Annual
Report
Annual General Meeting
The Annual General Meeting of
Service Stream Limited will be held at the
The Westin Hotel
205 Collins Street, Melbourne
19 October 2016, 10.30am
Service Stream Limited
ABN 46 072 369 870
Annual financial report for the financial year ended
30 June 2016
Annual financial report
for the financial year ended
30 June 2016
Directors' report
Auditor's independence declaration
Independent auditor's report to the members
Directors' declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Page
1
20
21
28
29
30
31
32
33-63
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 4 to 10, which is not part of these financial statements.
The financial statements were authorised for issue by the Directors on 17 August 2016. 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
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 2016, and in order to comply with the
provisions of the Corporations Act 2001, the Directors report as follows:
Information about the Directors
The names and particulars of the Directors of the Group during or since the end of the financial year are:
Brett Gallagher
Chairman
Term of Office: Non-Executive Director from April 2010 to April 2013 and from November 2013 to May 2014,
Managing Director from April 2013 to November 2013, Executive Director from May 2014 to February 2015,
Chairman since March 2015.
Qualifications: FAICD.
Brett Gallagher was appointed as Non-Executive Director of Service Stream Limited in April 2010 and was
appointed Chairman on 1 March 2015. Brett 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 is Chair of the Sustainability, Safety, Health and Environment Committee and was a member of the
Remuneration and Nomination Committee until 30 June 2016. Brett 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.
Leigh Mackender
Managing Director
Term of Office: Managing Director since May 2014.
Qualifications: MBA.
Leigh Mackender joined Service Stream Limited 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.
Prior to being appointed Managing Director, Leigh was 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 15 years of extensive experience working within the industrial services sector and held various
financial analysis, business
roles in private and public businesses specialising in contract management,
development and commercial negotiations.
Leigh is a member of the Sustainability, Safety, Health and Environment Committee.
Leigh has no other listed company directorships and has held no other listed company directorships in the last
three years.
Peter Dempsey
Non-Executive Director
Term of Office: Chairman from November 2010 to February 2015, Non-Executive Director since March 2015.
Qualifications: B. Tech. (Civil Eng.) (Adel), Grad. Diploma (Bus. Admin.), SAIT, FIEAust, MAICD.
Peter Dempsey was appointed as Non-Executive Director of Service Stream Limited on 1 November 2010 and
held the role of Chairman until February 2015. 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 $1.5 billion 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.
1
Peter is Chairman of the Remuneration and Nomination Committee, a member of the Audit and Risk Committee
and is the lead Independent Director.
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 held no other listed company directorships in the last three years.
Service Stream Limited
Directors' report
Greg Adcock
Non-Executive Director
Term of Office: Non-Executive Director since June 2016.
Qualifications: MAICD, MAIPM.
Greg Adcock was appointed as Non-Executive Director of Service Stream Limited on 1 June 2016. Greg brings
commercial and operational expertise developed from senior executive roles at Telstra Corporation where his
career spanned more than 20 years, and more recently at nbn co where he was the Chief Operating Officer
responsible for the key operational and commercial elements of Australia’s largest infrastructure project.
Greg’s roles at Telstra included overseeing business and capital planning, contract establishment, operational
process optimisation, regulatory compliance, strategic projects and the group’s productivity initiative program. His
experience includes developing and implementing construction contracting strategies as well as having been the
Superintendent on major construction contracts.
Greg has worked in and around major projects for over 25 years and began his career outside of Telstra in IT
including the computerisation of
services with various roles at Lindemans Wines, GE, and Aristocrat
manufacturing and accounting systems. He worked on the project
to build the New Parliament House in
Canberra which provided him an excellent insight into the complexities of project management.
Greg brings to Service Stream a broad telecommunications and operational management background with a
strong focus on commercial and project discipline.
Greg joined the Remuneration and Nomination Committee and the Sustainability, Safety, Health and
Environment Committee as a member with effect from 1 July 2016.
Greg has no other listed company directorships and has held no other listed company directorships in the last
three years.
Raelene Murphy
Non-Executive Director
Term of Office: Non-Executive Director since November 2015.
Qualifications: BBus, CA, GAICD.
Raelene Murphy has a proven track record in financial and operational performance improvement both as an
advisor and in CFO and CEO roles across a number of industry sectors in the private and public arena.
Her industry experience includes senior roles locally and internationally with Mars Inc., one of the largest food
manufacturers globally (turnover in excess of $30 billion), in planning, finance and supply chain management and
as CEO of the Delta Group, a leading diversified recycling and construction industry service provider employing
over 1,000 people Australia-wide. Raelene's advisory career has been with PwC and as a partner in national
accounting firms where she led financial and operational advisory. In that capacity, she was a lead partner on the
Federal Government's strategic review of the nbn.
Raelene is a member of the Audit and Risk Committee and Remuneration and Nomination Committee.
Raelene is a Non-Executive Director of Tassal Group Limited, Bega Cheese Limited and the DOXA Youth
Foundation, and held no other listed company directorships in the last three years.
Deborah Page AM
Non-Executive Director
Term of Office: Non-Executive Director since September 2010.
Qualifications: B Ec (Syd), FCA, FAICD.
2
Service Stream Limited
Directors' report
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 a Non-Executive Director of Brickworks Limited, BT Investment Management
Limited and GBST Holdings Limited.
During the last three years, Deborah held listed company directorship with Australian Renewable Fuels Limited
(retired October 2015) and Investa Listed Fund Management Limited, responsible entity of Investa Office Fund
(resigned April 2016).
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.
Service Stream Limited
Directors
Fully paid ordinary shares
Number
Performance rights
Number
B Gallagher
P Dempsey
G Adcock
R Murphy
D Page
L Mackender
9,682,035
1,186,775
-
-
364,268
1,136,221
-
-
-
-
-
1,430,556
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 12 to 18. 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, the following performance rights were granted to Directors and to
the five highest remunerated officers of the Group as part of their remuneration:
Directors and senior
management
Number of rights
granted
Number of ordinary
shares under rights
Service Stream Limited
L Mackender
R Grant
P McCann
M Saloyedoff
K Smith
1,000,000
1,000,000
700,000
650,000
650,000
650,000
700,000
650,000
650,000
650,000
3,650,000
3,650,000
Company secretary
Vicki Letcher joined Service Stream Limited 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. Vicki
is responsible for the corporate administration,
governance and risk management of the Group, along with having the responsibility for the Internal Audit
department of the Group.
Vicki has broad experience across a number of
industries, including manufacturing, consumer goods and
professional services having previously held a range of senior finance positions with Deloitte and Foster’s Group
Limited.
3
Service Stream Limited
Directors' report
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, HFC 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 maintained its recent trend of year-on-year growth with significant improvements recorded for the
financial year ended 30 June 2016 (FY16) across all key profitability measures. In addition, the Company further
improved its Net Cash position during the year notwithstanding an increase in dividends and a 5.0 cps capital
return.
Key financial measures
1.000
$ million
Revenue
EBITDA
EBITDA %
Net profit after tax
Earnings per share (cents)
Operating cashflow
Net cash
Total dividends declared (cents)
1.000FY16
1.000FY15
1.000
Change
438.9
35.8
8.2%
20.0
5.20
62.3
41.1
2.50
411.3
25.4
6.2%
11.7
3.03
32.3
14.8
1.50
27.7
10.4
2.0%
8.3
2.16
30.0
26.3
1.0
7% ▲
41% ▲
n/a ▲
71% ▲
71% ▲
93% ▲
178% ▲
67% ▲
1.000
All financial measures and year-on-year thereto, are rounded to the displayed number of decimal places.
Group revenue improved to $438.9 million from $411.3 million with the 7% year-on-year increase attributable to
growth in each of the three reporting segments of Fixed Communications (+7%), Mobile Communications (+8%)
and Energy & Water (+6%).
Group earnings before interest, tax, depreciation and amortisation (EBITDA) improved to $35.8 million from $25.4
million with the 41% year-on-year increase following growth of 53% in the same metric the year before. As with
revenue, EBITDA growth was achieved by each of Fixed Communications (+51%), Mobile Communications
(+21%) and Energy & Water (+42%)
Group net profit after tax (NPAT) improved to $20.0 million from $11.7 million with the 71% increase attributable
to the aforementioned improvement in EBITDA, which along with a $2.0 million reduction in net financing costs
offset a $1.1 million increase in depreciation & amortisation.
Basic earnings per share (EPS) improved to 5.20 cents from 3.03 cents with the increase attributable to the
significant increase in NPAT.
Group operating cashflow before interest and tax (OCFBIT) of $63.7 million significantly exceeded the $34.0
million recorded in the previous year, and was once again greater than EBITDA for the period due to the impact
of non-cash items in the P&L and further reductions in net working capital. Operating cashflow of $62.3 million
was similarly strong after factoring in tax payments of $1.7 million and net financing inflows of $0.3 million.
The Group’s strong financial performance for the year permitted the Board to pay a capital return to shareholders
of 5.0 cents per share on 10 June 2016 as well as approving increases to each of the interim and final dividends
for the year. An interim dividend of 1.0 cent (fully-franked) was paid on 14 April 2016 and a final dividend of 1.5
cents (fully-franked) has been declared, payable on 29 September 2016. Interim and final dividends for the
previous year were 0.5 cent and 1.0 cent respectively.
The Group once again concluded the year with cash-on-hand and no borrowings. The Group’s year-end Net
Cash balance of $41.1 million was an increase of $26.3 million over the previous year-end balance of $14.8
million notwithstanding distributions paid to shareholders during the year in the form of dividends ($7.7 million)
and capital return ($19.4 million).
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Service Stream Limited
Directors' report
Segment results
1.000
$ million
1.000
FY16
1.000
FY15
1.000
Change
Fixed Communications
Mobile Communications
Energy & Water
Eliminations & Interest Rec'd
Total Revenue
1.000
Fixed Communications
Mobile Communications
Energy & Water
Unallocated Corporate Services
Total EBITDA
1.000
Depreciation & Amortisation
EBIT
1.000
Financing costs
Income tax expense
Net profit after tax
1.000
1. Effective tax rate.
192.8
166.7
82.0
(2.4)
438.9
20.1
16.1
5.0
(5.4)
35.8
(7.4)
28.4
0.1
(8.5)
20.0
10.4%
9.7%
6.1%
2
(1.2%)
8.2%
6.5%
1
29.8%
4.6%
180.6
154.0
77.3
(0.7)
411.3
13.3
13.3
3.5
(4.8)
25.4
(6.3)
19.1
(1.9)
(5.4)
11.7
7.4%
8.7%
4.6%
2
(1.2%)
6.2%
4.6%
1
31.5%
2.8%
12.1
12.6
4.7
(1.8)
27.7
6.8
2.8
1.5
(0.7)
10.4
(1.1)
9.3
2.0
(3.1)
8.3
3.1%
1.0%
1.6%
(0.1%)
2.0%
1.8%
1.7%
2. The unallocated corporate services EBITDA percentage is calculated as a percentage of the Group's total revenue.
All financial measures and year-on-year changes thereto, are rounded to the displayed number of decimal places.
Revenue
Revenue increased by $27.7 million compared to the prior corresponding period driven primarily by:
•
Fixed Communications revenue was up (+$12.1 million) primarily due to a significantly higher number of
customer connections and related services being performed for nbn under the Field Service Delivery (FSD),
Network Augmentation & Restoration Activities (NARA) and Operations and Maintenance (OMMA)
ticket-of-work type contracts. In addition, the New Developments contract with nbn saw an increase in
volume and construction-type work commenced during the year under the new Multi-technology Integrated
Master Agreement (MIMA) with nbn. This was offset by the winding-up of
Infrastructure &
Associated Services (DIAS) contract with Telstra. In aggregate, revenue from nbn grew by $45.8 million to
$184.9 million for the year, whereas revenue from Telstra declined by $33.6 million to $7.9 million.
the Duct
• Mobile Communications revenue was up (+$12.6 million) due to a $24.7 million increase in revenue from
core wireless site acquisition & design services and construction activities, from $95.4 million to $120.1
million. This was offset by a $6.8 million decline in fixed-line work to $42.0 million and a $5.3 million decline
in low profitability “other” works to only $4.6 million.
•
Energy and Water revenue was up (+$4.7 million) primarily due to a $11.7 million increase in revenue from
core metering services, from $45.0 million to $56.7 million, partly due to the commencement of smart meter
installations for AGL Active Stream. This was offset by a $5.5 million decline in in-home services revenue to
$16.1 million and a $1.5 million reduction in revenue from customer care and other.
Earnings before interest, tax, depreciation and amortisation
The Group’s EBITDA of $35.8 million for the year was favourable to the prior year by $10.4 million.
•
Fixed Communications achieved an EBITDA of $20.1 million for FY16 which represents an improvement of
$6.8 million over the prior year. The higher EBITDA resulted from the increase in revenue detailed above
coupled with a 3.1 percentage point
improved
productivity, a more favourable mix of work and one-off benefits arising from the successful close-out of
certain contracts and trials.
increase in margin on the back of scale efficiencies,
• Mobile Communications recorded EBITDA of $16.1 million for FY16. This represents an improvement of $2.8
million over the prior year. The higher EBITDA resulted from the increase in revenue detailed above coupled
with a 1.0 percentage point increase in margin on the back of a more favourable mix of work.
