Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross
Electrical Engineering Limited
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Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
Contents
Chairman’s Review ........................................................................ 7
Managing Director’s Review ...................................................... 9
Directors’ Report (including Corporate
Governance Statement and
Remuneration Report) ...............................................................13
Statement of comprehensive income .................................39
Balance sheet ................................................................................40
Statement of changes in equity .............................................41
Statement of cash flows ............................................................42
Index to notes to the financial statements ........................43
Notes to the financial statements .........................................44
Directors’ declaration .................................................................82
Independent auditor’s report .................................................83
Lead auditor’s independence declaration..........................85
ASX additional information .....................................................86
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Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
Who we are
Southern Cross was established in 1978 and is a dedicated provider of large
scale specialised electrical, control and instrumentation services for major
resources projects.
Southern Cross delivers outstanding client service and has developed strong relationships with major operators including Rio
Tinto, BHP, Woodside, QGC, Barrick and Newmont.
With extensive knowledge and expertise gained from our more than 30 years experience in the resources sector in Australia and
overseas we understand the requirements of costs, compliance, quality and delivery.
“We have an exceptional
pipeline of construction
projects leading into
operational support
opportunities that can
underpin our continued
growth for many years
to come.”
Simon High, Managing Director
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Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
What we do
2012 Highlights
Some of the highlights were:
• Continued delivery of expansion projects in the Pilbara
for Rio Tinto.
• Ongoing commitment with Sino Iron at Cape Preston.
• Nearing successful completion of two major gold
projects, Cadia in New South Wales and Pueblo Viejo in
the Dominican Republic, and our first coal project in
Queensland, Lake Vermont Coal Handling Plant.
• Successful delivery of Early Works for Thiess on QGC’s
LNG project in Queensland.
• Maintaining our long term relationships in our
operational support and maintenance services business,
both off-shore and on-shore, with clients such as BP,
Stena and Rio Tinto.
Southern Cross now operates through three key brands to
facilitate the future growth of the company and provide “full
life cycle of project” electrical services:
• SCEE Infrastructure
• SCEE Construction
• SCEE Services
The range of electrical services we offer our clients includes:
• Constructability reviews;
• Material procurement, transport and logistics;
• Electrical and instrumentation installation;
•
• Shutdown maintenance and installations;
•
• Manufacturers’ data and maintenance manuals.
Installation pre-commissioning and commissioning;
Installation contractual verification documentation; and
Located in Western Australia and Queensland, and in Latin
America, Southern Cross is well positioned to drive growth
with the goal of providing long term relationships with our
clients and generating sustainable revenue in the
following sectors:
Iron Ore;
•
• Liquefied Natural Gas;
• Coal;
• Coal Seam Gas; and
• Metals and Minerals.
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Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
Outlook
In 2013 the performance of Southern Cross will be underpinned by the framework agreements it has entered into on the Sino Iron
project and with Rio Tinto for its 353mtpa program in the Pilbara. The outlook is optimistic given the strong investment pipeline in
significant Oil & Gas projects around Australia, sustaining capital initiatives in various resources sectors and life cycle replacement
and upgrades to their electrical infrastructure.
Southern Cross is well placed to undertake these larger complex projects with a strong balance sheet, skilled and experienced
workforce and the necessary plant and equipment.
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Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
“Our expectation is for
Southern Cross to have
strong growth in the
next financial year. “
John Cooper, Chairman
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Southern Cross Electrical Engineering Limited Annual Report 2012
Chairman’s
Review
John Cooper
Chairman
Dear Shareholders
I am delighted to report on the achievements of Southern
Cross Electrical Engineering Limited for the 2012 financial year.
The Board of Directors
The year has been both challenging and rewarding for
Southern Cross. Our results reflect the strong performance
by the whole group. The benefits of our excellent client
relationships are also evident in this year’s result and in
the strong order book for next year.
Results
Our results for 2012 reflect the enormous effort made by all
personnel in Southern Cross. We have achieved record revenue
of $220.0m for the year. Results from operations were $19.4m
and profit after tax from continuing operations was $13.7m.
On this basis the Board has declared a dividend of 2.25 cents
per share. As we enter the next financial year the Company
is in a strong financial position with cash of $31.5m and a
confirmed order book of $79.1m excluding recurring services
work at 30 June 2012. We have significant new orders in an
advanced state of negotiations.
Outlook
Our expectation is for Southern Cross to have strong growth
in the next financial year. We continue to strengthen our
management team as well as maintaining a focus and
commitment to the ongoing development of our
company systems and training at all levels.
Despite the current softening in the commodities sector, major
clients continue to develop work packages in the mining and
oil and gas sectors complementary to the core capabilities
of our organisation. Our record in project delivery coupled
with our focus on quality and safety ensures continuous
improvement within the Company.
We welcomed Peter Forbes and Jack Hamilton to the Board of
Southern Cross as Independent Non-Executive Directors from
1 October 2011. Their experience, together with that of Derek
Parkin (Independent Non-Executive Director), Frank Tomasi
(Non-Executive Director) and Simon High (CEO & Managing
Director), provides the Board with significant public company
experience as well as relevant operational, financial and
technical expertise.
The Board is committed to the highest standards of corporate
governance and welcomes the challenge in continuing to
shape the future of the Company.
I would like to thank all our staff for achieving such an
outstanding result in 2012 and look forward to all of our
stakeholders’ continued support in 2013 and beyond.
John Cooper
Chairman
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Southern Cross Electrical Engineering Limited Annual Report 2012
“We go into 2013 with an
increased order book, greater
operational capacity, a strong
balance sheet and having made
good progress improving our
systems and processes.”
Simon High, Managing Director
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Southern Cross Electrical Engineering Limited Annual Report 2012
Managing
Director’s
Review
Simon High
Managing Director
I am pleased to be able to report on the performance of
Southern Cross Electrical Engineering Limited during my
second year as Managing Director and one that has
produced significantly improved financial results.
Financial Results
The key financial results for 2012 were:
• Contract revenue: up 116% from $101.8m in 2011 to
$220.0m in 2012.
• Profit after tax from continuing operations: up from a loss
of $1.7m in 2011 to a profit of $13.7m in 2012.
• Earnings per share: up from a loss of 1.28cps in 2011 to
8.50cps in 2012.
• Cash: as at 30 June 2012 we had $31.5m cash (30 June 2011:
$26.3m) and minimal debt. During the year we acquired
$10.7m of fixed assets, mainly new plant, equipment and
vehicles to deploy on our projects, and funded the increased
working capital requirement to service our increased level
of activity.
• Banking and bonding: capacity increased from $30.25m to
$60.25m during the year and $5.0m of restricted cash
deposits released.
• Overheads: down from an unsustainable level of 15% of
revenue in 2011 to just below 10% of revenue in 2012
This was expected to be a transitional year for Southern
Cross, so to achieve a strong set of financial results whilst at
the same time building the foundations for much greater
and sustainable growth in the future has been pleasing. This
is demonstrated by the progress we have made against the
three-year targets we set ourselves at the beginning of FY12
which were to achieve:
• Annual revenue in excess of $200m;
• Overheads as a percentage of revenue to be below 10%; and
• EBITDA percentage to be 15% or greater.
