Keeping
Australia
connected
Annual Report
2022
Annual General Meeting
The Annual General Meeting of
Service Stream Limited will be held at
RACV City Club
Level 2, 501 Bourke Street, Melbourne
Wednesday 19 October 2022, 10.00am
Service Stream Limited
ABN 46 072 369 870
Annual report for the financial year ended
30 June 2022
Service Stream Limited ABN 46 072 369 870
Annual Report
for the year ended 30 June 2022
Contents
Directors' report
Remuneration report
Auditor’s independence declaration
Financial report
Page 1
Page 18
Page 39
Consolidated statement of profit or loss and other comprehensive income
Page 40
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report to the members
Page 41
Page 42
Page 43
Page 44
Page 86
Page 87
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 Australian dollars.
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 6 to 13, which is not part of these financial statements.
The financial statements were authorised for issue by the Directors on 26 August 2022. 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 media
releases, financial reports and other information are available on our website: www.servicestream.com.au.
Annual Report
26 August 2022
Chairman’s Letter
Service Stream’s commitment to keeping Australian communities connected has never been more important in this
constantly changing environment.
As we reflect upon the FY22 financial year, it was a year once again characterised by uncertainty and disruption to
the lives of many Australians. Businesses and communities across Australia continue to be challenged by severe
weather events and the ongoing impacts of the COVID-19 global pandemic. Additionally, macroeconomic
headwinds have resulted in business and industry facing a constrained labour market and higher than expected
inflationary pressures.
In spite of this challenging operating environment Service Stream had a transformational year, associated with the
acquisition and integration of Lendlease Services. On 1 November 2021, Service Stream acquired Lendlease
Services which marked a significant milestone in the Group’s Strategic Plan. The transaction effectively doubled
the size of the business and expanded our capabilities across the transport, industrial and power sectors. The
acquisition has also brought significant scale benefits to our existing water, gas and telecommunications divisions.
The Board have been delighted by the way in which the executive team has managed the transaction and navigated
the business through the headwinds of the FY22 financial year. The Board has every confidence in the Executive
Management Team, led by Leigh Mackender, to steer the Company successfully through the ongoing economic
volatility of FY23 by strengthening and diversifying the Group’s revenues.
Safety
The health and safety of our workforce, stakeholders, and the communities in which we operate remains the
number one priority for the Board and Management. Whilst the acquisition has resulted in a recalibration of our
safety metrics the business has retained industry leading LTIFR performance. The Board remains committed to
supporting Management’s continuous improvement of our safety culture, practices and upholding the highest levels
of safety performance.
Financial performance
Notwithstanding our busy agenda in FY22, Service Stream delivered a solid financial result for our shareholders.
The Group recorded T otal R evenue of $ 1,564m, which was a 94.5% increase on the previous year, and saw
EBITDA from Operations of $91.1m, an increase of 13.7% on the previous year. Additionally, the team delivered
an outstanding cash result with an EBITDA to OCFBIT conversion rate of 108%.
Environmental Social Governance (ESG)
The Board remains committed to the development of our ESG strategy and understands the increasing demands
of our stakeholders in appropriately managing ESG related risks and opportunities. During the year, Service Stream
strengthened its greenhouse gas emission targets and commitments to increasing the use of renewable electricity.
The Board acknowledges the importance of upholding our social responsibilities in the communities in which we
operate. In FY22 the business has taken an important step in creating social and economic opportunities in our
communities with the progression of a formal Innovative Reconciliation Action Plan. The Board looks forward
to supporting the Plan’s imminent launch and implementation.
Dividends
The Board previously committed to the resumption of dividends following a deferral to support the recent acquisition
of Lendlease Services. Following the year’s performance and our strong post acquisition cashflow result, the Board
is pleased to confirm the resumption of dividends to our shareholders, determining a final fully franked dividend of
1 cent per share.
Finally, on behalf of the Board, I would like to thank Management and all our valued people working across the
business for their hard work and dedication throughout over the year.
Brett Gallagher
Chairman
Service Stream Limited
Directors' report
Directors' Report
Your Directors present their report on the consolidated entity (the Group) consistent of Service Stream Limited and
entities it controlled at the end of, or during, the year ended 30 June 2022, and in order to comply with the
provisions of the Corporations Act 2001. The Directors' report is as follows:
Board of Directors biographical details
The names and particulars of the Directors of the Company during or since the end of the financial year are:
Brett Gallagher
Chairman
Leigh Mackender
Managing Director
Greg Adcock
Non-Executive Director
Term of Office: Managing Director since
May 2014.
Term of Office: Non-Executive Director
since June 2016.
Qualification: MBA (VU), MAICD.
Qualifications: MAICD, MAIPM.
Leigh Mackender is an experienced
executive with a history of working across
the industrial services markets supporting
Australia’s leading public, private and
government infrastructure owners and
operators.
Leigh was appointed as Service Stream’s
Managing Director in 2014, after holding
a number of management and executive
positions across the business since
joining in 2005. Leigh brings 20+ years of
demonstrated experience and expertise
including corporate strategy, financial and
operational management, client
engagement, health and safety, capital
markets and investor relations.
Leigh is a member of the Health, Safety,
Environment & Sustainability Committee.
Leigh has no other listed company
directorships and has held no other listed
company directorships in the last three
years.
Greg Adcock brings to the Board
extensive commercial and operational
expertise developed from senior
executive roles at Concrete
Constructions, Telstra Corporation and
nbn co, where he was the Chief
Operating Officer. He has specific
experience in strategic leadership, large
scale infrastructure and construction,
telecommunications technology, health,
safety & environment, risk management
and human resources.
Greg has served on numerous Boards
throughout his executive career and has
experience in governance and
compliance, corporate finance and
mergers & acquisitions.
Greg is Chairman of the Health, Safety,
Environment & Sustainability Committee
and a member of the Audit and Risk
Committee.
During the last three years, Greg held a
listed company directorship with
OptiComm Limited (retired as entity was
acquired in November 2020).
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.
Qualification: FAICD.
Brett Gallagher brings to the Board
extensive commercial and operational
expertise, and strategic leadership gained
in the telecommunications, utilities,
infrastructure and technical services
industries. He has spent over 25 years as
a senior executive, director and owner of
businesses within these sectors. Brett
has specific experience in service
delivery, contract management, business
development, health, safety &
environment, corporate finance and
mergers & acquisitions.
Brett is an experienced company director
and has experience in governance and
compliance, reporting and investor
relations. His current directorships include
not-for-profit and several private
businesses that operate predominantly in
the utilities and services sector.
Brett is a member of the Health, Safety,
Environment & Sustainability Committee.
Brett has no other listed company
directorships and has held no other listed
company directorships in the last three
years.
1
Service Stream Limited
Directors' report
Peter Dempsey
Non-Executive Director
Deborah Page AM
Non-Executive Director
Elizabeth Ward
Non-Executive Director
Term of Office: Chairman from
November 2010 to February 2015, Non-
Executive Director since March 2010.
Qualifications: B. Tech. (Civil Eng.)
(Adel), Grad. Diploma (Bus. Admin.),
SAIT, FIEAust, MAICD.
Peter Dempsey brings to the Board
extensive construction and development
expertise following a 40-year career in
those industries. He spent 30 years at
Baulderstone, including five years as
Managing Director. He has specific
expertise in engineering, strategic
leadership, health, safety & environment,
corporate finance, mergers &
acquisitions and human resources.
Peter has extensive experience as a
company director gained across ASX
listed and private companies over the
last 15 years. His relevant sector
experience includes engineering,
construction, utilities and
telecommunications. Peter’s experience
includes Board leadership, governance
and compliance, risk management,
reporting and remuneration practices.
Peter is Chairman of the Remuneration
and Nomination Committee and a
member of the Audit and Risk
Committee.
Peter is currently a Non-Executive
Director of Monadelphous Limited and
has held no other listed company
directorships in the last three years.
Term of Office: Non-Executive Director
since September 2010.
Term of Office: Non-Executive Director
since September 2021.
Qualifications: B Ec (Syd), FCA, FAICD.
Qualifications: MBA, MAICD.
Deborah Page brings to the Board
extensive financial expertise from her
time at Touche Ross/KPMG including as
a Partner, and subsequently from senior
finance and operating executive roles
with the Lendlease Group, Allen, Allen &
Hemsley and the Commonwealth Bank.
She has specific experience in corporate
finance, accounting, audit, mergers &
acquisitions, capital markets, insurance
and joint venture arrangements.
Deborah has extensive experience as a
company director gained across ASX
listed, private, public sector and
regulated entities since 2001. Her
relevant sector experience includes
telecommunications, utilities, insurance,
technology, renewables and
infrastructure. Deborah’s experience
includes Board leadership, governance
and compliance, risk management,
remuneration practices, technology,
investor relations and health, safety &
environment.
Deborah is Chairman of the Audit and
Risk Committee and is a member of the
Remuneration and Nomination
Committee.
Deborah is currently the Independent
Non-Executive Chair of Pendal Group
Limited and is a Non-Executive Director
of Brickworks Limited and Growthpoint
Properties Australia Limited. During the
last three years, Deborah held a listed
company directorship with GBST
Holdings Limited (retired as entity
delisted in November 2019). Deborah is
a member of Chief Executive Women
and a member of the Takeovers Panel.
Elizabeth Ward brings to the Board
extensive operational, contracting and
commercial expertise gained across a
diverse range of industries including
large-scale infrastructure, transport,
fisheries and telecommunications in
Australia and New Zealand. She has
over 30 years’ experience as a CEO,
senior executive and strategic advisor
across these sectors. She has specific
experience in change management,
business development, industrial
relations, contract management,
stakeholder engagement, service
delivery and mergers & acquisitions.
Elizabeth has held CEO roles with Gough
Group, Kennards Hire and CentrePort
Ltd and is an experienced company
director gained across government,
privately owned and regulated entities
such as NSW Telco Authority and Moana
(formerly Aotearoa Fisheries Ltd). She
has experience in audit and risk, health
and safety, and remuneration board
committees.
Elizabeth is a member of the Health,
Safety, Environment & Sustainability
Committee and a member of the
Remuneration and Nomination
Committee.
Elizabeth is currently a Non-Executive
Director of Aotearoa Fisheries Limited
t/as Moana New Zealand and Guide
Dogs NSW/ACT. Elizabeth has held no
other listed company directorships in the
last three years.
2
Tom Coen
Non-Executive Director
Term of Office: Non-Executive Director
since February 2019. Tom retired on 10
March 2022.
Tom Coen brought to the Board
extensive commercial and operational
expertise following a 35-year career at
Comdain Infrastructure where he served
as Managing Director and Chairman. He
has specific experience in strategic
leadership, civil construction, contract
and project management, health, safety
& environment, and joint ventures across
the utilities, engineering and
infrastructure services industries,
particularly in the water and gas sectors.
Tom has served on numerous Boards
throughout his executive career and has
experience in governance, compliance
and reporting.
Tom was a member of the Health,
Safety, Environment & Sustainability
Committee and a member of the
Remuneration and Nomination
Committee until his retirement on 10
March 2022.
Tom held no other listed company
directorships nor any in the last three
years before his retirement.
Service Stream Limited
Directors' report
3
Directors’ Shareholdings
The following table sets out each Directors’ relevant interest in shares of the Company as at the date of this report.
Service Stream Limited
Directors' report
Service Stream Limited
Fully paid ordinary shares
Performance rights
Directors
B Gallagher
G Adcock
P Dempsey
D Page
E Ward#
Number
4,000,000
93,333
1,400,000
646,801
-
Number
-
-
-
-
-
L Mackender
1,567,601
1,204,380
# Ms Ward has advised the Chairman that she intends to purchase SSM shares on-market following the cessation of the Company’s Closed Period
for securities trading, in accordance with and as specified in the Company’s Securities Trading Policy.
Key updates (retirement of Tom Coen)
Tom Coen retired from the Service Stream Limited Board on 10 March 2022.
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 18 to 37.
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:
Service Stream Limited
Director and senior executives
Number of rights granted
Number of ordinary shares
under rights
L Mackender
L Kow
P McCann
K Smith
B Wakeford
794,792
424,491
324,540
356,829
192,822
794,792
424,491
324,540
356,829
192,822
2,093,474
2,093,474
4
Service Stream Limited
Directors' report
Company secretaries
Chris Chapman
Qualifications: LLB BA (Politics), GAICD.
Chris Chapman was appointed General Counsel for the Group in August 2015. Chris has significant in-house
experience having held senior legal positions at large private and listed construction and infrastructure businesses.
Chris was appointed Company Secretary in February 2019.
Jamie O’Brien
Qualifications: LLB (Hons), BA.
Jamie O’Brien joined Service Stream in April 2015 and is currently a Senior Legal Counsel in the Legal team. He
has extensive experience as an in-house lawyer and senior lawyer in Australian and overseas law firms. Jamie
O’Brien was appointed as additional Company Secretary in April 2021.
Principal activities
Service Stream is an essential network service provider. The Group designs, constructs, operates and maintains
critical infrastructure networks across the Telecommunications, Utilities and Transport sectors. Services are
provided on behalf of Government, Government related entities and private asset owners / network operators.
5
Review of operations and financial performance
Financial overview
$'000
Revenue
EBITDA1
Depreciation & amortisation
FY22
1,516,537
FY21
804,163
64,609
75,153
(39,298)
(20,439)
Amort. of customer contracts / relationships
(14,024)
(8,852)
Service Stream Limited
Directors' report
Change
88.6%
(14.0%)
92.3%
58.4%
n/a
(158.7%)
77.1%
(82.1%)
(224.1%)
(185.2%)
(60.0%)
94.5%
13.7%
(19.4%)
(44.6%)
▲
▼
▼
▼
▼
▼
▼
▲
▼
▼
▼
▲
▲
▼
▼
▼
712,374
(10,544)
(18,859)
(5,172)
(38,206)
(72,781)
(3,119)
10,302
(38,206)
(26,919)
(7,163)
(2,242)
-
45,862
(4,044)
(12,544)
(36,324)
29,274
(65,598)
(6.09)
1.00
7.15
2.50
(13.24)
(1.50)
1,563,767
804,163
759,604
91,114
5.8%
31,385
5.27
80,111
10.0%
38,941
9.51
11,003
(4.2%)
(7,556)
(4.24)
Impairment loss
EBIT
Net financing costs
Income tax expense
Net profit after tax
Statutory EPS (cents)
Dividends per share (cents)
Adjusted profitability2:
Total Revenue
EBITDA from Operations
EBITDA from Operations %
Adjusted NPAT (NPAT-A)
Adjusted EPS (cents)
1Earnings before interest, tax, depreciation and amortisation
2Adjusted profitability includes non-IFRS measures that have been adjusted for non-operational costs, impairment charges,
amortisation of customer contract and proportionate consolidation of equity-accounted joint ventures. Refer to reconciliation
between IFRS and non-IFRS financial information for further details on page 7.
Group results
Group revenue increased by 88.6% to $1,516.5 million from $804.2 million with the acquisition of Lendlease
Services adding $689.6 million of revenue for the 8 months from November 2021.
Revenue from the legacy business has risen by 2.8% to $826.9m with revenue growth in Utilities offsetting the
decline in Telecommunications services revenue.
Group EBITDA from Operations increased to $91.1 million from $80.1 million. This was predominantly driven by
the acquisition of Lendlease Services which contributed earnings of $46.4 million (i ncluding synergies but
excluding the allocation of corporate and group wide costs), partially offset by the rebasing of the Group’s legacy
Telecommunications operations in line with the new customer contractual arrangements entered into during FY21
and the impact from a major Queensland Utility project.
Non-operational costs of $25.5 million were incurred in FY22 comprising $4.4m of acquisition transaction costs and
$21.2 million of business integration and transitional services costs relating to the acquisition of Lendlease
Services.
Depreciation & amortisation expense increased by $18.9 million due to the additional assets acquired through
Lendlease Services, including an additional $2.1 million arising from the revaluation of fleet assets as part of the
acquisition purchase price accounting. Amortisation of customer contracts & relationships expense relates to the
Comdain Infrastructure (2019) and Lendlease Services (2021) acquisitions. This expense is excluded from the
calculation of adjusted profitability metrics.
6
Service Stream Limited
Directors' report
Group earnings before interest and tax (EBIT) was a loss of $26.9 million, a decrease of $72.8 million on FY21.
The FY22 result includes a $38.2 million impairment charge to the carrying value of goodwill against the Energy
and Water cash generating unit.
The Group’s net financing costs increased by $3.1 million to $7.2 million due to additional debt funding required for
the acquisition of Lendlease Services.
Tax expense reduced to $2.2 million in FY22 from $12.5 million due to a lower profit primarily led by the higher
depreciation and amortisation charge, financing expenditure and non-operational costs.
Group net profit or loss after tax (NPAT) decreased from a profit of $29.3 million in FY21 to a loss of $36.3 million
and earnings per share (EPS) reduced from 7.2 cents to a loss of 6.1 cents per share primarily due to the matters
referred to above.
The Directors have determined a final FY22 dividend of 1.0 cent per share (fully franked).
Reconciliations between IFRS and non-IFRS financial information
$'000
Reconciliation of Total Revenue to revenue
Total Revenue
Share of revenue from joint ventures1
Revenue
FY22
FY21
1,563,767
804,163
(47,230)
-
1,516,537
804,163
Reconciliation of EBITDA from Operations to net profit/(loss) after tax
EBITDA from Operations
Joint venture adjustments2
Non-operational costs (before tax)3
EBITDA
Depreciation and amortisation
Impairment loss
Net finance costs
Income tax expense
Net profit/(loss) after tax
Reconciliation of NPAT-A to net profit/(loss) after tax
Adjusted NPAT (NPAT-A)
Addback:
- Non-operational costs (after tax)3
- Amort. of customer contracts (tax-effected)
- Impairment expense
Net profit/(loss) after tax
91,114
80,111
(968)
-
(25,537)
(4,958)
64,609
75,153
(53,322)
(29,291)
(38,206)
-
(7,163)
(4,044)
(2,242)
(12,544)
(36,324)
29,274
31,385
38,941
(19,834)
(3,471)
(9,669)
(6,196)
(38,206)
-
(36,324)
29,274
1Proportionate share of revenue from equity accounted joint ventures.
2Relates to depreciation and amortisation, interest and tax expense associated with equity accounted joint ventures.
3Non-operational costs include acquisition, business integration and restructuring costs. Refer note 6(c).
7
Segment Results
$'000
Telecommunications
Utilities
Transport
Service Stream Limited
Directors' report
FY22
639,968
696,987
220,078
FY21
392,385
413,286
-
Change
247,583
283,701
220,078
63.1% ▲
68.6% ▲
n/a ▲
Eliminations, interest & other revenue
6,734
(1,508)
8,242
(546.6%) ▲
Total Revenue
Telecommunications
Utilities
Transport
Unallocated corporate costs
EBITDA from Operations
Telecommunications
Utilities
Transport
EBITDA Margin
Telecommunications
1,563,767
804,163
759,604
61,509
19,533
9,864
208
91,114
9.6%
2.8%
4.5%
5.8%
57,783
29,048
-
(6,720)
80,111
14.7%
7.0%
-
10.0%
3,726
94.5% ▲
6.4% ▲
(9,515)
(32.8%) ▼
9,864
6,928
11,003
(5.1%)
(4.2%)
n/a
(4.2%)
n/a ▲
(103.1%) ▲
13.7% ▲
▼
▼
▲
▼
The Group’s Telecommunications segment provides a wide range of operations, maintenance, installation, design
and construction services to the owners of fixed-line and wireless telecommunication networks in Australia.
Principal customers include nbn co, Telstra and Optus. The acquisition of Lendlease Services has broadened the
coverage of Telecommunications clients which positions the Group to further capitalise on future infrastructure
investment across the country.
Telecommunications’ revenue increased by $247.6 million (63.1%) compared to FY21 due to:
●
Acquisition of Lendlease Services from 1 November 2021; offset by
● Reduction of revenue from the legacy Telecommunications operations reflective of the new contractual
arrangements with key clients entered into during FY21. Notwithstanding this, the rebased legacy operations
performed better than expected, driven by stronger volumes and additional scope of works secured.
Telecommunications' EBITDA was $61.5 million, an increase of 6.4% against prior year. Telecommunications'
EBITDA margin was 9.6%, a decrease of 5.1% against the prior year reflecting the reduction of scale across the
legacy operations, the dilutionary impact of contracts acquired through Lendlease Services, and delivery of cost
synergies post acquisition.