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Service Stream Limited
Directors' report
•
Energy & Water reported an EBITDA of $5.0 million for FY16, an increase of $1.5 million over the prior year.
The higher EBITDA resulted from the increase in revenue detailed above coupled with a 1.5 percentage
point increase in margin on the back of a more favourable mix of work.
Net financing costs
•
The Group earned interest income of $0.7 million for the year, which was offset by interest expense and
other financing costs of $0.6 million for a net financing benefit of $0.1 million. This was a $2.0 million
improvement over the previous year’s net financing cost of $1.9 million.
Tax
•
An income tax expense of $8.5 million was recorded for the period. Whilst income tax expense was $3.1
million higher than the prior period, the increase was in line with higher profit before tax and the effective tax
rate for the year of 29.8% was in line with expectations and marginally lower than the previous year’s 31.5%.
Depreciation and amortisation
•
A depreciation and amortisation charge of $7.4 million was recorded for the period. This was $1.1 million
higher than the charge in the prior year.
Cashflow
Key movements in cashflow compared to the prior period are as follows:
•
Net cashflow from operations was $62.3 million compared to $32.3 million in the prior period. The $30.0
million improvement can be attributed to:
○
○
○
Service Stream operations generated $63.7 million in operating cashflow before interest and tax
(OCFBIT) for the year compared to $34.0 million in the prior period. Whilst both periods produced
greater OCFBIT than EBITDA, the superior profit-to-cash conversion in FY16 was due to the
impact of non-cash items in the P&L and a significant reduction in net working capital of $26.5
million;
Net cash inflows associated with financing for the year was $0.3 million which compares to net
financing outflows of $1.6 million for the previous year. The year-on-year improvement is due to
the extent of average Net Cash that the Group held over the course of the year; and
Tax payments totaling $1.7 million were made during the year, compared to no tax payments in
the prior period.
•
Net investing cash outflows for the year increased by $4.6 million to $8.3 million due to:
○
○
$5.7 million increase in capital expenditure as part of a strategic investment in technology as
operations have grown; and
$1.1 million increase in proceeds from the sale of assets.
•
Net financing outflows, excluding repayment of borrowings, for the year increased by $24.2 million to $27.7
million due to:
○
○
○
$19.4 million expended in relation to a 5.0 cents per share return of capital to shareholders;
$7.7 million paid in dividends, an increase of $5.8 million over the previous year; and
$0.5 million expended in the current year to acquire shares in Service Stream Limited which will
contribute to satisfying the Group’s forecasted obligations under share-based incentive schemes.
Financial position
The financial position of the Group declined slightly during the year with Net Assets reducing by $4.0 million to
$185.4 million. Whilst the Group produced a record NPAT of $20.0 million for the year, the level of Net Assets
was impacted by the 5.0 cps capital return (-$19.4 million) and higher dividends (-$7.7 million). At 30 June 2016
Current Assets exceeded Current Liabilities by $67.0 million (30 June 2015: $74.5 million).
Debt and financing facilities
•
•
•
The Group ended the year with Net Cash of $41.1 million, an increase of $26.3 million over the $14.8 million
balance at the prior period end. There were borrowings of Nil at both balance dates.
Bank guarantee utilisation at year-end of $13.6 million was marginally higher than the prior year-end’s $10.9
million.
The Group’s finance facilities at 30 June 2016 comprised cash advance lines totaling $35.0 million (drawn:
Nil), bank guarantee facilities totaling $20.0 million (drawn: $13.6 million) and overdraft facilities totaling $5.0
million (drawn: Nil).
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Service Stream Limited
Directors' report
•
•
The Group was in compliance with, and had substantial headroom on each of the financial covenants that
applied during the year under the Syndicated Facilities Agreement with its bankers Australia & New Zealand
Banking Group and HSBC Bank Australia Limited.
The Group has executed binding term sheets with its existing bankers for a refinance of its banking facilities
for a term of three years to 30 September 2019.
Other Balance Sheet
Other key balance sheet movements during the year included:
• Working capital at 30 June 2016 was a net asset position of $27.5 million and reflected a $26.5 million
decrease from the prior year’s closing balance of $54.0 million.
•
•
•
•
•
•
•
Trade and other receivables of $39.3 million was $5.3 million higher than the prior year-end.
Inventories reduced from $7.6 million to $5.9 million.
Accrued revenue of $59.0 million was down significantly on the prior year-end by $18.8 million.
Trade and other payables of $60.7 million increased by $6.0 million.
Provisions of $15.6 million increased from the prior year-end balance of $10.1 million.
Property, plant and equipment at 30 June 2016 was $6.2 million compared to $8.1 million at 30 June 2015
and reflects the annual depreciation charge (-$3.8 million) and book-value of asset disposals (-$0.5 million)
substantially exceeding additions for the year (+$2.4 million).
Intangibles of $124.3 million increased by $3.6 million over the prior period-end with software additions
(+$7.2 million) exceeding the amortisation charge for the year (-$3.6 million).
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 FY16 improved over the prior year, delivering an EBITDA of
$20.1 million on revenue of $192.8 million (10.4% margin), compared with EBITDA of $13.3 million on
revenue of $180.6 million (7.4% margin) in the prior year.
During the year, Fixed Communications commenced delivering services to nbn under a new four-year
Operations and Maintenance Master Agreement (OMMA) and a new five-year Multi-technology Integrated
Master Agreement
(MIMA) as well as continuing to provide services to nbn under existing New
Developments, Field Service Delivery (FSD) and Network Augmentation & Restoration Activities (NARA)
contracts.
During the year, services ceased being provided to Telstra under the Duct Infrastructure & Associated
Services (DIAS) contract and relevant operations were demobilised.
Mobile Communications
Mobile Communications provides program management and turnkey services for infrastructure projects across
Australia, principally in the telecommunications sector. Service capability includes 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 FY16 also saw improvement with EBITDA of $16.1 million
on revenue of $166.7 million (9.7% margin) compared with EBITDA of $13.3 million on revenue of $154.0
million (8.7% margin) in the prior year.
•
During the year, Mobile Communications was successful in securing new contracts with Nokia Solutions and
Networks Australia Pty Ltd for design and construction services on the Optus wireless network, as well as
works commencing under new contracts with the NSW Telco Authority, PIPE Networks (part of the TPG
Group) and Axicom (previously known as Crown Castle Australia).
Energy & Water
Energy & Water provides a range of specialist metering, in-home and new energy services to electricity, gas, and
water networks across Australia; and through the Customer Care business, provides contact centre services and
workforce management support for key contracts.
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Service Stream Limited
Directors' report
•
•
•
Energy & Water’s financial performance in FY16 also saw improvement with EBITDA of $5.0 million on
revenue of $82.0 million (6.1% margin) compared with EBITDA of $3.5 million on revenue of $77.3 million
(4.6% margin) in the prior year.
During the year, Energy and Water commenced delivering services to Active Stream (a wholly-owned
subsidiary of AGL Energy Limited) under a new three-year metering field services contract, and by year-end
had installed 41,000 new electricity smart meters for AGL retail customers.
During the year Energy & Water completed 2,354 residential solar PV installations at an average size of
4.1kw (total
installed capacity 9.7 megawatts) as well as 91 commercial solar PV installations with an
average size of 17.6kw (total capacity 1.6 megawatts). This compares to the prior year’s 2,678 residential
solar PV installations at an average size of 3.7kw (total installed capacity 9.9 megawatts) and commercial
solar PV work with an aggregate installed capacity of 0.4 megawatts.
Overall Group strategy, prospects and risks
The financial performance of the Group further improved during the year, and the Group delivered on its strategic
plan in line with the Board’s expectation.
The Board is particularly pleased with Fixed Communications securing new cornerstone contracts (OMMA &
MIMA) with nbn, Mobile Communications securing contracts with new customers to improve its revenue
diversification, Energy & Water successfully mobilising its new metering services contract with Active Stream,
and the significant improvements that the Group has made in working capital management and cash generation.
The Board believes that the Group is well placed under the leadership of Managing Director, Leigh Mackender, to
continue to take advantage of growth opportunities as they present, and to maximise 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 particularly in the areas of its proven competence such as new
estates and customer connections.
In Mobile Communications, increasing demand for mobile data and advances in technology 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 and Telstra 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 its major 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.
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.
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
maximise the variability of
the business’ cost-base and structures through the use of
subcontractors wherever possible. Processes are therefore established and maintained to
attract, mobilise and retain key subcontractor 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.
In FY16, Fixed Communications secured the OMMA contract with nbn which, due to the
annuity-style revenues arising from customer connection associated with the mass roll-out of
a new high-speed telecommunications network, should provide greater certainty of customer
demand going forward.
8
Contract
management
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.
Service Stream Limited
Directors' report
In recent time, it has become evident that large customers are trying to impose higher liability
regimes onto contractors such as Service Stream, and that emerging risks around data
security and privacy are gaining greater contractual attention.
Management and the Board therefore remain focused on ensuring that appropriate contract
management disciplines are effectively embedded in the organisation to manage contract risk
and to maximise contract entitlements.
In that context, a now well-established Group Commercial function is in place, reporting
directly to the Managing Director. A revised New Business / Bid Management Framework has
already been developed and implemented, and contract management disciplines are
progressively being enhanced across the Group.
Renewal of
customer
contracts
Whilst the Group has been successful in renewing and extending all of the major customer
contracts that have recently expired, the renewal of contracts remains a risk that Management
and the Board continues to actively monitor and manage.
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.
Only a small number of contracts with key customers are due to expire during FY17, and
Management is confident that the majority of them will be either extended or renewed where
there is ongoing work.
Retention of key
personnel and
sourcing of
subcontractors
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
participation in talent management programs.
Access to an appropriately skilled and resourced pool of subcontractors across Australia is
also critical to Service Stream’s ability to successfully undertake and complete work for its
customers. Throughout FY16, Management has been particularly focused on mobilising a
large pool of subcontractors to undertake an increased volume of customer connection work
for nbn, and to support the recently secured OMMA and MIMA contracts. Internal systems
and processes have also been developed and enhanced to ensure that a sufficiently sized
subcontractor workforce can be attracted and mobilised as quickly as required.
Working with
potential safety
hazard
In undertaking work and delivering programs for its customers, Service Stream’s employees
and subcontractors can operate in potentially hazardous environments and perform potentially
hazardous tasks.
Management and the Board remain alert
to the safety risks posed to employees and
subcontractors, devote significant time to monitoring the effectiveness of the Group’s safety
framework, and have implemented a wide range of controls to prevent injuries to employees
and subcontractors.
During FY16, the Group’s safety performance across all major performance metrics has
continued to improve with an LTIFR of 0.83 at 30 June 2016.
Digital disruption Technology is changing and evolving at a rapid pace, and it is possible that such advances
may cause disruptions to certain elements of the markets in which Service Stream operates,
or to services that Service Steam provides.
Management and the Board spend time each year during a planning cycle to update the
Group Strategic Plan covering a four-year horizon. This planning process includes a detailed
assessment of relevant external factors, including digital or technological disruption, which
may have a bearing on the Group’s current markets and service offerings. Management and
the Board aim, wherever possible, to anticipate likely future changes and to position the
Company to take advantage of the changing landscape.
Information
management
Service Stream’s operational agility, overall cost effectiveness and ability to convert works to
cash in a timely manner are becoming increasingly reliant on the appropriate management of
data and information.
Management and the Board remain alert to ensuring that sufficient funds are made available
to maintain fit-for-purpose system applications and infrastructure, and that IT investments are
appropriately prioritised and undertaken effectively.
9
In FY16, several enhancements and system changes were implemented and a major project
was commenced to upgrade the Group’s enterprise-wide project management, financial and
supply chain systems. Management continues to assess the Group’s application suite and to
consider if and when further enhancements are required.
Service Stream Limited
Directors' report
Dividends
Dividends paid or declared by the Company during and since the end of the year are set out in note 17 to the
financial statements and further set out below:
Per share (cents)
Total amount ($'000)
Franked
Payment date
Final
2016
Interim
2016
Final
2015
1.50
5,394
100%
1.00
3,862
100%
1.00
3,856
100%
29 September 2016
14 April 2016
8 October 2015
Significant changes in the 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
Other than elsewhere disclosed in the financial statement, 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
regulation under a
Commonwealth, State or Territory law.
to any particular or significant environmental
Shares under performance rights
Details of unissued shares under performance rights at the date of this report are:
Series
Class of
shares
Exercise price
of right
FY14 LTIP Tranche
Ordinary
FY15 LTIP Tranche
Ordinary
FY16 LTIP Tranche
Ordinary
FY16 ESBIP Tranche Ordinary
$0.00
$0.00
$0.00
$0.00
Vesting date
September 2016
September 2017
September 2018
17 August 2016
Number of shares
under rights
3,987,543
2,284,032
1,690,324
5,150,000
13,111,899
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
performance rights have been issued since the end of the financial year.
In accordance with the Employee Share Ownership Plan the shares relating to the Long Term Incentive Plan
(LTIP) and Executive Share-based Incentive Plan (ESBIP) tranches will be issued to participants after release of
the financial statements in those financial years, to the extent that the vesting criteria has been satisfied.
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).