These three-year targets were an interim goal that allowed
every part of the Group to develop strategies and action plans
in an aligned manner in support of this goal. I am pleased to
report that by the end of the first year of that three year period
we have already achieved two of these three goals (revenue
and overheads) and are making good progress with the third
(EBITDA percentage).
Non-Financial Achievements
During the year we have significantly improved the size,
structure and capability of many of our support services.
One of the lessons learnt from our experiences in 2011 of
working on large schedule of rates contracts was that our
project management systems needed to be fundamentally
reviewed and updated. This resulted in a two-year programme
that has become known as SCEEtrak, to develop a suite of
project management systems specific to the needs of an
Electrical & Instrumentation construction company. We are
currently mid-way through this significant upgrade and are
on both budget and schedule. We have rolled out some of
the early modules of SCEEtrak, with immediate improvements
to our operations. The major benefits will be experienced
once the whole suite of modules that make up SCEEtrak are
complete and rolled out across the group, which we expect
to be by June 2013.
Our overall aim is to put in place the foundations in terms of
people, systems, processes, plant and equipment and financial
capacity to enable Southern Cross to be a Tier 1 Electrical &
Instrumentation construction company across all the markets
we service. The achievements of 2012 have taken us a
significant step in that direction.
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Southern Cross Electrical Engineering Limited Annual Report 2012
Managing Director’s Review (continued)
Operations Review
The overall business environment and prospects for Southern
Cross during 2012 reflected a much healthier situation than
encountered during 2011. From an opening order book of
$75.0m at the start of 2012, we won and executed a further
$145.0m, bringing our total revenue for the year to $220.0m.
Southern Cross now operates in four different resource sectors:
• Iron Ore;
• Minerals and Gold;
• Oil & Gas; and
• Coal.
Major projects in 2012
Client
Pueblo Viejo Dominican Corporation
MCC Mining
Rio Tinto Iron Ore
Cadia Holdings
Rio Tinto Iron Ore
Thiess Sedgman Joint Venture
Thiess
Project
Pueblo Viejo Gold Project
Sino Iron Project
Sustaining Works Project
Cadia Expansion Project
Coastal Waters 33kv Transmission Line
Lake Vermont Coal Handling Plant
QGC Upstream Early Works
Progress
Nearing Practical Completion
Ongoing
Ongoing
Complete
Ongoing
Ongoing
Ongoing
West Coast Operations
East Coast Operations
Activity has focussed on two major projects:
• MCCM Sino Iron Project
This has been a demanding project for Southern Cross, initially
working on the Concentrator area of Train 1 and some of the
common infrastructure referred to as Package F. Southern Cross
has now commenced work on the Train 2 concentrator and on
the main conveyors down to the primary crushers.
We believe we have developed a very constructive relationship
with the EPC contractor, MCC Mining, and the project owners,
Citic Pacific. This project is a major undertaking and I would
hope, based on performance, that Southern Cross will continue
to be involved until completion of the remaining four process
trains and then into the operational support phase.
• Rio Tinto Iron Ore Sustaining Works Projects
We continued to work for Rio Tinto across a number of their
operations in 2012. Many of the projects were early works
related to their 333 mtpa expansion in which Southern Cross
hopes to be involved in 2013 and beyond.
Operations on the East Coast have grown dramatically in 2012
and the main projects undertaken have been:
• Cadia Expansion Project
This project was practically complete by 30 June 2012, with a
small amount of work going into 2013. We were pleased with
the overall execution of the works and especially in achieving
a major plant shutdown in a safe and efficient manner towards
the end of calendar year 2011.
• Lake Vermont Coal Handling Plant
This was the first major coal project awarded to Southern Cross
by the Thiess Sedgman Joint Venture and is of both strategic and
operational significance. This is ongoing and we are pleased with
the performance to date as well as the constructive working
relationship that has developed with our client.
• QGC Early Works
We commenced work for Thiess on the Early Works element of
their coal seam gas contract with QGC. Whilst not without some
overall project challenges we are pleased with the constructive
relationship with Thiess and QGC. We would hope to continue
with other phases of this project during 2013 and beyond.
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Operations Review (continued)
International Operations
• Pueblo Viejo Gold Project, Dominican Republic
This project was substantially complete by 30 June 2012. Despite
logistical challenges undertaking a major project overseas we are very
pleased with how the project progressed and is now being closed out.
K.J. Johnson & Co
K.J. Johnson & Co has also experienced very rapid, although
sustainable, growth. Much of the corporate support for K.J. Johnson &
Co now comes from common group functions such as HR, Training,
Safety, Quality, Plant & Equipment and Finance allowing them to focus
on project delivery.
Progress on Rio Tinto’s Cape Lambert 33kV line is now well advanced
and was the first time we have used helicopters during construction of
the project. The award of two further Rio Tinto projects, Coastal Waters
and Yandi, provide a solid order book for K.J. Johnson & Co well into
2013. K.J. Johnson & Co has been rebranded SCEE Infrastructure from
1 July 2012.
Southern Cross Electrical Engineering Limited Annual Report 2012
Training
In June 2011 we launched the new Training Centre to
accommodate the growth in training requirements and provide a
holistic introduction to the company to all staff, including company
inductions, gap training and safety training prior to site mobilisation.
The Training Centre has exceeded expectations in mobilisation
and regular training of our employees. Direct savings have been
achieved by delivering in-house training with partnering Registered
Training Organisations.
Apprentice Program
We have employed 121 apprentices since 1979 and this has
produced outstanding tradespeople who have progressed to
Leading Hand, Supervisor and Manager roles within the company.
In 2012 we had 54 apprentices across the business and the
apprentice program growth strategy is aligned to the anticipated
labour shortage of electricians. I believe investment in our
apprentice program is one of our most important objectives.
opp pic
Safety
I am pleased that our Australian operations achieved an eighth
consecutive year without incurring a Lost Time Injury (LTI), which is a
credit to all our employees.
Regrettably we had an incident during the year on our project in the
Dominican Republic that injured two employees, resulting in them
having to take time off work to recover. I am pleased that both our
employees returned to work after receiving good medical attention.
We learnt valuable lessons from this incident which have been
shared across the Group.
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Southern Cross Electrical Engineering Limited Annual Report 2012
Managing Director’s Review (continued)
Growth Opportunities for FY13 and Beyond
Having achieved a very solid financial and operational
performance in 2012, we go into 2013 with an increased
order book, greater operational capacity, a strong balance
sheet and having made good progress improving our systems
and processes.
On the West Coast we believe iron ore developments with
key clients such as Rio Tinto, BHP and Fortescue Metals Group
will continue to provide a very good base workload. These,
together with the magnetite projects of which some are in
execution (eg Sino Iron), and others progressing to FID such as
Roy Hill, South Downs, West Pilbara Iron Ore, and Jack Hills will
provide a very solid pipeline of work.
