1 2 3 4 5 Saunders International Limited
Contents Page
ACN 050 287 431
FINANCIAL REPORT
for the financial year ended
30 June 2020
6
8
6
Saunders International Limited
Directors’ Report
DIRECTORS’ REPORT
The Directors present their report on Saunders International Limited (“Saunders” or the “Group”) for the financial year ended
30 June 2020 and the independent audit report thereon. In order to comply with the provisions of the Corporations Act 2001,
the Directors report as follows:
DIRECTORS
The Directors as at the date of this Director’s Report are:
Timothy Burnett
Mark Benson
Gregory Fletcher
The above-named directors held office during the whole of the financial year and since the end of the financial year up the date
of this report.
COMPANY SECRETARY
Rudy Sheriff and Steven Dadich both acted in the Company Secretary role during the whole year and up to the date of this
report.
PRINCIPAL ACTIVITIES
During the financial year, the principal activities of Saunders were the design, construction and maintenance of bulk liquid
storage facilities, tanks and road and rail bridges. The Group also manufactures precast concrete products for transport
infrastructure projects and provides a range of specialized services for the maintenance of commercial, industrial and marine
infrastructure and assets.
REVIEW OF OPERATIONS
A summary of the revenues and results is as follows: -
Revenue
Profit/(loss)
Income tax (expense)/benefit
2020
$’000
2019
$’000
66,462
50,126
1,853
(2,260)
(587)
650
Profit/(loss) attributable to the members of Saunders International Limited
1,266
(1,610)
Reconciliation of profit before income tax to EBITDA (unaudited):
Profit/(loss) before income tax
Interest expense on loans and hire purchase finance charges
Depreciation of owned and hire purchase assets
Depreciation of right of use assets
EBITDA
2020
$’000
2019
$’000
1,853
(2,260)
81
20
1,022
1,070
446
-
3,402
(1,170)
The new accounting stands AASB 16 Leases was adopted from 1 July 2019. Comparatives have not been restated.
7
Saunders International Limited
Directors’ Report
REVIEW OF OPERATIONS (cont)
Saunders’ revenue for the year is $66.5 million, an increase of $16.4 million over (FY19: $50.1 million) and the NPAT was a
profit of $1.3 million, an improvement of $2.9 million over (FY19 loss: $1.6 million), EBITDA was $3.4 million, an improvement
of $4.6 million over (FY19 loss of $1.2 million).
Earnings per share for the period were 1.23 cents (FY19 loss: 1.72 cents).
Saunders is in a strong financial position at year end with cash and cash equivalents of $11.1 million (FY19: $8.0 million). In
light of past results the Group has been focussed on the management of working capital. This disciplined approach has been
a principal driver in the strong cash flow reported and the increase in cash and cash equivalents for the financial year. The
Group has no interest-bearing loans, except for finance leases.
The past 12 months has seen a positive change in the Saunders’ performance through the execution of its strategic priorities,
which commenced in FY19. This included re-setting the operating model and the organisational structure that supported it,
(Fix Phase). The focus for FY20 was to execute the Grow phase which resulted in record contract awards and increased
pipeline. FY20-H2 had some challenges with the emergence of the COVID-19 pandemic which disrupted the economy, our
clients and the markets in which we operate. Saunders has been proactive with our response to the challenging conditions
due to COVID-19. The Group has taken and continues to take all preventive measures to ensure the safety of its employees,
clients and the communities in which it operates. The Group has developed and implemented policies and protocols across
all sites to ensure the business is best placed to mitigate impacts of COVID-19 and continue to grow. At the date of this report
all sites have continued operations.
Key Highlights
Strong Safety performance with over 2.7 million hours LTI free
•
• Responsiveness of our employees to positively react to the continual changes presented by COVID-19
• Return to Profit with positive operating cash flow of $4.9 million and strong balance sheet
•
Awarded over $100m in new contracts in FY20-H2 including major contracts with Rio Tinto, Sydney Water,
Dialog/VOPAK, NAVFAC and BP
Successful entry into the Defence sector with completion of one project and award of a further two contracts whilst
bidding on further opportunities
•
• Record orderbook of $110.5 million as at June 2020, with a further $70 million of preferred contractor status projects
Secured new $10 million bonding facility, which has tripled Saunders’ capacity to provide security up to a new $ 15
•
million limit
Outlook
Saunders’ Work in hand as at 30 June 2020 is $110.5 million (FY19: $60.5 million). Saunders is experiencing strong growth in
its core services and sectors and an increasing level of new contract business enquiries and requests for tenders in emerging
services and sectors, Defence, Water and Energy. Tendering activity shows the value of live tenders at $303.8 million. The
pipeline (yet to be tendered) is at $367.6 million.
Whilst we continue delivering on our recent growth, the economic outlook both locally and internationally remains uncertain
due to COVID-19. Although the COVID-19 pandemic is likely to lead to further economic stimulus, which should be positive for
Saunders, the financial performance of the Group will be dependent how the continued pandemic impacts our clients and our
people. The following drivers provide Saunders with confidence in earnings growth and a strong financial performance in
FY21:
Strong spend in infrastructure, industrial, minerals and defence sectors.
•
• Current infrastructure boom forecast to continue through Federal and State governments, including National bridge
replacement programme
• Defence - Government spend is forecast at 2% of GDP by 2022.
•
•
•
Strategic Fuel Storage – Federal Government initiative
Solid balance sheet coupled with support of financial institutional and access to capital markets
Saunders’ financial capacity will increase its ability to win and deliver larger more complex projects.
Employees
The Group’s total workforce managed by Saunders was approximately 218.
Saunders remain focused on investing in people and capability to ensure the achievement of our vision and strategic objectives.
We progressed our “One Team” culture program, introduced in FY19. The benefits have assisted with the sudden changes
experienced with the COVID-19 pandemic.
The directors wish to take to this opportunity to thank all employees for their efforts in FY20, in what has been a challenging
period. The swift response to the pandemic has been exceptional with limited impacts to all our projects and operations.
8
Saunders International Limited
Directors’ Report
REVIEW OF OPERATIONS (cont)
Safety
During the year, Saunders’ Total Recordable Injury Frequency Rate (TRIFR) was 1.56. Saunders continues to report zero LTIs
and has achieved in excess of 2.8 million-man hours LTI free.
The Leadership team have applied the revised COVID-19 protocols and processes to ensure safe practices and quality services
are observed.
The Group is confident that our safety is focussed on the correct areas with our leaders committed to the Health, Safety, Quality
and Welfare of our staff. We have achieved our “One Team” – Zero Harm targets through continual improvements of our
systems, procedure and processes.
Earnings per share
The basic and diluted earnings per share is calculated using the weighted average number of shares. This shows the basic
earnings per share of 1.23 cents and diluted earnings pers share of 1.20 cents (2019: basic and diluted loss per share 1.72
cents).
DIVIDEND
The Board has declared that the best protection for Saunders against any unforeseen impacts of COVID-19 will be to maintain
a strong balance sheet with a net positive cash balance. As a result of this prudent decision there will not be a final dividend
payable for FY2020 (FY2019 final dividend NIL).
DIRECTORS ATTENDANCE AT MEETINGS
Attendance at Meetings
The following table sets out the number of meetings in the year to 30 June 2020, held during the period that the individual was
a director and the number of meetings attended.
Directors
Meetings
Audit and Risk Committee
Meetings
Remuneration Committee
Meetings
Held
Attended
Held
Attended
Held
Attended
Timothy Burnett
Mark Benson
Greg Fletcher
12
12
12
12
12
12
4
-
4
4
-
4
4
-
4
4
-
4
INFORMATION ON DIRECTORS
Information on the directors who held office during and since the end of the financial year is as follows:-
Directors
Qualifications, Experience
and Special Responsibilities
Relevant Interest
in Shares of
Saunders International Limited
Timothy Burnett
Non-executive Chairman
11,556,548
Member of the Audit & Risk Committee
Member of the Remuneration Committee
Director since 28 November 1990
BE, MBA, FAICD
46 years of relevant industry experience
Other listed company directorships in the 3 years
immediately before the end of the financial year
- Nil
9
Saunders International Limited
Directors’ Report
INFORMATION ON DIRECTORS (Cont’d)
Information on the directors who held office during and since the end of the financial year is as follows: -
Directors
Qualifications, Experience
and Special Responsibilities
Relevant Interest
in Shares of
Saunders International Limited
Mark Benson
Managing Director from 5 October 2015
564,240
Director since 10 August 2015
AdvDipMan, AdvDipProjMgt, GAICD
27 years of relevant industry experience
Other listed company directorships in the 3 years
Immediately before the end of the financial year
- Nil
Greg Fletcher
Non-Executive Director
5,360
Chairman of the Audit & Risk Committee
Member of the Remuneration Committee
Director since 1 July 2015
BCom, CA
- Chairman SMEG Australia Pty Ltd
- Director TAFE NSW Commission
- Chairman and a member of Audit and Risk Committees
on a number of Government owned businesses
Other listed company directorships
- Co Vice Chairman Yancoal Australia Limited
Other listed company directorships in the 3 years
immediately before the end of the financial year –
- Director Yancoal SNC Limited
Greg was a Partner of Deloitte Touche Tohmatsu
until 31 May 2009, and Deloitte Touche Tohmatsu
has been the registered auditor of Saunders since
the year ended 30 June 2007
10
Saunders International Limited
Directors’ Report
AUDITED REMUNERATION REPORT
This remuneration report, which forms part of the directors’ report, contains information about the remuneration of Saunders
International Limited’s directors and its key management personnel for the financial year ended 30 June 2020. The
Remuneration Report sets out, in accordance with section 300A of the Corporations Act: (i) the Group’s governance relating
to remuneration, (ii) the policy for determining the nature and amount or value of remuneration of key management personnel;
(iii) the various components or framework of that remuneration; (iv) the prescribed details relating to the amount or value p aid
to key management personnel, as well as a description of any performance conditions; (v) the relationship between the policy
and the performance of the Group.
Key management personnel are the non-executive directors, the executive directors and employees who have authority and
responsibility for planning, directing and controlling the activities of the entity.
Remuneration Policy and Governance
The board of directors, through the Remuneration Committee, review and approve remuneration of the non-executive directors,
the managing director and key management personnel. Remuneration policy is determined by the needs of the Group and the
individual talents, capabilities and experience of relevant executives, and the need to attract and retain talent are considered
important factors in assessing remuneration.
Non-executive Directors
Non-executive directors are paid fees and where applicable compulsory superannuation contributions are made on their behalf.
The current fees are based on the level of fees for comparable listed companies and were reviewed during the year.
The non-executive directors have not been granted options and have not participated in the Employee Share Plan or the
Performance Rights Plan.
Managing Director
The managing director is remunerated on a salary package basis which is a component of a formal employment contract. The
salary package is considered to be appropriate for the experience and expertise needed for the position and is comparable to
other similar sized companies and business units of larger companies. The salary package contains a fixed component and a
variable bonus component. The bonus is based on an annual performance appraisal as conducted by the remuneration
committee of the board of directors. The performance is measured against a range of objectives set annually by the board.
The important objectives are safety, quality, personnel development, quantitative Group financial performance and certain
other (subjective and objective) criteria.
The managing director has also participated in the Employee Share Plan and the Performance Rights Plan. Mark Benson holds
550,000 options within the Employee Share Plan and 2,337,543 performance rights under the Saunders International
Performance Rights Plan.
Key Management Personnel
Key management personnel are remunerated based on a number of factors, including experience, qualifications, job level and
over performance of the company and individual. The remuneration includes a variable short term incentive (STI), between
10%-60% of salary component. This incentive rewards the key management personnel achieving; financial and operational
key performance indicators; progress with the delivery of the Group’s business plan and strategic objectives; and specific goals
in relation to the development of people within the Group and its profile within the business community.
Examples of key performance indicators measured to assess STI for the Key Management Personnel and Managing Director
include:
•
•
•
achievement of target work in hand levels at 30 June of each year to ensure the sustainability of revenue in subsequent
years;
targets set in relation to the achievement of the Group’s business plan such as the diversification of the business and
entry into new markets; and
targets set for safety performance based on Total Recordable Injury Free.
These indicators form approximately 50% of assessable STI with the remaining 50% focussed on the Financial Performance
of the Group; EBIT and Cash at hand.
Key management personnel as disclosed on page 14 of the remuneration report have participated in the Employee Share
Plan.
11
Saunders International Limited
Directors’ Report
AUDITED REMUNERATION REPORT (Cont’d)
Long Term Incentive
The board of directors have considered the issue of long-term incentive as a component of the remuneration of executive
directors and key management personnel.
Saunders operates two Long Term Incentive (“LTI”) plans, which are described below:
• Employee Share Plan
• Performance Rights Plan
As of the date of this report a number of executive officers’ own shares in the Group or interests via the Employee Share Plan
and the Performance Rights Plan. Key management personnel, who are not directors, collectively have an interest in 246,250
shares under the Employee Share Plan. In addition, other employees own 1,056,875 shares.
The breadth and depth of share ownership fosters an alignment of objectives between shareholders and directors and
management of the Group.
Employee Share Plan
Under the Employee Share Plan (ESP), the Group provides interest free loans to employees to acquire shares in Saunders
International Limited, at a specified price per share. The loans are secured by the shares acquired by the eligible employees.
The shares will vest and the loans will be repaid, upon a specified anniversary of the issue of the shares. If an eligible
employee’s employment with the Group is terminated prior to the specified anniversary of the issue of the shares, the shares
will be forfeited, and the Group will be entitled to the total amount raised pursuant to the divestment of the shares. The shares
are accounted for as in substance options.