10
Service Stream Limited
Directors' report
Meetings of Committees
Board
meetings
Audit and
Risk
Remuneration
and Nomination
Sustainability,
Safety, Health &
Environment
Term of
Directorship
NO OF MEETINGS HELD
No of meetings attended by
B Gallagher
P Dempsey
G Adcock 1
R Murphy 2
D Page
S Wilks 3
L Mackender
15
15
15
2^
10
15
8
15
4
4*
4
1^
2
4
2
4*
4
4*
4
1^
2
4
2
4#
4
4
4*
0
1
1*
3
4
6 years
6 years
1 month
8 months
6 years
11 years
2 years
* Attended as a Standing Invitee.
^ Attended May 2016 meetings as a guest.
# Attended as a guest for relevant agenda items.
1. G Adcock was appointed to the position of Non-Executive Director on 1 June 2016.
2. R Murphy was appointed to the position of Non-Executive Director on 18 November 2015.
3. S Wilks resigned from his position as Non-Executive Director on 31 December 2015.
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 26 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 26 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.
11
Service Stream Limited
Directors' report
Auditor's independence declaration
The auditor’s independence declaration is included on page 20 of the annual financial report.
Rounding of amounts
/ Directors' Reports)
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial
Instrument 2016/191,
relating to the
rounding-off of amounts in the Directors' report and the financial report. Amounts in the Directors' report and the
financial report have been rounded-off to the nearest thousand dollars, in accordance with that Instrument.
issued by the Australian Securities and Investments Commission,
Corporate governance statement
Service Stream Limited and the Board are committed to achieving and demonstrating the highest standards of
corporate governance. Service Stream Limited has reviewed its corporate governance practices against the 3rd
edition ASX Corporate Governance Principles and Recommendations. Service Steam is compliant with all ASX
Corporate Governance Principles and Recommendation, except for recommendation 2.5. Due to the fact that Mr
Gallagher held the role of Managing Director from April to November 2013 and Executive Director from May to
December 2014, he is currently deemed to not be independent.
the Group’s current corporate governance practices is set out
A description of
in the Group’s corporate
governance statement which can be viewed at http://www.servicestream.com.au/investors/corporate-governance.
The corporate governance statement is accurate and up to date as at 17 August 2016 and has been approved by
the Board.
Remuneration report
1 Introduction and scope
The Service Stream Limited 2016 remuneration report sets out information about the remuneration of Service
Stream Limited's key management personnel (KMP) for the financial year ended 30 June 2016 (FY16). The term
KMP 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 following table depicts the Directors and Senior Executives of the Group who were classified as KMP for the
entire financial year unless otherwise indicated.
Non-Executive Directors
Brett Gallagher
Peter Dempsey
Greg Adcock
Raelene Murphy
Deborah Page
Stephe Wilks
Executive Director
Leigh Mackender
Senior Executives
Robert Grant
Paul McCann
Max Saloyedoff
Kevin Smith
Chairman
Non-Executive Director
Non-Executive Director (since 1 June 2016)
Non-Executive Director (since 18 November 2015)
Non-Executive Director
Non-Executive Director (until 31 December 2015)
Managing Director
Chief Financial Officer
Executive General Manager, Energy and Water
Executive General Manager, Mobile Communications
Executive General Manager, Fixed Communications
2 Role of the Remuneration and Nomination Committee
The Board’s Remuneration and Nomination Committee (RNC)
reviewing and making
recommendations to the Board on the remuneration arrangements for the Non-Executive Directors, the Managing
Director and the executive management team including the Senior Executives. Information on the RNC’s role and
responsibilities
at
www.servicestream.com.au.
the Group’s website
is responsible for
charter, which
contained
available
on
its
in
is
is
12
Service Stream Limited
Directors' report
To assist in performing its duties and making recommendations to the Board, the RNC periodically seeks
independent advice from external consultants on various remuneration-related matters. In such cases, the RNC
follows protocols around the engagement and use of external remuneration consultants to ensure compliance
with the relevant executive remuneration legislation. All remuneration recommendations are provided by the
external consultant directly to the RNC.
During FY16, the RNC engaged Korn Ferry (previously Hay Group) to provide benchmarking data for salaried
roles across the Group. Recommendations for salary adjustments arising from the benchmarking data were
considered by the RNC and submitted to the Board for approval where appropriate. Korn Ferry was paid $48,000
for these services.
3 Executive remuneration policy and framework
Remuneration policy and principles
The Board, through the RNC, reviews the remuneration packages of all KMP on an annual basis. Remuneration
packages are set and reviewed with due regard to current market rates and are benchmarked, where relevant,
against comparable industry salaries.
The objectives of the Group's remuneration policy are to ensure that the Group:
•
•
•
Attracts, retains and motivates talented employees;
Aligns employee activities to the achievement of business objectives;
Creates a high performance culture that delivers shareholder value;
• Maintains fair, equitable and affordable rates of pay for all employees, based on their performance and the
markets in which the Group operates;
•
•
Encourages, recognises and rewards individual, team and group performance on the basis of ability-to-pay
and alignment with shareholder returns; and
Operates a remuneration system that is transparent, accountable, scalable, flexible and consistent, enabling
comparison with the external market.
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.
Overview of remuneration components
The table below depicts the components of the executive remuneration framework that apply to the Managing
Director and Senior Executives. Further details on each of the components are set out in section 5 of this
remuneration report.
Fixed remuneration
Incentive remuneration
FY16: 60% - 65% of total remuneration
FY16: 35% - 40% of total remuneration
> Fixed salary set by reference to appropriate
benchmark information and individual performance
> Fixed number of performance rights issued under an
Executive Share-based Incentive Plan (ESBIP)
> Includes superannuation and salary-sacrificed non-
monetary benefits
> Performance hurdle linked to annual EPS growth
> No cash bonuses
4 Linking performance to executive remuneration
the above elements of
Both of
the executive remuneration framework are linked to the Group’s financial
performance. Changes to fixed remuneration are determined by an individual's performance and by the Group’s
capacity to fund any changes. Vesting of performance rights issued under the ESBIP for incentive remuneration
are directly linked to the satisfaction of relevant Group financial measures.
The RNC reviews the remuneration packages of all Directors and Senior Executives on an annual basis and
makes recommendations to the Board in respect to any changes thereto. Remuneration packages are reviewed
with due regard to performance, the relativity of remuneration to comparable companies and where appropriate,
the RNC receives expert independent advice regarding remuneration levels required to attract and compensate
Directors and Senior Executives, given the nature of their work and responsibilities.
13
Service Stream Limited
Directors' report
In considering the Group’s financial performance, the RNC has regard to a number of measures including the
following:
Key Indicators
Revenue ($'000)
EBITDA 1 ($'000)
Net profit/(loss) after tax ($'000)
Earnings per share (cents)
Dividends per share 2 (cents)
Share price 30 June (cents)
2012
2013
2014
2015
2016
592,216
38,041
18,716
6.60
2.00
35.0
526,593
(13,392)
(107,054)
(37.77)
1.00
13.5
389,574
16,560
2,309
0.76
-
18.6
411,270
438,940
25,389
11,720
3.03
1.50
29.7
35,818
19,983
5.20
2.50
78.5
1. Earnings before interest, tax, depreciation and amortisation.
2. Franked to 100% at 30% corporate income tax rate.
The overall level of key management personnel compensation takes into account the size, complexity, financial
performance and growth prospects of the Group.
5 Managing Director and Senior Executive remuneration
Fixed remuneration
Fixed remuneration consists of base compensation and statutory superannuation contributions. Executives may
also elect to have other benefits provided out of their fixed remuneration, including additional superannuation and
the provision of a motor vehicle.
Incentive remuneration
Incentive remuneration consists of participation in the Group’s Executive Share-based Incentive Plan (ESBIP).
What is the ESBIP and who participates?
The ESBIP is a share-based incentive plan that was established by the Board in 2014 to operate for a five-year
period from FY15 to FY19 and offered to the Managing Director and to a small number of other key executives of
the time. In establishing the ESBIP, the Board’s aims were to recognise the efforts and loyalty of those individuals
instability, provide a retention
during the immediately preceding period of operating challenges and financial
incentive for those executives identified as being key to leading the Group's return to sustainable profitability, and
link their reward with the creation of shareholder value. Participation in ESBIP was conditional on each invited
executive agreeing to forego participation in any short-term cash bonus arrangement and the Long Term
Incentive Plan (LTIP) applicable to that five-year period.
The Managing Director and each of the Senior Executives listed in section 1 of this remuneration report are
participants in the ESBIP. The Board does not propose to offer ESBIP participation to any additional employees.
How does the ESBIP operate?
The ESBIP operates via the allocation of performance rights that are subject to satisfaction of EPS performance
conditions. Upon admission to the ESBIP, each participating executive is provided with an ESBIP invitation that
sets out the rules and mechanics of the plan, and provides details regarding the number of rights that will be
offered to that executive on an annual basis (by way of an annual offer letter) over the plan’s term. Each
performance right converts into one ordinary share of Service Stream Limited upon 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 offered to the Managing Director and Senior Executives under the ESBIP have
been endorsed by the RNC and approved by the Board and by shareholders in the case of the Managing
Director.
What is the performance period?
ESBIP performance rights are issued in respect of a particular financial year and are subject to the satisfaction of
performance hurdles over an initial one-year performance period. Any performance rights which do not vest at
the end of the initial performance period will be tested again at the end of year two, and if necessary the end of
year three (Aggregate Period). Any rights which have not vested at the end of the Aggregate Period will lapse.
14
Service Stream Limited
Directors' report
What are the performance hurdles?
The performance hurdles for each ESBIP grant are based on the following:
•
•
•
The participant must be an employee at the latter of the date on which the Company releases its results for
the financial year to which the ESBIP grant applies or otherwise determines that the vesting conditions have
been satisfied during the Aggregate Period; and
at least 10% growth in earnings per share (EPS) for the initial performance period is achieved; or
an average of at least 10% compound growth in EPS per annum for the Aggregate Period is achieved.
Why was this performance condition chosen?
The Board considers the EPS hurdle to be an appropriate measure on the basis that it is a relevant measure of
increase in shareholder value, it is a financial outcome that is highly correlated with the effectiveness of ESBIP
participants, and it is a financial metric the calculation of which is independently verified by virtue of the audit of
the financial statements.
Summary of grants under ESBIP and LTIP
Name
L Mackender
FY13 LTIP
FY14 LTIP1
FY15 ESBIP
FY16 ESBIP1
Total
R Grant
FY13 LTIP
FY14 LTIP1
FY15 ESBIP
FY16 ESBIP1
Total
P McCann
FY15 ESBIP
FY16 ESBIP1
Total
M Saloyedoff
FY13 LTIP
FY14 LTIP1
FY15 ESBIP
FY16 ESBIP1
Total
K Smith
FY13 LTIP
FY14 LTIP1
FY15 ESBIP
FY16 ESBIP1
Total
Balance as at 1
July 2015
Granted as
compensation
Vested
Forfeited
Balance as
at 30 June
2016
Number
Number
Number
Number
Number
164,438
430,556
1,000,000
-
-
-
-
(1,000,000)
-
1,000,000
-
-
-
-
430,556
-
1,000,000
(82,219)
(82,219)
-
Fair value
when
granted 2
$
Value of
shares
issued
$
39,465
77,500
194,000
284,000
25,003
n/a
304,200
n/a
1,594,994
1,000,000
(1,082,219)
(82,219)
1,430,556
522,297
1,241,389
700,000
-
-
-
-
700,000
(261,149)
(261,149)
-
-
(700,000)
-
-
-
-
1,241,389
-
700,000
125,351
223,450
135,800
198,800
79,415
n/a
212,940
n/a
2,463,686
700,000
(961,149)
(261,149)
1,941,389
650,000
-
(650,000)
-
650,000
-
650,000
650,000
(650,000)
-
-
-
-
650,000
650,000
126,100
184,600
197,730
n/a
102,690
409,722
650,000
-
-
-
-
650,000
(51,345)
(51,345)
-
(650,000)
-
-
-
-
-
409,722
-
650,000
24,646
73,750
126,100
184,600
15,614
n/a
197,730
n/a
1,162,412
650,000
(701,345)
(51,345)
1,059,722
104,047
245,720
650,000
-
-
-
-
650,000
(52,024)
(52,024)
-
-
(650,000)
-
-
-
-
245,720
-
650,000
24,971
44,230
126,100
184,600
15,820
n/a
197,730
n/a
999,767
650,000
(702,024)
(52,024)
895,720
Grant dates
Vesting dates
FY13 LTIP
FY14 LTIP
30 November 2012 26 August 2015
31 July 2014
September 2016
FY15 ESBIP
28 February 2015
12 August 2015
FY16 ESBIP
11 September 2015 17 August 2016
1. The number of rights relating to FY14 LTIP and FY16 ESBIP tranches will be issued to the participants after the release of financial
statement, to the extent that the vesting criteria has been satisfied.
15
Service Stream Limited
Directors' report
2. The grant date fair value of all rights on issue to KMP have been expensed as at 30 June 2016 in line with each of the tranche's
performance periods. As such, the maximum value of deferred shares yet to vest (which would be determined as the grant date fair
value of rights yet to be expensed) as required to be disclosed is nil.
Performance outcomes
The table below sets out the details of the percentage performance achieved against the applicable share plans,
where the rights under the plan either vested or the assessment of the achievement of the relevant performance
hurdles were assessed in the current financial year.
