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 23 October 2024, 10.00am
Service Stream Limited
ABN 46 072 369 870
Annual report for the financial year ended
30 June 2024
Service Stream Limited FY24 Annual Report
Service Stream Limited FY24 Annual Report
Service Stream Limited FY24 Annual Report
Service Stream Limited FY24 Annual Report
Service Stream Limited ABN 46 072 369 870
Annual Report
for the year ended 30 June 2024
Contents
Directors’ report
Page 1
Remuneration report
Page 21
Auditor’s independence declaration
Page 46
Financial report
Consolidated statement of profit or loss and other comprehensive income
Page 47
Consolidated statement of financial position
Page 48
Consolidated statement of changes in equity
Page 49
Consolidated statement of cash flows
Page 50
Notes to the consolidated financial statements
Page 51
Consolidated entity disclosure statement
Page 103
Directors’ declaration
Page 105
Independent auditor’s report to the members
Page 106
ASX Additional Information
Page 111
Corporate Directory
Page 113
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 11, which is not part of these financial
statements.
The financial statements were authorised for issue by the Directors on 21 August 2024. 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.
Service Stream Limited FY24 Annual Report
Annual Report
21 August 2024
Chairman’s Letter
Service Stream plays a vital role in keeping
communities connected to the essential
infrastructure networks that millions of Australians
depend on every day.
In the past 12 months, Service Stream has
delivered strong financial performance across all
operating and support divisions, underpinned by
our strong pipeline of contracted services across
growing markets.
The highlight this year were the announcements
relating to the business securing approximately
$2.2 billion of revenue under new and existing
agreements across all our reporting Divisions. This
demonstrates the demand for our capability
across Telecommunications, Utilities and
Transports sectors as we continue to invest in
future growth opportunities.
Another highlight was the strong performance of
our share price, which has increased by over 50%
from this time last year. This reflects a growing
level of confidence from our shareholders and the
market more broadly in our management team,
our ability to deliver value to our shareholders and
the Company’s long-term strategy.
Our clients continue to invest in the construction,
upgrade and maintenance of their essential
infrastructure networks driven by population
growth, aging infrastructure, and the digital and
energy transition. With a robust balance sheet,
strong cash flow, and significant portfolio of work-
in-hand, the Group is very well position to continue
to grow and deliver further value to our
shareholders in FY25.
Safety
Safety comes first at Service Stream.
In FY24, we continued our strong performance
across our lag and lead indicators. LTIFR remained
below 1.00, TRIFR was stable and when
benchmarked against peers and clients, all
frequency rates still reflect industry leading
performance.
Over the past 12 months the business has sought
to implement innovative and practical risk control
improvements to enhance resilience, while
empowering all our people to identify
opportunities for improvement and be part of the
solution. More than 500 employees completed our
‘Safety Leadership Workshops’ in FY24, and we are
anticipating higher attendance rates throughout
FY25.
In FY25 the business will continue to build on our
overall approach to health and safety to support
Management’s focus on driving superior safety
performance, supported by a strong safety culture.
There will be a continued focus on critical controls
reviews through the ‘spot check process’ on work
sites and on ensuring early intervention injury
management practices to all work-related injuries.
As always, the health and safety of our workforce,
clients and the communities in which we operate
remains the number one priority for the Board and
Management.
Financial performance
The business has delivered a strong financial
performance for shareholders over the past 12
months, by growing revenues, repaying debt, and
a generating a healthy amount of free cash flow.
In FY24, the Group recorded Total Revenue of $2.4
billion, which was an 11.2% increase on the prior
year, and underlying EBITDA from Operations of
$129.2m, an increase of 13.2% on FY23. NPAT-A of
$50.1m was an increase of 36.4% on the prior year.
Strong disciplines in the management of working
capital and investing cash flows has enabled the
Group to record a net cash position and
outstanding cash conversion rate for the full-year.
The business shifted from a net debt of $35.7m in
FY23 to a net cash of $7.9m (excluding capitalised
borrowing costs) and an OCFBIT conversion rate of
102% for the year.
Overall, the Board remains extremely optimistic
with the strength of the business’ balance sheet
heading into the FY25.
Service Stream Limited FY24 Annual Report
Rewarding Shareholders
A core part of the Board’s financial goals is
balancing the competition between capital for
growth initiatives and returns to shareholders. The
Board remains committed to the consistent
payment of dividends to our shareholders aligned
to the business’ profit, while ensuring the Group
maintains an appropriate capital management
strategy which can support both operational
delivery and our strategic plan.
Following the year’s performance and strong
cashflow result, the Board is pleased to confirm a
final fully-franked dividend of 2.5 cents per share
bringing the total full-franked dividend to 4.5 cents
per share for the year.
Group Strategy
FY24 marked the second year of Service Stream’s
strategy for the delivery of improved, consistent,
and incremental value to our stakeholders. We
have made significant progress in pursuit of ‘Our
Vision’ and ‘Our Purpose’ which are underpinned
by our strategic pillars of ‘Delivery, Optimisation
and Growth’.
While there is more to be done, Service Stream
has, to date, delivered industry leading safety
performance, improved its financial performance,
improved margins, reduced business overheads
and secured organic growth opportunities.
In FY25, Management will remain focused on our
strategic pillars with the knowledge that delivering
to our strategy will lead to the positive financial
performance of the business and long-term value
for our shareholders.
Sustainability
During the year, Service Stream improved its
delivery across its core sustainability focus areas,
aligned to the Group’s 5 pathways framework,
encompassing: Safety, People, Community,
Environment and Governance.
The business continues to take important steps in
delivering tangible social and economic results
through the implementation of the Reconciliation
Action Plan and Diversity, Equity & Inclusion
Strategy and Action Plan. Some of the initiatives
implemented in FY24 in support of our
sustainability pathways include the deployment of
a greenhouse gas emissions platform to enhance
our transition to a Net Zero future, roll-out of
mental health initiatives and implementation of
our Innovate Reconciliation Action Plan.
The Board remains committed to the
development and continual improvement of
performance and understands the increasing
demands of our stakeholders in appropriately
managing ESG related risks and opportunities. Our
core focus remains on driving long-term
sustainable practices which support and enhance
the environment, social and economic
performance for both Service Stream and our
wider business stakeholders.
Personal Note
On behalf of the Board, I would like to thank all our
valued people working across the business for
their hard work and dedication throughout the
year. They are the reason behind our ongoing
success. The Board continues to focus on
supporting our people as we execute on the key
drivers that shape our strategic plan.
Brett Gallagher
Chairman
Service Stream Limited FY24 Annual Report
Directors’ Report
1
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 2024, 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
Elizabeth Ward
Non-Executive Director
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 Committee and a
member of the Audit and Risk
Committee. Brett has no other listed
company directorships and has held
no other listed company directorships
in the last three years.
Term of Office: Managing Director
since May 2014.
Qualifications: MBA (VU), MAICD.
Leigh Mackender was appointed as the
Managing Director of Service Stream in
May 2014, after holding a number of
management and executive roles
within the business since joining in
2005.
Leigh has held senior roles in
government, private and public
businesses over the past 20 years, with
a strong focus on the development
and implementation of business
strategy, operational and financial
management, stakeholder relations,
health & safety and information
technology.
Leigh is a member of the Health, Safety
& Environment Committee.
Leigh has no other listed company
directorships and has held no other
listed company directorships in the last
three years.
Term of Office: Non-Executive Director
since September 2021.
Qualifications: MBA, MAICD.
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 Chair of the Health, Safety &
Environment Committee and a member
of the Remuneration and Nomination
Committee.
Elizabeth has no other listed company
directorships and has held no other
listed company directorships in the last
three years.
Service Stream Limited FY24 Annual Report
Directors’ Report
2
Martin Monro
Non-Executive Director
Sylvia Wiggins
Non-Executive Director
Peter Dempsey
Non-Executive Director
Term of Office: Non-Executive Director
since October 2022.
Qualifications: BA (Psych) FAICD, FAIB.
Martin Monro brings to the Board
extensive operational, contracting and
commercial expertise gained across
large-scale infrastructure projects in
Australia and overseas. He has over 30
years’ experience as a CEO, senior
executive and strategic advisor across
these sectors. He has specific
experience in risk management,
industrial relations, contract
management, stakeholder
engagement and service delivery.
Martin was previously Managing
Director and CEO of Watpac Limited
(now BESIX Watpac) and held senior
roles at Baulderstone Hornibrook. He is
an experienced company director
gained across listed entities such as
Fleetwood Limited, Big River Industries
and BESIX Watpac, as well as private
and government enterprises such as
Moits Geo-Civil Contracting, Pannell
Enoteca (previously S.C. Pannell Wines)
and Royal Melbourne Showgrounds
Unincorporated Joint Venture. He has
experience in audit and risk, health and
safety, and remuneration board
committees.
Martin is Chairman of the
Remuneration and Nomination
Committee, a member of the Health,
Safety & Environment Committee and
a member of the Audit and Risk
Committee.
Martin is currently Chair of Big River
Industries and a Non-Executive
Director of Fleetwood Limited, and has
held no other listed company
directorships in the last three years.
Term of Office: Non-Executive Director
since November 2022.
Qualifications: LLB, LJuris Law, GAICD.
Sylvia Wiggins brings to the Board
extensive infrastructure, finance,
strategic planning and risk
management gained across a diverse
range of industries including energy,
infrastructure, finance, funds
management, transport and
government in Australia and overseas.
She has over 30 years’ experience as a
CEO, senior executive and strategic
advisor across these sectors. She has
specific experience in corporate
finance, audit, risk management,
contract management, stakeholder
engagement and service delivery.
Sylvia was previously a public market
CEO at Global Investments Limited
and Executive Director of Finance &
Commercial of ASX listed company
Infigen Energy Group, prior to its
takeover.
Sylvia is an experienced company
director and currently a Non-Executive
Director of Collgar Renewables Group,
Epic Energy Group and Scheme
Financial Vehicle Pty Limited.
Sylvia is Chair of the Audit and Risk
Committee and a member of the
Remuneration and Nomination
Committee.
During the last three years, Sylvia held
listed directorships with Aeris
Resources Limited (retired 31
December 2023) and Altium Limited
(retired 1 August 2024).
Term of Office: Chairman from
November 2010 to February 2015, Non-
Executive Director since March 2010.
Peter retired 18 October 2023.
Qualifications: B. Tech. (Civil Eng.)
(Adel), Grad. Diploma (Bus. Admin.),
SAIT, FIEAust, MAICD.
Peter Dempsey brought 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 was Chairman of the
Remuneration and Nomination
Committee (until 28 February 2023)
and was a member of the
Remuneration and Nomination
Committee and Audit and Risk
Committee.
Peter held a listed company
directorship with Monadelphous
Limited (retired 22 November 2022)
and has held no other listed company
directorships in the last three years.
Service Stream Limited FY24 Annual Report
Directors’ Report
3
Nick Miller
Non-Executive Director
Term of Office: Non-Executive Director
since November 2023. Nick retired 16
January 2024
Qualifications: NZCE (Civil), BE (Hons),
FIPENZ, GAICD.
Nick Miller brought to the Board
extensive operational, contracting and
commercial expertise gained across a
diverse range of industries including
construction and resources sectors,
infrastructure and civil construction
services, electricity distribution
network services, industrial mineral
manufacturing, operations and
maintenance services in Australia and
New Zealand. He has over 30 years’
experience as a CEO, senior executive
and strategic advisor across these
sectors. He has specific experience in
change management, business
development, industrial relations,
contract management, stakeholder
engagement and service delivery.
Nick was previously Managing Director
and CEO of Fulton Hogan Ltd,
Broadspectrum and Adbri Limited. He
is an experienced company director
gained across listed entities such as
Adbri Limited, as well as private
enterprises such as Fulton Hogan,
Southbase Construction, Coleridge
Downs and Orion NZ Ltd. He has
experience in audit and risk; health,
safety, environment & sustainability;
and remuneration board committees.
Nick was a member of the Health,
Safety & Environment Committee and
was a member of the Audit and Risk
Committee.
Nick has no other listed company
directorships and has held no other
listed company directorships in the last
three years.
Service Stream Limited FY24 Annual Report
Directors’ Report
4
Directors’ Shareholdings
The following table sets out each Director’s relevant interest in shares of the Company as at the date of this
report.
Directors
Fully paid ordinary shares
Number
Performance rights
Number
B Gallagher
2,390,243
-
E Ward
100,559
-
M Monro
75,000
-
S Wiggins
112,725
-
L Mackender
1,772,914
2,704,961#
#Aggregation of performance rights granted under FY22, FY23 and FY24 LTI Plans.
Key updates (retirement of Peter Dempsey and Nick Miller)
Peter Dempsey retired from the Service Stream Limited Board on 18 October 2023.
Nick Miller retired from the Service Stream Limited Board on 16 January 2024.
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 21 to 45.
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:
Director and senior executives
Number of rights granted
Number of ordinary
shares under rights
L Mackender
919,727
919,727
L Kow
505,745
505,745
D Zropf
482,870
482,870
K Smith
411,235
411,235
J Van Dyk
310,078
310,078
2,629,655
2,629,655
Service Stream Limited FY24 Annual Report
Directors’ Report
5
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 the General Manager, Legal. 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 services provider in Australia. 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.
Service Stream Limited FY24 Annual Report
Directors’ Report
6
Review of operations and financial performance
Financial overview
Table 1 – Financial Performance
$'000
FY24
FY23
Change
Revenue
2,291,589
2,052,767
238,822
EBITDA from Operations 1
119,372
93,957
25,415
Non-operational costs
-
(5,081)
5,081
Joint venture adjustments
(2,620)
(1,998)
(622)
Depreciation & amortisation
(42,775)
(52,639)
9,864
Amort. of customer contracts / relationships
(15,686)
(15,411)
(275)
EBIT
58,291
18,828
39,463
Net financing costs
(11,396)
(13,605)
2,209
Income tax expense
(14,597)
(761)
(13,836)
Net profit after tax
32,298
4,462
27,836
Statutory EPS (cents per share)
5.25
0.72
4.53
Total Dividends (cents per share)
4.5
1.5
3.00
Adjusted profitability 2:
Total Revenue
2,391,801
2,150,782
241,019
Underlying EBITDA from Operations
129,172
114,098
15,074
Underlying EBITDA from Operations margin
5.40%
5.30%
0.10%
Adjusted NPAT (NPAT-A)
50,138
36,768
13,370
Adjusted EPS (cents)
8.15
5.97
2.18
1EBITDA from Operations is calculated as earnings before interest, tax, depreciation and amortisation, non-operational costs and joint venture
proportionate consolidation adjustments.
2Adjusted profitability includes non-IFRS measures that have been adjusted for non-operational costs, impairment charges, amortisation of
customer contracts and proportionate consolidation of equity-accounted joint ventures. Refer to reconciliation between IFRS and non-IFRS
financial information for further details on page 8.
Service Stream Limited FY24 Annual Report
Directors’ Report
7
Group results
Revenue increased by 11.6% to $2,291.6 million from $2.052.8 million driven by the Telecommunications
segment with robust growth across all market sectors and services. The Utilities segment also reported strong
growth across most market sectors despite phasing out revenue from discontinued operations and
transitioning away from large scale fixed price design and construct projects. The growth was partially offset
by the Transport segment with operations rebased following the de-mobilisation of the Western Australia
regional road operations in FY23.
Underlying EBITDA from Operations increased to $129.2 million from $114.1 million, largely driven by strong
contributions from the Telecommunications and Utilities segments. The underlying earnings result excludes
the additional $9.8m provision recognised for the onerous QLD Utility project (FY23: 20.1 million).
Depreciation & amortisation expense decreased by $9.9 million due to:
●
$6.6 million of one-off asset write-downs recognised in FY23 from decommissioning of software assets as
part of the Lendlease Services (LLS) integration activities;
●
Stringent capital expenditure spend management; and
●
Rationalisation of leasehold premises following the LLS acquisition.
The Group’s net financing costs decreased by $2.2 million resulting from an overall reduction in net debt
during the year.
Tax expense for the year was $14.6 million, reflecting an effective tax rate (ETR) of 31% which was in line with
expectations.
Group net profit after tax (NPAT) was $32.3 million in FY24, increasing $27.8 million from prior year. This was
driven by the revenue and EBITDA from Operations drivers outlined above, offset by a higher tax expense.
Adjusted NPAT (NPAT-A) was $50.1 million, an increase of $13.4 million from prior year.
The Directors have declared a final fully-franked FY24 dividend of 2.5 cents per share, taking the total fully-
franked dividend to 4.5 cents per share for the full year.
Service Stream Limited FY24 Annual Report
Directors’ Report
8
Reconciliations between IFRS and non-IFRS financial information
Table 2 – Reconciliation information
$'000
FY24
FY23
Reconciliation of Total Revenue to Revenue
Total Revenue
2,391,801
2,150,782
Less: Share of revenue from joint ventures1
100,212
98,015
Revenue
2,291,589
2,052,767
Reconciliation of Underlying EBITDA from Operations to Net profit/(loss) after tax
Underlying EBITDA from Operations
129,172
114,098
Onerous contract provision for QLD Utility project
(9,800)
(20,141)
EBITDA from Operations
119,372
93,957
Adjustments for joint ventures2
(2,620)
(1,998)
Depreciation and amortisation
(58,461)
(68,050)
Non-operational costs (before tax)3
-
(5,081)
Net finance costs
(11,396)
(13,605)
Tax expense
(14,597)
(761)
Net profit after tax
32,298
4,462
Reconciliation of NPAT-A to net profit/(loss) after tax
Adjusted NPAT (NPAT-A)
50,138
36,768
Amort. of customer contracts (tax-effected)
(10,980)
(10,787)
Non-operational costs (after tax)3
-
(7,421)
Onerous contract provision for QLD Utility project (tax effected)2
(6,860)
(14,098)
Net profit after tax
32,298
4,462
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) of the notes to the
consolidated financial statements.
