
- Long Term Incentive Plan (LTIP)
Weighted average number of ordinary shares used in the calculation of
diluted earnings per share
Service Stream Limited
Notes to the financial statements
2014
2013
No.’000
No.’000
305,493
283,419
663
1,897
306,156
285,316
1. The Group's result for the financial year ended 30 June 2013 is in a loss, as such the dilutive earnings per share equates to basic earnings per
share.
19. Dividends
Recognised amounts
Fully paid ordinary shares
Interim dividend
Fully paid ordinary shares
Interim dividend
2014
2013
Cents per
share
Cents per
share
-
-
1.0
1.0
2014
$’000
2013
$’000
-
5,668
No interim nor final dividend has been declared by the Board for the year ended 30 June 2014 (2013: Interim
one cent per fully paid share, Final nil).
Adjusted franking account balance as at 30 June
20. Obligations under finance leases
20.1 Leasing arrangements
Company
2014
$’000
2013
$’000
2,480
2,480
The Group previously leased plant and equipment, motor vehicles and software assets with lease terms of
between one to four years. The Group’s obligations under finance leases were secured by the lessor’s title to the
leased assets.
20.2 Finance lease liabilities
As at 30 June 2014, there were no outstanding finance lease liabilities. As at 30 June 2013, the present value of
minimum lease payments was $444,000, with an outstanding term not longer than one year.
47
21. Operating lease arrangements
21.1 Leasing arrangements
The Group leases a number of motor vehicles and premises throughout Australia. The rental period of each
individual lease agreement varies between one and seven years with the renewal options ranging from one to
six years. The majority of lease agreements are subject to rental adjustments in line with movements in the
Consumer Price Index or market rentals.
Service Stream Limited
Notes to the financial statements
21.2 Non-cancellable operating lease commitments
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
2014
$’000
2013
$’000
6,213
10,932
793
17,938
6,031
14,260
1,680
21,971
Income relating to the subletting of leased premises is not included in the above table.
22. Subsidiaries
Details of the Company’s subsidiaries at 30 June 2014 are as follows:
Name of entity
Parent entity
Service Stream Limited (i)
Subsidiaries
Service Stream Holdings Pty Ltd (ii) (v)
Service Stream Communications Pty Ltd (ii) (iii) (v)
Total Communications Infrastructure Pty Ltd (ii) (iii) (v)
Service Stream Solutions Pty Ltd (ii) (iii) (v)
Radhaz Consulting Pty Ltd (ii) (v)
Service Stream Infrastructure Services Pty Ltd (ii) (iii) (v)
Milcom Communications Pty Ltd (ii) (iii) (v)
McCourt Dando Pty Ltd (ii) (iv) (vii)
McCourt Dando Civil Pty Ltd (ii) (iv) (vii)
McCourt Dando Plant Hire Pty Ltd (ii) (iv) (vii)
AMRS (Aust) Pty Ltd (ii) (iii) (v)
Service Stream Nominees Pty Ltd (ii) (iii) (vi)
SEQUD Pty Ltd (ii) (iii)
Ownership interest
Country of
incorporation
2014
%
2013
%
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
Service Stream Limited is the head entity within the tax-consolidated Group.
(i)
(ii) These companies are / were members of the tax-consolidated Group.
(iii) These companies are wholly owned subsidiaries of Service Stream Holdings Pty Ltd.
(iv) These companies are / were wholly owned subsidiaries of Service Stream Infrastructure Services Pty Ltd.
(v) These wholly-owned subsidiaries have entered into a deed of cross guarantee with Service Stream
Limited pursuant to ASIC Class Order 98/1418 and are relieved of the requirement to prepare and lodge
an audited financial report.
(vi) Previously known as Service Stream Financial Services Pty Ltd
(vii) These companies were deregistered and removed from the deed of cross guarantee with Service Stream
Limited during 2014 financial year.
23. Deed of cross guarantee
The consolidated statement of comprehensive income and consolidated statement of financial position of the
entities party to the deed of cross guarantee are consistent with those of the Group.
48
Service Stream Limited
Notes to the financial statements
24. Notes to the statement of cash flow
24.1 Reconciliation of cash and cash equivalents
Cash at bank
Bank overdraft (note 14)
Cash and cash equivalents
24.2 Reconciliation of profit for the year to net cash flows from operating activities
Profit / (loss) for the year
(Gain) / loss on sale of disposal of non-current assets
R&D rebates
Depreciation and amortisation
Goodwill impairment
Share of investment in associates loss
Expense recognised in respect of equity-settled share-based payments
Impairment loss recognised on trade receivables
Increase in deferred tax balances
Decrease in current tax liability
Movement in working capital:
Decrease in receivables
Decrease in accrued income
Decrease / (increase) in other assets
Decrease / (increase) in inventories
(Decrease) / increase in trade and other payables
Decrease in provisions
Movement in other balance:
Borrowings (transaction costs)
Net cash provided by operating activities
2014
$’000
6,590
-
6,590
2013
$’000
13,398
(4,970)
8,428
2,309
(263)
(576)
8,996
-
-
180
577
(793)
-
22,287
16,732
3,282
10,654
(35,063)
(3,729)
(107,054)
7
-
8,345
89,800
23
(278)
80
10,354
(4,891)
1,975
9,493
(2,796)
(5,449)
4,338
(761)
261
-
24,854
3,186
25. Financial instruments
The Group’s activities expose it to a variety of financial risks including credit, currency, interest rate and liquidity
risk exposures. The Group’s risk management program looks to identify and quantify these exposures and where
relevant reduce the sensitivity to potential adverse impacts on its financial performance.
The Group uses derivative financial instruments to hedge certain market risk exposures as required. The use of
derivative and other financial instruments is undertaken in accordance with documented Risk Management
Policies and Delegations of Authorities approved by the Company’s Board.
25.1 Capital risk management
The capital structure of the Group consists of debt borrowings (as detailed in note 14), cash balances held at
bank and equity (comprising issued capital, reserves and retained earnings).
The Board and senior management review the capital structure of the Group at least annually considering the
relative cost and risks associated with each class of capital, as well as any restrictions or limitations that may
exist under current financing arrangements with regard to mix of capital.
The Group manages its capital and liquidity to ensure that it is able to continue as a going concern and to
maximise returns to shareholders. Liquidity risk management is undertaken via on-going monitoring of daily and
forecasted cashflows so as to ensure that adequate liquidity and access to financing & performance bonding
facilities are sufficient to support business operations and cost effective.
49
Service Stream Limited
Notes to the financial statements
25. Financial instruments (continued)
25.1 Capital risk management (continued)
The Group is subject to various financial debt covenants on its Syndicated Facilities Agreement in regards to
minimum level of equity, earnings, gearing, borrowing base and asset cover, all of which are regularly monitored
and reported upon.
