Synertec
2022 Annual Report
Challenge
Inspires
Change
1
The year in brief
Powerhouse
Powerhouse achieved a number of significant milestones during FY22 including
Synertec entering into a Memorandum of Understanding (“MOU”) with leading
independent energy producer Santos Ltd (ASX:STO) to progress the Powerhouse
technology. Post the end of the year, Powerhouse successfully passed a Factory
Acceptance Test (FAT) and has been mobilised to remote Queensland to
commence field trials with Santos.
Custody Transfer System (CTS)
During FY22, Synertec entered into an MOU with technology partner, Gaslog,
among the larger operators of LNG vessels globally.
Further, DNV approved Synertec’s marine Custody Transfer System for installation
on LNG vessels. DNV is the world’s leading Classification Society and a recognised
advisor to the maritime industry.
Composite Dry Powder (CDP)
During FY22 Synertec and GreenTech entered into a perpetual, exclusive and
royalty-free Intellectual Property Licence Agreement, providing Synertec with the
right to use GreenTech’s Composite Dry Power technology.
With the Licence Agreement in place the Company will now look to
commercialise CDP across some of the world’s largest hydrocarbon markets
including Australia, Canada, North America, Central America and South America.
Engineering
Several key agreements and contracts were signed during FY22, with long-time
customers including CSL Limited, Pfizer, Aspen Pharmacare, and Metro Trains
Melbourne. The engineering business supports the Group’s Technology
development, protecting valuable IP and enabling speed to market in the
commercialisation process.
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Contents
Chair’s Report
Managing Director’s Report
Synertec Environmental, Social and Governance Report
Synertec Board Members
Financial Report for the year ended 30 June 2022
Corporate Directory
Directors’ Report
Corporate Governance Statement
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the financial statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
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SYNERTEC ANNUAL REPORT 2022 : CHAIR’S REPORT
Challenge Inspires Change
From Chair of the Board, Mr. Dennis Lin
Amongst the focus on renewable
energy in the world, our technology is
unique and the first of its kind to be out
in the field and ready for mass
production and commercialisation.
Dear Shareholders,
On behalf of the Board of Directors, I am pleased to present
to you the 2022 Annual Report for Synertec Corporation
Limited. The 2022 Financial Year (‘FY’) sees ongoing
evolution of Synertec as we progressed our energy
transition technologies towards commercialisation and
marked this with formally establishing the Technology
business within the Group. Along with our transition
technologies, our niche engineering business continued to
support a range of Tier-1, blue chip customers, delivering a
growing revenue stream across our target sectors of critical
infrastructure, water, advanced manufacturing and energy.
Despite further COVID-19 related disruptions and
associated workplace restrictions, border closures and
floods, our people have demonstrated resilience and
determination to deliver innovative and commercial
solutions for our customers. The Board is proud to be part
of a committed team of professionals as we place
increasing focus on the technology evolution of our
business.
To our long-standing investors who have supported us, I
extend our gratitude for your patience which has enabled
us to remain focused on successfully delivering our
transformative impact technology, Powerhouse, which will
revolutionise the way power is delivered to industry with
zero-emissions and increased human safety.
Progressing our technologies that support a world in
transition
Synertec is dedicated to helping our partners reduce their
carbon footprint though our strategic focus on
environmentally friendly and energy efficient technologies.
Technology is key to the reduction of carbon emissions and
the responsible advancement of economic growth and
Synertec is striving to be at the forefront of this movement.
A number of new institutional shareholders joined our share
register at the successful share placement completed in
August 2021, which enabled our team to rapidly accelerate
the development of our technologies during the year,
including our Powerhouse technology (now deployed to
site and operational), the acquisition of exclusive licencing
for the Composite Dry Powder technology we had piloted
overseas and in Australia, and the international certification
and patenting of our LNG marine Custody Transfer System
technology.
Our Powerhouse technology, a unique proprietary
technology owned by Synertec that allows the utilisation of
renewable energy to exclusively power critical industrial
applications in remote locations, rapidly progressed towards
commercialisation during the year. Amongst the focus on
renewable energy in the world, our technology is unique
and the first of its kind to be out in the field and ready for
mass production and commercialisation.
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Photo: Aerial view of Synertec’s Powerhouse system onsite in Central Queensland
Our Managing Director, Michael Carroll, will discuss the
success our people are achieving and the rewards they
enjoy in more detail within his letter. I’ll preface his
comments by saying the skills, talent and commitment of
our people, as well as the progress they are making in the
industries of tomorrow, bode extremely well for a successful
future for Synertec.
On behalf of the Board, I would like to thank all of our
people for their tremendous commitment during another
challenging year for our communities.
Outlook for FY23
As we enter FY23, we do so on the verge of delivering some
exciting and meaningful revenue growth as Powerhouse
moves towards commercialisation and the Engineering
business continues to grow. The recent share placement
in September 2022, welcoming more new institutional
shareholders as well as receiving further support from
our existing shareholders, means we are well funded to
continue to achieve our ambitions and importantly, have the
internal skill-set and access to partners which will see the
Group develop and protect its technologies in key markets
and geographies.
I would like to recognise and thank our partners and
customers for their support and loyalty to Synertec
throughout the year and for the opportunities they have
provided for us to continue to work together into FY23 and
beyond.
Finally, I am grateful to our shareholders for supporting
Synertec’s vision, strategy and growth ambitions. I look
forward to your continued support.
Mr. Dennis Lin
Independent Non-Executive Chair
We see a significant local and global addressable market
for our Powerhouse technology where remote locations
operating critical industrial equipment can benefit from a
firmed base load renewable power supply. As the world
continues to transition to a carbon-free future, technologies
such as Powerhouse will allow our customers to achieve
their decarbonisation goals and deliver significant value for
our Company and our stakeholders.
Our other technologies such as the marine LNG Custody
Transfer System (a measurement and metering system for
the safe and accurate fiscal transfer of LNG) and Composite
Dry Powder (a technology to convert hydrocarbon drilling
mud into a safe and secure by-product including non-
polluting building materials) continue to attract industry
attention and provide a diversified approach for the future
growth of the Company.
Our People, Culture, Communities, and the Environment
Sustainability remains a core part of our business and it
gives me great satisfaction to deliver our first ESG Report
as part of this Annual Report. I am proud of the degree
to which our relatively small Company is taking a leading
approach to its ESG commitments and reporting those in
a constructive way throughout the organisation and to our
external stakeholders by making regular ESG disclosures
against the World Economic Forum (“WEF”) Stakeholder
Capitalism framework.
Our business would be nothing without our people. We
have a large growing base of engineers and other highly
skilled people, and it is a testament to the culture of the
organisation, our technologies and our outlook that we are
able to attract and retain some of the best talent in
Australia in an exceptionally tight and competitive job
market.
Ultimately what drives the success of our projects is our
people. We take pride in providing opportunities to work on
exciting projects that are changing the world around us and
providing clear career options that attract and retain
committed people. To bring out the best in those people,
we are building a culture that places a high value on
training, accountability and performance as well as health,
safety and the environment.
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SYNERTEC ANNUAL REPORT 2022 : MANAGING DIRECTOR’S REPORT
Resolve, Resilience, Results
From Managing Director, Mr. Michael Carroll
The global focus on reducing carbon
emissions presents an historic
investment opportunity for Synertec’s
Technology and Engineering solutions.
Dear Shareholders,
Welcome to the 2022 Annual Report for Synertec
Corporation Limited. During FY22 our Company made
significant progress in developing our impact energy
transition technologies, whilst further strengthening our
foundations as an engineering service provider to our Tier-1
customer base across large global markets, and our own
Technology business – enabling Synertec to prioritise, rapidly
commercialise and protect its valuable intellectual property.
The global focus on reducing carbon emissions presents an
historic investment opportunity for Synertec’s Technology
and Engineering solutions.
Financial Performance
It is with pleasure that I have had the opportunity to lead
Synertec again this last financial year, continuing the rapid
transformation of our business to a world-leading energy
transition technology provider and establishing a firm
platform for the growth and sustainability of our business.
Evidence that the transformation is producing results include
a 44% increase in revenue over FY21 to $12.1 million, cash
receipts from customers increased by 32% to $11.8 million, a 4
percentage point uplift in gross margins and record work in
hand at the end of the year.
This result was underpinned by strong growth in the engi-
neering consultancy services revenue category to $8.8 million
at improved gross margins from prior years, an increase of
88% on last year and the highest ever. Consultancy services
now represents over 80% of total engineering revenue and
reinforces the success of our strategy to weight engineering
services towards “programs” of work with our major
customers, and have less revenue derived from fixed price
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projects. The ongoing shift from fixed price revenue to
consultancy revenue significantly de-risks the business
against project cost blowouts and provides for higher
margins.
While the degree of technology investment was in line with
expectations announced by the Company earlier in the year,
the Powerhouse development timeframe was accelerated
with most of the anticipated total outlay condensed into
FY22. Included in the earnings is technology Research and
Development (‘R&D’) costs of $2.6 million, primarily for
development of the Powerhouse technology, which made a
significant advancement during the year progressing from
concept to site-commissioned. These costs have been
expensed for tax and accounting purposes, enabling the
Group to achieve maximum tax credits for this expenditure
which are expected to be refunded in cash to the Group
following lodgement of its annual income tax return during
FY23. The anticipated tax refund receivable which has been
recognised is $1.1 million.
The Company is extremely pleased with the outcome of the
Powerhouse technology development effort during the year
and pleased to report that it has continually met its ambitious
schedule of key milestones.
As a result, our workforce is continuing to grow to
accommodate customer demand for Synertec’s niche
expertise in its key sectors of critical infrastructure, water,
advanced manufacturing and energy – as well as servicing
the growing needs of our Technology business. With growing
revenue, stronger gross margins year-on-year and a solid
work in hand position, the Engineering business is now
positioned for self-sustainability. Importantly, the
appointment of our General Manager Engineering and further
in-house Human Resources capability will ensure talented people are
recruited, developed, performing and retained.
The Adjusted EBITDA of the Group was a loss of $2.7 million (30
June 2021: $2.2 million loss). Adjusted EBITDA excludes costs which
are discretionary for the purposes of exploring strategic long term
strategic growth opportunities and/or activities and expenses which
are not considered to be typical annual operational overheads for the
business.
The Adjusted EBITDA on a like-for-like basis between the two years,
excluding technology R&D costs and income, improved to a loss of
$1.4 million, compared to the FY21 loss of $2.2 million, an
improvement by 36%.
Engineering segment adjusted EBITDA was a loss of $0.2 million,
which was a 35% improvement on the prior year. The Engineering
business is now strongly positioned to be self-sustainable and
prepared for further growth.
With the recent share placement in September 2022, raising $5
million (before costs), the Company is well positioned to fulfill its
ambitious near-term technology development and commercialisation
opportunities across large global markets.
Importantly, Synertec continues to operate with no working capital
debt or covenants from its bank.
Technology Business
Synertec’s Technology business continued to progress its three key
environmentally targeted technology solutions to help industry
transition to a zero carbon future and reduce its environmental
footprint. Synertec is committed to being an impact investment for
shareholders and local communities, and to ensuring the Company is
supporting its partners in the collective endeavour to improve ESG
performance.
Powerhouse
Powerhouse is a proprietary technology that is;
• A zero emission, micro-grid power system;
• Initially targeting remote industrial applications;
• Deployable and re-deployable in a matter of days;
• Cost-competitive with remote diesel/gas power generation for
industrial applications; and
• A continuous and highly reliable energy solution.
Powerhouse achieved a number of significant milestones during
FY22 and since, including;
• Synertec entered into a Memorandum of Understanding
(“MOU”) with leading independent energy producer Santos Ltd
(ASX:STO) to progress the Powerhouse technology;
• Progressed to a commercial agreement in the form of an
overarching Goods and Services Contract and a Work Order for
installation and field testing of the Powerhouse prototype;
• Successful Factory Acceptance Test (“FAT”);
• Deployment to site in remote central Queensland to commence
site acceptance testing in preparation for field trials;
• Site Acceptance Testing (‘SAT’), including stress-testing of
system at load settings up to 200% of typical field application,
failure scenarios, maintenance practices & safety responses; and
• Coordinating site services for cutover to live field trial on Santos’
plant.
Total revenue & other Income ($m)
& Gross Margin (%)
$25.0
$20.0
$15.0
$10.0
$5.0
$0
FY18 FY19 FY20 FY21 FY22
1H
2H
Gross Margin
Total revenue & Other Income Growth
FY21 - FY22 ($m)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
% G R OWTH
O W T H 10
% G R
% GR O W T H 1
8
0
4
1H FY21 2H FY21 1H FY22 2H FY22
Engineering Consultancy
Services Revenue ($m)
FY18 FY19 FY20 FY21 FY22
1H
2H
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SYNERTEC ANNUAL REPORT 2022 : MANAGING DIRECTOR’S REPORT
We continue to work with Santos on an agreed implementation
plan and detailed commercial arrangement for the supply,
maintenance and operation of potential future Powerhouse units.
More broadly, Synertec has identified significant opportunities for
this technology for remote locations across the energy and
resources industries, both nationally and globally, and we will
continue to progress and prove the technology over the coming
year.
Following the success of site testing and agreeing commercial
terms for the prototype, Synertec started to explore the potential
for Powerhouse to be more broadly applied in Australia and the
USA given the strong market interest in this technology solution. As
a result, Synertec has initiated market and opportunity studies
within the United States market.
On 8 August 2022 the US Inflation Reduction Act was passed,
which effectively committed $US369 billion (A$528 billion) over 10
years to clean energy technology development, including;
• a tax credit system;
• a new “clean energy technology accelerator” to advance
renewable technologies; and
• investment funds to build clean technology manufacturing
facilities.
Powerhouse is well advanced in field testing here in Australia and
this further fuels our confidence to pursue in parallel the
considerable market opportunities presenting in Australia and USA.
Custody Transfer System (‘CTS’)
During FY22, leading global marine certification body, Det Norske
Veritas (‘DNV’), approved Synertec’s marine LNG Custody Transfer
System for installation on LNG vessels.
Synertec also announced that it is partnering with GasLog on the
development of the CTS technology. European-based GasLog is
amongst the largest independent owners, operators and managers
of LNG vessels in the world. In July 2021, GasLog signed a Heads of
Agreement with Venice Energy to negotiate the charter of an LNG
Floating Storage and Regasification Unit (‘FSRU’) for the Outer
Harbour LNG Import Project in Port Adelaide, South Australia.
Synertec is currently performing Front End Engineering Design
(FEED) work for the project consortium.
Additionally, Gaslog is a shareholder and appointed operation and
maintenance contractor for Gastrade, an organisation developing
FSRU projects for which Synertec is positioning as a key technology
supplier.
With IMO2020 regulations targeting a 40% reduction in shipping
carbon emissions by 2030 driving a long-term transition towards
LNG as a marine fuel for cleaner-burning vessels, and almost 200
LNG fuelled ships in operation worldwide and a further 200 on
order, marine CTS represents a significant growth opportunity for
Synertec.
Composite Dry Powder (‘CDP’)
Synertec and technology partner, GreenTech, entered into a
perpetual, exclusive and royalty-free Intellectual Property Licence
Agreement during FY22, providing Synertec with the right to use
GreenTech’s CDP technology.
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Total Cash to Net Assets ($m)
and Current Ratio (times)
11.0
9.0
7.0
5.0
3.0
1
-1
2.5
2.0
1.5
1.0
0.5
0
FY18 FY19 FY20 FY21 FY22
Net assets (excl cash) as at June 30
Total cash as at June 30
Current Ratio as at 30 June (RHS)
FY22 v FY21 Revenue by Type
19%
44%
FY22
81%
FY21
56%
Fixed price solutions & transfer of goods
Engineering consulting services
FY22 v FY21 Revenue Mix by Industry (%)
31%
27%
25%
FY21
23%
25%
36%
FY22
10%
23%
Water
Critical Infrastructure
Advanced Manufacturing
Energy
With the perpetual Licence Agreement in place the Company
will now look to commercialise CDP across some of the
world’s largest hydrocarbon markets including Australia,
Canada, North America, Central America and South America.
