Annual Report
2022
A C K N O W L E D G E M E N T T O C O U N T R Y
Saunders respectfully acknowledges the Traditional Owners and Custodians
of the country and their connection to land, sea and community. We pay our
respects to their cultures and to Elders past, present and emerging.
Contents
2022 Performance Highlights
Sustainability
Our Commitment
Chairman & CEO Letters
Board & Executive Team
Our Company
Services & Sectors
Our Values
Our People
Financial Report
Director’s Report
Auditor’s independence Declaration
Independent Auditor’s Report
Director’s Declaration
2
3
5
7
11
13
15
17
19
21
23
36
37
41
Consolidation Statement of Profit or Loss &
other comprehensive income
42
Consolidated Statement of Financial Position 43
Consolidated Statement of Changes in Equity 44
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Appendices
Corporate Governance Summary
Additional Shareholder Information
Corporate Directory
45
46
79
81
82
84
Performance
Highlights
Record revenue and earnings achieved through
global, environmental and economic uncertainty.
R E V E N U E
$129.9M
E B I T
$9.4M
C A S H
$36.7M
O R D E R B O O K
$192.9M
.
5
9
9
2
1
.
4
2
1
0
1
6
4
6
6
.
3
1
0
5
.
F Y 1 9
F Y 2 0
F Y 2 1
F Y 2 2
The outlook for Saunders remains positive
1
Saunders International Annual Report 2022
2
Sustainability
Saunders’ approach to Safety, Health, Environment and Quality (SHEQ) focuses on creating
a workplace culture that promotes safety, integrity, innovation, teamwork and leadership.
Saunders’ success in delivering consistent project excellence is shaped by our “OneTeam”
culture and underpinned by our robust risk management systems. We proactively identify critical
risks in our operations and implement strategies and systems to minimise the risk to our people,
our customers and our communities.
4.3 million hours
W I T H O U T A L O S T T I M E I N J U R Y ( LT I )
E N V I R O N M E N TA L
S O C I A L
G O V E R N A N C E
• Reduction of water consumption
• Diversity & social inclusion
• Formal strategy development
• Waste management
• Mental health & wellbeing initiatives
• Published policies & procedures
• Recycling, re-use, repurpose
• Promoting female participation
• Structured documents &
• Resource management
• Education & skills development
safety systems
• Sustainable materials usage
• Support of charitable organisations
• Stakeholder engagement
• Engagement with various
Indigenous vendors
• Formal commercial processes
3
Saunders International Annual Report 2022 4
Our
Commitment
As an Australian company, it is our responsibility to cultivate diversity and inclusion in our
workplace. To empower all cultures and demographics and increase the representation of
our First Nations peoples.
To represent Saunders’ commitment to Indigenous inclusion, we approached First Nation artist,
Sharon Smith to create an artwork that communicates the coming together of our two cultures.
This artwork hangs in our head office as a reminder of our company’s dedication to togetherness
and understanding of culture.
C O R P O R AT E C I T I Z E N S H I P
“When I paint, I think about how our ancestors worked
and looked after the land. This painting represents our Indigenous heritage and
an Australian company, Saunders International, coming together to listen, share
our stories and work together to protect and maintain our environment. It’s a part
of healing and understanding the importance of belonging, which helps create
a connection to community and culture. The travelling tracks in the painting
represent meeting places where men and women come together as one.”
- Sharon Smith (Wiradjuri Artist)
5
Saunders International Annual Report 2022 6
Chairman & CEO Letters
TIMOTHY BURNETT
Dear Shareholder,
I present the Chairman’s Letter for the 2022 Annual Report.
FY22 has been a year of very significant achievements for
Saunders.
improved financial perfor-
The Company delivered an
mance as detailed in this Annual Report. Saunders’ market
cap has been over $100 million for most of 2022 to date.
We have ended the year with a strong balance sheet
supported by over $36.7 million cash. We have continued to pay
fully franked dividends and we have increased surety facility to
cater for the growing value of the projects we are undertaking.
On the project front, a very significant achievement was to
win a $165 million contract to design and construct a US
Defence Fuel Storage Facility near Darwin. During the year,
Saunders also undertook several substantial projects at
Australian defence facilities. These projects are confirming our
capability
infra-
facilities.
structure and upgrade existing defence
to expeditiously deliver new defence
fuel
The Company has started FY23 with the solid foundation of a
substantial orderbook of $193 million.
I am pleased that last year’s acquisition of Plantweave has
been successfully integrated and is contributing to the broader
capabilities that we can offer industrial and defence clients.
Our strategic plan is to grow Saunders size and diversify its
capability. This is an active ongoing initiative. Objectives
include water sector infrastructure, electrical power distribution
infrastructure, industrial process automation and remote moni-
toring and control technology.
The safety of our employees
continually
improvements of the safety processes and systems.
review safety performance and
is our highest priority. We
in
invest
The Board and the Management Team are committed to
the ongoing improvement of our systems, procedures and
safety culture. I am pleased that proactive and ongoing
management and employee involvement has enabled the
Company to achieve an industry-leading TRIFR rate of 1.57.
I wish to thank our many long-term and loyal shareholders for
their confidence in the Board and the Management Team to
diversify the source of reliable income streams and grow
financial performance of the Company into the future.
I thank my fellow directors and on behalf of the board, I wish to
thank all Saunders employees for their efforts during the year.
Timothy Burnett
Chairman
We have faced several adverse headwinds during this last year.
impacted productivity and
Most of our construction work is conducted out-doors and
the record rainfall and flooding events, especially in NSW, have
adversely
increased costs,
especially in our bridge building and concrete pre-casting
operations. Continuous improvement is an ongoing objective
for the Saunders Management Team. We are recalibrating our
weather risk assessments and related commercial framework
for climate change impacts going forward.
Other adverse headwinds during the year included Covid-
related workforce absenteeism, supply chain logistic delays
impacting optimum project planning and the tight supply of
skilled workforce to meet our growth objectives.
The management team have worked exceptionally hard to
upscale our capability, increase our workforce numbers and
train new employees whilst dealing with the impacts of the
headwinds. I have high praise for the quality, resilience and
efforts of our management team and workforce. This is the main
reason why we have delivered the improved financial result
despite the headwinds.
Dramatic changes in the geopolitical security landscape have
emerged in eastern Europe and the western Pacific Ocean
in the last year. These ongoing conflicts and tensions have
heightened awareness in Australia of the need to be more
self-reliant in terms of industrial capability, fuel security storage
and defence infrastructure. Saunders is well placed to benefit
in the medium term from the opportunities that will come to
market because of this changing security landscape.
7
Saunders International Annual Report 2022 8
Dear Fellow Shareholders
Saunders has successfully delivered another a year of record
revenue and increased earnings. I am proud to report that
this has been achieved in a global environment of economic
uncertainty, pandemic
impacts, climate-related challenges,
labour shortages and supply issues, further impacted by the
Ukraine-Russia conflict. It is a tribute to our team of resilient
people, who have individually and collectively contributed to
these achievements for the third year in a row.
KEY SUCCESSES
largest contract
in the
In 2021, we were awarded the
company’s history, to build 11 fuel storage tanks within 22
months, in support of the US Defence Force. Project Caymus is
progressing and scheduled to be on target for delivery. Recruit-
ment of key personnel is complete and all major subcontracts
for the tank construction phase are now in place. The project is
31% complete and the balance of plant works packages will be
issued to the market over the coming months.
The PlantWeave acquisition is now complete, and the compa-
ny is fully integrated into the Saunders Group. We are already
seeing the benefits of providing our clients with industrial au-
tomation and cyber security solutions across several projects.
Our commitment to achieve Zero Harm, remains a key focus
for Board and Management. The strong safety performance
this year, has been achieved through greater emphasis on
pro-active reporting measures, ongoing reviews of near- miss
incidents, and regular management engagement with teams
on-site. We work hard to prevent injuries before they occur. Our
unique approach, in keeping with our ‘Raise-the-Bar’ initiative, is
to encourage a culture of safety with direct on-site involvement
from the Board and Executive team. Management members are
rostered to routinely attend project sites and directly engage
with the project teams at the daily pre-start team meeting and
then on-site to view works in progress.
Our Total Recordable Injury Frequency Rate (TRIFR) is 1.57 and
the company preserved its record of 4.3 million hours without a
lost-time injury.
Our 70th anniversary celebrations were held across the
country, where we handed ‘Years of Service’ awards to our staff.
I am proud to report that our people who received these awards
have stayed with the company for an average of 14 years. In
addition, over 20 nationalities are represented within a total of
350 plus staff.
As part of our commitment to accelerating diversity and
inclusion, and as an Australian company, I am pleased to say
that we have had a defining moment in the company’s 70-year
history. Representing Saunders’ commitment to indigenous
inclusion, we engaged the talents of Wiradjuri Artist, Sharon
Smith, to create an artwork exclusive to Saunders, that rep-
resents “the coming together of our two cultures. We listen,
share our stories and work together to protect and maintain our
in the
environment.” The original artwork proudly hangs
Boardroom of our corporate office and will be represented
graphically across our marketing collateral. It will serve as a
constant reminder of our company’s dedication to the healing,
reconciliation and understanding of our Indigenous heritage.
BUSINESS HIGHLIGHTS
Revenue for the Group has increased by $28.7m to $129.9m.
EBIT
increased by $1.3m to $9.4m. The record revenue
performance of the Group over the past 12 months is due to the
combination of strong operational project execution across the
business and increased opportunities within the markets where
we operate. Our infrastructure service projects primarily based
in NSW, were materially impacted by the severe flooding and
weather events in the NSW regions.
Saunders’ balance sheet remains robust, supported by strong
cash generation across the Group and effective working capital
management discipline.
The Group’s cash at $36.7m is an increase of $12.9m, which
was the result of $19.8m cash generated from operating
activities.
MARK BENSON
Over the past two years, Saunders has demonstrated its ability
to navigate these challenges and we are in a strong financial
and operational position to continue to mitigate them. Despite
the uncertainties of a tightening labour market, inflationary
pressures, supply chain costs, likely ongoing impacts from
COVID-19 and severe weather events, the outlook for Saunders
remains positive.
To ensure that we sustain the anticipated growth rate of the
company, we have recruited key project delivery personnel
and continue to improve our systems and process efficiencies.
We have a solid operational platform, and a dedicated, capa-
ble management team. At the current record levels of our order
book and the pipeline of new opportunities, we are confident
that we can deliver another year of continued revenue and
earnings growth.