Order Book
Our order book going into 2013 stands at confirmed orders of
$79.1m plus a further $140.0m of preferred contractor status
orders in an advanced state of negotiation. The majority of
both the secured as well as preferred contractor work is for
execution during 2013. This order book figure excludes our
recurring revenues coming from our services operations which
currently generate around $2m per month, which we expect
to continue at similar or greater levels.
Markets
Market conditions in Australia, China, USA and Europe have
softened, especially with respect to commodity prices, which has
taken some heat out of the market. This reduction in commodity
prices, coupled with rising labour costs and many major projects
experiencing cost increases and delayed start-ups, has left a
greater feeling of uncertainty about the market outlook.
However, in the LNG sector, we currently have six major
projects that have achieved Final Investment Decision (FID)
and are in execution - Gorgon, Wheatstone, Inpex, QGC, GLNG
and APLNG. This exceeds any previous level of work ever seen
in Australia and where, in general, the E&I construction work is
still to be awarded.
The QGC, GLNG and APLNG projects have upstream coal seam
gas elements which are very significant amounts of work and
will continue for a number of years past the LNG process plant
start-up.
Coal projects on the East Coast coupled with gold and
other mineral projects in Western Australia, Queensland and
South Australia will provide the fourth leg of our growth
opportunities.
SCEE Services
From 1 July 2012 the merging of Hindles and our West Coast
operations and maintenance support contracts under one
umbrella has commenced and has been branded as SCEE
Services. Whilst still relatively small, I believe this area of
our company will grow quickly as new projects come on
line, especially those where we are involved in the project’s
construction phase.
Conclusion
Whilst increased uncertainty is understandable, it does not in
our opinion change the extremely positive outlook we have
for the next three to five years as a minimum. I believe we
have an exceptional pipeline of construction projects leading
into operational support opportunities that can underpin our
continued growth for many years to come.
I would like to thank all our shareholders and employees for
their support and encouragement during the past year.
Simon High
Managing Director
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Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’
Report
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Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’ Report
For the year ending 30 June 2012
(continued)
Your Directors submit their report for Southern Cross Electrical Engineering Limited (“Southern Cross”, “SCEE” or “the Company”) for the
year ended 30 June 2012.
Directors
The names and details of the Company’s Directors in office during the financial year and until the date of this report are as follows.
Directors were in office for this entire period unless otherwise stated.
John Cooper
Chairman, Independent Non-Executive Director
John has over 35 years experience in the construction and engineering sector in Australia and
overseas. He has provided consulting services to major projects for a number of years. John
accepted the role of Chairman in March 2011, having served on the Board since the Company
listed on the ASX in 2007.
John is also a Non-Executive Director of Flinders Mines Limited, based in Adelaide, NRW Holdings,
a major Western Australian based Civil Engineering contractor, Neptune Marine Limited, based in
Perth, and QR National Limited, a Queensland based freight railway operator and rail transporter.
operations globally and was a Non-Executive Director of Clough Engineering after having served in the role as Interim CEO during which time he
successfully re-structured the Clough organisation.
John was previously a member of the Murray and Roberts International Board, overseeing its
John’s experience includes five years as Managing Director and Chief Executive of CMPS&F and over twenty years with Concrete Constructions,
where he held the position of General Manager and was on the Board. He is a Fellow of The Institute of Company Directors, a Fellow of the
Australian Institute of Management and a Fellow of the Institute of Engineers.
John was the Chairman of the Nomination and Remuneration Committee and a member of the Audit and Risk Management Committee until
30 September 2011.
Gianfranco Tomasi
Non-Executive Director
Frank has over 40 years experience in the electrical construction industry.
Frank is the founder of the Company. He was the Chairman of Southern Cross from 1978 until
he retired from that role in March 2011. Prior to founding the Company he worked at Transfield
(WA) Pty Ltd from 1968 – 1978, serving as the National Electrical Manager from 1971 – 1978.
Frank holds an Electrical Engineering Certificate (NSW) and is a Member of the Australian
Institute of Company Directors. Frank is a member of the Nomination and Remuneration
Committee and was a member of the Audit and Risk Management Committee until 30
September 2011.
Peter Forbes
Independent Non-Executive Director (Appointed 1 October 2011)
Peter is a Fellow of Certified Practicing Accountants, a Fellow of Chartered Secretaries
Australia and is a Fellow of the Australian Institute of Company Directors.
Peter was previously a Non-Executive Director of Macarthur Coal Ltd and currently serves
as a director of QIC Private Capital Pty Ltd and as a member of the Queensland Council of
the Australian Institute of Company Directors.
Peter has been the Chairman of the Nomination and Remuneration Committee and a
member of the Audit and Risk Management Committee since 1 October 2011.
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Southern Cross Electrical Engineering Limited Annual Report 2012
Directors (continued)
Simon High
Managing Director
Simon has over 35 years experience in many aspects of the resource industry (oil & gas
and mineral processing) on a global basis. He graduated in the UK with a Bachelor of
Science Degree in Civil Engineering and has worked in Project Management roles in the
UK, Norway, Europe and South Africa.
For the past 18 years Simon has worked in corporate management roles as Engineering
Director, Managing Director, President and Chief Operating Officer with John Brown
Engineers & Constructors, Aberdeen; Kvaerner Oil & Gas, Houston; United Construction,
Australia; and Clough Limited, Western Australia.
He has proven experience in capex and opex contracting roles where he has been responsible for execution of world size projects,
both offshore and onshore in addition to growing new and existing businesses. Simon has a track record in developing strong
customer relations based on industry knowledge, performance and trust. Simon has a Bachelor of Science in Civil Engineering, is a
Fellow of the Institute of Engineers and a Fellow of the Australian Institute of Company Directors.
Derek Parkin
Independent Non-Executive Director
Derek is a Fellow of the Institute of Chartered Accountants Australia (ICAA) and a Fellow of
the Australian Institute of Company Directors.
He is currently Professor of Accounting at the University of Notre Dame, Australia, having
previously been an assurance partner with Arthur Andersen and Ernst & Young. Derek’s
accounting experience has spanned some 40 years and four continents, primarily in the
public company environment.
ICAA’s national and state advisory committees. In 2011, he was a recipient of the ICAA’s prestigious Meritorious Service Award.
Derek is a past national Board member of the ICAA and has served on a number of the
Derek’s Non-Executive Directorships to date have been in the non-listed sphere, principally in the oil & gas and manufacturing sectors.
He has also chaired a number of advisory committees in both the government and not-for-profit sectors.
Derek is the Chairman of the Audit and Risk Management Committee and was a member of the Nomination and Remuneration
Committee until 30 September 2011.
John (“Jack”) Hamilton
Independent Non-Executive Director (Appointed 1 October 2011)
Jack has held a number of senior executive roles with international oil and gas exploration
and production companies including Shell, Woodside and Liquid Niugini Gas. Whilst with
Woodside, Jack was Director NW Shelf Ventures having overall responsibility for Woodside’s
NW Shelf Ventures Business Unit.