There were no breaches of financial debt covenants during the year that were not waived by the Group’s
bankers.
Since balance date, the Group has received credit-approved term sheets from a number of banking institutions
for a refinance of its banking facilities to 30 September 2016. The Board and Management are in the final stages
of assessing the offers and finalising documentation.
25.2 Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Bank overdraft
Cash advances
Derivatives
Finance lease / hire purchase liabilities
2014
$’000
2013
$’000
6,590
38,753
13,398
61,617
43,146
-
17,000
39
-
79,324
4,970
60,000
203
444
25.3 Financial risk management objectives
The financial risks to which the Group is typically exposed include market (interest rate and currency), liquidity
and credit risks.
The Group operates a centralised treasury function which manages all borrowings, derivative financial
instruments, provision of financial accommodation, external payments and all currency transactions on behalf of
the Group.
The use of derivative financial instruments is governed by the Group’s Financial and Treasury Risk Management
Policy.
Compliance with financial risk management policies, financial exposures and compliance with risk management
strategy are reviewed by senior management and reported to the Group’s Audit & Risk Committee and Board on
a regular basis.
25.4 Market risk
Market risk is the risk that the fair value of financial instruments or future cash flows will fluctuate due to changes
in market based interest rates, security prices or currency rates.
The Group’s funding activities routinely expose it to market related financial risks arising from changes in interest
rates (refer note 25.5).
The Group typically has only small value short-dated exposures to currency risk as the majority of its activities
are conducted within Australia and priced in AUD.
25.5 Interest rate risk management
The Group is exposed to interest rate risk through its floating rate borrowings and short-term cash investment
activities.
Management of the Group’s floating rate interest rate risk on borrowings is undertaken using derivative financial
instruments.
50
25. Financial instruments (continued)
25.5 Interest rate risk management (continued)
Service Stream Limited
Notes to the financial statements
The interest rate sensitivity analyses below has been determined based on the Group’s exposure to interest rate
risk on its net floating rate borrowings as at the end of the reporting period.
Based upon a 100 basis point parallel increase in prevailing market interest rates as applied to the Group’s net
debt balance at 30 June 2014, the Group’s sensitivity to interest rate risk would be equivalent to a $97,000 per
annum unfavourable impact to profit before tax (2013: $350,000).
The Group’s exposure to interest rates on financial assets and liabilities is detailed in the liquidity risk
management section of this note.
25.6 Credit risk management
Credit risk refers to the risk that transaction counterparties will default on their contractual obligations resulting in
a financial loss to the Group.
The Group transacts wholesale financial market transactions only with entities that have a minimum long-term
Investment Grade credit rating.
The Group’s wholesale credit risk is measured based upon the summation of any investments plus accrued
interest held with the counterparty together with the net positive mark-to-market fair valuation of any derivative
financial instruments also held with that counterparty.
The Group has adopted a retail and business-to-business credit policy of only dealing with creditworthy
counterparties and where appropriate, obtaining collateral or other forms of credit support as a means of
mitigating the risk of financial loss from credit defaults.
Credit reporting information is supplied by independent credit rating agencies where available and the Group
uses publicly available financial information and its own internal trading history to credit assess customers.
Credit exposures and credit ratings of counterparties are monitored on a regular basis.
A significant portion of the Group’s revenue is derived from highly credit rated companies including Telstra
Corporation Ltd, NBN Co Ltd, Origin Energy Ltd as well as various State utilities and Commonwealth agencies.
25.7 Currency risk management
Currency risk arises when future transactions and recognised assets and liabilities are denominated in a
currency other than the entity’s functional currency or from the translation of investments in foreign operations.
The Group operates currently only within Australia and receives revenues denominated only in AUD.
The Group has only minor USD denominated currency exposures primarily for small value inventory and
technology related service purchases.
At balance date no foreign exchange derivative contracts were open.
25.8 Liquidity risk management
Management of the Group’s liquidity risk exposure is undertaken daily by the Group’s treasury and finance
functions via monitoring of the Group’s actual cash flows and regularly updated forecasting of payable and
receivable profiles.
In order to maintain adequate liquidity, the Group typically maintains an at-call cash buffer as well having access
to additional overdraft facilities and via longer terms committed syndicated funding lines.
Included in note 25.8.2 are details of the borrowing facilities available to the Group at 30 June 2014.
25.8.1 Liquidity and interest rate risk tables
The following tables detail the Group’s maturity profile for non-derivative financial liabilities.
The table represents the undiscounted cash flows of financial liabilities based on the earliest date on which the
Group is contracted to repay principal. Where applicable, values represent both interest and principal cash flows.
51
25. Financial instruments (continued)
25.8.1 Liquidity and interest rate risk tables (continued)
Service Stream Limited
Notes to the financial statements
2014
Financial liabilities
Trade and other payables
Derivatives
Cash advances - variable
2013
Financial liabilities
Trade and other payables
Finance lease liabilities
Derivatives
Cash advances - variable
25.8.2 Financing facilities
Weighted
average
interest rate
Carrying
amount
Contractual
cash flow
6
months
or less
6-12
months
1-2
years
2-5
years
$’000
$’000
$’000
$’000
$’000
$’000
$’000
-
(43,146)
(43,146)
(43,146)
3.16%
6.71%
(39)
(39)
(39)
(17,000)
(17,147)
(17,147)
(60,185)
(60,332)
(60,332)
-
(79,324)
(79,324)
(69,824)
4.19%
3.16%
4.72%
(444)
(203)
(449)
(203)
(449)
(77)
(60,000)
(60,471)
(60,471)
-
-
-
-
-
-
(84)
-
-
-
-
-
(9,500)
-
(42)
-
(139,971)
(140,447)
(130,821)
(84)
(9,542)
-
-
-
-
-
-
-
-
Bank guarantees
Bank overdraft
Finance lease
liabilities
Cash advance 1
$’000
$’000
$’000
$’000
Amount used
Amount unused
Balance at 30 June 2014
Amount used
Amount unused
Balance at 30 June 2013
11,584
13,416
25,000
28,324
16,676
45,000
-
5,000
5,000
4,970
5,030
10,000
-
-
-
444
-
444
17,000
15,000
32,000
60,000
25,000
85,000
1. The secured cash advance facilities (2013: cash advance and trade finance facilities) are due to mature on 31 August 2014. Since balance
date, the Group has received credit-approved term sheets from a number of leading Australian and International financial institutions, that each
provide the commercial terms of offers for participation in a banking facility to 30 September 2016 commencing upon the expiry of the Group’s
existing banking facilities on 31 August 2014. Each such term-sheet is for a 50% participation in a multi-option facility under the Group’s
existing Syndicated Facilities Agreement and Security Arrangements and comprises cash advance, overdraft and bank guarantee facilities with
an initial total limit of $60.0 million. The offers contain improved terms and conditions relative to the Group’s existing banking facilities. The
Board and Management are in the final stages of assessing the offers and finalising documentation.