Service Stream Limited FY24 Annual Report
Directors’ Report
9
Segment Results
Table 3 – Segment results
$'000
FY24
FY23
Change
Telecommunications
1,200,215
970,380
229,835
Utilities
972,117
888,428
83,689
Transport
219,474
292,247
(72,773)
Eliminations, interest & other revenue
(5)
(273)
268
Total Revenue
2,391,801
2,150,782
241,019
Telecommunications
105,408
85,460
19,948
Utilities (underlying)
34,161
28,425
5,736
Transport
14,329
14,791
(462)
Unallocated corporate costs1
(24,726)
(14,578)
(10,148)
EBITDA from Operations (underlying)
129,172
114,098
15,074
Telecommunications
8.8%
8.8%
-
Utilities
3.5%
3.2%
0.3%
Transport
6.5%
5.1%
1.4%
EBITDA from Ops Margin
5.4%
5.3%
0.1%
1 FY24 unallocated costs include one-time investment costs in organic business development opportunities (e.g. Defence BST).
Telecommunications
Telecommunications’ Total Revenue increased by
$229.8 million (23.7%) compared to FY23 due to:
●
Expansion across fixed line and wireless
operations, encompassing both operations and
maintenance (O&M) and capital programs; and
●
increased connection volumes flowing from the
nbn fibre overbuild program.
Telecommunications' EBITDA from Operations was
$105.4 million, an increase of 23.3% against prior
year, reflecting impact of the revenue growth
drivers outlined above and additional earnings
opportunities from adverse weather rectification
works in Q3FY24. EBITDA margin of 8.8% remained
consistent with the prior period.
Utilities
Utilities’ Total Revenue increased by $83.7 million
(9.4%) compared to FY23 attributed to new O&M
contract wins and organic growth opportunities
within existing contracts. Utilities Underlying
EBITDA from Operations was $34.2 million, an
increase of $5.7 million. Exceptional performance
from core O&M contracts and good progress on
closing out problematic legacy projects enabled
second half EBITDA margin improvement to 3.4%.
Transport
Transport’s Total Revenue decreased by $72.8
million (24.9%) compared to FY23, following the
rebasing of operations after the de-mobilisation of
WA regional road operations in FY23.
Despite the revenue decline, EBITDA from
Operations remained relatively steady at $14.3
million as the impact of the WA revenue reduction
was mitigated through overhead cost reduction and
strong performance from remaining operations,
enhancing EBITDA margin. The Segment results
also include compensation from the Inland Rail PPP
demobilisation agreement reached during FY24.
Service Stream Limited FY24 Annual Report
Directors’ Report
10
Cashflow and Financial Position
Table 4 – Cashflow
$’000
FY24
FY23
Change
Underlying EBITDA from Operations
129,172
114,098
15,074
+/- non-cash items & change in working capital
6,395
(16,750)
23,145
Adjustment for joint ventures
(4,359)
(4,962)
603
OCFBIT 1
131,208
92,386
38,822
EBITDA to OCFBIT 1 conversion %
101.6%
81.0%
Non-operational costs and onerous contract2
(12,541)
(31,151)
18,610
Net interest and financing paid
(9,535)
(10,889)
1,354
Income taxes paid
(11,947)
44,466
(56,413)
Operating cashflow
97,185
94,812
2,373
Capital expenditure
(10,473)
(7,984)
(2,489)
Business acquisitions (net of cash acquired)
-
(12,896)
12,896
Proceeds from sale of assets
4,089
3,970
119
Free cashflow
90,801
77,902
12,899
Dividends paid
(18,436)
(9,236)
(9,200)
Lease liability payments
(24,554)
(23,064)
(1,490)
Repayment of borrowings
(65,000)
(30,012)
(34,988)
Purchase of shares
(4,131)
-
(4,131)
Net (decrease)/increase in cash
(21,320)
15,590
(36,910)
1 Operating Cashflow before interest, tax and non-operational costs.
2 Non-operational costs and onerous contract includes acquisition, business integration and restructuring costs (Note 6(c)) and net
cash outflow associated with the QLD utility onerous contract.
Service Stream Limited FY24 Annual Report
Directors’ Report
11
Cash Flow
Operating cash flow was $97.2 million, an increase
of $2.4 million against prior year, driven by:
●
Strong operating performance primarily in the
Telecommunications segment;
●
Improvement in net working capital across
the business;.
●
Lower financing costs due to an improved
leverage position.
This was partially offset by:
●
Higher income tax payments which are more
reflective of the tax expense for the year,
whereas FY23 benefited from a one-off refund
of $49.4 million arising from a tax deduction
associated with the LLS acquisition.
Operating cash flow before interest, tax and non-
operational costs (OCFBIT) was $131.2 million,
representing an 101.6% cash flow conversion rate
which exceeded expectations.
Net investing cash outflows were $6.4 million and
comprised:
●
$10.5 million of capital expenditure relating to
investment in technology and plant &
equipment; offset by
●
$4.1 million received as proceeds from the sale
of fleet assets.
Net financing outflows for the year were $112.1
million which included:
●
Operating lease payments for fleet assets and
property of $24.6 million;
●
Dividends of $18.4 million; and
●
Repayment of net borrowing of $65.0 million,
as the Group improved its net cash/debt
profile following a strong operating cash flow
result.
Financial position
The Group had net assets of $480.3 million at 30
June 2024 (2023: $465.4 million).
Cash and financing facilities
●
The Group ended the year with net cash of
$8.5 million, an improvement of $42.8 million
from prior year. This was driven primarily by
strong cash flow generated by operating
activities and continued focus on working
capital optimisation across the Group.
●
As at 30 June 2024, the Group had liquidity of
$287.3 million comprising cash balances of
$62.9 million and an undrawn committed loan
facility of $224.4 million.
●
The Group was in compliance with each of the
financial covenants that applied during the
year across all its financing facilities 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 2024 was a net
asset position of $86.1 million, a decrease of
$0.9 million from 30 June 2023. Net working
capital as a percentage of revenue was 3.8%,
down from 4.2% in prior year reflecting the
strong focus on working capital optimisation
throughout the business.
●
Property, plant and equipment at 30 June
2024 was $33.2 million compared to $43.0
million at 30 June 2023. The decrease is
primarily resulting from lower capital
expenditure and a higher depreciation charge
for the year associated with revalued fleet
assets acquired as part of the LLS acquisition.
●
Intangible assets at 30 June 2024 were $418.1
million compared to $437.0 million at June
2023. This included amortisation of software
assets and customer intangible assets
acquired through business combinations.
Right-of-use assets and lease liabilities recognised
under AASB 16 Leases were $60.7 million (2023:
$50.2 million) and $62.5 million (2023: $53.2
million), respectively. The increase attributed to
property leases as the Group entered into new
leases as part of its continued consolidation of its
premises footprint following the acquisition of LLS
in FY22.
Service Stream Limited FY24 Annual Report
Directors’ Report
12
Overall Group strategy, prospects
and risks
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 is 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.
Risk management
Our approach to risk management
Service Stream’s approach to risk management is
designed to:
●
support the Board, Executive and Senior
Leadership Teams, managers, and all staff to
confidently make informed decisions based
on organisational policy, values, and appetite;
●
assist the business to achieve organisational
objectives through the systematic and timely
identification and management of risks and
the identification and capitalisation of
opportunities;
●
consistently manage the effects of uncertainty
through the application of robust risk
management practices;
●
promote compliance with relevant
obligations; and
●
create and protect value by targeting effort
and resources to the areas of highest priority
and impact.
To achieve our Corporate Vision; to be Australia’s
leading essential network service provider, Service
Stream’s Risk Management philosophy is tied to
the achievement of the Group’s Corporate
Strategy. Service Stream’s overall philosophy for
Risk Management is to:
●
be aware of the risks to which the Group is
exposed through robust identification and
analysis efforts;
●
actively manage the risks we identify by
monitoring, reporting, and implementing
strategies for risks response; and
●
continually learn, develop, and mature our risk
capability and approach.
Our risk management framework
Risk is managed in every part of Service Stream
across all operations and activities. The Board is
ultimately responsible for ensuring the effective
and appropriate management of risks to the
Group and is the key determiner of the Group’s
Risk Appetite. Risk oversight and governance is split
between various Board Committees, with the
Group’s risk management cycle being comprised
of three main activities to drive oversight and
governance as demonstrated below.
Figure 1 – Components of Service Stream’s risk
management cycle
Service Stream Limited FY24 Annual Report
Directors’ Report
13
To acquit the requirements of the risk management cycle, risk forums have been established within the
Service Stream Group to ensure that there are appropriate platforms at all levels of the business to discuss,
monitor, respond to, and manage risk. The model of risk forums within the Group is demonstrated below.
Figure 2 – Risk Forums within the Service Stream Group
Material risks and our approach to managing those risks
The achievement of the Group’s business objectives may be impacted by the following material risks:
Material Risk
Approach to managing risk
Client concentration
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.
●
Expanding the Group’s customer base and creating a
broader portfolio of operations across the wider
infrastructure services market through organic and
acquisition opportunities.
●
Diversification of income streams by developing and offering
a broad range of services and geographic coverage.
Client demand
Many of the Group’s contractual agreements do not
contain volume commitments. Therefore, volumes
may be dependent on the client’s demand
requirements which could change over time and
lead to variability in expected future earnings.
In addition, the potential variability in client demand
presents operational challenges to the Group.
●
Maximising 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.
●
Maintaining a flexible workforce model 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.
Contract management
Acceptance of sub-optimal terms and conditions in
client contracts and the ineffective commercial
administration of client contracts over their term
could reduce future earnings.
●
We have developed and implemented a Commercial
Contract Standards policy that specifies the minimum
acceptable terms for the Group and the approval process for
diverting from those Standards.
●
We have dedicated in-house Corporate Legal and
Commercial functions to assist in the review and negotiation
of client contracts.
●
Contract managers are dedicated on material or complex
client contracts.
●
We have implemented a Commercial Health-Check
Program to assist in embedding sound contract
management disciplines across the Group.
Service Stream Limited FY24 Annual Report
Directors’ Report
14
Material Risk
Approach to managing risk
Weather / Climatic Conditions
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 and El Nino.
Adverse weather event material risks include
physical risks to fixed assets, key sites and locations,
as well as delays and increased costs to completing
work under contract.
●
Group-wide or project specific insurance policies.
●
Negotiated contract positions which enable Service Stream
to recover some of the cost impacts associated with adverse
weather.
●
Limited the Group’s exposure to fixed-price lump sum
contracts.
●
Allowing for appropriate risk contingency in pricing models
and programs.
Inflation
The nature of Service Stream’s operations can be
exposed to inflationary pressures across materials,
labour and other operating costs.
●
Incorporating anticipated inflationary increases into the
prices charged to clients.
●
Incorporating price review and relief mechanisms into client
contracts.
●
Limiting the Group’s exposure to fixed-price lump sum
contracts.
●
Implementing a procurement framework that seeks to
provide greater certainty on material costs.
Retention of key personnel and sourcing of
subcontractors
Attracting and retaining key personnel and the
sourcing of subcontractors presents a risk to Service
Stream’s ability to win work, deliver our contractual
requirements and achieve our objectives.
●
We have a remuneration framework that is structured to
attract, motivate and retain talent and reward employees for
delivering long-term shareholder value. The Remuneration
and Nomination Committee governs the remuneration
framework.
●
Implementation and refinement of Group employee value
proposition initiatives such as incentive arrangements,
remuneration reviews, retention bonuses, and employee
development and talent identification programs.
●
Provide hybrid working arrangements that involve a mix of
working from home, office and site.
●
Roll-out of employee engagement surveys to understand
and address priority issues for our workforce.
●
Capital investments to improve the subcontractor
engagement and onboarding experience, market
competitive payment terms, and market rate reviews assist
with the retention of the Group's growing subcontractor
base.
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. Poor safety performance can result in the loss
of customer contracts and regulatory penalties.
●
We have a dedicated HSE Committee to monitor and
govern the effectiveness of the Group’s safety framework.
●
We have a dedicated Corporate HSE Team, as well as safety
teams embedded within each Business Unit.
●
Investment in safety platforms, training, supervisors,
equipment and programs to increase awareness of
significant hazards and prevent injuries to employees and
subcontractors.
Service Stream Limited FY24 Annual Report
Directors’ Report
15
Material Risk
Approach to managing risk
Business interruption and resilience
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.
Our ability to prepare, manage and recover
operations from a major business disruptive event
could result in diminished financial returns and loss
of value.
●
Dedicating time each year during our planning cycle to
assess and plan for external factors such as digital disruption
or technological changes, which may have a bearing on the
Group’s operations.
●
The development, implementation, testing and review of
Business Continuity Plans for the Group.
●
Monitoring and reviewing the Group’s Business Continuity
Plans and strategic risk registers (including the risk register
for Information Technology) via the Audit & Risk Committee.
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.
A failure to maintain our business-critical systems
and/or the occurrence of a cyber security incident
could result in the loss of a customer contract,
reduce revenue and/or impact Service Stream’s
profitability.
Information technology and defence against cyber security
incidents are managed through the following:
●
Appropriate IT funding and investment to maintain fit-for-
purpose system applications and infrastructure. IT funding
and investment is a core component of the Group’s strategic
plan.
●
Dedicated investment in cyber security capability to protect
both our clients’ and the Company’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 & Risk Committee, and our
managers of key security risks.
●
Dedicated IT security team to manage cyber security risk
and improve controls.
●
The development, implementation and testing of Cyber
Security Incident Response Plans and Ransomware
Playbook.
●
By obtaining and subsequently maintaining ISO 27001
certification, along with a cybersecurity framework of
process controls, which include automated surveillance,
system, network and end-point protection, detect and
respond capability and 24/7 monitoring.
●
Employee cybersecurity education programs, including
phishing awareness and testing campaigns.
New business governance
Poor tender governance processes may lead to
Service Stream securing new contracts on
unfavourable terms and/or rates that could result in
material losses for the business.
●
We have a Business Development Compliance Framework
that is managed by Group Commercial. The Framework
establishes gated processes for new business opportunities,
formalises delegations of authority for those opportunities,
and is linked to the Group’s Commercial Contract Standards.
●
We have three tiers of Tender Investment Committees for
the approval of tender submissions: SIC (chaired by the
Managing Director), EIC (chaired by the relevant Executive
General Manager for the Business Unit), and MIC (chaired by
the relevant General Manager for the Business Unit). The
delegations of authority determine the Committee required
to approve a tender submission.
●
Service Stream has a centralised business development
division to monitor compliance to the Group’s Business
Development Compliance Framework, as well as dedicated
business development teams within each Business Unit to
manage all business opportunities.
Service Stream Limited FY24 Annual Report
Directors’ Report
16
Material Risk
Approach to managing risk
Project Delivery
This covers our ability to execute quality projects on
time and within budget, meet contractual
obligations and customer expectations.
If we fail to manage our contracts or deliver poor
quality work, we may incur additional costs, be
imposed with time based contractual damages,
and/or lose customer contracts, which could have an
adverse effect on Service Stream’s financial
performance.
Project delivery is supported by the following:
●
A project execution framework (PeX) to support Project
Leads through the full life cycle of a project. PeX provides
standardised delivery applications and continuous
improvement for project management.
●
Dedicated project management offices (PMO) within the
Business Units.
●
Project risk deep-dive assessments periodically undertaken
for early detection of project delivery issues.
●
A precedent suite of contract notices, subcontracts and
consultancy agreements to assist in the management of
contractual entitlements and the discharging of delivery
obligations.
Financial disclosures
Inaccurate financial forecasting and related financial
disclosures may adversely affect investor confidence
and our share price. Regulatory and legal action may
also be taken for inaccurate financial disclosures
which may impact profitability.
Financial reporting is supported by the following:
●
Weekly finance meetings between Group Finance and
Business Unit finance teams, as well as regular budgeting
and reforecasting sessions.
●
Monthly continuous disclosure meetings to monitor
compliance to the Company’s continuous disclosure
obligations.
●
Investment in the optimisation of finance systems and
processes to increase transparency, accuracy and timeliness
of financial reporting.
Regulatory Compliance
Service Stream is affected by a range of industry
specific, legal and regulatory controls. Changes in
these types of controls can have an adverse effect of
Service Stream’s financial performance.
●
We have a dedicated Group Legal and Compliance team
that advises the business on its legal, regulatory and
compliance obligations in all jurisdictions within Australia.
●
We seek to negotiate ‘change in law’ mechanisms in our
client contracts to enable us to recover the cost impact of
unexpected legislative changes.
●
We have a formal whistleblower policy and process and
utilise an external platform provider ‘Stopline’ to assist in the
reporting of inappropriate, unethical and corrupt behaviour,
as well as misconduct and any other improper state of
affairs.