The resilience with which Saunders navigates the current
challenges, are based on the strength of our relationships with
shareholders and clients and the ability of our people to work
as one team. As I celebrate 7 years at the helm of the company,
I would like to say it has been my privilege to work with our
shareholders and clients and to extend my heartfelt gratitude
to all our teams whose hard work and loyalty have helped to
achieve these successes in unprecedented times. It is because
of our people that I am confident Saunders will continue to
thrive in the coming year.
This was driven by the combination of working capital
management discipline and the receipt of billings in advance
for Project Caymus. The Group’s bank guarantee and bond
surety facilities have increased to $30 million, a $5 million
increase on the previous year, providing the Group with the
support needed for its current and future opportunities.
The decision from the Board to declare total dividends for
the year of 3.0 cents is reflective of the strong operational
performance reported. Final dividend declared for FY22 was
1.0 cent with a special dividend of 1.0 cent, which represents an
earnings payout ratio of approximately 50.0% of reported NPAT.
FUTURE PRIORITIES
Saunders recognises the environmental and social risks that
impact its activities and proactively reviews these, taking
appropriate and prompt actions to manage these risks. Climate
change and safety risks have been included in the internal
management process governing our investment decisions.
to
its strategic plan
The Group has revised
focus on
pursuing targeted initiatives intended to drive medium to
long-term growth. This includes increasing our support of the
Defence, Oil and Gas, and Infrastructure sectors, while position-
ing the company to redirect and expand its current capabilities
into the New Energy sector. As this sector grows, Saunders
will be ready to provide the comprehensive, full-asset lifecycle
solutions that will be required.
We start the new year well-positioned to take advantage of
opportunities across our services and sectors.
labour market, and
We offer attractive retention and incentive plans to counter
tighter commercial
the competitive
conditions to ensure our projects are protected from the
impact of increasing costs, constrained logistics and inclement
weather.
Mark Benson
Managing Director
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Saunders International Annual Report 2022 10
The Board
Executive Team
M R T I M O T H Y B U R N E T T
Chairman and Non-Executive Director
Mr. Burnett has been Chairman of Saunders since 2007 and a Non-Executive
Director since 28 November 1990. He served as Managing Director of
Saunders for 15 years. He has a BE and MBA degree and over 49 years of
relevant industry experience managing projects and companies in the
field of Engineering and Construction. Mr. Burnett is a member of the
Remuneration Committee and a member of the Audit and Risk Committee.
Other listed company directorships in the 3 years immediately before the
end of the financial year - NIL.
M R M A R K B E N S O N
Managing Director and Chief Executive Officer
AdvDipMan, AdvDipProjMgt, GAICD - Mr. Benson has over 29 years of
relevant industry experience in executive management roles in Engineering
& Construction. He served as General Manager of RCR Energy before joining
Saunders and has been Managing Director and Non-Executive Director
since 10 August 2015. Other listed company directorships in the 3 years
immediately before the end of the financial year - NIL
M R G R E G F L E T C H E R
Non Executive Director
Mr. Fletcher – Bcomm/CA - has been Saunders’ Non-Executive Director since
1 July 2015. He is the Chairman of the Saunders Audit & Risk Committee and
member of the Remuneration Committee. Mr. Fletcher is also the Chairman
of the NSW Electoral Commission, NSW eHealth / HealthShare Audit & Risk
Committee, a member of the NSW State Transit Authority, TAFE NSW and
NSW Health Infrastructure Audit & Risk Committee. He is Co-Vice Chairman
of Yancoal Australia Limited and was a partner of Deloitte Touche Tohmatsu
R U D Y S H E R I F F
A N G E L O D E A N G E L I S
R I C K B U R K E
Chief Financial Officer
Executive General Manager
Operations Manager
M AT T H E W R E D M O N D
J O N AT H O N B R O M I L O W
S T E V E B A I L E Y
Operations Manager
General Manager -
Saunders Civilbuild
Operations Manager
until 31 May 2009, and Deloitte Touche Tohmatsu has been the registered
R O B E R T H A R V E Y
F R A N K K R A F T
C L A U D E P O F F A N D I
auditor of Saunders since the year ended 30 June 2007. Other listed
company directorships in the 3 years immediately before the end of the
financial year - Director Yancoal SNC Limited
M R N I C K YAT E S
Non Executive Director
Mr. Yates – BE - has been a Non-Executive Director of Saunders since
16 September 2020. He is a member of the Audit & Risk Committee and
a member of the Remuneration Committee. Nick has over 35 years of
relevant industry experience. Other listed company directorships in the
3 years immediately before the end of the financial year - Interim
Chairman of BSA Limited.
General Manager -
Saunders PlantWeave
General Manager -
Business Development & Strategy
Commercial Manager
K A L A N O T L E Y
W AY N E M A S T E L L O
People & Capability Manager
SHEQ Manager
11
Saunders International Annual Report 2022 12
Our
Company
Saunders International Limited is a multi-disciplined engineering and construction company
providing design, fabrication, construction, shutdown, maintenance and industrial automation
services to leading organisations across Australia, and the Pacific Region. With over 70 years
of experience, the Saunders Group provided innovative cost-effective solutions to the oil & gas,
infrastructure, defence, water, power, new energy and mining & minerals sectors.
We apply the experience of our capable
team and innovative history to deliver
excellence in everything we do.
E M P L O Y E E S : 3 5 0 +
O F F I C E S
Newcastle
Rhodes
Newport
Gladesville
Darwin
Woolner
Papua New Guinea
P R O J E C T S
13
Saunders International Annual Report 2022 14
I N F R A S T R U C T U R E
D E F E N C E
C O N S T R U C T I O N
C I V I L
I N F R A S T R U C T U R E
W A T E R
N E W E N E R G Y
O U R
S E C T O R S
O U R
S E R V I C E S
E N G I N E E R I N G
& D E S I G N
A S S E T
S E R V I C E S
O I L & G A S
E N E R G Y
M I N I N G & M I N E R A L S
F A B R I C AT I O N
M A I N T E N A N C E
A U T O M AT I O N
& C O N T R O L
S T R U C T U R A L , M E C H A N I C A L
& P I P I N G ( S M P )
15
Saunders International Annual Report 2022
16
Excellence
in everything
we do
Our
Values
Our core values reflect the principles and beliefs which
shape the culture of our company and the approach to
towards our business activities, our people, customers
and the communities in which we operate.
Z E R O H A R M
We are committed to the practice of Zero Harm
behaviour at work and at home
O N E T E A M
We are better together when we collaborate
with each other and our customers
E X C E L L E N C E
We commit to delivering excellence in
everything we do
I N N O V A T I O N
We continually challenge ourselves to create
innovative solutions for our customers
I N T E G R I T Y
We hold ourselves to the highest standards
and deliver on our commitments
R E S P E C T
We act with respect to our people, customers,
communities and the environment
17
Saunders International Annual Report 2022 18
Our
People
Our people continue to be the drivers of our success. Saunders’ key priority is
to ensure we provide an inclusive working environment where people feel safe,
valued and able to meaningfully contribute to Saunders’ growth.
19
Saunders International Annual Report 2022 20
FINANCIAL
REPORT
F O R T H E F I N A N C I A L Y E A R
E N D E D 3 0 J U N E 2 0 2 2
21
Saunders International Annual Report 2022 22
Directors’
Report
R E V I E W O F O P E R AT I O N S ( C O N T . )
Saunders’ revenue for the year is $129.9 million, an increase of $28.7m or 28.4% (FY21: $101.2m).The NPAT was $6.5 million, an
improvement of $1.0 million or 18.2% (FY21: $5.5million), EBITDA was $11.7 million, an improvement of $1.6 million or 15.8%
(FY21: $10.1 million).
Earnings per share for the period was 6.24 cents (FY21: 5.36 cents).
The Directors present their report on Saunders International Limited (“Saunders” or the “Group”) for the financial year ended 30 June 2022
and the independent audit report thereon. In order to comply with the provisions of the Corporations Act 2001, the Directors report as
follows:
Saunders has strengthened its financial position at year end with cash and cash equivalents of $36.7 million (FY21: $23.8 million).
The Group has no interest-bearing loans, except for finance leases. Growth in larger project activity is expected to continue into FY23
with cash reserves gradually strengthening due to margin realisation.
D I R E C T O R S
The Directors as at the date of this Director’s Report are:
• Timothy Burnett
• Mark Benson
• Gregory Fletcher
• Nicholas Yates
Unless stated otherwise 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.
C O M P A N Y S E C R E TA R Y
Rudy Sheriff acted in the Company Secretary role during the whole year and up to the date of this report.
P R I N C I P A L A C T I V I T I E S
During the financial year, the principal activities of Saunders were the design, fabrication, 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 specialised services for the maintenance of commercial, industrial and marine infrastructure assets.
The Group provides shut down solutions for industrial clients and through Saunders PlantWeave the Group are able to provide
industrial automation and process controls activities.
R E V I E W O F O P E R AT I O N S
A summary of the revenues and results is as follows: -
Revenue
Profit before income tax
Income tax (expense)
Profit attributable to the members of Saunders International Limited
Reconciliation of profit before income tax to EBITDA (unaudited):
Profit 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
2022
$’000
129,955
9,379
(2,828)
6,551
2022
$’000
9,379
106
1,590
656
2021
$’000
101,242
8,085
(2,543)
5,542
2021
$’000
8,085
95
1,466
465
11,731
10,111
The record revenue performance of the Group over the past 12 months is due to a combination of strong operational execution of projects
across the Group and increased opportunities in the markets within which the Group operates.
The positive financial results were delivered in FY22 despite the evolving COVID-19 pandemic, major weather events and flooding across
parts of NSW which materially impacted our Infrastructure Services.
Key Highlights
• Safety performance remains strong as we continue to grow our employee numbers, achieving an industry leading performance with
TRIFR of 1.57. The Group has commenced both Federal Safety Commission (FSC) and Defence Industry Security Program (DISP)
accreditations.
• PlantWeave Technologies fully integrated within Saunders systems. Initial feedback from Saunders existing customers has been positive.
• Secured $165 million contract with Crowley for the design and construction of fuel storage tanks and EPCM services for the construction
of a US Defence Fuel Storage facility in Darwin.
• Leading Australian contractor for the construction and installation of Geodesic Dome Roofs for storage tanks, with seven roofs safely
installed over the past year and a further 13 roofs to be installed over FY23.
