Synertec
2020 Annual Report
Contents
Statement from The Chair
Managing Director’s Report
Synertec Board Members
Financial Report for the year ended 30 June 2020
Corporate Directory
Directors’ Report
Corporate Governance Statement
03
07
12
15
16
17
30
Statement of Profit or Loss and Other Comprehensive Income 31
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
32
33
34
35
58
59
62
ANNUAL OVERVIEW
$11.2mRevenue & other income
+30%Gross margin vs 20% in FY19
33%Growth in Engineering
Consulancy Services
revenue to record $4.1m
80%Revenue consistently derived
from repeat clients (70% FY19)
$3.9mNet assets (including cash $3.0m)
no bank
debt
or covenants at 30 June 2020 (30 June 2019: nil)
1.9 times
Current ratio vs 1.7 FY19, 1.5 FY18
50
Talented people across Australia
Ted Perkins - Synertec’s Construction Manager (2001 - 2020)
Statement from The Chair
“Over the past year, we experienced a lot of innovative change within the Company
as we built on the foundations and gathered the resources we need to execute on
multiple near-term global growth opportunities.”
Dear Shareholders,
As Chair and on behalf of
the Board of Directors, I am
pleased to present to you
the 2020 Annual Report
for Synertec Corporation
Limited.
It is impossible to present our year in review to shareholders
without first acknowledging COVID-19 and its impacts on
the regions in which we operate and our stakeholders
including our people, customers, suppliers and
shareholders.
The pandemic has reshaped most aspects of our
community. Governments around the world quickly
responded to help shield their citizens and economies from
the worst of the pandemic effects. In a similar vein,
Synertec’s Management and Board moved decisively to
tackle COVID-19 related risks – including the health and
safety of our people, our customers and the communities
in which we operate, as well as our operations and our
balance sheet.
We are proud of the way our Company has dealt with the
COVID-19 pandemic and community lockdowns imposed
by Governments across Australia and internationally. We
believe this demonstrates our strong commitment to our
customers and their mission-critical projects, our alliance
partners, our suppliers and our shareholders.
Several major projects which began in the prior year were
successfully delivered to a high standard of quality on time
and budget for our customers. We are proud of the ongoing
commitment of our people to safety and quality as Synertec
pursues continuous improvement in workplace safety on all
jobs and at all locations.
Over the past year, we experienced a lot of innovative change
within the Company as we built on the foundations and
gathered the resources we need to execute on multiple near-
term global growth opportunities.
We welcomed Mr Dennis Lin to the Board in August 2019,
and Mr Freddie Heng retired at the 2019 Annual General
Meeting in November. Freddie was a long-time director of
the Company providing excellent service as Audit and Risk
Committee Chair and was instrumental in the acquisition
of Synertec Pty Ltd. Dennis, with extensive ASX company
and funds management experience, and a long successful
career as an advisor and architect in corporate transactions
between Australia and Asia, has brought a wealth of
experience which is on-point with the cycle in Synertec’s
technology-led growth strategy focused on developing
opportunities across the Asia Pacific region.
A key driver of Synertec’s growth has been our philosophy
to align all our activities to our Purpose and to make long-
term decisions for superior rates of growth and shareholder
return. During the COVID-19 global pandemic, we have
adopted this same philosophy towards key decisions
regarding our people, our customers and our capital
structure. I am pleased to report that:
1. Our people underpin our long-term growth and we have
protected all of our employees maintaining Synertec’s strong
capability and pursuit of innovation in our chosen markets.
2. To support our customers and ensure we continue to
provide seamless service, we invested in numerous relief
measures and benefited from past investments in our
systems and infrastructure to facilitate the smooth transition
of our business to remote delivery of services and products
and capture all revenue opportunities during the period.
3. To ensure we have funding flexibility, we managed
discretionary costs and successfully renegotiated our
banking arrangements to free-up substantial cash reserves
previously required for security and ensured Synertec
remains free of working capital bank debt and covenants.
These measures have all supported Synertec’s long-term
shareholder value.
It would be easy to pull back on investment in staff,
technology and the suite of early stage ventures Synertec
has created, however as an organisation we have
consciously chosen not to cut costs too deep through this
crisis but continue to invest in our people and in technology,
in line with our strategy of commercialising globally scalable
technology through our established diversified engineering
consulting business.
2
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
3
Statement from The Chair (continued)
The scale of the longer-term opportunities we have
identified, particularly in oil and gas and wastewater
management technology, have presented us with the
exciting opportunity to partner with two international
companies during the year in Greentech (based in China)
and EffecTech (based in the United Kingdom), each seeking
to significantly expand their offering across the Asia Pacific
region.
Our partners identified Synertec based on our track record
in the hydrocarbons industry for delivering highly complex
and commercial engineering products and solutions to
blue-chip customers across the world, especially in
Australia’s world class hydrocarbons arena. This has made
FY20 a year of investment for Synertec as we have
continued to maintain focus on what we want the business
to look like and ensure we have the platforms to capitalise
on the economic recovery beyond the COVID-19 pandemic.
Our team has worked hard to deploy our strategy over the
course of FY20. As a result, our ability to replicate, expand
and commercialise our high-value proprietary intellectual
property in target growth markets such as water, rail, LNG
and other critical infrastructure is compounding with every
engagement and we are experiencing unprecedented levels
of revenue recurring from our existing customer base – an
important and pleasing development through such an
economic environment.
To secure technology-led growth opportunities and maintain
our strong capital structure the Company successfully
completed a fully subscribed share placement in July 2020
providing $1.3 million in important capital funding for further
investment in key growth initiatives. This activity attracted
many new investors for Synertec, and we warmly welcome
them to our Company. The Company was also grateful to
have received some of the COVID-19 related Government
subsidies provided to small Australian businesses in recent
months.
With a solid framework now established to commercialise
exciting technology both in-house and through strategic
partners, we expect that the investments the Company has
made will deliver scalable growth in revenue and profitability
in the years ahead. The focus for Synertec’s strategic
investments is early-stage emerging technology that will
benefit from long-term structural trends and complement
Synertec’s core capability in commercialisation and
scale-up and provide revenue, cost and technology
synergies. We firmly believe this approach will help deliver
outsized returns for shareholders.
The cost of maximising these long-term shareholder returns
will however sometimes come at the expense of short-term
profits.
The opportunity with Greentech continues to develop
positively, with Synertec providing critical funding to
Greentech to complete important technology pilot programs
with major Chinese State Owned Enterprise customers.
We remain confident that our technology, competitive
advantages and growth strategy, which we believe we have
communicated consistently to our shareholders since listing
on the ASX in 2017, will underpin our aspiration of $40
million in annual revenues with above-industry margins,
however COVID-19 could impact the timeframe.
The current macro outlook is highly uncertain and like most
businesses, there is a possibility that our near-term profits
will be impacted by COVID-19 conditions. The short term
focus is, in fact, getting through the crisis with an eye to the
future, continuing to execute and invest for the medium-to-
long-term benefit of our customers, people and ultimately
our shareholders.
We believe Synertec will emerge a stronger and better
business from this challenging period and when energy
markets return to more normal conditions, we expect to
generate a high ROI given our market leadership and track
record of generating strong returns from investing in
scalable technology. We are confident our investment and
long-term focus is the right approach given Synertec’s
revenue opportunity remains large and under-penetrated.
Built on strong foundations set in previous years, the
Company is well positioned in the markets it has targeted
and continues to focus and deliver on its key stated
priorities: Safety; Shareholder Value; Industry Focus; High
Performing Teams; and Innovation.
I would like to thank each and every employee for their
contribution. Their dedication in the past six months in
particular has been remarkable and underpinned much of
Synertec’s recent success in receiving further awards from
our existing customer base. Their talent is key to Synertec
achieving success in years to come.
I would also like to thank our shareholders for supporting
Synertec’s vision, strategy and development ambitions.
I look forward to your continued support.
Ms Leeanne Bond
Chair
4
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
5
ANNUAL REVENUE BY CATEGORY ($M)
& GROSS MARGIN (%)
OPERATING CASH ($M), ANNUAL NET CASH
FLOWS ($M) & CURRENT RATIO (TIMES)
$25.0
$20.0
$15.0
$10.0
$5.0
$0.0
FY18
FY19
FY20
Engineering
consultancy services
Fixed price projects
& transfer of goods
40%
30%
20%
10%
0%
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
-$1.0
-$2.0
2.5
2.0
1.5
1.0
0.5
0.0
Gross margin
Total operating cash
Net cash flows
Current ratio
FY18
FY19
FY20
ENGINEERING CONSULTANCY SERVICES
REVENUE ($M)
ANNUAL NET CASH FLOWS ($M)
BY HALF YEARS
5.0
4.0
3.0
2.0
1.0
0.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
FY18
FY19
FY20
FY18
FY19
FY20
1H
2H
Net cash flows 1H
Net cash flows 2H
SYNERTEC’S VALUED TIER ONE CUSTOMER BASE INCLUDES:
QCLNG
Darwin LNG
Managing Director’s Report
“Synertec continues to invest through “equity projects” which are identified as
having know-how and technology which could be developed, scaled and
applied more broadly across our target industries and geographies.”
First and foremost, I would
like to recognise the
steadfast support and
commitment of the people of
Synertec; to each other, to
our customers and to the
strength of our organisation.
Our people have drawn on
the agility, focus and care
that have been trademarks of our business over decades to
steer us through an extraordinary operating environment.
The COVID-19 pandemic is likely to be a defining moment in
history with the impacts to reshape society for years
to come.
FY20 has been a demanding and successful year for
Synertec on several fronts. The conditions of our operating
environment have presented challenges which are
significant, but I am pleased to report that these same
conditions have provided opportunities for us to
demonstrate value to our customers, partners and investors.
This is reflected in our unprecedented levels of consistent
staff utilisation and higher margin consultancy revenue
growing steadily throughout the year, as anticipated.
While we can point to a unique global event, Synertec
delivered a disappointing financial result for financial year
2020 (FY20), returning an operating loss after tax of $1.26
million (30 June 2019: $0.1 million). However, we made
substantial progress on our strategic agenda including
successful delivery of several large, high quality critical
infrastructure projects and creating new partnerships to
position the organisation for sustainable growth and
development. This included further investment in people,
process and technology which has laid the foundation to
better enable and fast track the delivery of our niche
products and solutions to customers in the current environ-
ment of working remotely under Government-imposed
COVID-19 restrictions.
We remain an agile and entrepreneurial organisation with a
disciplined strategy of reinvesting cash flow into existing
businesses and acquiring new growth platforms. Synertec
continues to invest through “equity projects” which are
identified as having know-how and technology which could
be developed, scaled and applied more broadly across our
target industries and geographies.
Financial performance
The core business was heavily impacted by COVID-19 and
this is reflected in our performance for the second half (2H)
of the financial year which was down significantly on our
expectations. We reported at the half year that Synertec’s
first half (1H) performance was in line with expectations. In
the 1H we invested in upgrades to our operating systems
and processes and positioned ourselves for large project
opportunities both domestically and abroad. In earlier
periods Synertec had recognised significant revenues
associated with several large and strategically important
projects awarded in 2017 and 2018. The timing of contract
awards and delivery relative to the Company’s reporting date
had a significant impact on overall revenue versus operating
cash flow.
Following this, as result of the deterioration in operating
conditions within global energy markets, the impact on our
business is most notable in the reduction in large project
awards previously anticipated in early 2H of FY20 mainly
from the oil and gas sector, which was negatively effected by
both the onset of the global COVID-19 pandemic and sharp
oil price decline in March 2020. While most large local and
international LNG infrastructure projects which the Company
has been involved with and has targeted for over a year still
required Synertec to tender, the award has in most cases
been deferred by the end customers until 2021 or 2022.
These types of investments in large scale bids for which
Synertec remains well positioned, are yet to be endorsed by
revenue. The costs of these growth initiatives are included in
both Corporate Development and Business Development
costs in FY20, as well as the time costs devoted to
developing scalable know-how and technology within select
projects.
As forecast by the Company, the rise in working capital
deployed during the 1H of FY20 has returned to more typical
levels during 2H of the year as net operating cash flow
improved following the completion of large scale projects
with extended working capital terms. The business carefully
managed the delivery of these projects across the past two
years both financially and technically and delivered world-
class outcomes for our customers on time and budget,
which has presented further opportunities for Synertec.
All the while, the Company has continued to operate bank
debt-free.
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SYNERTEC ANNUAL REPORT 2019 : 2020
7
Managing Director’s Report (continued)
This strong project execution, leading to further
opportunities with those clients, has now materialised within
our business of specialist engineering consultancy services
to our targeted sectors of critical infrastructure, water,
pharmaceutical and hydrocarbons. In FY20 Synertec
delivered total revenue and other income of $11.2 million
(30 June 2019: $24.2 million), with 33% growth in
Engineering Consultancy Services revenue to a record $4.1
million (30 June 2019: $3.1million). As a result, the Group
substantially improved gross margin from 20% in FY19 to in
excess of 30% for FY20.
A majority of the Fixed Price Solutions and Transfer of Goods
revenue of $7.0 million, which is mostly derived from fixed
price projects, was earned in 1H FY20 at margins more
consistent with FY19. To achieve the overall margin
performance delivered in FY20, gross margin performance
in 2H FY20 was particularly strong and this is expected to
carry into FY21. The Group has pivoted towards new
higher-value work thanks to Synertec’s trusted track record
over decades of successful project delivery and consultancy
in its target industries and our deep customer relationships.
It should be noted that the revenue results achieved in FY19
were exceptional, resulting from the simultaneous award
and delivery of several large Engineering Procurement and
Construction Management (EPCM) projects in the critical
infrastructure and pharmaceutical industries across various
regions of Australia. This performance demonstrated
Synertec’s capacity and expertise to safely and successfully
deliver many large, complex and mission-critical projects
across multiple target industries and regions, managing
large multi-disciplined teams of engineers and contractors.
Earnings and cash flows for that year also reflected further
heavy re-investment in technology development and other
growth opportunities.
In FY20 we implemented a range of measures to strengthen
the financial position of the Group. Discretionary costs were
reduced along with the reassessment of capital and project
expenditure, and the Group accessed wage subsidy
support in markets where it was offered and renegotiated its
tenancy agreements to reduce its occupancy expense. The
issuance of new equity through a successful share
placement in July 2020 and the resetting of the Group’s
banking arrangements have strengthened Synertec’s
capacity to manage through a potential sustained downturn
and positions the Group for a market recovery.