Utilities
The Group’s Utilities segment provides a wide range of specialist metering, new energy, inspection & compliance,
operations, maintenance, design & construction services to utility network owners and operators and other
customers in Australia.
Utilities’ achieved further revenue growth in FY22, delivering revenue of $697.0 million and an EBITDA of $19.5
million (2.8% margin) compared with revenue of $413.3 million and EBITDA of $29.0 million (7.0% margin) in the
prior year.
Revenue increased by $283.7 million (68.6%) compared to FY21 predominantly due to the acquisition of Lendlease
Services from 1 November 2021.
Utilities' EBITDA was $19.5 million, a decrease of $9.5 million against prior year. The EBITDA margin reduction
of 4.2% reflected poor performance in a Queensland project leading to an onerous contract provision of $5.1m
being recognised at 30 June. Work mix, continued subdued volumes on higher margin discretionary works
and high turnover of the itinerant workforce across metering operations have also contributed to the lower
margin.
8
Service Stream Limited
Directors' report
Transport
The Group’s new Transport segment provides a wide range of specialist operational support and maintenance
services to public and private road and tunnel asset owners across Australia.
Transport delivered revenue of $220.1 million with an EBITDA of $9.9 million (4.5% margin) for the 8 months.
Operations during H2 FY2022 were impacted by prolonged wet weather delaying road maintenance activities
across WA and NSW.
Cashflow and Financial Position
$'000
FY22
FY21
Change
EBITDA from Operations
+/- non-cash items & change in working
capital
Dividends from joint ventures
OCFBIT1
EBITDA to OCFBIT1 conversion %
Non-operational costs
Net finance costs
Income taxes paid
Operating cashflow
Capital expenditure
Business acquisitions (net of cash
acquired)
Proceeds from sale of assets
Free cashflow
Dividends paid
Lease liability payments
Proceeds / (repayment) of borrowings
Proceeds from capital raising
Purchase of shares
Net increase / (decrease) in cash
1Operating Cashflow before interest and tax
Cash Flow
91,114
80,111
11,003
13.7% ▲
6,768
825
98,707
108.3%
(22,637)
(6,740)
(10,783)
58,547
(5,379)
(728)
7,496
(1029.7%) ▲
-
825
n/a ▲
79,383
99.1%
(4,958)
(4,698)
(24,180)
45,547
(9,894)
19,324
24.3% ▲
(17,679)
356.6% ▼
(2,042)
13,397
13,000
4,515
43.5% ▼
(55.4%) ▲
28.5% ▲
(45.6%) ▲
(313,537)
-
(313,537)
n/a ▼
1,175
1,055
120
11.4% ▲
(259,194)
36,708
(295,902)
(806.1%) ▼
-
(16,739)
115,013
179,228
(204)
18,104
(28,719)
(11,888)
28,719
(4,851)
n/a ▲
40.8% ▼
(25,000)
140,013
(560.1%) ▲
-
-
179,228
(204)
n/a ▲
n/a ▼
(28,899)
47,003
(162.6%) ▲
Cash flow from operations for the year was $58.5 million compared to $45.4 million in FY21, with key components
being:
● Operating cash flow from operations before interest and tax (OCFBIT) was $98.7 million, representing a
108.3% cash flow conversion rate. The strong cash flow result reflects a continuing focus on releasing
working capital balances acquired from Lendlease Services and from recent contract mobilisations
●
●
Finance costs were $6.7 million, $2.0 million higher than FY21 due to increased debt acquired to finance the
acquisition of Lendlease Services
Tax paid of $10.8 million was $13.4 million lower than FY21, reflective of lower earnings.
Net investing cash outflows were $317.7 million and comprised:
●
●
●
$5.4 million of capital expenditure relating to investment in technology and plant & equipment
$1.2 million was received in proceeds from the sale of assets
$313.5 million payment for the acquisition of Lendlease Services, net of cash acquired.
9
Service Stream Limited
Directors' report
Net financing inflows for the year were $277.3 million which included proceeds from capital raising of $179.2 million
and additional net borrowing of $115 million primarily to support the acquisition of Lendlease Services.
Financial position
The financial position of the Group improved during the year, with Net Assets at 30 June 2022 of $468.1 million
compared to $323.3 million at 30 June 2021. At 30 June 2022, Current Assets exceeded Current Liabilities by
$132.0 million (30 June 2021: $55.4 million). The increase is due to the acquisition of Lendlease Services and
related capital raise which was completed in the first half of FY22. The acquisition of Lendlease Services has been
provisionally accounted for as at 30 June 2022.
Cash and financing facilities
●
●
●
The Group ended the year with net debt (excluding lease liabilities and capitalised borrowing costs) of
$81.3 million;
The Group completed a refinance of its banking facilities and increased its revolving debt facilities to $395
million in Q2 FY22; and
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 lenders.
Other Balance Sheet items / movements
Other key balance sheet movements during the year included:
● Net working capital (comprising the net of trade & other receivables, inventories, accrued revenue, other
assets, trade & other payables and provisions) at 30 June 2022 was a net asset position of $66.6 million, an
increase of $53.6m from 30 June 2021. This increase is due to the higher working capital requirements of
the Lendlease Services contracts;
●
●
Plant and equipment at 30 June 2022 was $59.6 million compared to $13.2 million at 30 June 2021. This
includes $59.4 million of plant and equipment acquired from the Lendlease Services acquisition, less
depreciation and amortisation expense for the year;
Intangibles at 30 June 2022 were $451.7 million compared to $306.7 million. This includes $90.7 million of
goodwill and $102.7 million of customer contracts and relationships from the Lendlease Services
acquisition, less the $38.2 million of Energy and Water goodwill impaired and amortisation expense for the
year. The Lendlease Services acquisition is provisionally accounted for at June 2022; and
● Right-of-use assets and lease liabilities in respect of AASB 16 of $52.5 million and $57.5 million respectively
at balance date compared to prior year of $30 million and $33.7 million respectively.
Overall Group strategy, prospects and risks
Consistent with the Group’s strategy to grow and diversify our operations, Service Stream entered into a
binding agreement to acquire 100% of Lendlease Services from Lendlease Group during FY22. This
transformational acquisition, which achieved Completion in November 2021, has further diversified the Group’s
revenues, enhanced current capabilities and expanded operations across additional market sectors.
The Board believes that demand for essential network services will remain strong over the long term, supported by
increasing investment in critical infrastructure. The Board are confident that the Group’s specialist capabilities and
service offerings position Service Stream to grow across a stable and attractive blue-chip client base of utility,
telecommunications and transport asset owners and operators.
10
The achievement of the Group’s business objectives may be impacted by the following material risks:
Service Stream Limited
Directors' report
Inflation
Weather
The nature of Service Stream’s operations can be exposed to inflationary pressures across
materials, labour and other operating costs. While the majority of the Group’s contractual
agreements enable the business to recover some or all inflationary pressures, a smaller
number of agreements are fixed over a period of time. Management seek to mitigate this risk
by incorporating anticipated inflationary increases into the prices charged to clients. The timing
of contractual reviews and the relief mechanisms prescribed under each agreement may also
pass through more or less than the actual inflationary impacts incurred, and may not directly
align with the timing of the business incurring inflationary pressures.
In undertaking and delivering programs for our clients, Service Stream is exposed to the
impacts of adverse weather events such as floods, bushfires and extreme heat, as well as the
effects of climate cycles such as La Nina. Some of the key risks include physical risks to fixed
assets, key sites and locations, delays and increased costs to completing work under contract
and reputational risks such as customer and shareholder expectations.
Group-wide or project specific insurance policies and negotiated contract positions which
enable Service Stream to recover some of the cost impacts associated with adverse weather
assist in the mitigation of this risk.
COVID-19
pandemic
The COVID-19 pandemic created an unprecedented level of uncertainty and continues to
present risks to near-term business performance. Service Stream may be exposed to risks
associated with labour market accessibility, reduction in client work programs, demand for
services and supply chain disruptions.
Retention of
key personnel
and sourcing
of
subcontractors
Attracting and retaining key personnel in a market with historically low unemployment and
market-wide inflationary wage pressures presents a risk to Service Stream. Management and
the Board have implemented a number of strategies to attract and retain key personnel and
enhance the Group’s employee value proposition. Initiatives include but are not limited to;
participation in appropriate incentive arrangements, out-of-cycle remuneration reviews,
implementation of retention bonuses and participation in the Group’s employee development,
talent identification and succession programs.
Access to an appropriately skilled and resourced pool of subcontractors across Australia is
also critical to Service Stream’s ability to successfully secure and complete field-based work
for its clients. The business continues to make appropriate capital investments to improve the
ease of engagement, review and implement favourable payment terms, offer broader
programs of work across the Group and conducts reviews against market rates to assist with
the engagement, deployment, daily management, and retention of the Group's growing
subcontractor base.
Integration risk The acquisition of Lendlease Services, successfully completed on 1 November 2021, is a
complementary acquisition that created a leading multi-network essential services provider
with diverse operations.
On 30 June 2022, Service Stream successfully exited all Transitional Services Agreement
(TSA) modules. Notwithstanding the exit from the TSA, possible issues which may arise as
integration activities continue include:
•
•
unanticipated or higher than expected ongoing costs relating to integration, support
operations, accounting, other systems or insurance arrangements;
unanticipated or higher than expected ongoing costs or extensive delays in the planned
upgrades, migration, integration and decommission of information technology systems
and platforms;
11
Service Stream Limited
Directors' report
•
•
•
loss of, or reduction in, key personnel, expert capability or employee productivity, or failure
to procure or retain employees;
failure to derive the expected benefits of the strategic growth initiatives; and
disruption of ongoing Service Stream operations.
Any failure to achieve the targeted business integration synergies may impact on the financial
performance of Service Stream.
Client
concentration
Management and the Board are conscious of the Group’s exposure to a small number of key
clients and infrastructure programs particularly within the telecommunications sector as a
source of revenue and profitability but accepts that concentration to clients such as nbn co and
Telstra is a natural consequence of operating in the Australian market.
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.
The acquisition of Lendlease Services, completed on 1 November 2021, expanded the
Group’s client base by creating a broader portfolio of operations across the wider infrastructure
services market to assist in further addressing this risk.
Client demand Many of the Group’s contractual agreements do not contain volume commitments and
therefore may be dependent on the client’s demand requirements which could change over
time. The adoption and deployment rate of new technology, such as 5G, smart metering, Solar
PV, can also provide variability against expected future earnings. Whilst Management and the
Board take a balanced view on the level of client demand that is expected to arise when
forecasting financial performance, there is a risk that these levels may change over time.
Contract
management
In addition, the potential variability in client 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 Group’s cost-base and structures by maintaining an appropriate balance
between an employee-based workforce and the use of specialist subcontractors. A flexible
workforce model is therefore maintained to attract, mobilise, and retain key resources to
ensure that they are available at the right time and right place to match customers' forecasts
of volume as they change over time.
Given that Service Stream’s operating model is premised on the provision of infrastructure-
related services to clients under periodically renewed contracts, Management and the Board
are conscious of the risks that can arise through the acceptance of sub-optimal conditions in
client contracts and through the ineffective commercial administration of these contracts over
their term. Management and the Board therefore remain focused on ensuring that appropriate
contract management disciplines are effectively embedded in the organisation to manage
contract risks and to maximise contract entitlements.
A Group Commercial function is in place to mitigate this risk. Group Commercial is responsible
for the development and maintenance of a Bid Management Framework in respect of winning
new business and a Commercial Health-Check Program in respect of existing business, and
generally for ensuring that sound contract management disciplines are embedded across
the Group.
Renewal of
client
contracts
Service Stream is a contracting business and as such there is always a natural cycle of
contracts coming up for renewal. The renewal of contracts remains a key 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 ability to potentially leverage
12
Service Stream Limited
Directors' report
more cost-effective business platforms or as a consequence of their potential adoption of loss-
leading strategies to maintain or increase market share.
The Board is confident that the Group’s superior performance and consistency of service
delivery will ensure successful delivery on these contracts, but failure to do so would have a
material impact on the Group.
Working with
potential
safety hazards
In undertaking work and delivering programs for its clients, 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 and proactive programs to
increase awareness of significant hazards and prevent injuries to employees and
subcontractors.
Digital
disruption
As technology continues to change and evolve at a rapid pace, 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 which extends across a four-year horizon. This planning process includes a
detailed assessment of relevant external factors, including digital disruption or technological
changes, which may have a bearing on the Group’s current markets and service offerings.
Information
technology
systems and
cyber security
The Group's operational agility, overall cost effectiveness and ability to convert works to cash
in a timely manner are becoming increasingly reliant on a number of business-critical systems
and in turn, the appropriate management of data and information and risks associated with
cyber security and malicious emails.
Management and the Board remain alert to ensure that funds are sufficient and made available
to maintain fit-for-purpose system applications and infrastructure, and that IT investments are
appropriately prioritised and undertaken effectively as part of the Group’s annual strategic
planning process.
Service Stream has established a comprehensive cyber security capability to protect both our
clients and the Group’s information assets. The backbone of our approach is a formal
Information Security Management System (ISMS), which provides a detailed overview to the
Board, Audit and Risk Committee, and our Managers of key security risks.
Dividends
Dividends paid or determined by the Company during and since the end of the year are set out in Note 19 to the
financial statements and further set out below:
Final 2022
Interim 2022
Final 2021
Per share (cents)
Total amount
($ million)
Franked
Payment date
1.00
6.15
100%
5 October
2022
-
-
-
-
-
-
-
-
13
Service Stream Limited
Directors' report
Significant changes in the State of affairs
Except as stated in the review of operations and financial performance, there were no other significant changes in
state of affairs of the Group during the financial year.
Events after the reporting date
There has not been any other matters or circumstance occurring subsequent to the end of the financial year that
has significantly affected, or may significantly effect, the operations of the Group, the results of those operations,
or the state of affairs of the Group in future financial years.
Environmental regulation
Other than compliance with general obligations under Federal and State environmental laws and regulations, the
Group’s operations are not subject to any particular or significant environmental regulation under a Commonwealth,
State or Territory law.
Shares under performance rights
Details of unissued shares under performance rights at the date of this report are:
Series
Class of shares
Exercise price
of right
Vesting date
Number of
shares under
rights
FY20 LTI Tranche
FY21 LTI Tranche
FY22 LTI Tranche
Ordinary
Ordinary
Ordinary
$0.00 September 2022
166,460
$0.00 September 2023
1,558,980
$0.00 September 2024
3,452,199
5,177,639
The holders of these rights do not have the right, but virtue of the performance right, to participate in any share
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 (LTI) Plan
will be issued to participants after release of the financial statements in the relevant financial year, to the extent
that the vesting criteria have been satisfied.
14
Service Stream Limited
Directors' report
Directors’ meeting attendance
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).
Meetings of Committees
Board
meetings
Audit and Risk Remuneration
and
Nomination
Health, Safety,
Environment &
Sustainability
Term of
Directorship
No. of meetings
held
No. of meetings
attended by
B Gallagher
G Adcock
P Dempsey
D Page
E Ward
L Mackender
T Coen
16
4
5
16
16
15
16
10#
16
11^
4*
4
4
4
3*
3*
3*^
5*
5*
5
5
4
4*
3^
*Attended as Standing Invitee
^Tom Coen retired on 10 March 2022.
#Elizabeth Ward joined Service Stream Board on 6 September 2021.
4
4
4
3*
4*
3
4
3^
12
years
6
years
11
years
11
years
1
year
8
years
3
years
15
Service Stream Limited
Directors' report
Indemnification of officers and auditors
During the financial year, the Group paid a premium in respect of a contract insuring the Directors of the Company
(as named above), the Company Secretaries, and all officers of the Group and any related body corporate against
a liability incurred as 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
and 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 incurred as 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 and auditors
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 32 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.
PricewaterhouseCoopers has been the auditor of the company since FY 2013, and Trevor Johnston has been the
Partner responsible since FY 2018. Trevor Johnson will be rotating off as the Partner responsible during 2022 and
will be replaced by Andrew Cronin.
The Directors are of the opinion that the services disclosed in note 32 to the financial statements do not compromise
the external auditor’s independence, based on advice received from the Audit and Risk Committee, for the following
reasons:
●
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in the
Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting
Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a
management or decision-making capacity for the Company, acting as advocate for the Company or jointly
sharing economic risks and rewards.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 39 of the annual financial report.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial / Directors' Reports) 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.
16
Corporate governance statement
Service Stream Limited and the Board are committed to achieving and demonstrating the highest standards
of corporate governance. Service Stream has reviewed its corporate governance practices against the 4th
edition ASX Corporate Governance Principles and Recommendations. Service Stream is materially compliant
with all ASX Corporate Governance Principles and Recommendations.
Service Stream Limited
Directors' report
the Group’s current corporate governance practices
A description of
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 23
August 2022 and has been approved by the Board.
is set out
in
Sustainability report
Service Stream Limited and the Board recognise the importance of driving long-term sustainable practices
which support and enhance the env ironment, social and economic performance for
our wider stakeholders.
both the Group and
The Group’s current sustainability report can be viewed at: http://www.servicestream.com.au/
investors/corporate-governance.
17
Remuneration Report
Message from the Chairman of the Remuneration and Nomination Committee
Service Stream Limited
Directors' report
26 August 2022
Dear Shareholders,
On behalf of the Board, I am pleased to be writing to you as Chairman of Service Stream’s Remuneration and
Nomination Committee (RNC) and to present Service Stream’s FY22 Remuneration Report.
Service Stream’s FY22 Remuneration Report provides information about the remuneration of its Key Management
Personnel and Non-Executive Directors and seeks to explain how performance has been linked to reward
outcomes for the FY22 financial year.
2021 Annual General Meeting
At our 2021 Annual General Meeting, 98.60% of all votes cast by shareholders were in favour of the FY21
Remuneration Report. The Board remains of the view that an incentive scheme which rewards Management for
taking a longer-term view of the Business, and that drives behaviour and decisions over the long term to deliver
growth and a more sustainable future, is in the best interests of all shareholders.
Ongoing Review
Notwithstanding the strong voting result on the FY21 Remuneration Report, in FY22 the Board continued to review
the Company’s short-term incentive (STI) and long-term incentive (LTI) plans (together the “Incentive Plans”) and
proactively consulted with a selection of proxy advisors and shareholders in the process.
The key changes to the FY22 Incentive Plans that maintain the Board’s reward philosophy are summarised below:
●
Following the acquisition of Lendlease Services Pty Ltd (“LLS”) and after year-end, the Board rebased the
vesting conditions for Year 1 of the FY22 LTI, with Years 2 and 3 of the plan to be assessed against the
vesting terms disclosed below in the Remuneration Report.
In FY22 the RNC engaged EY to conduct a review of Service Stream’s incentive framework against market
practices and provide executive remuneration market data. This information will be one input used to assess
whether any changes to the executive remuneration framework are required for FY23, along with expected wage
inflationary pressures.
The Board remains committed to being transparent with our stakeholders in the development and implementation
of the Board’s reward philosophy.
Remuneration Policy for Key Management Personnel
The Managing Director and CFO remuneration is reviewed annually and benchmarked against peer companies.
For FY22, the Board determined that the Managing Director’s remuneration would remain unchanged. The other
KMP, being the Chief Financial Officer, received an adjustment to her fixed annual remuneration in February 2022
to reflect market benchmarks for like roles against peer companies and the increased level of responsibilities in
her role following the LLS acquisition. The Chief Financial Officer had not received an adjustment to her fixed
annual remuneration since 2020.
The results for FY22 reflect a solid contribution from existing operations and a positive financial impact from LLS.
The acquisition has created a strong platform for the business to expand its capability and realise its growth plans
for the future. This transformational year was taken into consideration when considering remuneration outcomes
for the Managing Director and CFO.
In FY22 the Managing Director and CFO were awarded 77.5% and 79.1% respectively, of the total potential STI
payable to those individuals. Further details on the Managing Director’s scorecard is set out in the Remuneration
Report.
18
Service Stream Limited
Directors' report
Remuneration Policy for the Chairman and Non-Executive Directors
Fees for the Chairman and Non-Executive Directors are also reviewed annually and benchmarked against peer
companies. In-line with the Board’s decision concerning the Managing Director’s remuneration, no changes were
made to the Chairman’s and Non-Executive Director’s fees for FY22.
Summary
The Board believes that the Company’s Incentive Plans achieve the Board’s objective of rewarding Management
for delivering outcomes that contribute to the long-term, sustainable performance and success of the business.