• Strong financial results despite the changing operating landscape due to the COVID-19 pandemic and significant inclement weather in
most parts of NSW materially impacting infrastructure services.
• Continued geographical expansion with new offices established in Victoria to support our long-term industrial customers, in the Northern
Territory to support Project Caymus,other major projects and new opportunities in the region.
• Secured a further $5 million increase to surety facility. The new $30 million limit across our bank guarantees and surety facility will
support our current orderbook and the strong pipeline of opportunities.
• Continued focus on Environmental, Social and Governance matters across the Group.
Outlook
Saunders Work in Hand as at 30 June 2022 is $192.89 million (FY21: $83.34 million).
Tendering activity shows the value of live tenders as at 30 June 2022 was $482 million. The pipeline (yet to be tendered) is at $827 million.
This strong pipeline of opportunities reflects the Group’s diversification across each of the operating sectors and represents a mix of new and
existing customers. The Group is well positioned on a number of significant near-term opportunities.
The Group has revised its strategic plan to focus on pursuing targeted initiatives intended to drive medium to long-term growth. This includes
increasing our support of the Defence, Oil and Gas and Infrastructure sectors, while positioning the company to redirect and expand its
current capabilities into the New Energy sector. As this sector grows, Saunders will be ready to provide the comprehensive, full asset lifecycle
solutions that will be required.
We start the new year well-positioned to take advantage of opportunities across our services and sectors. We offer attractive retention and
incentive plans to counter the competitive labour market, and tighter commercial conditions to ensure our projects are protected from the
impact of increasing costs, constrained logistics and inclement weather.
Employees
The Group’s total workforce managed by Saunders was approximately 350.
Saunders remain focused on investing in people and capability to ensure the achievement of our vision and strategic objectives.
The directors wish to take this opportunity to thank the entire Saunders Team for their continued dedication in safely delivering the financial
results through another challenging year.
23
Saunders International Annual Report 2022 24
R E V I E W O F O P E R AT I O N S ( C O N T . )
Safety & Environment
I N F O R M AT I O N O N D I R E C T O R S
Information on the directors who held office during and since the end of the financial year is as follows:-
The Group is committed to the safety of our people and customers and the communities in which we operate. During the year, Saunders
Total Recordable Injury Frequency Rate (TRIFR) was 1.57.
The Group has continued to preserve its lost time injury free record of zero after circa 4.3 million hours. The environment has always been a
focus for the Group, and we continue the journey of improving our sustainability and climate change initiatives.
Directors
Qualifications, Experience
and Special Responsibilities
The Group recognises the material environmental and social risks that are relevant to its activities and takes action to manage those risks.
Discussion across a range of sustainability related topics, including climate change and safety, occur frequently at Board meetings. Climate
change risk has been included in the internal management process governing investment decisions.
Timothy Burnett
The Board provides oversight and strategic direction to sustainability and has ultimate responsibility for our Company’s consideration of
climate-related risk. It is guided by our Audit and Risk Committee.
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 6.24 cents (FY21: 5.36 cents) and diluted earnings pers share of 6.07 cents (FY21: 5.21 cents).
Mark Benson
D I V I D E N D
The Board declared on 24 August 2022 that there will be a final dividend payable of 1.00 cents per share fully franked and special dividend of
1.00 cents per share fully franked (FY21 0.75 cents per share final dividend : 1.00 cents per share special dividend paid). Both dividends will
be payable on 10th October 2022 with the record date for determining dividends on 13th September 2022.
The board has decided to deactivate the (DRP) Dividend reinvestment plan and it will not be offered in this dividend payment.
Greg Fletcher
D I R E C T O R S AT T E N D A N C E AT M E E T I N G S
Attendance at Meetings
The following table sets out the number of meetings in the year to 30 June 2022, held during the period that the individual was a director and
the number of meetings attended.
Directors
Meetings
Audit & Risk
Committee Meetings
Remuneration
Committee Meetings
Held
Attended
Held
Attended
Held
Attended
Timothy Burnett
Mark Benson
Greg Fletcher
Nicholas Yates
10
10
10
10
10
10
10
10
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
Nicholas Yates
• Non-executive Chairman
• Member of the Audit & Risk Committee
• Member of the Remuneration Committee
• Director since 28 November 1990
• BE, MBA
• 49 years of relevant industry experience
• Other listed company directorships in the 3 years
immediately before the end of the financial year
Nil
• Managing Director from 5 October 2015
• Director since 10 August 2015
• AdvDipMan, AdvDipProjMgt, GAICD
• 29 years of relevant industry experience
• Other listed company directorships in the 3 years
Immediately before the end of the financial year
Nil
• Non-Executive Director
• Chairman of the Audit & Risk Committee
• Member of the Remuneration Committee
• Director since 1 July 2015
• BCom, CA
• Chairman of the NSW Electoral Commission,
NSW eHealth/ HealthShare Audit and Risk Committees
• Member of the NSW State Transit Authority, TAFE NSW and
NSW Health Infrastructure Audit and Risk Committees
• 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
• Non-Executive Director
• Member of the Audit & Risk Committee
• Member of the Remuneration Committee
• Director since 16 September 2020
• 35 years of relevant industry experience
• BE
• Other listed company directorships in the 3 years
immediately before the end of the financial year
- Interim Chairman - BSA Limited
Relevant Interest
in Shares of
Saunders International Limited
11,686,311
2,295,824
5,599
35,211
25
Saunders International Annual Report 2022 26
A U D I T E D R E M U N E R AT I O N R E P O R T
A U D I T E D R E M U N E R AT I O N R E P O R T ( C O N T . )
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 2022. 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 paid 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.
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:
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.
•
•
Employee Share Plan
Performance Rights Plan
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.
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.
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 110,560 options were granted to Key Management Personnel (CEO and CFO) under the ESP. The aggregate fair value of the
options granted is $41,681 as set out on page 31. The CFO, who is not a director, has an interest in 141,460 shares under the Employee
Share Plan. In addition, other employees own 1,539,868 shares.
Performance Rights Plan
The managing director has also participated in the Employee Share Plan and the Performance Rights Plan. Mark Benson holds 269,100
options within the Employee Share Plan and 1,660,852 performance rights under the Saunders International Performance Rights Plan.
The Saunders International Rights Plan was approved by the Board and approved by shareholders at the Annual General Meeting in
November 2015.
Key Management Personnel
Key management personnel are remunerated based on a number of factors, including experience, qualifications, job level and over perfor-
mance of the company and individual. The remuneration includes a variable short-term incentive (STI), between 10%-60% of salary com-
ponent. 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 29 of the remuneration report have participated in the Employee Share Plan.
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 on-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. For Tranches 10, 12, 14 16 and 18 the targets were
based on a three-year NPAT or EBIT forecast. For Tranche 10 (FY2017) $3.5 million was On Target NPAT. For Tranche 12 (FY2018) $5.0
million was On Target NPAT. For Tranche 14 (FY2019) $3.3 million was On Target EBIT. For Tranche 16 (FY2020) $3.3 million was On
Target EBIT. For Tranche 18 (FY2021) $4.0 million was On Target EBIT. 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 (FY2021) for Tranche 20. 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.
27
Saunders International Annual Report 2022 28
A U D I T E D R E M U N E R AT I O N R E P O R T ( C O N T . )
A U D I T E D R E M U N E R AT I O N R E P O R T ( C O N T . )
Performance Rights Plan (Cont.)
During the year 328,141 Performance Rights were granted to the CEO under the LTI Plan. The aggregate fair value of the Performance Rights
granted is $224,221 as set out on page 31. A further 107,871 Performance rights were granted to the CFO under the LTI Plan. The aggregate
fair value of the Performance Rights granted to the CFO is $73,627 as set out on page 31.
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 $553,566
Performance Bonus:
Variable, ranging from 0% to 60% of total fixed annual remuneration, based on performance
measured against a range of key performance indicators
Particulars of Directors and Executive Officers interests, including interests under the ESP and Performance Rights Plan during the year
ended 30 June 2022 were:
Fully paid
ordinary
shares
2021
Fully paid
ordinary
shares
issued/
purchased
during
2022
Fully paid
ordinary
shares
2022
Share
options
2021
Share
options
vested
during
2022
Share
options
granted
during
2022
Share
options
at end
2022
Performance
rights at
end 2021
Performance
rights
granted
during
2022
Performance
rights
vested
during
2022
Performance
rights at
end 2022
Number
Number
Number
Number
Number
Number
Number
Number
Number
Number
Number
11,686,311
-
11,686,311
5,420
179
5,599
70,422
(35,211)
35,211
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Non-
Executive
Directors
Timothy
Burnett
Greg
Fletcher
Nicholas
Yates
Long-term Incentive:
Variable, ranging from 0% to 40% of total fixed annual remuneration, based on performance
measured against a range of key performance indicators
TOTAL
11,762,153
(35,032)
11,727,121
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
Executive
Officers
Mark
Benson1
Rudy
Sheriff2
1,075,278
1,220,546
2,295,824
650,000
(450,000)
69,100
269,100
2,405,273
328,141
(1,072,562)
1,660,852
43,374
200,986
244,360
150,000
(50,000)
41,460
141,460
655,691
107,871
(256,009)
507,553
TOTAL
1,118,652 1,421,532 2,540,184
800,000
(500,000)
110,560
410,560
3,060,964
436,012
(1,328,571)
2,168,405
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.
GRAND
TOTAL
12,896,266 1,386,500 14,267,305
800,000
(500,000)
110,560
410,560
3,060,964
436,012
(1,328,571)
2,168,405
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 2022:
1. Managing Director & CEO,
2. Chief Financial Officer
Revenue
Net profit/(loss) before income tax
Net profit/(loss) after income tax
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
30 June
2022
$’000
30 June
2021
$’000
30 June
2020
$’000
129,955
101,242
66,462
9,379
6,551
8,085
5,542
1,853
1,266
30 June
2019
$’000
50,126
(2,260)
(1,610)
30 June
2018
$’000
75,368
(4,213)
(2,840)
30 June
2022
30 June
2021
30 June
2020
30 June
2019
30 June
2018
1.02
1.00
2.00
6.24
6.07
0.79
0.75
1.75
5.36
5.21
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)
All dividends above were franked to 100% at 30% corporate tax rate.