I am proud to report that we have protected all of our
employees during the pandemic period, prioritising their
health and well-being and maintaining Synertec’s strong
capability and pursuit of innovation in our chosen markets.
We have deliberately refrained from cutting jobs or the
remuneration of our people. The dedication to the Company
and our customers by our people, which has only increased
through this time of pandemic, has been humbling for me
and is invaluable to a smart, innovative and growth-focused
organisation such as Synertec.
I am grateful to the Board for choosing to temporally reduce
Directors’ remuneration by 20% in response to the
uncertainty created by COVID-19 conditions and to ensure
the business is provided with the best opportunity to
maintain all of its valued team and strong capability.
Following the successful implementation of these and other
initiatives, and in line with solid business activity, the
Company substantially improved cash flow over the 2H of
FY20 as anticipated, reflected in positive net cash flows for
2H FY20 of $1.6m and positive net operating cash flows for
the final quarter of FY20.
In addition to this, the Company delivered a successful
share placement in July 2020, raising $1.3 million in new
capital. Net proceeds of the share placement will be
principally used to provide balance sheet support to fund
initiatives which progress the Company’s technology-led
growth strategy.
Health and safety
As COVID-19 conditions were becoming established, an
extraordinary effort was made to keep our people, and those
who interact with us, safe and to support the continuance of
operations. This level of focus was rapidly applied across the
business through adjusting office and site-based working
arrangements, seamlessly implementing remote working
capability and introducing new policies, education and
support for employees and customers as restrictions and
social distancing protocols became first lines of defence
against the virus.
The Company regrettably had one lost time injury during the
year. Safety is Synertec’s highest priority, and we continue to
focus sharply on the ongoing safety, well-being and care of
all people associated with Synertec.
Strategy
Currently, the management team and the Board are heavily
focused on the shape of the business in future years and by
the course we need to chart to achieve it. With that as our
guiding principle, and as we have consistently
communicated to the investor market, we are continuing
to invest ambitiously and expect to benefit from the global
economic recovery as we continue to execute our
technology-led growth strategy.
Additionally, COVID-19 has precipitated a national
conversation with regards to Australia’s ability to maintain
critical drug supply during global upheaval. Synertec is one
of very few local organisations with the knowledge and
experience to play a part in addressing any shortfalls in
manufacturing infrastructure. We are seeing the start of
what we believe is a shift towards greater sovereign
capability with regards to developing and producing
vaccines and critical pharmaceuticals. This is a core
capability and remains a central pillar in Synertec’s strategy.
We are excited by the potential of our new technology
partner, Greentech, with whom we are working to
commercialise innovative technology that provides an
environmentally friendly and cost-effective solution for the
treatment of hydrocarbon drilling mud and various forms of
waste water. Following formlisation of the partnership in June
2020, Synertec agreed to provide a loan facility of $1 million
AUD, fully secured, to enable the completion of
commercial-scale pilot programs with customers for
Greentech’s patent-pending Composite Dry Powder (“CDP”)
technology.
This chemistry-based CDP technology process provides a
fast, effective and affordable way to process water-based
hydrocarbon mud into a non-polluting material which has
the potential to be used in a high-strength environmentally-
friendly building product. With diverse global applications
beyond energy production, this technology fits ideally within
our strategy to commercialise replicable and scalable
solutions which enhance industrial clients’ profitability,
efficiency and safety.
Greentech directly opens Synertec to the benefits of the
world’s fastest growing economy, which seems to be
recovering quickly from the pandemic, and Greentech’s
customers have interests in Australia too which, combined
with our own oil and gas customer base, we expect will help
Synertec apply the technology in the Australian market.
Greentech’s activities complement those of our technology
design and development arm, through which — focusing on
our target growth market of LNG — we continue to see a
huge opportunity in the strategic niche of LNG Custody
Transfer Systems (CTS) and related products and services.
We expect planned industry spend in the hundreds of
billions of dollars on new and existing facilities over the next
decade will continue to create a large addressable market,
which we are now well-placed to serve having delivered
several highly successful LNG CTS projects across
Australia’s world-class LNG facilities.
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SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
9
Managing Director’s Report (continued)
Though the duration of the impacts of the pandemic is
uncertain, the Group enters FY21 well-positioned financially
to achieve these goals with a robust, cash-generative and
scalable platform, backed by the balance sheet strength to
grow quickly and opportunistically, particularly following the
capital raising that we completed in July 2020.
Business resilience and adaptability are critical to navigate
the uncertainty. We have a tremendous team and pipeline of
opportunities and are well placed to drive high quality
earnings growth and pursue new opportunities as we
emerge from the current economic challenges. On behalf of
the Group I again thank our employees, along with our loyal
customers, shareholders, suppliers and bankers for
supporting Synertec throughout the year.
I would like to formally recognise the significant
contribution of our friend and colleague Mr. Ted Perkins.
Ted was Synertec’s Construction Manager for over 20 years
and was renowned for his leadership, project management
and delivery of technical excellence. Ted retired from
Synertec in March 2020 due to ill health, and tragically
passed away in July. His legacy at Synertec will be enduring.
Finally, I would like to take this opportunity to thank my fellow
Directors for their guidance and support. The
Company’s operational and strategic achievements are
a direct result of the significant effort contributed by the
entire Synertec team.
Mr Michael Carroll
Managing Director & CEO
We see ourselves as still in the early stages of a global
mega-trend in LNG, and very few, if any, businesses globally
can provide the systems, products and solutions of the
quality which Synertec has delivered.
This has been reflected in the discussions we had during the
year in forming our partnership with EffecTech, considered
the global leader in gas measurement, providing accredited
inspection, calibration and testing services to the energy
and power industries for gas quality, flow and total energy
metering. The value which EffecTech adds to its customers’
operations is closely aligned with the gas custody transfer
and flow metering products and solutions delivered by
Synertec. Synertec’s proprietary fiscal custody transfer
systems, delivered in recent years to Australia’s largest
LNG facilities, were certified by EffecTech and are widely
regarded as the most accurate LNG fiscal custody transfer
systems in the world.
Synertec agreed to become EffecTech’s exclusive Asia-
Pacific regional representative for all site activities and
calibration services. This will see Synertec carry out
performance evaluations for EffecTech and Synertec clients
on instruments used in the analysis of natural gas and LNG.
Outlook
In the year ahead we will continue to pursue our immediate
global growth opportunities by commercialising innovative
technology, allowing us to deliver into multibillion-dollar
markets on the cusp of acceleration. We are well-placed to
achieve our goals building on our base business which
generates cashflow to fund anticipated growth, with our
diverse revenue base built on long-term deep relationships
with customers in high-risk and highly regulated industries.
We have looked back in history to times of global upheaval
and which companies prospered in in subsequent years.
We are inspired by the growth trajectories of some of today’s
ASX300 companies in related sectors. Many of these
industrial, technology and engineering-focused companies
thrived out of the GFC by continuing to invest heavily for
growth platforms during the period. While this may have
impacted their results in the very short term, these
companies and their loyal investors reaped the benefits over
the following decade.
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11
Synertec Board Members
Ms. Leeanne Bond
Independent Non-Executive Director
Chair of Board (and Nomination &
Remuneration Committee)
Mr. Michael Carroll
Managing Director and
Chief Executive Officer
Mr. Carroll is a founding principal and
Managing Director of Synertec and a
significant beneficial owner of
Synertec. He has successfully grown
the business of Synertec since it was
first established in 1996. His
leadership style is ‘hands-on’ and
visionary, ensuring efficient and robust
internal processes that directly support
the strategic direction of Synertec.
As Managing Director of Synertec, Mr.
Carroll has negotiated complex
agreements with a range of parties,
such as large multinational energy
conglomerates, water utilities, defence
and pharmaceutical companies. Mr.
Carroll has direct experience within the
Asian engineering market, having
established and sold successful
companies in both Singapore
and Malaysia.
Mr. Carroll is a member of the
Australian Institute of Company
Directors and holds a Degree in
Applied Science (Applied Chemistry)
and a postgraduate qualification in
Chemical Engineering.
Ms. Bond is a professional
company director with Board roles in
the energy, water and engineering
services industries. She has
qualifications in engineering and
management, and 30 years’
experience across a broad range of
industrial sectors including energy,
minerals, infrastructure and water.
From 1996 to 2006, Ms. Bond held
a number of management roles with
Worley in Queensland, including
General Manager (Qld, NT and PNG),
where she negotiated project
alliances and supervised contracts
and projects with many Australian and
international companies.
From 2017 to 2019, Ms. Bond held the
appointment of Executive for Diversity
& Inclusion at Downer EDI.
Ms. Bond is a non-executive director of
Snowy Hydro Limited, QADO group
and a board member of the Clean
Energy Finance Corporation. She is
also the independent non-executive
chair of Mining3, an industry directed
research and technology organisation
formerly known as CRCMining in
partnership with CSIRO and is an
independent non-executive director of
Aurecon.
Ms. Bond is the sole director and
owner of Breakthrough Energy Pty Ltd,
a project and business development
consulting firm.
Mr. Dennis Lin
Independent Non-Executive Director
(Chair of Audit & Risk Management
Commitee)
Mr. David Harris
Company Secretary and
Chief Financial Officer
Mr. Lin is founding partner and Chair
of Cortina Capital, an independent
private equity firm focused on middle
market businesses with great export
potential to Asia. He is also Executive
Chair of ASX listed companies, Bubs
Australia Limited (ASX: BUB) and
Buderim Group Limited (ASX: BUD).
Mr. Lin is an Australian qualified
Solicitor and Chartered Accountant
and was formerly a partner of global
accounting and advisory firm, BDO,
for eleven years. He retired from his
position as BDO’s Lead Corporate
Finance Partner, specialising in M&A
and China, in June 2020.
Mr. Harris is an Australian Chartered
Accountant and fellow of the Financial
Services Institute of Australasia and
the Governance Institute of Australia,
and a member of the Australian
Institute of Company Directors. He
has strong local and international
experience in senior leadership
positions for global and ASX-listed
companies and is also an experienced
Board member and Audit Risk
Committee Chair. Mr. Harris is also
the Chief Financial Officer of
Synertec.
Mr. Kiat Poh
Independent Non-Executive Director
Mr. Poh holds a Certified Diploma in
Accounting and Finance from ACCA,
UK, a Diploma in Management Studies
from the Singapore Institute of
Management, and a Diploma in Civil
Engineering from Singapore
Polytechnic.
Mr. Poh has over 30 years’ experience
at the senior management level in the
construction, real estate development,
manufacturing industries and financial
markets. Over the years, he also held
senior positions in corporate finance
and mezzanine capital investment
companies in Malaysia specialising in
investments as well as mergers and
acquisitions.
From 1998 to 2005, Mr. Poh was
Managing Director of a Singapore
Exchange listed company.
Since 2005, Mr. Poh has been
managing a Singapore-based
investment advisory company that
focuses on participating in strategic
stakes in listed companies. He has
previously held board positions on a
number of businesses including as a
non-executive director of Centrex
Metals Limited (ASX: CXM).
12
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
13
FINANCIAL REPORT
FOR THE FINANCIAL YEAR ENDED
30 June 2020
SYNERTEC CORPORATION LIMITED
ARBN 161 803 032
[ASX:SOP]
14
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
15
Corporate Directory
Directors
Company Secretary
Principal registered office in Bermuda
Registered agent office in Australia
Share registry
Auditor
Ms. Leeanne Bond (Chair)
Mr. Michael Carroll (Managing Director)
Mr. Kiat Poh (Non-executive Director)
Mr. Dennis Lin (Non-executive Director)
Mr. David Harris
Level 1, 57 Stewart Street
Richmond, VIC 3121
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Synertec Corporation Limited
Level 1, 57 Stewart Street
Richmond, VIC 3121
Australia
Telephone: +(61 3) 9274 3000
Boardroom Pty Limited
Grosvenor Place
Level 12, 225 George Street
Sydney, NSW 2000
Australia
Telephone: 1300 737 760 (within Australia)
+(61 2) 9290 9600 (outside Australia)
Facsimile: +(61 2) 9290 9655
Grant Thornton Audit Pty Ltd
Collins Square
Tower 5
727 Collins Street
Melbourne VIC 3008
Australia
Stock exchange listing
Synertec Corporation Limited shares are listed on the
Australian Securities Exchange (ASX)
ASX Code: SOP (fully paid ordinary shares)
Website address
www.synertec.com.au
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
The Directors present their report together with the financial statements of the consolidated entity for the year ended 30 June
2020.
1. Directors
The following persons were directors of Synertec Corporation Limited during or since the end of the financial year and up to the
date of this report:
Ms. Leeanne Bond
Mr. Michael Carroll
Mr. Kiat Poh
Mr. Dennis Lin (appointed 27 August 2019)
Mr. Kim Chuan Freddie Heng (resigned 21 November 2019)
1.1 Information on Directors
Ms. Leeanne Bond - Non-Executive Director, Chair
Ms. Bond is a professional company director with Board roles in the energy, water and engineering services industries. She has
qualifications in engineering and management, and 30 years’ experience across a broad range of industrial sectors including
energy, minerals, infrastructure and water.
From 1996 to 2006, Ms. Bond held a number of management roles with Worley in Queensland, including General Manager (Qld,
NT and PNG), where she negotiated project alliances and supervised contracts and projects with many Australian and
international companies. From 2017 to 2019, Ms. Bond held the appointment of Executive for Diversity & Inclusion at Downer EDI.
Ms. Bond is a non-executive director of Snowy Hydro Limited, QADO group and a board member of the Clean Energy Finance
Corporation. She is also the independent non-executive chair of Mining3, an industry directed research and technology
organisation formerly known as CRCMining in partnership with CSIRO and is an independent non-executive director of Aurecon.
Ms. Bond is the sole director and owner of Breakthrough Energy Pty Ltd, a project and business development consulting firm.
She has previously held board positions on a number of energy and water businesses including Liquefied Natural Gas Limited
(ASX: LNG), Tarong Energy, the Queensland Bulk Water Supply Authority (Seqwater) and was Chair of Brisbane Water.
Mr. Michael Carroll - Executive Director
Mr. Carroll is a founding principal and Managing Director and Chief Executive Officer of Synertec and a significant beneficial
owner of Synertec. He has successfully grown the business of Synertec since it was first established in 1996. His leadership
style is “hands on” and visionary, ensuring efficient and robust internal processes that directly support the strategic direction of
Synertec.