Further testing was undertaken during the year in Australia
with our Australian-based technology partners, and Synertec
is currently seeking industry partners and commercial
opportunities.
The novel environmentally friendly and cost-effective CDP
technology converts hydrocarbon drilling mud into a useful
non-polluting by-product with many potential applications
including high strength construction materials such as bricks
and road base. The technology has wider applications, with
potential use of CDP in mining tailings and sewage sludge to
help further reduce the environmental impact of mining,
tunnelling and waste treatment processes.
Engineering Business
The year delivered an increased pace in critical infrastructure
planning and expenditure across Australia, enabling
Synertec’s Engineering business to continue to win new work
in its target industries of critical infrastructure, water, energy
and advanced manufacturing. During the year, Synertec was
awarded various new contracts and existing contract
extensions across these four key target sectors.
Proportionality of revenue between these sectors has
changed between FY21 and FY22. While in FY21 revenue was
derived in almost four equal proportions, in FY22 revenue
was more weighted to Water (36%), Critical Infrastructure
(31%) and Advanced Manufacturing (23%), while the Group’s
Technology business continued to remain entirely focused on
the Energy sector.
The Engineering business achieved stronger gross margins in
FY22 (versus FY21) and has established a solid work in hand
position, setting it on a path for self-sustainability. Some key
awards received in the Engineering business during the year
include;
• Engineering services to a new client in support of the
development of a new green ammonia facility;
• Additional projects with existing client, APA, responding to
the need to increase gas supply within Victoria;
• Additional scope with existing client, Beon Energy, for
solar power projects in major water utilities;
• Engineering services for a water utility treatment plant
system upgrade with John Holland/KBR JV; and
• Additional contracts and Master Services Agreements with
long-time customers CSL Limited, Pfizer and Aspen
Pharmacare, to provide important Project Management,
Automation, Validation and Design support to several of
their critical pharma advanced manufacturing projects.
A significant additional engagement with Metro Trains
Melbourne was also signed and announced by the Group
during the year for the provision of services with an
estimated value of circa $3 million, with provision for scope
extensions, and a completion date of December 2024. This
important contract will see Synertec deliver the Control and
Monitoring System for the Metro Tunnel Project.
Despite the growing global challenges resulting from the
COVID-19 pandemic, including exceptionally strong ongoing
demand for localised labour and the resulting substantial
increase in labour and recruitment costs, the business was
able to significantly grow its team of highly skilled and
talented people across the year to almost 90 people,
including approximately 60 full time equivalent engineers,
project managers and related professionals. This represents
the largest workforce in the company’s history, and almost
doubles billable capacity from the prior year, which is
reflected in the increase of 88% to Engineering Consultancy
Services revenue.
To accommodate this, during the year the Company invested
in further Human Resource (“HR”), recruitment and team
management capability, including the introduction of a
General Manager of Engineering, to ensure its talented
people are suitably developed, performing and retained. The
Engineering business also restructured to a smaller team-
based approach to ensure its people receive the development
opportunities they require to grow and deepen the
Company’s valuable expertise, as well as improve retention of
talent. Synertec will continue to expand its engineering team
to support new and expanded engagements, as well as the
growing Technology arm of the Group.
Having the Technology arm as a client of the Engineering
group offers considerable advantages, not the least being our
ability to develop and protect our intellectual property within
our “four walls”.
PROJECT HIGHLIGHT - CSIRO
Karen Wright (CSIRO) left and Romila Gomez (Synertec) right.
Synertec’s Advanced Manufacturing Team reached a major
milestone on the CSIRO’s National Vaccine and Therapeutic Lab
project which was recently granted certification by the Office of
the Gene Technology Regulator (OGTR) at the Department of
Health. Synertec executed the schematic & detailed design,
provided contract documentation and tendering services,
contract administration and technical support as well as
commissioning, qualification and management services.
This facility is a first in Australia for single-use technology for
multi-product biologicals for both API and Final Product
Manufacture including sterile filling. Synertec worked closely
with the CSIRO team to define user requirments, engage with
the Therapeutic Goods Administration and overcome the many
challenges of construction during Covid.
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SYNERTEC ANNUAL REPORT 2022 : MANAGING DIRECTOR’S REPORT
The care and respect shown to each other and the desire to
perform to our best even under trying conditions has resulted
in exceptional outcomes for our customers and therefore, our
shareholders. This year has underscored the strength of our
culture and that our stated values are our “lived” values. For
this, I am very grateful to each and every one of our team.
I would like to take this opportunity to also thank our loyal
partners, customers, suppliers and shareholders for
supporting Synertec. I look forward to updating you on our
continued successes during FY23 and beyond.
Mr. Michael Carroll
Managing Director
Health and Safety
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. While the impacts of the
COVID-19 pandemic eased during the latter part of FY22, we
have all continued to face various challenges. Synertec’s
priority has remained the health, well-being and safety of its
people and continuing to provide a safe and inclusive work
environment for all.
We have made a concerted effort to keep our people, and
those who interact with us, safe. We are therefore proud to
have again experienced no lost time injuries during the year.
This is a testament to the diligence and dedication of our
people and our core values. Safety is a priority in everything
we do, as it is for our partners and customers, and we will
continue to ensure zero harm to our people, partners and
customers.
Outlook
Following the successful share placement in September 2022,
Synertec’s balance sheet is well positioned to support the
Company’s growth profile, and dual strategy of
commercialising large near-term transition technology
opportunities and growing our high-end Engineering
business.
Synertec will continue to progress its Powerhouse technology
over the next year, with plans to complete field testing,
achieve sign-off and reach commercial terms with Santos
Limited for future systems. The Company has also begun
exploring opportunities for Powerhouse with partners in the
United States.
The Company will continue to collaborate with its technology
partner, GasLog, to progress CTS opportunities led by the
Outer Harbour project in Australia, and progress field testing
of the CDP technology in Australia with its technology
partners.
While COVID-19 and global economic and supply-chain
challenges remain, demand for ESG-focused technologies
and engineering solutions continues to grow, particularly
around large infrastructure projects in the energy, rail and
water sectors. Synertec will continue to invest in its people to
drive continued growth in its technology and engineering
consultancy services over the next year.
With the commercialisation of Powerhouse progressing, a
strong pipeline of work in the engineering business and a
portfolio of technologies that help the global transition to a
low carbon future, Synertec is well positioned to deliver
growth into FY23 and beyond.
Our people have risen to many challenges over this reporting
period. Covid illness and mandated restrictions have added a
great deal of complexity to operations and anxiety of
employees. I am incredibly proud of the way, without
exception, each member of our team has “leant into” each
technical issue, each logistical issue and for many, alongside
personal challenges under the pandemic conditions our
communities have endured, to the very best of their ability.
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Synertec is dedicated to helping our
customers reduce their carbon footprint
through our strategic focus on
environmentally friendly and
energy efficient technologies.
11
SYNERTEC ANNUAL REPORT 2022 : ESG REPORT
ESG Report
Synertec has a history of strong Environmental
Social Governance (‘ESG’) focus based on the
technology and solutions provided to
customers.
With a track record of successful innovation
and research and development (‘R&D’),
Synertec design, develop and deliver
technology that supports our partners’
transition to a low carbon world.
Our ability to help solve our customers’
pressing ESG challenges provides a
significant near-term growth opportunity
for our business.
Whilst Synertec is poised to benefit from commercialising
our ESG-focused technologies, we have formalised our ESG
reporting to ensure that we drive an internal cultural
alignment to the external commercial opportunities we see
in the markets we operate in. By developing, implementing
and reporting strong ESG credentials, we hope to
demonstrate to all of our stakeholders that Synertec is
authentic about our ESG impact.
With the adoption of the World Economic Forum (‘WEF’)
ESG framework through the SocialSuite platform, Synertec
can implement a measurement plan for each sustainability
area across its business, which operates across the critical
infrastructure, water, energy and advanced manufacturing
sectors. The Company has committed to report on the
key ESG factors including governance, anticorruption and
bribery practices, ethical behaviour, human rights, carbon
emissions, water consumption, ecological sensitivity,
diversity, inclusion, pay equality and tax payments.
The WEF’s International Business Council (‘IBC’) created
a specialised task force, consisting of experts from a wide
range of industries, including the global Big-4 accounting
firms, to improve the ways that organisations measure and
demonstrate their contribution towards creating more
prosperous, fulfilled societies and a more sustainable
relationship with the planet.
This work resulted in the Stakeholder Capitalism Metrics
(‘SCM’) and disclosures that can be utilised by organisations
to mainstream reporting of their performance against
environmental, social and governance indicators and track
their performance towards the United Nation’s (‘UN’)
Sustainable Development Goals (‘SDG’) on a consistent
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1.
CORPORATE
PURPOSE
2.
BOARD
COMPOSITION
3.
STAKEHOLDERS
CONSULTATION
Y
T
I
G O
V
E
4.
ANTI
CORRUPTION
5.
ETHICAL
BEHAVIOUR
R
N
A
N
C
E
P
L
A
N
6.
RISK &
OPPORTUNITIES
7.
GHG
EMISSIONS
8.
TCDF
IMPLEMENTATION
E
T
9.
LAND USE
10.
WATER
CONSUMPTION
21.
GLOBAL
TAXATION
20.
RESEARCH &
DEVELOPMENT
R
E
P
S
O
R
P
19.
FINANCIAL
INVESTMENT
18.
ECONOMIC
CONTRIBUTION
17.
RATE OF
EMPLOYMENT
16.
TRAINING
PROVIDED
E
L
P
15.
HEALTH &
SAFETY
14.
CHILD &
LABOUR
O
E
P
13.
WAGE
LEVEL
12.
PAY
EQUITY
11.
DIVERSITY &
INCLUSION
basis. The metrics were deliberately based on existing
standards bringing comparability and consistency to the
reporting of ESG standards and were deliberately designed
to be used universally across all industries and business
types.
The image above highlights all of the 21 areas of the WEF
ESG framework, which are reported by Synertec at regular
intervals to show its ESG progress. Reporting will define the
Company’s priority areas, actions and progress in each area,
providing an easy way for investors to assess the
development of the Company’s aim and journey to become
a “best in class” ESG organisation and ensure that it remains
an impact investment for shareholders and local
communities.
Our major partners and customers, many of whom are key
organisations in Australia’s critical infrastructure, water,
energy and advanced manufacturing sectors, have
highlighted the growing need and opportunity for improved
ESG performance. We see this as a logical progression for
our organisation, building upon the strong foundations we
developed to support the global energy transition, reduce
carbon footprint and respond to tightening environmental
regulations while providing sustainable employment
opportunities and operating in a transparent and
accountable manner for all of Synertec’s stakeholders.
PEOPLE
Diversity and inclusion
Synertec is committed to providing an inclusive workplace
and recognises the value that a workforce made up of
individuals with diverse skills, values, backgrounds and
experience will bring to the Company. At the core of the
Company’s diversity policy is a commitment to equality and
respect.
The Company’s business success is a reflection of the
quality and skill of its people, and it is committed to seeking
out and retaining the finest human talent to ensure strong
business growth and performance by building upon the
positive and inclusive working culture successfully
established.
Synertec Workforce
By Gender
Synertec Workforce
By Age
Female 33%
Male 67%
Under 30 17%
30-50 62%
Over 50 21%
Pay Equality
Synertec understands that pay equality reflects an
organisation’s culture and helps to bridge diversity gaps,
attract talent and drive long-term competitiveness.
Director and Key Management remuneration details are
available in the Annual Report.
The ratio of basic salary and remuneration of women to
men in Management is 74%, Supervisors and Professionals
is 88%, resulting in a total workforce ratio of 79%.
Wage Level
Synertec understands that fair compensation and benefits
contribute to the economic well-being of employees, since
the distribution of wages and income is crucial for
eliminating inequality and poverty.
Synertec ensures that the pay is fair and appropriate in
relation to the rest of the work force.
The ratio of standard entry level wage compared to local
minimum wage is 133%.
The ratio of annual total compensation of the Chief
Executive Officer (‘CEO’) to the median of the annual total
compensation of employees is 313%.
Child, forced or compulsory labour
Synertec has established a Modern Slavery Policy, available
on the Company’s website.
Health and safety
The Company reports in its Annual Report all necessary
health and safety statistics such as;
• the number and rate of fatalities as a result of work-related
injury;
• high-consequence work-related injuries (excluding
fatalities);
• recordable work-related injuries; main types of work-related
injury; and
• the number of hours worked.
Refer to page 10 of FY22 Annual Report.
The Company also reports these statistics to its workplace
health and safety insurers (by State). The Company holds
quarterly Occupational Health Safety and Environment
(‘OHSE’) meetings with all Executives present. The Board
has a standing agenda item for safety at the beginning of all
Board meetings.
Synertec provides an Employee Assistance Program (‘EAP’)
for its employees.
Training provided
The Company understands the importance of employee
training and strengthening the workforce with knowledge
and opportunities to upskill.
The average training hours are as follows:
• Senior Management: 28 hours with an average cost of
$4312 per employee
• Management: 29.5 hours with an average cost of $3370 per
employee
• Supervisors and professionals: 54.8 hours with an average
of $3396 per employee
Diversity of Employees
% of Total Employees
10%
N O R T H E R N
E U R O P E
3%
E A S T E R N
E U R O P E
N O R T H A M E R I C A
C E N T R A L A M E R I C A
4%
S O U T H E R N
E U R O P E
11%
3%
N O R T H E R N
A F R I C A
1%
W E S T E R N
A F R I C A
W E S T E R N
A S I A
1%
E A S T E R N
A F R I C A
S O U T H A M E R I C A
1%
3%
S O U T H E R N
A F R I C A
14%
E A S T E R N A S I A
1%
S O U T H E R N
A S I A
6%
S O U T H E A S T E R N A S I A
41%
A U S T R A L I A &
N E W Z E A L A N D
13
SYNERTEC ANNUAL REPORT 2022 : ESG REPORT
GOVERNANCE
Setting Purpose
Synertec was created in 1996 as a specialist engineering
services company. Today, Synertec has evolved into a
diversified technology growth company with offerings serving
multiple industries, with particular proficiency in solutions for
the critical infrastructure, water, energy and advanced
manufacturing sectors.
With the vital importance of the ESG issues and challenges
facing the world today, Synertec are committed to
providing strategic focus on environmentally friendly and
energy efficient technology solutions to support reducing
emissions in a way that supports economic growth and
provides our stakeholders with a viable transition to a greener,
low-carbon future.
Synertec’s purpose is to embrace innovation, create value, and
work with our partners to build a better future.
Governance body composition
The Synertec Board is comprised of a diverse set of skills,
knowledge and capabilities and supports the appointment
of directors who bring a wide range of business, professional
skills and experience to the company.
The Synertec Board Charter and Corporate Governance
Statement defines the composition of the Board and the
corporate governance practices in place, in line with the 4th
edition of the ASX Principles of Good Corporate Governance
and Best Practice Recommendations.
At the core of Synertec’s diversity policy is a commitment to
equality and respect. The Company is committed to providing
an inclusive workplace and recognises the value individuals
with diverse skills, values, backgrounds and experiences will
bring to the Company.
Each Director is required to continuously disclose any interest
in securities in the Company and any other interest which
might create a potential conflict of interest with their duties as
a Director or which would affect their independence.
Director tenure is outlined in the Synertec Corporate
Governance Statement.
The Board is currently comprised of 75% Male and 25% female
members. 50% of the Board are aged 30-50, the other 50%
are aged over 50. 75% of the Board identify as Australian and
the remaining 25% ethnic origin is Chinese.
Material Issues impacting shareholders
Synertec is an ISO14001 Environment certified company. The
ongoing processes to maintain these international standards
includes the identification of stakeholders, regular materiality
assessments and independent auditing and ongoing
stakeholder feedback and consultation.