29
Saunders International Annual Report 2022 30
A U D I T E D R E M U N E R AT I O N R E P O R T ( C O N T . )
A U D I T E D R E M U N E R AT I O N R E P O R T ( C O N T . )
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:
Remuneration of Executive Officers and Key Management Personnel
Share options
granted during
2022
Share options
forfeited during
2022
Share options
vested during
2022
Performance
rights granted
during 2022
Performance
rights forfeited
during 2022
Performance
rights vested
during 2022
Fair Value $
Fair Value $
Fair Value $
Fair Value $
Fair Value $
Fair Value $
-
-
-
-
26,051
15,630
41,681
41,681
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
224,221
73,627
297,848
297,848
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Non-
Executive
Directors
Timothy
Burnett
Greg
Fletcher
Nicholas
Yates
TOTAL
Executive
Officers
Mark
Benson1
Rudy
Sheriff2
TOTAL
GRAND
TOTAL
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 31, 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 12.
1. Managing Director & CEO,
2. Chief Financial Officer
2022
Non-
Executive
Directors
Timothy
Burnett
Greg
Fletcher
Nicholas
Yates
Short-term Benefits
Cash
Fees/Salary
Cash
Bonus3
Non-monetary
Benefit4
Post-
employment
Benefits
Super-
annuation
Long-term
employee
benefits
Equity settled
share based
payments
Total
Percentage of
remuneration
related to
performance
Cash Bonus as
a percentage
of maximum
achievable5
$
104,545
68,182
68,182
$
-
-
-
$
-
-
-
$
10,455
6,818
6,818
24,091
$
-
-
-
$
115,000
75,000
75,000
265,000
%
-
-
-
%
-
-
-
TOTAL
240,909
Executive
Officers
Mark
Benson1
Rudy
Sheriff2
TOTAL
GRAND
TOTAL
516,813
280,404
13,185
23,568
111,300
945,270
29.66%
85.99%
326,637
97,141
6,192
23,568
34,932
488,470
19.89%
89.99%
843,450
377,545
19,377
47,136
146,232
1,433,740
1,084,359
377,545
19,377
71,227
146,232
1,698,740
No director or senior management person appointed during the year received a payment as part of his or her remuneration for agreeing 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. Managing Director & CEO,
2. Chief Financial
3. Cash bonuses are disclosed on an accruals basis and represent the amount earned in respect of the current financial year.
4. Non-monetary benefits relate to motor vehicle or other expenses packaged within the employee’s salary package.
5. Excludes equity settled share based payments. Cash bonuses are discretionary and are determined by the Board in August of each year.
31
Saunders International Annual Report 2022 32
A U D I T E D R E M U N E R AT I O N R E P O R T ( C O N T . )
Subsequent Events
Short-term Benefits
Cash
Fees/Salary
Cash
Bonus3
Non-monetary
Benefit4
Post-
employment
Benefits
Super-
annuation
Long-term
employee
benefits
Equity settled
share based
payments
Total
Percentage of
remuneration
related to per-
formance
Cash Bonus as
a percentage
of maximum
achievable5
$
116,986
58,493
46,459
$
-
-
-
$
-
-
-
$
11,114
5,557
4,414
21,085
$
-
-
-
$
128,100
64,050
50,873
243,023
%
-
-
-
%
-
-
-
TOTAL
221,938
2021
Non-
Executive
Directors
Timothy
Burnett
Greg
Fletcher
Nicholas
Yates
Executive
Officers
Mark
Benson1
Rudy
Sheriff2
TOTAL
GRAND
TOTAL
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 including pressures on resource availability and material escalation. The Group looks to mitigate these risks
by contingency planning as far as practicable and its flexible model allows management to quickly take action to react to any such risks as
they arise.
Saunders continues to work through the detailed scenarios and business continuity planning to minimise these supply chain and other
operational business interruptions.
There have been no other matters or circumstances occurring subsequent to the end of the financial year, that have 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.
The Group recognises the material environmental and social risks that are relevant to its activities and takes action to manage those risks.
Discussion across a rang e of sustainability related topics, including climate change, occur frequently at Board meetings. Climate change
risk has been included in the internal management process governing investment decisions.
The Board provides oversight and strategic direction to sustainability and has ultimate responsibility for our Company’s consideration of
climate-related risk. It is guided by our Audit and Risk Committee.
During the financial year, Saunders International, were compliant with the reporting requirements under relevant legislation. There were
no incidents which required reporting.
507,956
303,999
16,447
21,694
176,735
1,026,831
29.61%
93.22%
296,495
91,025
8,755
21,694
39,264
457,233
19.91%
91.72%
Future Developments
804,451
395,024
25,202
43,388
215,999
1,484,064
1,026,389
395,024
25,202
64,473
215,999
1,727,087
Details around the Operating and Financial Review and Outlook are disclosed on page 22 and 23.
Indemnification of Officers and Auditors
1. Managing Director & CEO,
2. Chief Financial Officer
3. Cash bonuses are disclosed on an accruals basis and represent the amount earned in respect of the current financial year.
4. Non-monetary benefits relate to motor vehicle or other expenses packaged within the employee’s salary package.
5. Excludes equity settled share based payments. Cash bonuses are discretionary and are determined by the Board in September of each year.
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.
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 $4,075 paid or payable for non-audit services.
Auditor’s Independence Declaration
The auditor’s independence declaration is included on page 35 of the annual report.
33
Saunders International Annual Report 2022 34
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, 24 August 2022
Timothy Burnett
Director
Sydney, 24 August 2022
Auditor’s Independence
Declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Eclipse Tower
60 Station Street
Parramatta
Sydney, NSW, 2150
Australia
Phone: +61 2 9840 7000
www.deloitte.com.au
The Board of Directors
Saunders International Limited
L2 Building F, Rhodes Corporate Park
1 Homebush Bay Drive
Rhodes NSW 2138
24 August 2022
Dear Board Members,
AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo SSaauunnddeerrss IInntteerrnnaattiioonnaall LLiimmiitteedd
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 report of Saunders International Limited for the year ended 30
June 2022, I declare that to the best of my knowledge and belief, there have been no contraventions of:
• The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
• Any applicable code of professional conduct in relation to the audit.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
David Sartorio
Partner
Chartered Accountants
35
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
20
Saunders International Annual Report 2022 36
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Eclipse Tower
60 Station Street
Parramatta
Sydney, NSW, 2150
Australia
Phone: +61 2 9840 7000
www.deloitte.com.au
IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee
MMeemmbbeerrss ooff SSaauunnddeerrss IInntteerrnnaattiioonnaall LLiimmiitteedd
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt
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 2022, 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 other explanatory information, and the directors’
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
• Giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance
for the year then ended; and
• 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 & Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are
relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
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.
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.
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr
Our procedures included, but were not limited to:
•
•
Evaluating management’s processes and key controls in
respect of the recognition of revenue and contract assets
and contract liabilities on construction contracts; and
Testing a sample of contracts 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;
assessed appropriateness of contingency 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.
▪
▪
▪
▪
▪
▪
▪
We also assessed the appropriateness of the disclosures in Notes
1(c), 1(i), 2, 3 and 10 to the financial statements.
Recognition of revenue and contract assets
liabilities on construction
and contract
contracts
‘Revenue’, Note 2
Refer to Note 1(c) ‘Construction Contracts’,
Note 1(i)
‘Critical
accounting judgements and key sources of
estimation uncertainty’, Note 3 ‘Revenue’
and Note 10 ‘Contract Assets and Contract
Liabilities’.
As at 30 June 2022 the Group’s revenue
from construction contracts is $130 million.
Construction revenue
is recognised by
management after assessing all factors
relevant to each contract. Significant
management estimation
in
assessing the following:
is required
•
•
•
•
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.
Liability limited by a scheme approved under Professional Standards Legislation.
37
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
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 2022, but does not include the financial report and our
auditor’s report thereon.
Saunders International Annual Report 2022 38
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 audit, or otherwise appears to be materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the 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.
27 to 33
39
Saunders International Annual Report 2022 40
Directors’
Declaration
The directors declare that: -
(a) 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;
(b) 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;
(c) 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, 24 August 2022
Timothy Burnett
Director
Sydney, 24 August 2022
Consolidated Statement
of Profit or Loss and Other
Comprehensive Income
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 2 2
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
Note
2022
$’000
2021
$’000
3
4
4
4
4
129,955
101,242
897
704
(87,552)
(58,838)
(27,709)
(28,100)
(2,246)
(1,931)
(365)
(468)
(106)
(317)
(237)
(95)
(3,027)
(4,343)
9,379
8,085
5
(2,828)
(2,543)
Profit / (loss) for the year attributable to shareholders of the parent entity
6,551
5,542
Other comprehensive income
-
-
Total comprehensive profit / (loss) attributable to shareholders of the parent entity
6,551
5,542
Earnings/(losses) per share
Basic (cents per share)
Diluted (cents per share)
14
14
6.24
6.07
5.36
5.21
The accompanying notes form part of these financial statements.
41
Saunders International Annual Report 2022 42
Consolidated Statement
of Financial Position
Consolidated Statement of
Changes in Equity
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 2 2
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 2 2
Note
2022
$’000
2021
$’000
Current assets
Cash and cash equivalents
Trade and other receivables
Contract Assets
Inventories
Other current Assets
Total current assets
Non-current assets
Property Plant and equipment
Right-of-use assets
Intangible asset
Deferred tax assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Contract liabilities
Provisions
Current tax liability
Lease liabilities
Total current liabilities
Non-current liabilities
Provisions
Lease liabilities
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Issued capital
Treasury shares under employee share plan
Share based payments reserve
Retained earnings
Total equity
18
6
10
7
8
20
5
9
10
11
5
8
11
8
5
12
12
12
13
36,746
28,946
9,340
189
192
23,816
10,258
2,884
163
151
75,413
37,272
12,086
10,473
3,674
2,534
321
-
16,081
91,494
35,500
13,023
4,427
2,089
1,191
-
63
13,070
50,342
10,725
5,684
2,642
524
704
Balance at 1 July 2020
Profit for the year
Total comprehensive income
Transactions with owners in their capacity as owners
Dividends paid
Shares issued during the year
Shares based payments vested / lapsed
Share-based payments expense
Balance at 30 June 2021
Balance at 1 July 2021 (as previously reported)
Profit for the year
Total comprehensive income
Transactions with owners in their capacity as owners
Dividends paid
56,230
20,279
Shares issued (net of forfiture/lapsing) during the year
Issued
Capital
$’000
Treasury
Shares
$’000
Share
Based
Payments
Reserve
$’000
Retained
Earnings
$’000
Total
$’000
19,701
(351)
776
2,532
22,658
-
-
385
323
278
-
20,687
20,687
-
-
93
1,132
570
-
-
-
-
(323)
-
-
(674)
(674)
-
-
-
(1,132)
-
-
-
-
-
-
(355)
315
736
736
-
-
-
-
(570)
218
384
5,542
5,542
5,542
5,542
(793)
(408)
-
77
-
7,358
7,358
6,551
6,551
-
-
315
28,107
28,107
6,551
6,551
(2,944)
(2,851)
-
-
-
-
-
218
10,965
32,025
Shares vested during the year
Share-based payments expense
Balance at 30 June 2022
22,482
(1,806)
The accompanying notes form part of these financial statements.