The Board is also of the view that the remuneration outcomes for FY22 are appropriate, present a fair alignment
between pay and performance, and recognise the challenges that presented the business in FY22.
I look forward to engaging with you in FY23 and thank you for your ongoing support of Service Stream.
Peter Dempsey
Chairman of the Remuneration and Nomination Committee
19
Introduction and scope
The Service Stream Limited remuneration report sets out information about the remuneration of Service Stream’s
KMP for the year ended 30 June 2022 (FY22). 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.
Service Stream Limited
Directors' report
The remuneration report covers the following matters:
1. Year in Review
2. Details of Key Management Personnel
3. Role of the Remuneration and Nomination Committee
4. Remuneration policy and framework
5. Overview of remuneration components
5.1
5.2
5.3
5.4
STI & LTI Participation rates
Fixed Remuneration
Short Term Incentive (STI)
Long Term Incentive (LTI)
6. Managing Director and KMP Remuneration
7. Non-Executive Director Remuneration
20
Service Stream Limited
Directors' report
1. Year in review
Over the course of the past year, Service Stream has continued to refine its remuneration policies and frameworks,
based on business drivers, industry and competitor analysis and stakeholder feedback. Changes to the
remuneration policy and frameworks have been summarised in the table below and outlined in detail throughout
the report.
Summary of remuneration policy and framework changes
Policy
Enhancements
FY22 Long-
term incentive
(LTI) tranche
vesting criteria
EPS performance vesting requirements from the FY22 Tranche has been adjusted to reflect a
sliding scale award on those which qualify for vesting in any period as per the table below:
EPS Growth Measure
% of performance rights that will vest
<5%
5%
5% to 10%
0%
40%
Pro-rata so that 12% of the performance rights in the
tranche will vest for every 1% between 5% and 10%
10% or above
100%
TSR Ranking
<50th percentile
50th percentile
% of performance rights that qualify for vesting
0%
40%
Above 50th and below 75th percentile
Pro-rata so that 2.4% of the performance rights in the
tranche will vest for every 1 percentile increase
between the 50th and 75th percentile
75th percentile and above
100%
The EPS and TSR requirements each have a 50% weighting in relation to the FY22 grant.
21
Service Stream Limited
Directors' report
Group performance
The graphs below outline the Group’s performance against key financial and non-financial performance indicators
over the past 5 years.
Key Indicators
2018
2019
2020
2021
2022
Total Revenue ($'000)
632,946
852,178
929,133
804,163
1,563,767
EBITDA ($'000)
67,296
89,543
105,588
75,153
EBITDA from Operations ($'000)
66,300
93,266
108,115
80,111
64,609
91,114
Net profit after tax ($'000)
41,107
49,859
49,315
29,274
(36,324)
Earnings per share (cents)
11.29
13.09
12.13
Dividends per share (cents)
Share price 30 June ($)
7.5
1.51
9.0
2.81
9.0
1.91
7.15
2.5
0.87
(6.09)
1.0
0.88
$120
$100
$80
$60
$40
$20
$0
$60
$50
$40
$30
$20
$10
$0
5
4
3
2
1
0
Group EBITDA from Operations
($m)
108.1
93.3
66.3
91.1
80.1
EBITDA from Operations to OCFBIT
conversion
148%
89%
81%
99%
108%
250%
200%
150%
100%
50%
0%
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
Adjusted NPAT (NPATA)
($m)
57.7
58.8
41.5
38.9
31.4
FY18
FY19
FY20
FY21
FY22
High Potential Incident
Frequency Rate (HPIFR)
2.6
2.8
1.6
1.7
1.6
FY18
FY19
FY20
FY21
FY22
15.00
10.00
5.00
0.00
-5.00
-10.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
Statutory EPS
(cents per share)
13.1
12.1
11.3
7.2
FY18
FY19
FY20
FY21
FY22
-6.1
Adjusted EPS
(cents per share)
15.1
14.5
11.4
9.5
5.3
FY18
FY19
FY20
FY21
FY22
22
Service Stream Limited
Directors' report
2. Details of Key Management Personnel (KMP)
As a result of the acquisition of LLS and the enlarged consolidated Group, and alongside internal structure and
responsibility changes, a review was undertaken to determine which roles would be identified as Key Management
Personnel (KMP). Following this review it was determined that based on the definition of a KMP under AASB 124,
from 1 November 2021 (i.e. acquisition date) only the Managing Director and Chief Financial Officer roles would
be KMP (being individuals with the authority and responsibility for planning, directing and controlling the activities
of the entity) for the FY22 Remuneration Report.
The following table depicts the Directors and Executive Key Management Personnel of the Group who were
classified as KMP for the entire financial year unless otherwise indicated.
Non-Executive Directors
Brett Gallagher
Greg Adcock
Tom Coen
Peter Dempsey
Deborah Page AM
Elizabeth Ward
Executive Directors
Leigh Mackender
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director
Key Management Personnel#
Linda Kow
Chief Financial Officer
Paul McCann (KMP ceased 1 November 2021)
Executive General Manager, Utilities
Kevin Smith (KMP ceased 1 November 2021)
Executive General Manager, Telecommunications
#
Following the acquisition of Lendlease Services Pty Ltd on 1 November 2021, the Board reviewed the list of Key Management Personnel from the
FY21 Remuneration Report and determined that only the Managing Director and CFO meet the definition of KMP across the enlarged consolidated
Group.
3. Role of the Remuneration and Nomination Committee (RNC)
The Board’s RNC is responsible for reviewing and making recommendations to the Board on the remuneration
arrangements for the Non-Executive Directors, the Managing Director, KMP and the executive management
team.
Information on the RNC’s role and responsibilities is contained in its charter, which is available on the
Group’s website at: www.servicestream.com.au.
4. Remuneration policy and framework
through
implementation of Service Stream’s
The Board,
remuneration policies and frameworks. The objectives of the Group's remuneration policy are to ensure that
it:
the RNC, oversees and approves
the
●
●
supports Service Stream’s strategy and reinforces our culture and values;
provides consistent and market competitive rewards which attract, motivate and retain highly skilled
employees;
23
Service Stream Limited
Directors' report
●
●
aligns employee activities to the achievement of business objectives;
supports alignment between executive remuneration and shareholder outcomes;
● maintains fair and equitable 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 in alignment with shareholder
returns;
operates a remuneration system that is transparent, accountable, scalable, flexible and consistent, enabling
comparison with the external market; and
reflects market practice by benchmarking remuneration outcomes against relevant peer companies.
Linking performance to executive remuneration
The executive remuneration framework is linked to the Group’s performance by:
●
●
●
●
requiring a significant portion of executive remuneration to vary with short-term and long-term performance;
a ‘Minimum Group Performance Threshold’ is required to be met before any STI can be paid, linked to
achieving the Group’s EBITDA from Operations target;
individual performance goals are tied to the annual objectives of the Group, linked directly to the overall
Group strategy; and
delivering a significant portion of remuneration in equity, to align with shareholder interests.
Service Stream measures performance across the following key corporate measures:
● Group EBITDA from Operations;
● Divisional/Business Unit EBITDA;
● Health & Safety Performance (TRIFR, HPIFR and LTIFR);
● Market & Customer;
● Risk & Governance;
●
●
Earnings Per Share (EPS) and Adjusted Earnings Per Share (EPS-A); and
Total Shareholder Returns (TSR) relative to the ASX 200 Industrials index.
Remuneration reviews
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 the level of remuneration
required to attract and compensate Directors and Senior Executives, given the nature of their work and
responsibilities.
The RNC periodically seeks independent advice from external consultants on various remuneration-related matters
to assist in performing its duties and making recommendations to the Board. During FY22, the RNC has continued
to engage Korn Ferry Hay to provide remuneration benchmarking data for salaried roles across the organisation
that are consistent with the markets in which Service Stream operates. In addition, the RNC engaged EY to conduct
a review of Service Stream’s reward framework against market practices and provide executive remuneration
market data. This information will be one input used to assess whether any changes to the executive remuneration
framework are required for FY23, along with expected wage inflationary pressures.
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Service Stream Limited
Directors' report
Employment conditions
The table below outlines the remuneration components for the Managing Director and executive KMP.
Position
Notice periods and termination payments
Managing Director
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
6 months either party (or payment in lieu)
Immediate for serious misconduct or breach of contract
Statutory requirements only for termination with cause
5. Overview of remuneration components
The table below depicts the potential remuneration components that apply to the Managing Director and CFO
employed for the entire financial period.
Fixed remuneration
Variable remuneration
●
●
Fixed salary set by reference to appropriate
benchmark information and individual
performance
Includes superannuation and salary-sacrificed
non-monetary benefits
●
● Cash incentive paid under the annual short-term
incentive (STI) plan, with hurdles linked to both
Group and Individual performance targets
Performance rights issued under the annual
long-term incentive (LTI) plan, with hurdles
linked to annual EPS targets and Relative TSR
Details of each remuneration component payable to the Managing Director and CFO are set out below, including
details of maximum STI and LTI opportunity as a percentage of fixed remuneration.
Managing Director
100% Fixed Remuneration
50% STI (at risk)
75% LTI (at risk)
Variable remuneration at risk
CFO
100% Fixed Remuneration
40% STI (at risk)
60% LTI (at risk)
The graphs below depict the maximum potential remuneration components that apply to the Managing Director
and CFO as a percentage of total remuneration.
Managing Director
Chief Financial Officer
33%
45%
22%
30%
20%
50%
Fixed remuneration
Variable - STI
Variable - LTI
25
Service Stream Limited
Directors' report
5.1 STI & LTI Opportunity
Details of the STI and LTI opportunities for FY22 are outlined in the table below.
Incentive Participation Rates
Executive Position
Target STI %
of fixed
remuneration
Maximum STI
% of fixed
remuneration
Target LTI %
of fixed
remuneration
Maximum LTI
% of fixed
remuneration
Maximum
total
performance-
based pay as
a % of fixed
remuneration
Managing Director
Chief Financial Officer
50
40
50
40
75
60
75
60
125
100
Details of individual performance indicators for the Managing Director are outlined in section 6.
5.2 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.
In recognition of the continued uncertainty that COVID-19 has presented on Service Stream’s operations, the
Managing Director’s fixed remuneration was unchanged for the period 1 July 2021 to 30 June 2022. An adjustment
was made to the Chief Financial Officer’s fixed remuneration effective from 1 February 2022 to reflect market
benchmarks for like roles against peer companies and the increased size and scope of the role following the
Lendlease Services acquisition. This is consistent with our policy where adjustments to executive salaries are made
only in instances where executive roles and responsibilities change significantly, and market data supports the
adjustment.
5.3 Short Term Incentive (STI)
5.3.1 STI Overview
The STI plan provides for an annual payment which varies depending on the performance achieved over the
assessment period. The incentive plan is designed to reward participants for the delivery of financial and
operational performance which is key to the success of Service Stream.
The award of any STI related incentives are first subject to Group performance meeting or exceeding the ‘Minimum
Group Performance Threshold’, this being the achievement of at least 90% of the Group’s EBITDA from Operations
target for the financial year. The minimum Group Performance Threshold exists as a gate and is applicable to all
STI participants, regardless of their individual performance.
Where 90% or more of the Group’s EBITDA from Operations target is achieved, the STI payment is payable to
employees based on Group, Divisional and individual performances against target. Any STI payments are at the
Board’s discretion.
Group Performance
Group Performance is set annually and is reflected as the Group’s EBITDA from Operations target for the financial
year. Each year the Board assesses the proposed budgets put forward by Management, aligned to the Group’s
strategic plan. Following detailed analysis and discussion a target is agreed which reflects the Group’s annual
EBITDA budget.
Following the acquisition of LLS, the Group FY22 EBITDA from Operations target was adjusted by the Board to
reflect 8-months of LLS in the Service Stream Group.
26
Service Stream Limited
Directors' report
Individual Performance
Individual performance goals are tied to the annual objectives of the Group, linked directly to the overall Group
strategy and categorised into the four quadrant measures of Financial Performance, Market & Customer, Safety &
People and Risk & Governance.
Individual performance targets under each Performance Quadrant for the Managing Director for the FY22 STI is
outlined in section 6.
5.3.2 STI summary table
Feature
Program detail
Purpose of short- term
incentive plan
Reward participants for the delivery of financial and operational
performance that are key to the success of Service Stream
Minimum performance
threshold
Achievement of 90% or more against annual Group EBITDA target before
the award of incentives under the Group, Divisional or Individual
Performance will be considered
Performance requirements
All STIs have performance criteria set across two separate areas:
1. Group Financial Performance
2.
Individual Performance is set across the following areas:
●
Financial Performance
● Market & Customer
●
Safety & People
● Risk & Governance
Target STI Opportunity
50% of total fixed remuneration for the Managing Director
40% of total fixed remuneration for the Chief Financial Officer
Maximum STI opportunity
50% of total fixed remuneration for the Managing Director
40% of total fixed remuneration for the Chief Financial Officer
Performance period
1 July 2021 to 30 June 2022
Assessment period
August 2022, following the audit of the Group's financial statements
Payment form
Cash based payment
Payment timing
September 2022
Board Discretion
Eligibility
The Board has discretion to adjust STI payments upwards and downwards
including to nil in certain circumstance e.g. where an executive has acted
inappropriately
The Managing Director and CFO are eligible to participate in the STI
program in the year in which they commence their position with the
Company
A pro-rata entitlement will be applied for up to and including start date if
the start date is pre-31 March
Post-31 March no employee will be entitled to a pro-rata payment for the
year in which they commence with the Company
27
Service Stream Limited
Directors' report
Termination of employment
On cessation of employment with the Group prior to the end of
the assessment period, there is no STI payable
Treatment of significant items
From time to time the Group’s performance may be impacted by significant
items. When this occurs, the Board has the discretion to adjust for
the impact (positively or negatively) on a case-by-case basis
5.4 Long-Term Incentive (LTI)
5.4.1 LTI Overview
The LTI is an equity-based plan that provides for an incentive award that vests subject to company performance
over a three-year performance period. A three-year measure of performance is considered to be the most
appropriate and reasonable time period which is consistent with market practice and Service Stream’s specific
industry dynamics.
The LTI operates within the shareholder approved Employee Share Ownership Plan (ESOP), which is overseen
by 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 RNC, which will then
make recommendations to the Board for approval.
The LTI Award is in the form of performance rights which are issued to participating employees, with each
performance right converting into one ordinary share of Service Stream Limited on meeting the vesting criteria. 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 opportunity, which is
expressed as a percentage of the participant’s total fixed remuneration, and the volume-weighted average market
price of the Group’s shares over a prescribed period of time or other issue price as deemed appropriate by the
Board.
5.4.2 LTI Performance Requirements
FY22 Tranche
Performance rights for each of the LTI tranches relevant to FY22 Tranche are subject to service and performance
criteria being:
1.
2.
Adjusted Earnings Per Share (Adjusted EPS) growth over the performance period. The Board considers
Adjusted EPS growth to be an appropriate performance measure for KMP reward as it represents an accurate
measure of short-term and long-term sustainable profit; and
Relative Total Shareholder Returns (TSR) being calculated as the difference in share price plus the value of
dividends paid on those shares over the performance period, expressed as a percentage of the share price
at the beginning of the performance period. The Board considers relative TSR to be an appropriate
performance measure for KMP reward as it focuses on the extent to which shareholder returns (being income
and capital gain) are generated relative to the performance of an appropriate comparator group.
Adjusted Earnings Per Share (Adjusted EPS) - 50% Weighting
The Adjusted EPS growth performance condition is based on the Company’s adjusted EPS growth over the three
years to 30 June 2024. The tranche of performance rights will vest on a pro-rata basis upon achieving the annual
Adjusted EPS target as set by the Board.
In FY22 and following the acquisition of LLS and after year-end, the Board reset the Year 1 Adjusted EPS growth
performance measure for the FY22 Tranche.
The performance vesting scale that will apply to the performance rights which are subject to the Adjusted EPS
growth test is outlined in the table below and disclosed in the Board paper on FY22 LTI outcomes:
28
% of performance rights that vest
FY22 EPS Target
Service Stream Limited
Directors' report
0%
40%
Proportional vesting
100%
< 5% EPS Growth
5% EPS Growth
5% to 10% EPS Growth
>10% EPS Growth
Relative Total Shareholder Return (TSR) - 50% Weighting
The relative TSR performance condition is based on the company’s TSR performance relative to the TSR of
comparative companies, comprising the ASX 200 Industrials, at the start of the performance period and measured
over the 3 years to 30 June 2024. If the TSR in the comparison group is ranked from highest to lowest, the median
TSR is the percentage return to shareholders that exceeds the TSR for half of the comparison companies. The
75th percentile TSR is the percentage return required to exceed the TSR for 75% of the comparison companies.
The performance vesting scale that will apply to the performance right which are subject to the TSR test is outlined
in the table below:
TSA Ranking
% of performance rights that vest
< 50th percentile
50th percentile
Above 50th and below 75th percentile
0%
40%
Pro-rata so that 2.4% of the performance rights in the
tranche will vest for every 1 percentile increase
between the 50th and below 75th percentile
75th percentile and above
100%
The Board does retain discretion to retain individuals in the LTI plan for factors such as death, total and permanent
disability or retirement. The Board also retains discretion to vest awards in the form of cash.
FY20 & F21 Tranches
% of Performance Rights that
Vest
FY21 EPS Target
(50% weighting)
FY20 EPS target
(80% weighting)
0%
40%
Below Target and below PY
Adjusted EPS
Below Target and below PY
Adjusted EPS
Below Target but equal to PY
Adjusted EPS
Below Target but equal to PY
Adjusted EPS
Proportional vesting
Below Target but greater than PY
Adjusted EPS
Below Target but greater than PY
Adjusted EPS
100%
100% of Target and above
100% of Target and above
50% of the performance rights granted in FY21 and 20% of the performance rights granted in FY20 tranches will
vest where the Group’s 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:
29
Service Stream Limited
Directors' report
TSR Ranking
% of performance rights that vests
< 50th percentile
50th percentile
0%
50%
Above 50th and below 75th percentile
Proportional vesting
75th percentile or above (top quartile)
100%
5.4.3 Performance re-testing
The Board is strongly of the view that the structure, conditions, and operation of the LTI scheme is the most
appropriate for the Group because:
●
●
the retesting regime at the end of the three-year period (based on average results for that period) allows the
Board to take a longer-term outlook;
the Board is conscious that a contracting business like Service Stream can be subject to market volatility
and encounter issues that adversely impact individual years and therefore a retesting regime at the end of
the three-year period is appropriate;
● management should be rewarded to the extent that the Group's performance over the entire period of review
meets the set targets for that period;
●
●
the review period accords with the average length of the Group’s annuity and panel client contracts, being 3
to 4-year terms, thereby enabling performance under the full term of each contract to be recognised; and
the service criteria (i.e. the requirement that the participant remain employed by the Group at the end of the
three-year period) and the retesting arrangement provide significant focus on a longer time horizon.
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Service Stream Limited
Directors' report
5.4.4 FY22 LTI summary table
Feature
Program detail
Purpose of long-term incentive plan
Reward participants for the delivery of performance which is linked
to enhancing long-term shareholder value over a three-year period
Manage risks associated with a tendency to focus on short-
term performance against longer-term performance
Performance requirements
All LTIs have performance criteria set across two areas:
1. Annual Earning Per Share (EPS) growth
2. Relative Total Shareholder Returns (TSR), measured against a
relevant per group being the ASX 200 Industrials index.
LTI Opportunity
75% of total fixed remuneration for the Managing Director
60% of total fixed remuneration for the Chief Financial Officer
Maximum LTI opportunity
75% of total fixed remuneration for the Managing Director
60% of total fixed remuneration for Chief Financial Officer
Performance period
1 July 2021 to 30 June 2024
Assessment period
August 2024, following the audit of the Group's financial statements
Award form
Award timing
Board discretion
Eligibility
Performance rights
September 2024
The Board has discretion to adjust LTI award including to nil in certain
circumstance e.g where an executive has acted inappropriately
Selected Executives and Senior Management may be invited to
participate
they
commence their position with the Group
the LTI program
in which
the year
in
in
Termination of employment
Where a participant ceases employment with the Group prior to the
end of the assessment period, any unvested performance rights
will be forfeited
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Service Stream Limited
Directors' report
6. Managing Director and Senior Executive Remuneration
Executive remuneration table
The information provided in the table below has been prepared in accordance with Australian accounting standards.