Also, as part of the Company’s commitment to complying
with the listing rules of the ASX and the Australian
Corporations Act, the Company continually assesses the
importance of the relationship between what is material to the
Company and its stakeholders in terms of disclosure. Please
find more information in our Continuous Disclosure Policy.
Stakeholder consultation is undertaken through regular and
ongoing meetings and communications with investors, clients,
subcontractors and suppliers and employees. Synertec also
have a documented process for stakeholder consultation in
the Company’s Health Safety and Environment (‘HSE’)
Management System manual.
14
To ensure a consistent approach to stakeholder feedback,
Synertec have created a standard client satisfaction procedure
and complaint handling procedure.
For further information on our identified material issues and
stakeholder feedback, please review the Synertec Annual
Report.
Anti corruption practices
The Synertec Code of Conduct has been established to set out
a clear set of values that emphasise culture which
encompasses strong corporate governance, sound business
practices and good ethical conduct.
The Synertec Securities Trading Policy is also in place,
ensuring compliance and ethical behaviour when dealing in
the securities of the Company.
Synertec covers Anti-Bribery and Anti-Corruption policies
within its Code of Conduct. This policy embeds new processes
in the Synertec onboarding procedure and document control
review. The Company is also reviewing options for
standardising employee training.
Mechanisms to protect ethical behaviour
Synertec is currently reviewing its Whistleblower Policy. As
part of this process Synertec is reviewing options for its
internal and external reporting mechanisms.
Risk and opportunity oversight
Synertec has gained accreditation with ISO 9001 (‘Quality’),
ISO 45001 (‘Occupational Health and Safety’) and ISO 14001
(‘Environment’). Part of maintaining these accreditations is
the continual improvement of Synertec’s organisational
systems and approach to environmental concerns which
consists of ongoing risk and opportunity assessments, with
ESG being the focus.
The Board also has an Audit and Risk Management
Committee which advises the Board on the establishment and
maintenance of a framework of internal control, risk
management and appropriate governance standards for the
management of the Company. The Board also identifies areas
of risk and continuously undertakes risk assessments of the
Company’s operations, processes and procedures.
Synertec has commenced the process for ISO 27001
(‘Information Security Management’) certification and expect
to receive this during 2023.
The Risk Management Commitee Charter is currently being
updated to reflect the Company’s commitment to data
stewardship and climate-change.
Please refer to our Audit and Risk Management Committee
Charter and Corporate Governance Statement for more
information.
PROSPERITY
Rate of employment
The total number of new employee hires during the financial
year were:
New Employee Hires
By Gender
New Employee Hires
By Age
Female 41%
Male 59%
Under 30 21%
30-50 54%
Over 50 25%
New Employee Hires
By Country of Origin
Australia & New Zealand 26%
Eastern Asia 21%
Northern Europe 25%
Southern Asia 9%
South East Asia 9%
Southern Europe 9%
Western Asia 6%
Northern Africa 6%
Staff Turnover
By Gender
Staff Turnover
By Age
Female 22%
Male 78%
Under 30 6%
30-50 83%
Over 50 11%
Economic contribution
Synertec discloses all economic performance and activities in
its Annual Report and Half Year Business & Financial Results
Overview.
Financial investment contribution
Synertec’s performance activities, key changes and financial
investment updates have been disclosed in the Annual Report
and the Half Year Business & Financial Results Overview,
which are available on the website and includes disclosures
relating to total capital expenditures (less depreciation) and
how it supports the Company’s investment strategies.
Synertec has not paid any shareholder dividends in recent
financial years.
Total R&D expenses
Synertec has, historically, received Research and Development
(‘R&D’) tax incentives, reflected in financial reporting of
results and its annual income tax returns. The Company
expects to receive R&D tax incentives in FY22.
All R&D expenditure has been expensed where IP is
developed. No intangible assets (i.e. capitalisation of R&D
spend) are recognised for this. In June 2021, to assist with its
Liquified Natural Gas (‘LNG’) Custody Transfer System (‘CTS’)
technology development and following a detailed
submission to Government by Synertec, the Company was
pleased to announce it had been awarded a grant of $50,000
(the maximum grant) under the Victorian Government
Technology Adoption and Innovation Program. The $5 million
Program is specifically designed to support Small Medium
Enterprises (‘SMEs’) to commercialise innovative technologies
or develop innovative, new and commercial technology.
Total tax paid
Please refer to the FY22 Annual Report.
PLANET
GHG emissions
Synertec has reviewed the Green House Gas (‘GHG’)
Protocol Corporate Accounting and Reporting Standards and
is currently investigating what the implementation of the GHG
reporting standard will mean for the Company.
TCFD implementation
Synertec has reviewed the Task Force on Climate-related
Financial Disclosures (‘TCFD’) reporting requirements and is
currently investigating what the implementation of the
reporting framework will mean for the Company.
Land use and ecological sensitivity
Synertec’s projects do not operate in, or near, Key Biodiversity
Areas.
Water usage
Synertec’s projects do not operate in water-stressed areas.
15
SYNERTEC ANNUAL REPORT 2022 : THE SYNERTEC BOARD
The Synertec Board
Dennis Lin
INDEPENDENT NON EXECUTIVE DIRECTOR, CHAIR
Michael Carroll
MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER
Mr. Carroll is a founding principal, 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.
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.
Mr. Lin practised as a solicitor, Chartered Accountant
and corporate advisor on equity markets and mergers
and acquisitions for over 20 years before retiring from
professional services. He now focuses on high growth
businesses that are looking to expand globally, and has
been part of the Synertec board since August 2019, and
becoming independent non-executive chair on 1 April
2021. He works closely with the team in setting strategic
priorities for the business.
Mr. Lin is also Executive Chair of ASX listed company
Bubs Australia Ltd (ASX:BUB).
Mr. Lin was appointed as a non-executive director of
Health and Plant Protein Group Limited on 3 November
2017, executive director from 1 July 2020 and executive
chair on 4 August 2021, before retiring on 30 June 2022.
Mr. Lin was appointed as a non-executive director of
eCargo Holdings Limited on 9 April 2019 and resigned
on 30 October 2019.
16
Leeanne Bond
INDEPENDENT NON-EXECUTIVE DIRECTOR
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.
Ms. Bond is a Non-Executive Director of Snowy Hydro
Limited and Aurecon Limited, and a board member of
the Clean Energy Finance Corporation. She is also Chair
and Non-Executive Director of Mining3, an industry
directed research and technology organisation and a
non-executive director of CRC OneBasin Limited. She
is a member of the advisory boards of ANU’s Battery
Storage and Grid Integration Program and UQ’s Master
of Sustainable Energy Program.
Ms. Bond is the sole director and owner of Breakthrough
Energy Pty Ltd, a private consulting firm.
David Harris
EXECUTIVE DIRECTOR, CHIEF FINANCIAL OFFICER &
COMPANY SECRETARY
Mr. Harris is an Executive Director, Chief Financial Officer
and Company Secretary of Synertec. Mr. Harris oversees
Future Business and Technology, as well as corporate
development, investor relations and finance functions
for the Group.
Mr. Harris is a graduate of the Australian Institute of
Company Directors, an Australian Chartered
Accountant, and fellow of both the Financial Services
Institute of Australasia and the Governance Institute of
Australia. He has over 25 years of local and international
experience in senior leadership and board positions for
global and ASX-listed companies and is also an
experienced Board member and Audit Risk Committee
Chair.
17
18
FINANCIAL REPORT
FOR THE FINANCIAL YEAR ENDED
30 June 2022
Synertec Corporation Limited
ARBN 161 803 032
[ASX:SOP]
19
Synertec Corporation Limited Corporate Directory
For the year ended 30 June 2022
Directors
Company Secretary
Principal registered office in Bermuda
Registered agent office in Australia
Share registry
Auditor
Mr. Dennis Lin (Independent Non-Executive Director, Chair)
Ms. Leeanne Bond (Independent Non-Executive Director)
Mr. Michael Carroll (Managing Director)
Mr. David Harris (Executive Director)
Mr. David Harris
2-6 Railway Parade
Camberwell VIC 3124
Australia
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Synertec Corporation Limited
2-6 Railway Parade
Camberwell VIC 3124
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
20
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
The Directors present their report together with the financial statements of the consolidated entity for the year ended 30
June 2022.
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:
Mr. Dennis Lin (Independent Non-Executive Director, Chair)
Ms. Leeanne Bond (Independent Non-Executive Director)
Mr. Michael Carroll (Managing Director)
Mr. David Harris (Executive Director)
1.1 Information on Directors
Mr. Dennis Lin - Independent Non-Executive Director, Chair
Mr. Lin practised as a solicitor, Chartered Accountant and corporate advisor on equity markets and mergers and acquisitions for
over 20 years before retiring from professional services. He now focuses on high growth businesses that are looking to expand
globally, and has been part of the Synertec board since August 2019, and becoming independent non-executive chair on 1 April
2021. He works closely with the team in setting strategic priorities for the business.
Mr. Lin is also Executive Chair of ASX listed company Bubs Australia Ltd (ASX:BUB).
Mr. Lin was appointed as a non-executive director of Health and Plant Protein Group Limited on 3 November 2017, executive
director from 1 July 2020 and executive chair on 4 August 2021, before retiring on 30 June 2022. Mr. Lin was appointed as a
non-executive director of eCargo Holdings Limited on 9 April 2019 and resigned on 30 October 2019.
Ms. Leeanne Bond - Independent Non-Executive Director
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.
Ms. Bond is a Non-Executive Director of Snowy Hydro Limited and Aurecon Limited, and a board member of the Clean Energy
Finance Corporation. She is also Chair and Non-Executive Director of Mining3, an industry directed research and technology
organisation and a non-executive director of CRC OneBasin Limited. She is a member of the advisory boards of ANU’s Battery
Storage and Grid Integration Program and UQ’s Master of Sustainable Energy Program.
Ms. Bond is the sole director and owner of Breakthrough Energy Pty Ltd, a private consulting firm.
Mr. Michael Carroll - Managing 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.
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.
Mr. David Harris - Executive Director
Mr. Harris is an Executive Director, Chief Financial Officer and Company Secretary of Synertec. Mr. Harris oversees Future
Business and Technology, as well as corporate development, investor relations and finance functions for the Group.
Mr. Harris is a graduate of the Australian Institute of Company Directors, an Australian Chartered Accountant, and fellow of
both the Financial Services Institute of Australasia and the Governance Institute of Australia. He has over 25 years of local
and international experience in senior leadership and board positions for global and ASX-listed companies and is also an
experienced Board member and Audit Risk Committee Chair.
1.2 Directors’ interest in shares and options
Independent Non-Executive Directors:
Dennis Lin (Chair)
Leeanne Bond
Interest in Ordinary Shares
Interest in Options
-
2,785,576
Executive Directors:
Michael Carroll (Managing Director)
David Harris (Executive Director/ Chief Financial Officer/ Company Secretary)
49,398,496
2,137,733
2,173,913
-
-
4,347,826
21
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
Mr. Michael Carroll is the beneficial owner of 100% of the benefits and rights in the Pinnacle (MCGA) Retirement Fund, which
in turn owns 100% of the ordinary shares in Kensington Trust Singapore Ltd which is the registered holder of 49,398,496
shares in Synertec Corporation Limited and is the largest shareholder in the Company.
During the period, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of unlisted
options to the Company’s Independent Non-Executive Director, Board and Nomination and Remuneration Committee
Chair, Mr. Dennis Lin; and Executive Director, Chief Financial Officer and Company Secretary, Mr. David Harris; for
their contribution to the achievement of various strategic objectives over preceding periods. A professional
independent valuation of the options has been performed by accounting and advisory firm, RSM Australia. The
attributed equivalent value of this award is accounted for as a share-based payment and reflected in the employee
benefits expense for the year ended 30 June 2022.
2. Principal activities
Synertec is a diversified technology design and development growth company enabling a low carbon future through
innovative technology solutions. Commercialising scalable, environmentally friendly and energy efficient technology for
global markets in energy, critical infrastructure and advanced manufacturing through innovative partnerships with a portfolio
of blue-chip customers, Synertec is proactively participating in the world’s transition to a low carbon economy in a practical
way for the benefit of future generations. In doing so, 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 2022.
4. Review of operations and results of those operations
Profit and loss performance
Summary Profit & Loss Performance
FY22
($’000s)
FY21 $ Change % Change
($’000s) ($’000s)
Total Revenue & Other Income
Engineering Consultancy Services Revenue
Adjusted EBITDA before R&D activities
Adjusted EBITDA
EBITDA
Adjusted Net Profit / (Loss) After Tax
Net Profit / (Loss) After Tax
12,089
8,848
(1,364)
(2,720)
(3,475)
(3,016)
(3,981)
8,436
4,697
(2,205)
(2,205)
(1,765)
(3,372)
(3,351)
Up
Up
Up
Down
Down
Up
43%
88%
38%
23%
97%
11%
Down 630 Down 19%
Up
Up
Up
Down
Down
Up
3,653
4,151
841
515
1,710
356
Synertec generated external revenue and other income for the year ended 30 June 2022 (“FY22”, or “year”) of $12.1 million,
up 43% on the prior comparable period (“pcp”) (30 June 2021: $8.4 million). This result was underpinned by strong growth
in the engineering consultancy services revenue category, which generated $8.8 million of revenue at further improved gross
margins from prior years, an increase of 88% on pcp (30 June 2021: $4.7 million).
The Board assesses the underlying performance of the business based on measures of Adjusted EBITDA which exclude the
effect of non-operating and non-recurring items. Outlined below is an analysis of Adjusted Earnings Before Income Tax
Depreciation Amortisation (‘EBITDA’) and Adjusted Net Profit After Tax (‘NPAT’) in the current period which is calculated
after excluding the effects of costs incurred and subsidies received but not related to underlying operations or expected to
occur in the future.
The Adjusted EBITDA was a loss of $2.7 million (30 June 2021: $2.2 million loss). Adjusted EBITDA excludes costs which are
discretionary for the purposes of exploring strategic long term strategic growth opportunities and/or activities and expenses
which are not considered to be typical annual operational overheads for the business. Such items include corporate
development costs of $0.2 million (30 June 2021: $0.6 million), share-based payments of $0.4 million approved by the
Company’s shareholders at the 2021 Annual General Meeting (30 June 2021: $nil), redundancy payments of $0.1 million (30
June 2021: $nil) and Federal Government JobKeeper payments which were nil in the year (30 June 2021: $1.0 million).
Note; COVID-19 impacts are reflected in Adjusted EBITDA only by the exclusion of government subsidies, with no attempt to
include a corresponding adjustment for the abnormal (but difficult to measure) reduction in revenue and increase in costs
which has continued throughout the current year with Government-imposed public lockdowns and workplace restrictions
continuing during the year.
22
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
On a like-for-like basis between the two years, excluding technology Research and Development (‘R&D’) costs and income,
the Adjusted EBITDA for the year was a loss of $1.4 million (30 June 2021: $2.2 million loss). While the degree of technology
investment was in line with expectations announced by the Company earlier in the year, the Powerhouse development
timeframe was accelerated with most of the anticipated outlay condensed into FY22.
Included in the Adjusted EBITDA is applicable technology R&D costs of $2.6 million, primarily for development of the
Powerhouse technology, which made a significant advancement during the year progressing from concept to site-
commissioned. These costs have been expensed for tax and accounting purposes (30 June 2021: nil), enabling the Group to
achieve maximum tax credits for this expenditure which are expected to be refunded in cash to the Group following
lodgement of its annual income tax return. The anticipated tax refund receivable which has been recognised is $1.1 million
(30 June 2021: nil).
The Company is extremely pleased with the outcome of the Powerhouse technology development effort during the year and
pleased to report that it has continually met its ambitious schedule of key milestones.