He holds a Bachelor of Chemical Engineering Degree and a Doctorate of Philosophy
(Engineering) both from the University of Melbourne. Jack currently holds a Non-Executive
Directorship with Geodynamics Ltd.
Jack has been a member of both the Nomination and Remuneration Committee and the Audit and Risk Management Committee
since 1 October 2011.
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Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’ Report
For the year ending 30 June 2012
(continued)
Executive Team
Simon Buchhorn
Chief Operating Officer
Simon has been with SCEE for over 30 years and has extensive experience through
a number of roles in the business. He is responsible for the Company’s operations,
contract delivery, client negotiations and general business activities.
Chris Douglass
Chief Financial Officer/Company Secretary (Appointed 19 September 2011)
Chris was formerly the Chief Financial Officer at Pacific Energy Ltd and prior to that held
a number of senior finance roles with Clough Ltd.
Chris is a Chartered Accountant and member of Chartered Secretaries Australia who
commenced his finance career with Deloitte. Prior to his time with Deloitte, Chris
qualified and practiced as a solicitor in London. He is responsible for the preparation
of the Company’s financial records, financial planning, enterprise risk management,
investor relations and company secretarial duties.
Stephen Fewster
Chief Financial Officer/Company Secretary (Resigned 7 October 2011)
Stephen was the Chief Financial Officer and Company Secretary at iiNet Ltd before joining SCEE in March 2008. Stephen has a Bachelor
of Business and is a Chartered Accountant and a member of FINSIA.
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Southern Cross Electrical Engineering Limited Annual Report 2012
Company Secretary
Chris Douglass CA, ACIS
Chris Douglass was appointed to the position of Company Secretary on 19 September 2011. Chris is a Chartered Accountant and a
member of Chartered Secretaries Australia.
Stephen Fewster CA, SA Fin
Stephen Fewster resigned from the position of Company Secretary on 7 October 2011.
Interests in the shares and options of the company and related bodies corporate
As at the date of this report, the interests of the Directors in the shares and options of Southern Cross Electrical Engineering Limited were:
Director
John Cooper
Simon High
Gianfranco Tomasi
Derek Parkin
Peter Forbes
Jack Hamilton
Directors’ Meetings
Number of
ordinary shares
Number of options
over ordinary shares
116,667
750,000
65,227,131
20,000
50,000
29,780
The number of Directors’ meetings and meetings of committees of Directors held and attended by each of the Directors of the
Company during the financial year are:
Director
John Cooper1
Simon High2
Gianfranco Tomasi3
Derek Parkin4
Peter Forbes5
Jack Hamilton6
Board Meetings
Held
Attended
10
10
10
10
7
7
10
10
10
10
7
7
Audit and Risk Management
Committee Meetings
Nomination and Remuneration
Committee Meetings
Held
2
N/A
2
5
3
3
Attended
2
N/A
1
5
3
3
Held
2
N/A
3
2
1
1
Attended
2
N/A
3
2
1
1
The number of meetings held represents the time the Director held office or was a member of the committee during the year.
1. John Cooper was the Chairman of the Nomination and Remuneration Committee and a member of the Audit and Risk
Management Committee until 30 September 2011.
2. Simon High was not a member of the Audit and Risk Management Committee and the Nomination and Remuneration Committee.
As the Managing Director, Simon had a standing invitation to attend committee meetings.
3. Gianfranco Tomasi was a member of the Audit and Risk Management Committee until 30 September 2011.
4. Derek Parkin was a member of the Nomination and Remuneration Committee until 30 September 2011.
5. Peter Forbes was appointed as a Non-Executive Director, the Chairman of the Nomination and Remuneration Committee and a
member of the Audit and Risk Management Committee on 1 October 2011.
6. Jack Hamilton was appointed as a Non-Executive Director and a member of both the Nomination and Remuneration Committee
and the Audit and Risk Management Committee on 1 October 2011.
-
-
-
-
-
-
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Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’ Report
For the year ending 30 June 2012
(continued)
Dividends
Declared and paid during the period (fully franked at 30%)
Final franked dividend for 2011
Interim franked dividend for 2012
Declared after balance date and not recognised as a liability (fully franked at 30%)
Final franked dividend for 2012
Principal Activities
Cents per
share
Total amount
$’000
-
-
-
-
2.25c
3,617
The principal activities during the year of the entities within the consolidated group were the provision of large scale specialised
electrical, control and instrumentation installation and testing services for the resources, infrastructure and heavy industrial sectors.
The group’s major projects during 2012 were:
• Sino Iron;
• Rio Tinto’s Iron Ore Sustaining Works;
• Cadia;
• TSJV Lake Vermont;
• QGC Early Works;
• Pueblo Viejo; and
• Rio Tinto’s Cape Lambert 33kV line.
Operating and Financial Review
A review of operations of the consolidated group during the financial year, the results of those operations, the changes in the state of
affairs and the likely developments in the operations of the consolidated entity are set out in the Chairman’s Review and Managing
Director’s Review.
Operating results for the year were:
Contract revenue
Profit/(loss) after income tax from continuing operations
Significant Changes in the State of Affairs
2012
$’000
219,983
13,708
2011
$’000
101,780
(1,652)
There have been no significant changes in the state of affairs of the Company or consolidated group during this financial year.
Significant Events after Sheet Balance Date
There are no matters or circumstances that have arisen since the end of the financial year which significantly affected or may
significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated
entity in subsequent financial years.
Likely Developments and Expected Results
Other than as referred to in this report, further information as to the likely developments in the operations of the consolidated entity
would, in the opinion of the Directors, be likely to result in unreasonable prejudice to the consolidated entity.
Environmental Regulation and Performance
The operations of the Group are subject to the environmental regulations that apply to our clients. During 2012 the Group complied
with the regulations.
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Southern Cross Electrical Engineering Limited Annual Report 2012
Share Options and Performance Rights
During the reporting period, no shares were issued from the exercise of options previously granted as remuneration.
During the reporting year 1,516,953 performance rights were issued to senior management and, subject to shareholder approval, a
further 419,664 performance rights are to be issued to Simon High under the Senior Management Long Term Incentive Plan.
At the date of this report unissued ordinary shares of the Company under options are:
Expiry date
28 November 2012
28 November 2013
Exercise price
Number of shares
$1.15
$1.15
166,667
166,667
333,334
All options expire on the earlier of their expiry date or termination of the employee’s employment. All of the above options have
vested. Further details are contained in note 31 to the accounts.
Indemnification and Insurance of Directors and Officers
During or since the end of the financial year, the Company has paid premiums in respect of a contract insuring all the Directors of the
Company against a liability incurred in their role as directors of the Company, except where:
the liability arises out of conduct involving a wilful breach of duty; or
a)
b) there has been a contravention of Sections 182 or 183 of the Corporations Act 2001.
The total amount of insurance contract premiums paid was $75,527 (2011: $18,872).