Short-term employee benefits
Post-
employ-
ment
benefits
Long-
term
benefits
Share-based
payments
Year
Salary
Termin-
ation
benefits
Short-term
incentives
Non-
monetary
Super
LSL
Performance
rights
Total
Fixed
At
Risk
L Mackender
2022
878,997
-
449,744*
23,568
16,599
13,977
1,382,885
66%
34%
2021
878,997
-
-
-
21,694
16,758
148,045
1,065,494
86%
14%
L Kow
2022
627,928
-
302,789*
31,246
1,764
51,179
1,014,906
65%
35%
2021
578,997
-
P McCann1
2022
159,666
2021
458,164
K Smith2
2022
176,332
2021
528,997
S Laffey3
2021
110,077
-
-
-
-
-
-
-
-
21,694
513
95,264
696,468
86%
14%
8,128
7,856
3,177
(37,525)
141,302
127%
-
27%1
-
24,384
21,694
23,221
55,896
583,359
90%
10%
58,019
-
7,856
7,920
2,389
252,516
76%
24%
-
21,694
10,575
66,657
627,923
89%
11%
-
-
-
9,039
-
-
5,342
124,458
96%
4%
-
239,993
100%
0%
J Ash4
2021
5,296
232,947
-
-
1,750
Total
2022
1,842,923
-
810,552
8,128
70,526
29,460
30,020
2,791,609
70%
30%
2021
2,560,528
232,947
-
24,384
97,565
51,067
371,204
3,337,695
89%
11%
1P McCann ceased as a KMP as of 1 November 2021. His reported remuneration is for the period from 1 July 2021 to that date. During FY22 P
McCann resigned, forfeiting his existing performance rights.
2K Smith ceased as a KMP as of 1 November 2021. His reported remuneration is for the period from 1 July 2021 to that date.
3S Laffey was the Acting Executive General Manager of Energy & Water until 9 November 2020. The position ceased being a KMP role following
the consolidation of the Utilities operations.
4J Ash resigned from his position as the Executive General Manager, Network Construction effective 6 July 2020.
*Short-term incentive includes a one-off discretionary bonus awarded by the Board for the successful acquisition and integration of Lendlease
Services
32
Service Stream Limited
Directors' report
FY22 STI performance outcomes
2022 STI
Name
Paid %
L Mackender
77.5%
L Kow
79.1%
L Mackender
The table below summarises the performance of the Managing Director against the individual elements of his
scorecard.
Measure Weighting
Target
Outcome
Financial
50%
Delivery
30%
Delivery of Group EBITDA from
Operations target, which has been
adjusted for the proforma
contribution from LLS
Acquisition and integration of LLS,
including successful exit from TSA
by 30 June 2022
Deliver LLS acquisition synergy
targets
Below
threshold
Partially
achieved
Fully
achieved
Above
target
Below
threshold
Partially
achieved
Fully
achieved
Above
target
Safety &
People
15%
FY22 Annual Group HPIFR Target
of < 1.61 is met or exceeded
Below
threshold
Partially
achieved
Fully
achieved
Above
target
Risk &
Governance
5%
Restructure Group Executive with
appointments made to key roles,
consistent with the enlarged
business
Below
threshold
Partially
achieved
Fully
achieved
Above
target
Specific financial, commercial and operational targets remain commercially sensitive and as such, have not been
disclosed.
33
Service Stream Limited
Directors' report
FY22 LTI performance outcomes
There were no LTI awards which vested for the Managing Director or KMP during FY22.
Summary of grants under LTI
Name
Plan
Balance at
1 July 2021
Granted as
compen-
sation
Vested
Forfeited
Balance at
30 June
2022
Number
Number
Number
Number
Number
Fair
value
Fair
value
when
granted
$
Fair
value at
vesting
$
L Mackender
FY20 LTI
238,544
FY21 LTI
361,879
-
-
FY22 LTI
-
794,792
Total
600,423
794,792
L Kow
FY21 LTI
193,076
-
Total
FY22 LTI
-
193,076
424,491
424,491
P McCann
FY20 LTI
76,776
FY21 LTI
132,791
-
-
Total
FY22 LTI
-
209,567
324,540
324,540
K Smith
FY20 LTI
106,903
FY21 LTI
162,254
-
-
Total
Total
FY22 LTI
-
269,157
356,829
356,829
1,272,223
1,900,652
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(190,835)
47,709
524,838
n/a
-
-
361,879
652,558
n/a
794,792
516,481
n/a
(190,835)
1,204,380
-
-
-
193,076
348,164
n/a
424,491
275,848
n/a
617,567
(76,776)
(132,791)
(324,540)
(534,107)
165,458
n/a
239,455
n/a
210,896
n/a
-
-
-
-
(85,522)
21,381
230,384
n/a
-
-
162,254
292,585
n/a
356,829
231,879
n/a
(85,522)
540,464
(810,464)
2,362,411
The balance at the end of the financial year excludes rights where the performance criteria has not been met in
relation to their performance period but they have not yet reached their vesting date.
Tranche
Number
Grant date
Fair value per right at grant date
FY20
118,751
18 September
2019
Relative TSR hurdle – 128.4 cps
EPS hurdle – 237.3 cps
FY20
CEO
47,709
23 October 2019
Relative TSR hurdle – 131.1 cps
EPS hurdle – 242.2 cps
FY21
1,558,980
21 October 2020
Relative TSR hurdle – 166.8cps
EPS hurdle – 193.8 cps
FY22
3,452,199
29 October 2021
Relative TSR hurdle – 55.2 cps
EPS hurdle – 74.7 cps
Vesting
date
21
September
2022
21
September
2022
21
September
2023
21
September
2024
Performance period
1 July 2019 - 30 June
2022
1 July 2019 - 30 June
2022
1 July 2020 - 30 June
2023
1 July 2021 - 30
June 2024
34
Service Stream Limited
Directors' report
Shareholding of key management personnel
The table below sets out the equity in Service Stream held by key management personnel for the 2022 and 2021
financial years:
Balance at
1 July
Received on
vesting of
performance
rights
(Disposed) /
Acquired
during the
year
Balance at
date of
appointment
Balance at
date of
resignation
Balance at
30 June
Name
2022
L Mackender
1,100,700
L Kow
70,000
P McCann1
539,017
K Smith2
2,482,425
2021
L Mackender
1,100,700
L Kow
P McCann
K Smith
J Ash
70,000
538,522
2,481,930
-
-
-
-
-
-
-
-
466,901
1,167,660
277,778
-
-
-
495
495
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,567,601
1,237,660
816,795
2,482,425
1,100,700
70,000
539,017
2,482,425
249,166
-
123,411
125,755
-
1Paul McCann ceased being a Key Management Personnel (KMP) on 1 November 2021. Shares acquired of 277,778 represents acquisitions
made during the period he was KMP. Balance at 30 June 2022 represents actual shareholdings at that date.
2Kevin Smith ceased being a Key Management Personnel (KMP) on 1 November 2021. Balance at 30 June 2022 represents actual shareholdings
at that date.
7 Non-Executive Directors’ Remuneration
The Board’s RNC is responsible for reviewing and making recommendations to the Board on the remuneration
for the Non-Executive Directors. Non-Executive Directors are remunerated only by way of fixed fees
(inclusive of superannuation where applicable). To preserve independence and impartiality, Non-Executive
Directors do not receive any performance related compensation.
The current maximum aggregate fee pool for
is $1,000,000 as approved
by shareholders on 23 October 2019. Board and committee fees (inclusive of superannuation where
applicable) are included in the aggregate pool. No changes were made to Non-Executive Director fees in FY22.
the Non-Ex ecutive Directors
Fees are reviewed annually taking into account comparable roles and market data provided by the
Board’s independent remuneration advisor.
35
Non-Executive Directors' remuneration
Service Stream Limited
Directors' report
B Gallagher
G Adcock1
P Dempsey
D Page
E Ward3
T Coen2
Total
Year
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Board and
Committee fees
Super
Total
182,648
18,264
182,648
17,352
130,000
130,000
-
-
118,722
11,872
118,721
11,279
130,000
124,361
88,175
-
80,822
107,763
-
5,639
8,818
-
8,082
10,237
730,367
47,036
663,493
44,507
200,912
200,000
130,000
130,000
130,594
130,000
130,000
130,000
96,992
-
88,904
118,000
777,402
708,000
1G Adcock’s remuneration was paid to Ausadcock Pty Ltd, a company in which Mr Adcock has a beneficial interest.
2T Coen’s remuneration was paid up to the date of his retirement on 10 March 2022.
3E Ward’s remuneration was paid from her start date of 6 September 2021.
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Service Stream Limited
Directors' report
Non-Executive Directors’ Shareholding
Balance at 1
July
Received on
vesting of
performance
rights
(Disposed) /
Acquired
during the
year
Balance at date
of appointment
Balance at
date of
resignation
Balance at
30 June
Name
2022
B Gallagher
3,299,673
G Adcock
70,000
T Coen1
38,444,918
P Dempsey
1,050,000
D Page
509,800
E Ward2
2021
-
B Gallagher
3,299,673
G Adcock
50,000
T Coen
38,444,918
P Dempsey
1,050,000
D Page
443,293
-
-
-
-
-
-
-
-
-
-
-
700,327
23,333
1,281,497
350,000
137,001
-
-
20,000
-
-
66,507
-
-
-
-
-
-
-
-
-
-
-
-
-
4,000,000
93,333
39,726,415
-
-
1,400,000
-
646,801
-
-
-
-
3,299,673
70,000
- 38,444,918
-
-
1,050,000
509,800
1T Coen retired as Non-Executive Director effective 10 March 2022.
2Elizabeth Ward was appointed as an Independent Non-Executive Director effective 6 September 2021. Ms Ward has advised the Chairman that
she intends to purchase SSM shares on-market following the cessation of the Company’s Closed Period for securities trading, in accordance with
and as specified in the Company’s Securities Trading Policy.
37
The Directors’ report is signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the
Service Stream Limited
Directors' report
Corporations Act 2001.
On behalf of the Directors
Brett Gallagher
Chairman
26 August 2022
Leigh Mackender
Managing Director
26 August 2022
38
Auditor’s Independence Declaration
As lead auditor for the audit of Service Stream Limited for the year ended 30 June 2022, I declare that
to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Service Stream Limited and the entities it controlled during the period.
Trevor Johnston
Partner
PricewaterhouseCoopers
Melbourne
26 August 2022
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, 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.
39
Service Stream Limited
Consolidated statement of profit or loss and other comprehensive income
for the financial year ended 30 June
Revenue from continuing operations
Revenue from contracts with customers
Other income
Expenses
Employee salaries and benefits
Subcontractor fees
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
Impairment
Net finance costs
Other expenses
Share of profits from investment in joint ventures and associates
(Loss) / profit before tax
Income tax expense
(Loss) / profit for the year
Total comprehensive (loss) / income for the year
Notes
3
4
6
14
5
25
7
(Loss) / profit attributable to the equity holders of the parent
Total comprehensive (loss) / income attributable to equity holders of the parent
2022
$'000
1,513,804
2,733
1,516,537
(381,866)
(901,477)
(88,111)
(20,058)
(11,359)
(5,280)
(29,772)
(13,278)
(53,322)
(38,206)
(7,163)
(2,919)
2,192
(34,082)
(2,242)
(36,324)
(36,324)
(36,324)
(36,324)
2021
$'000
803,006
1,157
804,163
(218,722)
(409,284)
(51,499)
(7,999)
(6,591)
(3,495)
(15,553)
(11,884)
(29,291)
-
(4,044)
(3,983)
-
41,818
(12,544)
29,274
29,274
29,274
29,274
Earnings per share
Basic (cents per share)
Diluted (cents per share)
8
8
(6.09)
(6.09)
7.15
7.15
Notes to the financial statements are included on pages 44 to 85
40
Consolidated balance sheet
at 30 June
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Accrued revenue
Other assets
Current tax asset
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Lease liabilities
Current tax liabilities
Total current liabilities
Non-current liabilities
Deferred tax liability (net)
Provisions
Borrowings
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Capital and reserves
Contributed equity
Reserves
(Accumulated losses) / retained earnings
Total equity
Service Stream Limited
Notes
2022
$'000
2021
$'000
20
9
10
11
12
7
25
13
15
14
16
17
15
7
7
17
20
15
18
68,677
105,011
14,738
273,841
9,992
7,889
50,573
46,821
6,837
88,418
4,898
-
480,148
197,547
5,606
59,643
52,529
451,729
569,507
-
13,170
29,963
306,746
349,879
1,049,655
547,426
267,472
62,350
18,304
-
103,520
23,710
11,197
3,732
348,126
142,159
38,253
7,117
148,907
39,156
233,433
18,964
6,672
33,783
22,516
81,935
581,559
224,094
468,096
323,332
499,682
(12,024)
(19,562)
468,096
318,721
(12,151)
16,762
323,332
Notes to the financial statements are included on pages 44 to 85
41
Consolidated statement of changes in equity
for the financial year ended 30 June
Contributed
equity
Employee equity-
settled benefits
reserve
Retained earnings/
(accumulated
losses)
$'000
$'000
$'000
314,741
(11,109)
Balance at 1 July 2020
Profit for the period
Total comprehensive income for the year
Equity-settled share-based payments,
inclusive of tax adjustments
Issue of shares (net of transaction costs)
Acquisition of treasury shares
Issue of treasury shares to employees
Dividends paid
Balance at 30 June 2021
Loss for the period
Total comprehensive loss for the year
Equity-settled share-based payments,
inclusive of tax adjustments
Issue of shares (net of transaction costs)
Acquisition of treasury shares
Issue of treasury shares to employees
Balance at 30 June 2022
-
-
-
2,023
(2,023)
2,023
1,957
318,721
-
180,961
(204)
204
499,682
-
-
981
-
-
(2,023)
-
(12,151)
331
-
-
(204)
(12,024)
Service Stream Limited
Total
$'000
321,796
29,274
29,274
981
2,023
(2,023)
-
(28,719)
323,332
(36,324)
(36,324)
331
180,961
(204)
-
18,164
29,274
29,274
-
-
-
-
(30,676)
16,762
(36,324)
(36,324)
-
-
-
-
(19,562)
468,096
Notes to the financial statements are included on pages 44 to 85
42
Consolidated statement of cash flows
for the financial year ended 30 June
Cash flows from operating activities
Receipts from customers (including GST)
Payments to suppliers and employees (including GST)
Interest received
Interest and facility costs paid
Income taxes paid
Dividends from joint venture associates
Net cash provided by operating activities
Cash flows from investing activities
Payments for plant and equipment
Proceeds from the sale of plant and equipment
Payments for intangible assets
Payment for businesses (net of cash acquired)
Net cash used in investing activities
Cash flows from financing activities
Purchase of shares (net of transaction costs)
Proceeds from issue of shares (net of transaction costs)
Principal elements of lease payments
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Net cash provided by / (used in) financing activities
Net increase / (decrease) in cash held
Cash at the beginning of the year
Cash at the end of the year
Service Stream Limited
Notes
2022
$'000
2021
$'000
1,647,293
(1,572,048)
99
(6,839)
(10,783)
825
58,547
887,100
(812,675)
40
(4,738)
(24,180)
-
45,547
(3,014)
1,175
(2,365)
(313,537)
(317,741)
(204)
179,228
(16,739)
-
500,013
(385,000)
277,298
18,104
50,573
68,677
(3,184)
1,055
(6,710)
-
(8,839)
-
-
(11,888)
(28,719)
-
(25,000)
(65,607)
(28,899)
79,472
50,573
20
29
20
Notes to the financial statements are included on pages 44 to 85
43
Service Stream Limited
Service Stream Limited
Notes to the consolidated financial statements
for the year ended 30 June 2022
Notes to the consolidated financial statements
1
General information
Page 45
Section A: Business performance
Section B: Operating assets & liabilities
2
Segment information
Page 45
9
Trade and other receivables
3
Revenue from contracts with customers Page 47
10 Inventories
4
Other income
Page 48
11 Accrued revenue
5
Net finance costs
Page 48
12 Other assets
6
Other expense items
Page 48
13 Property, plant and equipment
7
Income tax expense
Page 49
14 Intangible assets
8
Earnings per share
Page 51
15 Leases
16 Trade and other payables
17 Provisions
Section C: Capital and financing
Section D: Group structure
18 Contributed equity
Page 59
24
Subsidiaries
19 Dividends
Page 59
25
Joint arrangements
20 Notes to the consolidated statement of
cash flows
Page 60
26
Deed of cross guarantee
21 Financial instruments
Page 61
27
Related party transactions
22 Capital risk management
Page 64
28
Parent entity information
23 Share-based payments
Page 64
29
Business combinations
Page 52
Page 52
Page 52
Page 53
Page 53
Page 54
Page 56
Page 57
Page 58
Page 67
Page 68
Page 69
Page 70
Page 70
Page 72
Section E: Unrecognised items
Section F: Other
30 Contingent assets and liabilities
Page 74
32
Remuneration of auditors
Page 74
31 Events after the reporting period
Page 74
33
Significant accounting policies
Page 74
34
Critical accounting judgements and
key sources of estimation uncertainty
Page 85
44
Service Stream Limited
Notes to the consolidated financial statements
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
The Group's operating segments have been determined based on the nature of the business activities undertaken by the
Group and by reference to the structure of internal reporting that is prepared and provided to the chief operating decision
maker, being the Managing Director, who provides the strategic direction and management oversight of the Group in terms
of monitoring results and approving strategic planning for the business.
The Group acquired Service Stream Maintenance Pty Ltd (formerly Lendlease Services Pty Ltd) and its controlled entities
("LLS") on 1 November 2021 (refer note 29). This resulted in a re-organisation of its segments with the creation of a new
reportable segment, Transport, and the combining of the Telecommunications and Utilities segments into Service Stream’s
existing structure.
The principal services of the Group's reportable segments are as follows:
Telecommunications
Telecommunications provides a wide range of operations, maintenance, installation, design and
construction services to the owners of
fixed-line and wireless telecommunication networks in
Australia. Service capability includes customer connections, service and network assurance, site
acquisition, engineering, design, construction and installation of broadband, wireless and fixed-line
project services, as well as minor projects for asset remediation, augmentation and relocation.
Principal customers include nbn co, Optus, Telstra and other telecommunications providers.
Utilities
Transport
Utilities provides operations, maintenance, design and construction services, as well as a wide
range of specialist metering, new energy and inspection services to gas, water and electricity
network owners and other customers in Australia. Service capability includes asset upgrades and
replacement, engineering, design and construction of network assets and energy-related products,
meter reading and network assurance, as well as specialist inspection, auditing and compliance
services.
Transport provides long-term operational support and maintenance services to public and private
road and tunnel asset owners. Service capabilities include road network maintenance, control room
operations, minor civil construction services and installation and operation of intelligent transport
systems (ITS).
Performance is measured on the segment result which is EBITDA from Operations (earnings before depreciation and
amortisation, interest, taxation, non-operational costs* and adjustments for equity accounted joint ventures) as included in
the internal management reports that are reviewed by the Managing Director.
The segment results include the allocation of overheads that can be directly attributable to an individual business segment.
Costs relating to certain head office functions and non-operational activities are managed at Group level and not allocated
to the Group's segments. The information presented to the Managing Director does not report on segment assets and
liabilities and as such is not presented in this report.
*Non-operational cost items represent acquisition, integration and restructuring costs (refer note 6 (c)).
45
Service Stream Limited
Notes to the consolidated financial statements
2 Segment information (continued)
(b) Segment revenue and results
30 June 2022
Telecommunications
Utilities
Transport
Eliminations/
Unallocated
Segment revenue
Other income
Share of revenue from joint ventures
Total revenue (including joint venture)1
$'000
639,898
70
-
639,968
$'000
695,354
1,633
-
696,987
$'000
171,977
871
47,230
220,078
$'000
6,575
159
-
6,734
Total
$'000
1,513,804
2,733
47,230
1,563,767
EBITDA from Operations2
61,509
19,533
9,864
208
91,114
30 June 2021
Telecommunications
Utilities
Transport
Segment revenue
Other income
Share of revenue from joint ventures
Total revenue (including joint venture)1
$'000
392,378
7
-
392,385
$'000
411,541
1,745
-
413,286
$'000
-
-
-
-
Eliminations/
Unallocated
$'000
(913)
(595)
-
(1,508)
Total
$'000
803,006
1,157
-
804,163
EBITDA from Operations2
57,783
29,048
-
(6,720)
80,111
1This is a non-statutory disclosure as it includes other income and Service Stream's share of revenue from equity accounted joint
ventures.