As Managing Director of Synertec, Mr. Carroll has negotiated complex agreements with a range of parties, such as large multi-
national energy conglomerates, water utilities, defence and pharmaceutical companies. Mr. Carroll has direct experience within
the Asian engineering market, having established and sold successful companies in both Singapore and Malaysia.
Mr. Carroll is a member of the Australian Institute of Company Directors and holds a Degree in Applied Science (Applied Chem-
istry) and a postgraduate qualification in Chemical Engineering.
Mr. Kiat Poh - Non-Executive Director
Mr. Poh holds a Certified Diploma in Accounting and Finance from ACCA, UK, Diploma in Management Studies from the
Singapore Institute of Management, and a Diploma in Civil Engineering from Singapore Polytechnic.
Mr. Poh has over 30 years’ experience at senior management level in the construction, real estate development,
manufacturing industries and financial markets. Over the years, he also held senior positions in corporate finance and
mezzanine capital investment companies in Malaysia specialising in investments as well as mergers and acquisitions.
From 1998 to 2005, Mr. Poh was Managing Director of a Singapore Exchange listed company.
Since 2005, Mr. Poh has been managing a Singapore-based investment advisory company that focuses on participating in
strategic stakes in listed companies. He has previously held board positions on a number of businesses including as a non-
executive director of Centrex Metals Limited (ASX: CXM).
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SYNERTEC ANNUAL REPORT 2019 : 2020
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17
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
1. Directors (continued)
1.1 Information on Directors (continued)
Mr. Dennis Lin - Non-Executive Director
Mr. Lin is founding partner and Chair of Cortina Capital, an independent private equity firm focused on middle market
businesses with great export potential to Asia. He is also Executive Chair of ASX listed companies, Bubs Australia Limited (ASX:
BUB) and Buderim Group Limited (ASX: BUD).
Mr. Lin is an Australian qualified Solicitor and Chartered Accountant and was formerly a partner of global accounting and
advisory firm, BDO, for eleven years. He retired from his position as BDO’s Lead Corporate Finance Partner, specialising in
M&A and China, in June 2020.
1.2 Directors’ interest in shares and options
Interest in Ordinary Shares
Interest in Options
Non-Executive Directors:
Leeanne Bond (Chair)
Kiat Poh
Dennis Lin -
2,785,576
2,423,417
Executive Director:
Michael Carroll (Managing Director)
94,796,992
-
-
-
-
Mr. Michael Carroll is the beneficial owner of 52.1% of the benefits and rights in the Pinnacle (MCGA) Retirement Fund, which in
turn owns 100% of the ordinary shares in New Concept Corporation Limited. New Concept Corporation Limited is the registered
holder of 94,796,992 shares in Synertec Corporation Limited.
2. Principal activities
Synertec is a provider of engineering products and solutions which typically incorporate complex automated and highly
instrumented systems and processes designed to enhance clients’ productivity, efficiency and safety. These services are
provided across Australia and overseas through offices in Melbourne and Perth.
3. Significant changes in the state of affairs
No significant changes noted in the year ended 30 June 2020.
4. Review of operations and results of those operations
Proft and loss performance
In financial year 2020 (FY20) Synertec Corporation Limited (“Synertec” or the “Group”) achieved total revenue and other income of
$11.2 million (30 June 2019: $24.2 million), with 33% growth in Engineering Consultancy Services revenue to a record $4.1 million
(30 June 2019: $3.1 million). As a result, the Group substantially improved gross margin from 20% in FY19 to in excess of 30% for
FY20.
Most of the Fixed Price Solutions and Transfer of Goods revenue of $7.0 million, was earned in 1H FY20 at margins which were
more consistent with FY19. As a result, gross margin performance in 2H FY20 was particularly strong and this is expected to carry
into FY21 as the Group continues to pivot towards new higher-value work.
The revenue results achieved in FY19 were considered exceptional, resulting from the simultaneous delivery of several large
Engineering Procurement and Construction Management (EPCM) projects in the critical infrastructure and pharmaceutical
industries across various regions of Australia. This performance demonstrated Synertec’s capacity and expertise to safely and
successfully deliver many large, complex and mission-critical projects across multiple target industries and regions, managing large
multi-disciplined teams of engineers and contractors. Earnings and cash flows for that year also reflected further heavy
re-investment in technology development and other growth opportunities.
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
4. Review of operations and results of those operations (continued)
Proft and loss performance (continued)
As a result of Synertec’s long track record over decades of successful project delivery and consultancy in its target industries of
Energy, Pharmaceutical and Critical Infrastructure, Synertec secured a large amount of consultancy services from within its strong
and diversified blue chip customer base through FY20, further demonstrating its growth model of deep client relationships, enabling
development of strategic proprietary IP which can be commercialised and scaled up for international markets and increasing the
amount of repeat work from its customers – which has further increased to approximately 80% of revenue (FY19: 70%).
The impact of COVID-19 on the Company and its result in FY20, an operating loss after tax of $1.26 million (30 June 2019: $0.1
million) is most notable in the reduction in large project awards previously anticipated from the oil and gas sector which was
negatively affected by both the global COVID-19 pandemic and significant oil price decline, early in CY2020. While most large local
and international projects which the Company has been involved with and has targeted for over a year still required Synertec to
tender, the award has in most cases been deferred until later in FY21 or into FY22.
During the year, Synertec proudly delivered a large state-of-the-art veterinary pharmaceutical manufacturing facility in Victoria,
Australia. The customer is one of the largest vaccine manufacturers in the world and this facility represents the Global Centre of
Excellence for this product. This complex and highly regulated project is one which Synertec was uniquely positioned to deliver and
has developed further experience and know-how in the sensitive and critical arena of vaccine manufacture, scale up and delivery.
The Company also delivered strategically important projects in Australia’s critical infrastructure expansion including an advanced
integrated control and monitoring system for fire and life safety in the Melbourne Underground Rail Loop (MURL), followed by
delivery of other advanced integrated control and safety systems such as the critical Northern Gas Pipeline network for Jemena.
Synertec’s innovative and commercial approach to these projects led to pull-through of Synertec engineers into many of these
organisations for longer-term consultancy work during 2H FY20, which continues into FY21.
The Board remains confident the growth strategy of engineered content for diverse global niche markets combined with strong
operations management and strategic reinvestment of cash to create further value in the medium to long term is delivering
improved quality in earnings during a significant phase in Synertec’s development. Synertec maintains its vision of a diversified
technology company with a strong core engineering capability delivering into a diverse range of niche markets and serving a broad
blue-chip customer base.
The Company is improving upon execution in order to deliver superior growth and profitability and compelling cash flow deployed
to create shareholder value. Typically, this investment has been deliberately embedded within projects to ensure a commercial
approach to innovation and developing know-how which could be leveraged by Synertec across new clients, industries and/or
geographies.
During FY20 the Group deliberately strengthened its project targeting and contracting strategy, which has seen a comprehensive
filter applied to all potential new projects, ensuring projects which are carefully selected can deliver acceptable returns for
commensurate risk. This approach has already served the Group well, particularly in the current environment, and should continue
to deliver higher quality earnings and greater value from the resources allocated to growing the business.
The Group continued to control overheads and maintain its strong core capability during the impact of the COVID-19 environment.
While the Company has experienced a natural attrition in its team as the volume of work from large fixed price projects declined as
expected, the core team were heavily re-engaged in the growing amount of consultancy engagements with key existing clients.
During the financial year, the Group’s professional indemnity insurance increased substantially as a result of global conditions in
related insurance markets which were outside the control of Synertec. This increase resulted in an increase to the Group’s
operating costs for the year of $0.3 million, reflected in Other expenses.
Notwithstanding the complexities associated with operating in the COVID-19 environment, the Company continued to take a longer
term view of its growth strategy and as it firmly believes in the potential of its know-how and capability, continued to investigate and
invest in several potential high-growth strategic opportunities locally and internationally for durable organic and inorganic growth,
while continuing to generate cash flow. The operating result reflects several significant strategic investments across the Company’s
target sectors which are expected to deliver sustainable long-term growth, however as reported during the year, these investments
are yet to be endorsed by revenue as some large-scale international bids for which Synertec is well-positioned, are taking longer
than expected to reach final decision. The costs of these growth initiatives are included in both Corporate Development and
Business Development costs, as well as the time costs devoted to developing scalable know-how and technology within select
projects.
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19
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
4. Review of operations and results of those operations (continued)
4. Review of operations and results of those operations (continued)
Proft and loss performance (continued)
New standards adopted as at 1 July 2019 (continued)
In response to the COVID-19 global pandemic and to reduce potential impacts on the Company, the Board resolved to
implement a 20% reduction in Directors remuneration effective from 1 May 2020. This position will be reviewed by the Board
during FY21.
Earlier in the year Synertec reported that it had resolved to strengthen its IT environment and various systems to further reduce
enterprise risk. The solid operating platforms of the business continued to be improved by further leveraging technology and
several internal projects completed during the year enabled the Group’s entire workforce and systems to rapidly and seamlessly
transition to a work-from-home environment under COVID-19 imposed lockdown conditions. This allowed Synertec’s workforce
to maintain focus on customers’ mission critical projects whose operations cannot be interrupted by COVID-19, as well as
deliver on the growing demand for Synertec’s consultancy which has been successfully performed remotely.
In the statement of profit or loss and other comprehensive income, rental payments made by the Group that would have been
previously been classified as occupancy expenses, are now classified as depreciation and amortisation expenses.
Statement of Profit or Loss and Other
Comprehensive Income (Extract)
In Australian dollars
Depreciation and amortisation expense
Occupancy expenses
Leases finance cost
Amounts under
IAS 17
Adoption of
IFRS 16
Amounts under
IFRS 16
100,519
197,915
-
179,415
(179,415)
10,828
279,934
18,500
10,828
Synertec continues to respond to the COVID-19 pandemic by implementing a range of health and safety measures designed to
optimise the performance of its workforce under current conditions and meet Government and customer requirements.
In the cash flow statement, operating cash outflows is lower and financing cash flows is higher as principal repayments on all lease
liabilities is now included in financing activities rather than operating activities.
The Company regrettably had one lost time injury during the year. Safety is Synertec’s highest priority, and the Company
continues to focus sharply on the ongoing safety, well-being and care of all people associated with Synertec.
Financial position
COVID-19 stimulus and support measures availed by the Company during the year ended 30 June 2020
(1) In response to the COVID-19 relief measures announced by the Federal Government in April 2020, the Group received the
JobKeeper subsidy. The Group was entitled to $1,500 per employee per fortnight, beginning from 30 March 2020 (to 14
September 2020) and paid in arrears.
(2) In response to the COVID-19 relief measures announced by the Federal Government in April 2020, the Group received the
“cashflow boost” subsidy administered by the ATO. The support is provided in two tranches and is provided following
submission of the March 2020 quarterly Business Activity Statement (BAS) and the June 2020 and September quarterly
BASs. The second tranche is the same as the first tranche.
(3) In response to the COVID-19 relief measures announced by the Federal Government in April 2020, the Company received
permission from the Australian Taxation Office (ATO) to defer its March 2020 and June 2020 quarterly Pay As You Go
Withholding (PAYGW) and Goods and Services Tax (GST), to 14 September 2020. The Company estimates that this
represents a cash payment deferral of approximately $0.6 million. This has been accrued accordingly in the Company’s
position as at 30 June 2020.
(4) In response to the COVID-19 relief measures announced by the Federal and Victorian State Governments in April 2020, the
Group received permission from its landlord under the Commercial Tenancies Code (released and effective from 3 April
2020) to abate a portion of the rent charged for its Richmond office for the April to June 2020 rental periods. Of this
abatement, 50% was received as a discount on the monthly rent charge and 50% has been deferred until December 2020.
(5) In response to the COVID-19 relief measures announced by the Federal Government in April 2020, the Group applied the
“instant asset write off” available on new assets acquired and installed ready for use between 12 March 2020 and 30 June
2020. The total cost of those qualifying assets amounted to $41,949. This will be reflected in the Company’s 2020 income
tax return.
New standards adopted as at 1 July 2019
The new accounting standard IFRS 16 ‘Leases’, which replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4
‘Determining whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27 ‘Evaluating the
Substance of Transactions Involving the Legal Form of a Lease’), became effective and was adopted by the Group as at 1 July
2019 for the first time.
The adoption of this new Standard has resulted in the Group recognising a right-of-use asset and related lease liability in
connection with all former operating leases except for those identified as low-value or having a remaining lease term of less than
12 months from the date of initial application. As such, lease assets and financial liabilities on the balance sheet has increased
by $280,516 and $280,516 respectively at 1 July 2019.
The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16
being recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods
have not been restated.
The Group’s Balance Sheet remains strong, closing the year with net assets of $3.9 million (30 June 2019: $5.2 million) including
operating cash of $3.0 million (30 June 2019: $4.3 million). Synertec remains bank debt-free and has no reporting covenants while
maintaining access to a bank guarantee facility.
During the year, the Company implemented several corporate initiatives which significantly enhanced the Company’s liquidity and
capital reserves. Synertec’s bankers undertook a review of Synertec’s operations and governance processes and as a result, $1.5
million cash previously held as security was returned to the Company’s operating cash balance. This has been applied to working
capital reserves, prudent investment in the company’s growth strategy and protection of its workforce and technology. The
Company retains strong relationships with its bank and is grateful for its ongoing support.
Synertec also engaged proactively with Governments and their agencies to secure its eligibility for various business support
programs. Following the successful implementation of these and other initiatives, and in line with solid business activity, the
Company returned positive net cash flow of $1.6 million over the 2H of FY20, as anticipated. With the forecast rise in working
capital deployed during 1H FY20 returning to more typical levels, the Company returned positive net operating cash flows for the
final quarter of FY20.
In addition to this, the Company delivered a successful share placement of 55.2 million shares at an issue price of $0.023 per
share in July 2020, raising $1.3 million in capital. Net proceeds of the share placement will be principally used to provide balance
sheet support to fund initiatives which progress the Company’s technology-led growth strategy.
It is this fiscal discipline which the Board and management consider important and appropriate for the current engineering
environment and to deliver on the strategy and projected growth for the Group and provides the Company with important reserves
to continue to fund Synertec’s core strategic objectives and existing pipeline of work.
Outlook
Synertec’s strategy, platforms for growth and proactive response to COVID-19 is producing new contract awards and tendering in
the Company’s target sectors of Critical Infrastructure, Pharmaceutical and Energy, most of which is expected to deliver revenue in
FY21. The Group has recently been awarded several contract extensions, as well as new contract awards across these target
sectors in Australia, reflecting existing customers leveraging Synertec’s knowledge of their mission critical operations.