Service Stream Limited FY24 Annual Report
Directors’ Report
17
Dividends
Dividends paid or declared 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 2024
Interim 2024
Final 2023
Per share (cents)
2.50
2.00
1.00
Total amount
($ million)
15.39
12.31
6.15
Franked
100%
100%
100%
Payment date
4 October 2024
5 April 2024
5 October 2023
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 matter or circumstance arising in the interval between the end of the financial year
and the date of this consolidated financial report, that in the opinion of the Directors that affect significantly
the operations, 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.
Service Stream Limited FY24 Annual Report
Directors’ Report
18
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
Rights vesting
date
Share grant date
Number of
shares under
rights
FY22 LTI Tranche
Ordinary
$0.00
30 June 2024
September 2024
3,182,182
FY23 LTI Tranche
Ordinary
$0.00
30 June 2025
September 2025
5,502,990
FY24 LTI Tranche
Ordinary
$0.00
30 June 2026
September 2026
5,263,554
13,948,726
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.
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
Term of
Directorship
No. of meetings held
12
5
4
5
No. of meetings attended by
B Gallagher1
12
2*
2#
3*
5#
14 years
E Ward
12
5*
4#
5#
2 years
M Monro
12
5#
4#
5#
1 year
S Wiggins2
12
5#
1*
3#
5*
1 year
L Mackender
12
5*
4*
5#
10 years
P Dempsey3
3
1#
1#
2*
13 years
N Miller4
1
0
1*
0
4 months
*Attended as Standing Invitee. #Attended as a member. 1B Gallagher was appointed member of the Audit and Risk Committee on 16
January 2024. 2S Wiggins was appointed member of the Remuneration and Nomination Committee on 17 October 2023.
3P Dempsey retired on 18 October 2023. 4N Miller retired on 16 January 2024.
Service Stream Limited FY24 Annual Report
Directors’ Report
19
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 of the Company or of any
related body corporate against a liability incurred
as an officer.
The auditors of the Group are not indemnified by
the Group or covered in any way by the above
insurance in respect of the audit.
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 Andrew Cronin
has been the Partner responsible since FY 2023.
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.
Service Stream Limited FY24 Annual Report
Directors’ Report
20
Auditor’s independence declaration
The auditor’s independence declaration is
included on page 46 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.
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.
A description of the Group’s current corporate
governance practices is set out in the Group’s
corporate governance statement which can be
viewed at:
http://www.servicestream.com.au/investors/corpor
ate-governance. The corporate governance
statement is accurate and up to date as at 21
August 2024 and has been approved by the Board.
Sustainability report
Service Stream Limited and the Board recognise
the importance of driving long-term sustainable
practices which support and enhance the
environment, social and economic performance
for both the Group and our wider stakeholders.
The Group’s current sustainability report can be
viewed at:
http://www.servicestream.com.au/investors/corpor
ate-governance.
The Group’s new sustainability report will be
released in October 2024.
Service Stream Limited FY24 Annual Report
Remuneration Report
Service Stream Limited FY24 Annual Report
Remuneration Report
Remuneration Report
Contents
1
Details of Key Management Personnel (KMP)
Page 25
2.
Remuneration Policy, Framework and Governance
Page 26
3.
Linking Remuneration to Company Performance
Page 30
4. Overview of Remuneration Structure
Page 32
5.
Executive KMP Remuneration
Page 39
6.
Non-Executive Director Remuneration
Page 43
Service Stream Limited FY24 Annual Report
Remuneration Report
23
Remuneration Report
21 August 2024
Message from the Chairman of the Remuneration
and Nomination Committee
Dear Shareholders,
On behalf of the Board, I am pleased to present
Service Stream’s FY2024 Remuneration Report
(Report). This letter and the accompanying Report
detail the remuneration outcomes for FY2024, the
remuneration increases for FY2025, and the
outcome of the Board’s review of Service Stream’s
remuneration framework.
The tight labour market that continues within our
industry reinforces that the retention and reward
of our dedicated workforce of over 5,300 people is
critical to the current and ongoing success of the
business. It is therefore front-of-mind for the Board
that our remuneration framework be competitive,
drive positive behaviour and decisions over the
long term, retain talent, support the Group’s
strategy, and appropriately reward our employees
for continued performance. The Board will remain
focused on these issues throughout FY2025.
FY2024 Remuneration Outcomes
In FY2024 the business delivered for our
shareholders a significant increase in our share
price, an increase of 13.2% on underlying EBITDA
from operations, and an adjusted earnings per
share of 8.2 cents. Consistent with our messaging
to the market, a total of 4.5 cents per share fully-
franked dividend has also been declared for
shareholders in FY2024, which is an increase of
200% on FY2023.
The remuneration outcomes for our Executive Key
Management Personnel (KMP) in FY2024 are
summarised below.
●
A short-term incentive (STI) payout of 90% for
the Managing Director and 100% for the CFO.
The underlying EBITDA-A, cash conversion
ratio, and safety metrics were fully achieved
for both individuals.
●
Vesting outcomes of the FY22 long-term
incentive (LTI) scheme are provisional and will
be confirmed following the release of the
Company’s audited FY24 results. The EPS
growth target was achieved, while the relative
TSR metric (above the 75th percentile) is not
presently known.
The Board considers the FY2024 STI outcomes to
be a reflection of outstanding executive
performance and the value delivered for
shareholders in the past financial year. The vesting
of some, or all of the performance rights under the
FY2022 LTI reflects the successful integration of
the Lendlease Services business and demonstrates
the value created in Management taking a longer-
term view of operations and strategy.
For more detail on the remuneration outcomes,
including individual scorecards, please refer to
section 5 of the Report.
FY2025 Remuneration Increases
For FY2025, the Managing Director’s fixed
remuneration will increase by 3.5% (inclusive of the
0.5% superannuation increase), with the CFO’s
remuneration increasing by 12% (inclusive of the
0.5% superannuation increase). The Board was
cognisant of the need to adjust the CFO’s fixed
remuneration to better align Executive salaries
following the acquisition of Lendlease Services and
employment of new Executives.
The Board is satisfied that the Managing Director’s
and CFO’s remuneration have been set fairly, are
appropriate for the complexity of their roles and
the size of the business and are consistent with
external relative benchmarks.
Fees for the Chairman and Non-Executive
Directors are also reviewed annually and
benchmarked against peer companies. For Non-
Executive Directors (NED), the following fee
structure changes have been introduced to ensure
alignment with market practice and appropriate
recognition of committee chair and member roles:
●
Base NED fee increased by 0.5% from $122,283
to $123,000 (inclusive of superannuation).
●
Chairman of the Board base fee increased by
4% from $250,000 to $260,000 (inclusive of
superannuation).
●
RNC and HSEQ chair committee fee reduced
by 12% from $13,451 to $12,000.
●
ARC Chair committee fee increased by 26%
from $13,451 to $17,000.
●
Committee member fee of $7,000 (a NED is
limited to one committee fee) introduced.
Service Stream Limited FY24 Annual Report
Remuneration Report
24
FY2024 Remuneration Framework Changes
Following consultation with stakeholders and
external remuneration consultants, the Board
introduced the following key changes to the
Executive KMP STI and LTI Incentive Plans
effective FY2024:
●
Introduction of a 25% deferral of any awarded
STI for Executive Level Management for a
period of 1 year to allow for any claw back.
●
Adjustments to the sliding scale mechanism
for the STI and LTI plans.
●
STI targets significantly weighted to financial
metrics for KMP (for the Managing Director
60% at a Group level, with a portion of his
individual component (30%) also relating to
financial performance).
●
Introduction of a point-to-point compound
annual growth rate (CAGR) for measuring the
Company’s Adjusted Earnings Per Share (EPS)
performance for the LTI plan.
●
The removal of the single year re-testing
mechanism for the LTI plan (LTI performance
is measured over a 3-year horizon).
For more detail on the remuneration framework,
please refer to section 2 of the Report.
FY2025 Remuneration Framework Changes
At our 2023 Annual General Meeting (AGM), the
Board received further feedback from various
stakeholders on proposed changes to our
remuneration framework to strengthen alignment
with shareholders and market practice. The Board
is cognisant of balancing feedback from
stakeholders on particular design features of our
remuneration framework, against the need for a
framework that retains key talent, drives the right
behaviour and rewards decisions made for the
long-term benefit of the business.
Following a review of our framework, the Board
made the following changes to the Company’s STI
plan for FY2025 which we believe will maintain the
right balance of fixed and ‘at risk’ components of
the Executive KMPs remuneration:
●
Introduction of a 50% deferral of any awarded
STI for KMP to allow for any claw back in the
event it was ever needed.
●
The STI deferral will be active for 2 years, with
half the deferral paid 1 year after the STI award,
the remaining half paid 2 years after the STI
award.
●
The maximum STI % of fixed remuneration
available to KMP will be adjusted to address
the STI plan’s extension to a 3-year term. The
Managing Director’s STI % will be adjusted to
70% of his fixed remuneration and the CFO’s
to 65% of her fixed remuneration.
Following the changes, the Board is of the view
that our remuneration framework meets our
objectives and there will be no need for further
significant changes to the structure or
performance measures of Service Stream’s
incentive plans in the near future.
Personal Comment
Whilst remuneration outcomes can often be
assessed differently through the various lenses of
stakeholders and commentators, it is my strong
view that a Company’s remuneration framework
must be structured in a way that creates and
protects shareholder value. This means that the
framework must be appropriate and competitive,
drive the right behaviours and reward the right
outcomes, attract and retain the right people, and
not be so skewed to any one outcome such that
long-term sustainable value is compromised in
pursuit of short-term gains.
While the Board always remains open to
constructive feedback, we believe that our current
remuneration structure achieves this balance in a
considered and appropriate way. We are pleased
with many of the outcomes achieved for
shareholders in the past 12 months and, likewise,
consider that the outcomes for employees
generated by our current remuneration policy and
framework to be an appropriate contributor to and
reflection of the desired result.
I look forward to engaging with you in FY2025 and
thank you for your ongoing support of Service
Stream.
Martin Monro
Chairman of the Remuneration
and Nomination Committee
Service Stream Limited FY24 Annual Report
Remuneration Report
25
1.
Details of Key Management Personnel (KMP)
We have prepared this report in accordance with section 300A of the Corporations Act 2001 (Cth) and
Accounting Standards. It outlines the remuneration strategy for the financial year ended 30 June 2024 and
gives detailed information on the remuneration framework and arrangements for KMP.
The following tables depict the Personnel of the Group who were classified as KMP for the entire financial year
unless otherwise indicated in accordance with the definition of a KMP under AASB 124.
Table 5 – KMP Group Personnel – Non-Executive
Non-Executive Directors
Brett Gallagher
Chairman
Peter Dempsey 1
Non-Executive Director
Nick Miller 2
Non-Executive Director
Martin Monro
Non-Executive Director
Elizabeth Ward
Non-Executive Director
Sylvia Wiggins
Non-Executive Director
1P Dempsey retired at the conclusion of the 18 October 2023 AGM.
2N Miller commenced on 1 November 2023 and retired on 16 January 2024.
Table 6 – KMP Group Personnel – Executive
Executive Key Management Personnel
Leigh Mackender
CEO & Managing Director
Linda Kow
Chief Financial Officer
Service Stream Limited FY24 Annual Report
Remuneration Report
26
2.
Remuneration Policy, Framework and Governance
2.1
Remuneration Strategy and Objectives
Our Remuneration Strategy
Service Stream’s remuneration framework has been structured to support the Company’s strategy and deliver
value to our shareholders. Our success relies on the ability to attract, motivate and retain talent and
appropriately reward them for decision making that delivers consistent and long-term shareholder value.
Our strategic pillars set out how we will deliver improved, consistent and incremental value to our
shareholders over the long term. Our strategy drives delivery excellence, the enhancement of our delivery
model and profitable growth, while continuing to meet the core expectations of our stakeholders.
Figure 3 – Remuneration Strategy and Objectives
To achieve our remuneration policy objectives the Board will:
●
set measurable performance objectives for
Executive management on an annual basis;
●
undertake an annual salary review based on
performance and market rates;
●
utilise an external evaluation system to review
rates of pay against the market in which the
Company operates; and
●
implement short-term and long-term
incentive plans for relevant employees to
incentivise behaviour and to reward outcomes
that generate shareholder value.
Service Stream Limited FY24 Annual Report
Remuneration Report
27
2.2
KMP Remuneration Framework
Figure 4 – Remuneration Framework
Our remuneration framework for Executive KMP is comprised of the following:
1 Please refer to Section 5 of the Report for more detail on KMP FAR, STI and LTI entitlements.
Service Stream Limited FY24 Annual Report
Remuneration Report
28
2.3
Remuneration Governance
Service Stream’s remuneration framework is governed by the Remuneration and Nomination Committee
(RNC).
The RNC is comprised of three Independent Non-Executive Directors and is responsible for reviewing and
making recommendations to the Board on the remuneration policies and frameworks for the Group, as well
as the remuneration packages for the Non-Executive Directors, KMP and the Executive management team.
Figure 5 – RNC Responsibilities
The RNC’s delegated responsibilities are stipulated in the below diagram.
Service Stream Limited FY24 Annual Report
Remuneration Report
29
2.4 Annual Remuneration Reviews
The RNC reviews the remuneration packages of all
Non-Executive Directors, Executive KMP and
Executive managers 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, retain, and compensate Non-Executive
Directors, Executive KMP and Executive managers,
given the nature of their work and responsibilities.
2.5
External Consultants
The RNC periodically seeks independent advice
from external consultants on various
remuneration-related matters to assist in
performing its duties. During FY24, the RNC has
continued to engage Korn Ferry to provide
remuneration benchmarking data for salaried
roles across the organisation that are consistent
with the markets in which Service Stream
operates. No remuneration recommendations as
defined in Section 9B of the Corporations Act 2001
were provided by Korn Ferry.
2.6
Securities Trading Policy
The Company’s Securities Trading Policy prohibits
employees from dealing in the Company’s
securities while in possession of market sensitive
information relevant to the entity. In addition,
designated persons, including KMP, are prohibited
from dealing in the Company’s securities during
prescribed closed trading periods.
Service Stream Limited FY24 Annual Report
Remuneration Report
30
3.
Linking Remuneration to Company
Performance
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;
●
requiring a ‘Minimum Group Performance
Threshold’ to be met before any STI can be
paid to executive management; linked to
achieving the Group’s EBITDA from
Operations target;
●
tying individual performance goals 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 key
corporate measures, including:
●
Group EBITDA from Operations;
●
EBITDA to Operating Cash Flow Before
Interest and Tax (OCFBIT) conversion;
●
Adjusted earnings per share (EPS)
performance measured using a point-to-point
compounding annual growth rate (CAGR);
●
Total Shareholder Returns (TSR) relative to the
ASX 200 Industrials index; and
●
Health & Safety Performance based on High
Potential Incident Frequency Rate (HPIFR).
Performance across the key corporate measures
for the past 12 months are summarised below and
outlined in detail throughout the report.
Group Performance
for the year 30 June 2024
Revenue (including joint venture)
$2.4 billion
Underlying EBITDA-A
$129.2 million
EPS (statutory)
5.3cps
EPS-A
8.2cps
HPIFR
1.16
Dividends per share
4.5cps
Total FY24 dividend
Service Stream Limited FY24 Annual Report
Remuneration Report
31
3.1
Group Financial Performance
The table below outlines the Group’s performance against key financial and non-financial performance
indicators over the past 5 years.
Table 7 – Key Indicators
Key Indicators
2020
2021
2022
2023
2024
Total Revenue1 ($'000)
929,133
804,163
1,563,767
2,150,782
2,391,801
Underlying EBITDA from Operations1 ($'000)
108,115
80,111
91,114
114,097
129,172
Net profit/(loss) after tax ($'000)
49,315
29,274
(36,324)
4,462
32,298
Statutory Earnings per share (cents)
12.1
7.2
(6.1)
0.7
5.3
Adjusted Earnings per share (cents)
14.5
9.5
5.3
6.0
8.2
Total Dividends per share (cents)
9.0
2.5
1.0
1.5
4.5
Share price 30 June ($)
1.91
0.87
0.88
0.81
1.28
1Total Revenue, underlying EBITDA from Operations and Adjusted Earnings per share are non-IFRS measures that have been derived
from statutory information. Non-operational cost items include acquisition and integration costs associated with the Lendlease
Services transaction (refer note 6(c) to the financial statement).
Figure 6 – Group’s Performance
* The 10 day VWAP after announcement is used for TSR calculation. As a result, FY24 TSR is not available.
$108.1
$80.1
$91.1
$114.1
$129.2
$0.0
$50.0
$100.0
$150.0
2020
2021
2022
2023
2024
Underlying EBITDA from Operations
$'m
80.0%
92.6%
108.3%
81.0%
101.7%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2020
2021
2022
2023
2024
Underlying EBITDA to OCFBIT conversion
12.1
7.2
-6.1
0.7
5.3
-10.0
-5.0
0.0
5.0
10.0
15.0
2020
2021
2022
2023
2024
Statutory EPS
cps
14.5
9.5
5.3
6.0
8.2
0.0
5.0
10.0
15.0
20.0
2020
2021
2022
2023
2024
Adjusted EPS
cps
2.1
1.6
2.8
1.5
1.2
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2020
2021
2022
2023
2024
HPIFR
43%
-34%
-67%
-48%
-100%
-50%
0%
50%
2020
2021
2022
2023
2024
TSR (rolling 3 years)
N/A*
Service Stream Limited FY24 Annual Report
Remuneration Report
32
4.