Financial guarantees provided in the normal course of business are shown above. Based upon current
expectations as at 30 June 2014, the Group considers that it is more likely than not that such amounts will not be
payable under these arrangements.
52
25. Financial instruments (continued)
25.9 Fair value of financial instruments
Service Stream Limited
Notes to the financial statements
The Directors consider that the carrying amounts of financial assets and financial liabilities recognised at
amortised cost in the financial statements approximate their fair values.
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the
following fair value measurement hierarchy:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (level 2); and
• Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The Group’s derivatives are considered to be level 2 financial instruments.
The fair values of financial assets and financial liabilities are determined as follows:
• The fair values of financial assets and financial liabilities with standard terms and conditions and traded on
active liquid markets are determined with reference to quoted market prices (includes listed redeemable
notes, bills of exchange, debentures and perpetual notes);
• The fair values of other financial assets and financial liabilities (excluding derivative instruments) are
determined in accordance with generally accepted pricing models based on discounted cash flow analysis
using prices from observable current market transactions and dealer quotes for similar instruments;
The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available,
a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments
for non-optional derivatives, and option pricing models for optional derivatives. Foreign currency forward
contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates
matching maturities of the contracts. Interest rate swaps are measured at the present value of future cash flows
estimated and discounted based on the applicable yield curves derived from quoted interest rates.
26. Share-based payments
26.1 Long Term Incentive Plan (“LTIP”)
From time to time employees in senior management roles and/or Directors may be invited to participate in the
LTIP. The LTIP operates within the shareholder approved Employee Share Ownership Plan (“ESOP”), under the
administration of the Remuneration and Nomination Committee. The extent of individual participation for senior
management roles and the associated number of performance rights offered is recommended by the Managing
Director and reviewed by the Remuneration and Nomination Committee, which will then make recommendations
to the Board. Participation by Directors must be approved by shareholders.
In accordance with the provision of the ESOP and consistent with the prior year, Directors and employees in
senior management roles were invited during the year to participate in the LTIP which entitled them to receive a
number of performance rights in respect of the “FY14 Tranche”. Each performance right converts into one
Service Stream Limited ordinary share on vesting. No amounts are paid or payable by the participant on receipt
of the performance rights, and the performance rights carry neither rights to dividends nor voting rights. The
number of performance rights granted is based on the employee’s long term incentive participation rate, which is
expressed as a percentage of the participant’s TFR, and the volume-weighted average market price of the
Company’s shares over a prescribed period of time or other issue price as deemed appropriate by the Board.
The performance rights are subject to service and performance criteria being:
The FY14 Tranche performance rights are subject to service and performance criteria being:
o The participant must be an employee at the vesting date;
o
50% of the performance rights granted will each vest where:
o The Group’s earnings per share (“EPS”) achieves the following targets:
FY14 Tranche (vesting 30 June 2016)
Year 1
Year 2
Year 3
Average
EPS Target (cents per share)
2.81
3.09
3.40
3.10
53
Service Stream Limited
Notes to the financial statements
26. Share-based payments (continued)
26.1 Long Term Incentive Plan (“LTIP”) (continued)
Subject to the following proportional vesting:
Percentage of performance rights that vest
0%
40%
EPS Target
Below 75%
At 75%
Proportional vesting
Greater than 75% and less than 100%
100%
100% and above
o The Group’s total shareholder return (“TSR”) over the performance period is such that it would rank at
or above the 75th percentile (full achievement) or the 50th percentile (pro-rata achievement) of a
relevant peer group of companies being those comprising the ASX 200 Industrials index, as detailed
below:
Percentage of performance rights that vest
0%
50%
Proportional vesting
TSR ranking
Below the 50th percentile
At the 50th percentile
Above the 50th percentile but below
the 75th percentile
100%
75th percentile or above (top quartile)
Performance rights will vest to the extent that the participant remains employed by the Company on the vesting
date and to the extent that the Company’s performance over the relevant period satisfies the vesting conditions.
In contrast to the criteria set out above for the FY14 Tranche, performance rights issued in previous years were
subject to the following EPS performance criteria:
o The Group’s earnings per share (“EPS”) achieves annual growth of 10% or more (full achievement) or
7.5% (pro-rata achievement) over the performance period from an agreed base EPS, as detailed
below:
Performance period
Vesting date
FY12 Tranche
FY13 Tranche
3 years
3 years
30 June 2014
30 June 2015
EPS base (cents per share)
5.80
6.60
The service and TSR performance criteria is consistent across all tranches.
The following LTIP performance rights arrangements were in existence during the current period:
LTIP Series
Number
Grant date
Grant date fair value
Vesting date Performance
period start
date
FY12 tranche
1,071,819
25 November 2011
Relative TSR hurdle - $0.160
30 June 2014
1 July 2011
FY13 tranche
1,836,210
30 November 2012
Relative TSR hurdle - $0.190
30 June 2015
1 July 2012
FY14 tranche 1
4,722,515
31 July 2014
Relative TSR hurdle - $0.101
30 June 2016
1 July 2013
EPS growth hurdle - $0.290
EPS growth hurdle - $0.250
EPS hurdle - $0.154
1. As the grant date for the FY14 Tranche is 31 July 2014, the grant date fair values for this Tranche have been estimated for the purposes of
year-end reporting.
54
Service Stream Limited
Notes to the financial statements
26. Share-based payments (continued)
26.2 Fair value of performance rights
Subsequent to grant date, the FY14 Tranche performance rights with the relative TSR hurdle vesting condition
will be valued using a Monte-Carlo simulation. The FY14 Tranche performance rights with the EPS hurdle
vesting condition will be valued using a Binomial tree methodology. Both valuation methodologies are
underpinned by a ‘risk neutral’ probability framework with lognormal share prices. Key assumptions of the
framework that underpin the valuations performed are: arbitrage free markets, complete and liquid markets,
stationary lognormal share price return distributions, no trading costs or taxes, risk neutral probability framework,
short selling is possible, continuous trading and perfectly divisible securities. Previous years’ performance rights
have been valued using the methodology detailed above.
26.3 Key inputs into the model
The table below details the key inputs to the valuation models.
Volatility
Tranche
Share Price at
Grant Date
Expected
life
FY14 1
FY13
FY12
$0.18
$0.34
$0.30
TBC
2.8 years
2.6 years
TBC
50%
60%
Risk-free
interest rate
Dividend
yield
TBC
2.62%
3.06%
TBC
5.7%
6.7%
Vesting
date
30 June 2016
30 June 2015
30 June 2014
1. As the grant date for the FY14 Tranche is 31 July 2014, the valuation of this tranche was not completed as at year-end.