The awards and deepening of Synertec’s involvement in its customers operations reinforce its position as a recognised leader in its
target sectors. The Group’s agile response to recent changes in market conditions and its intense focus on customers’ needs is
translating to an increase in consultancy and tendering activity levels. To date, the imposition of travel restrictions has had minimal
impact on local business development. As a result of current circumstances, the Group has intensified its strategic focus for its core
engineering services on local Australian opportunities.
Synertec’s long standing reputation as an expert in mitigating risks to people, assets, business and the environment is driving
existing and potential clients to seek Synertec’s involvement with the likes of pharmaceutical facility design, conceptual thinking,
automation, hazardous area and functional safety consulting.
The Group expects that the pharmaceutical and biopharmaceutical sectors in particular will provide significant opportunities, with
Australia a natural choice for global pharma investment and vaccine production given its geographical advantages and experience
with therapeutic goods manufacturing technology and innovation. As a result, the Group is positioning itself to bid for project
opportunities which it is anticipating will result in services to be provided during FY21 and FY22 based on recent conceptual design
work and enquiry it has received.
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SYNERTEC ANNUAL REPORT 2019 : 2020
21
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
4. Review of operations and results of those operations (continued)
Outlook (continued)
As reported in July 2020, Synertec continues to focus its technology design and development activities on the oil and gas industry.
The Company has identified attractive global economic trends, including (but not limited to) the growth in demand for floating LNG
production, storage and bunker vessels and China’s part in growing the ongoing shale energy revolution. These macro trends
present growth opportunities which Synertec is uniquely positioned to capture given its extensive experience in Australia’s major
LNG projects over the last decade.
The Company’s lead product in LNG, the Synertec Custody Transfer System (CTS) with marine application (under worldwide
provisional patent application), is expected to deliver material financial gains, and Synertec is currently collaborating with major
industry participants, including Trelleborg Group and other major shipping operators, to deploy its marine-based CTS. The Group
has identified many potential new projects to target globally, with each marine CTS award potentially worth between approximately
$1.0 million and $2.0 million in revenue to Synertec.
Further, Synertec identified an attractive opportunity to augment its technology portfolio by collaborating with Sichuan GreenTech
Environmental Co. Ltd (“Greentech”). Greentech is a Chinese-based company piloting innovative, environmentally friendly
technologies that provide the potential of a cost-effective solution for the treatment and recycling of drilling mud, applicable to both
oil and gas operations as well as municipal waste water from sewage.
Working closely with two of the major oil and gas producers in China, Greentech is completing pilot programs which will evaluate
the technology with regard to cost competitiveness and environmental benefits. Several preliminary evaluation trials have already
been conducted returning encouraging results.
The Company has formalised this collaboration and provided Greentech with a loan facility of $1.0 million to complete the pilot
programs with its customers; two major Chinese State-Owned Enterprises. Greentech presents an early-stage technology
opportunity into a very large market segment and is closely aligned to the Group’s core strengths in commercialising and scaling
hydrocarbon technologies which can be applied globally.
5. Litigation
There has been no litigation in the year and to the best of the Directors’ knowledge there are no circumstances that would give
rise to any potential litigation relating to this same period.
6. Dividends
There were no dividends paid, declared or recommended during the current or previous financial period.
7. Subsequent events
On 9 July 2020, the Company issued 55,175,346 fully paid ordinary shares (“Shares”) at an issue price of $0.023 per share to
professional and sophisticated investors in a share placement (“Placement”). The Placement funds raised will support initiatives
which progress the Company’s technology-led growth strategy.
The growth strategy includes collaboration with a Chinese company, Sichuan GreenTech Environmental Co. Ltd (“Greentech”)
which will see the parties work together to commercialise Greentech’s environmentally focused and globally scalable hydrocarbons
and waste water treatment technology. Greentech is piloting innovative, environmentally friendly chemical technologies that provide
the potential of a cost-effective solution for the treatment and recycling of hydrocarbon drilling mud, applicable to both oil and gas
operations as well as municipal waste water from sewage.
Working closely with two major Chinese State Owned Enterprises (SOEs) responsible for oil and gas production in China,
Greentech is completing pilot programs which will evaluate the technology with regard to cost competitiveness and environmental
benefits. Preliminary evaluation trials and most of the pilot program testing has already been conducted returning encouraging
results.
The Company has formalised this collaboration on 26 June 2020 with a Memorandum of Understanding and subsequent to 30
June 2020 provided Greentech with a loan facility of AUD $1 million to complete the pilot programs with the two major SOEs. The
loan facility is to be repaid with interest by 31 December 2020, is fully secured and subject to customary terms and conditions. At
the date of this report, Greentech had drawn down $0.35 million of the facility.
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
8. Likely developments
Aside from the subsequent events noted above, it is not foreseen that the Group will undertake any change in its general
operations during the coming financial period.
9. Material business risks
The key challenges for the Group going into FY21 are:
• Maintaining and building balance sheet strength;
• Delivering profitability within the suite of projects and services; and
• Selecting projects that can deliver acceptable returns for commensurate risk.
Material risks that could adversely affect the Group include the following:
Impact of COVID-19 and associated market risk on the Company
The global economic outlook is highly uncertain due to the current COVID-19 pandemic. The COVID-19 pandemic had, and will
likely continue to have, a significant impact on global capital markets. In addition, the Company’s projects and/or pipeline of
opportunities may be impacted by international supply issues and/or the inability for the Company’s workforce to move between
States or overseas.
Synertec’s exposure to economic cycles
The Company is exposed to the impact of economic cycles and, in particular, how these cycles increase and decrease future
capital expenditure by States and Federal Government and by energy and resources companies and organisations involved
in the development of critical infrastructure. These economic cycles are in turn impacted by a number of factors including: the
fiscal condition of the economy; government policies on capital expenditure; and commodity prices.
Profitability of contracts
A portion of the Group’s contracts are ‘fixed price’ in nature and to the extent costs exceed the contracted price, there is a risk
these amounts may not be recovered. From time to time, variations to the planned scope occur or issues arise during the design
or construction phase of a project, not anticipated at the time of bid. This may give rise to claims under the contract with the
principal in the ordinary course of business. Where such claims are not resolved in the ordinary course of business, they may
enter formal dispute and the outcome upon resolution of these claims may be materially different to the position taken by the
Company.
Labour supply
Synertec’s ability to remain productive, profitable and competitive and to affect its planned growth initiatives, depends on its
ability to attract and retain skilled labour. Tightening of the labour market in key regions due to a shortage of skilled labour and
competing employers for skilled labour, may inhibit Synertec’s ability to hire and retain employees. Synertec is exposed to
increased labour costs where the demand for labour is strong. A shortage of skilled labour could limit Synertec’s ability to grow
its business and lead to a decline in productivity and an increase in training costs and adversely affect its safety record. Each of
these factors could materially adversely impact its revenue and, if costs increase or productivity declines, its operating margins.
Continuing support of Synertec from its bank and insurers
The Company and its bank and insurers undertake an annual review of the business. These reviews could reveal matters that
require the bank or the Company’s insurers to review their current arrangements with the Company.
During FY20, the Company continued to implement many initiatives to address the risks above. These initiatives
included:
• Streamlining of organisational structure and project delivery and contracting;
• Strengthened project targeting and contracting strategy, which has seen a comprehensive filter applied to all potential new
projects ensuring we select projects that can deliver acceptable returns for commensurate risk. The Company has also
improved its targeting of potential projects through a more strategic view of business and corporate development efforts
which should deliver greater value from the resources allocated to growing the business;
• Balance sheet strengthening via resetting of bank facilities and a share placement in July 2020;
• Maintenance of dedicated State-based workforces in Victoria and Western Australia to support projects in those states so as
to minimise the need for interstate travel; and
• Synertec management meets regularly with its banker, insurance brokers and insurers to discuss operations, performance
and developments within the business.
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Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
10. Environmental legislations
14. Remuneration report
The Group’s operations are not subject to significant environmental regulations under both Commonwealth and State legislation.
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity.
11. Company Secretary
Mr. David Harris is Company Secretary and Chief Financial Officer of Synertec Corporation Limited.
Mr. Harris is an Australian Chartered Accountant and fellow of the Financial Services Institute of Australasia and the Governance
Institute of Australia, and a member of the Australian Institute of Company Directors. He has strong local and international
experience in senior leadership positions for global and ASX-listed companies and is also an experienced Board member and
Audit Risk Committee Chair.
12. Directors’ meetings
The number of meetings of the Company’s Board of Directors (“the Board”) and of each Board committee held during the period
1 July to 30 June 2020, and the number of meetings attended by each Director were:
Board Meetings
Audit and Risk Committee
Nomination and Remuneration
Committee
Directors
Leeanne Bond
Michael Carroll
Kiat Poh
Dennis Lin
Others
David Harris - CFO /
Company Secretary
A
11
11
11
10
B
11
11
10
8
11
11
A
2
2
2
2
2
B A B
2
2
2
2
2
3
3
3
2
3
3
3
3
2
3
Where:
• column A is the number of meetings the Director was entitled to attend
• column B is the number of meetings the Director attended
13. Unissued shares under option
Under the Prospectus issued by the Company in June 2017, and following the successful execution of the Share Sale
Agreement with Synertec Pty Ltd on 8 August 2017, the Company issued 16,175,970 bonus options to existing shareholders
(options record date: 26 June 2017, ASX: SOPOA). The listed options (ASX: SOPOA) have an exercise price of $0.053 and are
exercisable on or before 5.00pm (AEST), 7 August 2020.
Since the end of the financial year, 396,846 shares were issued on 12 August 2020 as a result of the exercise of these options,
and the remaining balance (15,779,012 options) have expired. No other options have been granted or exercised.
Key management personnel are those persons having authority for planning, directing and controlling the activities of the entity,
directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
• Principles used to determine the nature and amount of remuneration
• Details of remuneration
• Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and
the creation of value for the shareholders. The Board of Directors (“the Board”) ensures that executive reward satisfies the
following key criteria for good reward governance practices:
• competitiveness and reasonableness
• acceptability to shareholders
• performance linkage/alignment of executive compensation
• transparency
The Board has established a Nomination and Remuneration Committee which operates in accordance with its charter as
approved by the Board and is responsible for determining and reviewing compensation arrangements for the Directors and the
Executive Team.
The Nomination and Remuneration Committee assess the appropriateness of the nature and amount of remuneration on a
periodic basis by reference to recent employment market conditions with the overall objective of ensuring maximum stakeholder
benefit from the retention of a high quality Board and Executive Team.
The Group seeks to remunerate Directors and executives in accordance with the general principles recommended by the ASX.
The Group is committed to remunerating executives in a manner that is market-competitive, reflects duties and supports the
interests of shareholders.
The reward framework is designed to align executive reward to shareholders’ interest. The Board have considered that it should
seek to enhance shareholders’ interests by:
• focusing on sustained growth in shareholder wealth, consisting of growth in share price, and delivering constant or
increasing return on assets as well as focusing the executive on key non-financial drivers of value; and
• attracting and retaining high calibre people.
Additionally, the reward framework should seek to enhance executives’ interests by:
• rewarding capability and experience;
• reflecting competitive reward for contribution to growth in shareholder wealth; and
• providing a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of non-executive directors and executive remuneration is
separate.
24
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SYNERTEC ANNUAL REPORT 2019 : 2020
25
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
14. Remuneration report (continued)
Non-executive directors’ remuneration
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors.
Non-executive directors’ fees and payments are reviewed by the Board as a whole.
ASX Listing rules require that the aggegate non-executive directors’ remuneration shall be determined periodically by a general
meeting. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by
shareholders at the Annual General Meeting.
In response to the COVID-19 global pandemic and to reduce potential economic impacts on the Company, the Board resolved
to implement a 20% reduction in Directors remuneration effective from 1 May 2020. This position will be reviewed by the Board
during FY21.
Details of remuneration
Amounts of remuneration
Details of remuneration of key management personnel of the consolidated entity are set out in the following tables.
Short-term benefits
Post-employment Long-term
benefits
benefits
2020
and fees
leave
Total
Cash salary
Bonus
Superannuation Long service
$
$ $
$
$
Non-Executive Directors
Leeanne Bond*
Kiat Poh**
Dennis Lin (appointed 27.08.2019)
Executive Director
Michael Carroll (Managing Director)
82,167
48,333
36,530
-
-
-
-
-
3,470
-
-
-
82,167
48,333
40,000
333,342
-
30,963
379
364,684
Other Key Management Personnel
Joern Buelter - COO
David Harris - CFO/Company Secretary
180,324
256,919
Total remuneration of key management personnel
937,615
-
-
-
17,243
24,292
3,477
3,687
201,044
284,898
75,968
7,543
1,021,126
* This was paid to Breakthrough Energy Pty Ltd
** This was paid to Asiaphere Pty Ltd
Short-term benefits
Post-employment Long-term
benefits
benefits
2019
and fees
leave
Total
Cash salary
Bonus
Superannuation Long service
$
$ $
$
$
Non-Executive Directors
Leeanne Bond*
Kiat Poh**
Kim Chuan Freddie Heng (resigned 21.11.2019)
Executive Director
Michael Carroll (Managing Director)
85,000
50,000
50,000
-
-
-
-
-
-
-
-
-
85,000
50,000
50,000
322,240
-
31,415
3,855
357,510
Other Key Management Personnel
Joern Buelter - COO
David Harris - CFO/Company Secretary
174,254
288,844
Total remuneration of key management personnel
970,338
-
-
-
16,459
26,364
6,142
2,129
196,855
317,337
74,238
12,126
1,056,702
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
14. Remuneration report (continued)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at Received as part
of remuneration
1 July 2019
Additions/
Bonus
(Disposals) Options
Balance at
30 June 2020
Non-Executive Directors
Leeanne Bond1
Kiat Poh2
Dennis Lin
2,185,576
2,423,417
-
Executive Director
Michael Carroll (Managing Director)3
94,796,992
Other Key Management Personnel
Joern Buelter - COO
David Harris - CFO/Company Secretary4
250,000
1,384,531
-
-
-
-
-
-
600,000
-
-
-
-
-
2,785,576
2,423,417
-
-
-
94,796,992
-
20,000
-
-
250,000
1,404,531
Notes:
1. Shares held by Bondatron Pty Ltd ATF Bondatron Super Fund A/C.
2. Shares/options held by Kiat Poh and joint names under Kiat Poh & Ju-Lynn Poh.
3. Shares held by New Concept Corporation Limited (”New Concept”) in which Michael Carroll is considered to have 52%
interest in the shares in New Concept. All the issued share capital of New Concept is beneficially owned by TMF Trustees
Singapore Limited as trustee of the Pinnacle (MCGA) Retirement Fund. Mr. Carroll has not disposed of any shares in which
he has a direct beneficial interest during the year and up to the date of this report.