2Performance is measured using EBITDA from Operations. In prior periods, the segment information presented Statutory EBITDA as the
performance measure which included non-operational costs. These costs were classified as unallocated items and as such, the results for
the reportable segments remain unchanged.
Reconciliation of EBITDA from Operations to net profit after tax
EBITDA from Operations
Adjustments for joint ventures
Depreciation and amortisation
Impairment expense
Non-operational costs (before tax) (refer note 6 (c))
Net finance costs
Income tax expense
Net (loss) / profit after tax
(c) Information about major customers
2022
$'000
91,114
(968)
(53,322)
(38,206)
(25,537)
(7,163)
(2,242)
(36,324)
2021
$'000
80,111
-
(29,291)
-
(4,958)
(4,044)
(12,544)
29,274
In the current reporting period, there was one major customer (2021: one customer) which contributed more than 10% to
the Group's revenue. The relevant revenue by segment is shown below:
Largest customer 2022: Telecommunications $419 million (2021: Telecommunications $307 million).
No other customer contributed to 10% or more of the Group's total revenue.
46
3 Revenue from contracts with customers
(a) Revenue from contracts with customers
Revenue
(b) Disaggregation of segment revenue
Service Stream Limited
Notes to the consolidated financial statements
2022
$'000
1,513,804
1,513,804
2021
$'000
803,006
803,006
The Group derives revenue from the transfer of goods and services over time and at a point in time. The table below
provides a disaggregation of reportable segment revenues from contracts with customers.
30 June 2022
Telecommunications
Utilities
Transport
Other
Segment revenue
Intra / Inter-segment revenue
Revenue from contracts with customers
Timing of revenue recognition
At point in time
Over time
Revenue from contracts with customers
$'000
639,898
-
639,898
$'000
695,354
-
695,354
$'000
171,977
-
171,977
$'000
7,126
(551)
6,575
Total
$'000
1,514,355
(551)
1,513,804
335,861
304,037
639,898
264,855
430,499
695,354
7,596
164,381
171,977
5,593
982
6,575
613,905
899,899
1,513,804
30 June 2021
Telecommunications
Utilities
Transport
Other
Total
Segment revenue
Intra / Inter-segment revenue
Revenue from contracts with customers
Timing of revenue recognition
At point in time
Over time
Revenue from contracts with customers
$'000
392,378
-
392,378
$'000
411,541
-
411,541
284,584
107,794
392,378
141,400
270,141
411,541
$'000
-
-
-
-
-
-
(c) Assets and liabilities related to contracts with customers
Revenue recognised that was included in contract liability balance at the beginning
of the period
$'000
-
(913)
(913)
-
(913)
(913)
2022
$'000
8,511
$'000
803,919
(913)
803,006
425,984
377,022
803,006
2021
$'000
10,435
Revenue (reversed) from performance obligations satisfied in previous periods
(1,339)
(536)
47
Service Stream Limited
Notes to the consolidated financial statements
3 Revenue from contracts with customers (continued)
(d) Significant estimates
The Group's revenue is recognised when and as the control of the goods and services are transferred to its customers.
Ticket of work services and cost reimbursable contract
Revenue is recognised based on the transaction price as specified in the contract, net of estimated achievements of the
variable considerations. Judgement is required in determining the Group's total transaction price. Accumulated experience
is used to estimate and provide for the variable considerations applicable, and revenue is only recognised to the extent that
it is highly probable that a significant reversal will not occur.
Project delivery
Revenue is recognised based on the proportion of contract costs incurred for work performed to date relative to the
estimated total contract costs (percentage of completion method). Judgement is required in determining the Group's total
progress and total contract costs, net of variable considerations on each project delivery. Accumulated experience is used
to estimate this progress and total contract costs. Revenue is only recognised to the extent that it is highly probable that a
significant reversal will not occur.
No element of financing is deemed present as sales are generally made with credit terms of 30 days, which is consistent
with market practice. The Group's obligation to warranty claims under the standard warranty terms is recognised as a
provision, see note 17.
4 Other income
Gain on disposal of assets
Other
5 Net finance costs
Interest received
Interest expense: leases
Interest expense: borrowings
Facility establishment costs
6 Other expense items
(a) Depreciation and amortisation expense
Depreciation of plant and equipment
Depreciation of right-of-use assets
Amortisation of software
Amortisation of customer contracts / relationships
Notes
13
15
14
14
2022
$'000
470
2,263
2,733
2022
$'000
(99)
1,624
4,865
773
7,163
2022
$'000
15,196
17,296
6,806
14,024
53,322
2021
$'000
843
314
1,157
2021
$'000
(40)
957
2,467
660
4,044
2021
$'000
4,892
11,256
4,291
8,852
29,291
48
Service Stream Limited
Notes to the consolidated financial statements
6 Other expense items (continued)
(b) Employee benefit expense
Superannuation expense
Equity-settled share-based payments
(c) Non-operational expenses
Individual non-operational items included in profit / loss before income tax
Acquisition costs1
Business integration and restructuring costs2
Total non-operational costs (before tax)
Tax on non-operational costs
Non-operational costs after tax
2022
$'000
32,237
332
32,569
2022
$'000
4,364
21,173
25,537
(5,703)
19,834
2021
$'000
16,654
1,288
17,942
2021
$'000
3,470
1,488
4,958
(1,487)
3,471
1Acquisition costs in 2022 relate to acquisition of Lendlease Services (Refer to note 29).
2Costs associated with business separation and integration related activities primarily in relation to the acquisition of Lendlease Services.
7 Income tax expense
(a) Income tax recognised in profit or loss
Tax expense comprises:
Current tax expense
Over provision in prior years
Deferred tax
Income tax expense
(b) Reconciliation of income tax expense to tax payable
(Loss) / profit from continuing operations
Tax at the Australian tax rate of 30%
Tax effect of amounts which are not deductible (taxable) in calculating taxable income
Goodwill impairment
Other non-deductible expenses
Franking credits on dividends received
Over provision in prior years
Income tax expense as per consolidated statement of profit or loss and other
comprehensive income
Over provision in prior years
Movement through deferred tax (note: 7c)
Tax payable
Less current year tax instalments paid during the year
Net income tax (refundable) / payable
2022
$'000
-
(806)
3,048
2,242
2022
$'000
(34,082)
(10,225)
11,462
2,014
(203)
(806)
2,242
806
(3,048)
-
(7,889)
(7,889)
2021
$'000
17,347
-
(4,803)
12,544
2021
$'000
41,818
12,545
-
(1)
-
-
12,544
-
4,803
17,347
(13,615)
3,732
Effective tax rate
30%
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.
7%
49
Service Stream Limited
Notes to the consolidated financial statements
7 Income tax expense (continued)
(c) Deferred tax balances
Deferred tax balances arise from the following:
2022
Temporary differences
Trade and other receivables
Accrued revenue
Trade, other payables and provisions
Share issue costs
Tax Losses
Employee benefits
Plant and equipment
Customer contracts / relationships
Right of use assets
Lease liabilities
Other
2021
Temporary differences
Trade and other receivables
Accrued revenue
Trade, other payables and provisions
Share issue costs
Employee benefits
Plant and equipment
Customer contracts / relationships
Right of use assets
Lease liabilities
Other
Opening
balance
Timing
difference
related to
prior
periods1
DTL (Net)
Acquired
through
Acquisition
Charged to
Income
Charged to
equity
Closing
balance
$'000
$'000
$'000
$'000
$'000
$'000
175
(15,150)
1,936
1,081
-
8,734
(346)
(17,131)
(8,989)
10,114
612
(18,964)
-
-
649
(520)
-
-
-
-
-
-
(261)
(132)
105
178
5,773
-
-
8,788
712
(33,270)
-
84
(212)
(17,842)
(12)
(46,907)
933
(511)
38,585
1,200
(302)
4,207
(6,770)
7,040
(511)
(3,048)
-
-
-
1,718
-
15
-
-
-
-
-
1,733
268
(61,879)
9,291
1,768
38,585
18,737
64
(46,194)
(15,759)
17,238
(372)
(38,253)
Opening
balance
Timing
difference
related to
prior
periods1
DTL (Net)
Acquired
through
Acquisition
Charged to
Income
Charged to
equity
Closing
balance
$'000
$'000
$'000
$'000
$'000
$'000
290
(21,664)
5,207
70
9,939
177
(19,787)
(8,727)
10,009
679
(23,807)
-
-
-
303
-
46
-
-
-
-
349
-
-
-
-
-
-
-
-
-
-
-
(115)
6,514
(3,271)
708
(896)
(569)
2,656
(262)
105
(67)
4,803
-
-
-
-
(309)
-
-
-
-
-
(309)
175
(15,150)
1,936
1,081
8,734
(346)
(17,131)
(8,989)
10,114
612
(18,964)
1The prior period timing difference arose from a true-up of deferred tax and tax payable position at balance date to the subsequent tax
return lodgement date.
Deferred tax assets and liabilities have been offset by the Group and are presented in the consoldiated balance sheet as a
net deferred tax liability.
50
Service Stream Limited
Notes to the consolidated financial statements
7 Income tax expense (continued)
(d) Tax consolidation
Reliance 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 24. A tax funding arrangement and a tax sharing agreement have 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 has
been performed (except for unrealised profits, distributions made and received and capital gains and losses and similar
items arising on transactions within the tax consolidated group which are treated as having no tax consequences). 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 enitity in the tax consolidation group).
Nature of tax funding arrangements and tax sharing agreements
Enities within the tax-consolidated group have entered into a tax 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 have 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.
8 Earnings per share
Basic earnings / (loss) per share:
Total basic earnings / (loss) per share
Diluted earnings / (loss) per share1 :
Total diluted earnings / (loss) per share
Basic and diluted earnings per share
2022
Cents per
share
2021
Cents per
share
(6.09)
7.15
(6.09)
7.15
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as
follows:
(Loss) / profit for the year attributable to owners of the Company
(Loss) / 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
2022
$'000
(36,324)
(36,324)
2022
$'000
2021
$'000
29,274
29,274
2021
$'000
596,100
409,477
-
596,100
229
409,706
1Weighted average number of shares used in basic and diluted Earnings Per Share calculation is the same for FY22.
Weighted average number of shares used in diluted Earnings Per Share calculation excludes unallocated treasury shares.
51
Service Stream Limited
Notes to the consolidated financial statements
9 Trade and other receivables
Current
1 Month
2 Months
3 Months
Over 3 months
Other receivables
Trade
receivables
2022
$'000
82,988
10,854
2,692
2,077
6,433
105,044
Expected
credit loss
2022
$'000
(173)
(125)
(138)
(283)
(177)
(896)
Trade
receivables
2021
$'000
38,933
5,007
282
Expected
credit loss
2021
$'000
(70)
(74)
(19)
63
1,336
45,621
(16)
(404)
(583)
Total
2022
$'000
82,815
10,729
2,554
1,794
6,256
104,148
863
105,011
Total
2021
$'000
38,863
4,933
263
47
932
45,038
1,783
46,821
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. 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.
They are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are
recognised initially at
financing
components, then they are recognised at fair value. The Group holds the trade receivables with the objective to collect the
contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.
Details about the Group's impairment policies and the calculation of the loss allowance are provide note 21(c).
is unconditional, unless they contain significant
the amount of consideration that
10 Inventories
Inventories
2022
$'000
14,738
14,738
2021
$'000
6,837
6,837
Inventories recognised as an expense during the year ended 30 June 2022 amounted to $88,111,000 (2020: $51,499,000).
These were included in the raw materials and consumables used line item in the consolidated statement of profit and loss
and other comprehensive income.
Write-downs of inventories to net realisable value amounted to $348,000 (2021: nil). These were recognised as an expense
during the year ended 30 June 2022 and included in raw materials and consumables in the consolidated statement of profit
or loss and other comprehensive income.
11 Accrued revenue
Accrued revenue
2022
$'000
273,841
273,841
2021
$'000
88,418
88,418
Accrued revenue is defined as a contract asset under AASB 15. The accrued revenue balance represents revenue which
has yet to be invoiced to customers due to work not yet reaching a stage where it can be invoiced and where the Group's
customers require payment claims to be submitted and approved prior to invoices being issued. The Group adopts the
principle consistent with AASB 15 and will not recognise revenue until it is considered to be highly probable which has
historically resulted in a high level of recoverability of amounts invoiced. 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 note 33(f) revenue
recognition. Details about the Group's impairment policy and assessment of the loss allowance are provided in note 21(c).
The Group is not subject to any significant financing component and the transaction price within the customer contracts
have not been adjusted. The Group has opted to apply the practical expedient available under AASB 15.121 whereby the
financing component of the performance obligations are not disclosed further as they have an original expected duration of
one year or less.
52
Service Stream Limited
Notes to the consolidated financial statements
2022
$'000
9,356
636
9,992
2021
$'000
3,748
1,150
4,898
Land
$'000
Leasehold
improvements
Plant and
equipment
Motor
vehicles
Total
$'000
$'000
$'000
$'000
-
-
-
-
-
-
-
-
-
2,150
-
-
-
2,150
2,150
-
2,150
1,132
-
(34)
(478)
620
9,657
(9,037)
620
620
278
-
-
(310)
588
9,936
(9,348)
588
9,459
3,180
(145)
(3,168)
9,326
29,642
(20,316)
9,326
9,326
44,460
2,651
(488)
(10,188)
45,761
74,262
(28,501)
45,761
4,565
4
(99)
(1,246)
3,224
15,156
3,184
(278)
(4,892)
13,170
5,934
(2,710)
3,224
45,233
(32,063)
13,170
3,224
12,472
363
(217)
(4,698)
11,144
13,170
59,360
3,014
(705)
(15,196)
59,643
16,532
(5,388)
11,144
102,880
(43,237)
59,643
12 Other assets
Prepayments
Other
13 Property, plant and equipment
Year Ended 30 June 2021
Opening net book value
Additions
Disposals1
Depreciation charge
Closing net book value
At 30 June 2021
Cost
Accumulated depreciation
Net book value
Year Ended 30 June 2022
Opening net book value
Acquired through business combination
Additions
Disposals1
Depreciation charge
Closing net book value
At 30 June 2022
Cost
Accumulated depreciation
Net book value
1Disposals are net of accumulated depreciation.
53
14 Intangible assets
Year Ended 30 June 2021
Opening net book value
Additions
Amortisation charge
Closing net book value
At 30 June 2021
Cost1
Accumulated amortisation
Net book value
Year Ended 30 June 2022
Opening net book value
Acquired through business combination
Additions
Amortisation charge
Goodwill impairment
Closing net book value
At 30 June 2022
Cost
Accumulated amortisation & impairment
Net book value
Service Stream Limited
Notes to the consolidated financial statements
Software
$'000
Customer
contracts and
relationships
$'000
17,242
6,710
(4,291)
19,661
55,251
(35,590)
19,661
19,661
8,291
2,365
(6,806)
-
23,511
65,907
(42,396)
23,511
65,954
-
(8,852)
57,102
86,771
(29,669)
57,102
57,102
102,700
-
(14,024)
-
145,778
189,471
(43,693)
145,778
Goodwill
$'000
229,983
-
-
229,983
229,983
-
229,983
229,983
90,663
-
-
(38,206)
282,440
320,646
(38,206)
282,440
Total
$'000
313,179
6,710
(13,143)
306,746
372,005
(65,259)
306,746
306,746
201,654
2,365
(20,830)
(38,206)
451,729
576,024
(124,295)
451,729
1The cost of goodwill represents the net carrying value at balance date.
(a) Impairment tests for goodwill
Goodwill and indefinite life intangible assets are tested annually for impairment. An impairment loss is recognised if the
carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount. It is Management's judgement
that the CGU is at its lowest level of aggregation and no further distinctions can be made. The judgements and assumptions
used in such determination are Management's best estimates based on the current market dynamics, business operations,
service offerings,
interactions with its customers and operational synergies achieved. Changes impacting these
assumptions could result in changes in the determination of CGU's and recognition of impairment charges in future periods.
For the legacy Service Stream business, goodwill
the
acquisition of Service Stream Maintenance has created a new CGU, which is also tested as a standalone business. A
summary of Group's carrying amount of goodwill by CGU is presented below.
is monitored at the level of operating segments. Additionally,
Telecommunications
Energy and Water
Comdain
Service Stream Maintenance
2022
$'000
71,450
20,042
100,285
90,663
282,440
54
Service Stream Limited
Notes to the consolidated financial statements
14 Intangible assets (continued)
(b) Key assumptions used the calculation of recoverable amount
The recoverable amount of an asset or CGU is the greater of its value in use or its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset or CGU. Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in its principal
or most advantageous market at the measurement date. It is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair
value measurement of a non-financial item assumes it is put to its highest and best use.
The recoverable amount of the Comdain CGU was determined through a fair value less costs to sell calculation using a
detailed 5-year cash flow financial model with revenue and earnings forecasts, discount rate and costs to sell reflective of a
market participant's view of valuing the business. The fair value measurement was categorised as a Level-3 fair value
based on the inputs in the valuation technique used (refer note 21 on for further details on fair value measurements).
The recoverable amount of all other CGUs are determined based on a value-in-use calculation which uses cash flow
projections based on financial forecasts covering a 5-year period. These forecasts are based on historical performance
combined with management's expectations of future performance based on prevailing and anticipated market factors.
The cash flows are based on board approved budget covering a one-year period together with management prepared cash
flows through to FY2027 with a terminal growth rate applied thereafter. Management's determination of cash flow
projections are based on past performance and its expectations for the future. The cash flows assume that all businesses
continue to undertake significant work with new and existing customers. This assumes existing contracts are extended, new
contracts are awarded and margins remain relatively stable.
The following table sets out the key assumptions for all CGUs with goodwill allocated to them:
Revenue growth rate1
Terminal growth rate
Pre-tax discount rate
15 year compounded annual growth rate to FY2027
Telecommunications Energy & Water
Comdain
Service Stream
Maintenance
5.9%
2.5%
12.6%
6.3%
2.5%
12.3%
8.4%
2.5%
12.5%
2.4%
2.5%
12.7%
In FY22, the Comdain business experienced challenging trading conditions caused by multiple and prolonged wet weather
events and resourcing constraints affecting a major Queensland project. The cash flows used in determining recoverable
amount assumes a return to normalised trading conditions in FY23. The forecast compound average annual earnings
growth over the forecast period from a base of FY23 used is 9.9%.
A post-tax discount rate to post-tax cash flows has been applied as the valuation calculated using this method closely
approximates applying pre-tax discount rates to pre-tax cash flows.
The terminal growth rate represents estimates of the CGUs growth to perpetuity.
Impairment of the Energy and Water CGU goodwill
Goodwill in the Energy and Water CGU was assessed for impairment at December 2021 with Management indicating that
any reasonable possible change in key assumptions could lead to a potential impairment. The underlying assumption on
revenue forecast assumed a return to pre-COVID activity levels. However, the business has seen a slower than expected
recovery particularly with continued resourcing issues and volume reductions in metering activity. Consequently, the Group
has tested impairment in this category and it was determined that the carrying value of the CGU of $67.7 million exceeds its
recoverable amount by approximately $38.2 million, resulting in a goodwill impairment.
55
Service Stream Limited
Notes to the consolidated financial statements
14 Intangible assets (continued)
(b) Key assumptions used the calculation of recoverable amount (continued)
Impact of possible changes in key assumptions
For the Comdain CGU, the carrying value approximates its recoverable amount. If operational earnings for the forecast
period (including the terminal year) reduced by 10%, the group would have had to recognise an impairment against goodwill
of $28.8 million. If the discount rate applied to the cash flow projections of this CGU had been 1% higher, the group would
have had to recognise an impairment against goodwill of $14.3 million.
Following the impairment charge in the Energy and Water CGU, the carrying value for this CGU equals its recoverable
amount. As such, any reasonable changes in key assumptions would lead to an impairment.
Other than as disclosed above, the Group believes that for the remaining CGUs, any reasonable possible change in the key
assumptions would not cause the carrying value of the CGUs to exceed their recoverable amount.
15 Leases
(a) Amount recognised in the consolidated balance sheet
The balance sheet shows the following amounts relating to leases:
Properties
Motor vehicles
Equipment
Total right-of-use assets
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
2022
$'000
21,732
26,629
4,168
52,529
18,304
39,156
57,460
2021
$'000
20,602
8,365
996
29,963
11,197
22,516
33,713
The Group's weighted average incremental borrowing rate applied to the lease liabilities as at 30 June 2022 was 3.24%.