Each employee share option converts into one ordinary share of Saunders International Limited on exercise. No amounts are
paid or payable by the recipient on receipt of the option. The options carry neither right to dividends nor voting rights. Options
may be exercised at any time from the date of vesting to the date of their expiry.
During the year 170,000 options were granted to Key Management Personnel under the ESP. The aggregate fair value of the
options granted is $64,600 as set out on page 15.
Performance Right Plan
The Saunders International Rights Plan was approved by the Board and approved by shareholders at the Annual General
Meeting in November 2015.
The features of the long-term incentive comprise the grant of equity in the form of Performance Rights which vest over a three
year period. The maximum number of Performance Rights will vest only if stretch objectives for each tranche are achieved.
Half of the Performance Rights will vest if the target objectives are achieved. The end of the measurement period for a tranche
of Performance Rights will be extended by up to two years at the Board’s discretion if significantly less than target vesting
would have been achieved for that tranche at the end of the measurement period, adjusted for the pro-rata increase in hurdles
to take into account the additional time. The two vesting conditions that will be used will be relative total shareholder return
(RTSR) and normalised earnings per share growth (NEPSG).
RTSR will be measured by comparing the Group’s TSR over the measurement period with the TSRs achieved by companies
that are in a comparator group and remain listed on the ASX. TSR is the percentage return generated from an investment in a
Group’s shares over the measurement period assuming that dividends are reinvested into the Group’s shares. NEPSG will be
assessed as the compound annual growth rate (CAGR) reflected in the increase in normalised earnings per share (EPS) from
the base year (FY2016) for tranches 1 to 8 and (FY2017) for tranches 9 and 10 to normalised EPS for the final year of the
measurement period. Normalised EPS will relate to normal operations and will exclude abnormal items as determined by the
Board in its discretion.
For the phase in tranches where the measurement period is less than three years, performance will be evaluated by the Board’s
assessment of the establishment of strategic foundations for superior TSR and NESPG over the long term. For future grants,
it is currently intended that the qualitative vesting conditions will be removed (but retaining TSR and NESPG), and that
measurement periods will be no shorter than 3 years.
The vesting scale will be applied to the tranches subject to objective measurement of Saunders performing relative to the
comparator group and NEPSG, as appropriate, with the vesting scale ranging continuously from 0% for very poor performance
to 100% for very good performance with 50% for on-target performance.
The long-term incentive is aimed at aligning remuneration with the longer-term performance of the Group and retaining the
long-term services of the key management personnel.
12
Saunders International Limited
Directors’ Report
AUDITED REMUNERATION REPORT (Cont’d)
Performance Right Plan (cont)
During the year 744,924 Performance Rights were granted to the CEO under the LTI Plan. The aggregate fair value of the
Performance Rights granted is $212,303 as set out on page 15. A further 399,937, Performance rights were granted to other
KMP under the LTI Plan. The aggregate fair value of the Performance Rights granted to other KMP is $113,982 as set out on
page 15
Key Terms of Employment Contracts
The Group entered into an executive service agreement with Mark Benson as Managing Director and Chief Executive Officer
effective 5 October 2015. The remuneration component of the agreement is in line with relevant industry comparables. The
variable component (Performance Bonus) can range anywhere between 0% to 60% of the fixed component based on
performance measured against a range of key performance indicators and targets, set annually by the directors. The attainment
of realistically achievable performance and targets on a weighted average measure would result in a bonus of 30% of the fixed
component and bonus above and below this would result from overall superior or poorer performance.
The executive service agreement contains the following key terms: -
Annual Salary:
Total fixed remuneration of $524,777
Performance Bonus:
Long Term Incentive:
Variable, ranging from 0% to 60% of total fixed annual remuneration, based on performance
measured against a range of key performance indicators
Variable, ranging from 0% to 40% of total fixed annual remuneration, based on performance
measured against a range of key performance indicators
Notice Period:
Six months’ notice
Executive officers are employed under ongoing employment arrangements. Their employment thus entails between three to
six months’ notice. This is considered appropriate because they have many years of service with the Group and are
shareholders of the company.
Relationship between Remuneration Policy and Company Performance
The remuneration of executive officers contains an annual cash bonus. The total cash bonus paid in a year is discretionary
and is closely related to and determined by the current profit levels of the Group.
Executive officer’s remuneration is aligned with the long-term Group performance via the shareholdings that these individuals
retain in the Group.
The tables below set out summary information about the Group’s earnings and movements in shareholder wealth for the five
years to June 2020:
30 June
2020
$’000
30 June
2019
$’000
30 June
2018
$’000
30 June
2017
$’000
30 June
2016
$’000
Revenue
66,462
50,126
75,368
45,805
41,828
Net profit/(loss) before income tax
Net profit/(loss) after income tax
1,853
1,266
(2,260)
(4,213)
(1,610)
(2,840)
1,336
1,428
3,705
2,891
30 June
2020
30 June
2019
30 June
2018
30 June
2017
30 June
2016
Share price at end of year
Interim dividend (cents per share)
Final dividend (cents per share)
Basic earnings/(losses) per share
Diluted earnings/(losses) per share
0.48
0.00
0.00
1.23
1.20
0.33
0.00
0.00
(1.72)
(1.72)
0.47
1.00
0.00
(3.03)
(3.03)
0.50
2.00
1.00
1.76
1.76
All dividends above were franked to 100% at 30% corporate tax rate.
0.50
2.00
2.00
3.68
3.65
13
Saunders International Limited
Directors’ Report
AUDITED REMUNERATION REPORT (Cont’d)
Particulars of Directors and Executive Officers interests, including interests under the ESP and Performance Rights Plan during the year ended 30 June 2020 were:
Fully paid
ordinary
shares
issued/
purchased
during 2020
Fully paid
ordinary
shares 2019
Fully paid
ordinary
shares 2020
Share options
2019
Share
options
vested
during 2020
Share
options
granted
during 2020
Share options
at end 2020
Performance
rights 2019
Performance
rights
granted
during 2020
Performance
rights
vested
during 2020
Performance
rights at end
2020
Number
Number
Number
Number
Number
Number
Number
Number
Number
Number Number
Non-executive Directors
Timothy Burnett
11,556,548
Greg Fletcher
TOTAL
5,360
11,561,908
Executive Officers
Mark Benson1
Rudy Sheriff2
Jonathon Bromilow3
Matthew Redmond4
564,240
-
-
-
TOTAL
564,240
GRAND TOTAL
12,126,148
-
-
-
-
-
-
-
-
-
11,556,548
5,360
11,561,908
-
-
-
564,240
450,000
-
-
-
50,000
66,250
60,000
564,240
626,250
12,126,148
626,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
50,000
10,000
10,000
550,000
100,000
76,250
70,000
1,592,529
282,926
101,445
63,677
744,924
219,460
86,846
93,631
170,000
796,250
2,040,577
1,144,861
170,000
796,250
2,040,577
1,144,861
-
-
-
-
-
-
-
-
-
-
-
-
2,337,453
502,386
188,291
157,308
3,185,438
3,185,438
1.CEO Managing Director, 2. Chief Financial Officer 3. GM Civilbuild 4.Operations Manager Construction and Maintenance (existing Saunders employee, part of KMP from 1 July 2019)
14
Saunders International Limited
Directors’ Report
AUDITED REMUNERATION REPORT (Cont’d)
The following table summarises the value of options and performance rights granted during the financial year, in relation to options granted to key management personnel as part of their
remuneration:
Share options granted
during 2020
Share options forfeited
during 2020
Share options vested
during 2020
Performance rights
granted during 2020
Performance rights
forfeited during 2020
Performance rights
vested during 2020
Fair Value
$
Fair Value
$
Fair Value
$
Fair Value
$
Fair Value
$
Fair Value
$
Non-executive Directors
Timothy Burnett
Greg Fletcher
TOTAL
Executive Officers
Mark Benson1
Rudy Sheriff2
Jonathon Bromilow3
Matthew Redmond4
TOTAL
GRAND TOTAL
-
-
-
38,000
19,000
3,800
3,800
64,600
64,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
212,303
62,546
24,751
26,685
326,285
326,285
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The value of the options and rights granted to key management personnel as part of their remuneration is calculated as at the grant date using a Black-Scholes pricing model. The amounts
disclosed as part of remuneration for the financial year, as disclosed on page 16, have been determined by allocating the grant date value on a straight-line basis over the period from grant
date to vesting date. Further details are set out in Note 13.
1.CEO Managing Director, 2. Chief Financial Officer 3. GM Civilbuild 4.Operations Manager Construction and Maintenance (existing Saunders employee, part of KMP from 1 July 2019).
15
AUDITED REMUNERATION REPORT (Cont’d)
Remuneration of Executive Officers and Key Management Personnel
2020
Short-term Benefits
Post-
employment
Benefits
Long term
employee benefits
Cash
Fees/Salary
Cash
Bonus5
Non-
monetary
Benefit6
Superannuation
Equity settled
share based
payments
Total
Percentage of
remuneration
related to
performance
Cash Bonus as
a percentage
of maximum
achievable7
Saunders International Limited
Directors’ Report
$
$
$
$
$
$
Non-executive
Directors
Timothy Burnett
Greg Fletcher
TOTAL
Executive Officers
Mark Benson1
Rudy Sheriff2
Jonathon Bromilow3
Matthew Redmond4
TOTAL
115,069
57,534
172,603
468,124
289,375
225,368
242,901
1,225,768
-
-
-
-
-
-
233,087
35,650
71,341
17,911
26,005
8,755
-
-
348,344
44,405
10,931
5,466
16,397
21,003
21,003
20,691
23,539
86,236
-
-
-
69,611
20,508
8,115
8,750
106,984
%
-
-
-
126,000
63,00
189,000
827,475
410,982
272,085
301,195
1,811,737
36.58%
22.35%
9.57%
11.54%
%
-
-
-
75.1%
75.2%
48.1%
65.0%
GRAND TOTAL
1,398,371
348,344
44,405
102,633
106,984
2,000,737
No director or senior management person appointed during the year received a payment as part of his or her remuneration for a greeing to hold the position. Non-executive directors have no
entitlement to cash bonus or non-monetary benefits. The key management personnel are also the senior managers of the Group. The value of the options and rights granted to key management
personnel as part of their remuneration is calculated as at the grant date using a Black-Scholes pricing model. The amounts disclosed as part of remuneration for the financial year have been
determined by allocating the grant date value on a straight-line basis over the period from grant date to vesting date.
1.CEO Managing Director, 2. Chief Financial Officer 3. GM Civilbuild 4.Operations Manager Construction and Maintenance. 5. Cash bonuses are disclosed on an accruals basis and represent
the amount earned in respect of the current financial year. 6. Non-monetary benefits relate to motor vehicle or other expenses packaged within the employee’s salary package.
7. Excludes equity settled share based payments. Cash bonuses are discretionary and are determined by the Board in September of each year.
16
Saunders International Limited
Directors’ Report
AUDITED REMUNERATION REPORT (Cont’d)
2019
Short-term Benefits
Post-
employment
Benefits
Long term
employee benefits
Cash
Fees/Salary
Cash
Bonus6
Non-
monetary
Benefit7
Superannuation
Equity settled
share based
payments
Total
Percentage of
remuneration
related to
performance
Cash Bonus as
a percentage
of maximum
achievable8
$
$
$
$
$
$
Non-executive
Directors
Timothy Burnett
Greg Fletcher
Malcolm McComas
TOTAL
Executive Officers
Mark Benson1
Rudy Sheriff2
David Griffiths3
Ian McLoughlin4
Jonathon Bromilow5
115,069
57,534
63,000
235,603
471,921
281,437
218,538
222,007
218,311
-
-
-
-
-
-
-
-
139,990
44,821
-
-
22,677
12,369
-
9,542
21,224
-
10,931
5,923
-
16,854
20,451
20,451
20,451
25,000
19,953
TOTAL
1,412,214
206,035
44,588
106,306
-
-
-
-
12,149
21,879
-
-
7,882
41,910
126,000
63,457
63,000
252,457
667,188
380,957
238,989
256,549
267,370
1,811,053
%
-
-
-
-
22.8
17.5
0.0
0.0
10.9
%
-
-
-
-
45.3
57.1
0.0
0.0
59.4
GRAND TOTAL
1,647,817
206,035
44,588
123,160
41,910
2,063,510
1. CEO Managing Director. 2. Chief Financial Officer 3. GM Business Development & Strategy (ceased employment on 30 June 2019). 4.GM Construction & Asset Services (ceased employment
on 25 June 2019) 5. GM Saunders Civilbuild. 6. Cash bonuses are disclosed on an accruals basis and represent the amount earned in respect of the current financial year. 7. Non-monetary
benefits relate to motor vehicle or other expenses packaged within the employee’s salary package. 8. Excludes equity settled share-based payments. Cash bonuses are discretionary and are
determined by the Board in September of each year.
17
Saunders International Limited
Directors’ Report
Subsequent Events
Subsequent to the end of the financial year, there continues to be considerable economic impacts in Australia and globally
arising from the outbreak of the COVID-19 virus and Government actions to reduce the spread of the virus. The Group is
closely monitoring the developments and the implications of the spread of the COVID-19 virus, the advice from health and
government authorities and the World Health Organisation.
Saunders has and continues to actively monitor the rapidly changing impact of COVID-19 (Coronavirus) across the company’s
operations. The company has taken decisive action and a pro-active approach to the current situation ensuring that the safety
of our teams has been at the forefront of all decisions.
Saunders has implemented a rigorous set of company procedures and protocols to ensure safe operational continuity. To date,
there has been no confirmed cases of COVID-19 at Saunders and the company is well prepared if this position is to change.