4. Shares/options held by DDGG Harris Holdings Pty Ltd ATF DDGG Harris Superannuation Fund.
Options held by key management personnel
Balance at Received as part
of remuneration
1 July 2019
Additions/
Bonus
(Disposals) Options
Balance at
30 June 2020
Non-Executive Directors
Leeanne Bond1
Kiat Poh2
Dennis Lin
Executive Director
Michael Carroll (Managing Director)3
-
-
-
-
Other Key Management Personnel
Joern Buelter - COO
David Harris - CFO/Company Secretary4
-
359,813
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
359,813
A bonus issue of one (1) Option (Bonus Option) for every five (5) Shares held by the Existing Shareholders of
Synertec Corporation Ltd (formerly SML Corporation Limited) for nil consideration was issued on 8 August
2017, being the date of completion of the sale transaction between Synertec Corporation Limited (formerly
SML Corporation Limited) and Synertec Pty Ltd. Each Bonus Option entitles the holder to subscribe for one
Share and is exercisable at $0.053 on or before 3 years from the date of issue of the Bonus Options (8 August 2020).
Additional disclosures relating to key management personnel
There were no other transactions with key management personnel during the year.
26
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SYNERTEC ANNUAL REPORT 2019 : 2020
27
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
Synertec Corporation Limited
DIRECTORS’ REPORT
30 June 2020
15. Indemnities given to, and insurance premiums paid for, officers and auditors
19. Proceedings on behalf of the Group
No person has applied to the Court for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings to
which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings.
This report is made in accordance with a resolution of directors.
For and on behalf of the Directors,
Mr. Michael Carroll
Managing Director
Melbourne, Australia
28 August 2020
Officers
During the year, Synertec Corporation Limited paid a premium to insure officers of the Group. The officers of the Group covered by
the insurance policy include all Directors.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against
the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the officers in
connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the
officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else to
cause detriment to the Group.
Details of the amount of the premium paid in respect of insurance policies are not disclosed as such disclosure is prohibited under
the terms of the contract.
The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or
agreed to indemnify any current or former officer of the Group against a liability incurred as such by an officer.
Auditors
The Group has not agreed to indemnify the auditor of the Group and any related entity against a liability incurred by the auditor.
During the financial year, the Group has not paid a premium in respect of a contract to insure the auditor of the Group or any
related entity.
16. Auditor
Grant Thornton Audit Pty Ltd continues in office.
17. Officers of the Group who are former audit partners of auditor
There are no officers of the Group who are former audit partners of Grant Thornton Audit Pty Ltd.
18. Non-audit services
During the year, the firm of Grant Thornton, the Group’s auditors, performed certain other services in addition to their statutory audit
duties.
The Board has considered the non-audit services provided during the year by the auditor and, in accordance with written advice
provided by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services during the year is
compatible with, and did not compromise, the auditor independence requirements for the following reasons:
• all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by
the Audit and Risk Committee to ensure they do not impact upon the impartiality and objectivity of the auditor; and
• the non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management
or decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.
Details of the amounts paid to the auditors of the Group, Grant Thornton, and its related practices for audit and non-audit services
provided during the year are set out in Note 23 to the financial statements.
28
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
29
Synertec Corporation Limited
CORPORATE GOVERNANCE REPORT
30 June 2020
Synertec Corporation Limited
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2020
The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, Synertec
Corporation Limited and its controlled entities (the Group) have adopted the third edition of the Corporate Governance Principles
and Recommendations which was released by the ASX Corporate Governance Council on 27 March 2014 and became effective
for financial years beginning on or after 1 July 2014.
The Group’s Corporate Governance Statement for the financial year ending 30 June 2020 is dated as at 30 June 2020 and was
approved by the Board on 28 August 2020. The Corporate Governance Statement is available on the Synertec Corporation
Limited website www.synertec.com.au.
In Australian dollars
Continuing operations
Revenue
Revenue
Other income
Expenses
Materials and service expense
Employee benefits expense
Superannuation expense
Depreciation and amortisation expense
Occupancy expenses
Business development expense
IT and telecommunication costs
Legal and professional fees
Other expenses
Loss on disposal of motor vehicles
Directors fees
Corporate development costs
Results from operating activities
Interest income
Finance costs
Net finance costs
Loss before tax
Income tax benefit/(expense)
Loss from operations
Discontinued operations
Loss from discontinued operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Note
30 June 2020
30 June 2019
6
7
8
9
9
10(i)
11,120,178
107,326
24,149,105
8,656
(4,828,995)
(5,513,203)
(525,720)
(279,934)
(18,500)
(365,441)
(292,029)
(106,042)
(689,046)
-
(190,290)
(167,946)
(1,749,642)
17,514
(74,587)
(57,073)
(1,806,715)
551,249
(1,255,466)
(14,862,341)
(6,850,630)
(579,804)
(127,562)
(224,051)
(370,260)
(261,503)
(114,936)
(460,223)
(10,834)
(185,000)
(147,063)
(36,446)
34,520
(51,801)
(17,281)
(53,727)
(31,118)
(84,845)
-
-
(1,255,466)
(12,002)
-
(96,847)
Earnings per share (cents)
Basic loss per share
Diluted loss per share
21
21
(0.57)
(0.57)
(0.04)
(0.04)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
30
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
31
Synertec Corporation Limited
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Synertec Corporation Limited
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Note
30 June 2020
30 June 2019
In Australian dollars Note
Issued capital
In Australian dollars
Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Contract assets
Current tax assets
Total current assets
Non-current assets
Net deferred tax assets
Other assets
Property, plant and equipment
Total non-current assets
Total assets
Liabilities
Trade and other payables
Warranty provision
Employee benefits
Contract liabilities
Lease liabilities
Total current liabilities
Non-current liabilities
Lease liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Total equity
11
12
13
14
10
13
15
16
17
18
19
19
17
20
3,039,998
670,178
484,392
1,386,911
-
5,581,479
1,062,631
-
307,520
1,370,151
6,951,630
2,278,995
18,989
495,890
15,133
87,497
2,896,504
4,336,500
1,541,861
231,383
1,373,049
14,188
7,496,981
502,893
1,500,000
262,349
2,265,242
9,762,223
3,548,855
39,709
479,903
345,477
-
4,413,944
12,813
96,247
109,060
3,005,564
-
99,751
99,751
4,513,695
3,946,066
5,248,528
596,139
3,349,927
3,946,066
641,113
4,607,415
5,248,528
Balance at 1 July 2018
Loss for the year - continued operations
Loss for the year - discontinued operations
Total comprehensive income
Balance at 30 June 2019
$
641,113
-
-
-
641,113
Retained
earnings
$
Total
$
4,704,262
(84,845)
(12,002)
(96,847)
4,607,415
5,345,375
(84,845)
(12,002)
(96,847)
5,248,528
Balance at 1 July 2019
Adjustment on transition to IFRS 16 - DTA
on initial recognition of leases
Capital raising costs
Deferred tax on capital raising costs
booked through equity
Loss for the year
Total comprehensive income
Balance at 30 June 2020
641,113
4,607,415
5,248,528
20
20
-
(55,480)
10,506
-
-
596,139
(2,022)
-
-
(1,255,466)
(1,255,466)
3,349,927
(2,022)
(55,480)
10,506
(1,255,466)
(1,255,466)
3,946,066
The above statement of changes in equity should be read in conjunction with the accompanying notes
The above statement of financial position should be read in conjunction with the accompanying notes
32
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
33
Synertec Corporation Limited
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
In Australian dollars
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest received
Income taxes received/(paid)
Net cash (used in)/from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Receipt of funds from term deposit held as security
Acquisition of property, plant and equipment
Net cash from investing activities
Cash flows from financing activities
Capital raising costs
Payment of lease liabilities
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalent at beginning of the year
Cash and cash equivalents at end of the year
Note
30 June 2020
30 June 2019
13,170,679
(15,707,779)
(2,537,100)
17,514
14,187
(2,505,399)
-
1,500,000
(41,949)
1,458,051
(55,480)
(193,674)
(249,154)
(1,296,502)
4,336,500
3,039,998
26,850,590
(26,045,040)
805,550
34,520
(14,187)
825,883
116,220
14,552
(129,827)
945
-
-
-
826,828
3,509,672
4,336,500
11A(i)
11A(iii)
The above statement of cash flows should be read in conjunction with the accompanying notes
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
1. General information and statement of compliance
The financial statements cover Synertec Corporation Limited as a consolidated entity consisting of Synertec Corporation Limited
(referred as the ‘Company’ or ‘Parent Company’) and the entities it controlled at the end of, or during, the year ended 30 June
2020 (together referred to as the ‘Group’).
Synertec Corporation Limited is the Group’s Ultimate Parent Company. It is a public company (limited by shares) incorporated in
Bermuda, and listed on the Australian Securities Exchange (ASX:SOP).
Its registered office is: Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
Its registered office in Australia is: Level 1, 57 Stewart Street, Richmond, VIC 3121, Australia.
A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ Report,
which is not part of the financial statements.
The financial statements were approved and authorised for issue, in accordance with a resolution of directors, on 28 August
2020.
2. Changes in significant accounting policies
2.1 New standards adopted as at 1 July 2019
IFRS 16 Leases
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining whether an Arrangement
contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions Involving the
Legal Form of a Lease’).
The adoption of this new Standard has resulted in the Group recognising a right-of-use asset and related lease liability in
connection with all former operating leases except for those identified as low-value or having a remaining lease term of less than
12 months from the date of initial application.
The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16
being recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods
have not been restated.
For contracts in place at the date of initial application, the Group has elected to apply the definition of a lease from IAS 17 and
IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as lease under IAS 17 and IFRIC 4.
The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in
existence at the date of initial application of IFRS 16, being 1 July 2019. At this date, the Group has also elected to measure the
right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at
the date of transition.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group has relied on
its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.
On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and
for leases of low-value assets, the Group has applied the optional exemptions to not recognise right-of-use assets but to
account for the lease expense on a straight-line basis over the remaining lease term.
For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of
initial application at the same amounts as under IAS 17 immediately before the date of initial application.
On transition to IFRS 16, the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16
was 6%.
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35
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
2. Changes in significant accounting policies (continued)
2.1 New standards adopted as at 1 July 2019 (continued)
IFRS 16 Leases (continued)
The Group has benefited from the use of hindsight for determining the lease term when considering options to extend and
terminate leases.
The following is a reconciliation of total operating lease commitments at 30 June 2019 (as disclosed in the financial statements
at 30 June 2019) to the lease liabilities recognised at 1 July 2019.
Adjusted total operating lease commitments at 30 June 2019(i)
Operating lease liabilities before discounting
Discounted using incremental borrowing rate
Total lease liabilities recognised under IFRS 16 at 1 July 2019
280,516
294,693
(14,177)
280,516
(i) For IFRS 16 purposes, the operating lease commitments disclosed in the financial statements as at 30 June 2019 of
$416,688 was adjusted to exclude outgoings and leases which were unlikely to be renewed and leases which had a
remaining lease term of less than 12 months at 30 June 2019.
3. Significant accounting policies
3.1 Basis of accounting
The consolidated general purpose financial statements of the Group have been prepared in accordance with the International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Synertec Corporation
Limited is a for-profit entity for the purpose of preparing the financial statements.
3.2 Basis of measurement
The financial statements have been prepared on the historical cost basis unless otherwise stated.
3.3 Functional and presentational currency
These financial statements are presented in Australian dollars, which is the Group’s functional currency and presentation currency.
3.4 Basis of consolidation
The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2020. The
parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the
ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses
on transactions between Group companies.
Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with
the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the
effective date of acquisition; or up to the effective date of disposal, as applicable.
3.5 Revenue and other income
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies
the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes
into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate
performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered;
and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the
customer of the goods or services promised.
The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the
extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The
measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved.
Amounts received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a
separate refund liability.
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
3. Significant accounting policies (continued)
3.5 Revenue and other income (continued)
The Group’s main revenue streams are as follows:
Transfer of goods
Revenue from the sale of custom products engineered by the Group for a fixed fee is recognised when or as the Group transfers
control of the assets to the customer. Invoices for goods transferred are due after receipt of the invoice by the customer.
For sales of engineered products that are not subject to significant integration services, control transfers at the point in time the
customer takes undisputed delivery of the goods.
Engineering services
The Group provides engineering services relating to the design and engineering of customised Process, Chemical,
Mechanical Design, Automation, Safety, Electrical and Software Engineering solutions. Revenue from these services is
recognised on a time-and-materials basis as the services are provided. Customers are invoiced monthly as work progresses.
Any amounts remaining unbilled at the end of a reporting period are presented in the statement of financial position as Contract
assets as only the passage of time is required before payment of these amounts will be due.
Fixed price solutions
The Group enters into contracts for the design, engineering and construction of customised engineering solutions in exchange
for a fixed fee and recognises the related revenue over time. Due to the high degree of interdependence between the various
elements of these projects, they are accounted for as a single performance obligation. When a contract also includes a warranty
period, the total transaction price is allocated to each of the distinct performance obligations identifiable under the contract on
the basis of its relative stand-alone selling price.
To depict the progress by which the Group transfers control of the systems to the customer, and to establish when and to
what extent revenue can be recognised, the Group measures its progress towards complete satisfaction of the performance
obligation by comparing actual costs (hours and purchases) spent to date with the total estimated costs required to design,
engineer, and construct each solution. The percentage complete basis provides the most faithful depiction of the transfer of
goods and services to each customer due to the Group’s ability to make reliable estimates of the total number of costs required
to complete the Project, arising from its significant historical experience constructing similar solutions.
Advanced receipt
When payments received from customers exceed revenue recognised to date on a particular contract, any excess (a contract
liability) is reported in the statement of financial position as contract liabilities.
Warranty period
The Group provides warranty on its engineering solutions. Under the terms of this warranty customers can request rectification
or replacement works if the solution provided by the Group fails to perform in accordance with the agreed contract and
specifications. These warranties are accounted for under IFRS 137 Provisions, Contingent Liabilities and Contingent Assets.
3.6 Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.