The result from operations before tax was a loss of $4.0 million (30 June 2021: $2.3 million loss) and the result after tax
(NPAT) was also a net loss of $4.0 million (30 June 2021: $3.4 million loss). The table below shows how FY22 and FY21 NPAT
compare, allowing for items unique to the respective periods:
FY22
FY21
($’000s) ($’000s)
Variance
($’000s)
Net Profit / (Loss) After Tax
JobKeeper Payments
Write-down of Deferred Tax Asset
Technology R&D Expenditure eligible for R&D credits
R&D credit from Technology development
Share Based Payments
Redundancy Payments
Comparable Net Profit / (Loss) After Tax
(3,981)
-
-
2,558
(1,202)
383
56
(2,186)
(3,351)
(995)
1,063
-
-
-
-
(3,283)
(630)
995
(1,063)
(2,558)
1,202
(383)
(56)
Up 1,097
Segment performance
Since 1 July 2021, as announced by the Company during the year, the Group restructured the business to form two key areas
of operation, being Engineering Solutions (‘Engineering’) and Technology and Future Business (‘Technology’). These two
divisions/segments are managed separately as each requires different skills, technologies, marketing approaches and other
resources. This is the basis on which information is internally provided to the Chief Operating Decision Makers (‘CODMs’) for
assessing performance and making operating decisions. All inter-segment transfers are conducted at arm’s length prices
based on prices charged to customers in stand-alone sales of identical goods or services.
The Corporate area of the Group, which is a cost centre, includes the Board and Executives which oversee the function and
strategic direction of Engineering and Technology, as well as the governance and operation of the public ASX-listed head
company, Synertec Corporation Limited. The activities of the head company include governance oversight, corporate
development, investor relations and other functions associated with the operation, governance and regulatory compliance of
the Group’s head company.
FY22
Engineering
Technology
Corporate
Total
($’000s)
($’000s)
($’000s)
($’000s)
Inter-
segment
($’000s)
External
sources
($’000s)
Revenue & Other Income
Segment Adjusted EBITDA
Net Profit / (Loss) After Tax
13,106
(201)
(982)
1,202
(1,988)
(1,759)
-
(805)
(1,240)
14,308
(2,994)
(3,981)
2,219
274
-
12,089
(2,720)
(3,981)
Total revenue for the Engineering business grew by 56% on pcp (30 June 2021: $8.4 million). This includes services and
materials provided to the Technology business of $2.2 million (30 June 2021: $nil) contributing to the development of the
Group’s three key environmentally friendly technology solutions to help global industry transition to a low carbon future and
reduce its environmental footprint. All inter-segment services and materials are conducted at arm’s length prices based on
prices charged to customers in stand-alone sales of identical goods or services.
Synertec’s Engineering business strengthens and protects important technology intellectual property development, which
would otherwise be sourced through external service providers. It is an efficient and commercial relationship between the
businesses which enables the Group to prioritise and focus on its growth-leading technology development and effectively
accelerate the technology commercialisation process.
As a result of the continued change in mix of revenues in the Engineering business over the past three years from
predominantly fixed price solutions to consultancy services, Engineering gross margins have continued to strengthen. During
the year, the gross margin increased a further 4 percentage points, which was in line with budgeted expectations and is
double the gross margin achieved in the financial year prior to COVID-19 (FY19).
23
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
Engineering segment adjusted EBITDA was a loss of $0.2 million (30 June 2021: $0.3 million loss), a 35% improvement on
the prior year. The Engineering business is now strongly positioned to be self-sustainable and prepared for further growth.
Further commentary on the annual performance and highlights for the Engineering business is provided below.
Technology income includes $1.2 million (30 June 2021: nil) in Research and Development tax credits receivable under the
federal government’s Research and Development Tax Incentive program (R&DTI). Associated Research and Development
(‘R&D’) costs of $2.5 million (30 June 2021: nil) have been expensed as incurred.
Capital Management
Balance Sheet
FY22
($’000s)
FY21 $ Change
($’000s) ($’000s)
% Change
Total Assets
Cash at Bank
Net Assets
Current Ratio (Current Assets / Current Liabilities)
10,903
4,121
5,161
2.1 times
8,228
2,626
2,096
1.6 times
2,675
1,495
3,064
Up
Up
Up
Up 0.5 times
Up
Up
Up
Up
33%
57%
146%
31%
Total Assets of $10.9 million (30 June 2021: $8.2 million) and Net Assets of $4.1 million (30 June 2021: $2.6 million) includes
cash of $4.1 million (30 June 2021; $2.6 million). The increase in net assets reflects the Company’s stronger cash balance
driven by the successful share placement (‘Placement’) completed in August 2021 (refer below for further commentary on
this), improved net working capital position from substantial growth in Engineering business activity, as well as the
anticipated cash refund of eligible R&D credits related to FY22 technology development of $1.1 million (30 June 2021: $nil).
Synertec operates with no working capital debt or covenants from its bank.
Cash Flow
Cash receipts from customers
Net cash used in operating activities before COVID
deferred payments related to prior years
Net cash used in/from operating activities
Net increase in cash
FY22
($’000s)
FY21 $ Change
($’000s) ($’000s)
% Change
11,824
8,941
Up
2,884
Up
32%
(4,256)
(4,826)
1,495
(358)
(358)
(414)
Down
Down
Up
3,898
4,468
1,909
Down
Down
Up
1090%
1250%
461%
Cash receipts from customers was $11.8 million (30 June 2021: $8.9 million), up 33% on pcp and debtor-days remain within
the Group’s 30-40 day target range. The Company continues to manage cash prudently and maintains a strong working
capital and liquidity position. The Company invested $2.6 million in technology R&D activities primarily for development of
the Powerhouse and LNG Custody Transfer System (‘CTS’) products.
The overall net cash flow for the year was an increase in cash held of $1.5 million. This included net proceeds of $6.6 million
from an oversubscribed Placement conducted in August 2021. The Placement of 71.4 million new shares at an issue price of
$0.10 per share represented a 9% discount to the last closing price and 5-day VWAP at the time of the Placement.
Net proceeds from the Placement have been principally used to provide balance sheet support to fund current growth
initiatives within the Company’s Technology business, and its rapidly growing portfolio of engineering solutions with its
many Tier-1, ‘blue-chip’ customers. The Placement was corner-stoned by high quality institutional investors, Perennial Value
Management and SG Hiscock, providing a strong endorsement for the Company and its ESG technology-led growth
strategy.
The net operating cash outflow of $4.8 million (30 June 2021: $0.4 million outflow) comprised net cash used in operations as
follows:
FY22
Net cash used in operations
COVID deferred payments related to prior years
Net cash used in R&D activities
Corporate development activities
Net operating cash flows
Engineering
($’000s)
Technology
($’000s)
Corporate
($’000s)
(622)
(570)
-
-
(1,192)
(301)
-
(2,470)
-
(2,771)
(601)
-
-
(262)
(863)
Total
($’000s)
(1,524)
(570)
(2,470)
(262)
(4,826)
The net cash flows from operating activities during the year do not include any JobKeeper payments, unlike the prior year
(30 June 2021: $1 million). The Group continues to avail of COVID-19 relief measures offered by both Federal and State
Governments during 2020 for the deferral of payroll tax for FY21 and the ability to defer and spread Pay-As-You-Go
(“PAYG”) and Business Activity Statement (“BAS”) payments related to the period April 2020 to September 2020 across 36
months with no interest or penalties. Synertec accepted these offers and accrued the costs accordingly in the
FY20 and FY21 results and set aside the entire cash requirements for these commitments which it is currently fulfilling.
These payments during the year amounted to $0.6 million (30 June 2021: nil). The deferred payments to the Victorian
State Government for FY21 payroll tax have been fully paid.
24
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
As noted above, the degree of technology investment was in line with expectations announced by the Company earlier in
the year, however the Powerhouse development timeframe was accelerated with most of the anticipated cash outlay
condensed into FY22.
The Engineering business had approximately $0.5 million of the total $1.3 million in contract assets (work in progress) at year
end which it carried over a large portion of the year until key project milestones were achieved in the month subsequent to
year end and this was invoiced accordingly. Delays on these project milestones were caused mainly due to COVID-19 impacts
and the inability for customers and Synertec personnel to attend sites for commissioning activities.
The Company remains focused on moving both the Technology and Engineering businesses towards consistent positive
operating cash flow.
Operations
TECHNOLOGY BUSINESS
Synertec’s Technology Business continues to progress its three key environmentally friendly technology solutions to help the
global energy industry transition to a low carbon future and reduce its environmental footprint. Synertec is committed to
being an impact investment for shareholders and local communities, and to ensuring the Company is supporting its partners
in the collective endeavour to improve ESG performance.
POWERHOUSE
The Powerhouse system involves a combination of an easily deployable industrial-scale solar panel array, battery storage,
and sophisticated predictive algorithms in a complex control system to optimise the generation and consumption of
renewable electricity without the need for a back-up power source like hybrid renewable solutions which rely on diesel or
gas powered generators, or mains grid power.
During the year, Synertec entered into a Memorandum of Understanding (“MOU”) with leading independent energy
producer Santos Limited (ASX:STO, “Santos”) to progress the Company’s Powerhouse technology (“Powerhouse”) which
centres around the design, construction and field testing of an innovative Artificial Intelligence (AI)-driven sustainable solar
renewable energy and battery power system for remote-site application. The system employs sophisticated AI and
predictive analytics to optimise energy efficiency and industrial-scale power delivery.
During the course of the year, despite challenging global supply-chain and pandemic conditions, the Group is pleased to
report that it swiftly advanced Powerhouse from concept to a commercial-scale commissioned prototype in the field,
undergoing site testing. Powerhouse is also connected to the Santos SCADA system, allowing for remote monitoring and
operability by each of the parties.
Further to this, as publicly announced, the Company progressed its commercial terms with Santos from MOU to executing
a General Services Contract (“GSC”) between the parties, and a Work Order for the Powerhouse prototype. The Santos GSC
forms the basis of any future deployments as the substantive contract conditions are agreed thereby allowing for potential
accelerated roll-out of Powerhouse units in the future. The parties continue to work together towards commercial terms
beyond the prototype on a case-by-case basis.
Synertec continues to see significant opportunities for this technology for remote locations across the energy and resources
industries, both nationally and globally, and will continue to progress and prove the technology over the coming year.
Following the success of factory testing and agreeing commercial terms for prototype, Synertec started to explore the
potential for Powerhouse to be more broadly applied in Australia and the USA given the strong market interest in this
technology solution.
As a result, Synertec has focused on the United States market, with a significant near-term development being the
announcement on 8 August 2022 of the passing of the US Inflation Reduction Act through the US Senate, committing
$US369 billion (A$528 billion) over 10 years, including tax credits for clean energy technology development that will help
with the high upfront costs, a new “clean energy technology accelerator” which will be created to help advance renewable
technologies and investment to build clean technology manufacturing facilities.
CUSTODY TRANSFER SYSTEM (CTS)
During the year, world-leading independent certification body DNV approved Synertec’s marine Custody Transfer System
for installation on LNG vessels. DNV is the world’s leading Classification Society and a recognised advisor to the maritime
industry, which provides certification services based on established standards and criteria for multiple sectors including the
maritime industry, oil and gas and renewable energy.
Synertec also announced during the year that it is partnering with GasLog on the development of Synertec’s CTS
technology. European-based GasLog is amongst the largest independent owners, operators and managers of LNG vessels in
the world, with 36 vessels in its fleet, all managed 100% in-house. Previously listed on the New York Stock Exchange, GasLog
recently merged with Blackrock’s Global Energy & Power Infrastructure Team which is focused on essential, long-term
infrastructure investments in the energy and power sector. GasLog is also active in the floating terminals business.
In July 2021, GasLog signed a Heads of Agreement with Venice Energy to negotiate the charter of an LNG Floating Storage
and Regasification Unit (FSRU) for the Outer Harbour LNG Import Project in Port Adelaide, South Australia. Synertec was
engaged to perform Front End Engineering Design (FEED) work for the project consortium. Gaslog is also a shareholder and
appointed operation and maintenance contractor for Gastrade who is developing Floating Storage and Regasification Units
(“FSRU”) in Europe for which Synertec is positioning as a key technology supplier.
25
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
COMPOSITE DRY POWDER (CDP)
During the year, Synertec and GreenTech entered into a perpetual, exclusive and royalty-free Intellectual Property Licence
Agreement (“Licence Agreement”), providing Synertec with the right to use GreenTech’s Composite Dry Power (“CDP”)
technology. The Licence Agreement replaced an existing arrangement between the two parties that was due to expire in
September 2022.
At the time of entering the Licence Agreement, Synertec paid an upfront Licence fee to GreenTech by extinguishing
$0.6 million of the $0.8 million secured loan to GreenTech, with GreenTech repaying the remaining balance of $0.2 million
plus interest. The Licence fee and associated costs incurred during the year of $0.2 million in securing the Licence
Agreement were capitalised as part of the intangible asset of $0.8 million recognised in the balance sheet and will be
amortised over 3 years.
With the Licence Agreement in place, the Company is now looking to commercialise CDP across some of the world’s largest
hydrocarbon markets including Australia, Canada, North America, Central America and South America. Field testing
commenced during the year in Australia with local technology partners, Beneterra, and Synertec is currently seeking
commercial opportunities.
The novel environmentally friendly and cost-effective CDP technology converts hydrocarbon drilling mud into a useful
non-polluting by-product starting material with many potential applications including high strength construction materials
such as bricks and road base. Conversion of drilling mud via the CDP process removes the need to transport waste mud to
treatment facilities and/or landfill, whilst additionally reducing the quarrying of raw materials to produce construction
products. The technology has wider applications, with potential use of CDP in mining tailings and sewage sludge to help
further reduce the environmental impact of mining, tunnelling and waste treatment processes.
ENGINEERING BUSINESS
The year delivered an increased pace in critical infrastructure planning and expenditure across Australia, enabling Synertec’s
Engineering business to continue to win new business in its target industries of critical infrastructure, energy, water and
advanced manufacturing. During the year, Synertec was awarded various new contracts and existing contract extensions
across these four key target sectors. Proportionality of revenue between these sectors has changed between FY21 and FY22.
While in FY21 revenue was derived in almost four equal proportions of 25% each, in FY22 revenue was more weighted to
Water (36%) and Critical Infrastructure (31%). Advanced Manufacturing (23%), where Synertec derived its niche expertise
over 25 years ago and has applied this to its other target sectors, continues to be an important and relevant sector for
Synertec’s growth.
The Engineering business achieved stronger gross margins in FY22 (versus FY21) and has established a solid work in hand
position, setting it on a path for self-sustainability. Some key awards received in the Engineering business during the year
include;
• Engineering services to a new client in support of the development of a new green ammonia facility;
• Additional projects with existing client, APA, responding to the need to increase gas supply within Victoria;
• Additional scope with existing client, Beon Energy, for solar power projects in major water utilities;
• Engineering services for a water utility treatment plant system upgrade with John Holland/KBR JV;
• Additional contracts and Master Services Agreements (“MSAs”) with long-time customers, CSL Limited, Pfizer and Aspen
Pharmacare, to provide important Project Management, Automation, Validation and Design support to several of their
critical pharma advanced manufacturing projects.
A significant additional engagement with Metro Trains Melbourne was also signed and announced by the Group during the
year for the provision of services with an estimated price of circa $3 million, with provision for scope extensions, and a
completion date of December 2024. This important contract will see Synertec deliver the Control and Monitoring System for
the Metro Tunnel Project (“MTP”).
The $11 billion-dollar MTP is one the largest infrastructure projects in Victoria. Synertec was awarded contract for works to
design and supply the Control and Monitoring System to allow the safe and reliable operation of the new Metro Tunnel.
Synertec has a strong rail industry reputation having already delivered several projects including critical safety systems on
the existing underground rail loop.