839
2,328
72
3,239
237
1,719
-
1,956
59,469
22,235
32,025
28,107
22,482
(1,806)
384
10,965
32,025
20,687
(674)
736
7,358
28,107
43
The accompanying notes form part of these financial statements.
Saunders International Annual Report 2022 44
Consolidated Statement of
Cash Flows
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 2 2
Notes to the Financial
Statements
Note
2022
$’000
2021
$’000
Statement of Compliance
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs paid
Income taxes (paid)
126,504
120,756
(105,496)
(105,102)
-
(105)
(1,140)
2
(95)
-
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’).
Net cash inflow / (outflow) from operating activities
18
19,763
15,561
The financial statements were authorised for issue by the directors on 24th August 2022.
Cash flows from investing activities
Payments for plant and equipment
Proceeds from sale of assets
Payments for business acquisition
Basis of Preparation
(3,124)
(1,751)
30
(185)
26
-
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.
Net cash used in investing activities
(3,279)
(1,725)
Cash flows from financing activities
Dividends paid
Proceeds of borrowings
Repayment of borrowings
Repayments of lease liabilities
(2,851)
1,407
(408)
1,173
(1,407)
(1,173)
(798)
(600)
(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 2020.
Accounting Standard in issue but not yet effective
Certain Australian Accounting Standards and amendments to standards have been published hat are not mandatory for reporting
period commencing 1 July 2021and not been early adopted by the Group. These standards are not expected to have a material
impact on the entity in the current or future reporting periods and on foreseeable future transactions.
(b)
Cash and Cash Equivalents
Net cash used in financing activities
(3,649)
(1,008)
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.
Net increase / (decrease) in cash and cash equivalents
12,835
12,828
(c)
Construction Contracts
Cash and cash equivalents at the beginning of the financial year
23,816
11,085
Effects of exchange rate fluctuations on cash held
95
(97)
Cash and cash equivalents at the end of the financial year
18
36,746
23,816
The accompanying notes form part of these financial statements.
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.
45
Saunders International Annual Report 2022 46
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
(d)
Employee Benefits
1 .
(f)
S U M M A R Y O F A C C O U N T I N G P O L I C I E S ( C O N T . )
Leases (Cont.)
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.
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.
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.
Lease payments included in the measurement of the lease liability comprise:
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).
• 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.
Deferred Tax
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
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 tax 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.
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 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 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.
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, as
described in Note 1(l).
47
Saunders International Annual Report 2022 48
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
(g)
Plant and Equipment
(i)
Revenue (Cont.)
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.
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.
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.
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. For the majority of fixed price contracts 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.
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.
Cost plus contracts
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
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
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:
Fabrication and construction revenue arises from contracts maintained by the Group to fabricate components and construct
bridges. 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.
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.
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.
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.
49
Saunders International Annual Report 2022 50
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
(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
Financial assets All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace.
(j)
Financial Assets (Cont.)
(i) Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income
over the relevant period.
For financial assets other than purchased or originated credit- impaired financial assets (i.e. assets that are credit- impaired on initial
recognition) , the effective interest rate is the rate that exactly discounts estimated future cash receipts ( including all fees and points
paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the
gross carrying amount of the debt instrument on initial recognition. For purchased or originated credit- impaired financial assets,
a credit-adjusted effective interest rate is calculated by discounting the estimated future cash flows, including expected credit
losses, to the amortised cost of the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the
principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial
amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised
cost of a financial asset before adjusting for any loss allowance.
Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost
and at FVTOCI. For financial assets other than purchased or originated credit- impaired financial assets, interest income is
calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that
have subsequently become credit- impaired ( see below) . For financial assets that have subsequently become credit- impaired,
interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset. If, in subsequent
reporting periods, the credit risk on the credit- impaired financial instrument improves so that the financial asset is no longer
credit- impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the
financial asset.
For purchased or originated credit- impaired financial assets, the Group recognises interest income by applying the credit- adjusted
effective interest rate to the amortised cost of the financial asset from initial recognition. The calculation does not revert to the gross
basis even if the credit risk of the financial asset subsequently improves so that the financial asset is no longer credit- impaired.
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the
classification of the financial assets.
Interest income is recognised in profit or loss and is included in the other income line item (note 4).
Classification of financial assets
(ii) Financial assets at FVTPL
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL. Specifically:
• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual
cash flows; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income
(FVTOCI) :
• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and
selling the financial assets; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).
Despite the foregoing, the Group may make the following irrevocable election / designation at initial recognition of a financial asset:
• the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive
income if certain criteria are met; and
• the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as measured at FVTPL
if doing so eliminates or significantly reduces an accounting mismatch.
• Investments in equity instruments are classified as at FVTPL, unless the Group designates an equity investment that is neither
held for trading nor a contingent consideration arising from a business combination as at FVTOCI on initial recognition;
• Debt instruments that do not meet the amortised cost criteria or the FVTOCI criteria are classified as at FVTPL. In addition, debt
instruments that meet either the amortised cost criteria or the FVTOCI criteria may be designated as at FVTPL upon initial
recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency ( so called
‘accounting mismatch’) that would arise from measuring assets or liabilities or recognising the gains and losses on them on
different bases. The Group has not designated any debt instruments as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses
recognised in profit or loss to the extent they are not part of a designated hedging relationship. The net gain or loss recognised in
profit or loss includes any dividend or interest earned on the financial asset and is included in the other income line item.
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. 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.
51
Saunders International Annual Report 2022 52
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
(k)
Goods and Services Tax
(n)
Basis of consolidation (Cont.)
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.
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)
Issues Share Capital
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. has power over the investee;
ii. 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.
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.
53
Saunders International Annual Report 2022 54
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
1 .
S U M M A R Y O F A C C O U N T I N G P O L I C I E S
(o)
Business combinations (Cont.)
(q)
Government Grants
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 circum
stances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.
(p)
Share Based Payments
During the Financial year, the Group became eligible for certain government support in response to the coronavirus pandemic,
as explained in Note 4. The Group’s accounting policy for government grants is explained below.
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching
to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as
expenses the related costs for which the grants are intended to compensate. Specifically, wage subsidies received under the
JobSaver/JobKeeper schemes are presented as other income in profit or loss. Government grants whose primary condition is that
the Group should purchase, construct or otherwise acquire non-current assets (including property, plant and equipment) are
recognised as deferred income in the consolidated statement of financial position and transferred to profit or loss on a systematic
and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving
immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they
become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference
between proceeds received and the fair value of the loan based on prevailing market interest rates.
2 .
C R I T I C A L A C C O U N T I N G J U D G E M E N T S A N D K E Y S O U R C E S O F E S T I M AT I O N U N C E R TA I N T Y
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.
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-Merton model, which requires the input of
highly subjective assumptions.
Construction contracts
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.
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.
55
Saunders International Annual Report 2022 56
3 .
R E V E N U E
5 .
I N C O M E TA X
Revenue
stream
Revenue
recognition
Australia
$’000
PNG
$’000
Total
2022
$’000
Australia
$’000
PNG
$’000
Engineering & Construction
Over time
Services
Over time
Fabrication & Construction
Over time
73,073
24,518
32,364
Interest Received
Point in time
-
Total revenue
129,955
-
-
-
-
-
73,073
36,026
24,518
35,918
32,364
29,297
-
1
129,955
101,242
-
-
-
-
-
Total
2021
$’000
36,026
35,918
29,297
1
101,242
4 .
P R O F I T F O R T H E Y E A R
Other income
JobSaver/JobKeeper subsidy (Government grants)
Profit on sale of asset
Other
Note
25
2022
$’000
2021
$’000
744
26
127
897
598
5
101
704
Profit before taxation
Income tax at 30%
Other
Total income tax expense
Current tax liability
Income tax recognised in profit
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
The prima facie income tax expense on pre-tax accounting profit reconciles to
income tax expense in the financial statements as follows:
2022
$’000
2021
$’000
2,693
135
2,828
9,379
2,814
14
2,828
(2,089)
391
2,152
2,543
8,085
2,426
117
2,543
(524)
Profit before income tax has been arrived at after (crediting)/charging
the following expenses:
Cost of sales
109,250
82,058
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.
The cost of sales figure above is the relates to labour, materials and subcontractors cost directly related to deriving the revenue for the Group
in the financial year.
Deferred Tax Balances
The deferred tax expense above is itemised as follows:
Depreciation Expense:
Buildings
Plant and equipment
Right-of-use-assets
Office furniture and equipment
Finance costs:
Finance cost on lease liabilities
Employee benefits expense:
Post-employment benefits – defined contributions
Payroll tax expense
Workers compensation insurance
Employee Share Plan
Salary and wages (net of recharge to work-in-progress)
2022
$’000
27
1,364
656
199
2,246
2021
$’000
27
1,262
465
177
1,931
106
95
2,114
1,305
596
218
23,476
27,709
1,743
1,348
726
315
23,968
28,100
57
Saunders International Annual Report 2022 58
5 .
I N C O M E TA X ( C O N T . )
6 .