Overview of Remuneration
Structure
Executive KMP’s total remuneration packages are
comprised of both fixed and variable components:
●
a fixed annual remuneration (inclusive of
superannuation);
●
a variable short-term cash-based incentive
(STI), of which 25% of any award is deferred
into equity for 12-months; and
●
a variable long-term share-based incentive
(LTI), measured over a 3-year horizon.
The total remuneration received by Executive KMP
each year will vary as it is dependent upon the
business’ performance and individual
achievements.
The below graphs depict the fixed and ‘at risk’
components of the Executive KMP’s remuneration.
Figure 7 – Remuneration Mix
Figure 8 – Remuneration Opportunity
Fixed
Remuneration
Short-Term
Incentive
(cash + equity) 1
Long-Term
Incentive
(equity)2
$1,086,750
$543,375
$815,062
Total Remuneration opportunity
$2,445,187
1 Excludes any amount received for exceeding STI target.
Fixed
Remuneration
Short-Term
Incentive
(cash + equity) 1
Long-Term
Incentive
(equity)2
$746,984
$336,143
$448,190
Total Remuneration opportunity
$1,531,317
2 Face value. The actual value of the LTI at the time of any
performance rights vesting cannot be determined at this
time.
45%
22%
33%
49%
22%
29%
0%
20%
40%
60%
Fixed
STI (at risk)
LTI (at risk)
Pay Mix (% of Total Annual Reward)
Managing Director
CFO
%
Service Stream Limited FY24 Annual Report
Remuneration Report
33
Table 8 – Maximum Total Performance Based Remuneration
The below table describes the maximum total performance-based remuneration (as a percentage of total
remuneration) that may be payable to the Executive KMP.
Executive KMP 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
50
60
75
75
135
Chief Financial Officer
45
54
60
60
114
Details of each component of the Managing
Director’s and Chief Financial Officer’s
remuneration packages are outlined below.
4.1
Fixed Remuneration
Fixed remuneration consists of base
compensation and the direct cost of providing
employee benefits including superannuation
contributions and fringe benefits tax.
The Managing Director’s and Chief Financial
Officer’s remuneration are reviewed annually. The
RNC takes into consideration market trends,
external benchmarking, changes in roles and
responsibilities, internal relativities, and broader
employment market environment.
The base salaries for the Managing Director and
CFO in FY24 were:
Table 9 – Base Salaries
Role
FY24 Fixed
Remuneration
% Increase on
prior year
Managing
Director
$1,086,750
3.5%
CFO
$746,984
3.5%
4.2 Short Term Incentive (STI)
4.2.1
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’; that 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 senior management
participants regardless of their individual
performance.
Where 90% or more of the Group’s EBITDA from
Operations target is achieved, the STI is payable
based on Group, Divisional and Individual
performance against measurable targets. For
Senior Management, a stretch opportunity may be
available for the Group and Divisional EBITDA
components only of the STI, should challenging
stretch targets be met or exceeded.
For Executive management, 75% of any STI award
is paid in cash after finalisation of the annual
audited results. The remaining 25% of the STI
award is deferred for 12-months and remunerated
in the form of performance rights.
The Board retains discretion over the payment of
any STI, including whether to pay the performance
rights in cash.
Service Stream Limited FY24 Annual Report
Remuneration Report
34
4.2.2 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 budget 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 from Operations budget.
4.2.3 Individual Performance
Individual performance goals are tied to the
annual objectives of the Group, linked directly to
the overall Group strategy and depending on the
individual, can be categorised into four quadrant
measures of Financial Performance, Market &
Customer, Safety & People and Risk & Governance.
The Performance Quadrants applicable to the
Managing Director for the FY24 STI are outlined in
section 5.
4.2.4 STI Summary Table
The key terms of the FY24 STI, including those applicable to the Managing Director and CFO, are summarised
as follows:
Table 10 – 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 for
senior management before the award of any 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 can be 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
45% of total fixed remuneration for the Chief Financial Officer
Stretch STI Target
Opportunity
The stretch award will commence at 101% of the Group’s EBITDA from
Operations target being met and will increase with 2.5% incremental STI
paid for each 1% in EBITDA delivered up to 120% of the EBITDA from
Operations target.
The stretch is applicable to financial performance only (being Group /
Divisional EBITDA) and will be capped at up to 150% of the applicable
financial targets.
Maximum STI opportunity
60% of total fixed remuneration for the Managing Director
54% of total fixed remuneration for the Chief Financial Officer
Performance period
1 July 2023 to 30 June 2024
Assessment period
August 2024, following the audit of the Group's financial statements.
Service Stream Limited FY24 Annual Report
Remuneration Report
35
Feature
Program detail
Payment form
75% cash based payment, 25% performance rights payment for deferred
component.
Payment timing
September 2024 for the cash payment of 75% of the award. The 25%
deferred performance rights component will vest 12 months after the end
of the performance year, subject to no malus.
Board Discretion
The Board has discretion to adjust STI payments upwards and
downwards including to nil in certain circumstances e.g. where an
executive has acted inappropriately. The Board also retains the discretion
to convert the deferred performance rights component into cash.
The STI also includes a claw-back provision. It operates to provide the
Board with the right, in the event of a claw-back-event, to take any steps
it considers necessary to ensure no unfair benefit has been obtained by
an STI participant.
Eligibility
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.
Termination of employment
On cessation of employment with the Group prior to the end of the
assessment period, there is no STI payable. For the deferred component
of the prior year’s STI, the Board will determine whether the employee is
a good leaver entitling them to the deferred component.
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.
Change in control
If a change of control event occurs, the Board in its absolute discretion
may determine if a cash STI payment will be made.
Service Stream Limited FY24 Annual Report
Remuneration Report
36
4.3 Long-Term Incentive (LTI)
4.3.1 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, the average term of our customer
contracts and Service Stream’s specific industry
dynamics.
The LTI operates within the shareholder approved
Employee Share Ownership Plan (ESOP), which is
overseen by the 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.
Any LTI award will be 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 do not carry rights to
dividends or voting.
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 (VWAP) of
the Group’s shares over 10-days of trading
following the release of full-year results.
4.3.2 LTI Summary
The key terms of the FY24 LTI Tranche, including
those applicable to the Managing Director and
CFO, are summarised as follows:
Table 11 – LTI Summary table
Feature
Program detail
Purpose of long- term
incentive plan
Objective of rewarding Management for delivering outcomes that contribute
to the long-term, sustainable performance and success of the business.
Performance period
1 July 2023 to 30 June 2026
Assessment period
August 2026, following the audit of the Group’s financial statements.
Performance rights share
grant date
September 2026
Payment form
Performance rights
Issue Price
$0.8862 per share, being the volume-weighted average market price (VWAP)
of the Group’s shares over 10-days of trading following the release of the FY23
full-year results.
Target 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 the Chief Financial Officer
Performance conditions
The performance rights granted will each vest where the following vesting
conditions are met:
●
50% of the performance rights granted will vest where the EPS CAGR
over the three financial years ending 30 June 2026 (Performance Period)
meet the growth targets (EPS Target); and
Service Stream Limited FY24 Annual Report
Remuneration Report
37
Feature
Program detail
●
50% of the performance rights granted will vest where the Company’s
Total Shareholder Return (TSR) over the Performance Period is such that
it would rank in the top quartile of a relevant peer group of companies
(being the ASX200 Industrials).
The performance rights are subject to proportional vesting according to the
tables below where the vesting conditions specified above are not fully met.
Earnings Per Share (50% weighting)
The growth performance condition is based on the Company’s EPS CAGR
over the Performance Period. The tranche of performance rights will vest on a
pro-rata basis upon achieving annual EPS CAGR growth of between 5% and
10%.
The performance vesting scale that will apply to the performance rights
which are subject to the EPS Target is outlined in the table below:
EPS CAGR
Percentage of performance rights which qualify
for vesting subject to the EPS conditions
< 5%
0%
5%
50%
Above 5% and less
than 10%
Straight-line vesting (i.e., 10% incremental vesting
for each 1% of EPS CAGR delivered)
10% or more
100%
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, as at the start of
the Performance Period and measured over the Performance Period. 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 comparator companies for the purposes of the TSR is the ASX200
Industrials. The Board considers this the most appropriate comparator group
as it includes Service Stream’s peer competitor companies.
The performance vesting scale that will apply to the performance rights
which are subject to the TSR test is outlined in the table below:
The Company’s
TSR ranking
Percentage of performance rights which
qualify for vesting subject to the TSR
condition
< 50th percentile
0%
50th percentile
50%
Above 50th and below
75th percentile
straight-line vesting (i.e., 2% incremental
vesting for each percentile ranking
achieved)
75th percentile and above
100%
Eligibility
Eligible participants must remain an employee of the Company on 30 June
2026.
Ceasing Executive
Where an executive ceases to be employed by the Company, the Board will
determine if the executive is a good leaver. If the executive is determined to
be a good leaver then the number of the performance rights held by that
executive that have not been exercised will lapse subject to an agreed
formula which takes into consideration the number of months between
cessation of employment and the end of the performance period. Any
performance right that does not lapse remains eligible to vest in accordance
with the performance conditions.
If the executive is not determined to be a good leaver then all performance
rights will lapse.
Service Stream Limited FY24 Annual Report
Remuneration Report
38
Feature
Program detail
Trading
Vested shares may only be traded in accordance with the Company’s
Securities Trading Policy.
Board discretion
The Board has the power to make and vary such arrangements, guidelines
and/or regulations (not being inconsistent with the LTI / LTI Rules) for the
implementation and administration of the LTI, as they may think fit.
The LTI also includes a claw-back provision. It operates to provide the Board
with the right, in the event of a claw-back-event, to take any steps it considers
necessary to ensure no unfair benefit has been obtained by an LTI participant.
Change in control
If there is an event which results in the Change of Control of the Company,
then unless the Board determines otherwise, a Performance Right which has
not lapsed will vest.
Service Stream Limited FY24 Annual Report
Remuneration Report
39
5.
Executive KMP Remuneration
5.1
Fixed Remuneration and Incentive Outcomes
5.1.1
FY24 Remuneration
The below table provides remuneration information prepared in accordance with Australian accounting
standards.
Table 12 – Statutory Remuneration Table
Short-term employee benefits
Post-employment
and Long-term benefits
Share-based
payments
Year
Salary
STI (cash)
Non-monetary
Super
LSL
Termination
benefits
LTI
(Performance
rights)
STI
(Performance
rights)1
Total
Fixed
At Risk
$
$
$
$
$
$
$
$
$
%
%
L Mackender
2024
1,059,351
366,777
-
27,399
31,295
-
650,820
61,130
2,196,772
51%
49%
2023
1,024,708
-
-
25,292
63,827
-
424,658
-
1,538,485
72%
28%
L Kow
2024
719,586
252,107
-
27,399
16,952
-
352,063
42,018
1,410,125
54%
46%
2023
696,432
-
-
25,292
13,853
-
232,884
-
968,461
76%
24%
Total
2024
1,778,937
618,884
-
54,798 48,247
-
1,002,883
103,148 3,606,897
52%
48%
2023
1,721,140
-
50,584 77,680
-
657,542
- 2,506,946
74%
26%
1Represents the 25% STI amount deferred into equity for 12 months, of which 50% is amortised in FY24 and balance in FY25.
Service Stream Limited FY24 Annual Report
Remuneration Report
40
5.1.2
FY24 STI Performance Outcomes
A minimum of 90% or more against the annual Group EBITDA target must be achieved before the award of an
STI under the Group, Divisional or Individual Performance will be considered for KMP.
In FY24, the minimum of 90% against the annual Group EBITDA target was achieved (refer to section 3.1 for
more detail) on Group Performance and accordingly the following STIs were awarded to the Executive KMP.
Table 13 – Managing Director Scorecard
FY2024 Performance
Weighted
payout outcome
Measure
Target1
Weighting
Min
Target
Max
FINANCIAL
Group EBITDA
from Operations
Deliver budget
50%
50%
Group OCFBIT
Conversion
Deliver target
range
10%
10%
DELIVERY
Optimisation
Optimisation
program target
30%
20%
Advanced
Realisation
Savings
program target
Strategic Growth &
Diversification
Organic
growth target#
SAFETY
HPIFR
HPIFR
10%
10%
FY2024 STI SCORECARD OUTCOME
90%
#The organic growth target could not be measured at the date of this Remuneration Report and will be assessed over the course of
FY25.
Table 14 – CFO Scorecard
FY2024 Performance
Weighted
payout outcome
Measure
Target1
Weighting
Min
Target
Max
FINANCIAL
Group EBITDA
from Operations
Deliver budget
50%
50%
Group OCFBIT
Conversion
Deliver target
range
10%
10%
DELIVERY
Optimisation
Optimisation
program target
30%
30%
Consolidation
Consolidation
program target
SAFETY
HPIFR
HPIFR
10%
10%
FY2024 STI SCORECARD OUTCOME
100%
1Specific financial, commercial and operational targets remain commercially sensitive and as such, have not been disclosed.
Service Stream Limited FY24 Annual Report
Remuneration Report
41
5.1.3 LTI Performance Outcomes
The FY22 LTI performance period concluded on 30 June 2024. Table 15 below table summarises the LTI
performance measures. Test outcomes for the FY22 LTI are provisional and will be confirmed following release
of the Company’s audited FY2024 results.
Table 15 – FY22 LTI Performance
KMP Executive(s)
LTI Measure
LTI Performance Outcome
% LTI tranche that vested
L Mackender and L Kow
EPS growth target
Achieved
100%
TSR Ranking relative to
ASX200 Industrials
Not yet formally determined
N/A
The below summarises the LTI performance rights grants balance for the Managing Director and the Chief
Financial Officer at the end of the FY24 financial year, along with the percentage of performance rights that
vested or were forfeited during the financial year for each LTI plan that affects compensation in this or future
reporting periods.
The below summarises the LTI granted and balance for the Managing Director and the Chief Financial Officer
at the end of the FY24 financial year, with percentage of performance rights that vested or amounts that were
forfeited during the year for each grant, that affects compensation in this or future reporting period.
Table 16 – Summary of Grants under LTI
Name
Plan
Balance
as at 1
July 2023
Awarded
but not
vested
Vested
and
exercised
% of
total
vested
Forfeited
Balance
as at 30
June
2024
Fair
value
per
right
Unamortised
value
Number
Number
Number
%
Number
Number
$
$
L Mackender
FY21 LTI
180,940
-
(60,313)
33
(120,627)
-
1.67
-
FY22 LTI
794,792
-
-
-
794,792
0.65
-
FY23 LTI
990,441
-
-
-
-
990,441
0.48
158,470
FY24 LTI
-
919,727
-
-
-
919,727
0.70
429,206
L Kow
FY21 LTI
96,538
-
(32,179)
33
(64,359)
-
1.67
-
FY22 LTI
424,491
-
-
-
424,491
0.65
-
FY23 LTI
544,629
-
-
-
-
544,629
0.50
90,771
FY24 LTI
-
505,745
-
-
-
505,745
0.67
225,899
Service Stream Limited FY24 Annual Report
Remuneration Report
42
5.2
Shareholdings of Managing Director and Chief Financial Officer
The below table sets out the equity holdings in fully paid ordinary shares in Service Stream of the Managing
Director and Chief Financial Officer for the 2024 financial year:
Table 17 – Equity Holdings
Name
Balance at
1 July
Received on vesting of
performance rights
(Disposed) / Acquired
during the year
Balance at
30 June
2024
L Mackender
1,712,601
60,313
1,772,914
L Kow
1,374,610
32,179
(150,000)
1,256,789
5.3
Employment Contracts
The below table identifies the key terms of the employment contracts for the Managing Director and Chief
Financial Officer.
Table 18 – Key Terms
Position
Term
Detail
Managing Director
Term
No fixed end date
Until terminated by either party
Total Fixed
Remuneration
$1,086,750 (inclusive of Superannuation)
Incentives
●
STI: 50% of total fixed remuneration up to a maximum of total
60% of fixed remuneration
●
LTI: 75% of total fixed remuneration
Termination
●
6 months either party (or payment in lieu)
●
Immediate for serious misconduct or breach of contract
●
Statutory requirements only for termination with cause
Chief Financial Officer
Term
No fixed end date
Until terminated by either party
Fixed Remuneration
$746,984 (inclusive of superannuation)
Incentives
●
STI: 45% of total fixed remuneration up to a maximum of total
54% of fixed remuneration
●
LTI: 60% of total fixed remuneration
Termination
●
6 months either party (or payment in lieu)
●
Immediate for serious misconduct or breach of contract
●
Statutory requirements only for termination with cause
Service Stream Limited FY24 Annual Report
Remuneration Report
43
6.
Non-Executive Director Remuneration
The RNC is responsible for reviewing and making recommendations to the Board on the remuneration for the
Non-Executive Directors. Non-Executive Directors are remunerated 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 the Non-Executive Directors is $1,300,000 as approved by
shareholders. Board and Committee fees (inclusive of superannuation where applicable) are included in the
aggregate pool.