Despite the growing global challenges resulting from the COVID-19 pandemic, including exceptionally strong ongoing
demand for localised labour and the resulting substantial increase in labour and recruitment costs, the Company was able
to significantly grow its team of highly skilled and talented people across the year to approximately 90 people, including
almost 60 full time equivalent engineers, project managers and related professionals. This represents the largest workforce
in the company’s history, and almost doubles billable capacity from the prior year (which is reflected in the increase of 88%
to Engineering Consultancy Services revenue of $8.8 million (30 June 2021: $4.3 million).
To accommodate this, during the year the Company invested in further Human Resource (“HR”), recruitment and team
management capability, including the introduction of a General Manager of Engineering, to ensure its talented people are
suitably developed, performing and retained. The Engineering business also restructured to a smaller team-based approach
to ensure its people receive the development opportunities they require to grow and deepen the Company’s valuable
expertise, as well as improve retention of talent. Synertec is well placed and continues to further expand its engineering
team to support new and expanded engagements, as well as the growing Technology arm of the Group.
26
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
ESG Reporting
Synertec is committed to building its Environmental, Social, and Governance (“ESG”) credentials. The Company is making
regular ESG disclosures against the World Economic Forum (“WEF”) Stakeholder Capitalism framework. The WEF frame-
work is a set of common metrics for sustainable value creation captured in 21 core ESG disclosures.
Synertec uses this universal ESG framework to align mainstream reporting on performance against ESG indicators. By
integrating ESG metrics into governance, business strategy, and performance management process, the Company diligently
consider all pertinent risks and opportunities in running our business.
The Company’s progress toward making disclosures under the four pillars of the WEF ESG framework (Governance, Planet,
People, and Prosperity) is captured in the regular “ESG Go” report.
Synertec’s ESG activity summary for the year is as follows:
• Delivery of the Company’s first annual ESG Report.
• Sustainability integrated into company strategy and values: the Environment, Social and Governance (ESG).
• The Board skills matrix was reviewed and approved and incorporates ESG competencies.
• The website has been expanded to include;
o An Environmental, Social and Governance page declaring Synertec’s commitment to the framework;
o Expanded biographies of the Directors and their relevant experience; and
o ISO accreditations in Quality (ISO 9001), Occupational Health & Safety (ISO 45001) and Environment (ISO 14001).
• Risk management systems have been reviewed for inclusion of ESG factors.
• Synertec has introduced, commenced and implemented ESG values and guidelines and structuring at Board level.
• The company commenced inducting new employees under ESG guidelines and framework.
• Synertec has partnered with Social Traders and is developing and reviewing its social enterprise procurement strategy to
ensure it is embedded firmly across the Group’s businesses.
Outlook
Synertec’s is well positioned to support the Company’s technology-led growth strategy, including commercialising large
near-term ESG-focused technology opportunities in the energy sector; while also growing out its high-end engineering
solutions business.
Synertec will continue to progress its Powerhouse technology over the next year, with plans to complete field testing,
achieve sign-off and reach commercial terms with Santos Limited for future systems. The Company has also begun exploring
opportunities for Powerhouse with partners in the United States.
The Company will continue to collaborate with its technology partner, GasLog, to progress CTS opportunities led by the
Outer Harbour project in Australia, and progress field testing of the CDP technology in Australia with its technology partners.
While COVID-19 and global economic and supply-chain challenges remain, demand for ESG-focused technologies and
engineering solutions continues to grow, particularly around large infrastructure projects in the energy, rail and water
sectors. Synertec will continue to invest in its people to drive continued growth in its technology and engineering
consultancy services over the next year.
With the commercialisation of Powerhouse progressing, a strong pipeline of work in the engineering business and a portfolio
of technologies that help the global transition to a low carbon future, Synertec is well positioned to deliver growth into FY23
and beyond.
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.
27
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
7. Subsequent events
During the year ended 30 June 2022, the global Coronavirus (COVID-19) pandemic has continued to significantly influence
market behaviour and as a result, has impacted the operations and financial results of the Company. While additional costs
in relation to COVID-19 have been incurred by the Company during the year ended 30 June 2022, the longer term impacts
on the operations of the Group remain uncertain and cannot be reliably quantified at this time. The Board remains confident
and optimistic about the long term strategy of the Company and the economic fundamentals of the target markets in which
it operates, delivering long term sustainable and profitable growth for its shareholders.
In order to fund and achieve its strategic objectives, Synertec undertook a share placement to various institutional and
sophisticated investors and successfully raised $5.0 million (before costs) through a placement of 31.25 million new fully paid
ordinary shares at $0.16 per share, as announced by the Company on 13 September 2022.
Capital raised through the Offer will be used to provide balance sheet support for execution of the dual strategy of
commercialising several large near-term ESG-focused technology opportunities in the energy sector and growing out a
high-end engineering solutions business as follows;
• $4.0 million - Drive technology development and commercialisation of its ESG-focused technologies to assist in the
decarbonisation of Synertec’s large and prestigious customer base; and
• $1.0 million - Working capital to fund a growing portfolio of engineering solutions with the Company’s blue-chip customer
base.
The Company has made several ASX announcements since year end which have provided updates of its significant strategic
developments and operational progress within both its Technology and Engineering business units.
Taylor Collison and PAC Partners acted as Joint Lead Managers (“JLMs”) to the Placement. The Company and the Lead
Managers approached new sophisticated investors as well as clients of the Lead Managers to participate in the Placement.
No securities were issued or agreed to be issued in the Placement to any related party.
Under the mandate with the JLM’s;
• The JLM’s will be paid a management fee of 2% of proceeds, being $100,000 (plus GST), and a selling fee of 4% of
proceeds, being $200,000 (plus GST); and
• Subject to shareholder approval, the JLM’s will be issued 3,600,000 unlisted options with an exercise price of $0.32 per
option and an expiry date of 2 years from the date of issue.
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 FY22 are:
• Maintaining and building balance sheet strength;
• Delivering commercialisation of the suite of technology solutions and profitability of its engineering projects and
programs of work for its customers; and
• Selecting technology and 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 remains highly uncertain due to the ongoing COVID-19 pandemic and resulting economic
consequences and challenges. 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 our customers’
decisions to delay existing work Synertec is involved in or defer or cancel projects for which Synertec has bid and/or
positioned itself in anticipation of being awarded in the short-term as well as international supply chain issues and/or the
inability for the Company’s workforce to expand and/or move between States or overseas to meet customer demand.
28
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
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 FY22, 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 share placement in September 2022;
• Maintenance of dedicated State-based workforces in Victoria, Western Australia and Queensland to support projects in
those and other 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.
10. Environmental legislations
The Group’s operations are not currently subject to significant environmental regulations under both Commonwealth and
State legislation.
11. Company Secretary
Mr. David Harris is an Executive Director, the Company Secretary and Chief Financial Officer of Synertec Corporation Limited.
Mr. Harris oversees Future Business and Technology, as well as corporate development, investor relations and finance
functions for the Group.
Mr. Harris is a graduate of the Australian Institute of Company Directors, an Australian Chartered Accountant, and fellow of
both the Financial Services Institute of Australasia and the Governance Institute of Australia. He has over 25 years of local
and international experience in senior leadership and board positions for global and ASX-listed companies and is also an
experienced Board member and Audit Risk Committee Chair.
29
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
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 2022, and the number of meetings attended by each Director were:
Directors
Dennis Lin
Leeanne Bond
Michael Carroll
David Harris
Board Meetings
A
B
8
8
8
8
7
8
8
8
Audit and Risk
Committee
B
A
2
2
2
2
2
2
2
2
Nomination and Remuneration
Committee
B
A
2
2
2
2
2
2
2
2
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
During the year, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of unlisted options with a
1-year expiry to the Company’s Independent Non-Executive Director, Board and Nomination and Remuneration Committee
Chair, Mr. Dennis Lin (2,173,913 options, strike price $0.023); and Executive Director, Chief Financial Officer and Company
Secretary, Mr. David Harris (2,173,913 options, strike price $0.023; and 2,173,913 options, nil strike price); for their contribution
to the achievement of various strategic objectives over preceding periods.
During the year, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of 10,000,000 unlisted
options with an exercise price of $0.20 (a 100% premium to the share placement price of $0.10) and term expiry of 3 years,
to its Joint Lead Managers and Brokers in the share placement conducted by the Company in August 2021. As a result Taylor
Collison’s nominees received a total of 6,000,000 options and PAC Partners nominees received a total of 3,500,000 options.
14. Remuneration report
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity.
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 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; and
• transparency.
The Board maintains 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.
30
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
The Nomination and Remuneration Committee (‘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.
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.
Link between remuneration and performance
FY 2020 AND 2021 PERFORMANCE AND IMPACT ON REMUNERATION
The Group’s overall performance and return to shareholders remained strong across FY20 and FY21 with the business
continuing to achieve many key strategic objectives and KPIs despite difficult trading conditions brought about by the
COVID-19 pandemic and flow-on consequences in our Australian market. This provided a substantial platform for growth in
FY22 and the formalisation of the Group’s Technology business.
To assist in this assessment, the Committee receives detailed reports on performance from management which are based on
KPIs established by the Board at the beginning of the financial year, independently verifiably data such as audited financial
measures and independent market data. For more information on strategic priorities and 2020 and 2021 results, see the
operating and financial review in the 2020 and 2021 Annual Reports and the 2021 Annual General Meeting Notice of Meeting.
As a result of the continued performance and resulting strong shareholder returns over the past two years, the Board
awarded certain senior management and key staff throughout the business cash incentives from a total pool of $100,000.
Also, during the period, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of unlisted options
to the Company’s Independent Non-Executive Director, Board and Nomination and Remuneration Committee Chair, Mr.
Dennis Lin; and Executive Director, Chief Financial Officer and Company Secretary, Mr. David Harris; for their contribution to
the achievement of various strategic objectives over preceding periods. A professional independent valuation of the options
has been performed by accounting and advisory firm, RSM Australia. The attributed equivalent value of this award is
accounted for as a share-based payment and reflected in the employee benefits expense for the year ended 30 June 2022.
Maintaining sustainable performance – future approach
The Group is anticipating a period of substantial growth in key markets (including commercialisation of transformative
technology currently in development and continued growth in the engineering business which is integral to supporting the
technology business) but anticipates significant competition in those markets in the next 1-5 years. In order to increase the
focus on sustainable performance, the remuneration committee proposes to progressively shift the weighting from STI to LTI
in the Executives’ pay mix. This will be done through awarding remuneration increases primarily in the form of incentive pay.
Measures of performance will also be reviewed to place greater weight on those non-financial indicators of performance that
will improve sustainability of operations.
Balancing short-term and long-term performance
Annual incentives are generally set at a maximum of 50% of fixed remuneration, in order to drive performance without
encouraging undue risk-taking. Sustainability of results is also ensured by the deferral of a portion of short-term incentives
for at least two years. This also encourages talent retention. Long-term incentives are generally assessed over a three year
period and are designed to promote long-term stability in shareholder returns.
Voting of shareholders at last year’s annual general meeting
The Company received 65% of “yes” votes on its remuneration report for the 2021 financial year. The company did not
receive any specific feedback at the AGM or throughout the year on its remuneration practices.
31
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
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 Post-employment
Equity Long-term
benefits benefits benefits
2022
Independent Non-Executive Directors
Dennis Lin (Chair)
Leeanne Bond*
Executive Directors
Michael Carroll (Managing Director)
David Harris - (Executive Director/
Chief Financial Officer / Company Secretary)
Other Key Management Personnel
Joern Buelter - (Chief Operating Officer)
Cash
salary
and fees
$
77,626
50,000
Long service
Bonus
Super - Termi- Options &
annuation nation** annual
leave Total
$
-
-
$
7,763
-
$
-
-
$
$
$
110,870
-
- 196,259
- 50,000
348,101
31,818
25,967
-
-
1,793
407,679
300,725
22,727
27,488
-
271,739 37,859
660,538
25,956
-
3,956
103,289
-
(4,443)
128,758
Total remuneration of key management personnel
802,407
54,545
65,173 103,289
382,609 35,209 1,443,233
* This was paid to Breakthrough Energy Pty Ltd
** The role of Chief Operating Officer was made redundant on 20 August 2021.
Short-term Post-employment
Equity Long-term
benefits benefits benefits
2021
Independent Non-Executive Directors
Dennis Lin (Chair)
Leeanne Bond*
Kiat Poh (resigned 31 March 2021)
Executive Directors
Michael Carroll (Managing Director)
David Harris - (Executive Director/
Chief Financial Officer / Company Secretary)
Other Key Management Personnel
Joern Buelter - (Chief Operating Officer)
Cash
salary
and fees
$
46,804
63,500
30,000
286,594
255,708
181,500
Total remuneration of key management personnel
864,106
Shares Long service
Bonus
Super - Termi- & &
annuation nation share annual
rights leave Total
$
4,446
-
-
$
-
-
-
$
-
-
-
$
$
51,250
-
-
63,500
- 30,000
27,226
-
-
6,110
319,930
24,292
-
23,972 27,797
331,769
17,243
-
14,383
6,015
219,141
73,207
-
38,355 39,922 1,015,590
$
-
-
-
-
-
-
-
During the period, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of unlisted options to
the Company’s Independent Non-Executive Director, Board and Nomination and Remuneration Committee Chair, Mr. Dennis
Lin; and Executive Director, Chief Financial Officer and Company Secretary, Mr. David Harris; for their contribution to the
achievement of various strategic objectives over preceding periods. A professional independent valuation of the options has
been performed by accounting and advisory firm, RSM Australia. The attributed equivalent value of this award is accounted
for as a share-based payment and reflected in the employee benefits expense for the year ended 30 June 2022.
32
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
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
1 July 2021
Received as
part of
remuneration
Additions/
(Disposals)
Options
Exercised 30 June 2022
Balance at
Independent Non-Executive Directors
Dennis Lin
Leeanne Bond1
-
2,785,576
Executive Directors
Michael Carroll (Managing Director)2 49,398,496
David Harris (Executive Director/
Company Secretary/
Chief Financial Officer)3
2,137,733
-
-
-
-
-
-
-
-
-
-
-
2,785,576
-
49,398,496
-
2,137,733
1. Shares held by Bondatron Pty Ltd ATF Bondatron Super Fund A/C.
2. Shares held by Kensington Trust Singapore (”KTSL”) Limited in which Michael Carroll is considered to have 100% interest
in the shares in KTSL. All the issued share capital of KTSL is beneficially owned by TMF Trustees Singapore Limited as
trustee of the Pinnacle (MCGA) Retirement Fund.
3. Shares held by David Harris consist of 2,137,733 shares held by DDGG Harris Holdings Pty Ltd ATF DDGG Harris
Superannuation Fund.
Options held by key management personnel
Balance at
1 July 2021
Independent Non-Executive Directors
Dennis Lin
Leeanne Bond
Executive Directors
Michael Carroll (Managing Director)
David Harris (Executive Director/
Company Secretary/
Chief Financial Officer)
Received as
part of
remuneration
2,173,913
-
-
-
-
-
-
4,347,826
Additions/
(Disposals)
Options
Exercised 30 June 2022
Balance at
-
-
-
-
-
-
-
2,173,913
-
-
-
4,347,826
Share based payments
During the year, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of unlisted options with a
1-year expiry to the Company’s Independent Non-Executive Director, Board and Nomination and Remuneration Committee
Chair, Mr. Dennis Lin (2,173,913 options, strike price $0.023); and Executive Director, Chief Financial Officer and Company
Secretary, Mr. David Harris (2,173,913 options, strike price $0.023; and 2,173,913 options, nil strike price); for their contribution
to the achievement of various strategic objectives over preceding periods. A professional independent valuation of the options
has been performed by accounting and advisory firm, RSM Australia. The attributed equivalent value of this award is accounted
for as a share-based payment and reflected in the employee benefits expense for the year ended 30 June 2022.