Proceedings on Behalf of Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the
Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
Non-audit Services
The Board of Directors, in accordance with advice from the Audit and Risk Management Committee, is satisfied that the provision of
non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations
Act 2001. The directors are satisfied that the services did not compromise the external auditor’s independence for the following
reasons:
• all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not
adversely affect the integrity and objectivity of the auditor; and
• the nature of the services provided do not compromise the general principles relating to auditor independence in accordance
with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.
Rounding off
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order,
amounts in the consolidated financial statements and directors’ report have been rounded off to the nearest thousand dollars,
unless otherwise stated.
Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2012 has been received and can be found on page 85 of this
Annual Report.
19
Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’ Report
For the year ending 30 June 2012
(continued)
Remuneration
Report
20
20
Southern Cross Electrical Engineering Limited Annual Report 2012
Remuneration Report
Remuneration Report – audited
This Remuneration Report outlines the Director and executive remuneration arrangements of the Group in accordance with the
requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key Management Personnel (KMP) of
the Group are defined as those persons having authority and responsibility for planning, Directing and controlling the major activities
of the Company and the Group, directly or indirectly, including any Director (whether executive or otherwise) of the parent company
and any executive in the Parent and the Group that is a senior executive, general manager or secretary who meets the definition of an
executive under the Corporations Act 2001.
Key Management Personnel in the period were:
Non-Executive Director
John Cooper
Gianfranco Tomasi
Derek Parkin
Peter Forbes
Jack Hamilton
Executive Director
Simon High
Executive*
Simon Buchhorn
Chris Douglass
Stephen Fewster
Independent Non-Executive Chairman
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Appointed 1 October 2011
Appointed 1 October 2011
Managing Director
Chief Operating Officer
Chief Financial Officer/Company Secretary
Chief Financial Officer/Company Secretary
Appointed 19 September 2011
Resigned 7 October 2011
* Gerard Moody, General Manager Business Development, and Philip Dawson, General Manager Corporate Services, ceased to be regarded
as KMP from 1 July 2011.
Remuneration Philosophy
The performance of the Group depends upon the quality of its Directors and executives. To prosper, the Group must attract, motivate
and retain highly skilled Directors and executives.
To this end the Group embodies the following principles in its remuneration framework:
• provide competitive rewards to attract high calibre executives;
• link executive rewards to shareholder value;
• have a significant portion of executive remuneration ‘at risk’; and
• establish appropriate, demanding performance hurdles for variable executive remuneration.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee of the Board of Directors is responsible for determining and reviewing remuneration
arrangements for the Directors and executives.
The Nomination and Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of executives
on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality, high performing director and executive team.
For details of who are the members of the Nomination and Remuneration Committee, refer to the Corporate Governance statement
on page 37 of this Annual Report.
21
Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’ Report
For the year ending 30 June 2012
(continued)
Remuneration Report – audited (continued)
Remuneration Structure
In accordance with best practice corporate governance, the structure of the Non-Executive Director and executive remuneration is
separate and distinct.
Executive Remuneration
Objective
The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities
within the Group so as to:
• reward executives for Group, business and individual performance against targets set by reference to appropriate benchmarks;
• align the interests of executives with those of shareholders; and
• ensure remuneration is competitive by market standards.
Structure
In determining the level and make-up of executive remuneration, the Nomination and Remuneration Committee reviews
independent research on executive remuneration.
The Company has entered into contracts of employment with the Managing Director and the executives. Details of these contracts
contain the following key elements:
• Fixed remuneration;
• Variable remuneration - Short term incentive (“STI”); and
• Variable remuneration - Long term incentive (“LTI”).
The nature, amount and proportion of remuneration that is performance related for each executive is set out in Table 1.
Executive Remuneration - Fixed
Objective
Fixed remuneration is reviewed annually by the Nomination and Remuneration Committee. This process consists of a review of
company, business and individual performance, relevant comparative remuneration externally and internally and external research.
Structure
Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash and fringe benefits such as
motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without undue cost for the Group.
There are no guaranteed base pay increases for any executive.
Executive Remuneration – Variable – Short Term Incentive (STI)
Objective
The purpose of the STI program is to link the achievement of the Group’s operational targets with the remuneration received by the
executives charged with meeting those targets. The total potential STI available is set at a level so as to provide sufficient incentive to
the executive to achieve the operational targets and such that the cost to the Group is reasonable in the circumstances.
22
Southern Cross Electrical Engineering Limited Annual Report 2012
Remuneration Report – audited (continued)
Structure
Actual STI payments granted to each executive depend on the extent to which specific targets as set at the beginning of the financial
year are met. The targets consist of a number of Key Performance Indicators (“KPIs”) covering both financial and non-financial,
corporate and individual measures of performance.
The financial KPIs used to assess performance are comparing to budget the following measures:
• Revenue;
• Net profit after tax;
• Overheads as a percentage of revenue; and
• Forward order book.
The financial KPIs account for between 80% and 90% of both the Managing Director’s and the executive team’s STI. The non-financial
KPIs comprise systems and process developments and health and safety improvements. These KPIs account for between 10% and
20% of both the Managing Director’s and the executive team’s STI. These measures were chosen as they represent the key drivers for
the short term success of the business and provide a framework for delivering long term value. For each component of the STI against
a KPI no award is made where performance falls below the minimum threshold for that KPI.
The assessment of KPIs for the year ended 30 June 2012 is based on the audited financial results for the company. The Nomination
and Remuneration Committee recommends the STI to be paid to the individuals for approval by the Board. The method of
assessment was chosen as it provides the Nomination and Remuneration Committee with an objective assessment of the
individual’s performance.
Executive Remuneration – Variable – Long Term Incentive (LTI)
Objective
The objective of the LTI plan is to retain and reward the members of the executive management team in a manner which aligns this
element of remuneration with the creation of shareholder wealth.
Structure
LTI grants to executives are delivered at the discretion of the Nomination and Remuneration Committee in the form of performance
rights or share options under the Senior Management Long Term Incentive Plan. During the year ended 30 June 2012, there were
351,874 performance rights issued to key management personnel and, subject to shareholder approval, a further 419,664 performance
rights are to be issued to Simon High under the Senior Management Long Term Incentive Plan. The Key Performance Indicators (“KPIs”)
used to measure performance for these performance rights are earnings per share growth and absolute total shareholder return.
These KPIs were chosen because they are aligned to shareholder wealth.
Under the Group’s share trading policy, directors, employees and contractors of the Company must not engage in hedging
arrangements, deal in derivatives or enter into other arrangements which limit the economic risk of any unvested entitlements under
any equity based remuneration scheme, as such arrangements have been prohibited by law since 1 July 2011. The Group regularly
reviews compliance with and effectiveness of its share trading policy. The Group considers contravention of the policy a serious matter
and any contravention will be investigated.
On a change of control LTI grants fully vest with the executives.