T R A D E A N D O T H E R R E C E I VA B L E S
2022
Deferred tax assets
Employee benefits
Restructure provision
Contract assets
Lease liabilities
Tax losses
Share issue costs
Accruals and other payables
Deferred tax assets
Deferred tax liabilities
Property, plant and equipment
Right of use asset
Other
Deferred tax liabilities
Net deferred tax liabilities
2021
Deferred tax assets
Employee benefits
Restructure provision
Contract assets
Lease liabilities
Tax losses
Share issue costs
Accruals and other payables
Deferred tax assets
Deferred tax liabilities
Property, plant and equipment
Right of use asset
Other
Deferred tax liabilities
Net deferred tax liabilities
Opening
balance
$’000
(Charged)/
Credited to
income
$’000
Recognised
directly to equity
$’000
736
129
4
306
43
63
353
1,634
(1,186)
(366)
(19)
(1,571)
63
145
579
(3)
(88)
36
-
(72)
597
(834)
104
(2)
(732)
(135)
-
-
-
-
-
-
-
-
-
-
-
-
-
Opening
balance
$’000
(Charged)/
Credited to
income
$’000
Recognised
directly to equity
$’000
620
90
41
366
1,591
63
403
3,174
(589)
(370)
-
(959)
2,215
116
38
(37)
(59)
(1,548)
-
(50)
(1,540)
(597)
4
(19)
(612)
(2,152)
-
-
-
-
-
-
-
-
-
-
-
-
-
Closing
balance
$’000
881
708
1
218
79
63
281
2,231
(2,020)
(262)
(21)
(2,303)
(72)
Closing
balance
$’000
736
129
4
306
43
63
353
1,634
(1,186)
(366)
(19)
(1,571)
63
Trade receivables (i)
2022
$’000
28,946
2021
$’000
10,258
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 2022 and 30 June 2021 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 risk1
Credit loss allowance
2022
Australia
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2022
PNG
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2021
Australia
0.0%
0.0%
0.0%
0.2%
0.5%
0.1%
2021
PNG
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2022
Australia
$’000
2022
PNG
$’000
2022
Total Group
$’000
2021
Australia
$’000
2021
PNG
$’000
2021
Total Group
$’000
25,038
2,304
148
768
369
28,627
9,340
-
-
-
319
25,357
-
-
-
-
2,304
148
768
369
319
28,946
-
-
-
-
9,340
-
-
-
8,256
1,354
115
114
137
9,976
2,884
6
(6)
-
282
-
-
-
-
282
-
-
-
-
8,538
1,354
115
114
137
10,258
2,884
-
-
-
Net carrying amount
37,967
319
38,286
12,860
282
13,142
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.
59
Saunders International Annual Report 2022 60
7 .
P R O P E R T Y , P L A N T A N D E Q U I P M E N T
8 .
L E A S E S ( G R O U P A S L E S S E E ) ( C O N T . )
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 2022 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.
Land
at cost
$’000
Buildings
at cost
$’000
Plant and
Equipment
at cost
$’000
Office furniture
and equipment
at cost
$’000
Gross carrying amount
Balance at 1 July 2020
3,400
1,150
Additions
Disposals
-
-
-
-
Balance at 30 June 2021
3,400
1,150
Business acquisition
Additions
Disposals
-
-
-
-
-
-
14,095
1,664
(100)
15,659
-
2,980
(85)
1,030
87
-
1,117
16
144
-
Total
$’000
19,675
1,751
(100)
21,326
16
3,124
(85)
Balance at 30 June 2022
3,400
1,150
18,554
1,277
24,381
Accumulated depreciation
Balance at 1 July 2020
Disposals
Depreciation expense
Balance at 30 June 2021
Reclassification to right-of-use
assets
Disposals
Depreciation expense
Balance at 30 June 2022
Net book value
As at 30 June 2021
As at 30 June 2022
-
-
-
-
-
-
-
-
94
-
27
121
-
-
27
148
3,400
3,400
1,029
1,002
8,782
(79)
1,262
9,965
(67)
(81)
1,364
11,181
5,694
7,373
590
-
177
767
-
-
199
966
350
311
9,466
(79)
1,466
10,853
(67)
(81)
1,590
12,295
10,473
12,086
8 .
L E A S E S ( G R O U P A S L E S S E E )
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 for office leases is
3.6 years. The average lease term for motor vehicles and other equipment is 4.5 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.
This note provides information for leases where the Group is a lessee.
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
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 costs relating to leases
Amounts recognised in the balance sheet
This Balance Sheet shows the following amounts in relation to leases:
2022
$’000
656
656
106
24
74
204
2021
$’000
465
465
95
22
38
155
Right of Use Assets
Gross amount
Opening balance, 1 July 2020
Reallocation
Additions
Balance as at 30 June 2021
Reclassification from property, plant and equipment
Additions
Balance as at 30 June 2022
Accumulated depreciation
Opening balance, 1 July 2020
Reallocation
Depreciation expense
Balance as at 30 June 2021
Reclassification from property, plant and equipment
Depreciation expense
Balance as at 30 June 2022
Net book value
As at 30 June 2021
As at 30 June 2022
2022
$’000
2021
$’000
$’0
1,285
57
-
1,342
-
73
1,415
270
14
94
378
188
294
860
964
555
1,315
(57)
914
2,172
-
1,790
3,962
245
(14)
371
602
(121)
362
843
1,570
3,119
2,600
-
914
3,514
-
1,863
5,377
515
-
465
980
67
656
1,703
2,534
3,674
61
Saunders International Annual Report 2022 62
8 .
L E A S E S ( G R O U P A S L E S S E E ) ( C O N T . )
1 0 .
C O N T R A C T A S S E T S A N D C O N T R A C T L I A B I L I T I E S ( C O N T . )
Lease Liabilities
Current
Non-Current
Total Lease Liabilities
Maturity Analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
9 .
T R A D E A N D O T H E R P AYA B L E S
Current
Trade payables (i)
Other payables
Goods and services tax payable
Accruals and other payables
2022
$’000
1,191
2,328
3,519
2022
$’000
1,191
1,005
646
416
261
-
2021
$’000
704
1,719
2,423
2021
$’000
704
716
530
360
113
-
3,519
2,423
2022
$’000
17,267
1,731
1,960
14,542
35,500
2021
$’000
8,212
-
351
2,162
10,725
(i) Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 45 days. For most suppliers no interest is charged on the trade payables for the first 45
days from the date of the invoice.
1 0 .
C O N T R A C T A S S E T S A N D C O N T R A C T L I A B I L I T I E S
Contract assets related to contracts
Contract liabilities relating to contracts
Contract assets
2022
$’000
9,340
13,023
2021
$’000
2,884
5,684
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.
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 $5.68
million (FY21: $4.59 million). Revenue recognised in the reporting period from performance obligations satisfied or partially
satisfied in previous periods was nil (FY21: nil). Partially satisfied performance obligations continue to incur revenue and costs in
the period.
Remaining performance obligations (Work in hand)
Contracts which have remaining performance obligations as at 30 June 2022 and 30 June 2021 are set out below.
Revenue stream
Engineering & Construction
Services
Fabrication & Construction
Total work in hand
2022
$’000
127,941
17,981
46,973
192,895
2022
$’000
30,799
9,032
43,499
83,330
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.
1 1 .
P R O V I S I O N S
Current
Employee benefits
Other provisions
Non-current
Employee benefits
Other provisions
2022
$’000
2,155
2,272
4,427
782
57
839
2021
$’000
2,104
538
2,642
237
-
237
63
Saunders International Annual Report 2022 64
1 2 .
I S S U E D C A P I TA L
1 2 .
I S S U E D C A P I TA L ( C O N T . )
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
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 17 tranches of the ESP have been issued.
Tranche 8: Offer of 400,000 shares in January 2016 with all offers accepted. The tranche has been modified, by the Board in
February 2020, to vest in February 2022. During the financial year, 400,000 shares vested and there was no forfeiture.
Tranche 9: During the financial year 65,000 shares vested and there was no forfeiture.
Tranche 10: During the financial year 145,000 shares vested and there was no forfeiture.
Tranche 11: During the financial year 95,000 shares vested and there was no forfeiture.
Tranche 12: During the financial year 165,000 shares vested and 15,000 shares were forfeited.
Tranche 13: During the financial year 45,000 shares were forfeited.
Tranche 14: During the financial year 45,000 shares were forfeited.
Tranche 15: During the financial year 50,000 shares were forfeited.
Tranche 16: During the financial year 235,000 new shares were issued and there was no forfeiture.
Tranche 17: During the financial year 485,428 new shares were issued and there was no forfeiture.
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.
Ordinary shares
Ordinary shares at beginning of financial year
Shares issued under Dividend Reinvestment Plan
2022
Number
2021
Number
103,990,067
102,848,127
112,880
1,044,471
Shares issued under Employee Share and Performance Rights Plans
1,654,588
564,969
Treasury shares vested during the year
Net Treasury shares issued during the year
Ordinary shares at end of financial year
Fully paid ordinary shares
Balance at beginning of financial year
Shares issued under Dividend Reinvestment Plan
Shares issued Performance Rights Plan
Shares issued under Employee Share Plan
Net treasury shares issued during the year
Balance at end of financial year
Treasury shares under employee share plan
Balance at beginning of financial year
Treasury shares vested during the year
Net Treasury shares issued during the year
Balance at end of financial year
Treasury shares under employee share plan
Balance at beginning of financial year
Net Treasury shares issued during the year
Balance at end of financial year
Reserves
Nature and purpose of reserves
622,703
-
(485,028)
(467,500)
105,895,210
103,990,067
2022
$’000
2021
$’000
20,687
19,701
93
436
134
1,132
22,482
2022
Number
385
278
-
323
20,687
2021
Number
2,345,625
1,878,125
(622,703)
-
485,028
467,500
2,207,950
2,345,625
2022
$’000
(674)
(1,132)
(1,806)
2021
$’000
(351)
(323)
(674)
(a) Treasury shares under employee share plan
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.
65
Saunders International Annual Report 2022 66
1 2 .
I S S U E D C A P I TA L ( C O N T . )
1 2 .
I S S U E D C A P I TA L ( C O N T . )
Details of the fair value assumptions used are as follows:
Movement in share options during the year
The following reconciles the share options outstanding at the beginning and end of the year.
Tranche 8
Tranche 9
Tranche 10
Tranche 11
Tranche 12
Tranche 13
Tranche 14
Tranche 15
Tranche 16
Tranche 17
Grant Date
Jan 2016
Feb 2016
Feb 2017
Oct 2017
Feb 2018
Feb 2019
Feb 2020
Feb 2021
Aug 2021
Feb 2022
Grant Price
$0.58
$0.58
$0.58
$0.50
$0.59
$0.33
$0.38
$0.69
$0.80
$1.02
Opening
Volume
400,000
65,000
145,000
95,000
180,000
320,000
442,500
607,500
-
-
New grants
-
-
-
-
-
-
-
-
235,000
485,428
Exercised
(400,000)
(65,000)
(145,000)
(95,000)
(165,000)
Forfeitures
Closing
Volume
Exercise
Price
Expected
Volatility
-
-
-
-
-
-
-
-
(15,000)
(45,000)
(45,000)
(50,000)
-
-
$0.58
$0.58
$0.58
$0.50
$0.59
$0.33
$0.38
$0.69
$0.80
$1.02
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
Option Life
6 years
6 years
5 years
5 years
4 years
4 years
4 years
4 years
4 years
4 years
Dividend
Yield
Risk Free
Interest
Rate
Grant date
fair value
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
2.05%
1.72%
2.00%
2.75%
2.82%
2.82%
2.82%
2.82%
2.82%
2.82%
$0.22
$0.21
$0.22
$0.19
$0.23
$0.12
$0.15
$0.27
$0.31
$0.39
There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant date. Tranche 8
was extended until February 2022 as set out above.