The fair values used as the basis of measuring the expense have been estimated for reporting purposes.
26.4 Movements in the LTIP performance rights during the year
The following table reconciles the outstanding performance rights granted under the LTIP at the beginning and
end of the financial year:
2014
2013
Number of
performance
rights
5,909,474
9,222,515
(1,024,703)
(6,476,742)
7,630,544
Grant date
weighted
average
fair value
$
0.270
0.158
0.607
0.113
. Number of
performance
rights
.
.
6,775,335
4,393,375
-
(5,259,236)
Grant date
weighted
average
fair value
$
0.378
0.240
-
0.384
0.240
.
5,909,474
0.270
Balance at start of the financial year
Granted during the year
Vested during the year
Forfeited during the year
Balance at end of the financial year
The fair value of $0.158 for performance rights issued during the year is the result of the separate criteria as set
out at note 26.2.
Included in the balance at the end of the financial year are rights which have reached their vesting date but
where the performance vesting criteria is yet to be calculated.
In accordance with the Employee Share Ownership Plan the shares relating to the FY12 Tranche will be issued
to the extent that vesting criteria have been satisfied following final calculations of the Relative TSR measure
after release of the FY14 financial statements.
As at 30 June 2014, 1,071,819 performance rights granted under the FY12 Tranche remain unforfeited and
subject to vesting criteria.
The performance rights outstanding at the end of the year have a remaining contractual life of two years (FY14
Tranche) and one year (FY13 Tranche).
55
27. Key management personnel compensation
27.1 Details of key management personnel
The Directors of the Company and key management personnel of the Group during the year were:
Service Stream Limited
Notes to the financial statements
P Dempsey (Chairman)
L Mackender (Managing Director – appointed 26 May 2014)
B Gallagher (Managing Director to 6 November 2013, Non-Executive Director from 7 November 2013 until 25
May 2014, Executive Director since 26 May 2014)
D Page AM (Non-Executive Director)
S Wilks (Non-Executive Director)
R Grant (Alternate Director, Chief Financial Officer)
T Sinclair (Managing Director from 6 November 2013 until 26 May 2014)
The following key management personnel held their current position for the whole of the financial year and since
the end of the financial year, except as noted below:
L Mackender (Executive General Manager, Energy and Water)
M Saloyedoff (Executive General Manager, Mobile Communications – appointed 18 October 2013)
K Smith (Executive General Manager, Fixed Communications – appointed 12 June 2014)
D Hill (Executive General Manager, Mobile Communications – until 18 October 2013)
C Orr (Executive General Manager, Fixed Communications – until 12 June 2014)
27.2 Key management personnel compensation
The aggregate compensation made to Directors and key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments 1
2014
2013
2,316,018
132,292
39,190
97,660
2,463,940
166,268
58,329
(26,220)
2,585,160
2,662,317
1. The fair value of performance rights issued under the Long Term Incentive Plan, allocated on a pro-rata basis, to the current financial year.
Where previously disclosed rights have been subsequently forfeited due to resignation the relevant remuneration disclosure will be negative.
The compensation of each member of the key management personnel of the Group is set out in the
Remuneration Report.
28. Related party disclosures
The immediate parent and ultimate controlling party of the Group is Service Stream Limited.
Balances and transactions between the Company and its controlled entities, which are related parties of the
Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions
between the Group and other related parties are disclosed below.
28.1 Transactions with key management personnel
28.1.1 Key management personnel compensation
Details of key management personnel compensation are disclosed in note 27 to the financial statements.
56
Service Stream Limited
Notes to the financial statements
28. Related party disclosures (continued)
28.1.2 Key management personnel equity holdings
Fully paid ordinary shares of Service Stream Limited
The numbers of shares in the Company held during the financial year by each Director and other key
management personnel member of the Group, including their personally related parties, are set out below.
Balance at
1 July
Granted as
compen
-sation
Balance as at
date of
appointment
Net other
change
Balance as at
date of
resignation
Balance at
30 June
No.
No.
No.
No.
No.
No.
2014
P Dempsey
D Page
B Gallagher
S Wilks
L Mackender
R Grant
C Orr 2
D Hill 2
2013
P Dempsey
D Page
B Gallagher
S Wilks
G Sumner 2
R Grant
S Ellich 2
C Orr 1
D Hill
L Mackender
570,000
129,400
8,792,113
385,000
49,434
144,166
1,134
1,134
320,000
82,900
8,792,113
140,000
350,000
144,166
367,655
-
1,134
49,434
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,134
-
-
103,637
23,528
1,598,566
70,001
43,203
396,689
-
-
-
-
-
-
-
-
(1,134)
(1,134)
673,637
152,928
10,390,679
455,001
92,637
540,855
-
-
250,000
46,500
-
245,000
150,000
-
-
-
-
-
-
-
-
-
(500,000)
570,000
129,400
8,792,113
385,000
-
-
144,166
(367,655)
-
-
-
-
1,134
1,134
49,434
The movement in equity holdings disclosed reflects only those movements which took place during the period that persons
were regarded as key management personnel.
1. The balance of securities held as at 1 July is nil as this person was not a key management person at that date.
2. The balance of securities held as at 30 June is nil as this person is no longer a key management person.
The numbers of rights and options over ordinary shares in the Company held during the financial year by each
Director and other key management personnel of the Group, including their personally related parties, are set out
below.
57
Service Stream Limited
Notes to the financial statements
28. Related party disclosures (continued)
28.1.2 Key management personnel equity holdings (continued)
Performance Rights of Service Stream Limited
Balance at
1 July
Granted as
compen-
sation
Vested during
year 1
Forfeited
during the
year
Net other
change
Balance at
30 June
No.
No.
No.
No.
No.
No.
L Mackender
380,021
430,556
R Grant
M Saloyedoff
K Smith
D Hill
T Sinclair
C Orr
1,579,319
1,241,389
102,690
291,306
343,692
409,722
245,720
-
(41,003)
(313,480)
-
(48,903)
(43,895)
(41,003)
(313,480)
-
(48,903)
(299,797)
-
4,500,000
-
(4,500,000)
457,516
-
(128,135)
(329,381)
-
-
-
-
-
-
-
728,571
2,193,748
512,412
439,220
-
-
-
1. Performance rights vested during the current financial year relate to the FY11 Tranche, with vesting date 30 June 2013.
All performance rights issued to key management personnel during the financial year were made in accordance
with the provisions of the LTIP.
Further details of the LTIP and of performance rights granted during 2014, 2013, 2012 and 2011 financial years
are contained in notes 26 to the financial statements
28.1.3 Other transactions with key management personnel of the Group
Brett Gallagher is a Director of Techsafe Australia Pty Ltd (“Techsafe”), which is currently performing inspections
and certifications of residential solar panel installations for the Group. The terms under which Techsafe provides
services are standard, arm’s length and of low value (approximately $14,000 per month) (2013: approximately
$20,000 per month).