23
Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’ Report
For the year ending 30 June 2012
(continued)
Remuneration Report – audited (continued)
Non-Executive Director Remuneration
Objective
The Board seeks to set aggregate remuneration at a level that provides the Group with the ability to attract and retain Non-Executive
Directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of Non-Executive Directors shall be determined
from time to time by a general meeting. The aggregate remuneration as approved by shareholders at the annual general meeting
held on 26 November 2008 is $600,000 per year.
The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually. The Board
considers advice from external market surveys as well as the fees paid to Non-Executive Directors of comparable companies in our
sector, which included Monadelphous Ltd, Clough Ltd and RCR Tomlinson Ltd, when undertaking the annual review process.
From 1 July 2011 until 31 December 2011 the Chairman of the Company’s Board received a base annual fee of $120,000 for being
the Chairman of the Group. The other Non-Executive Directors received a base annual fee of $60,500. An additional fee of $7,500
per annum was also paid for each Board committee on which a Non-Executive Director sat or $10,000 per annum if the Director was
a Chair of that Board Committee. Directors also received a travel allowance. From 1 January 2012 certain fees were revised upwards
so that the Chairman of the Company’s Board receives a base annual fee of $130,000 and the other Non-Executive Directors receive
a base annual fee of $80,000. Committee fees were unchanged and the travel allowance was abolished. Directors also received
superannuation at the statutory rate in addition to their Director fees and committee fees. The payment of additional fees for serving
on a committee recognises the additional time commitment required by the Non-Executive Directors who serve on one or
more committees.
The non-executive directors do not receive retirement benefits, nor do they participate in any incentive programs. The remuneration
of non-executive directors for the periods ended 30 June 2012 and 30 June 2011 is detailed in Table 1 of this report.
Consequences of Performance on Shareholder Wealth
In considering the impact of the Group’s performance on shareholder wealth and the related rewards earned by executives, the
Nomination and Remuneration Committee had regard to the following measures over the years below:
Profit/(loss) attributable to owners of the company
13,708
(1,652)
Dividends paid
Change in share price
Return on capital employed
-
43%
21%
5,588
(20%)
(2%)
8,675
7,913
13%
26%
15,464
11,312
7,200
(22%)
62%
9,756
22%
44%
2012
$’000
2011
$’000
2010
$’000
2009
$’000
2008*
$’000
*Official quotation of the Company on the Australian Securities Exchange commenced on 28 November 2007.
Profit amounts for 2008 to 2012 are calculated in accordance with Australian Accounting Standards (AASBs). The overall level of key
management personnel remuneration takes into account the performance of the Group over a number of years.
24
Southern Cross Electrical Engineering Limited Annual Report 2012
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R
Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’ Report
For the year ending 30 June 2012
(continued)
Remuneration Report – audited (continued)
Notes in relation to the table of Directors’ and executive officers’ remuneration
A. The STI bonus is for the amount that vested in the financial year based on achievement of personal goals and satisfaction of
specified performance criteria set for the 2011 financial year using the criteria set out on page 23. The amount was finally
determined after performance reviews were completed and approved by the Nomination and Remuneration Committee.
B. On 29 November 2011 750,000 ordinary shares were issued at nil consideration to Simon High as approved by shareholder
resolution at the Company’s Annual General Meeting on 28 November 2011. These shares were fair valued at $570,000.
C. The fair value of the options and performance rights with market related vesting conditions were valued using a Monte Carlo
simulation model. The use of a Monte Carlo Simulation model simulates multiple future price projections for both SCEE shares
and the shares of the peer group against which they are tested. The options and performance rights with non-market related
vesting conditions were valued using the Black-Scholes option model. The values derived from these models are allocated to
each reporting period evenly over the period from grant date to vesting date. The value disclosed is the fair value of the
options and performance rights recognised in this reporting period.
D. The 419,664 performance rights to be allocated to Simon High under the 2012 LTI are still subject to shareholder approval
but have been recognised as set out in (C) above.
Analysis of STI included in remuneration
Details of the vesting profile of the STI awarded as remuneration to the Managing Director and the named executives are below:
Managing Director
Simon High
Executives
Simon Buchhorn
Chris Douglass (B)
Stephen Fewster
Included in remuneration $
% vested in year
% forfeited in year
Short term incentive (A)
105,000
42,830
-
39,116
44%
44%
-
44%
56%
56%
-
56%
Note: Gerard Moody and Philip Dawson ceased to be regarded as KMP from 1 July 2011.
(A) Amounts included in remuneration for the financial year represent the amount that vested in the financial year based on
achievement of personal goals and satisfaction of specified performance criteria set for the 2011 financial year. No amounts
vest in future financial years in respect of the STI schemes for the 2011 financial year. The 2012 financial year STI will be assessed
by the Nomination and Remuneration Committee based on achievement of personal goals and satisfaction of specified
performance criteria set for the 2012 financial year.
(B) Chris Douglass was appointed Chief Financial Officer on 19 September 2011 and therefore was not entitled to receive any
STI payments relating to the 2011 financial year.
26
Southern Cross Electrical Engineering Limited Annual Report 2012
Remuneration Report – audited (continued)
Share Based Payments
Performance rights granted as remuneration in 2012
During the period performance rights over ordinary shares in the company were granted as remuneration to KMP. These performance
rights will vest subject to the meeting of performance set out below. Details on performance rights that were granted during the
period are as follows.
Table 2 - 2012 Performance Rights
Granted
Terms and Conditions for each Grant
Vested
As at
30 June
2012
Forfeited
As at
30 June
2012
No.
Grant
date
Fair value per
performance
right at grant
date ($)
Exercise
price per
performance
right ($)
Vesting Date
Expiry
Date
No. % No. %
Executive Director
Simon High1, 3
Simon High2, 3
Executives
Simon Buchhorn1
Simon Buchhorn2
Chris Douglass1
Chris Douglass2
209,832
2/5/12
209,832
2/5/12
93,503
2/5/12
93,503
2/5/12
82,434
2/5/12
82,434
2/5/12
771,538
1.25
0.92
1.25
0.92
1.25
0.92
0.00
0.00
0.00
0.00
0.00
0.00
30 June 2014
30 June 2015
30 June 2014
30 June 2015
30 June 2014
30 June 2015
30 June 2014
30 June 2015
30 June 2014
30 June 2015
30 June 2014
30 June 2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1. Performance rights granted with EPS growth as the vesting condition
2. Performance rights granted with Absolute TSR as the vesting condition
3. Performance rights to be allocated to Simon High are subject to shareholder approval
Up to 100% of the allocated performance rights may vest, subject to the achievement of the performance conditions as set out below.
The key terms of the performance rights are:
• To be performance tested over a three year period from 1 July 2011 to 30 June 2014 (“Performance Period”);
• No performance rights will vest until 30 June 2014;
• Performance testing criteria are 50% against Absolute Total Shareholder Return (“TSR”) performance, and 50% against
Earnings Per Share (“EPS”) performance; and
• Expiry on the 4th anniversary of the grant date unless an earlier lapsing date applies.