Fees are reviewed annually taking into account comparable roles and market data provided by the Board’s
independent remuneration advisor Korn Ferry. Following that review and noting that there had not been any
adjustment to Non-Executive Director fees for 3-years, the following adjustments were made in FY24:
●
The Chairman of the Board’s fee was increased to $250,000 (inclusive of superannuation) (FY23: $201,826);
and
●
The base fee for Non-Executive Directors was increased by 3.5% (inclusive of superannuation).
6.1
FY24 Non-Executive Director Fees
The fees payable to the Non-Executive Directors of Service Stream are summarised in the below table.
Table 19 – Non-Executive Director Fees
Role
Fees
Chairman of the Board
$250,000 per annum (inclusive of superannuation)
Base Fee Non-Executive Director
$122,283 per annum (inclusive of superannuation)
Additional Fee as Chair of a Board Sub-Committee
$13,451 per annum; taking that Director’s total to $135,734
(inclusive of superannuation)
Service Stream Limited FY24 Annual Report
Remuneration Report
44
6.2
FY24 Non-Executive Directors' remuneration
The below table lists the fees by Non-Executive Directors for the 2023 and 2024 financial years that are
measured in accordance with Australian Accounting Standards.
Table 20 – Non-Executive Director Remuneration
Name
Year
Board and
Committee fees
Super
Total
B Gallagher
2024
225,225
24,775
250,000
2023
182,648
19,178
201,826
P Dempsey1
2024
37,249
4,097
41,346
2023
115,859
12,165
128,024
E Ward
2024
122,283
13,451
135,734
2023
114,905
12,065
126,970
M Monro
2024
135,734
-
135,734
2023
91,585
9,616
101,201
S Wiggins
2024
135,734
-
135,734
2023
78,372
-
78,372
N Miller2
2024
26,697
2,937
29,634
2023
-
-
-
D Page3
2024
-
-
-
2023
108,333
-
108,333
G Adock4
2024
-
-
-
2023
39,140
-
39,140
Total
2024
682,992
45,260
728,182
2023
730,842
53,024
783,866
1P Dempsey retired as a Non-Executive Director effective 18 October 2023.
2N Miller was appointed as a Non-Executive Director effective 1 November 2023 and retired 16 January 2024.
3D Page’s remuneration was paid up to the date of her retirement on 30 April 2023.
4G Adcock’s remuneration was paid to Ausadcock Pty Ltd (a company in which Mr Adcock has a beneficial interest) up to the date of
retirement on 19 October 2022.
Service Stream Limited FY24 Annual Report
Remuneration Report
45
6.3
Non-Executive Directors’ Shareholding
The table below sets out the equity holdings in fully paid ordinary shares in Service Stream of the Non-
Executive Directors for the 2024 financial year.
Table 21 – Non-Executive Director Equity Holdings
Name
Balance at
1 July 2023
Received on
vesting of
performance
rights
(Disposed) /
Acquired during
the year
Balance at date
of resignation
Balance at
30 June 2024
B Gallagher
4,000,000
-
(1,609,757)
-
2,390,243
P Dempsey1
1,530,000
-
(330,000)
1,200,000
-
E Ward
80,901
-
19,658
-
100,559
M Monro
40,000
-
35,000
-
75,000
S Wiggins
66,000
-
46,725
-
112,725
N Miller2
-
-
-
-
-
1P Dempsey retired as a Non-Executive Director effective 18 October 2023.
2N Miller was appointed as a Non-Executive Director effective 1 November 2023 and retired 16 January 2024.
6.4 Related Party and Other Transactions
There were no other transactions entered into with KMP and their related parties during FY24.
The Directors’ report is signed in accordance with a resolution of the Directors made pursuant to s.298(2) of
the Corporations Act 2001.
On behalf of the Directors
Brett Gallagher
Chairman
21 August 2024
Leigh Mackender
Managing Director
21 August 2024
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.
Auditor’s Independence Declaration
As lead auditor for the audit of Service Stream Limited for the year ended 30 June 2024, I declare that
to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Service Stream Limited and the entities it controlled during the period.
Andrew Cronin
Melbourne
Partner
PricewaterhouseCoopers
21 August 2024
46
Service Stream Limited FY24 Annual Report
Financial Report – Consolidated statement of profit or loss and other comprehensive income
The accompanying notes to the consolidated financial statements are on pages 51 to 102
47
Consolidated statement of profit or loss and other
comprehensive income
for the financial year ended 30 June
Notes
2024
$'000
2023
Restated^*
$'000
Revenue from continuing operations
Revenue from contracts with customers
3
2,288,793
2,048,658
Other income
4
2,796
4,109
2,291,589
2,052,767
Expenses
Employee salaries and benefits
(636,573)
(587,882)
Subcontractor fees
(1,304,158)
(1,112,672)
Raw materials and consumables used
(131,619)
(164,372)
Depreciation and amortisation
6
(58,461)
(68,050)
Net finance costs
5
(11,396)
(13,605)
Other expenses
(108,601)
(105,625)
Share of profits from investment in joint ventures and
associates
25
6,114
4,662
Profit before tax
46,895
5,223
Income tax expense
7
(14,597)
(761)
Profit for the year
32,298
4,462
Total comprehensive income for the year
32,298
4,462
Profit attributable to the equity holders of the parent
32,298
4,462
Total comprehensive income attributable to equity
holders of the parent
32,298
4,462
Earnings per share
Basic (cents per share)
8
5.25
0.72
Diluted (cents per share)
8
5.14
0.71
^The Group’s presentation of expenses has changed from the prior period. Refer to Note 29(i) for details.
*See note 29(ii) for details regarding the restatement as a result of reclassification of expenses.
Service Stream Limited FY24 Annual Report
Financial Report – Consolidated statement of financial position
The accompanying notes to the consolidated financial statements are on pages 51 to 102
48
Consolidated statement of financial position
at 30 June
Notes
2024
$'000
2023
$'000
ASSETS
Current assets
Cash and cash equivalents
20
62,947
84,267
Trade and other receivables
9
164,714
186,120
Inventories
10
19,485
16,445
Accrued revenue
11
266,621
254,436
Other assets
12
12,547
11,038
Total current assets
526,314
552,306
Non-current assets
Investments accounted for using the equity method
25
10,306
8,567
Property, plant and equipment
13
33,170
43,017
Right-of-use assets
15
60,653
50,189
Intangible assets
14
418,116
437,028
Total non-current assets
522,245
538,801
Total assets
1,048,559
1,091,107
LIABILITIES
Current liabilities
Trade and other payables
16
285,571
301,780
Provisions
17
70,222
72,540
Lease liabilities
15
21,341
19,487
Current tax liabilities
7
4,034
3,096
Total current liabilities
381,168
396,903
Non-current liabilities
Deferred tax liability (net)
7
69,918
69,671
Provisions
17
21,507
6,806
Borrowings
20, 21
54,496
118,612
Lease liabilities
15
41,182
33,757
Total non-current liabilities
187,183
228,846
Total liabilities
568,271
625,749
Net assets
480,288
465,358
EQUITY
Capital and reserves
Contributed equity
18
496,344
499,682
Reserves
(5,582)
(9,988)
Accumulated losses
(10,474)
(24,336)
Total equity
480,288
465,358
Service Stream Limited FY24 Annual Report
Financial Report – Consolidated statement of changes in equity
The accompanying notes to the consolidated financial statements are on pages 51 to 102
49
Consolidated statement of changes in equity
for the financial year ended 30 June
Contributed equity
Employee equity-
settled benefits
reserve
Retained earnings/
(accumulated losses)
Total
$'000
$'000
$'000
$'000
Balance at 1 July 2022
499,682
(12,024)
(19,562)
468,096
Profit for the period
-
-
4,462
4,462
Total comprehensive income for
the period
-
-
4,462
4,462
Equity-settled share-based
payments, inclusive of tax
adjustments
-
2,036
-
2,036
Dividends paid
-
-
(9,236)
(9,236)
Acquisition of treasury shares
-
-
-
-
Issue of treasury shares to
employees
-
-
-
-
Balance at 30 June 2023
499,682
(9,988)
(24,336)
465,358
Profit for the period
-
-
32,298
32,298
Total comprehensive income for
the year
-
-
32,298
32,298
Equity-settled share-based
payments, inclusive of tax
adjustments
-
5,021
-
5,021
Dividends paid
-
-
(18,436)1
(18,436)
Acquisition of treasury shares
(4,131)
-
-
(4,131)
Issue of treasury shares to
employees
793
(615)
-
178
Balance at 30 June 2024
496,344
(5,582)
(10,474)
480,288
1 Dividend paid is net of dividend received from treasury shares held as at 30 June 2024 as disclosed in Note 18 (c).
Service Stream Limited FY24 Annual Report
Financial Report – Consolidated statement of cash flows
The accompanying notes to the consolidated financial statements are on pages 51 to 102
50
Consolidated statement of cash flows
for the financial year ended 30 June
Notes
2024
$'000
2023
$'000
Cash flows from operating activities
Receipts from customers (including GST)
2,523,592
2,194,683
Payments to suppliers and employees (including GST)
(2,409,300)
(2,135,149)
Interest received
2,014
1,822
Interest and facility costs paid
(11,549)
(12,711)
Income taxes (paid)/ refunded
(11,947)
44,466
Dividends from joint venture associates
4,375
1,701
Net cash provided by operating activities
20
97,185
94,812
Cash flows from investing activities
Payments for plant and equipment
(8,557)
(5,286)
Proceeds from the sale of plant and equipment
4,089
3,970
Payments for intangible assets
(1,916)
(2,698)
Payment for businesses (net of cash acquired)
-
(12,896)
Net cash (used in) investing activities
(6,384)
(16,910)
Cash flows from financing activities
Purchase of shares (net of transaction costs)
(4,131)
-
Principal elements of lease payments
(24,554)
(23,064)
Dividends paid
(18,436)
(9,236)
Proceeds from borrowings
50,000
141,324
Repayment of borrowings
(115,000)
(171,336)
Net cash (used in) financing activities
(112,121)
(62,312)
Net (decrease)/increase in cash held
(21,320)
15,590
Cash at the beginning of the year
84,267
68,677
Cash at the end of the year
20
62,947
84,267
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
51
Notes to the consolidated financial statements
Index to Notes
Overview
General information
Page 52
Section A: Business performance
2
Segment information
Page 52
3
Revenue from contracts with
customers
Page 55
4
Other income
Page 56
5
Net finance costs
Page 56
6
Other expense items
Page 57
7
Income tax expense
Page 58
8
Earnings per share
Page 61
Section B: Operating assets & liabilities
9
Trade and other receivables
Page 62
10
Inventories
Page 62
11
Accrued revenue
Page 63
12
Other assets
Page 63
13
Property, plant and equipment
Page 64
14
Intangible assets
Page 65
15
Leases
Page 67
16
Trade and other payables
Page 69
17
Provisions
Page 70
Section C: Capital and financing
18 Contributed equity
Page 71
19 Dividends
Page 72
20 Notes to the consolidated statement
of cash flows
Page 73
21 Financial instruments
Page 75
22 Capital risk management
Page 79
23 Share-based payments
Page 80
Section D: Group structure
24 Subsidiaries
Page 82
25 Joint arrangements
Page 83
26 Deed of cross guarantee
Page 84
27 Related party transactions
Page 86
28 Parent entity information
Page 87
29 Change in presentation of consolidated
statement of profit or loss and other
comprehensive income
Page 88
Section E: Unrecognised items
30 Contingent assets and liabilities
Page 90
31 Events after the reporting period
Page 90
32 Remuneration of auditors
Page 90
Section F: Other
33 Material accounting policies
Page 90
34 Critical accounting judgements and
key sources of estimation uncertainty
Page 102
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
52
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 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.
Utilities
Utilities provides a broad range of operations, maintenance, design and construction
services to gas, water and electricity network owners, industrial asset owners and
other customers in Australia. Service capability includes asset maintenance,
upgrades and replacement, engineering, design and construction of network assets,
meter reading and network assurance, as well as specialist inspection, auditing and
compliance services.
Transport
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. This includes business development expenditure
incurred in the pursuit of new contracts in new segments and markets. The information presented to the
Managing Director does not report on segment assets and liabilities and as such is not presented in this
report.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
53
2
Segment information (continued)
(b)
Segment revenue and results
30 June 2024
Telecommunications
Utilities
Transport
Eliminations/
Unallocated
Total
$'000
$'000
$'000
$'000
$'000
Segment revenue
1,200,215
969,587
119,155
(164)
2,288,793
Other income
-
2,530
107
159
2,796
Share of revenue from
joint ventures
-
-
100,212
-
100,212
Total revenue
(including joint
venture)1
1,200,215
972,117
219,474
(5)
2,391,801
EBITDA from
Operations 2
105,408
24,361
14,329
(24,726)
119,372
30 June 2023
Telecommunications
Utilities
Transport
Eliminations/
Unallocated
Total
$'000
$'000
$'000
$'000
$'000
Segment revenue
970,373
886,164
192,940
(819)
2,048,658
Other income
7
2,264
1,292
546
4,109
Share of revenue from
joint ventures
-
-
98,015
-
98,015
Total revenue
(including joint
venture)1
970,380
888,428
292,247
(273)
2,150,782
EBITDA from
Operations2
85,460
8,284
14,791
(14,578)
93,957
1 This is a non-statutory disclosure as it includes other income and Service Stream's share of revenue from equity accounted joint
ventures.
2 Performance is measured using EBITDA from Operations. Non-operational cost items include acquisition and integration costs
associated with the Lendlease Services transaction (refer note 6(c)).
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
54
2
Segment information (continued)
(b)
Segment revenue and results (continued)
Reconciliation of EBITDA from Operations to net profit after tax
2024
$'000
2023
$'000
EBITDA from Operations
119,372
93,957
Adjustments for joint ventures
(2,620)
(1,998)
Depreciation and amortisation
(58,461)
(68,050)
Non-operational costs (before tax) (refer note 6 (c))
-
(5,081)
Net finance costs
(11,396)
(13,605)
Income tax expense
(14,597)
(761)
Net profit after tax
32,298
4,462
(c)
Information about major customers
In 2024 and 2023, a customer in the Telecommunication segment contributed more than 10% of the Group’s
total revenue. Apart from that, no other customers contributed more than 10% of the Group’s total revenue in
2024 or 2023.
3
Revenue from contracts with customers
(a)
Revenue from contracts with customers
2024
$'000
2023
$'000
Revenue
2,288,793
2,048,658
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
55
3
Revenue from contracts with customers (continued)
(b)
Disaggregation of segment revenue
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 2024
Telecomm-
unications
Utilities
Transport
Other
Total
$'000
$'000
$'000
$'000
$'000
Segment revenue
1,200,215
969,587
119,155
(164)
2,288,793
Intra / Inter-segment
revenue
-
-
-
-
-
Revenue from contracts
with customers
1,200,215
969,587
119,155
(164)
2,288,793
Timing of revenue recognition
At point in time
614,931
530,337
36,586
(164)
1,181,690
Over time
585,284
439,250
82,569
-
1,107,103
Revenue from contracts
with customers
1,200,215
969,587
119,155
(164)
2,288,793
30 June 2023
Telecomm-
unications
Utilities
Transport
Other
Total
$'000
$'000
$'000
$'000
$'000
Segment revenue
970,373
886,164
192,940
1,741
2,051,218
Intra / Inter-segment
revenue
-
-
-
(2,560)
(2,560)
Revenue from contracts
with customers
970,373
886,164
192,940
(819)
2,048,658
Timing of revenue recognition
At point in time
402,744
453,489
17,511
432
874,178
Over time
567,629
432,675
175,429
(1,251)
1,174,482
Revenue from contracts
with customers
970,373
886,164
192,940
(819)
2,048,658
(c)
Assets and liabilities related to contracts with customers
2024
$'000
2023
$'000
Revenue recognised that was included in contract liability balance at the
beginning of the period
71,930
21,491
Revenue (reversed) from performance obligations satisfied in previous periods
(5,286)
(1,800)
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
56
3
Revenue from contracts with customers (continued)
(d)
Significant estimates and judgment
Measure of progress
Judgement is used in selecting an appropriate measure of progress towards completing satisfaction of a
performance obligation. The selected method considers the nature of the good or service that the Group has
promised to transfer to the customer and will be consistently applied to similar performance obligations
throughout the contract.
State of completion
In assessing the stage of completion using percentage of cost to complete, significant judgement may be
required to estimate total contract costs to complete. In making these estimates, management has relied on
internal and external subject matter experts and also on past experience of completed projects to determine
the progress of completion for projects.
Variation and valued claim
A variation or valued claim is a contract modification involving amendment of a contract with the consent of
all parties, where the Group has an enforceable right to payment. Revenue in relation to variation claims is
only included in the transaction price when the amount claimable is highly probable. Management uses
judgement in determining whether an approved enforceable right exists.
Variable considerations
Management estimates the amount of variable consideration based on either the ‘expected value’ or the
‘most likely amount’. The estimate of variable consideration is only recognised to the extent it is highly
probable that a significant revenue reversal will not occur in the future.
Changes in these estimates or judgements could have a material impact on the financial statements of the
Group.