3.7 Finance income and finance costs
The Group’s finance income and finance costs include:
• interest income;
• interest expense;
• finance costs as a result of IFRS 16; and
• the net gain or loss on financial assets at fair value through profit or loss.
Interest income or expense is recognised using the effective interest method.
36
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37
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
3. Significant accounting policies (continued)
3.8 Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Group at the exchange rates at
the dates of the transactions (spot exchange rate).
Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate
at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to
the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally
recognised in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not
translated.
3.9 Income taxes
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences and unused tax losses and under and over provision in prior periods, where applicable.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates
items recognised directly in equity or in other comprehensive income (OCI).
(i) Current tax
Current income tax assets and / or liabilities comprise those obligations to, or claims from, the Australian Taxation Office (ATO)
and other fiscal authorities relating to the current or prior reporting periods that are unpaid at the reporting date. Current tax is
payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax
rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on
the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting
nor taxable profit or loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent
that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable
income, based on the Group’s forecast of future operating results which is adjusted for significant non-taxable income and
expenses and specific limits to the use of any unused tax loss or credit. Deferred tax liabilities are always provided for in full.
The measurement of deferred tax 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 only if the Group has a right and intention to set-off current tax assets and liabilities
from the same taxation authority.
Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except
where they relate to items that are recognised in other comprehensive income (such as the revaluation of land) or directly in
equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.
Synertec Corporation Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these
entities are set off in the consolidated financial statements.
Synertec Holdings Pty Ltd is responsible for recognising the current tax liabilities of the Australian tax consolidated group. The
tax consolidated group has entered into an agreement whereby each component in the Group contributes to income tax payable
in proportion to their contributions to the taxable profit of the tax consolidated group.
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
3. Significant accounting policies (continued)
3.9 Income taxes (continued)
(iii) Non-financial assets
An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (“CGU”) exceeds its recoverable
amount. Impairment losses are recognised in profit or loss. They are allocated to reduce the carrying amount of assets in the
CGU on a pro rata basis. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been
recognised.
3.10 Profit or loss from discontinued operations
A discontinued operation is a component of the entity that either has been disposed of; or is classified as held for sale, and:
• represents a separate major line of business or geographical area of operations;
• is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
• is a subsidiary acquired exclusively with a view to resale.
Profit or loss from discontinued operations, including prior year components of profit or loss, are presented in a single amount in
the statement of profit or loss and other comprehensive income. This amount, which comprises the post-tax profit or loss of
discontinued operations and the post-tax gain or loss resulting from the measurement and disposal of assets classified as held
for sale.
3.11 Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
3.12 Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment
losses.
If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure
will flow to the Group.
(iii) Depreciation
Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values using the
straight-line basis over their estimated useful lives, and is generally recognised in profit or loss. Leased assets are depreciated
over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the
end of the lease term.
The estimated useful lives of property, plant and equipment are as follows:
• Motor Vehicles 10 years
• Furniture and Equipment 16 years
• Computers 3 years
In the case of leasehold improvements, expected useful lives are determined by reference to comparable owned assets or over
the term of the lease if shorter.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
38
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
39
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
3. Significant accounting policies (continued)
3. Significant accounting policies (continued)
3.13 Impairment
(i) Non-derivative financial assets
Financial assets not classified as at fair value through profit or loss, are assessed at each reporting date to determine whether
there is objective evidence of impairment.
Objective evidence that financial assets are impaired includes:
• default or delinquency by a debtor;
• restructuring of an amount due to the Group on terms that the Group would not consider otherwise;
• indications that a debtor or issuer will enter bankruptcy;
• adverse changes in the payment status of borrowers or issuers;
• the disappearance of an active market for a security.
(ii) Financial assets measured at amortised cost
The Group considers evidence of impairment for these assets measured at both a specific asset and collective level. All
individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then
collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant
are collectively assessed for impairment by grouping together assets with similar risk characteristics.
In assessing collective impairment the Group uses historical information on the timing of recoveries and the amount of loss
incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be
greater or lesser than suggested by historical trends.
An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated
future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected
in an allowance account. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant
amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through
profit or loss.
(iii) Non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than stock on hand and
deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is
based on the estimated future cash flows, 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 or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses
are recognised in profit or loss. They are allocated to reduce the carrying amount of assets in the CGU on a pro rata basis. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
3.14 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probably that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed the reimbursement is recognised as a separate but only
when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit or loss
net of any reimbursement.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where
discounting is used, the unwinding of the discount is recognised as finance cost.
No liability is recognised if an outflow of economic resources as a result of present obligation is not probable. Such situations
are disclosed as contingent liabilities, unless the outflow is remote in which case, no liability is recognised.
3.15 Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
(ii) Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected
to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by
the employee and the obligation can be estimated reliably.
(iii) Other long-term employee benefits
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value using
high quality corporate bond rates. Remeasurements are recognised in profit or loss in the period in which they arise.
3.16 Leases
For any new contracts entered into on or after 1 July 2019, the Group considers whether a contract is, or contains a lease. A
lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key
evaluations which are whether:
1. the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group.
2. the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of the contract.
3. the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has
the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-
use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred
by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for
impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that
date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing
rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed),
variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments
arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured
to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if
the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or
loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease
liabilities have been included in lease liabilities.
40
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
41
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
3. Significant accounting policies (continued)
4. Use of judgements and estimates
3.17 Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Taxation Office (ATO).
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the
application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
prospectively.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from
investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash
flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
3.18 Financial instruments
The Group does not hold derivative financial assets. Where required the Group classifies non-derivative financial assets into the
following categories: financial assets at fair value through profit or loss, and loans and receivables.
The Group classifies non-derivative financial liabilities into the other financial liabilities category.
(i) Non-derivative financial assets and financial liabilities - recognition and derecognition
The Group initially recognises loans and receivables and debt securities issued on the date when they are originated. All other
financial assets and financial liabilities are initially recognised on the trade date.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the
financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does
not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the
Group is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and
only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the
asset and settle the liability simultaneously.
(ii) Non-derivative financial assets - measurement
Loans and receivables
These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, they are measured at amortised cost using the effective interest method.
Cash and cash equivalents
In the statement of cash flows, cash and cash equivalents includes bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management.
(iii) Non-derivative financial liabilities - measurement
Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent
to initial recognition, these liabilities are measured at amortised cost using the effective interest method.
(iv) Share capital
Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects, are recognised as a deduction from
equity.
4.1 Judgements
Information about critical judgements in applying accounting policies that have the most significant effect on
the amounts recognised in the financial statements is included in note 3.5 – Revenue and other income.
Judgement is required to determine whether deferred tax assets are recognised in the balance sheet. Deferred tax assets,
including those arising from un-utilised tax losses, require management to assess the likelihood that the Group will generate
sufficient taxable earnings in the future periods in order to recognise and utilise those deferred tax assets. Judgement is also
required in respect of the expected manner of recovery of the value of an asset or liability (which will then impact the quantum of
the deferred tax assets or deferred tax liabilities recognised) and the application of existing laws.
Estimates of future taxable income are based on forecast cash flows from operations and existing tax laws in each jurisdiction.
These assessments require the use of estimates and assumptions such as exchange rates, commodity prices and operating
performance over the life of the assets. To the extent that cash flows and taxable income differ significantly from estimates, the
ability of the Group to realise the net deferred tax assets reported at the reporting date could be impacted.
Additionally, future changes in tax laws in which the Group operates could limit the ability of the Group to obtain tax deductions
and recover/utilise deferred tax assets in future periods.
As at 30 June 2020 the Group has concluded there are reasonable grounds the Group will derive sufficient future taxable profits
against which carry forward losses can be utilised.
4.2 Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment
within the year ended 30 June 2020 are included:
Note 14 - Contract assets - recognition of project revenue
Recognising project revenue requires judgement in determining milestones, actual work performed and/or the estimated costs to
complete the work.
Note 15 - Property, Plant and Equipment - useful lives of depreciable assets
Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility
of assets. Uncertainties in these estimates relate to potential obsolescence that may change the utility of certain equipment.
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and
non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values
are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value
hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest
level input that is significant to the entire measurement.
Further information about the assumptions made in measuring fair values is included in note 24 - financial instruments.
42
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
43
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
5. Operating segments
The Group has a single reportable segment in which it operates, being engineering services, and this is based on information
that is internally provided to the Chief Operating Decision Makers (‘CODM’) for assessing performance and making operating
decisions. Therefore, no additional disclosures in relation to the revenues, profit or loss, assets and liabilities and other material
items have been made. The operating entity is based in Australia.
The demand for engineering products and solution services is not subject to seasonal fluctuations.
6. Revenue
Engineering consultancy services
Fixed price solutions and transfer of goods
7. Other income
Government grant
Others
Note 30 June 2020
4,073,998
7,046,180
11,120,178
30 June 2019
3,063,731
21,085,374
24,149,105
100,000
7,326
107,326
-
8,656
8,656
In response to the COVID-19 relief measures announced by the Federal Government in April 2020, the Group received the
“cashflow boost” subsidy provided via the Australian Tax Office. The support is provided in two tranches and is provided
following submission of the March 2020 quarter Business Activity Statement (BAS) and the June 2020 and September quarter
BASs. The second tranche is the same as the first tranche.
8. Employee benefits expense
In response to the COVID-19 relief measures announced by the Federal Government in April 2020, the Group received the
JobKeeper subsidy. The Group was entitled to $1,500 per employee per fortnight, beginning from 30 March 2020 and paid in
arrears. Below is a reconciliation of the employee benefits expense recognised in the Statement of Profit or Loss and Other
Comprehensive Income which includes the JobKeeper subsidy.
Recognised in profit or loss
Gross employee benefits expense
JobKeeper benefit
Employee benefits expense in the Statement of Profit or Loss
and Other Comprehensive Income
5,846,203
(333,000)
6,850,630
-
5,513,203
6,850,630
9. Finance income and finance costs
Recognised in profit or loss
Interest income
Finance income
Facility interest & charges
Leases finance cost
Interest expense
Finance costs
Net finance costs recognised in profit or loss
9(i)
9(ii)
17,514
17,514
(63,759)
(10,828)
-
(74,587)
(57,073)
34,520
34,520
(50,725)
-
(1,076)
(51,801)
(17,281)
9(i) The interest income comprised of interest earned on deposits held as security by ANZ.
9(ii) The Group incurred finance costs during the year related to bank guarantees facilities provided by ANZ.
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
10. Taxes
(i) Tax recognised in profit or loss
Current tax benefit/(expense)
Current year
Deferred tax benefit
Origination and reversal of temporary differences
Tax benefit from continuing operations
30 June 2020
30 June 2019
-
-
-
-
551,249
551,249
551,249
(31,118)
(31,118)
(31,118)
The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors,
including interpretations of tax law and prior experience. The current tax asset is Nil (2019: Tax asset $14,188).
In respect to new assets acquired and installed ready for use between 1 July 2019 and 30 June 2020, Synertec was eligible for an
instant write-off of those assets. Those assets amounted to $41,949.
(ii) Reconciliation of effective tax rate
Loss before tax from continuing operations
Income tax benefit using the Group’s domestic tax rate (27.5%)
Non-deductible expenses
Carried forward section 40-880 ITAA expenditure not booked prior year
Adjustment in deferred tax carried forward losses
Adjustment to prior year current tax provision
Income tax (benefit)/expense
(iii) Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
(1,806,715)
(496,847)
(36,476)
(17,926)
-
-
(551,249)
(53,727)
(14,775)
30,856
(29,825)
(53,542)
98,403
31,118
Employee benefits
Corporate transaction costs
Deferred income
Other payables
Fixed assets
Leases
Carry forward tax losses
Net deferred tax assets /
(liabilities)
30-June-2020
162,837
107,167
-
57,740
(11,074)
(944)
746,905
30-June-2019
159,405
111,473
(2,901)
63,600
-
-
171,316
30-June-2020
-
-
-
-
-
-
-
30-June-2019
-
-
-
-
-
-
-
Net
30-June-2020
162,837
107,167
-
57,740
(11,074)
(944)
746,905
30-June-2019
159,405
111,473
(2,901)
63,600
-
-
171,316
1,062,631
502,893
-
-
1,062,631
502,893
44
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
45
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
10. Taxes (continued)
(iv) Movement in deferred tax balances during the year
01-Jul-2018 in profit in other 30-Jun-2019 in profit in other 30-Jun-2020
or loss comprehensive or loss comprehensive
Balance Recognised Recognised Balance Recognised Recognised Balance
income
income
Employee benefits
158,644
(3,998)
Deferred income
Corporate transaction costs 108,583
53,449
Other payables
-
Fixed assets
-
Leases
118,932
Carry forward tax losses
435,610
761
1,097
2,891
10,151
-
-
52,384
67,284
-
-
-
-
-
-
-
-
159,405
(2,901)
111,473
63,600
-
-
171,316
502,893
3,432
2,901
1,822
(5,860)
(11,074)
-
575,589
566,810
-
-
(6,128)
-
-
(944)
-
(7,072)
162,837
-
107,167
57,740
(11,074)
(944)
746,905
1,062,631
The Synertec Board and management have reviewed the carrying amount of the deferred tax asset at 30 June 2020 and
concluded that it presents fairly and there are reasonable grounds to believe that the Group will derive sufficient future taxable
profits against which the carry forward losses can be utilised.
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
11. Cash and cash equivalents (continued)
11A. Cash flow information (continued)
(ii) Credit standby facilities
The Company has the following credit standby facilities which are subject to bank review annually:
Bank guarantee (i)
Credit Card (i)
Total
Utilised
Bank guarantee
Credit Card
Total
(iii) Reconciliation of cash and cash equivalents at beginning of year
Synertec Pty Ltd
Synertec Corporation Limited
11. Cash and cash equivalents
Bank balances
Cash on hand
Cash and cash equivalents
11A. Cash flow information
(i) Reconciliation of cash flows from operating activities
Cash flows from operating activities
Loss for the year
Adjustments:
Depreciation and amortisation
Net interest costs
Loss on sale of property, plant and equipment
Loss from discontinued operations
Tax (benefit)/expense
Change in contract assets
Change in other assets
Change in trade and other receivables
Change in trade and other payables
Change in employee benefits
Change in contract liabilities
Cash generated from operating activities
Interest paid net of interest received
Realised foreign currency gains recognised as investing activities
Income taxes received/(paid)
Net cash (used in)/ from operating activities
Note
30 June 2020
30 June 2019
12. Trade and other receivables
3,038,651
1,347
3,039,998
4,335,153
1,347
4,336,500
Current
Trade receivables
Other receivables
Current
15
9
10
(1,255,466)
(96,847)
279,934
57,073
-
-
(551,249)
(1,469,708)
(153,971)
(242,459)
861,133
(1,290,583)
12,483
(190,236)
(2,473,341)
(46,245)
-
14,187
(2,505,399)
127,562
17,281
10,834
6,740
31,118
96,688
576,487
(50,289)
1,969,192
659,085
2,768
(2,397,221)
856,710
(17,281)
642
(14,187)
825,883
The Company’s exposure to credit and market risks, and impairment losses related to trade and other receivables, are disclosed in
Note 24.