The fair value of share-based payment transactions was determined using a ESO2 trinomial valuation model. The model
requires certain inputs in order to determine an appropriate fair value. These inputs include share price at grant date, risk free
rate, volatility factor, exercise price, time to maturity and expected dividend yield.
33
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
The above fair value calculation was based upon the following inputs.
Grant date
Share price at grant date
Exercise price
Expiry Date
Expected Future Volatility
Risk Free Rate
Early Exercise Multiple
Dividend Yield
Tranche 1
16-Dec-21
$0.075
Nil
14-Jan-22
90%
0.55%
N/A
Nil
Tranche 2
16-Dec-21
$0.075
$0.023
14-Jan-22
90%
0.55%
2.5x
Nil
Additional disclosures relating to key management personnel
There were no other transactions with key management personnel during the year.
This concludes the remuneration report.
15. Indemnities given to, and insurance premiums paid for,
officers and auditors
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.
34
Synertec Corporation Limited Directors’ Report
For the year ended 30 June 2022
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 27 to the financial statements.
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
20 September 2022
35
Synertec Corporation Limited Corporate Governance Statement
For the year ended 30 June 2022
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 fourth edition of the Corporate Governance
Principles and Recommendations released by the ASX Corporate Governance Council.
The Group’s Corporate Governance Statement for the financial year ending 30 June 2022 is accurate and up to date as at 20
September 2022 and was approved by the Board on 20 September 2022. The Corporate Governance Statement is available
on the Synertec Corporation Limited website www.synertec.com.au.
36
Synertec Corporation Limited Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2022
In Australian dollars
Note
30 June 2022
30 June 2021
Revenue & other income
Revenue
Other income
Total Revenue & other income
Expenses
Materials and service expense
Employee benefit expenses
Depreciation and amortisation expense
Technology research and development costs
Business and corporate development expenses
Other expenses
Net interest expense
Total expenses
Loss before tax
Income tax expense
Loss after tax
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year
5
6
7
15,16
8(a)
8(b)
9
10(i)
10,886,378
1,202,416
12,088,794
(1,222,623)
(9,676,081)
(517,313)
(2,531,213)
(420,693)
(1,566,308)
(135,797)
(16,070,028)
(3,981,234)
-
(3,981,234)
-
(3,981,234)
8,385,690
50,000
8,435,690
(1,809,131)
(6,056,366)
(374,256)
-
(831,203)
(1,548,950)
(104,149)
(10,724,055)
(2,288,365)
(1,062,631)
(3,350,996)
-
(3,350,996)
Earnings per share (cents)
Basic loss per share
Diluted loss per share
23
23
(1.14)
(1.11)
(1.18)
(1.18)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
37
Synertec Corporation Limited Consolidated Statement of Financial Position
As at 30 June 2022
In Australian dollars
Note
30 June 2022
30 June 2021
Assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Employee benefits
Contract liabilities
Lease liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share option reserve
Retained earnings
Total equity
11
12
13
14
15
16
17
18
19
20
17
20
18
21
24
4,120,753
2,519,135
1,339,443
513,924
8,493,255
1,788,498
621,085
2,409,583
10,902,838
3,005,665
855,427
50,053
86,985
3,998,130
151,241
1,431,459
161,193
1,743,893
5,742,022
5,160,816
8,518,510
624,609
(3,982,303)
5,160,816
2,625,853
1,746,872
655,170
1,276,628
6,304,523
1,923,555
-
1,923,555
8,228,078
3,015,332
677,758
201,109
96,581
3,990,780
504,166
1,499,459
137,235
2,140,860
6,131,640
2,096,437
2,097,506
-
(1,069)
2,096,437
The above statement of financial position should be read in conjunction with the accompanying notes
38
Synertec Corporation Limited Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
In Australian dollars
Note Issued Share option Retained
capital reserve earnings
Balance at 1 July 2020
Issue of shares
Capital raising costs
Loss for the year
Total comprehensive income
Balance at 30 June 2021
Balance at 1 July 2021
Issue of shares
Capital raising costs
Employee share-based payments
Broker options on issue
Loss for the year
Total comprehensive income
Balance at 30 June 2022
7, 24
24
21
$
596,139
1,608,412
(107,045)
-
-
2,097,506
2,097,506
7,147,211
(726,207)
-
-
-
-
8,518,510
$
-
-
-
-
-
-
-
-
-
382,609
242,000
-
-
624,609
$
3,349,927
-
-
(3,350,996)
(3,350,996)
(1,069)
(1,069)
-
-
-
-
(3,981,234)
(3,981,234)
(3,982,303)
Total
$
3,946,066
1,608,412
(107,045)
(3,350,996)
(3,350,996)
2,096,437
2,096,437
7,147,211
(726,207)
382,609
242,000
(3,981,234)
(3,981,234)
5,160,816
The above statement of changes in equity should be read in conjunction with the accompanying notes
39
Synertec Corporation Limited Consolidated Statement of Cash Flows
For the year ended 30 June 2022
In Australian dollars
Note
30 June 2022
30 June 2021
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash (used in)/generated from operations
Government grant received
Payments for R&D activities
Payments for corporate development activities
Repayment of COVID deferred payments relating to prior year
Interest received
Net cash used in operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Loan funds paid by/(to) technology partner
Payment for intangible asset associated costs
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Payments for capital raising costs
Proceeds from issue of shares
Repayment of finance lease liabilities
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalent at beginning of the year
Cash and cash equivalents at end of the year
11,824,270
(13,348,195)
(1,523,926)
88,426
(2,558,249)
(261,940)
(570,390)
-
(4,826,079)
-
255,000
(176,705)
(196,628)
(118,334)
(484,207)
7,147,211
(223,691)
6,439,313
1,494,900
2,625,853
4,120,753
8,940,522
(8,744,986)
195,536
-
-
(554,074)
-
933
(357,605)
18,182
(849,189)
-
(437,493)
(1,268,501)
(107,045)
1,512,526
(193,521)
1,211,960
(414,145)
3,039,998
2,625,853
11A(i)
11A(iii)
The above statement of cash flows should be read in conjunction with the accompanying notes
40
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
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 2022 (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: Ground Floor, 2-6 Railway Parade, Camberwell, VIC 3124, 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
20 September 2022.
2. Significant accounting policies
2.1 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.
2.2 Basis of measurement
The financial statements have been prepared on the historical cost basis unless otherwise stated.
2.3 Functional and presentational currency
These financial statements are presented in Australian dollars, which is the Group’s functional currency and presentation
currency.
2.4 Basis of consolidation
The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2022. 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.
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.
2.5 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.
The Group’s main revenue streams are as follows:
Engineering services
The Group provides engineering services relating to the design and engineering of customised Systems, 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 and the performance obligation is satisfied.
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.
41
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
2.5 Revenue and other income (continued)
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.
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 input 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 accurate 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 some of 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.
Research and development tax credits
Research and development (‘R&D’) tax credits relate to technology projects, for which eligible R&D activities are being
undertaken. The federal government’s Research and Development Tax Incentive program (R&DTI) offers a tax offset for
companies conducting eligible R&D activities. Companies in a tax loss position are able to obtain a refund of the tax offset.
When management is able to calculate a reasonable estimate of the R&DTI refund likely to be received for a financial year,
that amount is recognised in the financial year to which the refund relates. When a reasonable estimate cannot be
determined, income from the R&DTI refund is recognised when it is received.
The Group is eligible for a 43.5% refundable R&D tax offset on applicable research and development activities given that its
aggregate turnover is less than $50 million. The permanent tax benefit is currently 18.5% (FY21: 17.5%) of R&D expenditure
and the timing benefit is 25% (FY21: 26%), which is equivalent to the Group’s corporate tax rate. The Group has recognised
the R&D credit on an accrual basis.
2.6 Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.
2.7 Finance income and finance costs
The Group’s finance income and finance costs include:
• interest income;
• interest expense; and
• lease finance costs as a result of IFRS 16.
Interest income or expense is recognised using the effective interest method.
2.8 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.
42
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
2.9 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 liabilities are always provided for in full.
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.
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.
2.10 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.
2.11 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.
43
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
2.11 Property, plant and equipment (continued)
(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.
2.12 Intangible Assets
Research and development costs
Research costs are expensed as incurred.
Development expenditures on an individual project are recognised as an intangible asset when the Group can
demonstrate:
• The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
• Its intention to complete and its ability and intention to use or sell the asset
• How the asset will generate future economic benefits
• The availability of resources to complete the asset
• The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete, and the
asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales.
During the period of development, the asset is tested for impairment annually.
Licences
The Group acquired a licence. The licence for the use of intellectual property is granted for an initial period of 3 years. In
accordance with the terms of the Licence Agreement, Synertec will make additional consideration milestone payments of 2.5
million fully paid ordinary shares each (at an equivalent value of 10 cents per share) after 3 and 5 years respectively, based
on CDP revenue hurdles of $2 million by year 3 and $5 million by year 5 being achieved.
As a result, the licence is amortised over 3 years.
There are no ongoing royalty fees associated with the Licence Agreement. The Milestone Licence fees will be accounted at
cost at each Milestone date, if achieved. They constitute contingent liabilities.
2.13 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.
44
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
2.13 Impairment (continued)
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 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.
2.14 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.
2.15 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.
(iv) Share-based payment
The Group operates an equity-settled, share-based compensation plan. The value of the employee services received in
exchange for the grant of options is recognised as an expense with a corresponding increase in the share option reserve over
the vesting period. The total amount to be recognised over the vesting period is determined by reference to the fair value of
the options granted on grant date.
45
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
2.15 Employee benefits (continued)
(iv) Share-based payment (continued)
When the options are exercised, the proceeds received (net of transaction costs) and the related balance previously
recognised in the share option reserve are credited to the share capital account, when new ordinary shares are issued.
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using
either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option,
the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not
determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account
is taken of any other vesting conditions.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
• during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the
expired portion of the vesting period.
• from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the
reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been
made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total
fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the
control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition
is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining
expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards
are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised
immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if
they were a modification.
2.16 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 availale 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.
46
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
2.16 Leases (continued)
Measurement and recognition of leases as a lessee (continued)
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.
2.17 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).
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.
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.
2.18 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.
47
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
3. Use of judgements and estimates
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. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised prospectively.
3.1 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 2.5 – 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.
The carrying amount of recognised and unrecognised deferred tax assets was reviewed at 30 June 2022. While the Board
remains confident and optimistic about the long term strategy of the Company and the economic fundamentals of the target
markets in which it operates delivering long term sustainable and profitable growth for its shareholders, the Board resolved to
adopt a prudent approach with respect to the judgements involved in determining the carrying value of the deferred tax as-
set, considering the current and potential pandemic and economic environment. No deferred tax assets have been recognised
in the accounts of the Group.
3.2 Assumptions and estimation uncertainties
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.
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.
Research and Development tax credits
The Group has recognised Research and Development tax credits on an accrual basis. As the Company’s return has not yet
been submitted, the consolidated entity has made an estimate of the likely refund amount based on the preliminary number
provided by the Company’s external tax consultant.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or
BlackScholes model taking into account the terms and conditions upon which the instruments were granted. The accounting
estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of
assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Refer to note 7 and 22.
4. Operating segments
Since 1 July 2021, as announced by the Company during the year, the Group restructured the business to form two key areas
of operation, being Engineering Solutions (‘Engineering’) and Technology and Future Business (‘Technology’). These two
divisions/segments are managed separately as each requires different skills, technologies, marketing approaches and other
resources. This is the basis on which information is internally provided to the Chief Operating Decision Makers (‘CODMs’) for
assessing performance and making operating decisions. All inter-segment transfers are conducted at arm’s length prices
based on prices charged to customers in stand-alone sales of identical goods or services.
The segment disclosures are before corporate costs. The Corporate area of the Group, which is a cost centre, includes the
Board and Executives which oversee the function and strategic direction of Engineering and Technology, as well as the
governance, financing and operation of the public ASX-listed head parent company, Synertec Corporation Limited. The
activities of the head company include governance oversight, finance and related affairs, corporate development, investor
relations and other functions associated with the operation and regulatory compliance of the Group’s head company.
48
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
It includes parent company costs and interest income and charges which are not otherwise allocated to operating segments
as this type of activity is driven by the Group function, which manages the cash position, governance and compliance for the
Group as a whole.
The Board assesses the performance of the operating segments based on a measure of Adjusted EBITDA, which excludes
the effects of non-operating and non-recurring costs.
The revenues and profit generated by each of the Group’s two key business segments and the Corporate division, and their
respective segment assets and liabilities are summarised as follows:
Revenue and other income
From external customers
From other segments(1)
Government incentives
Segment revenues and other income
1 July 2021 to 30 June 2022
Engineering
Technology
Total
10,886,378
2,219,359
-
13,105,737
-
-
1,202,416
1,202,416
10,886,378
2,219,359
1,202,416
14,308,153
Segment Adjusted EBITDA
(200,232)
(1,988,407)
(2,188,639)
Depreciation and amortisation
Redundancy payments(2)
Share-based payments
Segment EBIT
Assets and Liabilities
Segment assets
Segment liabilities
(359,097)
(55,846)
-
(615,175)
(158,215)
-
(160,870)
(2,307,491)
(517,312)
(55,846)
(160,870)
(2,922,666)
6,180,767
4,553,649
10,734,417
5,247,029
236,483
5,483,513
(1) The revenue recognised by the Engineering business includes the provision of services to the Technology business,
primarily relating to the development of the Powerhouse and CTS technologies.
(2) This relates to redundancy payments paid to the Chief Operating Officer, whose role was made redundant on 20
August 2021.
The totals presented for the Group’s operating segments reconcile to the key financial figures as presented in its financial
statements as follows:
(i) Revenue and other income
Total reportable segment revenues
Elimination of inter-segment revenues
(ii) Segment operating profit/(loss)
Segment EBIT
Elimination of inter-segment profits
Corporate expenses
Group operating loss
Finance income
Finance costs
Group loss before tax
(iii) Segment assets
Segment assets
Corporate assets
Total assets
(iv) Segment liabilities
Segment liabiliies
Corporate liabilities
Total liabilities
1 July 2021 to
30 June 2022
14,308,152
(2,219,359)
12,088,794
(2,922,666)
274,038
(1,187,763)
(3,836,391)
539
(145,383)
(3,981,234)
30 June 2022
10,734,417
168,421
10,902,838
5,483,513
258,509
5,742,022
49
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
5. Revenue
Engineering services
Fixed price solutions
6. Other income
30 June 2022
8,847,611
2,038,767
10,886,378
30 June 2021
4,696,765
3,688,925
8,385,690
Government benefits - research and development tax credits
1,202,416
50,000
Research and development (‘R&D’) tax credits relate to technology projects, for which eligible R&D activities are being
undertaken. The federal government’s Research and Development Tax Incentive program (R&DTI) offers a tax offset for
companies conducting eligible R&D activities. Companies in a tax loss position are able to obtain a refund of the tax offset.
When management is able to calculate a reasonable estimate of the R&DTI refund likely to be received for a financial year,
that amount is recognised in the financial year to which the refund relates. When a reasonable estimate cannot be
determined, income from the R&DTI refund is recognised when it is received.
The Group is eligible for a 43.5% refundable R&D tax offset on applicable research and development activities given that its
aggregate turnover is less than $50 million. The permanent tax benefit is currently 18.5% (FY21: 17.5%) of R&D
expenditure and the timing benefit is 25% (FY21: 26%), which is equivalent to the Group’s corporate tax rate. The Group’s
taxable loss must be greater than R&D expenditure to access the full timing benefit. Given the Group’s current tax loss
position, the Group is entitled to a refundable benefit of 43.5% on all its eligible research and development expenditure.
The tax credits recognised for the period ended 30 June 2022 are expected to be refunded to the Group following
lodgement of its annual income tax return.