4
Other income
2024
$'000
2023
$'000
Gain on disposal of assets
17
1,248
Other
2,779
2,861
2,796
4,109
5 Net finance costs
2024
$'000
2023
$'000
Interest income
(2,014)
(1,822)
Interest expense: leases
2,736
2,332
Interest expense: borrowings
9,639
12,364
Facility establishment costs
1,035
731
11,396
13,605
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
57
6
Other expense items
(a)
Depreciation and amortisation expense
Notes
2024
$'000
2023
$'000
Depreciation of plant and equipment
13
14,264
19,196
Depreciation of right-of-use assets
15
23,369
21,180
Amortisation of software
14
5,142
5,919
Amortisation of customer contracts / relationships
14
15,686
15,411
Write-off of software assets
-
6,344
58,461
68,050
(b) Employee benefit expense
2024
$'000
2023
$'000
Superannuation expense
46,651
43,799
Equity-settled share-based payments
3,540
1,470
50,191
45,269
(c) Non-operational expenses
2024
$'000
2023
$'000
Individual non-operational items included in profit / loss before income tax
Acquisition and integration costs1
-
5,081
Non-operational cost excluded from EBITDA from Operations
Write-off of software assets and other expense2
-
6,594
Total non-operational costs (before tax)
-
11,675
Tax on non-operational costs
-
(4,254)
Non-operational costs after tax
-
7,421
1 Cost associated with the acquisition and integration of Lendlease Services Pty Ltd.
2 Mainly relates to write-off of software assets decommissioned during integration of the business.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
58
7
Income tax expense
(a)
Income tax recognised in profit or loss
2024
$'000
2023
$'000
Tax expense comprises:
Current tax expense
18,932
6,248
Under/ (Over) provision in prior years
93
(638)
Deferred tax expense
(4,428)
(4,849)
Income tax expense
14,597
761
(b)
Reconciliation of income tax expense to tax payable
2024
$'000
2023
$'000
Profit before income tax
46,895
5,223
Tax at the Australian tax rate of 30%
14,068
1,567
Tax effect of amounts which are not deductible / (taxable) in calculating taxable
income
Other non-deductible expenses
2,778
776
Franking credits on dividends received
(1,313)
(510)
Current year deferred tax revaluations against tax expense
(1,029)
(434)
(Under) / Over provision in prior years
93
(638)
Income tax expense as per consolidated statement of profit or loss and other
comprehensive income
14,597
761
(Under) / Over provision in prior years
(93)
638
Movement through deferred tax (note: 7c)
4,428
4,849
Tax payable
18,932
6,248
Less current year tax instalments paid during the year
(8,938)
(3,152)
Less outstanding refund relating to the prior year
(5,960)
-
Net income tax payable
4,034
3,096
Effective tax rate
31%
15%
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
59
7
Income tax expense (continued)
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate
entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when
compared with the previous reporting period.
(c)
Deferred tax balances
Deferred tax balances arise from the following:
Opening
balance
Timing
difference
related to
prior
periods1
DTL (Net)
Acquired
through
Acquisition
Charged
to Income
Charged
to equity
Closing
balance
2024
$'000
$'000
$'000
$'000
$'000
$'000
Temporary differences
Trade and other receivables
144
-
-
77
-
221
Accrued revenue
(65,099)
-
-
(2,892)
-
(67,991)
Trade, other payables and
provisions
6,692
-
-
2,419
-
9,111
Share issue costs
2,005
-
-
(741)
-
1,264
Tax Losses
6,788
(3,750)
-
(2,400)
-
638
Employee benefits
18,711
-
-
4,552
1,466
24,729
Plant and equipment
(16)
(2,020)
-
579
-
(1,457)
Customer contracts /
relationships
(37,052)
(230)
-
4,663
-
(32,619)
Right of use assets
(15,057)
-
-
(3,139)
-
(18,196)
Lease liabilities
15,973
-
-
2,784
-
18,757
Other
(2,760)
(141)
-
(1,474)
-
(4,375)
(69,671)
(6,141)
-
4,428
1,466
(69,918)
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
60
7
Income tax expense (continued)
(c)
Deferred tax balances (continued)
Opening
balance
Timing
difference
related to
prior periods
1
DTL (Net)
Acquired
through
Acquisition
Charged
to Income
Charged
to equity
Closing
balance
2023
$'000
$'000
$'000
$'000
$'000
$'000
Temporary differences
Trade and other receivables
268
-
-
(124)
-
144
Accrued revenue
(61,879)
(11,784)
(516)
9,080
-
(65,099)
Trade, other payables and
provisions
9,291
1,444
(704)
(3,339)
-
6,692
Share issue costs
1,768
862
0
(625)
-
2,005
Tax Losses
38,585
(27,895)
0
(3,900)
-
6,790
Employee benefits
18,737
(352)
263
(238)
302
18,712
Plant and equipment
64
(171)
(712)
803
-
(16)
Customer contracts /
relationships
(46,194)
285
4,290
4,566
-
(37,053)
Right of use assets
(15,759)
-
-
702
-
(15,057)
Lease liabilities
17,238
(89)
89
(1,265)
-
15,973
Other
(372)
(1,394)
(185)
(811)
-
(2,762)
(38,253)
(39,094)
2,525
4,849
302
(69,671)
1 The 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 Consolidated
statement of financial position as a net deferred tax liability.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
61
7
Income tax expense (continued)
(d)
Tax consolidation
Tax consolidation of 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 the head entity in the tax consolidation group).
Nature of tax funding arrangements and tax sharing agreements
Entities 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 and diluted earnings per share
2024
Cents per
share
2023
Cents per
share
Basic earnings per share:
Total basic earnings per share
5.25
0.72
Diluted earnings per share:
Total diluted earnings per share
5.14
0.71
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per
share are as follows:
2024
$'000
2023
$'000
Profit for the year attributable to owners of the Company
32,298
4,462
Earnings used in the calculation of basic EPS
32,298
4,462
2024
'000
2023
$'000
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
614,909
615,953
Shares deemed to be issued for no consideration in respect of employee share schemes
13,949
9,328
Weighted average number of ordinary shares for the purposes of diluted
earnings per share
628,858
625,281
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
62
9
Trade and other receivables
Trade
receivables
Expected
credit loss
Total
Trade
receivables
Expected
credit loss
Total
2024
$'000
2024
$'000
2024
$'000
2023
$'000
2023
$'000
2023
$'000
Current
128,539
(38)
128,501
142,813
(76)
142,737
1 Month
25,147
(29)
25,118
32,477
(74)
32,403
2 Months
2,741
(15)
2,726
4,304
(74)
4,230
3 Months
1,818
(22)
1,796
3,386
(183)
3,203
Over 3 months
6,455
(634)
5,821
3,054
(74)
2,980
164,700
(738)
163,962
186,034
(481)
185,553
Other receivables
752
567
164,714
186,120
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 assets. Trade receivables are recognised initially at the amount of consideration
that is unconditional, unless they contain significant 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 provided at note 21(c).
10
Inventories
2024
$'000
2023
$'000
Inventories
19,485
16,445
Inventories recognised as an expense during the year ended 30 June 2024 amounted to $131,619,000 (2023:
$159,217,000). 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 $467,294 (2023: nil). These were recognised as
an expense during the year ended 30 June 2024 and included in raw materials and consumables in the
consolidated statement of profit and loss and other comprehensive income.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
63
11
Accrued revenue
2024
$'000
2023
$'000
Accrued revenue
266,621
254,436
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 that is 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(e) 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 has 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 is not disclosed further
as having an original expected duration of one year or less.
12
Other assets
2024
$'000
2023
$'000
Prepayments
10,067
10,024
Other assets
2,480
1,014
12,547
11,038
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
64
13
Property, plant and equipment
Land
Leasehold
improvements
Plant and
equipment
Motor
vehicles
Total
$'000
$'000
$'000
$'000
$'000
Year Ended 30 June 2023
Opening net book value
2,150
588
45,761
11,144
59,643
Additions
-
770
4,501
15
5,286
Disposals1
-
-
(2,642)
(74)
(2,716)
Depreciation charge
-
(300)
(13,405)
(5,491)
(19,196)
Closing net book value
2,150
1,058
34,215
5,594
43,017
At 30 June 2023
Cost
2,150
10,705
73,369
13,739
99,963
Accumulated depreciation
-
(9,647)
(39,154)
(8,145)
(56,946)
Net book value
2,150
1,058
34,215
5,594
43,017
Year Ended 30 June 2024
Opening net book value
2,150
1,058
34,215
5,594
43,017
Additions
-
977
6,002
1,578
8,557
Disposals1
-
-
(3,684)
(456)
(4,140)
Depreciation charge
-
(190)
(10,515)
(3,559)
(14,264)
Closing net book value
2,150
1,845
26,018
3,157
33,170
At 30 June 2024
Cost
2,150
11,682
72,194
9,849
95,875
Accumulated depreciation
-
(9,838)
(46,176)
(6,691)
(62,705)
Net book value
2,150
1,844
26,018
3,158
33,170
1Disposals are net of accumulated depreciation.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
65
14
Intangible assets
Software
Customer
contracts and
relationships
Goodwill
Total
$'000
$'000
$'000
$'000
Year Ended 30 June 2023
Opening net book value
23,511
145,778
282,440
451,729
Additions
2,698
-
-
2,698
Asset written off
(6,443)
-
-
(6,443)
Amortisation charge
(5,919)
(15,411)
-
(21,330)
Net acquired through finalisation of
business combination
-
(6,097)
16,471
10,374
Closing net book value
13,847
124,270
298,911
437,028
At 30 June 2023
Cost
59,537
183,371
298,911
541,819
Accumulated amortisation &
impairment
(45,690)
(59,101)
-
(104,791)
Net book value
13,847
124,270
298,911
437,028
Year Ended 30 June 2024
Opening net book value
13,847
124,270
298,911
437,028
Additions
1,916
-
-
1,916
Amortisation charge
(5,142)
(15,686)
-
(20,828)
Closing net book value
10,621
108,584
298,911
418,116
At 30 June 2024
Cost
61,472
183,371
298,911
543,754
Accumulated amortisation &
impairment
(50,851)
(74,787)
-
(125,638)
Net book value
10,621
108,584
298,911
418,116
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
66
14
Intangible assets (continued)
(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 CGUs and recognition of impairment charges in future periods.
Goodwill is monitored at the level of operating segments as identified in Note 2.
A summary of the goodwill allocation are as follows:
2024
$'000
2023
$'000
Telecommunication
159,665
159,665
Utilities
129,947
129,947
Transport
9,299
9,299
298,911
298,911
(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 all CGUs 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 33 (o)) for further
details on fair value measurements).
The cash flows are based on the Board approved budget covering a one-year period together with
management prepared cash flows through to FY2029 with a terminal growth rate applied thereafter.
Management's determination of cash flow projections is 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:
CGU
Telecommunication
Utilities
Transport
Terminal growth rate
2.5%
2.5%
2.5%
Pre-tax discount rate
14.0%
13.7%
13.5%
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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
67
14
Intangible assets (continued)
(b)
Key assumptions used the calculation of recoverable amount (continued)
Impact of possible changes in key assumptions
For the Utilities CGU, there is limited headroom between its recoverable amount and carrying value. The CGU
achieved strong FY24 revenue growth through new contract wins and organic growth opportunities; despite
cycling off discontinued operations and large D&C project works which negatively impacted earnings. The
business has successfully repositioned itself strategically from the prior year with a strong recovery in earnings
expected in FY25. However, the reasonably possible change of 80 bps in the discount rate or a 3% reduction in
operational earnings for the forecast period (including terminal year) would result in the carrying value of the
CGU to equal its recoverable amount.
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 statement of financial position
The consolidated statement of financial position shows the following amounts relating to leases:
2024
$'000
2023
$'000
Properties
23,231
15,012
Motor vehicles
31,865
29,964
Equipment
5,557
5,213
Total right-of-use assets
60,653
50,189
Current lease liabilities
21,341
19,487
Non-current lease liabilities
41,182
33,757
Total lease liabilities
62,523
53,244
The Group's weighted average incremental borrowing rate applied to the lease liabilities as at 30 June 2024
was 5.55% (2023: 4.17%).
Additions and remeasurements to the right-of-use assets during the 2024 financial year were $33.7 million
(2023: $18.8 million).
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
68
15
Leases (continued)
(b)
Amount recognised in the consolidated statement of profit or loss and other
comprehensive income
The consolidated statement of profit and loss and other comprehensive income shows the following amounts
relating to leases:
2024
$'000
2023
$'000
Depreciation of right-of-use assets
Properties
10,055
9,275
Motor vehicles
11,718
10,274
Equipment
1,596
1,631
23,369
21,180
Interest expense (included in interest expense and other finance costs)
2,909
2,332
Expense relating to short-term leases (included in the occupancy and motor
vehicle expenses)
3,524
3,233
Income from sub-leasing of right-of-use assets
-
380
The total cash outflow for leases in 2024 was $27.2 million (2023: $25.1 million).
(c)
The Group's leasing activities and how these are accounted for:
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 or 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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
69
15
Leases (continued)
(c)
The Group's leasing activities and how these are accounted for (continued):
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 $44,128,000 (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
2024
$'000
2023
$'000
Trade creditors
45,985
74,996
Sundry creditors and accruals
141,827
120,096
Goods and services tax payable
8,754
11,601
Income in advance
89,005
95,087
285,571
301,780
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 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 duration of one
year or less.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
70
17
Provisions
2024
$'000
2023
$'000
Current
Employee benefits 1
51,705
49,157
Provision for contractual obligations 2
9,441
13,608
Provision for onerous contracts 3
4,536
6,929
Other provisions 4
4,540
2,846
70,222
72,540
Non-current
Provision for contractual obligations 2
14,175
-
Employee benefits 1
7,332
6,806
21,507
6,806
Total provisions
91,729
79,346
1 The provision for employee benefits represents annual leave, sick leave, rostered day-off and long service leave entitlements.
2 The provision for contractual obligations represents the present value of estimated future outflows that may be required under the
Group's obligations for warranties, rectification and rework with its various customers.
3 The provision for onerous contracts represents best estimation on loss-making projects where that cost is expected to exceed
total revenue.
4 Other provisions include make good provisions on premises, and other 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 required to be 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
Contractual
obligations
Onerous
contracts
Other
provisions
$'000
$'000
$'000
Balance at 1 July 2022
3,594
7,202
2,007
Additional provisions recognised
10,373
30,761
2,525
Unused amounts reversed
(357)
(472)
(790)
Amounts used during the year
(2)
(30,562)
(896)
Balance at 30 June 2023
13,608
6,929
2,846
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
71
17
Provisions (continued)
(a)
Movement in provisions (continued)
Contractual
obligations
Onerous
contracts
Other
provisions
$'000
$'000
$'000
Balance at 1 July 2023
13,608
6,929
2,846
Additional provisions recognised
15,134
16,479
3,055
Unused amounts reversed
(3,528)
(989)
(1,210)
Amounts used during the year
(1,598)
(17,883)
(151)
Balance at 30 June 2024
23,616
4,536
4,540
(b)
Significant estimates
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.
18
Contributed equity
Number of shares
Share capital
2024
'000
2023
'000
2024
$'000
2023
$'000
Fully paid ordinary shares
612,825
615,953
496,344
499,682
612,825
615,953
496,344
499,682
(a)
Fully paid ordinary shares
Number of
shares
Share
capital
'000
$'000
Balance at 30 June 2023 / 1 July 2023
615,953
499,682
Treasury shares purchased
(3,901)
(4,131)
Share issued under employee share scheme
773
793
Balance at 30 June 2024
612,825
496,344
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
72
18
Contributed equity (continued)
(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.
Number of
shares
Share
capital
'000
$'000
Balance at 1 July 2022
-
-
Balance at 30 June 2023
-
-
Acquisition of treasury shares (average prices; $0.933 per share)
1,000
933
Acquisition of treasury shares (average prices; $1.051 per share)
1,901
1,997
Acquisition of treasury shares (average prices; $1.201 per share)
1,000
1,201
Share issued under employee share scheme
(773)
(793)
Balance at 30 June 2024
3,128
3,338
19
Dividends
2024
2023
Cents per
share
Total
Amount
$’000
Cents per
share
Total
Amount
$’000
Prior year final
1.00
6,160
1.00
6,160
Current year interim
2.00
12,319
0.50
3,076
3.00
18,479
1.50
9,236
A final dividend of 2.5 cents per share has been declared by the Board for the year ended 30 June 2024 (2023:
1.0 cent). The amount will be paid on 4 October 2024 and, as it was declared subsequent to 30 June 2024, no
provision has been made as at 30 June 2024.