28.2 Transactions between Service Stream Limited and its related parties
During the financial year, the following transactions occurred between the Company and its related parties:
• The Company recognised tax payable in respect of the tax liabilities of its wholly-owned subsidiaries.
Payments to / from the Company are made in accordance with the terms of the tax funding arrangement.
The following balances arising from transactions between the Company and its related parties are outstanding at
the reporting date:
• Loans receivable totalling $109,303,846 are receivable from subsidiaries (2013: $99,905,960).
All amounts advanced to or payable to related parties are unsecured and are subordinate to other liabilities.
The amounts outstanding will be settled in cash. No guarantees have been given or received. No expense has
been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.
Transactions and balances between the Company and its controlled entities were eliminated in the preparation of
consolidated financial statements of the Group.
58
29. Remuneration of auditors
Auditor of the parent entity
Audit or review of the financial report
Additional fees in connection with audit of financial report
Review of income tax return
LTIP trust advice
Tax advice and other services
Service Stream Limited
Notes to the financial statements
2014
$
270,000
-
25,000
125,000
76,956
496,956
2013
$
235,000
100,000
25,000
-
39,000
399,000
30. Contingent assets and liabilities
Contingent liabilities and claims, indeterminable in amount, exist in the ordinary course of business. All known
liabilities have been brought to account and adequate provision has been made for any known and anticipated
losses.
31. Events after the reporting period
Since balance date, the Group has received credit-approved term sheets from a number of banking institutions
for a refinance of its banking facilities to 30 September 2016. The Board and Management are in the final stages
of assessing the offers and finalising documentation.
Except for as stated above, there has not been any matter or circumstance occurring subsequent to the end of
the financial year that has significantly affected, or may significantly affect, the operations of the Group, the
results of those operations, or the state of affairs of the Group in future financial years.
32. Parent entity information
The accounting policies of the parent entity, which have been applied in determining the financial information
shown below, are the same as those applied in the consolidated financial statements. Refer to note 33 for a
summary of the significant accounting policies relating to the Group.
32.1 Financial position
Current Assets
Non-current assets
Total Assets
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Issued capital
Retained earnings / (accumulated losses)
Reserves – Equity settled employee benefits
Equity
32.2 Financial performance
(Loss) / profit for the year
Other comprehensive income
Total comprehensive income
2014
$’000
2013
$’000
83
180,347
180,430
89
3,385
3,474
10,908
182,844
193,752
31,535
4,177
35,712
176,956
158,040
231,010
(56,964)
2,910
176,956
211,779
(56,469)
2,730
158,040
(495)
-
(495)
(59,719)
-
(59,719)
59
32. Parent entity information (continued)
32.3 Guarantees entered into by the parent entity
The parent entity is party to the Group’s bank debt facilities as a security provider under the Security Trust Deed.
In addition, there are cross guarantees given by the parent entity as described in note 22 and 23.
Service Stream Limited
Notes to the financial statements
33. Significant accounting policies
This note provides a list of significant accounting policies adopted in the preparation of these consolidated
financial statements. These policies have been consistently applied to all the years presented, unless otherwise
stated. The financial statements are for the consolidated entity consisting of Service Stream Limited and its
subsidiaries.
33.1 Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act
2001. Service Stream Limited is a for-profit entity for the purpose of preparing the financial statements.
The financial statements were authorised for issue by the Directors on 13 August 2014.
Compliance with IFRS
The consolidated financial statements of the Group also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time in their annual reporting period
commencing 1 July 2013:
• AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of
Interests in Other Entities, AASB 128 Investments in Associates and Joint Ventures, AASB 127
Separate Financial Statements and AASB 2011-7 Amendments to Australian Accounting Standards
arising from the Consolidation and Joint Arrangements Standards
• AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards
arising from AASB 13
• AASB 119 Employee Benefit (September 2011) and AASB 2011-10 Amendments to Australian
Accounting Standards arising from AASB 119 (September 2011)
The adoption of the above Accounting Standards have not resulted in material changes in the current and prior
reporting periods.
Early adoption of standards
The Group has not elected to early adopt the Standards and Interpretations issued but not yet effective. Refer to
note 33.28.
Historical cost convention
The consolidated financial statements have been prepared on the basis of historical cost, except for certain
assets and liabilities that are measured at revalued amounts or fair values, as explained in the accounting
policies below. Historical cost is generally based on the fair values of the consideration given in exchange for
assets. All amounts are presented in Australian dollars, unless otherwise noted.
Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant
to the financial statements, are disclosed in note 34.
The following significant accounting policies have been adopted in the preparation and presentation of the
annual financial report:
60
33. Significant accounting policies (continued)
33.2 Going concern
Service Stream Limited
Notes to the financial statements
The Group’s facilities for cash advances, overdraft and bank guarantees are provided under a Syndicated
Facilities Agreement with Australia & New Zealand Banking Group Ltd and Westpac Banking Corporation which
is scheduled to expire on 31 August 2014. During the year there were no breaches of the financial debt
covenants that apply under the Syndicated Facilities Agreement that were not waived by the syndicate members.
Since balance date, the Group has received credit-approved term sheets from a number of leading Australian
and International financial institutions, that each provide the commercial terms of offers for participation in a
banking facility to 30 September 2016 commencing upon the expiry of the Group’s existing banking facilities on
31 August 2014. Each such term-sheet is for a 50% participation in a multi-option facility under the Group’s
existing Syndicated Facilities Agreement and Security Arrangements and comprises cash advance, overdraft
and bank guarantee facilities with an initial total limit of $60.0 million. The offers contain improved terms and
conditions relative to the Group’s existing banking facilities. The Board and Management are in the final stages
of assessing the offers and finalising documentation.
Management and the Board have reviewed the Group’s cashflow forecasts in the context of the Group’s
obligations under the proposed banking facility, and are of the view that there are reasonable grounds on which
to conclude that the Group can continue to operate as a going concern.
Accordingly, the consolidated financial statements have been prepared on a going concern basis in the belief
that the Company will realise its assets and settle its liabilities and commitments in the normal course of
business.
33.3 Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries).
Subsidiaries are all entities over which the Group is exposed to, or has right to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct its activities of the
entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Joint operations
Service Stream Limited recognises its direct right to the assets, liabilities, revenues and expenses of the joint
operation have been incorporated in the financial statements under the appropriate headings. Details of the joint
operations are set out in note 8.