7. Employee benefits expense
Recognised in profit or loss
Gross employee benefits expense
Superannuation expense
Share-based payments
JobKeeper benefit
Employee benefits expense in the statement of profit or loss
and other comprehensive income
22
8,542,295
751,177
382,609
9,676,081
-
6,434,205
520,774
95,887
7,050,866
(994,500)
9,676,081
6,056,366
8. Business and corporate development expenses
& Other expenses
(a) Business and corporate development expenses
Business development costs
Corporate development costs
(b) Other expenses
IT and telecommunication costs
Legal, professional fees and insurances
Administrative expenses
259,974
160,719
420,693
343,304
742,879
480,125
1,566,308
277,129
554,074
831,203
283,086
746,452
519,412
1,548,950
50
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
9. Interest expense
Recognised in profit or loss
Interest income
Facility interest & charges
Lease finance costs
Net interest expense
9(i)
9(ii)
30 June 2022
30 June 2021
9,586
9,586
(50,949)
(94,434)
(145,383)
(135,797)
45,414
45,414
(51,981)
(97,582)
(149,563)
(104,149)
9(i) Interest income comprised of interest receivable on loan provided to GreenTech.
9(ii) The Group incurred finance costs during the year related to its bank guarantee facility provided by its corporate banker
ANZ.
10. Taxes
(i) Tax recognised in profit or loss
Deferred tax expense
Origination and reversal of temporary differences
Income tax expense
(ii) Reconciliation of effective tax rate
Loss before tax
Income tax benefit using the Group’s domestic tax rate (25%, FY21:26%)
Non-deductible expenses
R&D net benefit
Current year DTA movement not recognised
Prior year DTA derecognised
Income tax expense/(benefit)
(iii) Movement in deferred tax assets
Opening balance
Charged to profit and loss
Closing balance
(iv) Movement in deferred tax liabilities
Opening balance
Charged to profit and loss
Closing balance
(v) Movement in net deferred tax asset/(liability)
Opening balance
Charged to profit and loss
Closing balance
-
-
(1,062,631)
(1,062,631)
(3,981,234)
(995,308)
(201,184)
634,748
561,744
-
-
75,605
154,904
230,509
(75,605)
(154,904)
(239,509)
(2,288,373)
(594,977)
9,938
-
648,496
999,174
1,062,631
1,074,779
(999,174)
75,605
(12,148)
(63,457)
(75,605)
-
-
-
1,062,631
(1,062,631)
-
The carrying amount of recognised and unrecognised deferred tax assets was reviewed at 30 June 2022. While the Board
remains confident and optimistic about the long term strategy of the Company and the economic fundamentals of the
target markets in which it operates delivering long term sustainable and profitable growth for its shareholders, the Board
resolved to adopt a prudent approach with respect to the judgements involved in determining the carrying value of the
deferred tax asset, considering the current and potential pandemic and economic environment. No deferred tax assets have
been recognised in the accounts of the Group.
51
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
vi) Deferred tax assets not brought to account at reporting date
Temporary differences
Unused carry forward tax losses
30 June 2022
396,119
1,863,175
2,259,294
30 June 2021
369,015
1,253,792
1,622,807
Deferred tax assets are not subject to any expiry date or limited to a certain type of taxable income and remain available
to be deducted from any future taxable profits of the Company. This includes unused carry forward tax losses not brought
to account as at 30 June 2022, which amount to $1,863,175. At the current Australian corporate income tax rate applicable
to the Company of 25% (FY21: 26%), this equates to approximately $7.5 million in taxable profits that potentially could be
earned by the Company before an income tax expense is incurred, subject to applicable laws and regulations.
(vii) Movement in deferred tax balances during the year
Balance Recognised Recognised Balance Recognised Recognised Balance
30-Jun-2020 in profit in other 30-Jun-2021 in profit in other 30-Jun-2022
or loss comprehensive or loss comprehensive
income income
Deferred tax assets
Employee benefits
Deferred income
Corporate transaction costs
Other payables
Carry forward tax losses
Total Deferred tax assets
Deferred tax liabilities
Prepayments
Intangible asset
Fixed assets
Leases
Accrued interest
Total Deferred tax liabilities
Net Deferred taxes
162,837
-
107,167
57,870
746,905
1,074,779
(87,232)
-
(107,167)
(57,870)
(746,905)
(999,174)
(130)
-
(11,074)
(944)
-
(12,148)
115
-
(52,708)
944
(11,808)
(63,457)
1,062,631 (1,062,631)
-
-
-
-
-
-
-
-
-
-
-
-
-
75,605
-
-
-
-
75,605
154,904
-
-
-
-
154,904
(15)
-
(63,782)
-
(11,808)
(75,605)
-
15
(155,271)
(11,456)
-
11,808
(154,904)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
230,509
-
-
-
-
230,509
-
(155,271)
(75,238)
-
-
(230,509)
-
52
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
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
Interest costs
Share-based payments
Loss on sale of property, plant and equipment
Tax expense
Change in contract assets
Change in other assets
Increase in non current assets
Change in trade and other receivables
Change in trade and other payables
Change in employee benefits
Change in finance liabilities
Change in contract liabilities
Cash used in operating activities
Interest paid net of interest received
Realised foreign currency gains
Net cash used in operating activities
Note
30 June 2022
4,119,490
1,263
4,120,753
30 June 2021
2,624,522
1,331
2,625,853
15,16
7
10(i)
(3,981,234)
(3,350,996)
517,313
135,797
382,609
-
-
(2,945,515)
(684,273)
(694,151)
(776,705)
705,540
(362,595)
201,628
(77,596)
(151,056)
(4,784,724)
(41,357)
-
(4,826,079)
374,256
104,149
95,887
16,758
1,062,631
(1,697,315)
731,741
431,401
-
(1,237,694)
1,013,716
222,856
(3,729)
185,976
(353,049)
(6,567)
2,011
(357,605)
(ii) Credit standby arrangement
The Company has the following credit standby facilities which are subject to bank review annually:
Bank guarantee (1)
Credit Card
Total
Utilised
Bank guarantee
Credit Card
Total
700,000
100,000
800,000
700,000
50,000
750,000
544,109
93,728
637,837
346,226
20,311
366,537
(1) The Company is not subject to any covenants on its facilities with its corporate banker ANZ.
53
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
12. Trade and other receivables
30 June 2022
30 June 2021
Current
Trade receivables
Other receivables
Current
1,062,290
1,456,845
2,519,135
1,746,872
-
1,746,872
Included in other receivables is R&D tax credits amounting to $1,113,989, recognised for the period ended 30 June 2022
expected to be refunded to the Group following lodgement of its annual income tax return.
The Company’s exposure to credit and market risks, and impairment losses related to trade and other receivables, are
disclosed in Note 28.
13. Contract assets
Work in progress
1,339,443
655,170
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 (input) 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 2022, aggregate costs incurred under open contracts and recognised profits earned, net of recognised losses,
amounted to $1,339,443 (2021: $655,170).
14. Other assets
Prepayments and other debtors
Loan receivable(1)
Deposits
Stock on hand
458,893
-
42,769
12,262
513,924
397,145
845,414
21,807
12,262
1,276,628
(1) In July 2020, the Company provided Composite Dry Powder (‘CDP’) technology partner, GreenTech, with a loan facility
of up to AUD $1.0 million to complete extensive field pilot programs with two of China’s major oil and gas State Owned
Enterprises. As announced by the Company on the ASX on 24 November 2021, Synertec and GreenTech entered into
a perpetual, exclusive and royalty-free Intellectual Property Licence Agreement (“Licence Agreement”), providing
Synertec with the right to use GreenTech’s CDP technology in the key global energy territories of the entire Americas,
Canada, Australia and New Zealand. At the time of entering the agreement, the balance of the loan outstanding from
GreenTech ($800,000) plus interest accrued over the term of the facility ($55,000), was repaid to Synertec as follows;
$255,000 cash, with the balance of $600,000 offset as consideration for the licence payable by Synertec to GreenTech.
Refer to note 16.
54
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
15. Property, plant and equipment
Computers Furniture Leasehold
and
improvements vehicles assets
Motor Right-of-use TOTAL
Cost
Balance at 1 July 2020
Additions
Disposals
Balance at 30 June 2021
Balance at 1 July 2021
Additions
Disposals
Balance at 30 June 2022
equipment
600,949
133,461
(316,757)
417,653
417,653
147,620
(70,067)
495,206
156,081
4,525
(130,565)
30,041
30,041
-
(686)
29,355
21,157
299,507
(21,157)
299,507
299,507
28,198
-
327,706
201,096
-
(38,000)
163,096
163,096
20,810
(51,322)
132,584
283,157
1,591,670
-
1,874,827
1,874,827
51,660
-
1,926,487
1,262,440
2,029,163
(506,479)
2,785,123
2,785,124
248,288
(122,075)
2,911,338
Computers Furniture Leasehold
and
improvements vehicles assets
Motor Right-of-use TOTAL
equipment
Accumulated depreciation
Balance at 1 July 2020
Disposals
Depreciation/amortisation expense
Balance at 30 June 2020
Balance at 1 July 2021
Disposals
Depreciation/amortisation expense
Balance at 30 June 2022
521,216
(312,662)
75,633
284,187
284,187
(69,269)
102,978
317,896
120,316
(104,406)
5,963
21,873
21,873
(638)
3,252
24,487
19,858
(19,923)
22,993
22,928
22,928
-
31,048
53,976
114,113
(30,615)
16,581
100,079
100,079
(30,512)
12,543
82,110
179,416
-
253,086
432,502
432,502
-
211,871
644,373
954,917
(467,606)
374,256
861,568
861,568
(100,419)
361,692
1,122,840
Carrying amounts
at 1 July 2020
at 30 June 2021
at 1 July 2021
at 30 June 2022
16. Intangible asset
79,733
133,466
133,466
177,311
35,766
8,168
1,299
276,579
86,983
63,017
103,741
1,442,325
307,522
1,923,555
8,168
4,867
276,579
273,730
63,017
50,474
1,442,325
1,282,115
1,923,555
1,788,498
Details of the Group’s intangible asset and its carrying amount is as follows:
Acquired Licence
Gross carrying amount
Balance at 1 July 2021
Additions, separately acquired
Additions, associated costs capitalised
Disposals
Balance at 30 June 2022
Amortisation and impairment
Balance at 1 July 2021
Amortisation
Impairment losses
Disposals
Balance at 30 June 2022
Carrying amounts
at 1 July 2021
at 30 June 2022
-
600,000
176,705
-
776,705
-
155,620
-
-
155,620
-
621,085
55
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
As announced by the Company on the ASX Company announcements platform on 24 November 2021, Synertec and its CDP
technology partner, GreenTech, entered into a perpetual, exclusive and royalty-free Intellectual Property Licence Agreement
(“Licence Agreement”), providing Synertec with the right to use GreenTech’s CDP technology in the key global energy
territories of the entire Americas, Canada, Australia and New Zealand. At the time of entering the agreement, the balance of
the loan outstanding from GreenTech ($800,000) plus interest accrued over the term of the facility ($55,000), was repaid to
Synertec as follows; $255,000 cash, with the balance of $600,000 offset as consideration for the licence payable by
Synertec to GreenTech. The licence fee and costs directly attributable to obtaining the licence have been capitalised
accordingly.
In accordance with the terms of the Licence Agreement, Synertec will make additional consideration milestone payments
of 2.5 million fully paid ordinary shares each (at an equivalent value of 10 cents per share) after 3 and 5 years respectively,
based on CDP revenue hurdles of $2 million by year 3 and $5 million by year 5 being achieved. There are no ongoing royalty
fees associated with the Licence Agreement. The Milestone Licence fees will be accounted at cost at each Milestone date, if
achieved. They constitute contingent liabilities. Refer to Note 25.
The Licence fee and attributable costs will be amortised over 3 years, the initial exclusivity period of the Licence Agreement
and based on the timeframes of the milestones. The carrying value of the Licence will be reviewed for impairment at the end
of each reporting period.
The Licence has been assessed by the Group for impairment at 30 June 2022 based on the net present value of estimated
future cashflows. Since its recoverable amount exceeds its carrying amount as at 30 June 2022, there is no indication of
impairment.
17. Trade and other payables
Current
Trade payables
Other payables
Deferred tax obligations(1)
Fixed price project accruals
Non-Current
Other payables
Deferred tax obligations(1)
30 June 2022
1,380,028
1,182,347
310,534
132,756
3,005,665
30 June 2021
1,228,178
1,004,927
570,470
211,757
3,015,332
75,489
75,752
151,241
117,960
386,206
504,166
(1) In response to the COVID-19 relief measures announced by the Victorian State Government, deferral of payroll tax
liabilities for eligible employers was announced by the Victorian State Revenue Office in August 2020 and updated in
February 2021. As a result, Synertec’s payroll tax liabilities for FY21 have been deferred until FY22 (payable quarterly
across the financial year). Synertec accepted this offer and has accrued for this arrangement accordingly in the FY21
results and set aside the cash for this commitment.
In response to the COVID-19 relief measures announced by the Federal Government, the Australian Taxation Office
offered to Synertec the ability to defer and spread its Pay-As-You-Go (PAYG) and Business Activity Statement (BAS)
payments related to the period April 2020 to September 2020 across 36 months commencing from October 2020, with
no interest or penalties. Synertec accepted this offer and has accrued for this arrangement accordingly in the FY21
results and set aside the cash for this commitment.
The deferred payments to the Victorian State Government for FY21 payroll tax have been fully paid.
The Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 28.
56
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
18. Employee benefits
30 June 2022 30 June 2021
466,522
211,236
677,758
Annual leave
Long service leave
Current
624,865
230,562
855,427
Long service leave
Non-Current
19. Contract liabilities
Billing in advance of work completed
161,193
161,193
137,235
137,235
50,053
201,109
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.
20. Leases
Lease liabilities are presented in the statement of financial position as follows:
Lease liabilities (current)
Lease liabilities (non-current)
86,985
1,431,459
1,518,444
96,581
1,499,459
1,596,040
The Group has leases for its head office and warehouse in Camberwell, an office in Perth and a photocopier. The lease
liabilities are secured by the related underlying assets.
Future minimum lease payments at 30 June 2022 were as follows:
Minimum lease payment due
Within one One to Two to Three to Four to After five Total
year two years three years four years five years years
Lease payments
Finance charges
Net present values
255,597
(86,083)
169,515
249,413
(76,072)
173,341
247,900
(65,576)
182,324
221,184
(55,077)
166,106
224,330
(44,719)
179,610
710,009
(62,462)
647,547
1,908,433
(389,989)
1,518,444
Out of the total finance costs of $145,383, an amount of $94,434 was attributable to the lease liabilities during the year
ending 30 June 2022.
57
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
21. Issued capital
Shares Shares $ $
30 June 2022 30 June 2021 30 June 2022 30 June 2021
Ordinary shares - fully paid
Capital raising costs
357,360,560
-
285,888,449
-
357,360,560 285,888,449
9,244,717
(726,207)
8,518,510
2,204,552
(107,045)
2,097,506
In August 2021, Synertec undertook a share placement to various professional, sophisticated and institutional investors and
successfully raised $7.1 million (before costs) through a placement of 71,472,111 new fully paid ordinary shares at $0.10 per
share, which represented a 9% discount to the last closing price and 5-day VWAP at the time of the placement.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
22. Share based payments
During the year, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of unlisted options with a
1-year expiry to the Company’s Independent Non-Executive Director, Board and Nomination and Remuneration Committee
Chair, Mr. Dennis Lin (2,173,913 options, strike price $0.023); and Executive Director, Chief Financial Officer and Company
Secretary, Mr. David Harris (2,173,913 options, strike price $0.023; and 2,173,913 options, nil strike price); for their contribution
to the achievement of various strategic objectives over preceding periods.
During the year, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of 10,000,000 unlisted
options with an exercise price of $0.20 (a 100% premium to the share placement price of $0.10) and term expiry of 3 years,
to its Joint Lead Managers and Brokers in the share placement conducted by the Company in August 2021. As a result Taylor
Collison’s nominees received a total of 6,000,000 options and PAC Partners nominees received a total of 3,500,000 options.