2022
2021
Number
of options
Weighted average
exercise price
Number
of options
Weighted average
exercise price
2,255,000
720,428
(155,000)
(870,000)
1,950,428
-
0.53
0.95
0.48
0.57
0.67
-
1,788,125
612,500
(145,625)
-
2,255,000
-
0.48
0.69
0.47
-
0.53
-
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 Rights Plan
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 to
normalised EPS for the final year of the measurement period. Normalised EPS will relate to normal operations and will exclude ab
normal 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.
-
275,000
397,500
557,500
235,000
485,428
The Saunders International Rights Plan was approved by the Board and approved by shareholders at the Annual General Meeting
in October 2015.
67
Saunders International Annual Report 2022 68
2022
$’000
7,358
6,551
(2,944)
-
10,965
2021
$’000
2,532
5,542
(793)
77
7,358
2022
Cents
per share
6.24
6.07
2022
Cents
per share
5.36
5.21
1 2 .
I S S U E D C A P I TA L ( C O N T . )
1 3 .
R E TA I N E D E A R N I N G S
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 4,394,557 of which 1,169,559 have vested and 287,904 have lapsed as at 30 June 2022.
Details of the fair value assumptions used are as follows:
Tranche 10
Tranche 12
Tranche 13
Tranche 14
Tranche 15
Tranche 16
Tranche 17
Tranche 18
Tranche 19
Tranche 20
Grant Date 1 Sept 2016 1 Sept 2017 1 Sept 2018 1 Sept 2018 1 Sept 2019 1 Sept 2019 1 Sept 2020 1 Sept 2020 1 Sept 2021 1 Sept 2021
Grant Price
$0
$0
$0
$0
$0
$0
$0
$0
$0
Opening
Volume
238,095
306,747
401,299
401,299
590,979
590,979
374,373
374,373
-
$0
-
Balance at beginning of financial year
Profit for the year
Dividends provided for or paid
Share based payments vested/lapsed
Balance at end of financial year
1 4 .
E A R N I N G S P E R S H A R E
345,600
345,600
Diluted earnings/(losses) per share
Basic earnings/(losses) per share
New grants
-
-
-
110,023
157,595
157,595
Lapsed
(97,482)
(140,072)
(50,350)
Forfeited
-
-
-
-
-
Vested
(140,613)
(166,675)
(350,949)
(511,322)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
748,574
748,574
374,373
374,373
345,600
345,600
-
$0
-
$0
-
$0
Closing
Volume
Exercise
Price
Expected
Volatility
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
2022
$’000
6,551
6,551
2022
No.’000
2021
$’000
5,542
5,542
2021
No.’000
103,340
$0
$0
$0
$0
$0
$0
$0
Weighted average number of ordinary shares for the purposes of basic earnings per share
104,955
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
26.87%
Diluted earnings per share
Option Life
0 years
0 years
0 years
0 years
0.17 years
0.17 years
1.17 years
1.17 years
2.18 years
2.18 years
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:
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
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
1.93%
Weighted average number of ordinary shares used in the calculation of basic EPS
104,955
103,340
$0.46
$0.49
$0.34
$0.34
$0.29
$0.29
$0.52
$0.52
$0.70
$0.70
Shares deemed to be issued for no consideration in respect of employee options and
performance rights (a)
2,955
3,035
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 Performance
Rights is $0.00 per right and the share price on grant date was $0.46 per share for tranche 10, $0.49 per share for tranches 12,
$0.34 per share for tranches 13 and 14, $0.29 per share for tranches 15 and 16, $0.52 per share for tranches 17 and 18; and $0.70
per share for tranches 19 and 20. Remaining period refers to the remaining contractural life of the Performance Rights prior to their
expiry. Tranches 10, 12, 13 and 14 expired during the current year and therefore, these tranches have nil remaining period at the
end of the year. As at year end, tranches 15 and 16 have 0.17 year, tranches 17 and 18 have 1.17 years and tranches 19 and 20
have 2.18 years contractural life remaining prior to their expiry. The Performance Rights outstanding at the end of the year has a
weighted average remaining contractual life of 0.90 year.
Weighted average number of ordinary shares and potential ordinary shares used in the
calculation of diluted earnings per share
107,910
106,375
(a) During the year ended 30 June 2022 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.
69
Saunders International Annual Report 2022 70
1 5 .
D I V I D E N D S
1 8 .
N O T E S T O T H E S TAT E M E N T O F C A S H F L O W S
Recognised amounts
Fully paid ordinary shares
Final dividend (prior year):
Fully franked at a 30% tax rate
Interim dividend (current year):
Fully franked at a 30% tax rate
Unrecognised amounts
Fully paid ordinary shares
Final dividend (current year):
2022
2021
Cents per
share
Total
$’000
Cents per
share
Total
$’000
1.75
1.00
2.75
1,863
1,081
2,944
-
0.75
0.75
-
793
793
2.00
2,162
1.75
1,863
The Board declared on 24 August 2022 that there will be a final dividend payable of 1.00 cents per share fully franked and special
dividend of 1.00 cents per share fully franked (FY21 0.75 cents final dividend and 1.00 cents special dividend). Both dividends will
be payable on 10th October 2022 with the record date for determining dividends on 13th September 2022.
Adjusted franking account balance
1 6 .
S E G M E N T I N F O R M AT I O N
2022
$’000
3,098
2021
$’000
1,666
The Group operates in one reporting segment being the design, construction, and maintenance of steel storage tanks and
concrete bridges.
In the current period 3 customers made up 53% of the revenue earned (2021: 3 customers made up 36% of the revenue earned).
These customers accounted for $69,220,000 of the Groups’ total revenue.
1 7 .
C O N T I N G E N T L I A B I L I T I E S A N D C O N T I N G E N T A S S E T S
There are a number of commercial claims and exposures that may arise from the normal course of the Group’s business in respect
of which no provision has been made.
(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
(b) Reconciliation of profit/(loss) for the year to net cash flows from
operating activities
Profit for the year
Share-based payments expense
Depreciation
Gain on disposal of non-current assets
Unrealised foreign exchange loss
(Increase)/decrease in assets:
Current tax liability
Deferred tax assets
Deferred tax liabilities
Trade and other receivables
Contract assets
Inventories
Other assets
Increase/(decrease) in liabilities:
Trade and other payables
Contract liabilities
Provisions
Net cash inflow from operating activities
(c) Financing facilities
The Group’s principal financing facilities for the provision of bank guarantees as
described in Note 19 is secured by a fixed and floating charge over the assets of
the Group.
Amount used
Amount unused
2022
$’000
2021
$’000
36,746
23,816
6,551
218
2,246
(26)
(95)
1,565
63
72
(18,687)
(6,466)
(26)
(41)
24,806
7,340
2,243
19,763
18,551
11,449
30,000
5,542
315
1,931
(5)
97
377
2,152
-
3,039
3,827
211
(112)
(3,520)
1,095
612
15,561
10,121
9,879
20,000
The facilities have financial covenants relating to the Group’s capital adequacy ratio and its leverage ratio. During the financial year,
the total facilities increased from $20 million to $30 million.
71
Saunders International Annual Report 2022 72
1 8 .
N O T E S T O T H E S TAT E M E N T O F C A S H F L O W S ( C O N T . )
(d)
Asset and liabilities
1 9 .
F I N A N C I A L I N S T R U M E N T S ( C O N T . )
Financial risk management objectives
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.
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.
Lease liabilities
Balance at
1 July 2021
$’000
2,423
Financing Cash
Flows (i)
$’000
Non -Cash Movement in
Finance Leases
$’000
Balance at
30 June 2022
$’000
(798)
1,894
3,519
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.
(i)
Financing cash flows comprise of repayment of borrowings and payments in relation to finance leases.
Liquidity and interest risk tables
1 9 .
F I N A N C I A L I N S T R U M E N T S
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:
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.
(a)
Cash and cash equivalents
2022
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.
(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
Accounts receivables
Financial liabilities
Trade and other payables
Lease Liabilities
Obligations under finance leases
Leasing arrangements
2022
$’000
36,746
28,946
65,692
18,998
3,519
22,517
2021
$’000
23,816
10,258
34,074
8,212
2,423
13,148
Weighted average
effective interest rate
%
Less than
1 month
$’000
1 to 3
months
$’000
3 months to
2 years
$’000
Financial assets
Cash and cash equivalents
Trade receivables
Financial liabilities
Trade payables and other payables
Lease liabilities
2021
Financial assets
0.54%
-
-
5.0%
36,746
27,661
4,668
100
Cash and cash equivalents
0.52%
23,816
Trade receivables
Financial liabilities
Trade payables and other payables
Lease liabilities
-
-
4.8%
9,896
3,625
58
Interest rate sensitivity analysis
-
916
12,947
201
-
231
4,476
115
-
369
1,383
3,218
-
131
111
2,250
Total
$’000
36,746
28,946
18,998
3,519
23,816
10,258
8,212
2,423
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 $163,203 (2021: $149,825).
Foreign currency risk
The Group manages its foreign currency risk arising from significant supplier contracts in foreign currencies by holding foreign
currency. As a result of operations in Papua New Guinea the Group’s statement of financial position can be affected by movements
in the PGK/A$ 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 ex
change risk. At 30 June 2022, 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 2022, the Group had A$688,969 (2021: $690,432) 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 or decrease by $34,539 (2021: $34,609).
The Group leased certain of its construction equipment under finance leases. The average lease term is 4.2 years. The Group’s
obligations under finance leases are secured by the lessor’s title to the leased assets.
73
Saunders International Annual Report 2022 74
1 9 .
F I N A N C I A L I N S T R U M E N T S ( C O N T . )
2 2 .