Plan
Grant date
Vesting date
Fair value of each
performance right at
grant date
% of performance
hurdles achieved % of rights vested
FY13 LTIP 1
FY14 LTIP 2
FY16 ESBIP 3
30 November 2012
26 August 2015
24.0 cents
50%
50%
31 July 2014
September 2016
18.0 cents
To be determined
To be determined
31 August 2015
17 August 2016
28.4 cents
100%
100%
1. Rights have vested and shares have been delivered to plan participants.
2. Measurement of the Relative TSR for year three and the three-year period will not be completed until after the release of FY16 results.
3. Both the service and performance criteria have been assessed as met. The relevant number of shares will be delivered to the participants
after the release of the FY16 results.
Service agreements
The table below sets out the main terms and conditions of the employment contracts of the Managing Director
and Senior Executives.
Title
Notice periods and termination payments
Managing Director and Chief Financial Officer
> 6 months either party (or payment in lieu)
> Immediate for serious misconduct or breach of contract
> Statutory requirements only for termination with cause
Other Senior Executives
> 3 months either party (or payment in lieu)
> Immediate for serious misconduct or breach of contract
> Statutory requirements only for termination with cause
Executive remuneration table
Short-term employee
benefits
Post-
employment
benefits
Long-term
employee
benefits
Share- based
payments
Salary and
fees
Non-
monetary
Year
L Mackender
2016
465,193
R Grant
2015
2016
2015
456,217
437,559
419,901
-
-
-
-
P McCann
2016
239,551
27,864
Super
19,308
Performance
rights
LSL
Total
Fixed At Risk
14,082
320,393
818,976
61%
39%
18,783
29,700
223,738
728,438
69%
31%
19,308
18,649
303,729
779,245
61%
39%
28,008
19,308
9,146
7,385
221,196
678,251
67%
33%
184,600
478,708
61%
39%
2015
215,417
4,840
16,713
12,718
126,100
375,788
66%
34%
M Saloyedoff 2016
328,521
K Smith
2015
2016
2015
336,353
317,293
295,625
-
-
-
-
19,308
18,783
9,828
9,164
219,232
576,889
62%
38%
157,992
522,292
70%
30%
19,308
13,890
205,370
555,861
63%
37%
18,783
22,249
142,844
479,501
70%
30%
Total
2016
1,788,117
27,864
96,540
63,834
1,233,324
3,209,679
62%
38%
2015
1,723,513
4,840
101,070
82,977
871,870
2,784,270
69%
31%
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Service Stream Limited
Directors' report
6 Non-Executive remuneration
Overview
Aggregate fees approved by shareholders
The current maximum aggregate fee pool
for the Non-Executive Directors is $750,000 as approved by
shareholders. Board and committee fees (inclusive of superannuation where applicable) are included in the
aggregate pool.
Promote independence and objectivity
fixed fees (inclusive of superannuation where
Non-Executive Directors are remunerated only by way of
applicable). To preserve independence and impartiality, Non-Executive Directors do not receive any performance
related compensation.
Regular reviews of remuneration
Fees are reviewed annually taking into account comparable roles and market data provided by the Board’s
independent remuneration adviser.
Non-Executive Directors' remuneration
B Gallagher 1
P Dempsey
G Adcock 2
R Murphy 3
D Page
S Wilks 4
Total
Year
2016
2015
2016
2015
2016
2016
2016
2015
2016
2015
2016
2015
Board and
Committee fees
Super
Total
113,014
10,736
123,750
154,795
14,597
169,392
89,041
94,629
17,500
65,830
93,607
99,412
47,500
103,746
8,459
8,990
-
-
8,893
9,444
-
-
97,500
103,619
17,500
65,830
102,500
108,856
47,500
103,746
426,492
28,088
454,580
452,582
33,031
485,613
1. B Gallagher was Executive Director until February 2015. His remuneration for the year ended 30 June 2015 included a higher duties
allowance of $53,381.
2. G Adcock was appointed to the position of Non-Executive Director on 1 June 2016.
3. R Murphy was appointed to the position of Non-Executive Director on 18 November 2015 and her remuneration is paid to Wealth For
Toil Pty Ltd, a company in which Mrs Murphy has a beneficial interest.
4. S Wilks held the position of Non-Executive Director until 31 December 2015. Up until this date his remuneration was paid to High
Expectations Pty Ltd, a company in which Mr Wilks has a beneficial interest.
17
7 Shareholdings of key management personnel
Received on
vesting of
performance
rights
(Disposed)/
acquired
during the
year
Balance as
at 1 July
Balance as at
date of
appointment
Balance as at
date of
resignation
Impact of
share
consolidation
Balance as at
30 June
No.
No.
No.
No.
No.
No.
No.
Service Stream Limited
Directors' report
2016
Non-Executives
B Gallagher
10,390,679
P Dempsey
1,073,637
-
-
332,928
710,911
G Adcock
R Murphy
D Page
S Wilks 1
1.000
Executives
-
-
-
-
-
-
L Mackender
137,163
1,082,219
R Grant
P McCann
M Saloyedoff
K Smith
1.000
2015
684,209
-
-
114,786
961,149
650,000
701,345
702,024
-
200,000
-
-
58,000
-
-
-
3,060
(695,000)
3,060
Non-Executives
B Gallagher
10,390,679
P Dempsey
D Page
S Wilks
Executives
L Mackender
R Grant
K Smith
673,637
152,928
590,911
92,637
540,855
84,968
-
-
-
-
-
400,000
180,000
120,000
44,526
143,354
29,818
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(708,644)
9,682,035
(86,862)
1,186,775
-
-
-
-
(26,660)
364,268
(710,911)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(83,161)
1,136,221
(112,212)
1,533,146
(44,538)
608,522
(432)
5,913
(55,913)
763,957
-
-
-
-
-
-
-
10,390,679
1,073,637
332,928
710,911
137,163
684,209
114,786
1. During the period, S Wilks resigned from his position of Non-Executive Director.
8 Voting and comments made at the Company's 2015 Annual General Meeting
The Company received 99% of “yes” votes on its Remuneration Report for the 2015 financial year. The Company
did not receive any specific feedback at the AGM on its remuneration practices.
18
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
Brett Gallagher
Chairman
17 August 2016
Leigh Mackender
Managing Director
17 August 2016
19
Auditor’s Independence Declaration
As lead auditor for the audit of Service Stream Limited for the year ended 30 June 2016, I declare that
to the best of my knowledge and belief, there have been:
1.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2.
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
17 August 2016
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 audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Service Stream Limited (the Company) and its subsidiaries (together the
Group) is in accordance with the Corporations Act 2001, including:
a) giving a true and fair view of the Group's financial position as at 30 June 2016 and of its financial
performance for the year then ended; and
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited:
The Group’s financial report comprises:
the consolidated balance sheet as at 30 June 2016;
the consolidated statement of profit or loss and other comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended;
notes to the consolidated financial statements; and
the Directors' declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110
Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
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.
Our audit approach
Overview
Service Stream Limited is an Australian company listed on the ASX. Service Stream Limited provides a wide range
of specialist services to develop and operate Australia’s essential communications, energy and water networks.
Materiality
For the purposes of our audit, we used a threshold for overall Group
materiality of $895,000, which is based on 2.5% of the Group’s EBITDA
for the year ended 30 June 2016.
Audit scope
We conducted an audit of Service Stream Limited and its subsidiaries
(together the Group).
Key Audit Matters
The appropriateness of goodwill carrying value (Energy & Water)
Revenue recognition
Recoverability of accrued revenue.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to provide reasonable
assurance about whether the financial report is free from material misstatement. Misstatements may arise due to
fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the financial report.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall Group materiality for the financial report as a whole as set out in the table below. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our
audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial
report as a whole.
Overall
materiality
We determined an overall Group materiality of $895,000. We applied this
threshold in:
planning and performing the audit;
evaluating the effect of:
identified misstatements on the audit;
uncorrected misstatements, if any, on the financial report; and
o
o
forming our opinion in the auditor's report.
Based on 2.5% of the Group’s EBITDA for the year ended 30 June 2016.
We selected EBITDA as the primary benchmark because in our view, it is a
key metric upon which the Group’s performance is assessed. We determined
2.5% based on our professional judgement, noting that it is within the range
of commonly accepted EBITDA related benchmarks.
How we
determined it
Rationale for the
materiality
benchmark
applied
Audit scope
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
Group financial report. In particular, we considered where the Directors made subjective judgements, for example
in respect of significant accounting estimates that involved making assumptions and consideration of future events
that are inherently uncertain. One of the key areas in this respect is the Group’s annual goodwill impairment
assessment. We also addressed the risk of management override of internal controls, including among other
matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due
to fraud.
We tailored the scope of our audit to perform sufficient work to be able to give an opinion on the financial report as
a whole, taking into account the geographic and management structure of the Group, the Group’s accounting
processes and controls, and the industry in which the Group operates. This included specialists and experts in IT,
tax and valuations.
The Group operates across Australia in its key segments being Fixed Communications, Mobile Communications
and Energy & Water, and has a corporate accounting function based in Melbourne. Our work is performed
predominantly in Melbourne. We also visit the Group’s significant warehouse locations annually based on
assessed risk.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report for the current period. We have communicated the key audit matters to the Audit and Risk
Committee, but they are not a comprehensive reflection of all matters that were identified by our audit and that
were discussed with the Committee. In the table below we have described the key audit matters we identified and
have included a summary of the principal audit procedures we performed to address those matters.
The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the
outcomes of a particular audit procedure is made in that context.
Key audit matter
The appropriateness of goodwill carrying
value (Energy & Water)
Refer to note 11 in the financial report
Goodwill is allocated to the Group’s three
segments. We focused on the goodwill
associated with Energy & Water ($42 million)
because the carrying value is material and the
level of headroom between the recoverable
amount and the carrying value is limited
($4 million).
Assessing the carrying value of goodwill
requires making estimates of uncertain future
cash flows. For example, key customer volumes
are not contracted and can fluctuate
significantly. Because the headroom is limited,
the impairment outcome is highly sensitive to
reasonably possible changes to the assumptions.
The recoverable amount is estimated based on
the Board approved business plan for Energy &
Water. The significant assumptions include the
discount rate and the EBITDA growth rates
which support the forecast cash flows.
How our audit addressed the key audit matter
We evaluated management’s cash flow forecasts for the
Energy & Water business and the process by which they were
developed at an individual customer level. We compared the
previous year’s forecasts for 2016 with the actual results for
2016 to assess the accuracy of forecasting. We found that
actual 2016 performance was materially consistent with the
forecast performance.
We checked that the four year forecast used in the valuation
model was consistent with the Board approved plan for the
Energy & Water business and that the key assumptions were
subject to oversight from the Directors.
We assessed the assumptions and methodology used for the
impairment test, in particular, those assumptions relating to
the discount rate and EBITDA growth rates. To do this we:
evaluated the appropriateness of the discount rate
adopted. Assisted by our valuation experts, we
developed an acceptable range of discount rates based
on market data and industry research. We found that
the discount rate used by the Group was at the
midpoint of the acceptable range
Key audit matter
How our audit addressed the key audit matter
evaluated the underlying cash flow assumptions at an
individual customer level with reference to current
year results and expected project pipelines and
considered external industry information and market
data
checked the calculations in the valuation model for
mathematical accuracy
considered the sensitivity of the calculations by
varying key assumptions and applying other values
within a reasonably possible range for the Energy &
Water business, for example, by increasing the
discount rate and by reducing certain growth
assumptions.
As indicated in note 11 of the financial report, the impairment
assessment remains sensitive to a range of assumptions, in
particular to the retention of material contracts and projected
growth in the markets that Energy & Water operates within.
For revenue from contracts to provide services, we:
tested a sample of transactions by sighting evidence of
completed subcontractor claims and/or work orders
and compared the revenue amount recognised to the
contracted rate with the customer for the type of
service.
For revenue from construction contracts, we:
assessed management’s estimates of total contract
revenue and contract costs and recalculated the stage
of completion based on actual costs incurred to date
for a sample of transactions
checked start and end dates of projects to supporting
evidence for a sample of revenue recognised on a time
basis
performed retrospective analysis of incomplete
projects at year end. We compared estimated project
completion dates with actual completion dates post
year end to assess the allocation of revenue between
periods.
For both categories of revenue, our procedures included,
amongst others, data analysis of the expected flows of
revenue transactions and performing testing over
transactions that deviated from our expectations.
Revenue recognition
Refer to notes 3, 30(e) and 30(f) in the
financial report
The Group has two distinct categories of
revenue, being revenue from contracts to
provide services and revenue from construction
contracts.
Revenue from contracts to provide services
involves a high volume of transactions and is
recognised as the services are delivered.
Revenue recognition in relation to construction
contracts is complex because it is based on
management estimates of:
the stage of completion of the
contract activity;
total contract revenue and costs;
the probability of customer approval of
variations and claims; and
project completion dates.
We believe this is a key audit matter because of
its significance to profit, the high volume of
revenue transactions associated with services
revenue and the judgement required in
recognising revenue from construction
contracts.
Key audit matter
Recoverability of accrued revenue
Refer to note 9 in the financial report
How our audit addressed the key audit matter
Several of the Group’s customers require
payment claims to be submitted and approved
prior to invoices being issued. This process can
extend the time that revenue is held as accrued
as claims typically include high volumes of data.
We evaluated the aging of accrued revenue to identify areas of
higher risk. Whilst each segment includes aged accrued
revenue balances, the Fixed Communications segment has
the most significant balances and was where we directed the
majority of our audit effort.