A professional independent valuation of the options has been performed by accounting and advisory firm, RSM Australia.
The attributed equivalent value of this award is accounted for as a share-based payment and reflected in the employee
benefits expense for the year ended 30 June 2022.
The fair value of share-based payment transactions was determined using a ESO2 trinomial valuation model. The model
requires certain inputs in order to determine an appropriate fair value. These inputs include share price at grant date, risk
free rate, volatility factor, exercise price, time to maturity and expected dividend yield.
The above fair value calculation was based upon the following inputs.
Grant date
Share price at grant date
Exercise price
Expiry Date
Expected Future Volatility
Risk Free Rate
Early Exercise Multiple
Dividend Yield
Tranche 1
16-Dec-21
$0.075
Nil
14-Jan-22
90%
0.55%
N/A
Nil
Tranche 2
16-Dec-21
$0.075
$0.023
14-Jan-22
90%
0.55%
2.5x
Nil
Tranche 3
16-Dec-21
$0.075
$0.20
14-Jan-24
90%
0.90%
2.5x
Nil
58
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
23. 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.
In accordance with the principles of reverse acquisition accounting, the weighted average number of ordinary
shares outstanding during the year ended 30 June 2022 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
(b) the actual number of ordinary shares of Synertec Corporation Limited outstanding during the period after acquisition.
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
Loss after income tax (in Australian dollars)
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
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
30 June 2022
(3,981,234)
348,940,558
357,857,770
(1.14)
(1.11)
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.
59
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
24. Share option reserve
Balance at 1 July 2021
Employee share-based payments
Broker options on issue
Balance at 30 June 2022
25. Contingent liabilities
Note
30 June 2022
30 June 2021
7, 22
22
-
382,609
242,000
624,609
-
-
-
-
The Group has potential contingent liabilities with respect to the perpetual and exclusive Intellectual Property Licence
agreement (“Licence Agreement”) with CDP technology partner, GreenTech.
The Licence Agreement is exclusive within the stated Territories, however if:
• on or before the date which is three years after the Commencement Date (“First Milestone Date”), Synertec has not
received an amount of revenue equal to more than $2 million from services or sales associated with the GreenTech IP
within the Territories (or with the consent of GreenTech, from outside the Territories) (“First Milestone”); or
• on or before the date which is five years after the Commencement Date (“Second Milestone Date”), the licence is still an
exclusive licence and Synertec has not received an amount of revenue equal to more than $5 million from services or sales
associated with the GreenTech IP within the Territories (or with the consent of GreenTech, from outside the Territories)
(“Second Milestone”);
then GreenTech may convert the licence from an exclusive licence to a non-exclusive licence.
As additional consideration for the grant of the licence, Synertec will issue the following securities to GreenTech (or its
nominee):
• 2.5 million fully paid ordinary shares in Synertec if the First Milestone is achieved by the First Milestone Date; and
• 2.5 million fully paid ordinary shares if the Second Milestone is achieved by the Second Milestone Date.
If a change of control of Synertec occurs or if the milestone fees are unable to be paid by way of issue of shares in Synertec
when payable, the milestone fees will be paid in cash in the amount of $250,000 each.
26. Related parties
The key management personnel compensation comprised:
Short-term employee benefits
Post-employment benefits
Equity
Other long-term employment benefits
Note
7, 22
30 June 2022
856,953
168,462
382,609
35,209
1,443,233
30 June 2021
864,106
73,207
38,355
40,708
1,016,376
Compensation of the Company’s key management personnel includes salaries, accrued leave balances, non-cash benefits
and contributions to an employee defined contribution plan.
60
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
27. 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
28. Financial instruments
30 June 2022
30 June 2021
78,657
78,657
10,500
-
89,157
78,314
78,314
11,049
-
89,363
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.
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:
Carrying amount
Trade and other receivables
Cash and cash equivalents
Loan receivable
Deposits
Note
12
11
14
14
30 June 2022
1,062,290
4,120,753
-
42,769
5,225,812
30 June 2021
1,746,872
2,625,853
845,414
21,807
5,239,946
61
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
(i) Credit risk (continued)
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
30 June 2022
1,062,290
1,062,290
30 June 2021
1,746,872
1,746,872
The Group’s most significant balance outstanding to a single customer, accounts for $363,161 of the trade and other
receivables carrying amount at 30 June 2022 (2021: $725,372). The amount was received subsequent to year end within the
agreed terms.
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
898,271
164,019
1,062,290
1,746,872
-
1,746,872
Cash and cash equivalents (including deposits)
The Group held cash and cash equivalents of $4,120,753 at 30 June 2022 (2021: $2,625,853) which represents its maximum
credit exposure on these assets. The cash and cash equivalents are held with a reputable bank and financial institution
counterparties.
(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 2022, the expected cash flows from trade and other receivables maturing within two months
are $1,062,290 (2021: $1,746,872). This excludes the potential impact of extreme circumstances that cannot reasonably be
predicted, such as natural disasters. After the year end, $1,007,708 out of the amount due at 30 June 2022 has been
received.
62
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
(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 2022
Non-derivative financial liabilities Carrying Total 0-1 years 1-2 years 2-5 years
amount
Lease liabilities
Trade and other payables
1,518,444
3,156,906
4,675,350
1,518,444
3,156,906
4,675,350
169,515
3,005,665
3,175,180
173,341
151,241
324,582
1,175,588
-
1,175,588
Contractual cashflows
30 June 2021
Non-derivative financial liabilities Carrying Total 0-1 years 1-2 years 2-5 years
amount
Lease liabilities
Trade payables
1,596,040
3,500,509
5,096,549
1,596,040
3,500,509
5,096,549
96,581
2,996,343
3,092,924
163,257
504,166
667,423
1,336,202
-
1,336,202
Contractual cashflows
(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, EUR and USD.
At any point in time, the Group typically holds EUR 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.
63
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
(iii) Market risk (continued)
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 2022 30 June 2021
USD EURO USD
EURO
Trade and other receivables 4,648
Cash and cash equivalents
Financial assets
Trade and other payables
Financial liabilities
4,648
-
-
-
- 3,849
5,259
5,259
28
28
-
3,849
-
-
-
5,525
5,525
28
28
Net exposure
4,648
5,287
3,849
5,552
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% 10% 10% 10%
increase decrease increase decrease
30 June 2022
USD
Euro
Currency exchange risk (net)
(446)
(222)
(668)
(446)
(222)
(668)
545
271
816
545
271
816
30 June 2021
USD
Euro
Currency exchange risk (net)
(238)
(222)
(460)
291
271
562
(238)
(222)
(460)
291
271
562
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 Chatel mortgage
Nominal amount
30 June 2022 30 June 2021
7.60%
7.30%
64
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
(iii) Market risk (continued)
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 2022
Variable rate instruments
Cash flow sensitivity (net)
30 June 2021
Variable rate instruments
Cash flow sensitivity (net)
Capital Management
826
826
5,600
5,600
(826)
(826)
(5,600)
(5,600)
826
826
5,600
5,600
(826)
(826)
(5,600)
(5,600)
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.
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 (which approximate fair value) shown in
the statement of financial position are as follows:
Note Loans and Other financial Other financial Total carrying
receivables assets liabilities amount
30 June 2022
Cash and cash equivalents
Trade and other receivables
Deposits
Finance lease liabilities
Trade and other payables
11
12
14
20
17
4,120,753
1,062,290
-
5,183,043
-
-
42,769
42,769
-
-
-
-
-
-
-
-
-
-
1,518,444
3,156,906
4,675,350
4,120,753
1,062,290
42,769
5,225,812
1,518,444
3,156,906
4,675,350
Note Loans and Other Other Total
receivables financial financial carrying
assets liabilities amount
30 June 2021
Cash and cash equivalents
Trade and other receivables
Loan receivable
Deposits
Finance lease liabilities
Trade and other payables
11
12
14
14
20
17
2,625,853
1,746,872
-
-
4,372,725
-
-
845,414
21,807
867,221
-
-
-
-
-
-
-
-
-
-
-
1,596,040
3,500,509
5,096,549
2,625,853
1,746,872
845,414
21,807
5,239,946
1,596,040
3,500,509
5,096,549
65
Synertec Corporation Limited Notes to the financial statements
For the year ended 30 June 2022
29. Interest in subsidiaries
Composition of the Group
Name of subsidiary Country of Principal Group proportion
incorporation / activity of ownership interests
principle place
of business 30 June 2022 30 June 2021
Synertec Holdings Pty Ltd Australia Holding company
Synertec Pty Ltd Australia Engineering products
100%
100%
100%
100%
and solutions
30. Subsequent events
During the year ended 30 June 2022, the global Coronavirus (COVID-19) pandemic has continued to significantly influence
market behaviour and as a result, has impacted the operations and financial results of the Company. While additional costs
in relation to COVID-19 have been incurred by the Company during the year ended 30 June 2022, the longer-term impacts
on the operations of the Group remain uncertain and cannot be reliably quantified at this time. The Board remains confident
and optimistic about the long term strategy of the Company and the economic fundamentals of the target markets in which
it operates, delivering long term sustainable and profitable growth for its shareholders.
In order to fund and achieve its strategic objectives, Synertec undertook a share placement to various institutional and
sophisticated investors and successfully raised $5.0 million (before costs) through a placement of 31.25 million new fully paid
ordinary shares at $0.16 per share, as announced by the Company on 13 September 2022.
Capital raised through the Offer will be used to provide balance sheet support for execution of the dual strategy of
commercialising several large near-term ESG-focused technology opportunities in the energy sector and growing out a
high-end engineering solutions business as follows;
• $4.0 million - Drive technology development and commercialisation of its ESG-focused technologies to assist in the
decarbonisation of Synertec’s large and prestigious customer base; and
• $1.0 million - Working capital to fund a growing portfolio of engineering solutions with the Company’s blue-chip customer
base.
The Company has made several ASX announcements since year end which have provided updates of its significant strategic
developments and operational progress within both its Technology and Engineering business units.
Taylor Collison and PAC Partners acted as Joint Lead Managers (“JLMs”) to the Placement. The Company and the Lead
Managers approached new sophisticated investors as well as clients of the Lead Managers to participate in the Placement.
No securities were issued or agreed to be issued in the Placement to any related party.
Under the mandate with the JLM’s;
• The JLM’s will be paid a management fee of 2% of proceeds, being $100,000 (plus GST), and a selling fee of 4% of
proceeds, being $200,000 (plus GST); and
• Subject to shareholder approval, the JLM’s will be issued 3,600,000 unlisted options with an exercise price of $0.32
per option and an expiry date of 2 years from the date of issue.
66
Synertec Corporation Limited Directors’ Declaration
For the year ended 30 June 2022
1. In the opinion of the Directors of Synertec Corporation Limited (“the Group”):
(a) the financial statements and notes thereto, set out on pages 37 to 66:
(i) present fairly the financial position of the Group as at 30 June 2022 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 2 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 2022, 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 20 September 2022
Mr. Michael Carroll
Managing Director
Melbourne, Australia
67
Synertec Corporation Limited Independent Auditor’s Report
68
Synertec Corporation Limited Independent Auditor’s Report
69
Synertec Corporation Limited Independent Auditor’s Report
70
Synertec Corporation Limited Shareholder Information
As at 19 September 2022
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
71
58
65
366
205
765
Total Units
16,288
163,408
522,963
14,895,839
341,762,062
357,360,560
%
0.000
0.050
0.150
4.170
95.640
100.000
Unmarketable Parcels
The number of unmarketable parcel holders as at 19 September 2022 based upon a share price of $0.170 (17.0 cents) is
106 shareholders holding in aggregate 81,891 ordinary shares.
The number of unmarketable parcel holders as at 24 August 2021 (date of last Annual Report) based upon a share price of
$0.100 (10.0 cents) was 120 shareholders holding in aggregate 139,972 ordinary shares.
Top 20 Holdings
Name
KENSINGTON TRUST SINGAPORE LTD
NORTHWEST NONFERROUS AUSTRALIA MINING PTY LTD
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
FIRST TRUSTEE COMPANY (NZ) LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
LYNTER PTY LTD
CITICORP NOMINEES PTY LIMITED
MR ANDREW MACBRIDE PRICE
UBS NOMINEES PTY LTD
GP SECURITIES PTY LTD
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
KIPBERG PTY LTD
CALAMA HOLDINGS PTY LTD
PONDEROSA INVESTMENTS (WA) PTYLTD
MR MARK LEAR POLLASKY
TAYCOL NOMINEES PTY LTD <211 A/C>
LJEG SMSF PTY LTD
TWENTY TEN ENTERPRISES PTY LTD
MR JAMES LEE PARKS
Total Securities of Top 20 Holdings
Total of Securities
Substantial shareholders of the Company are set out below:
KENSINGTON TRUST SINGAPORE LTD
NORTHWEST NONFERROUS AUSTRALIA MINING PTY LTD
PERENNIAL VALUE MANAGEMENT LIMITED*
REGAL FUNDS MANAGEMENT PTY LTD*
SG HISCOCK & COMPANY*
Number held
%
49,398,496
39,375,000
27,082,674
19,147,286
12,500,000
11,782,456
10,000,000
9,675,243
7,375,000
7,307,931
6,727,160
6,110,000
5,582,240
5,000,000
5,000,000
4,500,000
3,717,694
3,461,029
3,439,674
2,750,000
239,931,883
357,360,560
49,398,496
39,375,000
27,082,674
27,909,954
18,123,661
13.823%
11.018%
7.579%
5.358%
3.498%
3.297%
2.798%
2.707%
2.064%
2.045%
1.882%
1.710%
1.562%
1.399%
1.399%
1.259%
1.040%
0.968%
0.963%
0.770%
67.140%
13.823%
11.018%
7.579%
7.810%
5.072%
*Indicative shareholding based on number of voting securities recorded as at date of last substantial holder notice (lodged July/
August 2022).
Voting rights attached to ordinary shares
Upon poll each share shall have one vote, and on a show of hands every member present at a meeting in person or by proxy
shall have one vote.
71
Synertec Corporation Limited Shareholder Information
Unnissued equity securities:
During the year, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of unlisted options with a
1-year expiry to the Company’s Independent Non-Executive Director, Board and Nomination and Remuneration Committee
Chair, Mr. Dennis Lin (2,173,913 options, strike price $0.023); and Executive Director, Chief Financial Officer and Company
Secretary, Mr. David Harris (2,173,913 options, strike price $0.023; and 2,173,913 options, nil strike price); for their contribution
to the achievement of various strategic objectives over preceding periods.
During the year, at the Company’s 2021 Annual General Meeting, shareholders approved the grant of 10,000,000 unlisted
options with an exercise price of $0.20 (a 100% premium to the share placement price of $0.10) and term expiry of 3 years,
to its Joint Lead Managers and Brokers in the share placement conducted by the Company in August 2021. As a result Taylor
Collison’s nominees received a total of 6,000,000 options and PAC Partners nominees received a total of 3,500,000 options.
Securities exchange
The Company is listed on the Australian Securities Exchange (ASX:SOP).
72
OUR VISION
To be the Technology and Engineering partner of choice -
supporting environmentally friendly, energy efficient, social and
sustainability goals of industry.
OUR PURPOSE
To embrace innovation, create value, and work with our partners
to build a better future
LEADERSHIP
EXCELLENCE
Our people have the courage
to take ownership and
responsibility for
new challenges
We are passionate and proud
to deliver the highest value
outcomes, always striving
to do things in the best
way possible
INTEGRITY
With a foundation of
strong moral principles,
our people always have
the resolve to do the
right thing - even
when no one
is looking
SYNERTEC
VALUES
SAFETY
We value the health
and personal well being
of people before
all else
RELATIONSHIPS
We work with trust and respect
to build strong, positive
relationships with our
clients, stakeholders
and each other
73
Synertec
2022 Annual Report
74