Additions and remeasurements to the right-of-use assets during the 2022 financial year were $40.5 million.
(b) Amount recognised in the consolidated statement of profit or loss and other comprehensive income
The statement of profit and loss and other comprehensive income shows the following amounts relating to leases:
Depreciation of right-of-use assets
Properties
Motor vehicles
Equipment
Interest expense (included in interest expense and other finance costs)
Expense relating to short-term leases (included in the occupancy and motor vehicle
expenses)
Income from sub-leasing of right-of-use assets
The total cash outflow for leases in 2022 was $18.4 million.
2022
$'000
10,053
6,264
979
17,296
1,624
3,044
847
2021
$'000
7,676
2,819
761
11,256
957
1,627
124
56
Service Stream Limited
Notes to the consolidated financial statements
15 Leases (continued)
(c) The Group's leasing activities and how these are accounted for:
The Group leases various properties, equipment and motor vehicles. Rental contracts are typically made for fixed periods of
two to five years but many have extension options as described in (ii) below. Lease terms are negotiated on an individual
basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but
leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available
for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to
profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on
a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
•
•
•
•
amounts expected to be payable by the Group under residual value guarantees;
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payments that are based on an index or a rate; and
the exercise price of a purchase option if the Group is reasonably certain to exercise that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the
Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary
to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
•
•
•
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any lease incentives received; and
any initial direct costs.
(i) Variable lease payments
There are no variable lease payments requiring estimations.
(ii) Extension and termination options
Extension and termination options are included in a number of properties, equipment and motor vehicles leases across the
Group. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension
and termination options held are exercisable only by the Group and not by the respective lessor.
(d) Critical judgements
In determining the lease term, management consider all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options)
are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Potential future cash
outflows of approximately $55,194 thousand (undiscounted) have not been included in the lease liability because it is not
reasonably certain that the leases will be extended or not terminated.
16 Trade and other payables
Trade creditors1
Sundry creditors and accruals
Goods and services tax payable
Income in advance
2022
$'000
76,677
148,222
2,312
40,261
267,472
2021
$'000
42,361
49,065
3,041
9,053
103,520
1Typically, no interest is charged by trade creditors. The Group has financial risk management policies in place to ensure that all payable
are paid within the credit timeframe.
57
Service Stream Limited
Notes to the consolidated financial statements
16 Trade and other payables (continued)
Income in advance is defined as contract liabilities under AASB 15. A contract liability pertains to the Group's obligation to
transfer services to its customer for which it has already received payment. The amounts included in income in advance
reflect a significant portion of the aggregate performance obligation amounts not yet satisfied as at the end of the reporting
period. The Group has opted to apply the practical expedient available under AASB 15.121 whereby the performance
obligations are not disclosed further as they have an original expected duration of one year or less.
17 Provisions
Current
Employee benefits1
Provision for contractual obligations2
Provision for onerous contracts3
Other provisions4
Non-current
Employee benefits1
Total provisions
2022
$'000
49,547
3,594
7,202
2,007
62,350
7,117
7,117
69,467
2021
$'000
19,585
3,782
343
-
23,710
6,672
6,672
30,382
1The provision for employee benefits represents annual leave, rostered day-off and long service leave entitlements.
2The 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 with its various customers.
3The provision for onerous contracts represents best estimation on loss-making projects where that cost is expected to exceed total
revenue.
4Other provisions represents make good provisions on premises, restructuring costs and redundancy provisions as required.
The Group does not offer its customers the option to purchase warranties as a separate service. Warranties simply relate
to rectifications and rework performed on completed services. These assurance-type warranties are accounted for in
accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets.
(a) Movement in provisions
Balance at 1 July 2021
Additions recognised through business combinations
Additional provisions recognised
Unused amounts recognised
Amounts used during the year
Balance at 30 June 2022
(b) Significant estimates
Contractual
obligations
$'000
3,782
Onerous
contracts
$'000
343
3,662
1,095
(2,464)
(2,481)
3,594
2,901
6,569
(152)
(2,459)
7,202
Other
provisions
$'000
-
-
2,007
-
-
2,007
Management estimates the provisions for future claims based on the value of work historically performed and the claims of
any on-going disputes. 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.
58
18 Contributed equity
Fully paid ordinary shares
Treasury shares
(a) Fully paid ordinary shares
Balance at 1 July 2020
Issue of shares
Dividend reinvestment plan
Balance at 30 June 2021
Issue of shares
Balance at 30 June 2022
Service Stream Limited
Notes to the consolidated financial statements
Number of shares
Share capital
2022
No.'000
615,953
-
615,953
2021
No.'000
410,393
-
2021
No.'000
318,721
-
410,393 499,682 318,721
2022
No.'000
499,682
-
Number of
shares
$'000
408,026
1,044
1,323
410,393
205,560
615,953
Share
capital
$'000
314,741
2,023
1,957
318,721
180,961
499,682
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 23.
(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 a
first-in-first-out basis.
Balance at 1 July 2020
Acquisition of treasury shares (average prices; $1.94 per share)
Share issued under employee share schemes
Balance at 30 June 2021
Acquisition of treasury shares (average prices; $0.89 per share)
Share issued under employee share schemes
Balance at 30 June 2022
19 Dividends
Recognised amounts
Fully paid ordinary shares
Interim dividend
Number of
shares
$'000
-
(1,044)
1,044
-
(229)
229
-
Share
capital
$'000
-
(2,023)
2,023
-
(204)
204
-
2022
Cents per
share
2021
Cents per
share
2022
$'000
2021
$'000
-
-
2.50
2.50
-
-
10,244
10,244
59
19 Dividends (continued)
Fully paid ordinary shares
Final dividend
Service Stream Limited
Notes to the consolidated financial statements
2022
Cents per
share
2021
Cents per
share
1.00
1.00
-
-
2022
$'000
6,160
6,160
2021
$'000
-
-
A final dividend of 1 cent per share has been determined by the Board for the year ended 30 June 2022 (2021: nil).
Franking credits available for subsequent reporting periods based on a tax rate of 30%
(2020: 30%)
The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted
for franking credits and debits that will arise from the settlement of liabilities or receivables for income tax after the end of
the year.
Company
2022
42,209
2021
42,858
20 Notes to the consolidated statement of cash flows
(a) Reconciliation of cash and cash equivalents
Cash and cash equivalents
Balance per consolidated statement of cash flows
(b) Reconciliation of profit for the year to net cash flows from operating activities
(Loss) / profit for the year
Gain on sale of disposal of non-current assets
Impairment loss
Depreciation and amortisation
Equity-settled share-based payments expense
Decrease in tax balances & other tax adjustments
Movement in working capital net of balances acquired through business combinations:
Decrease / (increase) in trade and other receivables
(Increase) / decrease in accrued income
(Increase) in other assets
(Increase) in inventories
Increase in trade and other payables
Increase / (decrease) in provisions
Increase / (decrease) in borrowing costs
Net cash provided by operating activities
(c) Liabilities from financing activities
$'000
Balance as at 30 June 2021
Acquired through business combinations
Additions
Remeasurements
Financing cash flows
Interest expense
Interest payments
Balance as at 30 June 2022
2022
$'000
68,677
68,677
2022
$'000
(36,324)
(470)
38,206
53,322
332
(8,541)
20,872
(46,706)
(1,930)
(1,835)
38,706
2,804
111
58,547
2021
$'000
50,573
50,573
2021
$'000
29,274
(843)
-
29,291
1,288
(11,914)
(7,617)
13,383
(378)
(578)
465
(5,607)
(1,217)
45,547
Borrowings
33,783
-
-
111
115,013
5,638
(5,638)
148,907
Lease
liabilities
33,713
26,090
13,555
841
(16,739)
1,624
(1,624)
57,460
60
Service Stream Limited
Notes to the consolidated financial statements
21 Financial instruments
(a) Overview
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 financing facilities 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 and Risk Committee and Board on a regular basis.
(b) Market risk - interest rate risk management
Based upon a 100 basis point increase in prevailing market interest rates as applied to the Group's net cash balance at 30
June 2022 the Group's sensitivity to interest rate risk would be equivalent to a $802,000 per annum unfavourable impact to
profit before tax (2021: $168,000 favourable).
(c) Credit risk management
Credit risk of the Group arises predominately from outstanding receivables and unbilled accrued revenue to its customers.
Refer below for details of the Group's impairment of financial assets assessment.
The Group will not recognise revenue until it is considered to be highly probable. Historically unbilled accrued revenue has
led to a high level of recoverability.
Receivable balances are monitored on an ongoing basis and the Group has a policy of only dealing with creditworthy
counterparties and where appropriate, obtaining credit support as 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 information and its own internal trading history to credit-assess customers.
Impairment of financial assets
The Group has two types of financial assets that are subject to the expected credit loss model:
•
•
trade receivables; and
accrued revenue (contract assets) relating to its customer contracts.
While cash and cash equivalents are also subject to the impairment requirements of AASB 9, the expected credit loss is
immaterial.
Trade receivables and accrued revenue
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and accrued revenue.
The expected loss rates on trade receivables are based on the payment profiles of sales over a period of 12 months and the
corresponding historical credit losses experienced within this period. This historical loss rate is adjusted to reflect current
and forward-looking information affecting the ability of specific customers to settle their receivables. The nature of the
Group's customers, which includes government enterprises and large private sector corporations, is such that the risk of
default of receivables is low.
indicative of
When applying the impairment requirement of AASB 9 to accrued revenue, the Group recognises that the ageing of accrued
revenue is not
its recoverability profile, rather the ability to complete work in progress and/or pending
customers' approval in order to invoice. Under the expected credit loss principle adopted, the Group assessed that the
accrued revenue balance carries a similar expected loss profile as those trade receivables aged as current, before adjusting
for any specific forward-looking factors. Applying the associated expected loss rate to the accrued revenue balance results
in an impairment loss.
On that basis, the loss allowance as at 30 June was determined as follows.
61
21 Financial instruments (continued)
(c) Credit risk management (continued)
2022
Expected loss rate
Gross carrying amount - trade receivables
Loss allowance
Service Stream Limited
Notes to the consolidated financial statements
Current
0-30 days
$'000
$'000
31-60
days
$'000
61-90
days
$'000
91 days +
Total
$'000
$'000
0.21%
82,988
173
1.15%
10,854
125
5.13% 13.63%
2,077
2,692
283
138
2.75%
6,433
177
105,044
896
Current
0-30 days
$'000
$'000
31-60
days
$'000
61-90
days
$'000
91 days +
Total
$'000
$'000
2021
Expected loss rate
Gross carrying amount - trade receivables
Loss allowance
0.18%
38,933
70
1.50%
5,007
74
6.91% 25.81% 30.24%
1,336
404
282
19
63
16
The loss allowances for trade receivables at 30 June 2022 reconciles to the opening loss allowances as follows:
Opening balance
Acquired through business combination
Additional provision recognised
Receivables written off during the year as uncollectible
Unused amount reversed
Closing balance
(d) Liquidity risk management
2022
$'000
583
352
537
-
(576)
896
45,621
583
2021
$'000
969
-
226
-
(612)
583
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 as having access to
overdraft facilities and syndicated funding lines.
Included in note 21(d)(ii) are details of the financing facilities available to the Group at 30 June 2022.
(i) Liquidity and interest rate risk tables
The following table detail the Group's maturity profile for financial liabilities.
The amount disclosed in the table represent the undiscounted cash flows of financial liabilities based on the earliest date on
which the Group is contracted to repay principal. Where applicable, these amounts 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
5 +
years
$'000
$'000
$'000
$'000
$'000
$'000
$'000
3.24% (57,460)
1.76% (148,907)
(267,472)
(473,839)
-
(59,897)
(153,718)
(267,472)
(481,087)
(10,723)
(1,315)
(267,472)
(279,510)
(9,643)
(1,307)
-
(10,950)
(15,790)
(151,096)
-
(166,886)
(18,661)
-
-
(18,661)
(5,080)
-
-
(5,080)
2022
Financial liabilities
Lease liabilities
Borrowings
Trade and other payables
62
Service Stream Limited
Notes to the consolidated financial statements
21 Financial instruments (continued)
(d) Liquidity risk management (continued)
Weighted
average
interest
rate
Carrying
amount
Contractual
cash flow
6 months
or less
6 - 12
months
1 - 2
years
2 - 5
years
5 +
years
$'000
$'000
$'000
$'000
$'000
$'000
$'000
2.86% (33,713)
1.78% (33,783)
(103,520)
(171,016)
-
(35,535)
(36,506)
(103,520)
(175,561)
(6,172)
(312)
(103,520)
(110,004)
(5,796)
(312)
-
(6,108)
(9,790)
(623)
-
(10,413)
(11,492)
(35,260)
-
(46,752)
(2,285)
-
-
(2,285)
2022
$'000
112,863
150,013
262,876
2021
$'000
42,428
35,000
77,428
2021
Financial liabilities
Lease liabilities
Borrowings
Trade and other payables
(ii) Financing facilities
Bank guarantee
Borrowings
Amount used
During the period, the Group completed a refinancing of its banking facilities, and increased its revolving facilities to $395
million which are due to expire in November 2023 and have a variable rate of interest. The refinancing during the period
was treated as a non substantial modification, and the transaction costs attributable to the refinancing have been netted off
against the loan.
As at 30 June 2022, the Group had unused facilities of $132 million across bank guarantees, borrowings and bank
overdraft, of which the overdraft has a maximum draw down of $30 million. In the prior year, the Group had unused
facilities of $198 million mainly attributable to borrowings, bank guarantees, bank overdraft and cash advances.
(e) Categories of financial instruments
Financial assets at amortised cost
Cash and cash equivalents
Accrued revenue
Trade and other receivables
Financial liabilities at amortised cost
Lease liabilities
Borrowings
Trade and other payables
2022
$'000
2021
$'000
50,573
68,677
88,418
273,841
46,821
105,011
447,529 185,812
2022
$'000
2021
$'000
33,713
57,460
33,783
148,907
267,472 103,520
473,839 171,016
The Group consider that the carrying amounts of financial assets and liabilities recognised at amortised cost in the
financial statements approximate their fair values.
63
Service Stream Limited
Notes to the consolidated financial statements
22 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 manner to support the goal of
maximising shareholder wealth.
The Board and Senior Management review the capital structure of the Group at least annually considering 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 under its Syndicated Facilities Agreement regarding minimum
levels of equity, gearing, fixed charge cover and borrowing base; all of which are regularly monitored and reported upon.
The Group has complied with the financial debt covenants of its borrowing facilities during the 2022 and 2021 financial
reporting periods.
23 Share-based payments
(a) Long-Term Incentive (LTI) Plan
From time to time employees in Senior Management roles may be invited, with approval from the Board, to participate in the
LTI plan. The LTI operates within the shareholder-approved Employee Share Ownership Plan (ESOP), under the
administration of the Remuneration and Nomination Committee (RNC). The extent of individual participation and the
associated number of performance rights offered is recommended by the Managing Director and reviewed by the RNC,
which will then make recommendations to the Board for approval.
In accordance with the provisions of the ESOP, certain employees in Senior Management roles were invited to participate in
the LTI which entitles them to receive a number of performance rights in respect of the year ending 30 June 2022 (FY22).
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 Group's shares over a prescribed period of time or other issue price as deemed appropriate by
the Board.
Performance rights for each of the LTI tranches are subject to service and performance criteria being:
A
B
The participant must be an employee at the conclusion of the performance period; and
50% of the performance rights granted with respect to the FY22 tranche will vest where the Group's adjusted earnings
per share (Adjusted EPS) achieves an annual growth of 10% (full achievement) or above 5% but less than 10% (pro
rata achievement) over the performance period. 50% of the performance rights granted with respect of the FY21
tranche (80% for FY20 tranche) will vest where the Group's Adjusted EPS achieves the target as set by the Board of
Directors, as detailed below.
LTI tranches
Performance period
Vesting date
FY201
3 years
September 2022
FY212
3 years
September 2023
FY223
3 years
September 2024
1 The FY20 LTI targets, Year 1: 15.02 cps, Year 2: 13.87 cps, Year 3: 6.00 cps.
2 The FY21 LTI targets, Year 1: 13.87 cps, Year 2: 6.00 cps, Year 3: not yet determined.
3 The FY22 LTI targets, Year 1: 6.00 cps, Year 2 and Year 3: not yet determined. FY22 LTI targets were
rebased post year end.
Subject to the following proportional vesting:
Percentage
of performance rights that vest
FY22 EPS target
FY20 - FY21 EPS target
0%
40%
Proportional vesting
100%
Below 5% annual EPS
growth
At 5% annual EPS growth
Above 5% and less than 10%
annual EPS growth
10% or above annual EPS
growth
Below Target and below PY
Adjusted EPS
Below Target but equal to PY
Adjusted EPS
Below Target but greater than
PY Adjusted EPS
100% of Target and above
64
Service Stream Limited
Notes to the consolidated financial statements
23 Share-based payments (continued)
(a) Long-Term Incentive (LTI) Plan (continued)
C 50% of the performance rights granted for the FY22 tranche (50% for FY21 and 20% for FY20 tranches) will
vest where the Group's total shareholder return (TSR) over the performance period is such that it would rank
at or above companies being those comprising the ASX 200 Industrials index, as detailed below:
Percentage of performance
rights that vest
TSR ranking
0%
40%
Proportional vesting
100%
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 extend that the Group's performance over the relevant period satisfies the vesting conditions.
The following LTI performance rights arrangements were in existence at the end of the current period:
Tranche
Number
Grant date
Fair value per right at
grant date
Vesting date
Performance period
FY20
118,751
18 September 2019
FY20 - CEO 47,709
23 October 2019
FY21
1,558,980
21 October 2020
FY22
3,452,199
29 October 2021
Fair value of performance rights
TSR - 128.4cps
EPS - 237.3 cps
TSR - 131.1cps
EPS - 242.2 cps
TSR - 166.8cps
EPS - 193.8 cps
TSR - 55.2 cps
EPS - 74.7 cps
September 2022
1 July 2019 - 30 June 2022
September 2022
1 July 2019 - 30 June 2022
September 2023
1 July 2020 - 30 June 2023
September 2024
1 July 2021 - 30 June 2024
The FY22 LTI performance rights with the relative TSR hurdle vesting condition have been valued by an independent expert
using a Monte-Carlo simulation. The FY22 LTI performance rigths with the Adjusted EPS hurdle vesting condition have
tree methodology. Both valuation methodologies are underpinned by a 'risk-neutral'
been valued using a Binominal
probability framework with lognormal share prices,
the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield, the risk-free interest rate for the term of the option and the correlations and
volatilities of the peer group companies. 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
FY20
FY20 - CEO
FY21
FY22
Share
price at
grant date
$2.60
$2.65
$2.19
$0.88
Expected life
Volatility1
2.78 years
2.69 years
2.90 years
2.67 years
30%
30%
40%
40%
Risk-free
interest
rate
0.82%
0.72%
0.11%
1.07%
Dividend yield
Vesting period
4.04%
3.96%
4.63%
4.96%
September 2022
September 2022
September 2023
September 2024
1The expected volatility is based on historic volatility (based on the remaining life of the options), adjusted for any expected changes in
future volatility due to publicly available information.
65
Service Stream Limited
Notes to the consolidated financial statements
23 Share-based payments (continued)
(a) Long-Term Incentive (LTI) Plan (continued)
Movements in the LTI performance rights during the year
The following table reconciles the outstanding performance rights granted under the LTI 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
2022
2021
Number of
rights
Grant date
weighted avg FV
$
Number of
rights
Grant date
weighted avg FV
$
3,005,626
4,112,340
-
(1,940,327)
5,177,639
1.863
0.650
-
1.470
1.047
2,424,047
1,996,737
(675,541)
(739,617)
3,005,626
1.573
1.804
1.093
1.456
1.863
The balance at the end of the financial year excludes rights where the performance criteria has not been met in relation to
their performance period but they have not yet reached their vesting date.
The balance of performance rights outstanding at the end of the year have a remaining contractual life of two years (FY22
Tranche), one year (FY21 Tranche) and 3 months (FY20 Tranche).