Company
2024
$'000
2023
$'000
Franking credits available for subsequent reporting periods based on a tax rate of 30%
(2023: 30%)
12,805
5,279
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. The balance excludes the impact on franking credits associated with
the final dividends declared at year-end.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
73
20
Notes to the consolidated statement of cash flows
(a)
Reconciliation of cash and cash equivalents
2024
$'000
2023
$'000
Cash and cash equivalents
62,947
84,267
Balance per consolidated statement of cash flows
62,947
84,267
(b)
Reconciliation of profit for the year to net cash flows from operating activities
2024
$'000
2023
$'000
Profit for the year
32,298
4,462
Gain on sale of disposal of non-current assets
(17)
(1,248)
Depreciation and amortisation
58,461
68,050
Equity-settled share-based payments expense
4,390
2,051
Increase in tax balances & other tax adjustments
1,186
42,403
Movement in working capital:
Decrease / (Increase) in trade and other receivables
21,405
(81,124)
(Increase) / Decrease in accrued income
(12,185)
19,405
(Increase) in other assets
(1,508)
(1,046)
(Increase) in inventories
(3,040)
(1,707)
(Decrease) / Increase in trade and other payables
(16,188)
33,687
Increase in provisions
12,383
9,879
Net cash provided by operating activities
97,185
94,812
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
74
20
Notes to the consolidated statement of cash flows (continued)
(c)
Liabilities from financing activities
$'000
Borrowings
Lease
liabilities
Balance as at 30 June 2022
148,907
57,460
Additions
-
18,848
Financing cash flows
(30,012)
(23,064)
Interest expense
13,063
2,332
Interest payments
(10,379)
(2,332)
Balance as at 30 June 20231
121,579
53,244
$'000
Borrowings
Lease
liabilities
Balance as at 30 June 2023
121,579
53,244
Additions
-
27,993
Remeasurements
-
5,841
Financing cash flows
(65,000)
(24,554)
Interest expense
7,676
2,736
Interest payments
(8,813)
(2,736)
Balance as at 30 June 20241
55,442
62,524
1 Bank borrowings as at 30 June 2024 consist of borrowing of $55.0 million (2023: $118.6 million) and accrued interest of $0.9mil (2023:
$2.9 million), which is classified as trade and other payables.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
75
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 2024 the Group's sensitivity to interest rate risk would be equivalent to a $85,000 per
annum favourable impact to profit before tax (2023: $343,000 unfavourable).
(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 does not recognise revenue until it is considered to be highly probable. Historically the Group has
had a high level of recoverability of accrued revenue.
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.
When applying the impairment requirement of AASB 9 to accrued revenue, the Group recognises that the
ageing of accrued revenue is not indicative of 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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
76
21
Financial instruments (continued)
(c)
Credit risk management (continued)
On that basis, the loss allowance as at 30 June was determined as follows.
Current
0-30
days
31-60
days
61-90
days
91 days
+
Total
$'000
$'000
$'000
$'000
$'000
$'000
2024
Expected loss rate
0.03%
0.11%
0.55%
1.23%
9.83%
Gross carrying amount - trade
receivables
128,539
25,147
2,741
1,818
6,455
164,700
Loss allowance
38
29
15
22
634
738
Current
0-30
days
31-60
days
61-90
days
91 days
+
Total
$'000
$'000
$'000
$'000
$'000
$'000
2023
Expected loss rate
0.05%
0.23%
1.73%
5.40%
2.42%
Gross carrying amount - trade
receivables
142,813
32,477
4,304
3,386
3,054
186,034
Loss allowance
76
74
74
183
74
481
The loss allowances for trade receivables at 30 June 2024 reconciles to the opening loss allowances as follows:
2024
2023
$'000
$'000
Opening balance
481
896
Additional provision recognised
300
-
Unused amount reversed
(43)
(415)
Closing balance
738
481
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
77
21
Financial instruments (continued)
(d)
Liquidity risk management
Management of the Group's liquidity risk exposure is undertaken daily by the Group's treasury and finance
functions via monitoring of the Group's actual cash flows and regularly updated forecasts 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 2024.
(i)
Liquidity and interest rate risk tables
The following table details the Group's maturity profile for financial liabilities.
The amount disclosed in the table represents the undiscounted cash flows of financial liabilities based on the
earliest date on which the Group is contracted to repay principal. Where applicable, 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
2024 Financial liabilities
Lease liabilities
5.55%
(62,523)
(68,794)
(13,540)
(10,443)
(17,922)
(23,719)
(3,170)
Borrowings1
5.62%
(54,496)
(59,363)
(1,559)
(1,534)
(56,270)
-
-
Trade and
other payables
(285,571)
(285,571)
(285,571)
-
-
-
-
(402,590)
(413,278)
(300,670)
(11,977)
(74,192)
(23,719)
(3,170)
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
78
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
2023 Financial liabilities
Lease liabilities
4.17%
(53,244)
(57,498)
(11,505)
(9,759)
(14,223)
(18,955)
(3,057)
Borrowings1
4.84%
(118,612)
(133,964)
(2,930)
(2,882)
(5,764)
(122,388)
-
Trade and
other payables
N/A
(301,780)
(301,780)
(301,780)
-
-
-
-
(473,637)
(493,242)
(316,215)
(12,641)
(19,987)
(141,343)
(3,057)
1Borrowings maturity has been updated to reflect the underlying facility expiry.
(ii)
Financing facilities
2024
2023
$'000
$'000
Bank guarantee
115,245
113,355
Surety bonds
19,471
21,835
Borrowings
55,000
120,000
Amount used
189,716
255,190
As at 30 June 2024, the Group had undrawn committed loan facilities of $230.3 million (FY23: 161.6 million)
across bank guarantees, surety bonds, borrowings and bank overdraft, of which the overdraft facility had $25
million available. The revolving credit facilities are due to expire in November 2025 and have a variable interest
rate.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
79
21
Financial instruments (continued)
(e)
Categories of financial instruments
2024
$'000
2023
$'000
Financial assets at amortised cost
Cash and cash equivalents
62,947
84,267
Accrued revenue
266,621
254,436
Trade and other receivables
164,714
186,120
494,282
524,823
2024
$'000
2023
$'000
Financial liabilities at amortised cost
Lease liabilities
62,523
53,244
Borrowings
54,496
118,612
Trade and other payables
285,571
301,780
402,590
473,636
The Group considers that the carrying amounts of financial assets and liabilities recognised at amortised
cost in the financial statements approximates their fair value.
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 the mix of
capital.
The Group is subject to various financial 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 all of the financial covenants of its borrowing
facilities during the financial year ended 30 June 2024, and there are no indications that the entity may have
difficulties complying with the covenants when they will be next tested at the 30 June 2025 interim reporting
date.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
80
23
Share-based payments
(a)
Long-Term Incentive (LTI) Plan
Recognition and measurement
The Group operates equity incentive plans which provide equity instrument to certain executives as a
component of their remuneration. Any LTI award will be 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 right, and the performance rights do not carry rights to dividend or voting.
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 (TFR), and the volume-
weighted average market price (VWAP) of the Group's shares over 10-days of trading following the release of
full-year results. Refer to the Remuneration Report for further details of the LTI plan.
The amount recognised as expense over the vesting period is adjusted to reflect management's estimate of
actual number of performance rights that are likely to vest except where forfeiture is due to failure to achieve
market-based performance indicators.
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
Rights
vesting date
Share grant
date
Performance
period
FY22
3,182,182
29 October 2021
TSR - 55.2 cps
EPS - 74.7 cps
June 2024
September
2024
1 July 2021 -
30 June 2024
FY23
4,512,548
17 November 2022
TSR - 34.90 cps
EPS - 64.93 cps
June 2025
September
2025
1 July 2022 -
30 June 2025
FY23 -
MD
990,441
19 October 2022
TSR - 33.50 cps
EPS - 61.77 cps
June 2025
September
2025
1 July 2022 -
30 June 2025
FY24
4,343,827
24 November 2023
TSR - 54.54 cps
EPS - 79.24 cps
June 2026
September
2026
1 July 2023 -
30 June 2026
FY24 -
MD
919,727
18 October 2023
TSR - 58.30 cps
EPS - 81.90 cps
June 2026
September
2026
1 July 2023 –
30 June 2026
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
81
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:
2024
2023
Number of
rights
Grant date
weighted avg FV
$
Number of
rights
Grant date
weighted avg FV
$
Balance at start of the financial year
9,858,921
0.642
5,177,639
1.047
Granted during the year
5,346,354
0.675
6,155,835
0.497
Vested during the year
(240,199)
-
-
-
Forfeited during the year
(1,016,351)
1.129
(1,474,553)
1.456
Balance at end of the financial year
13,948,725
0.630
9,858,921
0.642
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.
Fair value of performance rights
The FY24 LTI performance rights with the relative TSR hurdle vesting condition have been valued by an
independent expert using a Monte-Carlo simulation. The FY24 LTI performance rights with the Adjusted EPS
hurdle vesting condition have been valued using a Binominal tree methodology. Both valuation
methodologies are underpinned by a 'risk-neutral' probability framework with key inputs as outlined below.
Tranche
Share price
at grant
date
Expected
life
Volatility 1
Risk-free
interest
rate
Dividend
yield
Rights
vesting date
Share grant date
FY22
$0.88
2.67 years
40%
1.07%
4.96%
June 2024
September 2024
FY23
$0.74
2.67 years
40%
3.19%
4.99%
June 2025
September 2025
FY23 – MD
$0.71
2.70 years
40%
3.46%
5.16%
June 2025
September 2025
FY24
$0.88
2.60 years
40%
4.15%
4.03%
June 2026
September 2026
FY24 - MD
$0.91
2.70 years
40%
4.13%
3.90%
June 2026
September 2026
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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
82
24
Subsidiaries
Details of the Company's subsidiaries at 30 June 2024 are as follows:
Ownership interest
Name of entity
Country of
incorporation
2024
%
2023
%
Parent entity
Service Stream Limited
Australia
Subsidiaries
Service Stream Holdings Pty Ltd (i)
Australia
100
100
Service Stream Fixed Communications Pty Ltd (i)
Australia
100
100
Service Stream Mobile Communications Pty Ltd (i)
Australia
100
100
Service Stream Customer Care Pty Ltd (i)
Australia
100
100
Radhaz Consulting Pty Limited (i)
Australia
100
100
Service Stream Infrastructure Services Pty Ltd (i)
Australia
100
100
Service Stream Energy & Water Pty Ltd (i)
Australia
100
100
Service Stream Nominees Pty Ltd (i)
Australia
100
100
Service Stream Property Pty Ltd (i) (ii)
Australia
100
100
TechSafe Australia Pty. Ltd. (i)
Australia
100
100
TechSafe Management Pty Ltd (i)
Australia
100
100
Ayrab Pty. Ltd. (i)
Australia
100
100
Service Stream Utilities Pty Ltd (i)
Australia
100
100
Comdain Civil Constructions Pty Ltd (i)
Australia
100
100
Comdain Civil Constructions (QLD) Pty. Ltd. (i)
Australia
100
100
Comdain Services Pty Ltd (i)
Australia
100
100
Comdain Asset Management Pty Ltd (i)
Australia
100
100
Comdain Gas (Aust) Pty Ltd (i)
Australia
100
100
Comdain Services (AMS) Pty Ltd (i)
Australia
100
100
Comdain Corporate Pty Ltd (i)
Australia
100
100
Comdain Assets Pty Ltd (i)
Australia
100
100
Service Stream Maintenance Pty Ltd (i)
Australia
100
100
Westlink (Services) Pty Limited
Australia
100
100
EnerSafe Pty Ltd
Australia
100
100
(i)
These 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 audited financial reports and Directors' report.
(ii)
Subsequent to year end Service Stream Operations Pty Ltd changed its name to Service Stream Property
Pty Ltd on 10 July 2024.
Service Stream Limited FY24 Annual Report
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83
25
Joint arrangements
(a)
Joint Operations
Recognition and measurement
In accordance with AASB 11 Joint Arrangements, the group recognises its direct right to the jointly held assets,
liabilities, revenues and expenses of its joint operations as described in note 33(b).
Principal activity
Principal place of
business
Ownership interest
June
2024
June
2023
Delivering for Customer (D4C)
Sydney Water design,
construction, maintenance and
management services
Australia
60.0%
60.0%
The Intelligent Freeways Alliance (IFA)
Road and Maintenance services
for Mitchell Freeway
Australia
42.1%
42.1%
1 Both joint operations above are unincorporated
(b)
Details of joint ventures and associates
The Group has interest in the following joint ventures and associates which are equity accounted as described
in note 33 (b).
Ownership interest
Measurement
basis
Principal place of business
and country of incorporation
June 2024
June 2023
LT Joint Venture Pty Ltd1
50%
50%
Equity Accounted
Victoria, Australia
ConnectSydney Pty Ltd
50%
50%
Equity Accounted
New South Wales, Australia
South Australian Road Services Pty
Ltd
50%
50%
Equity Accounted
South Australia, Australia
Brisbane Motorway Services Pty Ltd1
50%
50%
Equity Accounted
Queensland, Australia
1 These joint ventures are dormant and are in the process of being liquidated.
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25
Joint arrangements (continued)
(c)
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
$’000
$’000
$’000
$’000
$’000
Opening balance as at 1 Jul 2022
39
5,219
343
5
5,606
Total share of profit
12
4,610
40
-
4,662
Dividends received
-
(1,701)
-
-
(1,701)
Closing balance as at 30 Jun 2023
51
8,128
383
5
8,567
Opening balance as at 1 Jul 2023
51
8,128
383
5
8,567
Total share of profit
-
5,855
259
-
6,114
Dividends received
-
(4,375)
-
-
(4,375)
Closing balance as at 30 Jun 2024
51
9,608
642
5
10,306
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 lodgment of financial reports,
and Directors' report.
A Consolidated statement of profit or loss and other comprehensive income and a Consolidated statement of
financial position for the year ended 30 June 2024 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
2024
$'000
2023
$'000
Revenue
2,262,852
2,028,129
Expenses
(2,224,557)
(2,030,535)
Share of profits from investment in associates
6,114
4,662
Profit before tax
44,409
2,256
Income tax expense
(14,597)
(761)
Profit for the year
29,812
1,494
Total comprehensive profit for the year
29,812
1,494
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
85
26
Deed of cross guarantee (continued)
(b)
Consolidated statement of financial position of the deed of cross guarantee group
2024
$'000
2023
$'000
ASSETS
Current assets
530,933
545,481
Non-current assets
522,245
538,801
Total assets
1,053,178
1,084,282
LIABILITIES
Current liabilities
408,667
399,278
Total non-current liabilities
173,148
229,085
Total liabilities
581,815
628,363
Net assets
471,363
455,919
EQUITY
Capital and reserves
Contributed equity
496,344
499,667
Reserves
(5,582)
(9,973)
Retained earnings / (accumulated losses)
(19,399)
(33,775)
Total equity
471,363
455,919
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
86
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:
2024
$
2023
$
Short-term employee benefits
3,080,744
2,451,982
Post-employment benefits
100,058
103,609
Other long-term benefits
48,248
77,680
Share-based payments1
1,106,030
657,541
4,335,080
3,290,812
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 transactions with key management personnel of the Group
There were no other transactions with key management personnel of the Group for the financial year ended
30 June 2024.
Service Stream Limited FY24 Annual Report
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87
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.
(a)
Financial position
2024
$'000
2023
$'000
Non-current assets
483,079
451,216
Total assets
483,079
451,216
Current liabilities
7,642
6,704
Non-current liabilities
247
-
Total liabilities
7,889
6,704
Net assets
475,190
444,512
Issued capital
478,219
478,132
Reserves - equity-settled employee benefits
(5,336)
(9,972)
Accumulated profit/(losses)
2,307
(23,648)
Equity
475,190
444,512
(b)
Financial performance
2024
$'000
2023
$'000
Profit for the year
44,391
15,666
Total comprehensive income
44,391
15,666
(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 provides 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 the investment in subsidiary
undertakings, with a corresponding credit to the equity.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
88
29
Change in presentation of consolidated statement of profit or loss and other
comprehensive income
(i)
Change in presentation of expenses
The Group has reviewed the expense categories disclosed and determined that the revised presentation
below is most relevant for the users of the financial statements:
1.
Motor vehicle expenses typically relate to management of fleet costs that are typically used on projects
or on-site, therefore classification as site fees, which is within the subcontractor and site fees, is
appropriate.
2.
Consulting, company administration and insurance expenses, occupancy expenses and technology
and communication services are primarily ancillary support related service expenses and therefore
classification as other expenses is appropriate.
(Increase)/
Decrease
(Restated)
30 Jun 2023
$'000
30 Jun 2023
$'000
30 Jun 2023
$'000
Expenses (excluding income tax expense)
Employee salaries and benefits
(503,466)
-
(503,466)
Subcontractor fees and site fees
(1,193,670)
(18,925)
(1,212,595)
Raw materials and consumables used
(159,217)
-
(159,217)
Consulting and temporary staff fees
(28,831)
28,831
-
Company administration and insurance expenses
(17,544)
17,544
-
Occupancy expenses
(10,041)
10,041
-
Technology and communication services
(28,112)
28,112
-
Motor vehicle expenses
(18,925)
18,925
-
Depreciation and amortisation
(68,050)
-
(68,050)
Net finance costs
(13,605)
-
(13,605)
Other expenses
(10,745)
(84,528)
(95,273)
Total Expenses1
(2,052,206)
-
(2,052,206)
1 Total Expenses excludes share of profit from investment in joint ventures and associates, and income tax expense.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
89
29
Change in presentation of consolidated statement of profit or loss and other
comprehensive income (continued)
(ii)
Incorrect prior year presentation of certain overhead expenses
The Group identified a historical error in its classification of certain overhead expenses. The prior year
comparative has been restated to reflect the consistent presentation and classification of the relevant items,
noting that there is no impact on revenue, total expenses, net profit/(loss) for the period disclosed. The table
presented below is after the presentation change described in note 29(i) above.