33.4 Goodwill
Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the
business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognised at the date of the acquisition. Goodwill is subsequently measured at its cost less
any impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units, or
groups of cash-generating units, expected to benefit from the synergies of the business combination. Cash-
generating units or groups of cash-generating units 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 cash-generating unit (or group of cash-generating units) is less than
the carrying amount of the cash-generating unit (or groups of cash-generating units), the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating units and then pro-
rata on the basis of the carrying amount of each asset in the cash-generating unit (or groups of cash-generating
units). An impairment loss recognised for goodwill is recognised immediately in the profit or loss and is not
reversed in a subsequent accounting period.
61
33. Significant accounting policies (continued)
33.4 Goodwill (continued)
Service Stream Limited
Notes to the financial statements
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
33.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker is responsible for allocating resources and
assessing performance of the operating segments. Details of the Group’s segment reporting is set out in note 2.
33.6 Investment in joint arrangements
A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic
activity that is subject to joint control (i.e. when the strategic financial and operating policy decisions relating to
the activities of the joint venture require the unanimous consent of the parties sharing control).
The proportionate interest in the assets, liabilities, revenue and expenses of the joint operations activity have
been incorporated in the financial statements under the appropriate headings. Details of the joint operations are
set out in note 8.
33.7 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as
revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future
economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as
described below. The Group bases its estimates on historical results, taking into consideration the type of
customer, the type of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
Rendering of services
Revenue from a contract to provide services is recognised when probable and measurable, as labour hours or
contracted services are delivered.
Revenue from construction contracts is recognised in accordance with the accounting policy set out in note 33.8.
Interest revenue
Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the
amount of revenue can be measured reliably.
33.8 Construction contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by
reference to the stage of completion of the contract activity at the end of the reporting period. This is normally
measured according to the proportion of contract costs incurred for work performed to date relative to the
estimated total contract costs, except where this would not be representative of the stage of completion. Where
this is the case, stage of completion is measured on a time basis. Variations in contract work, claims and
incentive payments are included to the extent that the amount can be measured reliably and its receipt is
considered probable.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the
extent that it is probable that contract costs incurred will be recoverable. Contract costs are recognised as
expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised
as an expense immediately.
Where recognised revenues exceed progress billings, the surplus is shown as accrued. For contracts where
progress billings exceed recognised revenues, the surplus is shown as income in advance. Amounts received
before the related work is performed are included in the consolidated statement of financial position, as a liability,
62
33. Significant accounting policies (continued)
33.8 Construction contracts (continued)
Service Stream Limited
Notes to the financial statements
as income in advance. Amounts billed for work performed but not yet paid by the customer are included in the
consolidated statement of financial position under trade and other receivables.
33.9 Leases
Leases are classified as finance leases whenever the terms of the lease substantially transfer all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases. As at 30 June 2014, the
Group had extinguished all finance lease obligations.
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.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as
a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line
basis, except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed.
33.10 Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and
long service leave when it is probable that settlement will be required and they are capable of being measured
reliably.
Liabilities recognised in respect of employee short-term benefits are measured at their nominal values using the
remuneration rate expected to apply at the time of the settlement.
Liabilities recognised in respect of long-term employee benefits are measured as the present value of the
estimated future cash outflows in respect of services provided by employees up to reporting date.
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have
rendered service entitling them to the contributions.
Termination benefits are payable when employment is terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination
benefits when it is demonstrably committed to either terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal or to providing termination benefits as a result of an
offer made to encourage voluntary redundancy where applicable. Benefits falling due more than 12 months after
the end of the reporting period are discounted to present value.
33.11 Share-based payments
Long Term Incentive Plan
Equity-settled share-based payments to employees under the Long Term Incentive Plan (“LTIP”) are measured
at the fair value of the equity instrument at the grant date. As there are two separate hurdles, being relative total
shareholder return (“TSR”) and earnings per share (“EPS”), a fair value has been determined for each. In
respect of the TSR hurdle, fair value is measured using a Monte-Carlo simulation, whilst for the EPS hurdle, fair
value is measured using a Binomial tree methodology. Both valuation methodologies are underpinned by a ‘risk
neutral’ probability framework with lognormal share prices. Details regarding the determination of the fair value
of the LTIP are set out in note 26.
The fair value determined at the grant date of the LTIP is expensed on a straight-line basis over the vesting
period. However, in respect of the EPS portion, at the end of each reporting period the Group revises its estimate
of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any,
is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to the equity-settled employee benefits reserve. Whereas the fair value determined for
TSR at the grant date expensed on a straight-line basis with no adjustments, other than to take into account the
impact of participants who will not meet the service period criteria.
An expense amount of $179,576 has been recognised in profit and loss for the year ended 30 June 2014 (2013:
-$277,253) in respect of the LTIP.
63
33. Significant accounting policies (continued)
33.12 Taxation
Current tax
Service Stream Limited
Notes to the financial statements
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in
the consolidated statement of comprehensive income because of items of income or expense that are taxable or
deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally
recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to
be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which
the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the
reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to
items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in
which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a
business combination. In the case of a business combination, the tax effect is included in the accounting for the
business combination.
Tax consolidation
Refer to note 6.3.
R & D tax incentive
R&D tax incentives are accounted for in accordance with AASB 120 Accounting for Government Grants and
Disclosure of Government Assistance whereby the additional 10% incentive from the Government to invest in
specific R&D activities is classified as revenue. Where R&D relates to capital items, the incremental 10%
income is recognised as the asset is amortised.
This approach has been adopted as at 1 July 2011 with the 2012 impact being recognised via opening retained
earnings ($306k). The current year tax entries, which include revision to estimates relating to prior periods, bring
to account the R&D related amounts for 2013 and 2014.
33.13 Plant and equipment
Plant and equipment, leasehold improvements and motor vehicles are stated at cost less accumulated
depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition. In the event
that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the
amount payable to their present value as at the date of acquisition.
Depreciation is calculated on a straight-line basis so as to write-off the net costs or other revalued amount of
each asset over its expected useful life to its estimated residual value. Depreciation methods, estimated useful
lives and residual values are reviewed at the end of each annual accounting period, with the effect of any
changes recognised on a prospective basis.
64
Service Stream Limited
Notes to the financial statements
33. Significant accounting policies (continued)
33.13 Plant and equipment (continued)
Plant and equipment is de-recognised upon disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property,
plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the
asset and is recognised in profit or loss.
The following estimated useful lives are used in the calculation of depreciation:
•
•
•
Leasehold improvements
Plant and equipment
Motor vehicles
33.14 Intangible assets
2 - 7 years
2 - 10 years
3 - 7 years
Cost incurred in developing products or systems and costs incurred in acquiring software and licenses that will
contribute to future period financial benefits through revenue generation or cost reduction are capitalised to
software and systems.
IT development costs include only those costs directly attributable to the development phase and are only
recognised following completion of technical feasibility and where the Group has an intention and ability to use
the asset.
The amount initially recognised include external direct costs of materials and service and direct payroll and
payroll related costs of employees’ time spent on the project.