Saunders has monitored the outcomes of these impacts on our projects and work sites, which include:
• Reduced productivity across some sites (including Saunders’ precast facility) due to the increased requirements to
ensure that relevant social distancing guidelines are being adhered to
• Delayed receipt of material due to impacts on freight channels for our international supply chain other logistic
constraints
•
Interstate travel restrictions preventing specialist project personnel from being able to attend certain sites
Saunders continues to work through the detailed scenarios and business continuity planning to minimise these supply chain
and other operational business interruptions. Saunders has observed that there has been an increase of new project
opportunities being delayed with limited financial investment decisions being approved, impacting new capital expenditure.
Although Saunders has experienced minor resourcing and logistic issues with border closures and reduced productivity across
a number of sites due to implementation of social distancing measures, there has been no significant financial effects arising
from the economic impacts of the virus included in the financial results for the year ended 30 June 2020.
Other than this, the directors are not aware of any matter or circumstance, not already disclosed, occurring subsequent to the
end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of
those operations, or the state of affairs of the Group in future financial years.
Environmental Regulation and Performance
Saunders International is subject to a range of environmental regulations. In line with our Safety, Health and Quality objectives,
Saunders strives to continually improve its environmental performance.
During the financial year, Saunders International, were compliant with all the reporting requirements under any relevant
legislation. There were no incidents which required reporting.
Future Developments
Details around the Operating and Financial Review and Outlook are disclosed on page 7 and 8. Disclosure of other information
regarding likely developments in the operations of the Group in future financial years and the expected results of those
operations is likely to result in unreasonable prejudice to the Group. Accordingly, this information has not been disclosed in
this report.
Indemnification of Officers and Auditors
During the financial year, the Group paid a premium in respect of a contract insuring the directors of the Group, the Group
secretary, and all executive officers of the Group and of any related body corporate against a liability incurred by such a director,
secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified
or agreed to indemnify an officer or auditor of the Group or of any related body corporate against a liability incurred as such an
officer or auditor.
18
Saunders International Limited
Directors’ Report
Non-audit Services
Details of amounts paid or payable to the auditor for non-audit services are outlined in Note 24 to the financial statements.
During this financial year there was $26,781 paid or payable for non-audit services.
Auditor’s Independence Declaration
The auditor’s independence declaration is included on page 20 of the annual report.
Rounding Off of Amounts
The Group is of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191,
dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors’ report and the financial
statements are rounded off to the nearest thousand dollars, unless otherwise indicated.
This directors’ report is signed in accordance with a resolution of directors made pursuant to s298(2) of the Corporations Act
2001.
On behalf of the Directors
Mark Benson
Director
Sydney, 26 August 2020
Timothy Burnett
Director
Sydney, 26 August 2020
19
Auditor’s Independence Declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Eclipse Tower
60 Station Street
Parramatta
Sydney NSW 2150
Australia
Tel: +61 (0) 2 9840 7000
www.deloitte.com.au
26 August 2020
Dear Board Members
Saunders International Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the directors of Saunders International Limited.
As lead audit partner for the audit of the financial statements of Saunders International Limited for the financial year
ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Nathan Balban
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific and the Deloitte Network.
20
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Eclipse Tower
60 Station Street
Parramatta
Sydney NSW 2150
Australia
Tel: +61 (0) 2 9840 7000
www.deloitte.com.au
Independent Auditor’s Report to the Members of
Saunders International Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Saunders International Limited (the “Company”) and its subsidiaries (the “Group”)
which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit
or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting
policies and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance
for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
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 are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific and the Deloitte Network.
21
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. These 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.
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Recognition of revenue and contract assets and
contract liabilities on construction contracts
Our procedures included, but were not limited to:
Refer to Note 1(c) ‘Construction Contracts’, Note 1(i)
‘Revenue’, Note 2 ‘Critical accounting judgements
and key sources of estimation uncertainty’, Note 3
‘Revenue’ and Note 10 ‘Contract Assets and Contract
Liabilities’.
•
•
As at 30 June 2020 the Group’s revenue from
construction contracts is $66.5 million.
Construction revenue is recognised by management
after assessing all factors relevant to each contract.
Significant management estimation is required in
assessing the following:
•
•
•
•
Estimation of total contract revenue, including
determination of contractual entitlement and
assessment of
the probability of customer
approval of variations and acceptance of claims;
Estimation of total contract costs, including
revisions to total forecast costs for events or
conditions that occur during the performance of
the contract, or are expected to occur to
complete the contract;
Estimation of project contingencies; and
Estimation of stage of completion
determination of project completion date.
including
Evaluating management’s processes and relevant
controls in respect of the recognition of revenue and
contract assets and contract liabilities on construction
contracts; and
Testing contracts on a sample basis, and:
▪
▪
agreed the contract terms to the initial contract price,
tested contractual entitlements
for changes,
variations and claims recognised within contract
revenue
to supporting documentation, and by
reference to the underlying contract,
assessed management’s basis for estimates of
unapproved variations and claims brought to account
within contract revenue,
tested a sample of costs incurred to date to
supporting documentation,
assessed the forecast costs to complete through
discussion and challenge of project managers and
finance personnel,
recalculated the percentage of completion based on
costs incurred to date relative to total forecast costs,
contingency
assessed
allowances within forecast costs,
evaluated exposure to liquidated damages for late
delivery of works, and
challenged management’s ability to forecast margins
on contracts by analysing the accuracy of previous
margin forecasts to actual outcomes.
appropriateness
of
▪
▪
▪
▪
▪
▪
▪
We also assessed the appropriateness of the disclosures in
Notes 1(c), 1(i), 2, 3 and 10 to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the information included in the Group’s
annual report for the year ended 30 June 2020 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 express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the a udit, or
otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
22
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s
internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
•
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether
the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
•
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and
performance of the Group’s audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of
the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
23
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 17 of the Directors’ Report for the year ended 30 June
2020.
In our opinion, the Remuneration Report of Saunders International Limited, for the year ended 30 June 2020, 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.
DELOITTE TOUCHE TOHMATSU
Nathan Balban
Partner
Chartered Accountants
Sydney, 26 August 2020
24
Saunders International Limited
Directors’ Declaration
Directors’ Declaration
The directors declare that: -
(a)
(b)
(c)
in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable;
in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standard,
as stated in Note 1 to the financial statements;
in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act
2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance
of the Group, and
(d)
the directors have been given the declarations required by s.295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to s295(5) of the Corporations Act 2001.
On behalf of the Directors
Mark Benson
Director
Sydney, 26 August 2020
Timothy Burnett
Director
Sydney, 26 August 2020
25
Saunders International Limited
Consolidated Statement of Profit or Loss and other Comprehensive Income
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the Financial Year Ended 30 June 2020
Revenue
Other income
Materials and third-party costs charged to projects
Employee benefits expense
Depreciation expense
Motor vehicle expense
Occupancy and operating lease expense
Finance costs
Other expenses
Profit / (loss) before income tax
Income tax (expense) / benefit
Profit / (loss) for the year attributable to shareholders of the parent entity
Other comprehensive income
Total comprehensive profit / (loss) attributable to shareholders of the
parent entity
Earnings/(losses) per share
Basic (cents per share)
Diluted (cents per share)
Note
2020
$’000
2019
$’000
3
4
4
4
5
66,462
50,126
185
218
(37,280)
(26,178)
(22,588)
(21,768)
(1,468)
(1,070)
(306)
(244)
(81)
(286)
(714)
(20)
(2,827)
(2,568)
1,853
(587)
1,266
-
(2,260)
650
(1,610)
-
1,266
(1,610)
15
15
1.23
1.20
(1.72)
(1.72)
The accompanying notes form part of these financial statements.
26
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2020
Saunders International Limited
Consolidated Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Contract Assets
Inventories
Other
Total current assets
Non-current assets
Property Plant and equipment
Right-of-use assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Contract liabilities
Provisions
Current tax liability
Lease liabilities
Borrowings
Lease incentives
Total current liabilities
Non-current liabilities
Provisions
Lease liabilities
Borrowings
Lease incentives
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Shares buy-back reserve
Share based payments reserve
Retained earnings
Total equity
Note
19(a)
6
10
7
8
5
9
10
11
5
8
12
11
8
12
13
13
13
14
The accompanying notes form part of these financial statements.
2020
$’000
11,085
13,297
6,711
374
38
31,505
10,209
2,085
2,215
14,509
2019
$’000
8,030
8,475
2,681
169
286
19,641
10,352
-
2,825
13,177
46,014
32,818
14,246
4,588
2,034
146
568
-
-
21,582
234
1,540
-
-
1,774
7,105
1,785
1,801
160
-
122
35
11,008
94
381
138
613
23,356
11,621
22,658
21,197
19,701
(351)
776
2,532
22,658
19,701
(351)
581
1,266
21,197
27
Saunders International Limited
Consolidated Statement of Changes in Equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the Financial Year Ended 30 June 2020
Balance at 1 July 2018
Loss for the year
Total comprehensive loss
Transactions with owners in their capacity as owners
Share based payments vested/lapsed
Share-based payments expense
Balance at 30 June 2019
Balance at 1 July 2019 (as previously reported)
Opening balance adjustment on application of AASB 16 (Note 1(a))
Balance at 1 July 2019 (restated)
Profit for the year
Total comprehensive income
Transactions with owners in their capacity as owners
Share based payments vested/lapsed
Share-based payments expense
Balance at 30 June 2020
Issued
Capital
$’000
19,652
-
-
49
-
19,701
19,701
-
19,701
-
-
-
-
Shares
(Issued)/Vested
Under
Employee
share plan
$’000
(351)
Share
Based
Payments
reserve
$’000
623
-
-
-
-
(351)
(351)
-
(351)
-
-
-
-
-
-
(49)
7
581
581
-
581
-
-
-
195
776
19,701
(351)
The accompanying notes form part of these financial statements.
Retained
earnings
$’000
2,876
(1,610)
(1,610)
-
-
1,266
1,266
-
1,266
1,266
1,266
-
-
Total
$’000
22,800
(1,610)
(1,610)
-
7
21,197
21,197
-
21,197
1,266
1,266
-
195
2,532
22,658
28
CONSOLIDATED STATEMENT OF CASH FLOWS
for the Financial Year Ended 30 June 2020
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs paid
Income taxes refunded / (paid)
Saunders International Limited
Notes to the Financial Statements
Note
2020
$’000
2019
$’000
73,241
54,966
(68,243)
(58,710)
5
(81)
-
45
-
377
Net cash inflow / (outflow) from operating activities
19(b)
4,922
(3,322)
Cash flows from investing activities
Payments for plant and equipment
Proceeds from sale of assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds of borrowings
Repayment of borrowings
Repayments of lease liabilities
Net cash used in financing activities
(1,439)
(1,189)
6
180
(1,433)
(1,009)
522
(522)
(438)
-
-
(81)
(438)
(81)
Net increase / (decrease) in cash and cash equivalents
3,051
(4,412)
Cash and cash equivalents at the beginning of the financial year
8,030
12,377
Effects of exchange rate fluctuations on cash held
4
65
Cash and cash equivalents at the end of the financial year
19(a)
11,085
8,030
The accompanying notes form part of these financial statements.
29
Saunders International Limited
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
1.
SUMMARY OF ACCOUNTING POLICIES
Statement of Compliance
The financial statements are general purpose financial statements which have been prepared in accordance with the
Corporations Act 2001, Accounting Standards and other authoritative pronouncements issued by the Australian
Accounting Standards Board (AASB), and comply with other requirements of the law.
The financial statements comprise the consolidated financial statements of the Group. For the purposes of preparing
the consolidated financial statements, the Group is a for-profit entity.
Accounting Standards include Australian Accounting Standards (‘AAS’). Compliance with AAS ensures that the
financial statements and notes of the Group comply with International Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the directors on 26th August 2020.
Basis of Preparation
The financial statements for the Group have been prepared on the basis of historical cost. Cost is based on the fair
values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars,
unless otherwise noted.
The Group is of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument
2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors’ report
and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.
(a) Amendments to Accounting Standards that are mandatorily effective for the current reporting period
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board (the AASB) that are relevant to its operations and effective for an accounting period that begins on
or after 1 July 2019. New and revised Standards and amendments thereof and Interpretations effective for the current
year that are relevant to the Group include:
AASB 16 Leases
In the current year, the Group has applied AASB 16 Leases that is effective for annual periods that begin on or after 1
January 2019.
AASB16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes
to lessee accounting by removing the distinction between operating and finance lease and requiring the recognition of
a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of
low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely
unchanged. Details of these new requirements are described further in this note. The impact of the adoption of AASB
16 on the Group’s consolidated financial statements is described below.
The date of initial application of AASB 16 for the Group is 1 July 2019. The Group adopted the modified retrospective
approach.
Under this approach the Group has recognised the cumulative effect of initially applying AASB 16 as an adjustment to
the opening balance of retained earnings at the date of initial application. This approach does not permit the
restatement of comparatives, which continue to be presented under the AASB 117 and Interpretation 4.
(i)
Impact of new definition of a lease
The Group has made use of the practical expedient available on transition to AASB 16 not to reassess whether a
contract is or contains a lease. Accordingly, the definition of a lease in accordance with AASB 117 and Interpretation
4 will continue to be applied to those contracts entered or modified before 1 July 2019.
The change in definition of a lease mainly relates to the concept of control. AASB 16 determines whether a contract
contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period
of time in exchange for consideration. This is in contrast to the focus on 'risks and rewards' in AASB 117 and
Interpretation 4.
The Group has also elected not to reassess whether a contract is or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date, the Group relied on its assessment made applying AASB
117 and Interpretation 4 Determining whether an Arrangement contains a Lease.