27
Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’ Report
For the year ending 30 June 2012
(continued)
Remuneration Report – audited (continued)
The TSR formula is:
((Share Price at Test Date – Share Price at Start Date) + (Dividends Reinvested))/Share Price at Start Date
TSR will be assessed against targets for threshold performance of 12% per annum compounded over the Performance Period and
for stretch performance of 15% per annum compounded over the Performance Period. The vesting schedule is as follows for TSR
performance over the Performance Period:
Less than 12% per annum compounded
12% per annum compounded
Between 12% and 15% per annum compounded
At or above 15% per annum compounded
0% vesting
50% vesting
Pro-rata vesting between 50% and 100%
100% vesting
EPS will be assessed against targets for threshold performance of 12 cents per share at the end of the Performance Period and
for stretch performance of 15 cents per share at the end of the Performance Period. The vesting schedule is as follows for EPS
performance at the end of the Performance Period:
Less than 12 cents per share
12 cents per share
Between 12 and 15 cents per share
At or above 15 cents per share
0% vesting
50% vesting
Pro-rata vesting between 50% and 100%
100% vesting
Once the performance measurement calculation has been finalised the company will allot and issue the equivalent number of shares
at nil consideration on the basis of one ordinary share per vested performance right for all performance rights exercised.
Performance rights granted as remuneration in 2011
During the 2011 financial year performance rights over ordinary shares in the company were granted as remuneration to KMP. These
performance rights will vest subject to the meeting of performance conditions summarised below. Details on the performance rights
that were granted during the 2011 period are as follows:
Table 3 - 2011 Performance Rights
Granted
Terms and Conditions for each Grant
No.
Grant
date
Fair value per
performance right
at grant date ($)
Exercise price
per performance
right ($)
Vesting
Date
Expiry
Date
Vested
As at 30 June
2012
Forfeited
As at 30 June
2012
No.
%
No.
%
Executives
Simon
Buchhorn1
Stephen
Fewster1, 3
Simon
Buchhorn2
Stephen
Fewster2, 3
30,215
31/7/2010
27,596
31/7/2010
30,216
31/7/2010
27,595
31/7/2010
115,622
0.96
0.96
0.67
0.67
0.00
0.00
0.00
0.00
30 June
2012
30 June
2012
30 June
2012
30 June
2012
30 June
2013
30 June
2013
30 June
2013
30 June
2013
-
-
-
-
30,215
100%
27,596
100%
15,108
50%
15,108
50%
-
15,108
-
-
27,595
100%
100,514
-
1. Performance rights granted with EPS growth as the vesting condition
2. Performance rights granted with Relative TSR as the vesting condition
3. Stephen Fewster resigned on 7 October 2011 and forfeited his performance rights all of which had not yet vested on that date.
28
Southern Cross Electrical Engineering Limited Annual Report 2012
Remuneration Report – audited (continued)
The performance rights are to be performance tested over a three-year period from 1 July 2009 to 30 June 2012. The hurdles used to
determine performance are Earnings per Share (EPS) growth and Relative Total Shareholder Return (TSR).
The performance rights based on the three year compound EPS growth of the Company (50% of award) will vest as follows:
Below 7.5%
Between 7.5% and 10%
Above 10%
Nil
Pro-rata vesting between 50% and 100%
100% satisfied
The performance rights based on the relative growth in the TSR of the Company (50% of award) in comparison to the basket of
companies named below, as selected by the Board, will vest as follows:
0 to 49th percentile
50th to 74th percentile
75th to 100th percentile
Nil
Linear scale: 50% to 98% satisfied
100% satisfied
The Comparator Companies Basket comprises the following companies provided that any of the following companies whose shares
are not quoted on the ASX for the relevant three year period will not be included:
Ausenco Ltd
Engenco Ltd
Nomad Ltd
Campbell Brothers Ltd
Fleetwood Ltd
Sedgman Ltd
Cardno Ltd
Lycopodium Ltd
Worley Parsons Ltd
Clough Ltd
Mermaid Marine Ltd
VDM Group Ltd
Coffey Ltd
Monadelphous Ltd
Analysis of movement in options
The movement during the reporting period, by value, of options over ordinary shares in the Company held by each key management
person is detailed below:
Executive
Stephen Fewster1
Granted in year
$
Value of options exercised in year
$
Lapsed in year
$
-
-
-
-
21,272
21,272
1. Stephen Fewster resigned on 7 October 2011 and forfeited his options all of which had vested but not been exercised on that date.
Employment Contracts
All executives have non-fixed term employment contracts. The company may terminate the employment contract by providing the
other party notice as follows:
Executive
Notice Period
Simon High
Simon Buchhorn
Chris Douglass
Stephen Fewster
12 months*
3 months
6 months
3 months
* Simon High must provide six months notice to the Company prior to resignation. All other executives must provide notice as per above.
The Group retains the right to terminate a contract immediately by making a payment in lieu of the notice period. An executive
may be terminated immediately for a breach of their employment conditions. Upon termination the executive is entitled to receive
their accrued annual leave and long service leave together with any superannuation benefits. There are no other termination
payment entitlements.
29
Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
Corporate
Governance
Statement
30
30
Southern Cross Electrical Engineering Limited Annual Report 2012
Corporate Governance Statement
For the year ending 30 June 2012
The Board of Directors of Southern Cross Electrical Engineering Limited is responsible for the corporate governance of the
consolidated entity. The Board guides and monitors the business and affairs of SCEE on behalf of the shareholders by whom they are
elected and to whom they are accountable.
The table below summarises the Group’s compliance with the Corporate Governance Council’s Recommendations.
Recommendation
Comply
Yes / No
Explanation
Principle 1 – Lay solid foundations for management and oversight
1.1
1.2
1.3
Companies should establish the functions reserved for the board and those
delegated to senior management and disclose those functions.
Companies should disclose the process for evaluating the performance of senior
executives.
Companies should provide the information indicated in the Guide to reporting on
Principle 1.
Principle 2 – Structure the board to add value
2.1
2.2
2.3
2.4
2.5
2.6
A majority of the Board should be independent directors.
The chairman should be an independent director.
The roles of chairman and chief executive officer should not be exercised by the
same individual.
The Board should establish a nomination committee.
Companies should disclose the process for evaluating the performance of the board,
its committees and individual directors.
Companies should provide the information indicated in the Guide to reporting on
Principle 2.
Principle 3 – Promote ethical and responsible decision making
Establish a code of conduct and disclose the code or a summary of the code as to:
• the practices necessary to maintain confidence in the Company’s integrity;
• the practices necessary to take into account their legal obligations and the
reasonable expectations of their stakeholders; and
• the responsibility and accountability of individuals for reporting and investigating
reports of unethical practices.
Establish a policy concerning diversity and disclose the policy or a summary of that
policy. The policy should include requirements for the board to establish measurable
objectives for achieving gender diversity for the board to assess annually both the
objectives and progress in achieving them.
Companies should disclose in each annual report the measurable objectives for
achieving gender diversity set by the board in accordance with the diversity policy
and progress towards achieving them.
Companies should disclose in each annual report the proportion of women
employees in the whole organisation, women in senior executive positions and
women on the board.