Amortisation is recognised on a straight-line basis over the estimated useful life. The estimated useful life and
amortisation method are reviewed at the end of each annual accounting period, with the effect of any changes in
estimate being accounted for on a prospective basis.
The estimated useful lives used in the calculation of amortisation range from between two and five years.
33.15 Impairment of tangible and intangible assets excluding goodwill
At the end of each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have incurred an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the
Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of the fair value less costs to sell and value-in-use. In assessing value-in-
use, the estimated future cash flows are discounted to their present value using the pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised immediately in profit or loss unless the relevant asset is carried at a revalued amount, in which
case the impairment loss is treated as a revaluation decrease.
33.16 Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are assigned to inventories by the
method most appropriate to the particular class of inventory, with the majority being valued on a first in, first out
basis. The inventory balance is comprised of purchase inventory, the cost of which is determined after deducting
rebates and discounts.
65
33. Significant accounting policies (continued)
33.17 Provisions
Service Stream Limited
Notes to the financial statements
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made
of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows (where the effect of the time value of money is
material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous
contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be received under it.
Warranties
Provisions for the expected cost of warranty obligations are recognised at management’s best estimate of the
expenditure required to settle the Group’s obligation.
33.18 Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately
in profit or loss.
33.18.1 Financial assets
All financial assets are recognised and de-recognised on trade date where the purchase or sale of a financial
asset is under a contract whose terms require delivery of the financial asset within the timeframe established by
the market concerned. Such assets are initially measured at fair value, plus transaction costs, except for those
financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit
or loss’ (“FVTPL”), ‘held-to-maturity’ investments, ‘available-for-sale’ (“AFS”) financial assets and ‘loans and
receivables’. The classification depends on the nature and purpose of the financial assets and is determined at
the time of initial recognition.
Effective interest method
The effective interest method is a method of calculating the amortised costs of a debt instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash receipts (including all fees paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) over the expected life of the debt instrument or,
(where appropriate) a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets
classified as at FVTPL.
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
cost using the effective interest method, less any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
66
33. Significant accounting policies (continued)
33.18 Financial instruments (continued)
33.18.1 Financial assets (continued)
Impairment of financial assets
Service Stream Limited
Notes to the financial statements
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each
reporting period. Financial assets are considered to be impaired when 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 flows of the investment have been affected.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance
account. When a trade receivable is considered uncollectable, it is written-off against the allowance account.
Subsequent recoveries of amounts previously written-off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in profit or loss.
33.18.2 Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of
the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all
of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct
issue costs.
Financial guarantee liabilities
A financial guarantee is a contract that requires the issuer of the guarantee to make a specified payment/s to the
holder of the guarantee in the event that they suffer a loss due to the guarantee drawer’s failure to make
payment or otherwise satisfy their contractual obligations under an agreement with the holder. The drawer of the
guarantee is required to reimburse the issuer for any loss suffered in satisfaction of the guarantee obligation to
the holder.
Financial guarantee liabilities are initially measured at their fair values and are subsequently measured at the
higher of:
•
•
the amount of the obligation under the contract, as determined in accordance with AASB 137
Provisions, Contingent Liabilities and Contingent Assets; and
the amount initially recognised, less where appropriate, cumulative amortisation recognised in
accordance with the revenue recognition policies.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ (“FVTPL”) or
‘other financial liabilities’.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to
the net carrying value on initial recognition.
De-recognition of financial liabilities
The Group de-recognises financial liabilities only when the Group’s obligations are fully discharged, cancelled or
otherwise expire. The difference between the carrying amount of the financial liability de-recognised and the
consideration paid or payable is then recognised in profit or loss.
67
33. Significant accounting policies (continued)
33.19 Derivative financial instrument
Service Stream Limited
Notes to the financial statements
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 the end of each reporting period. The accounting treatment for
subsequent changes in fair value will be dependent upon whether the derivative was designated as a hedging
instrument at its inception and the type of hedge.
In accordance with the requirements of AASB 139 Financial Instruments: Recognition and Measurement, the
Group documents at the inception of the hedge transaction the relationship between the hedging instrument and
the hedged item, as well as the risk being hedged and the risk management objective for undertaking the hedge
transaction. The Group documents both at hedge inception and on an ongoing basis its assessment of whether
the hedge transaction is expected to be and continues to be highly effective in offsetting changes in fair values or
cash flows of the hedged item.
The current fair values of derivative financial instruments used for hedging purposes are disclosed in note 25.9
and changes in fair values taken to the hedging reserve are shown in the statements of changes in equity.
Cash flow hedge
The portion of the gain or loss on the hedging instrument that is determined to be hedge effective is recognised
within comprehensive income within the equity reserve. The gain or loss relating to the hedge ineffective portion
is recognised immediately in profit or loss.
Amounts accumulated within the equity reserve are reclassified to profit or loss in the periods when the hedged
item affects profit or loss. When a hedging instrument is de-designated, expires, is sold, terminated, or when a
hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity relating to
the period where the hedge was effective may remain in equity and is then recognised when the forecast
transaction occurs.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss reported in equity is
immediately reclassified to profit or loss.
33.20 Trade receivables
Trade receivables are recognised initially at fair value and subsequently adjusted for provision for impairment.
Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless
collection is not expected for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible
are written-off by reducing the carrying amount directly. An allowance account (provision for impairment of trade
receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered
indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of
discounting is immaterial.
33.21 Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial
year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade
and other payables are presented as current liabilities unless payment is not due within 12 months from the
reporting date. They are recognised initially at their fair value and are not discounted if the effect of discounting is
immaterial.
33.22 Goods and services tax
Revenues, expense and assets are recognised net of the amount of associated GST, unless the GST incurred is
not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other payables in the consolidated
68
33. Significant accounting policies (continued)
33.22 Goods and services tax (continued)
balance sheet as applicable.
Service Stream Limited
Notes to the financial statements
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.
33.23 Cash and cash equivalents
Cash comprises cash on hand and outstanding deposits less any unpresented cheques. 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 three months or less at the date of acquisition.
Bank overdrafts are shown within borrowings in current liabilities in the consolidated balance sheet.
33.24 Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds. Where any Group company purchases
the Company’s equity instruments, for example as the result of a share buy-back or a share-based payment
plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is
deducted from equity attributable to the owners of Service Stream Limited as treasury shares until the shares are
cancelled or reissued.
Where such ordinary shares are subsequently reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects, is included in equity attributable to
the owners of Service Stream Limited.
33.25 Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting
period.
33.26 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
•
•
the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary
shares
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for
bonus elements in ordinary shares issued during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares, and
the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
33.27 Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in
certain cases, the nearest dollar.