30
Saunders International Limited
Notes to the Financial Statements
1. SUMMARY OF ACCOUNTING POLICIES (cont)
(a) Amendments to Accounting Standards that are mandatorily effective for the current reporting period (cont)
The Group applies the definition of a lease and related guidance set out in AASB 16 to all contracts entered into or
changed on or after 1 July 2019.
(ii)
Impact on Lessee Accounting
Former operating leases
AASB 16 changes how the Group accounts for leases previously classified as operating leases under AASB 117, which
were off balance sheet.
Applying AASB 16, for all leases (except as noted below), the Group:
a. Recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially
measured at the present value of the future lease payments;
b. Recognises depreciation of right-of-use assets and interest on lease liabilities in profit or loss;
c.
Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest
(presented within the financing activities) in the consolidation statement of cash flows.
Lease incentives (e.g. rent-free period) are recognised as part of the measurement of the right-of-use assets and lease
liabilities whereas under AASB 117 they resulted in the recognition of a lease incentive, amortised as a reduction of
rental expenses generally on a straight-line basis.
Under AASB 16, right-of-use assets are tested for impairment in accordance with AASB 136.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as tablet and personal
computers, small items of office furniture and telephones), the Group has opted to recognise a lease expense on a
straight-line basis as permitted by AASB 16. This expense is presented within ‘other expenses’ in profit or loss.
Former finance leases
The main differences between AASB 16 and AASB 117 with respect to contracts formerly classified as finance leases
is the measurement of the residual value guarantees provided by the lessee to the lessor. AASB 16 requires that the
Group recognises as part of its lease liability only the amount expected to be payable under a residual value guarantee,
rather than the maximum amount guaranteed as required by AASB 117. This change did not have a material effect on
the Group’s consolidated financial statements.
(iii) Impact on Lessor Accounting
AASB 16 does not change substantially how a lessor accounts for leases. Under AASB 16, a lessor continues to
classify leases as either finance leases or operating leases and account for those two types of leases differently.
However, AASB 16 has changed and expanded the disclosures required, in particular with regard to how a lessor
manages the risks arising from its residual interest in leased assets.
Under AASB 16, an intermediate lessor accounts for the head lease and the sub-lease as two separate contracts. The
intermediate lessor is required to classify the sub-lease as a finance or operating lease by reference to the right-of-use
asset arising from the head lease (and not by reference to the underlying asset as was the case under AASB 117).
There were no changes to the Group's accounting for assets held as a lessor under operating leases as a result of the
adoption of AASB 16.
(iv) Impact on Lessee Accounting
Practical expedient applied
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard:
•
•
•
•
•
applied a single discount rate to a portfolio of leases with reasonably similar characteristics;
relying on previous assessments on whether leases are onerous as an alternative to performing an
impairment review - there were no onerous contracts as at 1 July 2019;
relief from requirement to separate non-lease components from lease components;
accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-
term leases; and
accounting for operating lease for which the underlying assets are valued less than $5,000 over the entire
lease term as at 1 July 2019 as of low-value leases.
31
Saunders International Limited
Notes to the Financial Statements
1. SUMMARY OF ACCOUNTING POLICIES (cont)
Measurement of lease liabilities
The weighted average lessees incremental borrowing rate applied to lease liabilities recognised in the statement of
financial position on 1 July 2019 is 3.5% to 4%.
The following table shows the operating lease commitments disclosed applying AASB 117 at 30 June 2019, discounted
using the incremental borrowing rate at the date of initial application and the lease liabilities recognised in the statement
of financial position at the date of initial application:
Operating lease commitments disclosed as at 30 June 2019
Add lease fit out incentive
Impact of discounting
Impact of the adoption of AASB 16
Add: finance lease liabilities recognised as at 30 June 2019
Lease liabilities recognised as at 1 July 2019
Of which are included in
Current lease liabilities
Non-current lease liabilities
$’000
1,487
173
(96)
1,564
503
2,067
471
1,596
2,067
Adjustments recognised in the consolidated statement of financial position on 1 July 2019
As reported at 30
June 2019 ($’000)
AASB 16 transition
adjustments ($’000)
Opening balance 1
July 2019 ($’000)
Impact on Total Assets
ROU asset
Property, Plant & Equipment
Net Impact on Total Assets
Impact on Total Liabilities
Lease liability – current
Lease liability – non-current
Borrowings – current
Borrowings – non-current
Lease incentives
Net Impact on Total Liabilities
Net Impact on Retained Earnings
-
10,352
-
-
122
381
173
1,993
9,750
471
1,596
-
-
-
1,993
(602)
1,391
471
1,596
(122)
(381)
(173)
1,391
-
The Group has recognised $1,993,000 of right of use assets and $2,067,000 of lease liabilities upon transition to AASB
16 net of the following other reclassifications:
•
•
Equipment under finance lease arrangements previously presented within ‘Property, plant and equipment’ is
now presented within the line item ‘Right-of-use assets’. There has been no change in the amount recognised.
Lease incentives liability previously recognised with respect to operating leases have been derecognised and
the amount was factored into the measurement of the right-of-use assets and lease liabilities.
32
Saunders International Limited
Notes to the Financial Statements
1. SUMMARY OF ACCOUNTING POLICIES (cont)
Accounting Standard in issue but not yet effective
Certain Australian Accounting Standards and Interpretations have recently been issued or amended but are not yet
effective and have not been adopted by the Group for year ended 30 June 2020. There will be no material impact of
these new standards or amendments to the consolidated statement of financial position and consolidated statement of
profit or loss and other comprehensive income of the Group.
(b) Cash and Cash Equivalents
Cash of the Group comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
(c) Construction Contracts
The Group recognises a contract asset for any work performed. Any amount previously recognised as a contract asset
is reclassified to trade receivables at the point at which it is invoiced to the customer. If the amount invoiced exceeds
the revenue recognised to date then the Group recognises a contract liability for the difference. There is not considered
to be a significant financing component in construction contracts with customers as the period between the recognition
of revenue and the receipt of payment is always expected to be less than one year.
(d)
Employee Benefits
A liability of the Group is recognised for benefits accruing to employees in respect of wages and salaries, annual leave,
long service leave, and sick leave when it is probable that settlement will be required and they are capable of being
measured reliably.
Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their
nominal values using the remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are
measured as the present value of the estimated future cash outflows to be made by the Group in respect of services
provided by employees up to reporting date.
(e)
Income Tax
Current Tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable
profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively
enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent
that it is unpaid (or refundable).
Deferred Tax
Deferred tax is recognised on temporary differences between the tax base of an asset or liability and its carrying amount
in the financial statements. The tax base of an asset or liability is the amount attributed to that asset or liability for ta x
purposes.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are
recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax offsets can be utilised.
However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise
from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects
neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable
temporary differences arising from the initial recognition of goodwill.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the
asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted by reporting date. 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 reporting date, to recover or settle
the carrying amount of its assets and liabilities.
33
Saunders International Limited
Notes to the Financial Statements
1. SUMMARY OF ACCOUNTING POLICIES (cont)
Deferred tax assets and liabilities are offset 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 is recognised as an expense or income in profit and loss, except when it relates to items
credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it
arises from the initial accounting for a business combination, in which case it is taken into account in the determination
of goodwill or excess.
(f)
Leases
The Group has applied AASB 16 using the cumulative catch-up approach and therefore comparative information has
not been restated and is presented under AASB 117. The details of accounting policies under both AASB 117 and
AASB 16 are presented separately below.
The Group as lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a
right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee,
except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets
(such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group
recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless
another systematic basis is more representative of the time pattern in which economic benefits from the leased assets
are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the
Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
•
•
•
•
•
fixed payments, less any lease incentives receivable;
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at
the commencement date;
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
•
•
•
The lease term has changed or there is a significant event or change in circumstances resulting in a change in
the assessment of exercise of a purchase option, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
The lease payments change due to changes in an index or rate or a change in expected payment under a
guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease
payments using an unchanged discount rate (unless the lease payments change is due to a change in a
floating interest rate, in which case a revised discount rate is used).
A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case
the lease liability is remeasured based on the lease term of the modified lease by discounting the revised
lease payments using a revised discount rate at the effective date of the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at
or before the commencement day, less any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment losses.
34
Saunders International Limited
Notes to the Financial Statements
1. SUMMARY OF ACCOUNTING POLICIES (cont)
(f)
Leases
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which
it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision
is recognised and measured under AASB 137. To the extent that the costs relate to a right-of-use asset, the costs are
included in the related right-of-use asset.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a
lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects
to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
The Group applies AASB 136 to determine whether a right-of-use asset is impaired and accounts for any identified
impairment loss.
(g)
Plant and Equipment
Plant and equipment and leasehold improvements are stated at cost less accumulated depreciation and impairment.
Note 7 provides more detail. Cost includes expenditure that is directly attributable to the acquisition of the item. In the
event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the
amounts payable in the future to their present value as at the date of acquisition.
Depreciation is provided on plant and equipment. Depreciation is calculated on a straight-line basis so as to write off
the net cost over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over
the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. The estimated
useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the
effect of any changes recognised on a prospective basis. Freehold Land is not depreciated.
The following estimated useful lives are used in the calculation of depreciation: -
Buildings
Plant and Equipment
Office Furniture and Equipment
40 years
3 – 20 years
3 – 7 years
(h)
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 reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is
measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of
those cashflows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and
has raised a valid expectations in those affected that it will carry out the restructuring by starting to implement the plan
or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the
direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the
restructuring and not associated with ongoing activities of the entity.
(i)
Revenue
Engineering and Construction revenue
The Group derives revenue from the long-term construction of tanks across Australia and the Pacific region. Contracts
entered into may be for the construction of one or several inter-linked pieces of large infrastructure. These contracts
include two performance obligations being:
1. The design and provision of plans for the construction of tanks; and
2. The construction, site establishment, erection, commissioning and testing of tanks.
35
1. SUMMARY OF ACCOUNTING POLICIES (cont)
(i) Revenue (cont)
Saunders International Limited
Notes to the Financial Statements
Each tank is referred to as a project. Where contracts are entered into for the design and construction of several
projects the total transaction price is allocated across each performance obligation based on stand-alone selling prices.
The transaction price typically contains a fixed lump sum amount. It is normal practice for contracts to include bonus
and penalty elements based on timely construction or other performance criteria known as variable consideration,
discussed below.
The performance obligations are fulfilled over time and as such revenue is recognised over time. This is because as
work is performed on the assets being designed or constructed they are controlled by the customer and have no
alternative use to the Saunders Group, with the Group having a right to payment for the performance to date. Thus
control of the goods and services is transferred to the customer over time.
Revenue earned is typically invoiced monthly or in some cases on achievement of milestones or in line with costs
incurred. Invoices are paid on commercial terms, which may include the customer withholding a retention amount until
finalisation of the construction. Where payment is received prior to or post recognition of revenue using the percentage
cost of completion method, revenue is deferred or accrued for on the balance sheet.
Services revenue
Fixed price contracts
For fixed price services contracts, revenue arises from maintenance and other services supplied to infrastructure assets
and facilities which may involve a range of services and processes. The Group has assessed the services provided to
be one performance obligation. The transaction price typically contains a fixed lump sum amount. The total transaction
price may include variable consideration.
Performance obligations are fulfilled over time as the customer simultaneously receives and consumes the benefits
provided by the Group’s performance as the Group performs, and the Group enhances assets which the customer
controls as the Group performs. Thus control of the goods and services is transferred to the customer over time.
Revenue is recognised as the services are provided using cost as the measure of progress.
Customers are in general invoiced on a monthly basis for an amount that is in line with costs incurred. Payment is
received following invoicing on normal commercial terms. Where payment is received prior to or post recognition of
revenue using the percentage cost of completion method, revenue is deferred or accrued for on the balance sheet.
Cost plus contracts
For cost plus services contracts, revenue arises from maintenance and other services supplied to infrastructure assets
and facilities which may involve a range of services and processes. The Group has assessed the services provided to
be one performance obligation.
Performance obligations are fulfilled over time as the customer simultaneously receives and consumes the benefits
provided by the Group’s performance as the Group performs, and Group enhances assets which the customer controls
as the Group performs. Thus control of the goods and services are transferred to the customer over time.
Customers are in general invoiced on a monthly basis for an amount that is which is calculated on a cost plus basis
that are aligned with the stand alone selling prices for each performance obligation. As the amount the Group is entitled
to invoice to a customer corresponds directly with the value provided to the customer under the Group’s performance
completed to date, the Group has applied the practical expedient under AASB 15 and recognised revenue in the
amount that they are entitled to invoice. Payment is received on normal commercial terms.
Fabrication and construction revenue
Fabrication and construction revenue arises from contracts maintained by the Group to fabricate components and
construct bridges. These contracts include three performance obligations being:
1. The design and provision of plans for the construction of bridges; and
2. The fabrication, construction, site establishment, erection, commissioning and testing of bridges.
The transaction price typically contains a fixed lump sum amount. The total transaction price is allocated across each
performance obligation based on stand-alone selling prices. It is normal practice for contracts to include bonus and
penalty elements based on timely construction or other performance criteria known as variable consideration,
discussed below.
Each performance obligation is fulfilled over time as the Group enhances assets which the customer controls, for which
the Group does not have alternative use and for which the Group has right to payment for performance to date. In
some cases, the fabrication of bridge components can be contracted for by itself and in these cases, revenue will be
recorded over time. Revenue is recognised as the services are provided using cost as the measure of progress.