Payment claims on customers may be rejected
for a variety of reasons, for example, the claim’s
adherence to contractual specifications.
Rejected claims are commonly revised,
resubmitted and subsequently approved for
payment. However, there is a risk that not all
claims will be recovered in full, particularly
those that have significantly aged since the
original services were provided.
We therefore focused on the recoverability of
aged accrued revenue because judgement is
required to evaluate whether any allowance
should be made to reflect the commercial risk
that some claims may not be recovered in full.
We performed the following procedures, amongst others, in
relation to the recoverability of accrued revenue:
assessed the reliability of accrued revenue aging
reports by testing that the aging profile was accurate
evaluated the consistency of management’s approach
to estimating recoverability of accrued revenue with
that used in prior periods
confirmed that provisions were established to reflect
those categories of aged accrued revenue items that
had an increased risk of non-recoverability
assessed key assumptions such as the long term
average claim rejection rate which we compared to
actual experience, including recent trends.
We also performed sample testing over individual accrued
revenue balances to check the Group’s entitlement to the
accrued revenue balances.
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2016, including the Directors' Report and ASX
Additional Information, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial report
or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors 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 gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the Directors.
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance in
the audit of the financial report for the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 12 to 18 of the Directors’ report for the year ended
30 June 2016.
In our opinion, the remuneration report of Service Stream Limited for the year ended 30 June 2016 complies with
section 300A of the Corporations Act 2001.
Responsibilities
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.
PricewaterhouseCoopers
Andrew Cronin
Partner
Melbourne
17 August 2016
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 2016 and of
its performance for the 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, and
at the date of this declaration, there are reasonable grounds to believe that the members of the extended
closed Group identified in note 19 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 20.
Note 30 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.
Brett Gallagher
Chairman
17 August 2016
Leigh Mackender
Managing Director
17 August 2016
28
Consolidated statement of profit or loss and other comprehensive
income
for the financial year ended 30 June 2016
Service Stream Limited
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
Depreciation and amortisation
Interest expense and other finance costs
Other expenses
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Item that may be reclassified to profit or loss
Cash flow hedges
Blank
Total comprehensive income for the year
0
Profit attributable to the equity holders of the parent
0
Total comprehensive income attributable to equity holders of the
parent
Note
3
4
6
5
7
2016
$'000
2015
$'000
437,872
1,068
438,940
(115,836)
(157,582)
(76,903)
(16,562)
(4,061)
(3,540)
(7,168)
(9,415)
(7,648)
(7,410)
(639)
(3,703)
28,473
(8,490)
19,983
410,888
382
411,270
(105,352)
(163,963)
(67,616)
(14,941)
(4,682)
(4,082)
(6,067)
(8,315)
(7,014)
(6,325)
(2,079)
(3,718)
17,116
(5,396)
11,720
-
22
19,983
11,742
19,983
19,983
11,720
11,742
Earnings per share
Basic (cents per share)
Diluted (per share)
16
16
5.20
5.07
3.03
3.02
Notes to the financial statements are included on pages 33 to 63
29
Consolidated balance sheet
as at 30 June 2016
ASSETS
1
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
1
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Lease incentives
Total current liabilities
Non-current liabilities
Provisions
Deferred tax liability
Lease incentives
Total non-current liabilities
Total liabilities
Net assets
EQUITY
1
Capital and reserves
Contributed equity
Reserves
Accumulated losses
Total equity
Service Stream Limited
Note
2016
$'000
2015
$'000
21
8
9
12
10
11
13
14
14
7
15
41,086
39,337
5,858
59,022
2,427
147,730
6,244
124,318
130,562
14,756
34,084
7,598
77,845
3,246
137,529
8,089
120,759
128,848
278,292
266,377
60,718
6,792
12,174
1,023
80,707
3,444
6,994
1,796
12,234
54,710
-
7,256
1,092
63,058
2,858
8,265
2,874
13,997
92,941
77,055
185,351
189,322
228,001
6,191
(48,841)
246,207
4,221
(61,106)
185,351
189,322
Notes to the financial statements are included on pages 33 to 63
30
Consolidated statement of changes in equity
for the financial year ended 30 June 2016
Service Stream Limited
Contributed
equity
Employee
equity-
settled
benefits
reserve
Hedging
reserve
Accumulated
losses
Total
$'000
$'000
$'000
$'000
$'000
247,647
2,910
(22)
(70,900)
179,635
Balance at 1 July 2014
Profit for the period
Other comprehensive income
Total comprehensive income for the year
Equity-settled
inclusive of tax adjustments
share-based
Acquisition of treasury shares
payments,
Issue of treasury shares to employees
Dividends paid
Balance at 30 June 2015
Profit for the period
Total comprehensive income for the year
Equity-settled
inclusive of tax adjustments
share-based
Acquisition of treasury shares
payments,
-
-
-
-
(1,540)
100
-
-
-
-
1,411
-
(100)
-
246,207
4,221
-
-
-
(540)
-
-
3,693
-
Issue of treasury shares to employees
1,723
(1,723)
Return of capital
Dividends paid
(19,389)
-
-
-
Balance at 30 June 2016
228,001
6,191
-
22
22
11,720
11,720
-
22
11,720
11,742
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,411
(1,540)
-
(1,926)
(1,926)
(61,106)
189,322
19,983
19,983
19,983
19,983
-
-
-
-
3,693
(540)
-
(19,389)
(7,718)
(7,718)
(48,841)
185,351
Notes to the financial statements are included on pages 33 to 63
31
Consolidated statement of cash flows
for the financial year ended 30 June 2016
Service Stream Limited
Notes
2016
$'000
2015
$'000
Cash flows from operating activities
Receipts from customers (including GST)
Payments to suppliers and employees (including GST)
Cash generated from operations before interest and tax
Interest received
Interest and facility costs paid
Income taxes paid
Net cash provided by operating activities
21
Cash flows from investing activities
Payments for plant and equipment
Proceeds from sale of plant and equipment
Payments for intangible assets
Proceeds from sale of intangible assets
Net cash used in investing activities
Cash flows from financing activities
Repayment of borrowings
Dividends paid
Return of capital
Purchase of shares
Net cash used by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
518,764
469,008
(455,091)
(435,053)
63,673
33,955
668
(355)
(1,656)
62,330
(2,373)
508
(7,173)
725
(8,313)
131
(1,775)
-
32,311
(1,297)
178
(2,560)
-
(3,679)
-
(7,718)
(19,429)
(540)
(17,000)
(1,926)
-
(1,540)
(27,687)
(20,466)
26,330
14,756
8,166
6,590
Cash and cash equivalents at end of the financial year
21
41,086
14,756
Notes to the financial statements are included on pages 33 to 63
32
Service Stream Limited
Notes to the consolidated financial statements
Notes to the financial statements
for the financial year ended 30 June 2016
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 is 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
(a) Products and services from which reportable segments derive their revenues
Operating segments are reported in a manner consistent with internal reporting provided to the chief operating
decision makers, being the Chief Executive Officer who provides the strategic direction and management
oversight of the company in terms of monitoring results and approving strategic planning for the business.
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.
The principal products and services of each of these segments are as follows:
Fixed Communications 1.000
Fixed Communications provides a wide range of design, construction,
to the owners of
maintenance and customer
telecommunications network infrastructure in connection with the roll-out of the
National Broadband Network in Australia.
connection services
Mobile Communications
Energy & Water
infrastructure
Mobile Communications provides program management and turnkey services
the
for
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.
principally
Australia,
projects
across
in
Energy & Water provides a range of specialist metering, in-home and new
energy services to electricity, gas, and water networks across Australia; and
through the Customer Care business, provides contact centre services and
workforce management support for key contracts.
Information regarding these segments is presented below:
(b) Segment revenues and results
Segment revenue
Segment EBITDA
Fixed Communications
Mobile Communications
Energy & Water
Total of all segments
Eliminations
Unallocated
EBITDA 1
Interest revenue
Net financing costs
Depreciation and amortisation
Total revenue
Profit before tax
Income tax expense
Profit for the year
1 Earnings before interest, tax, depreciation and amortisation.
2016
$'000
192,760
Four 166,666
81,956
441,382
(3,145)
2015
$'000
180,645
154,022
77,264
411,931
(792)
703
131
438,940
411,270
2016
$'000
2015
$'000
20,122
16,112
5,030
41,264
13,309
13,323
3,538
30,170
(5,446)
35,818
(4,781)
25,389
65
(7,410)
(1,948)
(6,325)
28,473
(8,490)
19,983
17,116
(5,396)
11,720
33
2 Segment information (continued)
(c) Segment assets and liabilities
Fixed Communications
Mobile Communications
Energy & Water
Total of all segments
Unallocated
Consolidated
(d) Other segment information
Fixed Communications
Mobile Communications
Energy & Water
Total of all segments
Unallocated
Consolidated
Service Stream Limited
Notes to the consolidated financial statements
Segment assets
Segment liabilities
2016
$'000
48,784
Four 116,722
59,573
225,079
53,213
278,292
2015
$'000
77,185
111,597
53,209
241,991
24,386
266,377
2016
$'000
2015
$'000
26,845
40,477
9,302
76,624
16,317
92,941
17,879
29,497
10,434
57,810
19,245
77,055
Depreciation and
amortisation
Additions to non-current
assets
2016
$'000
2015
$'000
2016
$'000
2015
$'000
Four
1,262
936
1,577
3,775
3,635
7,410
1,036
1,247
314
2,597
3,728
6,325
1,431
623
846
2,900
6,646
9,546
248
1,098
1,314
2,660
1,197
3,857
(e)
Information about major customers
In the current reporting period there were two customers (2015: two customers) which each contributed more
than 10% of the Group’s revenue. The relevant revenue by segment is shown below:
Largest customer
1.000
Second largest customer
2016: Fixed and Mobile Communications $186.5 million (2015: Fixed and
Mobile Communications $161.2 million).
2016: Fixed and Mobile Communications $133.6 million (2015: Fixed
Communications $140.6 million).
No other single customer contributed 10% or more of the Group’s total revenue in 2016 and 2015.
3 Revenue from the rendering of services
Revenue from operations
Interest revenue
4 Other income
Gain on disposal of plant, equipment and intangible assets
R&D tax incentives
2015
$'000
410,757
131
410,888
2016
$'000
437,169
703
437,872
1
1
2016
$'000
2015
$'000
811
257
1,068
119
263
382
34
5 Finance costs
Interest on bank overdrafts and loans
Other interest expense
Total interest expense
Facility costs
Interest expense and other finance costs
6 Other expense items
(a) Depreciation and amortisation expense
Depreciation of non-current assets
Amortisation of intangible assets
(b) Operating lease rental expenses
Minimum lease payments
(c) Employee benefit expense
Post-employment benefits plans
Equity-settled share-based payments
7 Income tax expense
(a)
Income tax recognised in profit or loss
Tax expense comprises:
Current tax expense in respect of the current year
Adjustments for current tax of prior periods
Deferred tax
Income tax expense
Service Stream Limited
Notes to the consolidated financial statements
1
2016
$'000
2015
$'000
14
401
415
224
639
675
675
1,350
729
2,079
Note
10
11
2016
$'000
2015
$'000
3,805
3,605
7,410
6,645
6,645
8,431
2,385
10,816
3,887
2,438
6,325
5,367
5,367
7,655
1,273
8,928
2016
$'000
2015
$'000
18,330
-
(9,840)
8,490
2,984
63
2,348
5,396
35
Service Stream Limited
Notes to the consolidated financial statements
7 Income tax expense (continued)
(b) Reconciliation of income tax expense to tax payable
1.000
Profit from continuing operations
Tax at the Australian tax rate of 30%
1.000
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income
Share-based plans
R&D tax incentives
Other
Adjustments for current tax of prior periods
Income tax expense as per statement of comprehensive income
1.000
Movement through deferred tax (note: 7c)
R&D tax expenditure claimed as an offset below
Adjustments for current tax of prior periods
Tax payable prior to the utilisation of losses and offsets
1.000
Current period R&D offsets
Prior period R&D offsets
Prior period tax losses
Tax losses and offsets utilised
1.000
Net income tax payable
1.000
Effective tax rate
2016
$'000
2015
$'000
28,473
8,542
17,116
5,135
-
(77)
25
-
241
(79)
36
63
8,490
5,396
9,840
-
-
18,330
-
(1,903)
(7,980)
(9,883)
8,447
(2,348)
812
(64)
3,796
(1,083)
(2,713)
-
(3,796)
-
29.82%
31.52%
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.
(c) Deferred tax balances
Deferred tax balances arise from the following:
Opening
balance
Charged to
income
Timing
difference
related to
prior
periods
Carried
forward
losses
utilised
Charged to
equity
Closing
balance
2016
$'000
$'000
$'000
$'000
$'000
$'000
(240)
(9,883)
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
10,123
31
(22,523)
1,670
209
3,608
(1,572)
189
-
64
5,969
1,671
(98)
1,060
829
345
(8,265)
9,840
-
-
-
-
-
205
-
(35)
-
-
-
-
40
1,309
-
-
-
95
(16,554)
3,341
151
5,977
(538)
534
-
-
-
-
-
-
-
(9,883)
1,349
(6,994)
36
Service Stream Limited
Notes to the consolidated financial statements
7 Income tax expense (continued)
(c) Deferred tax balances (continued)
Opening
balance
Charged to
income
Timing
difference
related to
prior
periods
Carried
forward
losses
Charged to
equity
Closing
balance
2015
$'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
12,836
-
190
(159)
(20,556)
(1,967)
1,756
389
3,298
(1,454)
156
(86)
(180)
171
(160)
33
(3,385)
(2,348)
-
-
-
-
-
-
42
-
42
(2,713)
-
-
-
-
-
-
-
-
-
-
-
139
-
-
10,123
31
(22,523)
1,670
209
3,608
(1,572)
189
(2,713)
139
(8,265)
Deferred tax assets and liabilities have been set-off by the Company and are presented in the statement of
financial position as a deferred tax liability.