(Increase)/
Decrease
(Restated)
30 Jun 2023
$'000
30 Jun 2023
$'000
30 Jun 2023
$'000
Expenses (excluding income tax expense)
Employee salaries and benefits
(503,466)
(84,416)
(587,882)
Subcontractor fees and site fees
(1,212,595)
99,923
(1,112,672)
Raw materials and consumables used
(159,217)
(5,155)
(164,372)
Depreciation and amortisation
(68,050)
-
(68,050)
Net finance costs
(13,605)
-
(13,605)
Other expenses
(95,273)
(10,352)
(105,625)
Total Expenses1
(2,052,206)
-
(2,052,206)
1 Total Expenses excludes share of profit from investment in joint ventures and associates, and income tax expense.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
90
30
Contingent assets and liabilities
At the date of this report there are no contingent assets and liabilities that are expected to materially impact,
either individually or in aggregate, the Group’s financial position or results from operations (2023: nil).
31
Events after the reporting period
There have not been any matters or circumstances 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.
32
Remuneration of auditors
2024
$
2023
$
Audit and review of the financial report
1,081,000
1,208,000
Other assurance services
20,900
60,000
Tax services
68,285
219,599
1,170,185
1,487,599
The auditor of Service Stream Limited is PricewaterhouseCoopers.
33
Material accounting policies
This note provides a list of Material 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 21 August 2024.
(i)
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.
(ii)
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.
(iii)
New and amended standards adopted by the Group
The group has applied AASB 2020-1, 2022-5 and 2023-1 for the first time for the annual reporting period
commencing 1 July 2023. The amendments above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or future periods.
(iv)
New standards and interpretations not yet adopted
Certain new accounting standards, amendments to accounting standards and interpretations have
been published that are not mandatory for 30 June 2024 reporting periods and have not been early
adopted by the group. These standards, amendments or interpretations are not expected to have a
material impact on the group in the current or future reporting periods and on foreseeable future
transactions.
Service Stream Limited FY24 Annual Report
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33
Material accounting policies (continued)
(a)
Basis of preparation (continued)
(v)
Changes in accounting policy
There were no changes in accounting policies during the period.
(vi)
Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statement, are disclosed in note 34.
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 recognised in profit or loss. In addition, any amounts previously
recognised in other comprehensive income in respect of that entity are accounted for as if the Group had
directly disposed of the related assets or liabilities. This means that amounts previously recognised in other
comprehensive income are reclassified to profit or loss.
(b)
Joint arrangements
Joint arrangements under AASB 11 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 statement of financial position 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.
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.
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33
Material accounting policies (continued)
(c)
Goodwill
Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the
business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognised at the date of the acquisition. Goodwill is subsequently measured at its cost
less any impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units, or
groups of cash generating units (CGUs), expected to benefit from the synergies of the business combination.
CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently if events or
changes in circumstances indicate that goodwill might be impaired. If the recoverable amount of the CGU is
less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the CGU and then pro-rata on the basis of the carrying amount of each asset in that CGU.
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 CGU, the attributable amount of goodwill is included in the determination of the
profit or loss on disposal.
(d)
Operating segments
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.
(e)
Revenue recognition
The Group has three distinct revenue streams, being (i) revenue from the provision of ticket of work services,
(ii) revenue from the delivery of projects and (iii) revenue from cost reimbursable contracts.
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).
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 utility networks;
Service Stream Limited FY24 Annual Report
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33
Material accounting policies (continued)
(e)
Revenue recognition (continued)
●
lump sum term maintenance contracts, typically associated with infrastructure networks. Under these
contracts delivery obligations may consist of program 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 transfers 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 using
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 in some cases on achievement of milestones. Payment of
invoices is typically subject 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.
Where recognised project revenues exceed progress billings, the surplus is shown in the Consolidated
statement of financial position as an asset, under accrued revenue. Where progress billings exceed recognised
revenues, the surplus is shown in the Consolidated statement of financial position 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 statement of financial position 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.
These are recognised on a straight-line basis over the life of the contract or recovered based on an actual cost
basis.
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.
Service Stream Limited FY24 Annual Report
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33
Material accounting policies (continued)
(e)
Revenue recognition (continued)
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 time. Accrued revenue
represents the Group's right 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 arises 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.
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 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.
(f)
Leases
The Group recognises leases in line with AASB 16 Leases, measuring lease liabilities 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.
Subsequent to initial recognition, right-of-use assets are measured at cost (adjusted for any remeasurement
of 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.
Service Stream Limited FY24 Annual Report
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33
Material accounting policies (continued)
(f)
Leases (continued)
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.
(g)
Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and
long service leave when it is probable that settlement will be required and they are capable of being
measured reliably.
Liabilities recognised in respect of employee short-term benefits are measured at their nominal values using
the remuneration rate expected to apply at the time of the settlement.
Liabilities recognised in respect of long-term employee benefits are measured as the present value of the
estimated future cash outflows in respect of services provided by employees up to reporting date. Expected
future payments falling due more than 12 months after the end of the reporting period are discounted using
corporate bonds market yields. Remeasurements as a result of employment status and changes in actuarial
assumptions are recognised in profit or loss.
Termination benefits are payable when employment is terminated before the normal retirement date, or
when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises
termination benefits when it is demonstrably committed to either terminating the employment of current
employees according to a detailed formal plan without possibility of withdrawal or to providing termination
benefits as a result of an offer made to encourage voluntary redundancy where applicable.
The obligations are presented as current liabilities in the consolidated statement of financial position 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.
(h)
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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
96
33
Material accounting policies (continued)
(i)
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.
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.
(j)
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 the 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 is 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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
97
33
Material accounting policies (continued)
(j)
Property, plant and equipment (continued)
The following estimated useful lives are used in the calculation of depreciation:
●
Leasehold improvements: 3 - 13 years
●
Plant and equipment: 1 -10 years
●
Motor vehicles: 5 - 10 years
(k)
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. 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 expenses 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 services, 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 methods are reviewed at the end of each annual accounting period, with the effect of
any changes in estimates being accounted for on a prospective basis.
The estimated useful lives used in the calculation of amortisation ranges from 3 to 8 years for software, 1 to 15
years for customer contracts and 15 years for customer relationships.
(l)
Impairment of tangible and intangible assets excluding goodwill
At the end of each reporting date, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have incurred an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual
cash generating units, or otherwise they are allocated to the smallest group of cash generating units for which
a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of the fair value less costs 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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
98
33
Material accounting policies (continued)
(m)
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.
(n)
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.
(o)
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 for managing the financial assets and liabilities and
the contractual terms of the cash flows.
For assets and liabilities measured at fair value, gains and losses will either be recorded in profit or loss or OCI.
(ii)
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. Impairment losses (and reversal of impairment
losses) on equity investments measured at fair value through other comprehensive income (FVOCI) are not
reported separately from other changes in fair value.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
99
33
Material accounting policies (continued)
(o)
Financial instruments (continued)
(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 consolidated statement of financial position 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
●
the amount initially recognised, less where appropriate, cumulative amortisation recognised in
accordance with the revenue recognition policies.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
100
33
Material accounting policies (continued)
(o)
Financial instruments (continued)
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss (FVTPL) or other
financial liabilities.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method,
with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying value on initial recognition.
De-recognition of financial liabilities
The Group de-recognises financial liabilities only when the Group’s obligations are fully discharged, cancelled
or otherwise expire. The difference between the carrying amount of the financial liability de-recognised and
the consideration paid or payable is then recognised in profit or loss.
(p)
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.
(q)
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of
financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12
months from the reporting date. They are recognised initially at their fair value and are not discounted if the
effect of discounting is immaterial.
(r)
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is
not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or other payables
in the Consolidated statement of financial position 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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
101
33
Material accounting policies (continued)
(s)
Cash and cash equivalents
Cash comprises cash on hand and outstanding deposits less any unpresented cheques. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject
to an insignificant risk of changes in value and have a maturity of three months or less at the date of
acquisition.
Bank overdrafts are shown within borrowings in current liabilities in the Group's Consolidated statement of
financial position.
(t)
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.
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.
(u)
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.
(v)
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.
(w)
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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
102
34
Critical accounting judgement 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).
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.
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
103
Consolidated entity disclosure statement
as at 30 June 2024
Name of entity
Type of entity
% of
share
capital
Place of
business/
country of
incorporation
Australian
resident/
foreign
resident
Parent entity
Service Stream Limited
Body Corporate
n/a
Australia
Australian
Subsidiaries
Service Stream Holdings Pty Ltd
Body Corporate
100
Australia
Australian
Service Stream Fixed Communications Pty Ltd
Body Corporate
100
Australia
Australian
Service Stream Mobile Communications Pty Ltd
Body Corporate
100
Australia
Australian
Service Stream Customer Care Pty Ltd
Body Corporate
100
Australia
Australian
Radhaz Consulting Pty Limited
Body Corporate
100
Australia
Australian
Service Stream Infrastructure Services Pty Ltd
Body Corporate
100
Australia
Australian
Service Stream Energy & Water Pty Ltd
Body Corporate
100
Australia
Australian
Service Stream Nominees Pty Ltd
Body Corporate and
Trustee of a Trust
100
Australia
Australian
Service Stream Operations Pty Ltd1
Body Corporate
100
Australia
Australian
TechSafe Australia Pty. Ltd.
Body Corporate
100
Australia
Australian
TechSafe Management Pty Ltd
Body Corporate
100
Australia
Australian
Ayrab Pty. Ltd.
Body Corporate and
Trustee of a Trust
100
Australia
Australian
Service Stream Utilities Pty Ltd
Body Corporate
100
Australia
Australian
Comdain Civil Constructions Pty. Ltd.
Body Corporate
100
Australia
Australian
Comdain Civil Constructions (QLD) Pty Ltd
Body Corporate
100
Australia
Australian
Comdain Services Pty Ltd
Body Corporate
100
Australia
Australian
Comdain Asset Management Pty Ltd
Body Corporate
100
Australia
Australian
Comdain Gas (Aust) Pty Ltd
Body Corporate
100
Australia
Australian
Comdain Services (AMS) Pty Ltd
Body Corporate
100
Australia
Australian
Comdain Corporate Pty Ltd
Body Corporate
100
Australia
Australian
Comdain Assets Pty Ltd
Body Corporate
100
Australia
Australian
Service Stream Limited FY24 Annual Report
Financial Report – Notes to the consolidated financial statements
104
Name of entity
Type of entity
% of
share
capital
Place of
business/
country of
incorporation
Australian
resident/
foreign
resident
Service Stream Maintenance Pty Ltd
Body Corporate
100
Australia
Australian
Westlink (Services) Pty Limited
Body Corporate
100
Australia
Australian
EnerSafe Pty Ltd
Body Corporate
100
Australia
Australian
Trust
Service Stream Employee Share Trust
Trust
n/a
n/a
Australian
Ayrab Unit Trust
Trust
n/a
n/a
Australian
1.
Subsequent to year end Service Stream Operations Pty Ltd changed its name to Service Stream Property Pty Ltd on 10 July
2024.
Basis of Preparation:
This consolidated entity disclosure statement (CEDS) has been prepared in accordance with the Corporations
Act 2001 and includes information for each entity that was part of the consolidated entity as at the end of the
financial year in accordance with AASB 10 Consolidated Financial Statements.
Trust
Australian tax law does not contain specific residency test for trust. Generally, these entities are taxed on a
flow-through basis so there is no need for a general residency test. There are some provisions which treat trust
as residents for certain tax purposes, but this does not mean the trust itself is an entity that is subject to tax.
Service Stream Limited FY24 Annual Report
Financial Report – Directors declaration
105
Directors' declaration
In the Directors' opinion:
(a)
the financial statements and notes thereto are in accordance with the Corporations Act 2001, including:
(b)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
(c)
giving a true and fair view of the consolidated entity's financial position as at 30 June 2024 and of its
performance for the year ended on that date, and
(d)
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
(e)
the consolidated entity disclosure statement on page 103 is true and correct, and
(f)
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
21 August 2024
Leigh Mackender
Managing Director
21 August 2024
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.
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 2024 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 financial report comprises:
•
the consolidated statement of financial position as at 30 June 2024
•
the consolidated statement of changes in equity for the year then ended
•
the consolidated statement of cash flows for the year then ended
•
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
•
the notes to the consolidated financial statements, including material accounting policy
information and other explanatory information
•
the consolidated entity disclosure statement as at 30 June 2024
•
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.
106
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.
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.
Key audit matter
How our audit addressed the key audit matter
Revenue recognition
(Refer to note 3) $2,288.8m
For the year ended 30 June 2024, the Group
recognised $2,288.8 million of revenue from contracts
with customers, and $266.6 million was accrued as an
asset at 30 June 2024.
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
We evaluated the design of relevant key internal
controls over the recognition of revenue.
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.
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
107
Key audit matter
How our audit addressed the key audit matter
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 and the
estimation required in recognising revenue from the
delivery of projects.
•
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
2024 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.
Goodwill impairment assessment - Utilities
(Refer to note 14) $129.9m
The Group is required by Australian Accounting
Standards to test goodwill annually for impairment at
the cash generating unit (CGU) level.
The consolidated statement of financial position at 30
June 2024 includes goodwill relating to the Utilities
CGU ($129.9 million).
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.
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.
To evaluate the recoverable amount of the Utilities
CGU, 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.
We considered the adequacy of the disclosures relating
to the Group’s goodwill impairment assessment in light
of the requirements of Australian Accounting
Standards.
108
Key audit matter
How our audit addressed the key audit matter
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.
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 2024, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon through our opinion on the financial
report. We have issued a separate opinion on the remuneration report.
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.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report in accordance
with Australian Accounting Standards and the Corporations Act 2001 including giving a true and fair
view and for such internal control as the directors determine is necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error.
In 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
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.
109
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 the directors’ report for the year ended 30 June
2024.
In our opinion, the remuneration report of Service Stream Limited for the year ended 30 June 2024
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Andrew Cronin
Melbourne
Partner
21 August 2024
110
Service Stream Limited FY24 Annual Report
ASX Additional Information
111
ASX Additional Information
for the financial year ended 30 June 2024
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 8 August 2024
Category (size of holding)
Holders
1-1,000
1,844
1,001- 5,000
2,557
5,001-10,000
1,225
10,001-100,000
1,999
100,001+
184
7,809
B. There are 7,809 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 677.
D. The names of the substantial shareholders listed in the holding company’s
register, and their shareholdings (including shareholdings of their
associates), as at 8 August 2024 are:
Shareholder
Ordinary
%
Allan Gray Australia Pty Ltd1
84,302,110
13.69%
Wilson Asset Management Group2
34,806,440
5.65%
Tiga Trading Pty Ltd3
28,693,355
4.66%
Thorney Opportunities Ltd3
6,635,948
1.08%
Jasforce Pty Ltd (as trustee for the Alex Waislitz Retirement Plan)3
2,000,000
0.32%
Waislitz Charitable Corporation Pty Ltd (as trustee for the Waislitz Family
Foundation)3
285,000
0.05%
1Number of shares is based on the most recent Nasdaq report (22 July 2024).
2Number of shares is based on the most recent Nasdaq report (22 July 2024). Wilson Asset Management Group comprises the following entities: Wilson Asset Management
(International) Pty Limited, MAM Pty Limited, WAM Capital Limited, WAM Research Limited, WAM Active Limited, Botanical Nominees Pty Limited ATF Wilson Asset
Management Equity Fund, WAM Leaders Limited, WAM Microcap Limited, WAM Global Limited, WAM Strategic Value Limited, WAM Alternative Assets Limited, Wilson Asset
Management Leaders Fund.
3The Company treats Tiga Trading Pty Ltd, Thorney Opportunities 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 6.11%, 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 $0.1009 (2023: $0.0460)
Service Stream Limited FY24 Annual Report
ASX Additional Information
112
G. 20 Largest Shareholders as at 8 August 2024 - Ordinary Shares
Name of 20 largest shareholders in each class of share
Ordinary
shares Fully
paid number
of shares
held
% Held
CITICORP NOMINEES PTY LIMITED
150,753,198
24.47
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
122,024,733
19.81
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
106,600,884
17.31
UBS NOMINEES PTY LTD
33,817,839
5.49
NATIONAL NOMINEES LIMITED
16,790,704
2.73
BNP PARIBAS NOMINEES PTY LTD
15,618,980
2.54
COMDAIN NOMINEES PTY LTD
9,420,880
1.53
MR KENNETH JOSEPH HALL
7,109,288
1.15
RUBINO GROUP PTY LTD
7,000,000
1.14
DR ROGER GRAHAM BROOKE + MRS SALLY ANN BROOKE
4,488,542
0.73
THORNEY OPPORTUNITIES LTD
4,000,000
0.65
BNP PARIBAS NOMINEES PTY LTD
3,950,937
0.64
SERVICE STREAM NOMINEES PTY LTD
3,127,984
0.51
NETWEALTH INVESTMENTS LIMITED
2,543,133
0.41
MR KEVIN ASHLEY SMITH
2,453,002
0.40
BNP PARIBAS NOMS PTY LTD
2,013,085
0.33
JASFORCE PTY LTD
1,950,000
0.32
BNP PARIBAS NOMS PTY LTD
1,758,738
0.29
CITICORP NOMINEES PTY LIMITED
1,717,876
0.28
LKDL INVESTMENTS PTY LTD
1,256,789
0.20
498,396,592
80.91
Service Stream Limited FY24 Annual Report
Corporate Directory
113
Corporate Directory
Directors
Brett Gallagher
Leigh Mackender
Elizabeth Ward
Martin Monro
Sylvia Wiggins
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
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