36
Saunders International Limited
Notes to the Financial Statements
1. SUMMARY OF ACCOUNTING POLICIES (cont)
(i) Revenue (cont)
Customers are in general invoiced on a monthly basis for an amount that is in line with costs incurred. Payment is
received following invoice on normal commercial terms. Where payment is received prior to or post recognition of
revenue using the percentage cost of completion method, revenue is deferred or accrued for on the balance sheet.
Variable consideration
Where consideration in respect of a contract is variable, the expected value of revenue is only recognised when the
uncertainty associated with the variable consideration is subsequently resolved, known as “constraint” requirements.
The Group assesses the constraint requirements on a periodic basis when estimating the variable consideration to be
included in the transaction price. When calculating the estimates of variable consideration, the Group considers
available information including historic performance on similar contracts and other information regarding events that
affect the variability that are out of the control of the Group.
Where modifications in design or contract requirements are entered into, these are treated as a continuation of the
original contract in accordance with the contract modification guidance in AASB 15, and the transaction price and
measure of progress is updated to reflect these. Where the price of the modification has not been confirmed, this is
treated as variable consideration and an estimate is made of the amount of revenue to recognise whilst also considering
the constraint requirement.
Tender and contract costs
Costs incurred prior to the commencement of a contract that give rise to resources that will be used in the anticipated
delivery of the contract and are expected to be recovered are capitalised. Typically, these are design costs. Where
these contract assets are capitalised, they are amortised over the course of the contract consistent with the transfer of
service to the customer. Tenders costs which are capitalised are only costs incremental in the winning of a contract.
(j)
Financial Assets
Loans and receivables
Trade receivables, loans and other receivables are recorded at amortised cost less impairment.
(k)
Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the
cost of acquisition of an asset or as part of an item of expense; or
ii.
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables.
Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising
from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as
operating cash flows.
(l)
Impairment of Assets
At each reporting date, the Group reviews the carrying amounts of its tangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-
generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a 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 (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment
loss is treated as a revaluation decrease.
37
Saunders International Limited
Notes to the Financial Statements
1. SUMMARY OF ACCOUNTING POLICIES (cont)
(l)
Impairment of Assets
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased
to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment or loss been recognised for the asset
(cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless
the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation
increase.
(m)
Contributed Equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of income
tax. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are not included
in the cost of the acquisition as part of the purchase consideration.
(n) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including
structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
i.
ii.
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
iii.
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when
the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.
The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights
in an investee are sufficient to give it power, including:
i.
the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other
vote holders;
ii.
potential voting rights held by the Company, other vote holders or other parties;
iii.
rights arising from other contractual arrangements; and
iv. any additional facts and circumstances that indicate that the Company has, or does not have, the current
ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at
previous shareholders' meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of profit or loss and other comprehensive income from the
date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and
each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling
interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non -
controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with the Group's accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members
of the Group are eliminated in full on consolidation.
Changes in the Group's ownership interests in existing subsidiaries
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-
controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to owners of the Company.
38
Saunders International Limited
Notes to the Financial Statements
1. SUMMARY OF ACCOUNTING POLICIES (cont)
(n) Basis of consolidation
When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the
difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained
interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any
non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that
subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary
(i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable
AASB’s).
(o) Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests
issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit
or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value,
except that:
-
deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised
and measured in accordance with AASB 112 Income Taxes and AASB 119 respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree
are measured in accordance with AASB 2 at the acquisition date); and
assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 Non-current Assets
Held for Sale and Discontinued Operations are measured in accordance with that Standard.
-
-
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over
the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the
fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in
profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their
holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at
fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable
net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-
controlling interests are measured at fair value or, when applicable, on the basis specified in another AASB.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from
a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent
consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding
adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information
obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and
circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration
that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted
for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent
reporting dates in accordance with AASB 139, or AASB 137 Provisions, Contingent Liabilities and Contingent Assets,
as appropriate, with the corresponding gain or loss being recognised in profit or loss.
When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is
remeasured to its acquisition-date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts
arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other
comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were
disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities
are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date
that, if known, would have affected the amounts recognised at that date.
39
Saunders International Limited
Notes to the Financial Statements
1. SUMMARY OF ACCOUNTING POLICIES (cont)
(p)
Share Based Payments
Equity-settled share-based payments with employees and others providing similar services are measured at the fair
value of the equity instrument at the grant date. Fair value is measured by use of a Black-Scholes-Mertin model, which
requires the input of highly subjective assumptions.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.
Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and
services received, except where the fair value cannot be estimated reliably, in which case they are measured at the
fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty
renders the service.
For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised
at the current fair value determined at each reporting date.
(q) Comparative amounts
When required by accounting standards, comparative amounts have been adjusted to conform to changes in
presentation for the current financial year.
2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of Saunders’ accounting policies, which are described in Note 1, the directors of the Group are
required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Key Sources of Estimation Uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the
balance date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
Construction contracts
Construction revenue is recognised by management after assessing all factors relevant to each contract. Significant
management estimation is required in assessing the following:
•
•
•
•
Estimation of total contract revenue, including determination of contractual entitlement and assessment of
the probability of customer approval of variations and acceptance of claims;
Estimation of total contract costs, including revisions to total forecast costs for events or conditions that occur
during the performance of the contract, or are expected to occur to complete the contract;
Estimation of project contingencies; and
Estimation of stage of completion including determination of project completion date.
Recoverability of deferred tax assets
Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available
against which deductible temporary differences or unused tax losses can be utilised. The factors considered by
management in making this assessment includes expectations of future profitability, and in the case of unused tax
losses, that these will continue to be available under current tax legislation.
COVID-19
The outbreak of the Novel Coronavirus (COVID-19) was declared as a "Global Pandemic" by the World Health
Organisation on 11 March 2020 and developments throughout 2020 has caused great uncertainty for the global and
Australian economy. This uncertainty has created risks and conditions that the Group has not encountered before. As
a result there has been a continual assessment of the impacts of COVID-19 on the financial statements arising from
this major global risk.
40
Saunders International Limited
Notes to the Financial Statements
3.
REVENUE
Revenue stream
Revenue
recognition
Australia
$’000
PNG
$’000
Total
2020
$’000
Australia
PNG
$’000
$’000
Total
2019
$’000
Engineering & Construction
Over time
11,175
19
11,194
5,580
2,400
7,980
Services
Over time
Fabrication & Construction
Over time
29,232
26,031
Interest Received
Point in time
5
-
-
-
29,232
18,937
26,011
23,147
5
62
-
-
-
18,937
23,147
62
Total revenue
66,443
19
66,462
47,726
2,400
50,126
4.
PROFIT / (LOSS) FOR THE YEAR
Other income
Other
Profit on sale of asset
Profit / (loss) before income tax has been arrived at after (crediting) / charging the
following expenses:
Cost of sales
Depreciation
Buildings
Plant and equipment
Right-of-use-assets
Office furniture and equipment
Finance costs
Release of Make good provision
Bad debt expense
Lease expenses:
Finance cost on lease liabilities
Employee benefits expense:
Post-employment benefits – defined contributions
Payroll tax expense
Employee Share Plan
Salary and wages
2020
$’000
2019
$’000
182
3
185
138
80
218
55,665
42,987
29
822
446
171
1,468
-
-
-
29
950
-
91
1,070
17
(270)
240
81
20
1,318
859
195
20,216
22,588
1,450
1,018
7
19,293
21,768
41
Saunders International Limited
Notes to the Financial Statements
5.
INCOME TAX
Income tax recognised in profit/loss
Income tax expense comprises:
Current income tax (benefit) / expense
Deferred tax expense / (benefit) relating to the origination and reversal of temporary
differences
Total income tax expense / (benefit)
The prima facie income tax expense on pre-tax accounting profit reconciles to
income tax expense in the financial statements as follows:
Profit/(loss) before taxation
Income tax at 30%
Other
Total income tax expense / (benefit)
Current tax liability
2020
$’000
(23)
610
587
2019
$’000
55
(705)
(650)
1,853
(2,260)
556
31
587
(146)
(678)
28
(650)
(160)
The income 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.
Deferred Tax Balances
The deferred tax expense above is itemised as follows:
2020
Deferred tax assets
Employee benefits
Restructure Provision
Contract Assets
Lease liabilities
Tax Losses
Share issue costs
Accruals and other
Deferred tax asset
2020
Deferred tax liabilities
Property, plant and equipment
Right of use asset
Other
Deferred tax liabilities
Net deferred tax asset
Opening
balance
$’000
(Charged)/
Credited to
income
$’000
Recognised directly
to equity
$’000
Closing
balance
$’000
526
87
40
-
2,139
111
318
3,221
(381)
-
(15)
(396)
2,825
94
3
1
366
(548)
(48)
85
(47)
(208)
(370)
15
(563)
(610)
-
-
-
-
-
-
-
-
-
-
-
-
-
620
90
41
366
1,591
63
403
3,174
(589)
(370)
-
(959)
2,215
42
5.
INCOME TAX (cont)
2019
Deferred tax assets
Employee benefits
Restructure Provision
Contract Assets
Tax Losses
Share issue costs
Accruals and other
Deferred tax asset
2019
Deferred tax liabilities
Property, plant and equipment
Other
Deferred tax liabilities
Net deferred tax asset
Saunders International Limited
Notes to the Financial Statements
Opening
balance
$’000
(Charged)/
Credited to
income
$’000
Recognised directly to
equity
$’000
Closing
balance
$’000
697
522
221
735
128
142
2,445
(555)
(35)
(590)
1,855
(171)
(435)
(446)
1,404
(17)
176
511
174
20
194
705
-
-
265
-
-
-
265
-
-
-
265
526
87
40
2,139
111
318
3,221
(381)
(15)
(396)
2,825
43
6.
TRADE AND OTHER RECEIVABLES
Trade receivables (i)
Saunders International Limited
Notes to the Financial Statements
2020
$’000
13,297
2019
$’000
8,475
A provision matrix is determined based on historic credit loss rates for each group of customers, adjusted for any
material expected changes to the customer’s future credit risk. On that basis, the credit loss allowance as at 30 June
2020 and 30 June 2019 was determined as follows:
Provision matrix
Current
1 to 30 days
30 to 60 days
60 to 90 days
Over 90 days
Contract assets
Receivables
Current
1 to 30 days
30 to 60 days
60 to 90 days
Over 90 days
Total receivables
Contract assets (Note 10)
Allowance based on historic credit losses
Adjustment for expected changes in
credit risk ¹
Credit loss allowance
Net carrying amount
2020
Australia
0.0%
0.0%
0.0%
0.2%
0.5%
0.1%
2020
Total
Group
$’000
9,921
1,177
682
1,108
520
13,408
6,711
11
100
111
2020
PNG
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2019
Australia
0.0%
0.0%
0.0%
0.2%
0.5%
0.1%
2019
2019
Australia
$’000
PNG
$’000
5,036
2,739
151
263
460
8,649
2,549
5
255
260
-
-
-
82
4
86
132
-
-
-
2019
PNG
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2019
Total
Group
$’000
5,036
2,739
151
345
464
8,735
2,681
5
255
260
2020
2020
Australia
$’000
PNG
$’000
9,921
1,177
682
1,108
469
13,357
6,711
11
100
111
-
-
-
-
51
51
-
-
-
-
19,957
51
20,008
10,938
218
11,156
¹ Adjustment to reflect the lower credit risk and probability of default relating to customers that are over 90 days past due.
Trade receivables and contract assets are written off when there has been a significant change in the risk
characteristics of a debtor and there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group.
(i)
The average credit period on sale of goods and rendering of services is approximately 35 days. No interest is
charged on trade receivables. Each receivable 60 days overdue has been reviewed to assess whether there is
a risk that it might be irrecoverable. On the basis of this review, management has provided for trade receivable
balances which may be at risk of being irrecoverable.
Ageing of past due but not impaired
60 days over the due date
2020
$’000
1,517
2019
$’000
549
44
Saunders International Limited
Notes to the Financial Statements
7.
PROPERTY, PLANT AND EQUIPMENT
Impairment Testing
Saunders International Limited reviews the carrying amounts of its tangible assets annually at each reporting date
to determine whether there is any impairment. As at 30 June 2020 the directors reviewed the future budgets of the
Group to determine whether there are any indications of impairment. No indicators of impairment were noted and
no impairment losses are recorded.
Gross carrying amount
Balance at 1 July 2018
Additions
Disposals
Balance at 30 June 2019
Additions
Reclassification (i)
Disposals
Balance at 30 June 2020
Accumulated depreciation
Balance at 1 July 2018
Disposals
Depreciation expense
Balance at 30 June 2019
Disposals
Reclassification (i)
Depreciation expense
Balance at 30 June 2020
Net book value
As at 30 June 2019
As at 30 June 2020
Land at
cost
$’000
Buildings
at cost
$’000
Plant and
Equipment at cost
$’000
Office furniture and
equipment at cost
$’000
Total
$’000
3,400
-
-
1,150
-
-
3,400
1,150
-
-
-
-
-
-
3,400
1,150
-
-
-
-
-
-
-
36
-
29
65
-
29
94
3,400
3,400
1,085
1,056
13,364
1,069
(820)
13,613
1,237
(735)
(20)
14,095
7,950
(826)
950
8,074
(18)
(96)
822
8,782
5,539
5,313
832
287
18,746
1,356
(399)
(1,219)
720
246
64
-
18,883
1,483
(671)
(20)
1,030
19,675
594
(293)
8,580
(1,119)
91
392
-
27
171
590
328
440
1,070
8,531
(18)
(69)
1,022
9,466
10,352
10,209
(i)
The net reclassification out of property, plant and equipment of $602,000 relates to the initial application of
AASB 16. Refer to note 1(a) for further details.
8.