(d) 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 19. 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.
(e) Significant estimates
Judgement is required in determining the Group's 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.
37
Service Stream Limited
Notes to the consolidated financial statements
8 Current trade and other receivables
Current
1 month
2 months
3 months
Over 3 months
Other receivables
Trade
receivables
Allowance for
doubtful debt
2016
$'000
2016
$'000
Total
2016
$'000
Trade
receivables
Allowance for
doubtful debt
2015
$'000
2015
$'000
Total
2015
$'000
38,177
1,284
22
23
52
39,558
(137)
(86)
(22)
(23)
(52)
(320)
38,040
1,198
-
-
-
39,238
99
39,337
30,133
2,884
458
68
159
33,702
-
-
-
-
(107)
(107)
30,133
2,884
458
68
52
33,595
489
34,084
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.
9 Accrued revenue
Accrued revenue
2016
$'000
59,022
59,022
2015
$'000
77,845
77,845
The accrued revenue balance 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 a 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 30(e) revenue recognition and 30(f)
construction contracts.
38
10 Plant and equipment
Year Ended 30 June 2016
Opening net book value
Additions
Disposals 1
Depreciation charge
Closing net book value
1.000
At 30 June 2016
Cost
Accumulated depreciation
Net book value
1.000
Year Ended 30 June 2015
Opening net book value
Additions
Disposals 1
Depreciation charge
Closing net book value
1.000
At 30 June 2015
Cost
Accumulated depreciation
Net book value
1. Disposals are net of accumulated depreciation.
Service Stream Limited
Notes to the consolidated financial statements
Leasehold
improvements
$'000
Plant and
equipment
$'000
Motor vehicles
$'000
Total
$'000
4,335
902
(9)
(1,300)
3,928
11,825
(7,897)
3,928
5,304
357
-
(1,326)
4,335
11,445
(7,110)
4,335
3,062
1,337
(259)
(2,352)
1,788
16,162
(14,374)
1,788
4,910
518
(35)
(2,331)
3,062
19,665
(16,603)
3,062
692
134
(145)
(153)
528
2,700
(2,172)
528
524
422
(24)
(230)
692
4,943
(4,251)
692
8,089
2,373
(413)
(3,805)
6,244
30,687
(24,443)
6,244
10,738
1,297
(59)
(3,887)
8,089
36,053
(27,964)
8,089
39
11 Intangible Assets
Year Ended 30 June 2016
Opening net book value
Additions
Disposals 1
Amortisation charge
Closing net book value
At 30 June 2016
Cost 2
Accumulated amortisation
Net book value
1.000
Year Ended 30 June 2015
Opening net book value
Additions
Amortisation charge
Closing net book value
1.000
At 30 June 2015
Cost 2
Accumulated amortisation
Net book value
Service Stream Limited
Notes to the consolidated financial statements
Software
$'000
Goodwill
$'000
Total
$'000
5,197
7,173
(9)
(3,605)
8,756
115,562
120,759
-
-
-
7,173
(9)
(3,605)
115,562
124,318
25,021
(16,265)
115,562
-
140,583
(16,265)
8,756
115,562
124,318
5,075
2,560
(2,438)
5,197
115,562
-
-
120,637
2,560
(2,438)
115,562
120,759
23,202
(18,005)
115,562
-
138,764
(18,005)
5,197
115,562
120,759
1. Disposals are net of accumulated amortisation.
2. The cost of goodwill represents net carrying value at balance date.
(a)
Impairment tests for goodwill
Goodwill
allocation is presented below.
is monitored by management at an operating segment level. A segment level summary of goodwill
Fixed Communications
Mobile Communications
Energy and Water
(b) Significant estimates
2016
$'000
2015
$'000
17,987
55,529
42,046
17,987
55,529
42,046
115,562
115,562
The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of a
cash generating unit (CGU) is determined based on value-in-use calculations which require the use of
assumptions. The calculations use cash flow projections based on financial forecasts approved by management
covering a four-year period. For key assumptions used in the value-in-use calculations refer to note 11(c).
(c) 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 forecasts covering a four-year period. These forecasts are based
on historical performance combined with management’s expectations of future performance based on prevailing
and anticipated market factors.
40
Service Stream Limited
Notes to the consolidated financial statements
11 Intangible Assets (continued)
(c) Key assumptions used for value-in-use calculations (continued)
Cash flows beyond the next four-year period have been extrapolated where relevant using a 0% per annum real
growth rate. A pre-tax discount rate of 12.9% (FY15: 12.9%) has been applied in order to discount expected
future cash flows into present-day values.
Forecast compound average annual revenue growth over the four-year period is 5.6% for Fixed Communications,
4.6% for Mobile Communications and 7.5% for Energy and Water.
The cash flow assumptions that are significant to the determination of the recoverable amounts for each CGU are
as follows:
(i)
Fixed Communications
The critical cash flow assumption in Fixed Communications is that Service Stream continues to undertake
significant work with nbn on the national broadband roll-out. This assumes existing contracts are extended, new
contracts are awarded and margins remain stable as the national broadband infrastructure is constructed and
then maintained.
(ii) Mobile Communications
The critical cash flow assumption for Mobile Communications is that contracts and margins with Service Stream’s
major customers are maintained into future years, along with the major telecommunications providers continuing
to develop and augment their existing infrastructure; as well as growth in adjacent roads and other infrastructure
work which leverages existing competencies of the business.
(iii)
Energy & Water
Over the four-year forecast period the Energy and Water cash flows comprise three material revenue streams:
meter reading, meter replacement including advanced meter installations (AMI) and in-home services (including
solar PV and battery storage installations).
The meter reading contracts relate to existing contracts and work schedules and the cash flows are relatively
predictable, subject to the Company retaining these contracts, which has been assumed. Across the Company's
portfolio, volumes in the forecast have been assumed to be relatively consistent with current
levels, with
moderate operational efficiencies assumed.
AMI revenues relate to contracts with existing customers however volumes are not contracted and growth is
difficult to predict. The Company is however optimistic of increasing activity in AMI as “Power of Choice”
commences in December 2017.
this initiative will encourage customer retention and
acquisition strategies by electricity retailers and is expected to drive an increase in tariff offerings and associated
products. EBITDA related to meter replacement represents 37% of the forecast EBITDA for Energy and Water in
FY17, 36% in FY18, 38% in FY19 and 34% in FY20.
is anticipated that
It
The in-home services cash flows relate to current contracts and projected future growth in the residential and
commercial solar PV and battery storage markets. Cashflows relate primarily to existing contracts however
volumes are not contracted and can fluctuate significantly. Market forecasts for growth in the new energy sector
are expected to continue to be strong. EBITDA from in-home services represent 21% of the forecast EBITDA for
Energy and Water in FY17, 28% in FY18, 32% in FY19 and 39% in FY20.
The EBITDA growth in the Energy and Water segment for FY16 was 42% reflecting contract wins and a
favourable outlook for the markets that Energy and Water operates within. However, due to limited headroom for
this segment, should any of the existing material contracts not be retained, or if the projected increases in meter
replacement or in-home services be delayed or not occur, it is likely that an impairment will arise.
(d) Impact of possible changes in key assumptions
Energy and Water
The recoverable amount of the Energy and Water cash generating unit (CGU) is estimated to be $50.3m (FY15:
$46.7m). This exceeds the carrying amount of the CGU by $4.3m (FY15: $3.9m).
The annual growth in EBITDA underlying the cash flows used in the value-in-use calculations of the Energy and
Water CGU over the 4-year forecast period is:
FY17
27.3%
FY18
4.6%
FY19
13.8%
FY20
0.2%
The EBITDA growth in FY17 is driven by the full-year impact of new contracts commencing in FY16. It also
assumes new contracts commencing in FY17.
41
Service Stream Limited
Notes to the consolidated financial statements
11 Intangible Assets (continued)
(d) Impact of possible changes in key assumptions (continued)
the overall cash flows used in the value-in-use calculations had been 8.5% lower than management’s
If
estimates, the recoverable amount of the CGU would equal its carrying amount.
If the pre-tax discount rate applied to the cash flow projections of the Energy and Water CGU was 14.1% instead
of 12.9%, the recoverable amount of the CGU would equal its carrying amount.
12 Other assets
Work in progress
Prepayments
Financing facility establishment costs
Other
13 Trade and other payables
Current
Trade creditors1
Sundry creditors and accruals
Goods and services tax payable
Income in advance
2016
$'000
2015
$'000
516
1,572
68
271
2,427
197
2,494
243
312
3,246
1
2016
$'000
2015
$'000
13,580
36,401
2,893
7,844
60,718
17,178
31,327
1,844
4,361
54,710
1. Typically no interest is charged by trade creditors. The Group has financial risk management policies in place to ensure that all payables
are paid within the credit timeframe.
14 Provisions
Current
Employee benefits1
Provision for contractual obligations2
Non-current
Employee benefits1
1
2016
$'000
2015
$'000
6,536
5,638
12,174
3,444
3,444
6,238
1,018
7,256
2,858
2,858
15,618
10,114
1. The provision for employee benefits represents annual leave, RDO and long service leave entitlements.
2. The provision for contractual obligations represents the present value of an estimate for the future outflow of economic benefits that
may be required under the Group’s obligations for warranties, rectification and rework, and data and artefact quality, with its various
customers under various contracts.
42
14 Provisions (continued)
(a) Movement in provision
Carrying amount at start of year
1.000
Charged / (credited) to profit or loss
Additional provisions recognised
Unused amounts reversed
Carrying amount at end of year
(b) Significant estimates
Service Stream Limited
Notes to the consolidated financial statements
Provision for contractual obligations
2016
$'000
2015
$'000
1,018
259
5,150
(530)
5,638
759
-
1,018
Management estimates the provision for future claims based on the value of work historically performed. Actual
claim amounts in the next reporting period are likely to vary from management's estimates. Amounts may be
reversed if it is determined they are no longer required.
15 Contributed equity
Fully paid ordinary shares
Treasury shares
1.000
(a) Fully paid ordinary shares
Balance at 1 July 2014
Balance at 30 June 2015
Return of capital and share consolidation
Transaction costs relating to capital return
Balance at 30 June 2016
Number of shares
Share capital
2016
No.'000
2015
No.'000
2016
$'000
2015
$'000
360,039
(426)
359,613
386,390
(5,436)
380,954
228,258
(257)
228,001
247,647
(1,440)
246,207
Number of
shares
'000
386,390
Share
capital
$'000
247,647
386,390
247,647
(26,351)
-
(19,297)
(92)
360,039
228,258
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(b) Employee share schemes
Information relating to the employee share schemes is set out in note 24.
(c) Treasury shares
Treasury shares are shares in Service Stream Limited that are held by the Service Stream Employee Share Trust
for the purpose of issuing shares under various share-based incentives plans. Shares issued to employees are
recognised on the first-in-first-out basis.
43
15 Contributed equity (continued)
(c) Treasury shares (continued)
Balance at 1 July 2014
Acquisition of treasury shares (average price: $0.26 per share)
Shares issued under employee share schemes
Balance at 30 June 2015
Acquisition of treasury shares (average price: $0.42 per share)
Shares issued under employee share schemes
Share consolidation
Balance at 30 June 2016
16 Earnings per share
Basic earnings per share:
Total basic earnings per share
Diluted earnings per share:
Total diluted earnings per share
Basic and diluted earnings per share
Service Stream Limited
Notes to the consolidated financial statements
Number of
shares
'000
Share
capital
$'000
-
(5,888)
452
(5,436)
(1,293)
6,272
31
(426)
-
(1,540)
100
(1,440)
(540)
1,723
-
(257)
2016
2015
Cents per
share
Cents per
share
5.20
5.20
5.07
5.07
3.03
3.03
3.02
3.02
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per
share are as follows:
Profit for the year attributable to owners of the Company
Earnings used in the calculation of basic EPS
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
Shares deemed to be issued for no consideration in respect of
employee share schemes
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
2016
$'000
19,983
19,983
2015
$'000
11,720
11,720
1
2016
No.'000
2015
No.'000
384,590
386,390
9,721
2,263
394,311
388,653
44
17 Dividends
Recognised amounts
Fully paid ordinary shares
Interim dividend
Unrecognised amounts
Fully paid ordinary shares
Final dividend
Service Stream Limited
Notes to the consolidated financial statements
2016
Cents per
share
2015
Cents per
share
2016
$'000
2015
$'000
1.00
1.00
0.50
0.50
3,862
3,862
1,926
1,926
2016
Cents per
share
2015
Cents per
share
2016
$'000
2015
$'000
1.50
1.50
1.00
1.00
5,394
5,394
3,856 1
3,8561
1. The 2015 final fully-franked dividend was paid on 8 October 2015.
An interim dividend of 1.00 cent per share franked to 100% at 30% corporate income tax rate was paid to the
holders of fully paid ordinary shares on 14 April 2016. In addition, on 17 August 2016, the Directors declared a
fully-franked final dividend of 1.50 cents per share to the holders of fully paid ordinary shares in respect of the
financial year ended 30 June 2016, to be paid to shareholders on 29 September 2016. This dividend has not
been included as a liability in these consolidated financial statements. The dividend will be paid to all
shareholders on the Register of Members on 14 September 2016 with the exception of treasury shares and the
total dividend estimated to be paid is $5,394,000.