69
Service Stream Limited
Notes to the financial statements
33. Significant accounting policies (continued)
33.28 New accounting standards and interpretations (continued)
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2014 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set
out below.
• AASB 9 Financial Instruments (effective from 1 January 2017).
AASB 9 Financial Instruments addresses the classification, measurement and de-recognition of financial
assets and financial liabilities. The standard is not applicable until 1 January 2017 but is available for early
adoption. There will be no impact on the Group's accounting for financial liabilities, as the new requirements
only affect the accounting for financial liabilities that are designated as at fair value through profit or loss and
the Group does not have any such liabilities. The de-recognition rules have been transferred from AASB
139 Financial Instruments: Recognition and Measurement and have not been changed. The Group has not
yet decided when to adopt AASB 9.
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements (effective 1 July 2014).
In July 2011 the AASB decided to remove the individual key management personnel (KMP) disclosure
requirements from AASB 124 Related Party Disclosures, to achieve consistency with the international
equivalent standard and remove a duplication of the requirements with the Corporations Act 2001. While
this will reduce the disclosures that are currently required in the notes to the financial statements, it will not
affect any of the amounts recognised in the financial statements. The amendments apply from 1 July 2014
and cannot be adopted early. The Corporations Act requirements in relation to remuneration reports will
remain unchanged for now, but these requirements are currently subject to review and may also be revised
in the near future.
• AASB 2013-3 Amendments to AASB 136 Recoverable Amount Disclosures for Non-Financial Assets
(effective 1 January 2014).
The AASB has made small changes to some of the disclosures that are required under AASB 136
Impairment of Assets. These may result in additional disclosures if the Group recognises an impairment loss
or the reversal of an impairment loss during the period. They will not affect any of the amounts recognised in
the financial statements. The Group intends to apply the amendment from 1 July 2014.
34. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 33, the Directors are required to
make judgements, 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
other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both current and future periods.
34.1 Critical judgements in applying accounting policies
The following is the critical judgement that, apart from those involving estimations (see 34.2 below), the Directors
have 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.
Revenue recognition
Under AASB 111 Construction Contracts, where a construction contract can be estimated reliably, revenue and
costs are recognised by reference to the stage of completion of the contract activity at balance sheet date.
Judgements made in the application of AASB 111 include:
•
•
•
•
determination of stage of completion;
estimation of total contract revenue and contract costs;
assessment of the probability of customer approval of variations and acceptance of claims; and
estimation of project completion date.
70
34. Critical accounting judgements and key sources of estimation uncertainty
(continued)
34.1 Critical judgements in applying accounting policies (continued)
It is reasonably possible on the basis of existing knowledge that outcomes within the next financial year are
different from the estimates and assumptions listed above.
Service Stream Limited
Notes to the financial statements
34.2 Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at
the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
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 Directors to estimate the future
cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate
present value.
Income tax expense
Judgement is required in determining the Group provision for income taxes. The Group estimates its tax liabilities
based on its current understanding of the income tax law. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the current and deferred
income tax assets and liabilities in the future period in which such determination is made. R&D tax concessions
available to the business are estimated in the accounts because a full assessment of the position cannot be
made by the year-end.
Please refer to note 6 for further details on the Group’s income tax balances.
71
Service Stream Limited
ASX Additional Information
ASX Additional Information
for the financial year ended 30 June 2014
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere
in this report.
A. Distribution of Shareholders Number as at 29 August 2014
Category (size of holding)
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001+
Holders
557
958
553
1,497
334
3,899
B. There are 3,899 holders of fully paid ordinary shares.
The Company has no other class of shares issued.
C. The number of shareholdings held in less than marketable parcels is 1,013.
D. The names of the substantial shareholders listed in the holding company’s
register, and their shareholdings (including shareholdings of their
associates), as at 29 August 2014 are:
Shareholder
Thorney International Pty Ltd (1)
Thorney Opportunities Ltd (1)
Forager Funds Management Pty Ltd
Gandel Springwest Pty Ltd
Rubi Holdings Pty Ltd
Ordinary
77,516,531
32,231,408
30,148,719
21,356,226
19,453,173
%
20.06
8.34
7.80
5.53
5.03
(1)
The Company treated Thorney International Pty Ltd and Thorney Opportunities Ltd as associated entities as defined in the Corporations Act, for the purposes of
the recent capital raising.
E. Voting Rights
The voting rights attached to each class of equity security are as follows:
Ordinary shares
Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or
by proxy has one vote on a show of hands.
Options
These securities have no voting rights.
F. Net Tangible Assets
The net tangible assets per security is $0.1527 (2013: $0.1206).
72
G. 20 Largest Shareholders as at 29 August 2014 - Ordinary Shares
Service Stream Limited
ASX Additional Information
Name of 20 largest shareholders in each class of share
HSBC Custody Nominees (Australia) Limited
UBS Nominees Pty Ltd
Gandel Springwest Pty Ltd
National Nominees Limited
Rubi Holdings Pty Ltd
JBL-G Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Bond Street Custodians Limited
Citicorp Nominees Pty Ltd
Rudie Pty Ltd
Mr Darren Ronald Patterson
Dr Roger Graham Brooke & Mrs Sally Ann Brooke
Brispot Nominees Pty Ltd
J P Morgan Nominees Australia Limited
Berkeley Services Pty Ltd
Dr Hedley Sandler & Mrs Beverley Sandler
Global Property Services Pty Limited
Mrs Maree Helen Theiler
Miclod Holdings Pty Ltd
Picton Cove Pty Ltd
Ordinary shares
Fully paid number
of shares held
82,166,666
34,443,271
21,356,226
21,029,938
19,453,173
10,390,679
10,052,118
9,792,224
9,208,841
4,194,499
4,000,000
3,968,766
3,406,999
2,500,001
2,148,761
1,918,077
1,603,206
1,557,353
1,241,630
1,187,373
% Held
21.27
8.91
5.53
5.44
5.03
2.69
2.60
2.53
2.38
1.09
1.04
1.03
0.88
0.65
0.56
0.50
0.41
0.40
0.32
0.31
245,619,801
63.57
73
Corporate Directory
Directors
Peter Dempsey
Leigh Mackender
Brett Gallagher
Deborah Page AM
Stephe Wilks
Company Secretary
Vicki Letcher
Jessica Lyons
Registered Office
Level 4
357 Collins Street
Melbourne Victoria 3000
Tel: +61 3 9677 8888
Fax: +61 3 9677 8877
www.servicestream.com.au
Bankers
Australia & New Zealand Banking Group
HSBC Bank Australia Limited
Share Registry
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford Victoria 3067
Tel: 1300 850 505 (within Australia)
+61 3 9415 4000 (outside Australia)
Fax: +61 3 9473 2500
Auditors
PricewaterhouseCoopers
Service Stream Limited
Corporate Directory
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