LEASES (GROUP AS LESSEE)
The new accounting standard AASB16 Leases was adopted from 1 July 2019. Comparatives have not been restated.
The Group has entered into an office lease and a number of motor vehicle leases. The office lease has fixed annual
rent increases. The motor vehicle leases do not reflect any rent increases over the term of the lease. The average
lease term is 2.2 years.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The
lease agreements do not impose any covenants other than security interests in the leased assets that are held by
the lessor. Leased asset may not be used as security for borrowing purposes.
Prior to the application of AASB 16, leases of property, plant and equipment were classified as either finance leases
or operating leases. From 1 July 2019, leases are recognised as a right of use and a corresponding liability at the
date at which the leased asset is available for use by the Group.
This note provides information for leases where the Group is a lessee.
45
Saunders International Limited
Notes to the Financial Statements
8.
LEASES (GROUP AS LESSEE) (cont)
Amounts recognised in the consolidated income statement
The Consolidated Income Statement includes the following amounts relating to leases:
Depreciation charge for right of use assets
Property, Plant and Equipment
Total Depreciation Charge for Right of Use Assets
Other cost relating to leases
Interest expense on lease liabilities (included in Finance Costs)
Expenses relating to leases of low value assets
Expenses relating to variable lease payments not included in the measurement of the
lease liabilities
Total other costs relating to leases
Amounts recognised in the balance sheet
This Balance Sheet shows the following amounts in relation to leases:
Right of Use Assets
Gross amount
Opening balance, 1 July 2019
Impact of AASB 16
Reclassification from property, plant and equipment
Additions
Balance as at 30 June 2020
Accumulated depreciation
Opening balance, 1 July 2019
Reclassification from property, plant and equipment
Depreciation expense
Balance as at 30 June 2020
Property
Other
-
1,285
-
-
1,285
-
-
270
270
-
106
671
538
1,315
-
69
176
245
2020
$’000
446
446
81
33
61
175
2020
$’000
-
1,391
671
538
2,600
-
69
446
515
Carrying amount as at 30 June 2020
1,015
1,070
2,085
Maturity Analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
2020
$’000
568
564
449
323
204
-
2,108
46
8.
LEASES (GROUP AS LESSEE) (cont)
Lease Liabilities
Current
Non-Current
Total Lease Liabilities
9.
TRADE AND OTHER PAYABLES
Current
Trade payables (i)
Goods and services tax payable
Accruals and other
Saunders International Limited
Notes to the Financial Statements
2020
$’000
568
1,540
2,108
2020
$’000
2019
$’000
11,030
6,663
261
2,955
237
205
14,246
7,105
(i)
The average credit period on purchases of goods is between 45-60 days. No interest is charged on the
trade payables. The Group has a policy that all payables are paid within the agreed credit timeframe.
10.
CONTRACT ASSETS AND CONTRACT LIABILITIES
Contract assets related to contracts
Contract liabilities relating to contracts
Contract assets
2020
$’000
6,711
4,588
2019
$’000
2,681
1,785
Contract assets are balances due from customers under long term contracts as work is performed and therefore a
contract asset is recognised over the period in which the performance obligation is fulfilled. This represents the Group’s
right to consideration for the services transferred to date. Amounts are generally reclassified to accounts receivable
when these have been invoiced to a customer.
The directors of the Group always measure the loss allowance on amounts due from customers at an amount equal to
lifetime ECL, taking into account the historical default experience and the future prospects of the construction industry.
None of the amounts due from customers at the end of the reporting period is past due. There has been no change in
the estimation techniques or significant assumptions made during the current reporting period in assessing the loss
allowance for the amounts due from customers under construction contracts. Refer to Note 6 for the risk profile of
amounts due from customers based on the Group’s provision matrix.
Contract liabilities
Contract liabilities relating to construction contracts are balances due to customers under construction contracts. These
arise if a particular milestone payment exceeds the revenue recognised to date under the percentage cost complete
method. Revenue recognised in the reporting period that was included in the contract liability balance at the beginning
of the period was $1.79 million (FY19: $4.79 million). Revenue recognised in the reporting period from performance
obligations satisfied or partially satisfied in previous periods was $0.72 million (FY19: $1.25 million). Partially satisfied
performance obligations continue to incur revenue and costs in the period.
47
10.
CONTRACT ASSETS AND CONTRACT LIABILITIES (cont)
Remaining performance obligations (Work in hand)
Contracts which have remaining performance obligations as at 30 June 2020 and 30 June 2019 are set out below.
Saunders International Limited
Notes to the Financial Statements
Revenue stream
Engineering & Construction
Services
Fabrication & Construction
Total work in hand
2020
$’000
39,835
2019
$’000
1,818
54,136
27,917
16,575
110,546
30,762
60,497
Contracts in the different sectors have different lengths. The average duration of contracts is 12 – 24 months,
however some contracts will vary from these typical lengths. Revenue is typically earned over these varying
timeframes, however more of the revenue noted above is expected to be earned within 12 months.
11.
PROVISIONS
Current
Employee benefits
Restructure Provision (i)
Non-current
Employee benefits
2020
$’000
2,034
-
2,034
234
234
2019
$’000
1,661
140
1,801
94
94
(i) The restructure provision is inclusive of but not limited to; right sizing the business and redundancies,
operational improvements and relocation of plant and equipment to Newcastle.
Provision
Restructure
Provision
Opening
balance
$’000
140
12.
BORROWINGS
Current
Finance Lease Liabilities
Non-current
Finance Lease Liabilities
Additions to
provision during
current period
Credited to profit
and loss
Utilisation of
provision during
current period
$’000
-
$’000
-
$’000
(140)
Closing
balance
$’000
-
2020
$’000
2019
$’000
-
-
122
381
The new accounting standard AASB16 Leases was adopted from 1 July 2019. Comparatives have not been restated.
48
13.
ISSUED CAPITAL
102,848,127 fully paid ordinary shares (2019: 102,848,127)
Fully paid ordinary shares carry one vote per share and carry the right to
dividends.
Ordinary shares
Ordinary shares at beginning of financial year
Ordinary shares issued during the current year
Ordinary shares at end of financial year
Fully paid ordinary shares
Balance at beginning of financial year
Shares issued performance Rights Plan
Balance at end of financial year
Saunders International Limited
Notes to the Financial Statements
2020
$’000
-
2019
$’000
19,350
2020
Number
102,848,127
2019
Number
102,730,469
-
117,658
102,848,127
102,848,127
2020
$’000
19,701
-
19,701
2019
$’000
19,652
49
19,701
49
Saunders International Limited
Notes to the Financial Statements
(351)
(351)
-
-
-
-
(351)
(351)
19,350
19,350
13.
ISSUED CAPITAL (cont)
Treasury shares under employee share plan
Balance at beginning of financial year
Treasury shares vested during the year
Share issued during the year
Balance at end of financial year
Issued capital
Reserves
Nature and purpose of reserves
(a) Share buyback reserve
The value of shares bought back are allocated to this reserve
(b) Share-based payments reserve
The share-based payments reserve is for the fair value of options granted and recognised to date but not yet exercised,
and treasury shares purchased and recognised to date which have not yet vested.
Employee Share Plan
The Board has approved and implemented an Employee Share Plan (“ESP”).
Under the ESP, the Group provides interest free loans to employees to acquire shares in Saunders International
Limited, at a specified price per share. The loans are secured by the shares acquired by the eligible employees. The
shares will vest and the loans will be repaid, upon a specified anniversary of the issue of the shares. If an eligible
employee’s employment with the Group is terminated prior to the specified anniversary of the issue of the shares, the
shares will be forfeited, and the Group will be entitled to the total amount raised pursuant to the divestment of the
shares. The shares are accounted for as in substance options.
Each employee share option converts into one ordinary share of Saunders International Limited on exercise. No
amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor
voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.
At balance date, a total of 14 tranches of the ESP have been issued.
Tranche 6: During the financial year 65,000 shares forfeited.
Tranche 8: Offer of 400,000 in January 2016 with all offers accepted. The tranche has been modified, by the Board in
February 2020, to vest in February 2021.
Tranche 9: During the financial year zero shares forfeited.
Tranche 10: During the financial year zero shares forfeited.
Tranche 11: During the financial year zero shares forfeited.
Tranche 12: During the financial year zero shares forfeited.
Tranche 13: During the financial year zero shares forfeited.
Tranche 14: During the financial year 477,500 new shares were issued.
The fair value of the share options granted during the financial year is included in below table. Options have been
valued using the Black Scholes pricing model. Expected volatility is based on the historical share price volatility over
the past 3 years.
One individual employee holds more than 200,000 options under the ESP.
50
13. ISSUED CAPITAL (cont)
Details of the fair value assumptions used are as follows:
Saunders International Limited
Notes to the Financial Statements
Tranche 6
Tranche 8
Tranche 9
Tranche 10
Tranche 11
Tranche 12
Tranche 13
Tranche 14
Grant Date
Feb 2015
Jan 2016
Feb 2016
Feb 2017
Grant Price
Opening Volume
New grants
$0.72
65,000
-
Forfeited
(65,000)
Closing Volume
Exercise Price
Expected
Volatility
Option Life
Dividend Yield
Risk Free Interest
Rate
Grant date fair
value
-
$0.72
45%
4 years
0%
6.25%
$0.31
$0.58
400,000
-
-
400,000
$0.58
45%
4 years
0%
2.05%
$0.22
$0.58
80,000
-
-
80,000
$0.58
45%
4 years
0%
1.72%
$0.21
$0.58
170,000
-
-
Oct 2017
$0.50
105,625
-
-
Feb 2018
Feb 2019
Feb 2020
$0.59
200,000
-
-
$0.33
355,000
-
-
$0.38
-
477,500
-
170,000
105,625
200,000
355,000
477,500
$0.58
45%
4 years
0%
2.00%
$0.22
$0.50
45%
4 years
0%
2.75%
$0.19
$0.59
45%
4 years
0%
2.82%
$0.23
$0.33
45%
4 years
0%
2.82%
$0.12
$0.38
45%
4 years
0%
2.82%
$0.15
There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant date. Tranche 6 was not extended and did not vest. Tranche 8 was
extended until February 2021 as set out above.
51
Saunders International Limited
Notes to the Financial Statements
13.
ISSUED CAPITAL (cont)
Movement in share options during the year
The following reconciles the share options outstanding at the beginning and end of the year.
2020
2019
Number of
options
Weighted
average exercise
price
1,375,625
477,500
(65,000)
-
1,788,125
-
0.52
0.38
0.72
-
0.48
-
Number of options
1,526,250
Weighted
average
exercise price
0.62
365,000
(515,625)
-
1,375,625
-
0.33
0.66
-
0.52
-
Balance at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year
Balance at end of year
Exercisable at end of year
Performance Right Plan
The Saunders International Rights Plan was approved by the Board and approved by shareholders at the Annual
General Meeting in October 2015.
The features of the long-term incentive comprises the grant of equity in the form of Performance Rights which vest over
a three year period. The maximum number of Performance Rights will vest only if stretch objectives for each tranche are
achieved. Half of the Performance Rights will vest if the target objectives are achieved. The end of the measurement
period for a tranche of Performance Rights will be extended by up to two years at the Board’s discretion if significantly
less than target vesting would have been achieved for that tranche at the end of the measurement period, adjusted for
the pro-rata increase in hurdles to take into account the additional time. The two vesting conditions that will be used will
be relative total shareholder return (RTSR) and normalised earnings per share growth (NEPSG).
RTSR will be measured by comparing the Group’s TSR over the measurement period with the TSRs achieved by
companies that are in a comparator group and remain listed on the ASX. TSR is the percentage return generated from
an investment in a Group’s shares over the measurement period assuming that dividends are reinvested into the Group’s
shares. NEPSG will be assessed as the compound annual growth rate (CAGR) reflected in the increase in normalised
earnings per share (EPS) from the base year (FY2016) for tranches 1 to 8 and (FY2017) for tranches 9 and 10 to
normalised EPS for the final year of the measurement period. Normalised EPS will relate to normal operations and will
exclude abnormal items as determined by the Board in its discretion.
For the phase in tranches where the measurement period is less than three years, performance will be evaluated by the
Board’s assessment of the establishment of strategic foundations for superior TSR and NESPG over the long term. For
future grants, it is currently intended that the qualitative vesting conditions will be removed (but retaining TSR and
NESPG), and that measurement periods will be no shorter than 3 years.
The vesting scale will be applied to the tranches subject to objective measurement of Saunders performing relative to
the comparator group and NEPSG, as appropriate, with the vesting scale ranging continuously from 0% for very poor
performance to 100% for very good performance with 50% for on-target performance.
The long-term incentive is aimed at aligning remuneration with the longer term performance of the Group and retaining
the long-term services of the key management personnel.
52
13. ISSUED CAPITAL (cont)
The Managing Director and certain Key Management Personnel participate in the Saunders International Rights Plan. This plan is part of the long term incentive component of the
respective remuneration packages. The total number of Performance Rights issued under the plan is 4,171,590 of which 316,269 have vested, 320,948 have lapsed and a further
238,864 have been forfeited as at 30 June 2020.