Adjusted franking account balance as at 30 June
18 Operating lease arrangements
(a) Leasing arrangements
Company
2016
$'000
2015
$'000
3
1,654
The Group leases a number of motor vehicles and premises throughout Australia. The rental period of each
individual lease agreement varies between one and four years with the renewal options ranging from one to five
years. The majority of
lease agreements are subject to rental adjustments in line with movements in the
Consumer Price Index or market rentals.
(b) Non-cancellable operating lease commitments
Not longer than 1 year
Longer than 1 year and not longer than 5 years
2016
$'000
2015
$'000
7,131
13,804
20,935
6,242
10,458
16,700
45
19 Subsidiaries
Details of the Company’s subsidiaries at 30 June 2016 are as follows:
Service Stream Limited
Notes to the consolidated financial statements
Name of entity
Parent entity
Service Stream Limited (i)
Subsidiaries
Service Stream Holdings Pty Ltd (ii) (iv)
Service Stream Communications Pty Ltd (ii) (iii) (iv)
Total Communications Infrastructure Pty Ltd (ii) (iii) (iv)
Service Stream Solutions Pty Ltd (ii) (iii) (iv)
Radhaz Consulting Pty Ltd (ii) (iv)
Service Stream Infrastructure Services Pty Ltd (ii) (iii) (iv)
AMRS (Aust) Pty Ltd (ii) (iii) (iv)
Service Stream Nominees Pty Ltd (ii) (iii)
Service Stream Operations Pty Ltd (ii) (iii) (v)
Country of
incorporation
Ownership interest
2016
%
2015
%
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
(i) Service Stream Limited is the head entity within the tax-consolidated Group.
(ii) These companies are members of the tax-consolidated Group.
(iii) These companies are wholly owned subsidiaries of Service Stream Holdings Pty Ltd.
(iv) 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 and Directors' report.
(v) This company was previously SEQUD Pty Ltd and officially changed its name to Service Stream
Operations Pty Ltd in June 2016.
20 Deed of cross guarantee
The parties to a deed of cross guarantees for the Group as listed in note 19 represent a ‘closed group’ for the
purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled
by Service Stream Limited, they also represent the ‘extended closed group'. A separate consolidated statement
of comprehensive income and consolidated balance sheet of the parties to the deed of cross guarantees have
not been disclosed separately as it is not materially different to those of the Group.
21 Notes to the statement of cash flow
(a) Reconciliation of cash and cash equivalents
Cash at bank
Term deposits
2016
$'000
2015
$'000
21,086
20,000
41,086
14,756
-
14,756
46
21 Notes to the statement of cash flow (continued)
(b) Reconciliation of profit for the year to net cash flows from operating activities
Service Stream Limited
Notes to the consolidated financial statements
Profit for the year
Gain on sale of non-current assets
Depreciation and amortisation
Equity-settled share-based payments
Increase in tax balances
1
Movement in working capital:
(Increase) / decrease in trade and other receivables
Decrease / (increase) in accrued income
Decrease / (increase) in other assets
Decrease / (increase) in inventories
Increase in trade and other payables
Increase in provisions
Decrease in lease incentives
Net cash inflow from operating activities
22 Financial instruments
(a) Overview
19,983
(811)
7,410
2,385
6,870
(5,253)
18,822
819
1,740
6,008
5,504
(1,147)
62,330
11,720
(119)
6,325
1,273
5,019
4,669
(6,239)
(826)
(707)
9,779
2,396
(979)
32,311
The Group’s activities expose it to a variety of financial risks including interest rate, credit 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 operates a
centralised treasury function which manages all borrowings and external payments on behalf of the Group.
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.
(b) Categories of financial instruments
2016
$'000
2015
$'000
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
The Directors consider that
amortised cost in the financial statements approximate their fair values.
the carrying amounts of
financial assets and financial
41,086
39,337
80,423
60,718
60,718
14,756
34,084
48,840
54,710
54,710
liabilities recognised at
(c) Market risk - Interest rate risk management
During the year, the Group's exposure to the risk of change in market interest rates related primarily to the
Group's holding of cash and short-term deposits.
The Group has managed its interest rate risk during the year by maximising the interest earned from available
funds balanced against its working capital needs.
Based upon a 100 basis point decrease in prevailing market interest rates as applied to the Group’s cash balance
at 30 June 2016, the Group’s sensitivity to interest rate risk would be equivalent to a $410,862 per annum
unfavourable impact to profit before tax (2015: $147,562 unfavourable).
47
Service Stream Limited
Notes to the consolidated financial statements
22 Financial instruments (continued)
(d) Credit risk management
Credit risk of the Group arises predominately from outstanding receivables from customers.
Receivable balances are monitored on an ongoing basis and the Group has a 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.
A significant portion of the Group’s revenue is derived from highly credit rated companies including Telstra
Corporation Ltd, nbn co, Origin Energy Ltd as well as various state utilities and Commonwealth agencies.
(e) 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 syndicated funding lines.
Included in note 22(e)(ii) are details of the borrowing facilities available to the Group at 30 June 2016.
(i) Liquidity and interest rate risk tables
The following tables detail the Group’s maturity profile for 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.
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
2016
Financial liabilities
Trade and other payables
1.000
2015
Financial liabilities
-
(60,718)
(60,718)
(60,718)
(60,718)
(60,718)
(60,718)
Trade and other payables
-
(54,710)
(54,710)
(54,710)
(54,710)
(54,710)
(54,710)
(ii) Financing facilities
-
-
-
-
-
-
-
Amount used
Amount unused
Balance at 30 June 2016
1.000
Amount used
Amount unused
Balance at 30 June 2015
Bank guarantees Bank overdraft
Cash advance
$'000
$'000
$'000
13,587
6,413
20,000
10,908
9,092
20,000
-
5,000
5,000
-
5,000
5,000
-
35,000
35,000
-
35,000
35,000
-
-
-
-
48
Service Stream Limited
Notes to the consolidated financial statements
22 Financial instruments (continued)
(e) Liquidity risk management (continued)
The Group's financing facilities are due to expire on 30 September 2016. Since balance date, the Group has
executed binding term sheets from its two existing financiers for extension of its financing facilities for a period of
three years to 30 September 2019. Each 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 a total limit of $60 million.
Financial guarantees provided in the normal course of business are shown above. Based upon current
expectations as at 30 June 2016, the Group considers that it is more likely than not that such amounts will not be
payable under these arrangements.
23 Capital risk management
The Group manages its capital to ensure that it is able to continue as a going concern and to maximise returns to
shareholders. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
and return capital paid to shareholders or issue new shares. Capital is managed in order to maintain a strong
financial position and ensure that the Group’s funding needs can be optimised at all times in a cost-efficient
means to support the goal of maximising shareholder wealth.
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 is subject to various financial debt covenants on its Syndicated Facilities Agreement in regards to
minimum levels of equity, earnings, gearing, borrowing base and asset cover, all of which are regularly monitored
and reported upon.
24 Share-based payments
(a) Long Term Incentive Plan (LTIP)
From time to time employees in senior management roles 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 for approval.
In accordance with the provision of the ESOP, certain employees in senior management roles were invited to
participate in the LTIP which entitles them to receive a number of performance rights in respect of the year
ending 30 June 2016 (FY16). 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 total fixed remuneration (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.
Performance rights for each of the LTIP tranches are subject to service and performance criteria being:
A
B
The participant must be an employee at the vesting date;
50% of the performance rights granted will each vest where:
(i)
The Group’s earnings per share (EPS) achieves annual growth of 10% or more over the performance
period, commencing with growth from an agreed base EPS, as detailed below.
LTIP tranche
Performance period
Vesting date
FY14 1
3 years
FY15 2
3 years
FY16 3
3 years
September 2016
September 2017
September 2018
1. The FY14 LTIP targets, from base of 2.55 cps are: Year 1: 2.81 cps, Year 2: 3.09 cps, Year 3: 3.40 cps.
2. The FY15 LTIP targets, from base of 0.76 cps are: Year 1: 0.84 cps, Year 2: 3.33 cps, Year 3: 5.72 cps.
3. The FY16 LTIP targets, from base of 3.03 cps are: Year 1: 3.33 cps, Year 2: 5.72 cps, Year 3: not yet determined.
49
Service Stream Limited
Notes to the consolidated financial statements
24 Share-based payments (continued)
(a) 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
(ii) 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
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)
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.
The following LTIP performance rights arrangements were in existence at the end of the current period:
Series
Number
Grant date
Grant date fair value
Vesting date
Performance
period start date
FY14 LTIP
3,987,543
31 July 2014
Relative TSR hurdle - 16.0 cps September 2016
1 July 2013
FY15 LTIP
2,284,032
28 February 2015
Relative TSR hurdle - 13.8 cps September 2017
1 July 2014
EPS hurdle - 18.5 cps
FY16 LTIP
1,690,324 11 September 2015
Relative TSR hurdle - 21.7 cps September 2018
1 July 2015
EPS hurdle - 26.8 cps
EPS hurdle - 20.0 cps
Fair value of performance rights
The FY16 LTIP performance rights with the relative TSR hurdle vesting condition have been valued by an
independent expert using a Monte-Carlo simulation. The FY16 LTIP performance rights with the EPS hurdle
vesting condition have been 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.
Key inputs into the model
The table below details the key inputs to the valuation models.
Tranche
FY14 LTIP
FY15 LTIP
FY16 LTIP
Share price at
grant date
Expected
life
Volatility
Risk-free
interest rate
Dividend yield
Vesting date
$0.202
$0.207
$0.302
2.2 years
55%
2.63 years
60% to 70%
2.89 years
55%
2.61%
2.53%
1.94%
0.00%
4.80%
6.00%
September 2016
September 2017
September 2018
50
Service Stream Limited
Notes to the consolidated financial statements
24 Share-based payments (continued)
(a) Long Term Incentive Plan (LTIP) (continued)
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:
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
2016
2015
Number of
rights
Grant date
weighted avg FV
$
Number of
rights
Grant date
weighted avg FV
$
8,020,030
1,966,199
(786,247)
(1,238,083)
7,961,899
0.186
0.243
0.240
0.229
0.188
7,630,544
2,635,968
(451,869)
(1,794,613)
8,020,030
0.198
0.162
0.205
0.196
0.186
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 FY14 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 FY16 financial statements.
As at 30 June 2016, 3,987,543 performance rights granted under the FY14 Tranche remain unforfeited and
subject to vesting criteria.
The balance of performance rights outstanding at the end of the year have a remaining contractual life of two
years (FY16 Tranche) and one year (FY15 Tranche).
(b) Executive Share-based Incentive Plan (ESBIP)
The ESBIP is a share-based incentive plan that was established by the Board in 2014 to operate for a five year
period from FY15 to FY19 and offered to the Managing Director and to a small number of other key executives of
the time. By accepting the offer to participate in the ESBIP, these executives have forfeited their entitlement to
participate in both the LTIP and the Short Term Incentive Plan (STIP). ESBIP operates within the
shareholder-approved Employee Share Ownership Plan (ESOP), under the administration of the Remuneration
and Nomination Committee. The number of performance rights offered to participating executives has been
endorsed by the Remuneration and Nomination Committee and approved by the Board and by shareholders in
the case of the Managing Director.
The ESBIP invitation letter provided to participants sets out their rights and obligation under the plan, and
provides details regarding the number of rights that will be offered to them on an annual basis (by way of an
annual offer letter) over a period of up to five years. 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 FY16 ESBIP performance rights are subject to service and performance criteria being:
A
The participant must be an employee at the later of the date on which the Company releases its results
for the financial year ending 30 June 2016 or otherwise determines that the vesting conditions have been
satisfied; and
B(i) at least 10% growth in earnings per share (EPS) for the performance period is achieved; or
B(ii) an average of at least 10% compound growth in EPS per annum for the aggregate period is achieved.
ESBIP tranche
Performance period
Vesting date
Aggregate period end date
EPS base (cents per share)
FY16
1 year
17 August 2016
30 June 2018
3.03
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.
51
Service Stream Limited
Notes to the consolidated financial statements
24 Share-based payments (continued)
(b) Executive Share-based Incentive Plan (ESBIP) (continued)
The following ESBIP performance rights arrangements were in existence at the end of the current period.
Series
Number
Grant date
Grant date fair value
Vesting date
Performance
period start date
FY16 ESBIP
5,150,000
31 August 2015
28.4 cps
17 August 2016
1 July 2015
Fair value of ESBIP performance rights
The FY16 ESBIP performance rights with the EPS hurdle vesting condition have been valued by an independent
expert using a Binomial tree methodology. This methodology is 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.
Key inputs into the ESBIP valuation model
The table below details the key inputs to the valuation models.