13. Other assets
Current
Prepayments and other debtors
Deposits
Stock on hand
Current
Non-Current
ANZ term deposits(i)
Non-current
428,485
43,645
12,262
484,392
188,518
30,603
12,262
231,383
-
-
1,500,000
1,500,000
Note (i)
The deposit with ANZ was held as cash security for its facilities with the Bank, which included a bank guarantee facility of
$1,500,000. Other components of the bank facility included an overdraft facility of $750,000 (undrawn) and a commercial card
facility of $155,000 (drawn component repaid monthly).
In April 2020, Synertec’s bankers concluded a review of Synertec’s operations and governance processes and as a result the $1.5
million cash deposit previously held as security was returned to the Company’s operating cash balance. This has been applied to
working capital reserves, prudent investment in the Company’s growth strategy and protection of its workforce and technology. The
bank guarantee facility was reduced to $600,000, of which $440,584 was utilised at 30 June 2020. The undrawn bank overdraft
facility of $750,000 was removed (unused) and the credit card facility was reduced to $50,000.
30 June 2020
30 June 2019
600,000
50,000
650,000
440,584
9,817
450,401
3,013,300
26,698
3,039,998
1,500,000
155,000
1,655,000
815,267
60,075
875,342
4,329,992
6,508
4,336,500
509,178
161,000
670,178
1,531,311
10,550
1,541,861
46
SYNERTEC ANNUAL REPORT 2019 : 2020
SYNERTEC ANNUAL REPORT 2019 : 2020
47
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
14. Contract assets
Work in progress
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
15. Property, plant and equipment (continued)
30 June 2020 30 June 2019
1,373,049
1,386,911
Included in the net carrying amount of property, plant and equipment are right-of-use assets as follows:
Determining when to recognise contract revenue requires a degree of judgement. Contract revenue and expenses are recognised
in accordance with the percentage of completion method unless the outcome of the contract cannot be reliably estimated. The
percentage of completion is estimated by assessing milestones, actual work performed and the estimated costs to complete the
work.
At 30 June 2020, aggregate costs incurred under open contracts and recognised profits earned, net of recognised losses,
amounted to $1,386,911 (2019: $1,373,049).
Furniture and equipment
Leasehold improvements
Total right-of-use assets
30 June 2020
16,975
266,182
283,157
30 June 2019
-
-
-
The amount of depreciation that has been recognised on the right-of-use assets at 30 June 2020 is $179,415.
15. Property, plant and equipment
equipment improvements vehicles
Computers Furniture and Leasehold Motor TOTAL
Cost
Balance at 1 July 2018
Additions
Disposals
Balance at 30 June 2019
Balance at 1 July 2019
Adjustment on transition to IFRS16
Lease modifications
Additions
Disposals
Balance at 30 June 2020
476,196
82,804
-
559,000
559,000
-
-
41,949
-
600,950
191,058
17,023
(52,000)
156,081
156,081
16,975
-
-
-
173,056
21,157
-
-
21,157
21,157
263,541
(2,609)
5,250
-
287,339
386,961
30,000
(215,865)
201,096
201,096
-
-
-
-
201,096
1,075,372
129,826
(267,865)
937,333
937,333
280,516
(2,609)
47,199
-
1,262,439
Computers Furniture and Leasehold Motor TOTAL
equipment improvements vehicles
Accumulated depreciation
Balance at 1 July 2018
Disposals
Depreciation/amortisation expense
Balance at 30 June 2019
Balance at 1 July 2019
Disposals
Depreciation/amortisation expense
Balance at 30 June 2020
154,795
(113,940)
48,930
89,785
89,785
-
24,327
114,113
96,275
(4,938)
17,586
108,923
108,923
-
15,821
124,744
396,103
-
60,641
456,743
456,743
-
64,473
521,216
19,128
-
406
19,534
19,534
-
175,311
194,846
Carrying amounts
at 1 July 2018
at 30 June 2019
at 1 July 2019
at 30 June 2020
80,094
102,257
102,257
79,733
94,783
47,159
47,159
48,312
2,029
1,623
1,623
92,493
232,167
111,310
111,310
86,983
666,302
(118,878)
127,562
674,984
674,984
-
279,934
954,918
409,071
262,349
262,349
307,520
16. Trade and other payables
Trade payables
Other payables
Fixed price project accruals
1,272,544
647,939
358,512
2,278,995
2,483,379
303,544
761,932
3,548,855
The Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 24.
17. Employee benefits
Annual leave
Long service leave
Current
Long service leave
Non-Current
18. Contract liabilities
Billing in advance of work completed
318,368
177,522
495,890
96,247
96,247
286,120
193,783
479,903
99,751
99,751
15,133
15,133
345,477
345,477
Where progress billings and recognised losses exceed costs incurred plus recognised profits earned, the Group recognises
these amounts as billing in advance of work completed.
Contract liabilities have decreased compared to the previous year as work on those projects was completed through the year.
As a result, the amount of contract liabilities included in the revenue for the year ended 30 June 2020 was $330,344 (30 June
2019: $2,397,221).
48
SYNERTEC ANNUAL REPORT 2019 : 2020
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49
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
19. Leases
Lease liabilities are presented in the statement of financial position as follows:
Lease liabilities (current)
Lease liabilities (non-current)
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
20. Issued capital (continued)
Capital raising costs
30 June 2020
87,497
12,813
100,310
30 June 2019
-
-
-
As detailed in the Directors’ report, the Company undertook a successful share placement and issued 55,175,347 shares on
9 July 2020. As a result, legal and other related costs associated with the share placement and issue of shares incurred during
the year ended 30 June 2020 have been accrued and deducted from contributed equity. The net proceeds of $1.3 million from
the share placement were received by the Company on 8 July 2020.
The Group has leases for offices, a warehouse and a photocopier. The lease liabilities are secured by the related underlying
assets.
With the Commercial Tenancies Code released and effective from 3 April 2020, Synertec received rental abatement for its
Richmond Office, constituting of 28.5% waiver and 28.5% deferral (until December 2020), for its April to June 2020 rent. All
outgoings per the lease agreement remained payable by the due date. All other terms and conditions remained per the existing
lease, which is due to expire in December 2020.
Synertec also engaged with the Perth Office’s landlord during April 2020 and negotiated a reduction in rent as from 1 May 2020
and an extention of the lease until August 2021.
Future minimum lease payments at 30 June 2020 were as follows:
Minimum lease payment due
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
21. Earnings per share
Both the basic and diluted earnings per share have been calculated using the profit attributable to shareholders of the Parent
Company as the numerator (i.e. no adjustments to profit were necessary in 2019 or 2018).
In accordance with the principles of reverse acquisition accounting, the weighted average number of ordinary shares
outstanding during the year ended 30 June 2020 has been calculated as:
(a) the weighted average number of ordinary shares of Synertec Pty Ltd outstanding during the period before acquisition
multiplied by the exchange ratio established in the acquisition accounting, and
Within one One to two Two to three Three to four Four to five After five Total
(b) the actual number of ordinary shares of Synertec Corporation Limited outstanding during the period after acquisition.
year
years
years years years years
Lease payments
Finance charges
Net present values
90,735
(2,707)
88,028
8,673
(419)
8,254
4,140
(112)
4,028
-
-
-
-
-
-
-
-
-
103,548
(3,238)
100,310
Out of the total finance costs of $74,586, an amount of $10,828 was attributable to the lease liabilities during the year ending 30
June 2020.
On 1 July 2020, the Group entered into a lease for a new head office in Camberwell, Victoria. Following fit-out of the new office,
the Group plans to transition from its current office. The Group received attractive lease incentives from the lessor which have
been applied across the first 5-year term of the lease. The Group has the option to renew the lease for a further 5-year term.
Future minimum lease payments for the Camberwell Office is as follows:
Minimum lease payment due
Within one One to two Two to three Three to four Four to five After five Total
year
years
years years years years
Lease payments
Finance charges
Net present values
73,767
(84,084)
(10,317)
140,180
(81,932)
58,249
206,769
(76,477)
130,293
212,972
(68,267)
144,705
219,362
(59,164)
160,198
1,045,913
(147,421)
898,491
1,898,963
(517,345)
1,381,619
20. Issued capital
Shares Shares $ $
30 June 2020 30 June 2019 30 June 2020 30 June 2019
Ordinary shares - fully paid
Capital raising costs
Deferred tax on capital raising costs booked through equity
220,701,277 220,701,277
-
-
-
-
220,701,277 220,701,277
641,113
(55,480)
10,506
596,139
641,113
-
-
641,113
The basic earnings per share for the comparative period before the acquisition date presented in the consolidated statements
following a reverse acquisition is calculated by dividing (a) by (b):
(a) the profit or loss of Synertec Corporation Limited attributable to ordinary equity holders of the Company in the period.
(b) Synertec Corporation Limited’s historical weighted average number of ordinary shares outstanding multiplied by the
exchange ratio established in the acquisition accounting.
In accordance with IFRS 33 ‘Earnings Per Share’, as potential ordinary shares may only result in a situation where their
conversion results in an increase in loss per share or decrease in profit per share from continuing operations, no dilutive effect
has been taken into account.
Earnings per share
30 June 2020
30 June 2019
Loss after income tax (in Australian dollars)
(1,255,466)
(84,845)
Weighted average number of ordinary shares used in calculating basic earnings per share
Weighted average number of ordinary shares used in calculating diluted earnings per share
220,701,277
220,701,277
220,701,277
220,701,277
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
(0.57)
(0.57)
(0.04)
(0.04)
There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the
number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of
these financial statements.
The 16,175,970 options granted on 8 August 2017 are not included in the calculation of diluted earnings per share because they
are antidilutive for the year ended 30 June 2020. These options could potentially dilute basic earnings per share in the future.
50
SYNERTEC ANNUAL REPORT 2019 : 2020
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51
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
22. Related parties
The key management personnel compensation comprised:
Short-term employee benefits
Post-employment benefits
Other long-term employment benefits
30 June 2020
763,138
72,498
126,407
962,043
30 June 2019
781,446
74,237
111,417
967,100
Compensation of the Company’s key management personnel includes salaries, accrued leave balances, non-cash benefits and
contributions to an employee defined contribution plan.
In response to the COVID-19 global pandemic and to reduce potential economic impacts on the Company, the Board resolved
to implement a 20% reduction in Directors remuneration effective from 1 May 2020. This position will be reviewed by the Board
during FY21.
23. Auditor’s remuneration
Audit and review services
Auditors of the Company - Grant Thornton Audit Pty Ltd
Audit and review of financial statements
Other services
Auditors of the Company - Grant Thornton Australia Limited
In relation to taxation
In relation to other services
72,000
72,000
10,000
13,686
95,686
72,000
72,000
10,000
27,593
109,593
24. Financial instruments
Financial risk management
Overview
The Group has exposure to the following risks from its use of financial instruments:
• credit risk
• liquidity risk
• market risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and
processes for measuring and managing risk, and the Group’s management of capital.
Risk management framework
The Group’s Directors have overall responsibility for the establishment and oversight of the risk management framework.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate
risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Group’s activities. The Group, through their training and
management standards and procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
(i) Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
24. Financial instruments (continued)
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
end of the reporting period was as follows:
Trade and other receivables
Cash and cash equivalents
ANZ deposit
Deposits
Carrying amount
Note
12
11
13
13
30 June 2020
670,178
3,039,998
-
43,645
3,753,821
30 June 2019
1,541,861
4,336,500
1,500,000
30,603
7,408,964
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However,
management also considers the demographics of the Group’s customer base, including the default risk of the industry and
country in which customers operate, as these factors may have an influence on credit risk.
As the Group provides services under contract, each new customer is analysed individually for creditworthiness before the
Group’s standard payment and delivery terms and conditions are offered.
The Group historically has had negligible bad debts and as such does not consider it necessary to establish an allowance for
impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.
The Group does not require collateral in respect of trade and other receivables. The maximum exposure to credit risk for trade
and other receivables at the reporting date by type of counterparty was as follows.
Australia
Carrying amount
670,178 1,541,861
670,178 1,541,861
The Group’s most significant balance outstanding to a single customer, accounts for $135,249 of the trade and other receivables
carrying amount at 30 June 2020 (2019: $881,323). The amount was received subsequent to year end.
Impairment losses
The aging of the trade and other receivables balance at the end of the reporting period that were not impaired was as follows.
Neither past due nor impaired
Past due 1 - 30 days
426,145
83,034
509,179
1,297,196
234,115
1,531,311
Cash and cash equivalents (including deposits)
The Group held cash and cash equivalents of $3,039,998 at 30 June 2020 (2019: $4,336,500) which represents its maximum
credit exposure on these assets. The cash and cash equivalents are held with a reputable bank and financial institution
counterparties. The term deposit of $1,500,000 held by ANZ as security for the performance guarantee bond facility was
released back to the Group in April 2020.
(ii) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group uses detailed project plans, which assists it in monitoring cash flow requirements and optimising its cash return on
projects delivered. The Group aims to maintain the level of its cash and cash equivalents at an amount in excess of expected
cash outflows on financial liabilities (other than trade payables) over the succeeding 60 days. The Group also monitors the level
of expected cash inflows on trade and other receivables together with expected cash outflows on trade and other payables. At
30 June 2020, the expected cash flows from trade and other receivables maturing within two months are $509,178 (2019:
$1,254,703). This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural
disasters.
52
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SYNERTEC ANNUAL REPORT 2019 : 2020
53
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
24. Financial instruments (continued)
(ii) Liquidity risk (continued)
The following are the remaining contractual maturities at the end of the reporting period of financial liabilities, including
estimated interest payments and excluding the impact of netting agreements:
30 June 2020
Non-derivative financial liabilities
Lease liabilities
Trade payables
30 June 2019
Non-derivative financial liabilities
Trade payables
Carrying
amount
100,310
2,278,995
2,379,305
Carrying
amount
3,548,855
3,548,855
Contractual cashflows
Total
100,310
2,278,995
2,379,305
0-1 years
88,028
2,278,995
2,367,023
1-2 years
8,254
-
8,254
2-5 years
4,028
-
4,028
Contractual cashflows
Total
3,548,855
3,548,855
0-1 years
3,548,855
3,548,855
1-2 years
-
-
2-5 years
-
-
(iii) Market risk
Market risk is the risk that changes in market prices – such as foreign exchange rates and interest rates– will affect the Group’s
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return.