Saunders International Limited
Notes to the Financial Statements
Details of the fair value assumptions used are as follows:
Tranche
1 & 2
2 June
2016
Grant Date
Grant Price
$0
Tranche 3
2 June
2016
$0
Tranche 6
& 7
2 June
2016
$0
Tranche 8
Tranche 9
2 June
2016
$0
1 Sept
2016
$0
Tranche
10
1 Sept
2016
Tranche
11
1 Sept
2017
Tranche
12
1 Sept
2017
Tranche
13
1 Sept
2018
Tranche
14
1 Sept
2018
Tranche
15
1 Sept
2019
Tranche
16
1 Sept
2019
$0
$0
$0
$0
$0
Opening
Volume
388,954
194,477
186,197
62,066
238,095
238,095
379,689
379,689
461,185
461,185
New grants
-
Lapsed
(271,296)
Forfeited
-
Vested
(117,658)
-
-
-
-
-
-
(37,239)
(12,413)
-
-
(148,958)
(49,653)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(59,546)
(59,546)
(59,886)
(59,886)
-
-
-
-
$0
-
$0
-
590,979
590,979
-
-
-
-
-
-
Closing
Volume
Exercise
Price
Expected
Volatility
-
$0
194,477
$0
-
$0
-
$0
238,095
238,095
320,143
320,143
401,299
401,299
590,979
590,979
$0
$0
$0
$0
$0
$0
$0
$0
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
Option Life
0 years
0 .25years
0 years
0 years
0.25 years
0.25 years
0.25 years
0.25 years
1.25 years
1.25 years
2.25 years
2.25 years
Dividend
value
Risk Free
Interest
Rate
Grant date
fair value
$0.06
$0.06
$0.06
$0.06
$0.06
$0.06
$0.06
$0.06
$0.06
$0.06
$0.06
$0.06
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
$0.41
$0.41
$0.47
$0.47
$0.46
$0.46
$0.49
$0.49
$0.41
$0.41
$0.29
$0.29
There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant date and number of options granted were outstanding at the end of
the year. The weighted average exercise price of the option is $0.00 per option and the share price on grant date was $0.54 per share for tranches 1 to 8, $0.52 per share for tranches 9 and 10,
$0.46 for tranches 11 and 12, $0.41 for tranches 13 and 14 and $0.29 for tranches 15 and 16. The share options outstanding at the end of the year has a weighted average remaining contractual
life of 1.81 years.
53
Saunders International Limited
Notes to the Financial Statements
14.
RETAINED EARNINGS
Balance at beginning of financial year
Profit for the year
Dividends provided for or paid
Balance at end of financial year
Opening balance adjustments on application of AASB 15
Balance restated at end of financial year
15.
EARNINGS PER SHARE
Basic earnings/(losses) per share
Diluted earnings/(losses) per share
The earnings and weighted average number of ordinary shares used in the
calculation of basic earnings per share are as follows:
Net profit/(loss)
Earnings used in the calculation of basic and diluted EPS
Weighted average number of ordinary shares for the purposes of basic earnings
per share
Diluted earnings per share
Weighted average numbers of ordinary shares and potential ordinary shares used in
the calculation of diluted earnings per share reconciles to the weighted average
number of ordinary shares used in the calculation of basic earnings per share as
follows:
Weighted average number of ordinary shares used in the calculation of basic EPS
Shares deemed to be issued for no consideration in respect of employee options
and performance rights (a)
2020
$’000
1,266
1,266
-
2,532
-
2,532
2019
$’000
3,566
(1,610)
-
1,956
(690)
1,266
2020
Cents
per share
1.23
1.20
2019
Cents
per share
(1.72)
(1.72)
2020
$’000
1,266
1,266
2019
$’000
(1,610)
(1,610)
2020
No.’000
2019
No.’000
102,848
93,617
102,848
93,617
2,427
-
Weighted average number of ordinary shares and potential ordinary shares used in
the calculation of diluted earnings per share
105,275
93,617
(a) During the year ended 30 June 2020 a portion of the potential ordinary shares associated with the employee share
option plan as set out in Note 13 are dilutive and therefore included in from the weighted average number of ordinary
shares for the purposes of diluted earnings per share. The potential ordinary shares associated with the Performance
Rights are dilutive and have been included in the weighted average number of ordinary shares for the purposes of
diluted earnings per share.
54
16.
DIVIDENDS
Recognised amounts
Fully paid ordinary shares
Final dividend (2019):
Fully franked at a 30% tax rate
Interim dividend (2020):
Fully franked at a 30% tax rate
Unrecognised amounts
Fully paid ordinary shares
Final dividend (2020):
Saunders International Limited
Notes to the Financial Statements
2020
Cents
per share
Total
$’000
2019
Cents
per share
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
On 26 August 2020, the directors declared that there will not be a final dividend paid to shareholders for the financial
year ended 30 June 2020.
Adjusted franking account balance
17.
SEGMENT INFORMATION
2020
$’000
1,774
2019
$’000
1,774
The Group operates in one reporting segment being the design, construction, and maintenance of steel storage tanks
and concrete bridges.
In the current period 1 customer made up 16% of the revenue earned (2019: 1 customer made up 13% of the revenue
earned). The customer accounted for $10,653,000.
18.
CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Contract dispute
In the ordinary course of business, the Group receives claims against it which may involve litigation. In the
event that a claim is successful, it is expected to be adequately covered by the insurance policies held by the
Group. Where the outcome is probable and can be reasonably quantified, provision is made in these financial
statements.
Proceedings
Proceedings have recently commenced against the group in relation to a legal matter, which the entity intends
to defend. In the event the action is successful it is expected that the group’s insurance policy will respond
accordingly.
55
19.
NOTES TO THE STATEMENT OF CASH FLOWS
Saunders International Limited
Notes to the Financial Statements
2020
$’000
2019
$’000
(a) Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents includes
cash on hand and in banks and investments in money market instruments. Cash
and cash equivalents at the end of the financial year as shown in the statement of
cash flows is reconciled to the related items in the statement of financial position as
follows:
Cash and cash equivalents
11,085
8,030
(b) Reconciliation of profit / (loss) for the year to net cash flows from operating activities
Profit / (loss) for the year
Share-based payments expense
Depreciation
Gain on disposal
(Increase) / decrease in assets:
Current tax balance
Deferred tax asset
Trade and other receivables
Contract assets
Inventories
Other assets
Increase / (decrease) in liabilities:
Trade and other payables
Contract liabilities
Provisions
Lease incentives
1,266
195
1,468
(3)
(18)
610
(4,822)
(4,030)
(205)
248
7,037
2,803
373
-
(1,610)
7
1,070
(80)
401
(705)
(1,885)
1,125
108
(178)
(76)
533
(2,205)
173
Net cash inflow / (outflow) from operating activities
4,922
(3,322)
(c) Financing facilities
The Group’s principal financing facilities for the provision of bank guarantees as
described in Note 20 is secured by a fixed and floating charge over the assets of the
Group.
Amount used
Amount unused
6,637
3,363
10,000
3,072
1,928
5,000
The facilities have financial covenants relating to the Group’s capital adequacy ratio and its leverage ratio. Post 30
June 2020, Saunders’ total facility increased to $15 million.
(d) Asset and liabilities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-
cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will
be, classified in the Group’s consolidated statement of cash flows from financing activities.
Note
Balance
at 1 July
Reclassification
from
borrowings
2019
$’000
$’000
On
adoption
of AASB
16
$’000
Cash
Financing
cash flows
(i)
$’000
Non-Cash
Movement
in finance
leases
$’000
Balance
at 30
June
2020
$’000
Lease liabilities
-
503
1,391
(438)
652
2,108
(i)
Financing cash flows comprise of repayment of borrowings and payments in relation to finance leases.
56
20.
FINANCIAL INSTRUMENTS
The Group has three significant categories of financial instruments which are described below together with the policies
and risk management processes which the Group utilises:
Saunders International Limited
Notes to the Financial Statements
(a) Cash and cash equivalents
The Group deposits its cash and cash equivalents with Australian banks. Funds can be deposited in cheque accounts,
cash management accounts and term deposits. The policy is to utilise at least two Australian banks for cash
management accounts and term deposits. The policy with term deposits is to provide for liquidity with a range of
maturities up to 6 months.
(b) Debtors and credit risk management
The Group has a credit risk policy to protect against the risk of debtor default. The majority of the Group’s debtors are
long term customers and are multinational oil and gas companies, government authorities and large Australian
corporations where the credit risk is considered to be low. New customers are assessed for credit risk using credit
references and reports from credit agencies as necessary.
(c) Bank guarantees
The Group has a preference to provide bank guarantees to customers in lieu of the cash retention required under
contracts. This preference is pursued subject to specific contract requirements and the Group’s bank facility
requirements.
Capital risk management
The Group’s capital structure currently consists of equity and retained earnings and there is no external long-term debt
or short-term debt. The operating cash flows of the Group are used to finance short term capital. The capital risk
management is continuously reviewed as the Group has surplus cash available for investment.
Categories of financial instruments
Financial assets
Cash and cash equivalents
Loans and receivables
Financial liabilities
Trade payables and accruals
Lease Liabilities
Obligations under finance leases
Leasing arrangements
2020
$’000
11,085
13,297
24,382
14,246
2,108
16,354
2019
$’000
8,030
8,475
16,505
7,105
503
7,608
The Group leased certain of its construction equipment under finance leases. The average lease term is five years.
The Group’s obligations under finance leases are secured by the lessor’s title to the leased assets.
57
20.
FINANCIAL INSTRUMENTS (cont.)
Financial risk management objectives
Saunders International Limited
Notes to the Financial Statements
The Group’s exposure to market risk mainly arising from interest rate risk, is disclosed (including currency risk, fair value
interest rate risk and price risk) and cash flow interest rate risk is disclosed in the interest rate sensitivity analysis below.
Credit risk is monitored monthly through continuous management of the ongoing projects.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term liquidity
management requirements. The Group manages liquidity risk by continually monitoring and maintaining adequate
banking facilities. Cash flows are monitored and matched to the maturity profiles of financial assets and liabilities.
Liquidity and interest risk tables
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial assets and liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial assets and liabilities based on the
earliest date on which the Group can be required to receive or pay. The table includes both interest and principal cash
flows.
Weighted
average
effective
interest
rate
Less than 1
month
1 to 3
months
3 months
to 2 years
%
$’000
$’000
$’000
2020
Financial assets
Cash and cash equivalents
0.35%
Trade receivables
Financial liabilities
Trade payables and accruals
Lease liabilities
2019
Financial assets
-
-
11.1%
Cash and cash equivalents
0.21%
Trade receivables
Financial liabilities
Trade payables and accruals
Lease liabilities
Interest rate sensitivity analysis
-
-
11.1%
11,085
2,967
1,435
43
8,030
4,936
1,789
5
-
9,921
4,474
129
-
3,235
2,501
13
-
409
8,337
1,936
-
304
2,815
485
Total
$’000
11,085
13,297
14,246
2,108
8,030
8,475
7,105
503
The sensitivity analysis below has been determined based on exposure to interest rates for cash and cash equivalents
that were subject to interest rate fluctuations at the reporting date. At reporting date, if interest rates had been 1% higher
or lower and all other variables were held constant, the Group’s profit or loss would increase or decrease by $110,846
(2019: $80,173).
Foreign currency risk
The Group manages its foreign currency risk arising from significant supplier contracts in foreign currencies by holding
foreign currency. As a result of operations in Papua New Guinea the Group’s statement of financial position can be
affected by movements in the PGK/A$ exchange rate. The Group also has transactional currency exposures. Such
exposure arises from sales or purchases by an operating entity in currencies other than the functional currency. Where
possible, Saunders does not take on foreign exchange risk. At 30 June 2020, the Group had no forward contracts.
The Group also mitigates its exposure to foreign currency risk by minimising excess foreign currency balances in
overseas jurisdictions not required for working capital. At 30 June 2020, the Group had A$1,253,019 (2019: A$1,386,417)
of cash in PGK. At reporting date, if the PKG/AUD exchange rate had moved by 5%, with all other variables held constant,
the group's profit or loss would increase of decrease by $59,667 (2019: $66,020).
58
Saunders International Limited
Notes to the Financial Statements
20.
FINANCIAL INSTRUMENTS (cont.)
Fair value of financial instruments
No financial asset or financial liability is held at fair value. The directors consider the fair value of the financial assets and
financials liabilities to approximate their carrying amounts.
21.
DIRECTORS AND KEY MANAGEMENT PERSONNEL COMPENSATION
The board of directors approves on an annual basis the amounts of compensation for directors and key management
personnel with reference to the Group’s performance and general compensation levels in equivalent companies and
industries.
(a) Remuneration of Directors and Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
2020
$
1,791,120
102,633
106,984
2019
$
1,898,440
123,160
41,910
2,000,737
2,063,510
The names of and positions held by the key management are set out on page 16 of the Remuneration Report. Further
details of the remuneration of key management are disclosed in the Remuneration Report.
(b) Other Transactions with Key Management Personnel
There were no transactions with directors and other key management personnel apart from those disclosed in this note
and note 22.
(c) Directors’ and Key Management Equity Holdings
Refer to the table on page 14 of the Remuneration Report.
22.
SUBSIDIARIES
Details of the Group's material subsidiaries at the end of the reporting period are as follows.
Name of subsidiary
Principal activity
Saunders Civilbuild Pty Ltd
Bridge
construction and
maintenance
Place of
incorporation
and operation
Proportion of ownership interest
and voting power held by the Group
2020
2019
Australia
100%
100%
Saunders Property (NSW) Pty Ltd
Real property
investments
Australia
Saunders Asset Services Pty Ltd
Maintenance
Australia
Saunders PNG Limited
Tank construction
and maintenance
PNG
100%
100%
100%
100%
100%
100%
59
Saunders International Limited
Notes to the Financial Statements
23.
PARENT ENTITY INFORMATION
The accounting policies of the parent entity, which have been applied in determining the financial information shown
below, are the same as those applied in the consolidated financial statements except as set out below. See Note 1 for a
summary of the significant accounting policies relating to the Group.
Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries, associates and joint ventures are accounted for at cost. Dividends received from
subsidiaries, associates and joint ventures are recognised in profit or loss when a right to receive the dividend is
established (provided that it is probable that the economic benefits will flow to the Parent and the amount of income can
be measured reliably).