66
24 Subsidiaries
Details of the Company's subsidiaries at 30 June 2022 are as follows:
Name of entity
Parent entity
Service Stream Limited
Subsidiaries
Service Stream Holdings Pty Ltd1
Service Stream Fixed Communications Pty Ltd1
Service Stream Mobile Communications Pty Ltd1
Service Stream Customer Care Pty Ltd1
Radhaz Consulting Pty Ltd1
Service Stream Infrastructure Services Pty Ltd1
Service Stream Energy & Water Pty Ltd1
Service Stream Nominees Pty Ltd1
Service Stream Operations Pty Ltd1
TechSafe Australia Pty Ltd1
TechSafe Management Pty Ltd1
Ayrab Pty Ltd1
Service Stream Utilities Pty Ltd (formerly Comdain Infrastructure Pty Ltd)1(cid:3)
Comdain Civil Constructions Pty Ltd1
Comdain Civil Constructions (QLD) Pty Ltd1
Comdain Services Pty Ltd1
Comdain Asset Management Pty Ltd1
Comdain Gas (Aust) Pty Ltd1
Comdain Services (AMS) Pty Ltd1
Comdain Corporate Pty Ltd1
Comdain Assets Pty Ltd1
Service Stream Maintenance Pty Ltd (formely Lendlease Services Pty Ltd)1(cid:3)
Westlink (Services) Pty Limited
EnerSafe Pty Ltd
Brisbane Motorway Services Pty Limited
ConnectSydney Pty Limited
LT Joint Venture Pty Ltd
South Australian Road Services Pty Limited
Service Stream Limited
Notes to the consolidated financial statements
Country of
incorporation
Ownership interest
2022
%
2021
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
50
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
0
0
0
0
0
0
1These wholly-owned subsidiaries have entered into a deed of cross guarantee with Service Stream Limited pursuant to ASIC
Corporations (wholly-owned companies) Instrument 2016/785 (Instrument) and are relieved of the requirement to prepare and lodge an
audited financial and Directors' report.
25 Joint arrangements
Delivering for Customers (D4C) is an unincorporated jointly controlled entity between Service Stream Utilities Pty Ltd
(formerly Comdain Infrastructure Pty Ltd), Service Stream Maintenance Pty Ltd (previously Lendlease Services Pty Ltd),
John Holland Pty Ltd and WSP Australia Pty Ltd. This arrangement was established on 18 December 2019. The principal
place of business of the joint operation is in Australia.
Service Stream Utilities Pty Ltd and Service Stream Maintenance Pty Ltd are wholly owned subsidiaries of Service Stream
Holdings Pty Ltd. Collectively they hold 60% beneficial interest in D4C.
The Joint Venture Deed in relation to the D4C requires unanimous consent from all joint venture parties for all relevant
activities. All partners have direct rights to the assets of the partnership and are jointly and severally liable for the liabilities
incurred by the partnership. In accordance with AASB 11 Joint Arrangements, this entity is therefore classified as a joint
operation and the group recognises its direct right to the jointly held assets, liabilities, revenues and expenses as described
in note 33(c).
67
Service Stream Limited
Notes to the consolidated financial statements
25 Joint arrangements (continued)
(a) Details of joint ventures and associates
LT Joint Venture Pty Ltd
ConnectSydney Pty Ltd
South Australian Road Services Pty Ltd
Brisbane Motorway Services Pty Ltd
Ownership
interest June
2022
50%
50%
50%
50%
Measurement basis
Principal place of business
and country of incorporation
Equity Accounted
Equity Accounted
Equity Accounted
Equity Accounted
Victoria, Australia
New South Wales, Australia
South Australia, Australia
Queensland, Australia
(b) Summarised financial information for joint ventures and associates
Reconciliation of carrying amount in joint ventures and associates:
LT Joint
Venture
Connect-
Sydney
South
Australian
Road
Services
Brisbane
Motorway
Services
Total
Opening balance
Acquired through business combinations
Total share of profit
Dividends received
Closing balance
-
465
199
(625)
39
-
3,570
1,649
-
5,219
-
-
343
-
343
-
204
1
(200)
5
-
4,239
2,192
(825)
5,606
(c) LT Joint Venture Pty Ltd
The LT Joint Venture Pty Ltd is a 50-50 joint venture between Service Stream Maintenance Pty Ltd and Tyco Projects
(Australia) Pty Ltd. Whilst the company operated for seven years predominately under a core contract, this contract did
conclude operational obligations on 30 June 2021. The principal activity of the Company was providing specialist road
maintenance and asset management services under an Intelligent Transport Systems maintance contract with Transport for
NSW. It is expected that the company will be wound up in FY23 after succesfully completing all contractual obligations.
(d) ConnectSydney Pty Ltd
ConnectSydney Pty Ltd was incorporated on 16 December 2020, commencing delivery obligations under a Strategic Road
Asset Performance Contract (SRAPC) with Transport
the joint venture
undertakes is to provide specialist road and Intelligent Transport Systems (ITS) asset maintenance and asset management
services to the client within the Harbour Zone of Sydney. The company is a joint venture between Service Stream
Maintenance Pty Ltd, Bitupave Ltd and Tyco Australia Group Pty Ltd. SRAPC has an initial nine year contract term, with two
options to extend of three years each.
for NSW on 1 July 2021. The core contract
(e) South Australian Road Services Pty Ltd
South Australian Road Services Pty Limited (SARS) was incorporated on 1 July 2020, commencing operations on 2
November 2020. The Company is responsible for the maintenance of infrastructure on behalf of the Department of
Infrastructure and Transport (DIT). Core activities consist primarily in the maintenance of sealed and unsealed roads
through regional South Australia, asset management and minor capital project scope in the region. SARS is a 50-50 joint
venture between Service Stream Maintenance Pty Ltd and Bitumax Pty Ltd. The regional contract with the DIT has an initial
seven year contract term, with two options to extend of three years each.
(f) Brisbane Motorway Services Pty Ltd
Brisbane Motorway Services Pty Ltd (BMS) is a 50-50 joint venture between Service Stream Maintenance Pty Ltd and
Ventia Pty Ltd. The company has been dormant
time having successfully completed all contractual
for a period of
obligations. BMS previously had a core contract for the incident response and maintenance of the Clem 7 motorway and
tunnel in Brisbane. The company will be wound up in FY23.
68
Service Stream Limited
Notes to the consolidated financial statements
26 Deed of cross guarantee
The Australian wholly owned subsidiaries listed in note 24 (excluding Westlink (Services) Pty Limited and Enersafe Pty Ltd),
are parties to a deed of cross guarantee under which each company guarantees the debts of the others.
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 , the wholly-owned subsidiaries listed in
note 24 (excluding Westlink (Services) Pty Limited and Enersafe Pty Ltd) are relieved from the Corporations Act 2001
requirements for preparation, audit and lodgement of financial reports, and directors' report.
A Consolidated statement of profit or loss and other comprehensive income and Consolidated balance sheet for the year
ended 30 June 2022 for the deed of cross guarantee group are set out below:
(a) Consolidated Statement of Profit or Loss and Other Comprehensive Income of the deed of cross guarantee
group
Revenue
Expenses
Share of profits from investment in associates
(Loss) / profit before tax
Income tax expense
(Loss) / profit for the year
Total comprehensive (loss) / income for the year
(b) Consolidated Balance Sheet of the deed of cross guarantee group
ASSETS
Current assets
Non-current assets
Total assets
LIABILITIES
Current liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Capital and reserves
Contributed equity
Reserves
Retained earnings / (accumulated losses)
Total equity
2022
$'000
1,500,191
(1,537,733)
2,192
(35,350)
(1,712)
(37,062)
(37,062)
2022
$'000
475,716
574,557
1,050,273
350,383
233,059
583,442
466,831
499,682
(12,024)
(20,827)
466,831
2021
$'000
804,163
(762,345)
-
41,818
(12,544)
29,274
29,274
2021
$'000
197,547
349,879
547,426
142,159
81,935
224,094
323,332
318,721
(12,151)
16,762
323,332
69
Service Stream Limited
Notes to the consolidated financial statements
27 Related party transactions
The immediate parent and ultimate controlling party of the Group is Service Stream Limited.
Balances and transactions between the Group and its controlled entities, which are related parties of the Group, 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) 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
2022
$
3,391,970
117,562
29,460
30,020
3,569,012
2021
$
3,481,352
142,072
51,067
371,204
4,045,695
1The fair value of performance rights issued under the LTI plan allocated on a pro-rata basis to the current financial year.
The compensation of each member of the key management personnel of the Group is set out in the remuneration report.
(b) Other transaction with key management personnel of the Group
During the period, Tom Coen had a beneficial interest in two of the commercial properties that the Group occupied. Total
rental income paid to the landlord is approximately $767,000 across these two properties (2021: $927,000). The terms of
the leases have been reviewed and are at arm's length with the duration of leases for these properties expiring in December
2024 and August 2025 respectively.
28 Parent entity information
The accounting policies of the parent entity, which have been applied in determining the financial information of the parent
entity shown below, are the same as those applied in the consolidated financial statements. Refer to note 33 for a summary
of the significant accounting policies relating to the Group.
70
Service Stream Limited
Notes to the consolidated financial statements
2022
$'000
7,863
430,298
438,161
-
-
-
2021
$'000
196
258,802
258,998
3,654
-
3,654
438,161
255,344
478,148
(9,908)
(30,079)
438,161
297,186
(12,152)
(29,690)
255,344
2022
$'000
(389)
(389)
2021
$'000
19,753
19,753
28 Parent entity information (continued)
(a) Financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Reserves - equity-settled employee benefits
Accumulated losses
Equity
(b) Financial performance
(Loss) / profit for the year
Total comprehensive income
(c) Determining the parent entity financial information
(i) Investment in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Service Stream Limited.
Dividends received from associates are recognised in the parent entity's profit or loss when its right to receive the
dividend is established.
(ii) Guarantees entered into by parent entity
The parent entity is party to the Group's financing facilities as a security provider under the Security Trust Deed. In
addition, the parent entity provides cross guarantees as described in notes 24 and 26, and the parent entity
guarantees to certain clients in relation to subsidiary contract performance obligations.
(iii) Share-based payments
The grant by the Group of shares over its equity instruments to the employees of subsidiaries is treated as a capital
contribution to that subsidiary. The fair value of employee services received, measured by reference to the grant
date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with
a corresponding credit to the equity.
71
Service Stream Limited
Notes to the consolidated financial statements
29 Business combination - Lendlease Services Pty Ltd and its controlled entities
(a) Summary of acquisition
On 1 November 2021, the Group acquired 100% of the issued share capital of Lendlease Services Pty Ltd and its wholly-
owned subsidiaries under the terms of a Share Sale Agreement (SSA).
Lendlease Services is a leading provider of operations and maintenance and special design and construction services
across telecommunications, utilities and transportation sectors. It has a strong national presence and a diverse client base,
including many of Australia's largest public and private infrastructure owners and operators.
The acquisition provides further diversification to the Group's revenue streams and enhances current capabilities and
expands on the Group's addressable markets.
On 2 November 2021, Lendlease Services Pty Ltd changed its name to Service Stream Maintenance Pty Ltd.
The following table summarises the acquisition date fair value of the cash consideration paid:
Purchase consideration
Cash paid
Total consideration
$'000
316,566
316,566
The acquisition was completed on 1 November 2021 with the Completion mechanism under the SSA requiring a true-up for
Net Assets. This process is still in progress and is expected to be finalised before November 2022. Although progress has
been made to finalise the fair values of the assets and liabilities acquired, the Completion Adjustment is expected to result in
a change to the total consideration paid and resultantly impact the values of certain assets and liabilities. As such, the
accounting for the acquisition has been provisionally determined as at 30 June 2022. The key balances which remain
provisional are intangible assets, deferred taxes, leases and provisions.
1 November 2021
Cash and cash equivalents
Trade and other receivables
Accrued revenue
Inventories
Other assets
Property, plant and equipment
Right-of-use assets
Investments accounted for using the equity method
Intangible assets
Other non-current assets
Trade and other payables
Provisions
Lease liabilities
Deferred tax liability (net)
Net identifiable assets acquired
Add: Goodwill
Total consideration
Provisional
31 December 2021
$'000
3,029
79,062
139,312
9,655
4,983
48,240
22,301
4,239
5,629
2,906
(127,964)
(30,143)
(22,794)
(24,919)
113,536
203,030
316,566
Provisional
30 June 2022
$'000
3,029
79,062
138,717
6,066
4,422
59,360
25,476
4,239
110,991
-
(125,246)
(36,281)
(26,090)
(17,842)
225,903
90,663
316,566
Goodwill primarily comprises the skills and technical talent of Service Stream Maintenance's workforce and the synergies
expected to be achieved from integrating the company into the Group’s operations and existing governance and risk
mitigating practices. Goodwill is not deductible for tax purposes.
The fair value of acquired trade receivables is $79.1 million. The gross contractual amount for trade receivables due is
$79.4 million, with a loss allowance of $0.3 million recognised on acquisition.
72
Service Stream Limited
Notes to the consolidated financial statements
29 Business combination - Lendlease Services Pty Ltd and its controlled entities (continued)
(a) Summary of acquisition (continued)
(i)
Cash consideration
Cash consideration comprised $316.6 million paid on the completion date. The Completion mechanism as outlined in
the SSA requires a further true up for Net Assets against the final Completion Balance Sheet, expected to be finalised
before December 2022.
(ii)
Revenue and profit contribution
From the date of acquisition to 30 June 2022, LLS contributed revenue of $689.6 million and EBITDA from Operations
of $46.4 million (including synergies but excluding the allocation of corporate and group-wide costs).
If the acquisition had occurred on 1 July 2021, consolidated revenue for the year ended 30 June 2022 would have
been approximately $1,840.2 million. Based on the nature of support services under the previous ownership structure,
it is impractical to determine a comparable earnings impact had this acquisition occurred on 1 July 2021.
(iii)
Acquisition-related costs
The Group incurred acquisition related costs of $4.4 million which included transaction advisory costs, legal and
accounting fees and stamp duty on transfer of assets. These costs have been included in 'Consulting and temporary
staff fees' and are treated as non-operational costs (refer note 6(c)).
(b) Purchase consideration - cash outflow
Cash outflow with respect to the acquisition
Cash consideration paid
Less: Cash acquired
Payments for businesses (net of cash acquired)
30 June 2022
$'000
316,566
(3,029)
313,537
30 June 2021
$'000
-
-
-
73
Service Stream Limited
Notes to the consolidated financial statements
30 Contingent assets and liabilities
Acquisition of Lendlease Services
On 1 November 2021, the Group acquired 100% of the issued share capital of Lendlease Services Pty Ltd and its wholly-
owned subsidiaries under the terms of a Share Sale Agreement “SSA” (refer Note 29 for further details). An upfront cash
consideration was paid on 1 November 2021, with the Completion mechanism under the SSA requiring a subsequent true-
up for Net Assets resulting in a deferred consideration payment (Completion Adjustment Payment). Under the processes
defined in the SSA, an Independent Expert (IE) has been engaged with both Service Stream and the vendor providing their
positions on the Completion Adjustment Payment to the IE who will decide the final outcome. The nature of the process is
such that arguments are largely dependent on the interpretation of Lendlease Services’ accounting practices at December
2020 (Reference Balance Sheet) and certain clauses set out in the SSA. Given the significant uncertainty of the outcome,
is unable to reliably estimate the Completion adjustment payment amount, and
the Group has determined that
accordingly, no provision has been recognised as of 30 June 2022. The Completion adjustment payment is expected to be
finalised before November 2022.
it
The Group is not aware of any other material contingent assets and liabilities at balance date that have not been disclosed
in these financial statements (2021: nil).
31 Events after the reporting period
the financial year that has
There have not been any matters or circumstances occurring subsequent
significantly affected, or may significantly effect, the operations of the Group, the results of those operations, or the state of
affairs of the Group in future financial years.
to the end of
32 Remuneration of auditors
Audit and review of the financial report
Other assurance services
Tax services
2022
$
1,171,000
100,000
31,000
1,302,000
2021
$
746,400
30,000
102,740
879,140
The auditor of Service Stream Limited is PricewaterhouseCoopers.
33 Significant accounting policies
This note provides a list of significant accounting policies adopted in the preparation of these consolidated financial
statements. These policies have been consistently applied to all the years presented. 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 26 August 2022.
74
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(a) Basis of preparation (continued)
Compliance with IFRS
The consolidated financial statements of the Group also comply with International Financial Reporting Standards as issued
by the International Accounting Standard Board.
New and amended standards adopted by the Group
The group has not adopted any new or amended standards for the first time for their annual reporting period commencing 1
June 2021.
Changes in accounting policy
There were no changes in accounting policies during the period.
Early adoption of standards
The Group has not elected to early adopt the Standards and Interpretations issued but not yet effective. The Group has
deemed the impact of these as not material for FY22.
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
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
statement, are disclosed in note 34.
financial statements requires the use of certain critical accounting estimates.
(b) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Group and entities controlled by the Group
(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 the 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 the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
When the Group ceases to consolidate an entity, any retained interest in the entity is remeasured to its fair value with the
change in carrying amount
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.
recognised in profit or
loss.
(c) Joint arrangements
Under AASB 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or joint
ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal
structure of the joint arrangement.
Investments in joint ventures
A joint venture is an arrangement in which Service Stream has joint control and Service Stream has rights to the net assets
of the arrangement, rather than right to its assets and obligations for its liabilities. Investments in joint ventures are
accounted for using the equity method.
Under the equity method of accounting, the investments in joint ventures are initially recognised in the Consolidated
Balance Sheet at cost and adjusted thereafter to recognise the group's share of profits or losses of the joint venture.
Dividends received or receivable from joint ventures are recognised as a reduction in carrying amount of the investment.
75
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(c) Joint arrangement (continued)
Where the group's share of losses in an equity accounted investment equals or exceeds its interest in the joint venture,
including any other unsecured long-term receivables, the group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the joint venture.
Unrealised gains on transactions between the group and its joint ventures are eliminated to the extent of the group's interest
in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in
note 33 (m).
Joint operations
The Group recognises its direct right to the assets, liabilities, revenue and expenses of joint operations and its share of any
jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements.
Details of the joint arrangements are set out in note 25.
(d) 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 for goodwill is recognised immediately in the profit or loss and is not reversed in a
subsequent accounting period.
On disposal of the relevant cash generating unit, the attributable amount of goodwill is included in the determination of the
profit or loss on disposal.
(e) Segment reporting
Operating segments are determined based on the nature of the business activities undertaken by the Group and by
reference to the structure of 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. Where operating
segments have been assessed as bearing similar economic characteristics and being similar in terms of each of the
aggregation criteria set out in AASB 8 Operating Segments including the nature of services, the type of customers and the
method by which services are provided, they may be aggregated into a single reportable segment. Details of the Group’s
segment reporting is set out in note 2.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker.
(f) Revenue recognition
The Group has four distinct revenue streams, being (i) revenue from the provision of ticket of work services, (ii) revenue
from the delivery of projects, (iii) revenue from cost reimbursable contracts and (iv) revenue from overhead recovery.
Ticket of work services
Ticket of work services are repetitive, high volume tasks performed by the Group such as the provision of:
•
operations and maintenance services to the owners and operators of telecommunications, gas and water networks
including customer connections and service assurance;
specialist metering, in-home and new energy services in respect of electricity, gas, power and water networks;
inspection, auditing and compliance services to electricity network owners and regulators, government entities and
electrical contractors; and
contact centre services and workforce management support for key contracts.
•
•
•
The benefits provided to customers under this category of work type do not transfer to the customer until the completion of
the service and as such revenue is recognised upon completion (At point in time).
76
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(f) Revenue recognition (continued)
Project delivery
Project works relate primarily to:
•
•
•
turnkey services associated with the engineering, design and construction of infrastructure projects in the
telecommunications, utilities and transport sectors. Service capability includes program management, site acquisition,
town planning, design, engineering and construction management for projects in telecommunications, gas, power,
road. intelligent transport services (ITS) and water utilities networks;
lump sum term maintenance contracts, typically associated with infrastructure networks. Under these contracts delivery
obligations may consist of programme management, asset management, routine maintenance and periodic
maintenance tasks; and
minor work services such as asset remediation, augmentation and relocation.
The benefits provided to customers under this category of work transfer to the customer as the work is performed and as
such revenue is recognised over the duration of the project based on percentage of completion. The Group’s performance
obligation is fulfilled over time and as such revenue is recognised over time (Over time).
Percentage of completion is 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 milestone basis.