Currency risk
The Group is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales and
purchases and cash and cash equivalents are denominated. The currencies in which these transactions are primarily
denominated are AUD, GBP, EUR and USD.
At any point in time, the Group typically holds EUR, GBP and USD in anticipation of future purchase orders. The Group reviews
the market regularly to evaluate if the cost of obtaining derivatives outweighs the risk of currency movement. They have not
invested in any derivative financial assets. The Group has reviewed contract terms with customers where significant currency
risk on purchase orders may occur, and have enforceable provisions protecting them from adverse currency movements.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group’s policy is to ensure that its net
exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address
short-term imbalances.
Exposure to currency risk
The summary quantitative data about the Group’s exposure to currency risk as reported to the management of the Group is as
follows.
30 June 2020
30 June 2019
USD
GBP
EURO
USD
GBP
EURO
Trade and other receivables
Cash and cash equivalents
Financial assets
Trade and other payables
Financial liabilities
11,298
42,599
53,897
558
558
-
2
2
-
-
-
13,657
13,657
-
1,248,893
1,248,893
-
159,643
159,643
-
-
-
-
-
-
-
19,313
19,313
-
-
Net exposure
54,455
2
13,657
1,248,893
159,643
19,313
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
24. Financial instruments (continued)
(iii) Market risk (continued)
Currency risk sensitivity analysis for currencies in which monetary assets are held
A reasonably possible change of 10% in exchange rates at the reporting date would have increased/(decreased) equity and
profit or loss by the amounts shown below. This analysis assumes an increase/(decrease) in the value of the Australian dollar
against the currencies shown below.
Profit or loss, net of tax
Equity, net of tax
10% increase 10% decrease 10% increase 10% decrease
30 June 2020
USD
GBP
Euro
Currency exchange risk (net)
30 June 2019
USD
GBP
Euro
Currency exchange risk (net)
(2,711)
-
(869)
(3,580)
3,313
-
1,062
4,375
(2,711)
-
(869)
(3,580)
3,313
-
1,062
4,375
(79,475)
(10,159)
(1,229)
(90,863)
97,136
12,417
1,502
111,055
(79,475)
(10,159)
(1,229)
(90,863)
97,136
12,417
1,502
111,055
Exposure to interest rate risk
The interest rate profile of the Group’s interest-bearing financial instruments as reported to the management of the Group is as
follows.
Variable rate instruments
ANZ interest expense
Interest on ANZ deposits
Nominal amount
30 June 2020 30 June 2019
18.99%
18.99%
- 2.10%-2.35%
Cash flow sensitivity analysis for variable rate instruments
A reasonably possible change of 1% in interest rates at the reporting date would have increased (decreased) equity and profit
or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain
constant.
Profit or loss
Equity, net of tax
1% increase 1% decrease 1% increase 1% decrease
30 June 2020
Variable rate instruments
Cash flow sensitivity (net)
30 June 2019
Variable rate instruments
Cash flow sensitivity (net)
-
-
-
-
-
-
-
-
10,500
10,500
(10,500)
(10,500)
10,500
10,500
(10,500)
(10,500)
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55
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
24. Financial instruments (continued)
(iii) Market risk (continued)
Synertec Corporation Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
25. Interest in subsidiaries
Composition of the Group
Capital Management
The Board’s policy is to maintain a strong capital base to sustain future development of the business. Capital consists of total
equity. The Directors monitor the return on capital as well as the level of dividends to ordinary shareholders.
Name of subsidiary
Country of incorporation
/ principle place
Principal activity
of business
Group proportion of
ownership interests
30 June 2020 30 June 2019
The Directors seek to maintain a balance between the higher returns that might be possible with higher levels of borrowings and
the advantages and security afforded by a sound capital position.
There were no changes in the Group’s approach to capital management during the year.
Accounting classifications and fair values vs carrying amount
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position
are as follows. The carrying amounts for financial assets and liabilities approximates fair value.
Synertec Holdings Pty Ltd Australia Holding company
Synertec Pty Ltd Australia Engineering products
100%
100%
100%
100%
and solutions
26. Contingent liabilities
The consolidated entity does not have any contingent liabilities at reporting date.
30 June 2020
Cash and cash equivalents
Trade and other receivables
Deposits
Finance lease liabilities
Trade and other payables
30 June 2019
Cash and cash equivalents
Trade and other receivables
ANZ deposits
Deposits
Finance lease liabilities
Trade and other payables
Note
Loans and Other financial Other financial Total carrying
receivables assets liabilities amount
11
12
13
19
16
3,039,998
670,178
-
3,710,176
-
-
43,645
43,645
-
-
-
-
3,039,998
670,178
43,645
3,753,821
-
-
-
-
-
-
100,310
2,278,995
2,379,305
100,310
2,278,995
2,379,305
Note
Loans and Other financial Other financial Total carrying
receivables assets liabilities amount
11
12
13
13
16
4,336,500
1,541,861
-
-
5,878,361
-
-
1,500,000
30,603
1,530,603
-
-
-
-
-
4,336,500
1,541,861
1,500,000
30,603
7,408,964
-
-
-
-
-
-
-
3,548,855
3,548,855
-
3,548,855
3,548,855
27. Subsequent events
On 9 July 2020, the Company issued 55,175,346 fully paid ordinary shares (“Shares”) at an issue price of $0.023 per share to
professional and sophisticated investors in a share placement (“Placement”). The Placement funds raised will support initiatives
which progress the Company’s technology-led growth strategy.
The growth strategy includes collaboration with a Chinese company, Sichuan GreenTech Environmental Co. Ltd (“Greentech”)
which will see the parties work together to commercialise Greentech’s environmentally focused and globally scalable
hydrocarbons and waste water treatment technology. Greentech is piloting innovative, environmentally friendly chemical
technologies that provide the potential of a cost-effective solution for the treatment and recycling of hydrocarbon drilling mud,
applicable to both oil and gas operations as well as municipal waste water from sewage.
Working closely with two major Chinese State Owned Enterprises (SOEs) responsible for oil and gas production in China,
Greentech is completing pilot programs which will evaluate the technology with regard to cost competitiveness and
environmental benefits. Preliminary evaluation trials and most of the pilot program testing has already been conducted returning
encouraging results.
The Company has formalised this collaboration on 26 June 2020 with a Memorandum of Understanding and subsequent to 30
June 2020 provided Greentech with a loan facility of AUD $1 million to complete the pilot programs with the two major SOEs.
The loan facility is to be repaid with interest by 31 December 2020, is fully secured and subject to customary terms and
conditions. At the date of this report, Greentech had drawn down $0.35 million of the facility.
56
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57
Synertec Corporation Limited
DIRECTORS’ DECLARATION
For the year ended 30 June 2020
Directors’ declaration
1. In the opinion of the Directors of Synertec Corporation Limited (“the Group”):
(a) the financial statements and notes thereto, set out on pages 31 to 57:
(i) present fairly the financial position of the Group as at 30 June 2020 and its performance, as represented
by the results of its operations and its cash flows, for the year ended on that date;
(ii) comply with International Financial Reporting Standards as issued by the International Accounting
Standards Board as described in Note 3 to the financial statements; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2. In respect of the year ended 30 June 2020, the persons performing the roles of Chief Executive Officer and
Chief Financial Officer have declared that the Company has:
(a) kept such accounting records as correctly record and explain its transactions and financial position;
(b) kept its accounting records such that financial statements of the Group that are presented fairly can be prepared
from time to time; and
(c) kept its accounting records accordingly so that the financial statements of the Company can be conveniently
and properly audited.
Signed in accordance with a resolution of the Directors:
Dated at 28 August 2020
Mr. Michael Carroll
Director
Melbourne, Australia
Synertec Corporation Limited
INDEPENDENT AUDITOR’S REPORT
For the year ended 30 June 2020
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Synertec Corporation Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Synertec Corporation Limited (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss
and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows
for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group gives us a true and fair view of the Group’s financial position
as at 30 June 2020 and of its performance for the year ended on that date and is in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
Basis for opinion
We conducted our audit in accordance with International Financial Reporting 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 Accounting Professional
and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our
audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
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and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
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Synertec Corporation Limited
INDEPENDENT AUDITOR’S REPORT
For the year ended 30 June 2020
Synertec Corporation Limited
INDEPENDENT AUDITOR’S REPORT
For the year ended 30 June 2020
Key audit matters
Responsibilities of the Directors for the financial report
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Revenue Recognition (note 3.5 and 6)
Synertec Corporation Limited recognised a large portion of
their revenue using the stage of completion method for fixed
price projects. Hourly rate projects are recognised as the
associated labour expense is incurred. As these projects may
be ongoing at year end there is significant estimation required
when recognising the work in progress (Contract Asset) or
deferred revenue (Contract Liability) and ensuring that the
appropriate amount of revenue has been recognised under
IFRS 15 Revenue from Contracts with Customers.
The engagement team has identified this area as a significant
risk due to the significant judgement involved in estimating the
stage of completion for fixed price projects and in
appropriately capturing the time and material costs for hourly
rate projects to recognise revenue under IFRS 15.
Due to the significant estimation involved and recognition
under IFRS 15, the engagement team has determined this as
a Key Audit Matter.
Recoverability of deferred tax assets (note 10)
Our procedures included, amongst others:
• Analytically assessing revenue for all significant revenue
categories;
• Testing a sample of revenue transactions to supporting
documentation and assessment whether revenue has been
accurately recorded in the correct period;
• Testing a sample of contracts to ensure compliance with
IFRS 15;
• Reviewing the progress of fixed price contracts to gain an
understanding of the stage of completion and progress
against project budget through discussions with project
managers; and
• Assessing the adequacy of disclosures for compliance in
accordance with International Accounting Standards.
International Accounting Standards require deferred tax
assets to be recognised only to the extent that it is probable
that sufficient future taxable profits will be generated in order
for the benefits of the deferred tax assets to be realised.
These benefits are realised by reducing tax payable on future
taxable profits. The Group recognised gross deferred tax
assets of $1,062,631 at 30 June 2020, of which $746,905
arises from tax losses carried forward.
Our procedures included, amongst others:
Reviewing the tax calculations and associated support for
recovery of carried forward losses prepared by the Group;
Evaluating the assessment of the recoverability of its
deferred tax assets through the availability of its future
taxable income, including a critical assessment of historical
forecasting and analysis of the Group’s 2021 budget; and
Assessing the adequacy of the related disclosures in the
financial report.
Due to the significant judgement involved and recognition
under IAS 12 Income taxes, the engagement team has
determined this as a Key Audit Matter.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2020, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the 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.
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with International Accounting Standards as issued by the International Accounting Standards Board 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 Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: https://www.auasb.gov.au/auditors_responsibilites/ar1_2020.pdf. This description forms part of
our auditor’s report.
Grant Thornton Audit Pty Ltd
Chartered Accountants
A C Pitts
Partner – Audit & Assurance
Melbourne, 28 August 2020
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Synertec Corporation Limited
SHAREHOLDER INFORMATION
As at August 25 2020
Securities
Fully Paid Ordinary Shares
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-9,999,999,999
Totals
Holders
69
37
17
319
162
604
Total Units
15,955
85,050
130,565
12,448,081
263,593,930
276,273,581
%
0.010
0.030
0.050
4.510
95.410
100.000
The number of unmarketable parcel holders as at 25 August 2020 based upon a share price of $0.056 (5.6 cents) is 117
shareholders holding in aggregate 176,912 ordinary shares.
The number of unmarketable parcel holders as at 23 August 2019 (date of last report) based upon a share price of $0.046
(4.6 cents) was 123 shareholders holding in aggregate 251,663 ordinary shares.
Top 20 Holdings
Name/Holder
NEW CONCEPT CORPORATION LIMITED
NORTHWEST NONFERROUS AUSTRALIA MINING PTY LTD
KIPBERG PTY LTD
TRANSACTION SERVICES PTY LTD
CALAMA HOLDINGS PTY LTD
MR STEPHEN HAROLD BAKER
LONGRIDGE PARTNERS PTY LTD
GP SECURITIES PTY LTD
MR GOO TONG ANG
MISS XIAOYING LIU
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
PUNTERO PTY LTD
SAILORS OF SAMUI PTY LTD
MR KIAT POH & MISS JU-LYNN POH
SPOTTED CHOOK INVESTMENTS PTY LTD
BONDATRON PTY LTD
MR YUKUN QIU
OCTIFIL PTY LTD
MR PETER SCARF & MRS IDA SCARF
NATJAD & ASSOCIATES PTY LTD
Total Securities of Top 20 Holdings
Total of Securities
Number held
94,796,992
39,375,000
7,582,240
7,095,065
5,000,000
5,000,000
3,444,546
3,136,620
3,100,000
2,616,154
2,573,189
2,500,000
2,496,060
2,423,417
2,200,000
2,097,702
2,021,953
2,000,000
2,000,000
2,000,000
193,458,938
276,273,581
%
34.313%
14.252%
2.744%
2.568%
1.810%
1.810%
1.247%
1.135%
1.122%
0.947%
0.931%
0.905%
0.903%
0.877%
0.796%
0.759%
0.732%
0.724%
0.724%
0.724%
70.024%
Substantial shareholders of the Company are set out below:
NEW CONCEPT CORPORATION LIMITED
NORTHWEST NONFERROUS AUSTRALIA MINING PTY LTD
94,796,992
39,375,000
34.313%
14.252%
Voting rights attached to ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon poll each share shall
have one vote.
Unissued equity securities
There were no unissued securities at the date of this report.
Securities exchange
The Company is listed on the Australian Securities Exchange (ASX: SOP).
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EXCELLENCE
We are passionate and deliver
the highest value outcomes,
always striving to do things
in the best way possible
SYNERTEC
VALUES
SAFETY
We value the health and
personal well being of
people before
all else.
LEADERSHIP
Our people have the courage
totake ownership and
responsibility for
new challenges
INTEGRITY
Our people have the resolve
to do the right thing, even
when nobody is looking
RELATIONSHIPS
We work with trust and respect
to build strong, positive
relationships with our
Clients, Stakeholders
and each other