Tax consolidation
The company and its wholly-owned Australian resident entities are members of a tax-consolidated group under Australian
tax law. The company is the head entity within the tax-consolidated group. In addition to its own current and deferred tax
amounts, the company also recognises the current tax liabilities and assets and deferred tax assets arising from unused
tax losses and relevant tax credits of the members of the tax-consolidated group.
Amounts payable or receivable under the tax-funding arrangement between the company and the entities in the tax
consolidated group are determined using a ‘separate taxpayer within group approach to determine the tax contribution
amounts payable or receivable by each member of the tax-consolidated group. This approach results in the tax effect of
transactions being recognised in the legal entity where that transaction occurred, and does not tax effect transactions
that have no tax consequences to the group. The same basis is used for tax allocation within the tax-consolidated group.
Summary financial information
The individual financial statements for the parent entity, Saunders International Limited show the following aggregate
amounts:
Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Shares buy-back reserve under employee share plan
Share based payments reserve
Retained earnings
Total equity
Financial Performance
Profit / (loss) for the year
Other comprehensive income / (loss)
Total comprehensive income / (loss)
The parent entity has no capital commitments.
2020
$’000
19,963
16,733
36,696
13,235
1,313
14,548
2019
$’000
8,676
16,862
25,538
4,061
234
4,295
19,701
(351)
19,701
(351)
776
581
2,022
22,148
1,312
21,243
2020
$’000
2019
$’000
710
-
710
(1,815)
-
(1,815)
60
24.
REMUNERATION OF AUDITOR
Audit or review of the financial report
PNG tax services
Saunders International Limited
Notes to the Financial Statements
2020
$
2019
$
135,000
26,781
161,781
142,000
7,852
149,852
The auditor of Saunders International Limited is Deloitte Touche Tohmatsu.
25.
SUBSEQUENT EVENTS
Subsequent to the end of the financial year, there continues to be considerable economic impacts in Australia and globally
arising from the outbreak of the COVID-19 virus and Government actions to reduce the spread of the virus. The Group is closely
monitoring the developments and the implications of the spread of the COVID-19 virus, the advice from health and government
authorities and the World Health Organisation.
Saunders has and continues to actively monitor the rapidly changing impact of COVID-19 (Coronavirus) across the Group’s
operations. The Group has taken decisive action and a pro-active approach to the current situation ensuring that the safety of
our teams has been at the forefront of all decisions.
Saunders has implemented a rigorous set of company procedures and protocols to ensure safe operational continuity. To date,
there has been no confirmed cases of COVID-19 at Saunders and the Group is well prepared if this position is to change.
Saunders has monitored the outcomes of these impacts on our projects and work sites, which include:
• Reduced productivity across some sites (including Saunders’ precast facility) due to the increased requirements to
ensure that relevant social distancing guidelines are being adhered to
• Delayed receipt of material due to impacts of freight channels for our international supply chain other logistic constraints
•
Interstate travel restrictions preventing specialist project personnel from being able to attend certain sites
Saunders continues to work through the detailed scenarios and business continuity planning to minimise these supply chain and
other operational business interruptions. Saunders has observed that there has been an increase of new project opportunities
being delayed with limited financial investment decisions being approved, impacting new capital expenditure.
Although Saunders has experienced minor resourcing and logistic issues with border closures and reduced productivity across
a number of sites due to implementation of social distancing measures, there has been no significant financial effects arising
from the economic impacts of the virus that have been included in the financial results for the year ended 30 June 2020.
Other than this, the directors are not aware of any matter or circumstance, not already disclosed, occurring subsequent to the
end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of
those operations, or the state of affairs of the Group in future financial years.
26.
ADDITIONAL COMPANY INFORMATION
General Information
Saunders International Limited is incorporated and operating in Australia.
Saunders International Limited’s registered office and its principal place of business is as follows:
Registered office
Principal place of business
Suite 2.04, Level 2 Building F
Rhodes Corporate Park, 1 Homebush Bay Drive
Suite 2.04, Level 2 Building F
Rhodes Corporate Park, 1 Homebush Bay Drive
Tel: (02) 9792 2444
Tel: (02) 9792 2444
61
62 Saunders International Limited
Corporate Governance Summary
__________________________________________________________________________________
CORPORATE GOVERNANCE STATEMENT (26 AUGUST 2020)
The ASX has released the third edition of the Corporate Governance Principles and Recommendations. There
are 8 principles and 29 recommendations in this document. The following tables set out the Company’s position
in relation to the principles and recommendations. The board of the company has approved this document.
PRINCIPLES AND
RECOMMENDATIONS
PRINCIPLES AND RECOMMENDATIONS AND DISCLOSURE AS TO COMPLIANCE
AND/OR REASONS FOR NON-COMPLIANCE
PRINCIPLE 1:
LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
The Company complies with this principle and recommendations to the extent as
described below: -
Recommendation 1
The Company has a Board Charter which addresses Recommendation 1.1 in that it
identifies the respective roles and responsibilities of the board and management and
it identifies those matters expressly reserved for the board and those delegated to
management.
Recommendation 1.2 to 1.4
The Company complies with Recommendations 1.2 to 1.4 concerning the appointment
and engagement of directors and the accountability of the company secretary.
Recommendation 1.5
Recommendation 1.6
The Company does not comply with Recommendation 1.5, gender diversity. However,
the Company does comply with the Workplace Gender Equality Act for the latest
reporting period as confirmed by written advice from the Workplace Gender Equality
Agency, a copy of which is on the Company’s website.
The Company does not follow Recommendation 1.5 and therefore it does not have a
written policy. The reasons for not following this recommendation include; 1. the
Company has a small number of employees (circa 200) and 2. a small board (3 persons).
The Company considers that it is unrealistic or not in its interest to establish
measurable objectives for gender diversity across its workforce. However, the
Company’s Recruitment Strategy ensures that appropriate selection criteria based on
qualifications, experience and diverse skills are used when hiring new staff.
Additionally, the Company’s Harassment and Discrimination Strategy embraces the
principle of equal opportunity for all regardless of gender, race, sexual preference,
family responsibilities and any other attributes.
The Company has continued its successful recruitment of female candidates to the
business with several female candidates commencing in the financial year. The
Company has set a goal to further improve gender diversity in this year.
The Company does not comply with Recommendation 1.6 in that although it does have
a formal process for the periodic evaluation of the performance of the board, this does
not extend to its committees and individual directors. Because the board is small, the
preferred method for evaluation of the committee and individual directors is ongoing
comment and review between board members.
Recommendation 1.7
The Company does comply with Recommendation 1.7 in that it does have a formal
process for the evaluation of the CEO and senior executives and this is conducted
annually with the latest being in June-August 2020.
63
PRINCIPLES AND
RECOMMENDATIONS
PRINCIPLES AND RECOMMENDATIONS AND DISCLOSURE AS TO COMPLIANCE
AND/OR REASONS FOR NON-COMPLIANCE
PRINCIPLE 2:
STRUCTURE THE BOARD TO ADD VALUE
The Company complies with this principle and recommendations to the extent as
described below: -
Recommendation 2.1
The board does not have a nomination committee. The board is a small board
(currently 3 persons) and therefore it is able to effectively undertake the relevant tasks
such as addressing succession issues and ensuring the board has the appropriate
balance of skills, knowledge, experience, independence and diversity to enable it to
discharge its duties and responsibilities effectively.
Recommendation 2.2
The board discloses the skills and experience of its directors on its website and in each
annual report.
Recommendation 2.3
The Company discloses on its website which directors are considered by the board to
be independent directors and also the length of service as a director of the Company.
Recommendation 2.4
A majority of the board should be independent directors. The Company does not
comply with this recommendation in that only 33% of the currently serving directors
are independent. The Company considers the composition to be in its best interests.
The size of the Company and the specialist nature of its activities is best served by a
small board with an adequate component of Company and industry specific
knowledge.
Recommendation 2.5
The chair should be an independent director. The Company does not comply with this
recommendation in that the Chairman is not independent. The Company considers
this to be appropriate and in its best interests. The size of the Company and specialist
nature of its activities is best served by a chairman who has Company and industry
specific knowledge and significant equity in the Company.
Recommendation 2.6
The Company has a process to induct a new director which is customized to meet each
director’s needs. The Company encourages directors to maintain their skills and
knowledge as needed.
PRINCIPLE 3:
ACT ETHICALLY AND RESPONSIBLY
The Company complies with this principle and recommendations to the extent as
described below: -
Recommendation 3.1:
The Company has a Code of Conduct for Directors and Senior Executives and this is
disclosed on the Company website.
64
PRINCIPLES AND
RECOMMENDATIONS
PRINCIPLES AND RECOMMENDATIONS AND DISCLOSURE AS TO COMPLIANCE
AND/OR REASONS FOR NON-COMPLIANCE
PRINCIPLE 4:
SAFEGUARD INTEGRITY IN CORPORATE REPORTING
Recommendation 4.1:
The Company complies with this principle and recommendations to the extent as
described below: -
The Company has an Audit and Risk Committee. The charter of this committee is
disclosed on the website. The committee is composed of one independent director
and is chaired by that independent director who is not the chairman of the board.
The Company considers the composition to be in its best interests. The size of the
Company and the specialist nature of its activities is best served by a small board
with an adequate component of Company and industry specific knowledge.
The composition of the committee, the number of meetings and attendance is
disclosed annually in the Company’s Annual Report.
Recommendation 4.2:
With respect to the latest financial year, the CEO and the CFO have confirmed to the
board, in a written statement, that: -
•
•
The financial reports are complete and present a true and fair view, in all
material aspects, of the financial condition and operating results of the
Company.
These views are founded on a sound system of internal control and risk
management that implements the policies adopted by the board.
Recommendation 4.3:
The Company ensures that its external auditor attends the AGM and is available to
answer questions from security holders relevant to the audit.
PRINCIPLE 5:
MAKE TIMELY AND BALANCED DISCLOSURE
The Company complies with this principle and recommendations to the extent as
described below: -
Recommendation 5.1:
The Company has a written Continuous Disclosure Policy which is disclosed on the
Company’s website.
PRINCIPLE 6:
RESPECT THE RIGHTS OF SECURITY HOLDERS
The Company complies with this principle and recommendations to the extent as
described below: -
Recommendation 6.1
The Company discloses information about itself and its corporate governance via its
website.
Recommendations 6.2 and
6.3
The Company has a Shareholder Communication Policy which addresses these
recommendations.
Recommendation 6.4
The Company gives security holders the option to receive communications
electronically.
65
PRINCIPLES AND
RECOMMENDATIONS
PRINCIPLES AND RECOMMENDATIONS AND DISCLOSURE AS TO COMPLIANCE
AND/OR REASONS FOR NON-COMPLIANCE
PRINCIPLE 7:
RECOGNIZE AND MANAGE RISK
The Company complies with this principle and recommendations to the extent as
described below: -
Recommendation 7.1:
The Company does have an Audit and Risk Committee. See notes on the
Recommendation 4.1 concerning the composition of the committee.
Recommendation 7.2:
Recommendation 7.3:
Recommendation 7.4:
The charter of the committee is disclosed via the Company’s website.
The composition of the committee, the number of meetings and attendance is
disclosed annually in the Company’s Annual Report.
The Company does comply with this recommendation in that it has a Risk
Management Framework. Although the Risk Management Framework was not
reviewed by the board during the last financial year, the Board does consider the
relevant risk to the Company’s performance at the monthly Board meetings. The
Board oversees the risk management process which is managed by the senior
leadership team.
The Company does not have an all-embracing internal audit function. The Company
does have comprehensive internal audit processes with respect to certain classes of
risk, namely OHS and Quality.
Other risks are monitored and managed by management and this process is
overseen by the board.
The Company has exposure to material economic risks including variability of market
conditions and legislative changes in the sectors within which it operates. There risks
are mitigated by ongoing research and monitoring of the changing market conditions
and by the diversification of services and sectors the Company offers and operates
in.
The Company has implemented new policies, procedures and protocols to limit the
operational impact due to the COVID-19 pandemic. The Company is monitoring the
pandemic situation closely to react to any changes and ensure the safety of our
people, our clients and the communities we operate in.
The Company’s mitigation of environmental risks includes maintenance of a certified
environmental management systems (AS/NZS ISO 14001:2015) and compliance with
state and territory environmental protection legislation. The company has
implemented an environmental management program that aims to ensure
sustainable work practises and monitoring to minimise environmental impacts as a
best as possible.
66
PRINCIPLES AND
RECOMMENDATIONS
PRINCIPLES AND RECOMMENDATIONS AND DISCLOSURE AS TO COMPLIANCE
AND/OR REASONS FOR NON-COMPLIANCE
PRINCIPLE 8:
REMUNERATION FAIRLY AND RESPONSIBLY
The Company complies with this principle and recommendations to the extent as
described below: -
Recommendation 8.1:
The Company has a remuneration committee which has a charter which is disclosed
via the Company’s website. The remuneration committee is composed of one
independent non-executive Director and the Board Chairman.
The Company is currently undertaking a review of the size of the Board which will
enable a Remuneration Committee to be formed in the future to which complies
with the requirements of the Corporate Governance principles.
The composition of the committee, the number of meetings and attendance is
disclosed annually in the Company’s Annual Report.
The Company discloses annually, information about the remuneration of non-
executive directors, the managing director and key management personnel in the
Remuneration Report section of the Annual Report.
Recommendation 8.2:
Recommendation 8.3:
The Company discloses annually, information about its Employee Share Plan and
Performance Rights Plan in the notes to the Financial Statements contained in the
Annual Report.
67
69