As work is performed on the assets being constructed, they are controlled by the customer and have no alternative use to
the Group, with the Group having a right to payment for performance to date. Project revenue earned is typically invoiced
monthly or
to customer
approval/certification. Invoices are paid on standard commercial terms, which may include the customer withholding a
retention amount until finalisation of the construction.
in some cases on achievement of milestones. Payment of
invoices is typically subject
Where recognised project revenues exceed progress billings, the surplus is shown in the consolidated balance sheet as an
asset, under accrued revenue. Where progress billings exceed recognised revenues,
the surplus is shown in the
consolidated balance sheet, as a liability, as income in advance under trade and other payables. Amounts billed for work
performed but not yet paid by the customer are included in the consolidated balance sheet, as an asset, under trade and
other receivables.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an
expense and onerous contract provision as set out in note 17.
Cost reimbursable
The Group recognises revenue (and its associated margins) on all direct, indirect and overhead related costs, as prescribed
under the cost reimbursable contract.
The work performed has no alternative use for the Group and there is an enforceable right to payment, including a profit
margin, when the costs are incurred, as such revenue is recognised over time (Over time).
Overhead recovery
Certain customer contracts allow for the recovery of specified overhead costs.
The benefits provided to the customer under this revenue stream are simultaneously received and consumed by the
customer and as such revenue is recognised over the period the services are provided (Over time).
Variable consideration
It is common for contracts to have variable considerations such as variations, performance bonuses or penalties and other
performance constraints related KPIs. The expected value of revenue is only recognised when the uncertainty associated
with the variable consideration is subsequently resolved, or when it becomes highly probable. The Group assesses the
variable consideration to be included in the transaction price periodically. This assessment involves judgement and is based
on all available information including historical performance and any variations that are entered into.
Contract assets and liabilities
AASB 15 uses the terms contract assets and contract liabilities to describe what the Group refers to as accrued revenue
and income in advance respectively. Trade receivables represent receivables in respect of which the Group's right to
consideration is unconditional subject only to the passage of
to
consideration for services provided to customers for which the Group's right remains conditional on something other than
the passage of time. Income in advance arise where payment is received prior to the work being performed. Accrued
revenue and income in advance are recognised and measured in accordance with this accounting policy.
time. Accrued revenue represent
the Group's right
77
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(f) Revenue recognition (continued)
Contract fulfilment costs
Costs incurred prior to the commencement of a contract may arise due to mobilisation/site set-up costs, feasibility studies,
environmental impact studies and preliminary design activities as these are costs incurred to fulfil a contract. Where these
costs are expected to be recovered, they are capitalised and amortised over the course of the contract consistent with the
transfer of service to the customer. Where the costs, or a portion of these costs, are reimbursed by the customer, the
amount received is recognised as deferred revenue and allocated to the performance obligations within the contract and
recognised as revenue over the course of the contract.
Financing components
The Group does not expect to have any contracts where the period between the transfer of the promised goods or services
to the customer represents a financing component. As a consequence, the Group does not adjust any of the transaction
prices for the time value of money.
Warranties and defect periods
Construction and services contracts generally include defect and warranty periods following completion of the project.
These obligations are not deemed to be separate performance obligations and therefore estimated and included in the total
costs of the contracts. Where required, amounts are recognised accordingly in line with AASB 137 Provision, Contingent
Liabilities and Contingent Assets.
(g) Leases
The Group recognises leases in line with AASB 16 Leases, measuring lease liabilities measured at the present value of the
remaining lease payments, discounted using the Group’s incremental borrowing rate. The Group’s leasing policy is
described in note 15(c).
Right-of-use assets
Right-of-use assets are initially recognised at cost, comprising the amount of the initial measurement of the lease liability,
any lease payments made at or before the commencement date of the lease, less any lease incentives received, any initial
direct costs incurred by the Group, and an estimate of costs to be incurred by the Group in dismantling and removing the
underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the
terms and conditions of the lease.
to initial recognition, right-of-use assets are measured at cost (adjusted for any remeasurement of
Subsequent
the
associated lease liability), less accumulated depreciation and any accumulated impairment loss. Right-of-use assets are
depreciated over the shorter of the lease term and the estimated useful life of the underlying asset, consistent with the
estimated consumption of the economic benefits embodied in the underlying asset.
Lease liabilities
Lease liabilities are initially recognised at the present value of the future lease payments (i.e., the lease payments that are
unpaid at the commencement date of the lease). These lease payments are discounted using the interest rate implicit in the
lease, if that rate can be readily determined, or otherwise using the Group’s incremental borrowing rate.
Subsequent to initial recognition, lease liabilities are measured at the present value of the remaining lease payments (i.e.,
the lease payments that are unpaid at the reporting date). Interest expense on lease liabilities is recognised in profit or loss
(presented as a component of finance costs). Lease liabilities are remeasured to reflect changes to lease terms, changes to
lease payments and any lease modifications not accounted for as separate leases.
Variable lease payments not included in the measurement of lease liabilities are recognised as an expense when incurred.
Leases of 12-months or less and leases of low value assets
Lease payments made in relation to leases of 12-months or less and leases of low value assets (for which a lease asset
and a lease liability has not been recognised) are recognised as an expense on a straight-line basis over the lease term.
(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
remuneration rate expected to apply at the time of the settlement.
their nominal values using the
78
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(h) Employee benefits (continued)
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 liabilities in the balance sheet if the entity does not have an unconditional right to
defer settlement for at least 12 months after the reporting period, regardless of when the actual settlement is expected to
occur.
(i) Share-based payments
Equity-settled share-based payments to Senior Executives 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 23.
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 situations in which
applicable tax regulations are subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
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 the recognition of leases) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability
is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the
end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities, 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.
79
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(j) Taxation (continued)
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.
(k) Property, plant and equipment
Plant and equipment, leasehold improvements and motor vehicles are stated at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly attributable to the acquisition. In the event that settlement of all or part
of the purchase consideration is deferred, cost is determined by discounting the amount payable to their present value as at
the date of acquisition.
Depreciation is calculated on a straight-line basis so as to write-off the net costs or other revalued amount of each asset
over its expected useful life to its estimated residual value. Depreciation methods, estimated useful lives and residual
values are reviewed at the end of each annual accounting period, with the effect of any changes recognised on a
prospective basis.
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: 3 - 13 years;
Plant and equipment: 1 -10 years; and
Motor vehicles: 5 - 10 years
(I)
Intangible assets
Costs incurred in developing products or systems and costs incurred in acquiring software and licences that the Group
controls and that will contribute to future period financial benefits through revenue generation or cost reduction are
capitalised as software. A software is assessed as being controlled by the Group if it has the power to obtain the future
economic benefits flowing from the software itself and to restrict others’ access to those benefits. Any costs associated with
maintaining this software 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 direct costs of materials and
service and direct payroll and other payroll-related costs of employees’ time spent on the project.
Customer contracts and relationships acquired in a business combination are initially recognised at their fair value at the
acquisition date, which is regarded as their cost.
Software, customer contracts and relationships have finite lives and are carried at cost less any accumulated amortisation
and any impairment losses.
Amortisation is recognised on a straight-line basis over each asset’s estimated useful life. The estimated useful life and
amortisation method are reviewed at the end of each annual accounting period, with the effect of any changes in estimate
being accounted for on a prospective basis.
The estimated useful lives used in the calculation of amortisation range from 3 to 8 years for software, 1 to 15 years for
customer contracts and 15 years for customer relationships.
80
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(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
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 impairment
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.
(i)
Classification
The Group classifies its financial assets and liabilities in the following measurement categories:
•
•
those to be measured subsequently at fair value (either through other comprehensive income (OCI) or profit or loss),
and
those to be measured at amortised cost.
The classification depends on the entity’s business model
contractual terms of the cash flows.
for managing the financial assets and liabilities and the
For assets and liabilities measured at fair value, gains and losses will either be recorded in profit or loss or OCI.
81
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(p)
(ii)
Financial instruments (continued)
Recognition and derecognition
Purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or
sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have
expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At initial recognition,
the Group measures a financial asset at its fair value, plus transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit
or loss (FVPL) are expensed in profit or loss.
Changes in the fair value of financial assets at FVPL are recognised in other gains/losses in the statement of profit or loss
and other comprehensive income as applicable.
losses) on equity
investments measured at fair value through other comprehensive income (FVOCI) are not reported separately from other
changes in fair value.
losses (and reversal of
Impairment
impairment
(iv)
Impairment
The Group assesses, on a forward-looking basis, the expected credit losses associated with its financial assets carried at
amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase
in credit risk.
For trade receivables and contracts assets, the group applies the simplified approach permitted by AASB 9, which requires
expected lifetime losses to be recognised from the date of initial recognition, see note 21(c) for further details.
(v)
Borrowings
Borrowings are initially measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees
paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent
there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or
transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
profit or loss as other income or finance costs.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting period.
(vi)
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
82
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(p)
Financial instruments (continued)
(vi)
Financial liabilities and equity instruments (continued)
•
the amount initially recognised, less where appropriate, cumulative amortisation recognised in accordance with the
revenue recognition policies.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss (FVTPL) or other financial
liabilities.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial
expense recognised on an effective yield basis.
liabilities are subsequently measured at amortised cost using the effective interest method, with interest
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 measured at amortised cost using the effective
interest method, less loss allowance. See note 21(c) for an assessment of the Group's impairment methodology.
Trade and other payables
(r)
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
the taxation authority is included with other receivables or other payables in the
recoverable from, or payable to,
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.
Cash and cash equivalents
(t)
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 Group'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.
83
Service Stream Limited
Notes to the consolidated financial statements
33 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:
•
profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares; and
•
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) Instrument
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial
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)
Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
•
•
•
•
fair values of the assets transferred;
liabilities incurred to the former owners of the acquired business;
equity interests issued by the group; and
fair value of any asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date.
84
Service Stream Limited
Notes to the consolidated financial statements
33 Significant accounting policies (continued)
(y)
Business combinations (continued)
Acquisition-related costs are expensed as incurred.
consideration transferred;
amount of any non-controlling interest in the acquired entity; and
acquisition-date fair value of any previous equity interest in the acquired entity;
The excess of the:
•
•
•
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair
value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a
bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
34 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 33.
The areas involving a higher degree of judgement or estimates are:
•
•
•
•
•
Recognition of revenue from contracts with customers - note 3(d);
Testing of goodwill for impairment - notes 14(b);
Estimation uncertainties and judgements made in relation to lease accounting - note 15(d);
Estimation of provision for contractual obligations, contractual disputes and onerous contracts - note 17(b); and
Business combinations - note 29.
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.
85
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,
professional reporting requirements, and
the Corporations Regulations 2001 and other mandatory
giving a true and fair view of the consolidated entity's financial position as at 30 June 2022 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 24 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 26.
Note 33 confirms that the financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Brett Gallagher
Chairman
26 August 2022
Leigh Mackender
Managing Director
26 August 2022
86
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 controlled entities
(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 2022 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated balance sheet as at 30 June 2022
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
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
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 & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (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
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999
Liability limited by a scheme approved under Professional Standards Legislation.
87
Our audit approach
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.
We tailored the scope of our audit to ensure that we performed enough 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, its accounting processes and controls and the industry in which it operates.
Materiality
● For the purpose of our audit we used overall Group materiality of $7.6 million, which represents
approximately 0.5% of the Group’s revenue from continuing operations.
● We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
● We chose Group revenue from continuing operations because, in our view, it is an appropriate benchmark
against which to measure the performance of the Group.
● We utilised a 0.5% threshold based on our professional judgement, noting it is within the range of
commonly acceptable thresholds.
Audit Scope
● Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
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. 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. We communicated the key audit matters to the Audit
and Risk Committee.
88
Key audit matter
How our audit addressed the key audit matter
Business combination accounting
(Refer to note 29) $316.6 million
The Group acquired Service Stream Maintenance Pty
Ltd (formerly Lendlease Services Pty Ltd) and its
controlled entities on 1 November 2021 for total
consideration of $316.6 million, as described in note
29 of the financial report.
The accounting for the acquisition was a key audit
matter because it was a significant transaction in the
year. In addition, the Group made complex
judgements when accounting for the acquisition,
including:
●
identifying all assets and liabilities of the newly
acquired business and estimating the fair value
of each asset and liability for initial recognition by
the Group, particularly the customer contracts
and relationships.
The accounting for the acquisition is provisional at the
time of authorisation of the financial report.
Goodwill impairment assessment - Energy &
Water and Comdain Infrastructure
(Refer to note 14) $120.3 million
The Group is required by Australian Accounting
Standards to test goodwill annually for impairment at
the cash generating unit (CGU) level.
The consolidated balance sheet at 30 June 2022
includes goodwill relating to the Energy & Water
($20.0 million) and Comdain Infrastructure ($100.3
million) CGU’s. An impairment of $38.2 million has
been recorded against the Energy & Water CGU in
the current year.
The determination of the recoverable amount of each
CGU, being the higher of value-in-use (“VIU”) and fair
value less costs of disposal (“FVLCD”), requires
judgement and estimation on the part of
management.
Assisted by our PwC valuation experts in aspects of
our work, our procedures included the following,
amongst others:
●
●
●
evaluating the identification of the assets and
liabilities acquired against the requirements of
Australian Accounting Standards;
assessing the fair values of the acquired assets
and liabilities recognised, including:
○ considering key assumptions used in
estimating the fair values of customer
contracts and relationships;
○ considering the valuation methodologies
applied against the requirements of Australian
Accounting Standards; and
○ assessing the competence and capability of
the Group’s experts.
considering the adequacy of the business
combination disclosures in light of the
requirements of Australian Accounting
Standards.
To evaluate the recoverable amount of the Energy &
Water and Comdain Infrastructure CGU’s, with
assistance from PwC Valuation experts in aspects of
our work, we performed the following procedures,
amongst others:
●
●
●
●
assessed the appropriateness of the
discount rate in consideration of the forecast
cash flows;
evaluated the Group’s historical ability to
forecast future cash flows by comparing
forecast cash flows with reported actual
performance;
evaluated the underlying cash flow
assumptions for key customer contracts with
reference to historical results and expected
project pipelines on a sample basis; and
considered whether the allocation of
corporate costs between CGUs was
appropriate.
89
Key audit matter
How our audit addressed the key audit matter
We considered the adequacy of the disclosures
relating to the Group’s goodwill impairment
assessment in light of the requirements of Australian
Accounting Standards.
In undertaking impairment testing, the following
assumptions require estimation:
● expected cash flows, as taken from Board
approved budgets and strategic plans, including
assumptions regarding extending existing and
winning new contracts.
● discount rates used to discount the estimated
cash flows.
● the long-term growth rate to be applied to the
forecast cash flows in the terminal year.
This was a key audit matter because of the level of
estimation required by the Group in determining the
assumptions used to perform the impairment testing.
Revenue recognition
(Refer to note 3) $1,513.8 million
We evaluated the design of relevant key internal
controls over the recognition of revenue.
For the year ended 30 June 2022, the Group
recognised $1,513.8 million of revenue from contracts
with customers, of which $273.8 million was accrued
at 30 June 2022.
For revenue from the provision of ticket of work
services, amongst other procedures and for a sample
of transactions, we obtained evidence supporting the
amount of revenue recognised in the current year.
Revenue from the provision of ticket of work services
involves a high volume of transactions and is
recognised at a point in time once services or
activities have been completed. Additionally, due to
contractual terms and certain customers requiring
payment claims to be submitted and approved prior to
invoices being issued, this process can extend the
time that revenue is classified as accrued. Judgement
is required to determine if accrued revenue will be
recoverable. Only revenue that is highly probable of
not reversing can be recorded.
Revenue recognition in relation to the delivery of
projects is complex because it is based on the
Group’s estimates of:
●
●
●
the stage of completion of the contract activity
total forecast contract costs, and
variable consideration
This was a key audit matter because of its
significance to profit, the high volume of revenue
transactions associated with ticket of work services
For revenue from the delivery of projects, amongst
other procedures and for a sample of contracts, we:
●
●
●
obtained an understanding of the terms and
conditions of contracts
obtained an understanding, and agreed to
supporting documents, the estimates of total
contract revenue and forecast contract costs and
evaluated the percentage of completion based on
the actual costs incurred to date and the
estimated costs to complete; and
assessed the Group’s forecasting accuracy by
comparing historical actual costs incurred relative
to the forecast of those costs.
In addition, for revenue that was accrued at 30 June
2022 we evaluated the appropriateness of
management's recoverability assessment.
For all categories of revenue our procedures included
identifying a sample of journal entries impacting
revenue based on specific criteria and obtaining
source documents to determine if the journals were
reasonable.
90
Key audit matter
How our audit addressed the key audit matter
and the estimation required in recognising revenue
from the delivery of projects.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2022, but does not include the
financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other
information we obtained included the directors' report. We expect the remaining other information to
be made available to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
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 on the other information that we obtained prior to the date of
this auditor’s report, 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.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
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 Group or to cease
operations, or have 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
91
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.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 18 to 37 of the directors’ report for the
year ended 30 June 2022.
In our opinion, the remuneration report of Service Stream Limited for the year ended 30 June 2022
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
Trevor Johnston
Partner
Melbourne
26 August 2022
92
Service Stream Limited
ASX Additional Information
ASX Additional Information
for the financial year ended 30 June 2022
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 26 August 2022
Category (size of holding)
1-1,000
1,001- 5,000
5,001-10,000
10,001-100,000
100,001+
Holders
2,230
3,488
1,812
3,159
294
10,983
B. There are 10,983 holders of fully paid ordinary shares.
The Company has no other class of shares issued.
C. The number of shareholdings held in less than marketable parcels is 1,467.
D. The names of the substantial shareholders listed in the holding company’s
register, and their shareholdings (including shareholdings of their
associates), as at 26 August 2022 are:
Shareholder
Allan Gray Australia Pty Ltd1
Thorney Opportunities Ltd2
Tiga Trading Pty Ltd 2
Jasforce Pty Ltd (as trustee for the Alex Waislitz Retirement Plan) 2
Waislitz Charitable Corporation Pty Ltd (a s trustee for the Waislitz
Family Foundation)2
1Number of shares is based on the most recent notification lodged by Allan Gray Australia Pty Ltd with the ASX.
Ordinary
%
86,715,600
6,937,761
33,320,283
1,605,445
14.08%
1.13%
5.41%
0.26%
1,000,000
0.16%
2The Company treats Thorney Opportunities Ltd, Tiga Trading Pty Ltd, Jasforce Pty Ltd (as trustee for the Alex Waislitz Retirement Plan) and Waislitz Charitable
Corporation Pty Ltd (as trustee for the Waislitz Family Foundation) with an aggregated holding of 7%, 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 $0.0266 (2021: $0.0404)
G. 20 Largest Shareholders as at 26 August 2022 - Ordinary Shares
Service Stream Limited
ASX Additional Information
Name of 20 largest shareholders in each class of share
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
UBS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
COMDAIN NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
RUBI HOLDINGS PTY LTD
MR KENNETH JOSEPH HALL
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
DR ROGER GRAHAM BROOKE + MRS SALLY ANN BROOKE
NETWEALTH INVESTMENTS LIMITED
THORNEY OPPORTUNITIES LTD
TELUNAPA PTY LTD
INVESTMENT HOLDINGS PTY LTD
MR KEVIN ASHLEY SMITH
JASFORCE PTY LTD
CRISTATUS PTY LTD
CITICORP NOMINEES PTY LIMITED
Ordinary
shares Fully
paid number
of shares
held
121,222,979
96,504,317
62,022,351
35,418,974
31,349,615
30,181,415
7,130,784
7,000,000
5,926,084
5,925,459
5,626,230
4,706,162
4,437,556
4,000,000
3,000,000
2,500,000
2,453,002
1,555,445
1,400,000
1,336,238
% Held
19.68
15.67
10.07
5.75
5.09
4.90
1.16
1.14
0.96
0.96
0.91
0.76
0.72
0.65
0.49
0.41
0.40
0.25
0.23
0.22
433,696,611
70.41
Service Stream Limited
Corporate Directory
Corporate Directory
Directors
Brett Gallagher
Leigh Mackender
Peter Dempsey
Greg Adcock
Deborah Page AM
Elizabeth Ward
Company Secretaries
Chris Chapman
Jamie O’Brien
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
Commonwealth Bank of Australia
HSBC Bank Australia Limited
National Australia Bank
Westpac Banking Corporation
Share Registry
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnson Street
Abbotsford Victoria 3067
Tel: 1300 850 505 (within Australia)
+61 3 9415 4000 (outside Australia)
Fax: +61 3 9473 2500
Auditor
PricewaterhouseCoopers
ABN: 46 072 369 870
Level 4, 357 Collins Street, Melbourne, Victoria 3000
servicestream.com.au