S U B S I D I A R I E S
Fair value of financial instruments
Details of the Group’s material subsidiaries at the end of the reporting period are as follows.
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.
2 0 .
I N TA N G I B L E A S S E T S
On 30 July 2021, the Group acquired Plantweave Technologies (PlantWeave), a specialist in industrial process automation and
electrical solutions. The purchase was made with the Group’s cash reserves and resulted in recognition of intangible assets of
$321,313. The nature of this amount is Goodwill arising from the acquisition of PlantWeave Technologies. There remains an
element of deferred cash payments which may or may not be payable under the earn-out plan.
2 1 .
D I R E C T O R S A N D K E Y M A N A G E M E N T P E R S O N N E L C O M P E N S AT I O N
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
2022
$’000
2021
$’000
1,481,281
2,258,480
71,227
146,232
131,964
247,136
1,698,740
2,637,580
The names of and positions held by the key management are set out on page 31 of the Remuneration Report. Further details of the
remuneration of key management are disclosed in the Remuneration Report. Note, the Group has reviewed and amended the positions
classified as key management positions, the 2021 comparatives figures are reflective of the prior financial year key management positions.
Name of
subsidiary
Principal
activity
Place of
incorporation and
operation
Saunders Civilbuild Pty Ltd
Saunders Property (NSW) Pty Ltd
Bridge construction
and maintenance
Real property
investments
Australia
Australia
Saunders Asset Services Pty Ltd
Maintenance
Australia
Saunders PNG Limited
Tank construction
and maintenance
PNG
Saunders PlantWeave Pty Ltd
Industrial automation
Australia
Proportion of ownership interest and
voting power held by the Group
2022
100%
100%
100%
100%
100%
2021
100%
100%
100%
100%
-
2 3 .
P A R E N T E N T I T Y I N F O R M AT I O N
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).
(b)
Other Transactions with Key Management Personnel
Tax consolidation
There were no transactions with directors and other key management personnel apart from those disclosed in this note.
(c)
Directors’ and Key Management Equity Holdings
Refer to the table on page 31 of the Remuneration Report.
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.
75
Saunders International Annual Report 2022 76
Summary financial information
2 5 .
G O V E R N M E N T G R A N T S A N D G O V E R N M E N T A S S I S TA N C E
The individual financial statements for the parent entity, Saunders International Limited show the following aggregate amounts:
The Group has benefited from government support package as a result of COVID-19 during the period.
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 for the year
Other comprehensive income
Total comprehensive income
2 4 .
R E M U N E R AT I O N O F A U D I T O R
Audit or review of the financial report
PNG tax services
The auditor of Saunders International Limited is Deloitte Touche Tohmatsu.
2022
$’000
58,355
17,473
75,828
42,644
1,563
44,207
22,482
(1,806)
384
10,561
31,621
2022
$’000
7,640
-
7,640
2022
$’000
185,000
4,075
189,075
2021
$’000
31,562
11,895
43,457
15,672
1,170
16,842
20,687
(674)
736
5,866
26,615
2021
$’000
4,560
-
4,560
2021
$’000
135,000
8,188
143,188
JobSaver Scheme (Australia)
Due to the impact of COVID-19 on the Groups’ turnover, government subsidies of $744 thousand (2021: $598 thousand) were
received under the Australian Federal Government’s Job Saver scheme. The entity became eligible for the Scheme and in March
2022 no longer received any payments under the Scheme. The amounts were paid to employees in line with government’s
objectives of helping businesses to continue paying employees to keep them in their jobs so that businesses can re-start when
business conditions improve. The amounts received have been recognised as other income in the statement of profit or loss.
2 6 .
S U B S E Q U E N T E V E N T S
SSubsequent 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 including pressures on resource availability and material escalation. The Group looks to
mitigate these risks by contingency planning as far as practicable and its flexible model allows management to quickly take action
to react to any such risks as they arise.
Saunders continues to work through the detailed scenarios and business continuity planning to minimise these supply chain and
other operational business interruptions.
There have been no other matters or circumstances occurring subsequent to the end of the financial year, that have 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.
2 7 .
A D D I T I O N A L C O M P A N Y I N F O R M AT I O N
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
Tel: (02) 9792 2444
Suite 2.04, Level 2 Building F
Rhodes Corporate Park, 1 Homebush Bay Drive
Tel: (02) 9792 2444
77
Saunders International Annual Report 2022 78
APPENDICES
C O R P O R AT E G O V E R N A N C E
A S X S H A R E H O L D E R I N F O R M AT I O N
C O R P O R AT E D I R E C T O R Y
Saunders International Annual Report 2022
80
Corporate
Governance
The Board of Saunders International Limited has adopted a suite of Corporate
Governance Practices to ensure that the company effectively identifies, monitors
and manages risks, with the appropriate disclosures.
In developing and adopting the Practices, the Board considered the fourth edition of the ASX Corporate Governance
Principles and Recommendations. The Board incorporates the Principles and Recommendations into its Practices to
the extent that they are appropriate, taking into account the Company's size, activities and resources. The Board has
adopted the following Charters, Policies and Codes: -
T H E B O A R D C H A R T E R
The Board Charter sets out matters relating to the responsibilities of the Board and its directors
and matters relating to the composition of the Board and appointment of directors.
B O A R D C O M M I T T E E S A N D T H E I R C H A R T E R S
In order to better manage its responsibilities, the Board has established an Audit and Risk
Committee and a Remuneration Committee. Each committee has adopted a Charter approved
by the Board.
P O L I C I E S A N D C O D E S O F C O N D U C T
The Company has adopted Policies and Codes of Conduct which are available on the
Company’s website.
C O R P O R AT E G O V E R N A N C E S TAT E M E N T A N D A P P E N D I X 4 G
The Company reports on an annual basis, its compliance and/or reasons for non-compliance
with the fourth edition of the ASX Corporate Governance Principles and Recommendations.
The Corporate Governance Statement and the Appendix 4G have been released on the ASX
The Corporate Governance Statement and the Appendix 4G have been released on the ASX
Announcements platform and are on the Company’s website” no paragraph break between
ASX Announcements.
Further information on the above Charters Policies and Codes can be found on the
Company’s website
www.saundersint.com/investors/corporate-governance/
N O . O F H O L D E R S O F E Q U I T Y S E C U R I T I E S
Ordinary Share Capital
There are 105,895,210 fully paid ordinary shares held by
554 individual shareholders. In addition, there are 2,207,950
shares issued to employees under the Employee Share
Purchase Plan (ESP). There ESP shares are not included
for the purpose of calculating the totals and percentages
used in this section. There are no options issued.
S U B S TA I N T I A L S H A R E H O L D E R S
SHAREHOLDER
INFORMATION
Shareholder
No. of Shares
Percentage
NAOS Asset Management
Mr. Desmond Bryant
Anacacia Pty Ltd (Wattle Fund)
Mr. Timothy Burnett
D I S T R I B U T I O N O F S H A R E S
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,000 and over
Total
25,347,755
24,316,811
12,371,553
11,686,311
23.94%
22.96%
11.68%
11.04%
No. of Holders
87
136
75
204
52
154
T W E N T Y L A R G E S T R E G I S T E R E D H O L D E R S
Name
No. of Shares
Percentage
NATIONAL NOMINEES LIMITED
MR DESMOND BRYANT
ANACACIA PTY LTD
WATTLE FUND
DEBRY PTY LTD
TIVOLICO PTY LTD
MARLOT PTY LTD
MR JOHN POWER
EFFJAY HOLDINGS PTY LIMITED
BENSON FAMILY HOLDINGS P/L
BENSON FAMILY
PACBAY PTY LTD
R & B INVEST PTY LTD
SAGIMO HOLDINGS PTY LTD
MRS KARYN MAY MCCLELLAND
DONALD CANT PTY LTD
ANACACIA PTY LTD
PARMELIA PTY LTD
WOODSCENIC PTY LTD
ANACACIA CAPITAL PTY LTD
MR ROBERT GRABURN PATTERSON
FLAGSTAFF SUPERANNUATION PTY LTD
28,261,715
13,322,343
10,731,123
8,677,667
6,878,987
4,807,324
3,401,453
2,316,801
1,980,824
1,931,344
1,669,607
1,301,208
1,229,012
1,057,931
1,002,155
755,969
688,985
638,275
553,530
419,134
26.69%
12.58%
10.13%
8.19%
6.50%
4.54%
3.21%
2.19%
1.87%
1.82%
1.58%
1.23%
1.16%
1.00%
0.95%
0.71%
0.65%
0.60%
0.52%
0.40%
81
Saunders International Annual Report 2022
82
Total
91,625,387
86.52%
Corporate
Directory
Saunders International Sydney
Board of Directors
ABN 14 050 287 431
Timothy Burnett - Chairman
Level 2, 1F Homebush Bay Drive,
Mark Benson - Managing Director
Rhodes NSW 2138
Phone (02) 9792 2444
Saunders Civilbuild
ABN 86 617 431 562
74 Kalaroo Rd,
Redhead NSW 2290
Phone (02) 4946 0266
Saunders PlantWeave
ABN 14 652 303 305
Unit 10, 47-48 Buffalo Rd,
Gladesville NSW 2111
Phone (02) 9848 4488
Saunders (PNG) Limited
1-114512
Greg Fletcher - Non-Executive Director
Nick Yates - Non-Executive Director
Rudy Sheriff - Company Secretar
Auditors
Deloitte Touche Tohmatsu
Eclipse Tower, Level 19
60 Station Street,
Parramatta NSW 2150
Principal Banker
Commonwealth Bank
Corporate Financial Services
Level 1, 430 Forest Rd,
Hurstville NSW 2220
Share Register Link Market
Ground Floor, Century 21 House
Services Limited
Lot 51, Section 35 Kunai Street
Level 12, 680 George Street,
Hohola National Capital District,
Sydney NSW 2000
Papua New Guinea
Phone (02) 8280 7111
Saunders Asset Services
Stock Exchange Listing
ABN 95 610 760 426
Saunders Property Group
ABN 39 617 486 021
Australia Securities Exchange
20 Bridge St,
Sydney NSW 2000
Lot 4740, 2 Cochrane Rd,
Website
East Arm NT 0822
www.saundersint.com
Unit 6 / 5 Bishop St,
Woolner NT 0820
Unit 2 / 100 Champion Rd,
Newport VIC 3015
83
Saunders International Annual Report 2022 84
saundersint.com
For the financial year ended 30 June 2022
ACN 050 287 431