Series
Share price at
grant date
Expected
life
Volatility
Risk-free
interest rate
Dividend yield
Vesting date
FY16 ESBIP
$0.312
0.89 years
55%
1.94%
6.00%
17 August 2016
Movements in the ESBIP performance rights during the year
The following table reconciles the outstanding performance rights granted under the ESBIP at the beginning and
end of the financial year:
2016
2015
Number of
rights
Grant date
weighted avg FV
Number of
rights
Grant date
weighted avg FV
Balance at beginning of the financial year
Granted during the year
Vested during the year
Balance at end of the financial year
4,650,000
5,150,000
(4,650,000)
5,150,000
0.194
0.284
0.194
0.284
4,650,000
0.194
-
-
-
-
4,650,000
0.194
Included in the balance are rights which have reached their vesting date and both the service and performance
criterias have been met (number of rights 5,150,000). The relevant number of shares will be delivered to the
participants after the release of the FY16 financial statements.
25 Related party transactions
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.
(a) Transactions with key management personnel
(i) Key management personnel compensation
The aggregate compensation made to key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments1
2016
$
2015
$
2,242,473
2,180,935
124,628
63,834
1,233,324
3,664,259
134,101
82,977
871,870
3,269,883
1. The fair value of performance rights issued under the ESBIP and LTIP, allocated on a pro-rata basis to the current financial year.
52
Service Stream Limited
Notes to the consolidated financial statements
25 Related party transactions (continued)
(a) Transactions with key management personnel (continued)
The compensation of each member of the key management personnel of the Group is set out in the remuneration
report.
(ii) 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 $3,100 per year) (2015: approximately
$16,800 per year).
(b) 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 balances 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 $100,502,111 are receivable from subsidiaries (2015: $117,581,852).
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
the consolidated financial statements of the Group.
26 Remuneration of auditors
Audit or review of the financial report
Review of income tax return
Employee share trust advice
Tax advice and other services
2016
$
288,000
15,000
-
129,000
432,000
2015
$
280,000
25,000
14,280
46,524
365,804
The auditor of Service Stream Limited is PricewaterhouseCoopers.
27 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.
28 Events after the reporting period
Other than elsewhere disclosed in the financial statements, 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.
29 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 30 for a
summary of the significant accounting policies relating to the Group.
53
29 Parent entity information (continued)
(a) Financial position
Current assets
Non-current assets
Total assets
1.000
Current liabilities
Non-current liabilities
Total liabilities
1.000
Net assets
1.000
Issued capital
Reserves – equity-settled employee benefits
Accumulated losses
Equity
(b) Financial performance
Profit / (loss) for the year
Other comprehensive income
Total comprehensive profit / (loss)
(c) Guarantees entered into by the parent entity
Service Stream Limited
Notes to the consolidated financial statements
2016
$'000
203
162,468
162,671
7,094
-
7,094
2015
$'000
200
174,753
174,953
577
668
1,245
155,577
173,708
211,621
5,933
(61,977)
155,577
229,569
4,221
(60,082)
173,708
2016
$'000
2015
$'000
5,870
-
5,870
(1,193)
-
(1,193)
The parent entity is party to the Group’s financing facilities as a security provider under the Security Trust Deed.
In addition, there are cross guarantees given by the parent entity as described in notes 19 and 20.
30 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.
(a) 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 17 August 2016.
Compliance with IFRS
The consolidated financial statements of the Group also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standard Board (IASB).
New and amended standards adopted by the Group
The group has applied the following standards and amendments for first time in their annual reporting period
commencing 1 July 2015:
•
AASB 2014-1 Amendments to Australian Accounting Standards (including Part A: Annual Improvements
2010-2012 and 2011-2013 Cycles).
The group also elected to adopt the following two amendments early:
•
AASB 2015-1 Amendments to Australian Accounting Standards - Annual
Accounting Standards 2012-2014 Cycle, and
Improvements to Australian
54
Service Stream Limited
Notes to the consolidated financial statements
30 Significant accounting policies (continued)
(a) Basis of preparation (continued)
•
AASB 2015-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB
101.
As these amendments merely clarify the existing requirements, the adoption of the above improvements did not
have an impact on the current period nor any prior period and is not likely to affect future 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 30(y).
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.
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 31.
The following significant accounting policies have been adopted in the preparation and presentation of the annual
financial report:
(b) Basis of consolidation
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 has control. The Group controls an entity when 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 deconsolidated 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
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
the asset
consistency with the policies adopted by the Group.
When the Group ceases to consolidate, any retained interest in the entity is remeasured to its fair value with the
change in carrying amount recognised in profit or loss. In addition, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the
related assets or liabilities. This means that amounts previously recognised in other comprehensive income are
reclassified to profit or loss.
(c) 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.
On disposal of
determination of the profit or loss on disposal.
the relevant cash generating unit,
the attributable amount of goodwill
is included in the
55
Service Stream Limited
Notes to the consolidated financial statements
30 Significant accounting policies (continued)
(d) 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.
(e) 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:
Revenue from operations
Revenue from a contract to provide services is recognised when probable and measurable, as contracted
services are delivered.
Revenue from construction contracts is recognised in accordance with the accounting policy set out in note 30(f).
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.
(f) Construction contracts
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 the end of 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 revenue. 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, 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.
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.
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.
(g) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as
lessee are classified as operating leases. Payments made under operating leases (net of any incentives received
from the lessor) are charged to the profit or loss on a straight-line basis over the period of the lease.
56
Service Stream Limited
Notes to the consolidated financial statements
30 Significant accounting policies (continued)
(h) 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. Expected
future payments falling due more than 12 months after the end of the reporting period are discounted using
corporate bonds market yields. Remeasurements as a result of employment status and changes in actuarial
assumptions are recognised in profit or loss.
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.
The obligations are presented as current
the entity does not have an
unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when
the actual settlement is expected to occur.
liabilities in the balance sheet
if
(i) Share-based payments
Equity-settled share-based payments to executives and Directors are measured at the fair value of the equity
instrument at the grant date. Details regarding the determination of the fair value of the equity instruments are set
out in note 24.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period. 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.
(j) Taxation
Current tax
The income tax expense for the period is the tax payable on the current period's taxable income based on the
applicable income tax rate for each jurisdiction adjusted by any changes in the deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted by the
end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to
It establishes provisions where
situations in which applicable tax regulations are subject
appropriate on the basis of amounts expected to be paid to the tax authorities.
to interpretation.
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.
57
Service Stream Limited
Notes to the consolidated financial statements
30 Significant accounting policies (continued)
(j) Taxation (continued)
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 7(d).
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%
incentive is recognised as the asset is amortised.
(k) Plant and equipment
Plant and equipment,
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.
leasehold improvements and motor vehicles are stated at cost
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.
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 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: 4 - 7 years
Plant and equipment: 3 - 10 years
•
•
• Motor vehicles: 3 - 7 years
(l)
Intangible assets
Costs 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. Any costs associated with maintaining software and systems are recognised as an
expense as incurred.
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 includes external direct costs of materials and service and direct payroll and other
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.
58
Service Stream Limited
Notes to the consolidated financial statements
30 Significant accounting policies (continued)
(l)
Intangible assets (continued)
The estimated useful lives used in the calculation of amortisation range from between three to five years.
(m) 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
impairment annually, and whenever there is an indication that the asset may be impaired.
lives and intangible assets not yet available for use are tested for
The recoverable amount is the higher of the fair value less costs of disposal 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.
(n) 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 purchased inventory,
the cost of which is determined after
deducting rebates and discounts.
(o) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.
(p) 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.
(i) 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.
59
Service Stream Limited
Notes to the consolidated financial statements
30 Significant accounting policies (continued)
(p) Financial instruments (continued)
loss (FVTPL), held-to-maturity investments, available-for-sale (AFS)
Financial assets are classified into the following specified categories: financial assets at fair value through profit
or
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.
Impairment of financial assets
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.
(ii) 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 to the
holder of the guarantee in the event that it suffers a loss due to the guarantee drawer’s failure to make payment
or otherwise satisfy its 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.
60
Service Stream Limited
Notes to the consolidated financial statements
30 Significant accounting policies (continued)
(p) Financial instruments (continued)
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.
(q) Trade receivables
Trade receivables are recognised initially at fair value and subsequently adjusted for provision for impairment.
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.
(r) Trade and other payables
Trade and other payables 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.
(s) Goods and Services Tax (GST)
Revenues, expenses 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 receivables or other payables in
the consolidated balance sheet as applicable.
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.
(t) 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 Groups's consolidated balance sheet.
(u) 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 incentive
scheme, 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.
61
Service Stream Limited
Notes to the consolidated financial statements
30 Significant accounting policies (continued)
(u) Contributed equity (continued)
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.
Shares held by the Service Stream Employee Share Trust are disclosed as treasury shares and deducted from
contributed equity.
(v) 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.
(w) 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.
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.
(x) Rounding of amounts
/ Directors' Reports)
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial
Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘rounding
off’ of amounts in the Directors' report and the financial report. Amounts in the Directors' report and the financial
report have been rounded off to the nearest thousand dollars, in accordance with that Instrument.
(y) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2016 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 2018).
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 2018 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 15 Revenue from Contracts with Customers (effective 1 January 2018).
The AASB has issued a new standard for the recognition of revenue. The new standard is based on the
principle that revenue is recognised when control of a good or service transfers to a customer. The standard
permits either a full retrospective or a modified retrospective approach for the adoption and it replaces AASB
118 which covers contracts for good and services and AASB 111 which covers construction contracts.
Management is currently in the process of evaluating the impact of applying the new standard on the Group's
financial statements and will continue with more detailed assessments of the effect of the new rules over the
next twelve months.
62
Service Stream Limited
Notes to the consolidated financial statements
30 Significant accounting policies (continued)
(y) New accounting standards and interpretations (continued)
•
•
AASB 16 Leases (effective 1 January 2019).
AASB 16 will primarily affect the accounting by lessees and will result in the recognition of almost all leases
on the balance sheet. The standard removes the current distinction between operating and financial leases
and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals
for almost all
lease contracts. The new standard will be effective from 1 January 2019. Management is
currently in the process of evaluating the impact of applying the new standard on the Group's financial
statements and will continue with more detailed assessments of the effect of the new rules over the next
twelve months.
31 Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting
policies as described in note 30.
The areas involving a higher degree of judgement or complexity are:
•
•
•
•
Estimation of current tax payable and deferred tax balances - note 7(e)
Testing of goodwill for impairment - note 11(b)
Estimation of provision for contractual obligations - note 14(b)
Recognition of revenue on construction contracts - note 30(f)
Estimates and judgements are continually evaluated. They are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the entity and that are believed to be
reasonable under the circumstances.
63
Service Stream Limited
ASX Additional Information
ASX Additional Information
for the financial year ended 30 June 2016
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 19 August 2016
Category (size of holding)
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001+
Holders
212
1,005
663
1,515
249
3,644
B. There are 3,644 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 142.
D. The names of the substantial shareholders listed in the holding company’s
register, and their shareholdings (including shareholdings of their
associates), as at 19 August 2016 are:
Shareholder
Thorney International Pty Ltd (1)
Thorney Opportunities Ltd (1)
Ordinary
68,412,476
29,903,931
%
18.73
8.19
(1)
The Company treats Thorney International Pty Ltd and Thorney Opportunities Ltd as associated entities as defined in the Corporations Act.
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 $0.1695 (2015:$0.1774).
64
Service Stream Limited
ASX Additional Information
G. 20 Largest Shareholders as at 19 August 2016 - Ordinary Shares
Name of 20 largest shareholders in each class of share
HSBC Custody Nominees (Australia) Limited
UBS Nominees Pty Ltd
Citcorp Nominees Pty Ltd
Rubi Holdings Pty Ltd
National Nominees Limited
Gandel Springwest Pty Ltd
JBL-G Pty Ltd
RBC Investor Services Australia Pty Ltd
J P Morgan Nominees Australia Limited
Berkeley Services Pty Ltd
Mr Darren Ronald Patterson
Howes Creek Pty Ltd
Dr Roger Graham Brooke & Mrs Sally Ann Brooke
Researched Investments Pty Ltd
Bond Street Custodians Limited
ABN Ambro Clearing Sydney Nominees Pty Ltd
Grant Family Nominees Pty Ltd
Ecapital Nominees Pty Ltd
Cranley Nominees Pty Ltd
Brispot Nominees Pty Ltd
Ordinary
shares Fully
paid number of
shares held
88,712,356
36,764,717
19,645,642
15,000,000
13,500,820
10,581,732
9,682,035
8,991,843
6,716,230
5,398,617
5,191,547
4,800,741
3,931,047
3,027,954
2,692,968
2,159,175
2,074,387
2,000,000
1,929,756
1,646,571
% Held
24.29
10.07
5.38
4.11
3.70
2.90
2.65
2.46
1.84
1.48
1.42
1.31
1.08
0.83
0.74
0.59
0.57
0.55
0.53
0.45
244,448,138
66.94
65
Corporate Directory
Directors
Brett Gallagher
Leigh Mackender
Peter Dempsey
Greg Adcock
Raelene Murphy
Deborah Page AM
Company Secretary
Vicki Letcher
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
66
SERVICE STREAM LIMITED
ABN: 46 072 369 870
Level 4, 357 Collins Street
Melbourne, Victoria 3000
WWW.SERVICESTREAM.COM.AU