3.1
3.2
3.3
3.4
3.5
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Pages 33-34
Pages 21-23
Pages 31-37
Pages 33-34
Pages 33-34
Pages 33-34
Pages 36-37
Pages 33-34
Pages 33-37
Yes
Website
No
Pages 34-35
No
Pages 34-35
Yes
Pages 34-35
Companies should provide the information indicated in the Guide to reporting on
Principle 3.
Pages 31-37
Principle 4 – Safeguard integrity in financial reporting
4.1
4.2
4.3
4.4
The Board should establish an audit committee.
Structure the audit committee so that it consists of:
• only non-executive directors;
• a majority of independent directors;
• an independent chairman, who is not chairman of the Board; and
• at least three members.
The audit committee should have a formal charter.
Companies should provide the information indicated in the Guide to reporting on
Principle 4.
Yes
Yes
Pages 35-36
Pages 35-36
Yes
Yes
Website
Pages 31-37
31
Southern Cross Electrical Engineering Limited Annual Report 2012
Corporate Governance Statement
(continued)
For the year ending 30 June 2012
Recommendation
Principle 5 – Make timely and balanced disclosure
Comply
Yes / No
Explanation
Yes
Website
Yes
Yes
Yes
Yes
Website
Pages 31-37
Pages 34-35
Pages 34-35
Yes
Page 36
5.1
5.2
7.1
7.2
7.3
7.4
Establish written policies designed to ensure compliance with ASX Listing Rule
disclosure requirements and to ensure accountability at a senior management level
for that compliance and disclose those policies or a summary of those policies.
Companies should provide the information indicated in the Guide to reporting on
Principle 5.
Yes
Pages 31-37
Principle 6 – Respect the rights of shareholders
6.1
6.2
Design and disclose a communication strategy to promote effective communication
with shareholders and encourage effective participation at general meetings.
Companies should provide the information indicated in the Guide to reporting on
Principle 6.
Principle 7 – Recognise and manage risk
Companies should establish policies for the oversight and management of material
business risks and disclose a summary of those policies.
The board should require management to design and implement the risk
management and internal control system to manage the company’s material
business risks and report to it on whether those risks are being managed
effectively. The Board should disclose that management has reported to it as to the
effectiveness of the company’s management of its material business risk.
The board should disclose whether it has received assurance from the chief
executive officer (or equivalent) and the chief financial officer (or equivalent) that
the declaration provided in accordance with section 259A of the Corporations Act
is founded on a sound system of risk management and internal control and that the
system is operating effectively in all material respects in relation to financial reporting
risks.
Companies should provide the information indicated in the Guide to reporting on
Principle 7.
Yes
Pages 31-37
Principle 8 – Remuneration fairly and responsibly
8.1
8.2
8.3
8.4
The Board should establish a remuneration committee.
The remuneration committee should be structured so that it:
• consists of a majority of independent directors;
• is chaired by an independent chair;
• has at least three members.
Clearly distinguish the structure of non-executive directors’ remuneration from that
of executive directors and senior executives.
Companies should provide the information indicated in the Guide to reporting on
Principle 8.
Yes
Yes
Yes
Yes
Pages 36-37
Pages 36-37
Pages 21-29
Pages 31-37
SCEE’s corporate governance practices were in place throughout the year ended 30 June 2012, unless otherwise stated. SCEE
complies in all material respects with the Council’s best practice recommendations.
Various corporate governance practices are discussed within this statement. For further information on corporate governance
policies adopted by SCEE refer to our website: www.scee.com.au
32
Southern Cross Electrical Engineering Limited Annual Report 2012
Board Functions
The Board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations.
In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to
adequately manage those risks.
To ensure that the Board is well equipped to discharge its responsibilities it has established processes for the nomination and
selection of directors and for the operation of the Board.
The responsibility for the operation and administration of the company is delegated by the Board to the Managing Director and
the executive management team. The Board ensures that this team is appropriately qualified and experienced to discharge their
responsibilities and has in place procedures to assess the performance of the Managing Director and the executive
management team.
Whilst at all times the Board retains full responsibility for guiding and monitoring the company, in discharging its stewardship it
makes use of sub-committees. Specialist committees are able to focus on a particular responsibility and provide informed feedback
to the Board.
To this end the Board has established the following committees:
• Audit and Risk Management Committee; and
• Nomination and Remuneration Committee.
The roles and responsibilities of these committees are discussed throughout this Corporate Governance Statement.
The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risk identified
by the Board. The Board has a number of mechanisms in place to ensure this is achieved including:
• Board approval of a strategic plan designed to meet stakeholders’ needs and manage business risk;
• ongoing development of the strategic plan and approving initiatives and strategies designed to ensure continued growth
and success of the entity; and
• implementation of budgets by management and monitoring progress against budgets via the establishment and reporting
of both financial and non-financial key performance indicators.
Other functions reserved to the Board include:
• approval of the annual and half-yearly financial reports;
• approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;
• ensuring that any significant risks that arise are identified, assessed, appropriately managed and monitored; and
• reporting to shareholders.
Structure of the Board
The skills, experience and expertise relevant to the position of Director held by each Director in office at the date of the annual report
is included in the Directors’ Report on pages 14 and 15. Directors of the Company are considered to be independent when they are
independent of management and free from any business or other relationship that could materially interfere with or could reasonably
be perceived to materially interfere with the exercise of their unfettered and independent judgement.
In the context of Director independence, ‘materiality’ is considered from both the company and individual director perspective.
The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be
quantitatively immaterial if it is equal or less than 5% of the appropriate base amount. It is presumed to be material (unless there
is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors
considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the
contractual or other arrangements governing it and other factors which point to the actual ability of the director in question to shape
the direction of the company’s loyalty.
In accordance with the definition of independence above, and the materiality thresholds set, Mr J Cooper, Mr D Parkin, Mr P Forbes
and Dr J Hamilton are considered to be Independent Directors. There are procedures in place, agreed by the Board, to enable Directors,
in furtherance of their duties, to seek independent professional advice at the company’s expense.
33
Southern Cross Electrical Engineering Limited Annual Report 2012
Corporate Governance Statement
(continued)
For the year ending 30 June 2012
Structure of the Board (continued)
Mr P Forbes and Dr J Hamilton commenced on 1 October 2011 which resulted from that date in there being a majority of
independent Non-Executive Directors with combined skills and capabilities which best serve the interests of shareholders.
The term in office held by each Director in office at the date of this report is as follows:
Director
Term in office (Years)
Role
John Cooper
Simon High
Gianfranco Tomasi
Derek Parkin
Peter Forbes (appointed 1 October 2011)
Jack Hamilton (appointed 1 October 2011)
Performance
5
2
34
1
0
0
Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
The performance of the Board and key executives is reviewed regularly against both measurable and qualitative indicators. During the
reporting period, the Nomination and Remuneration Committee conducted performance evaluations of the executive team which
involved an assessment of each executive’s performance against specific and measurable qualitative and quantitative performance
criteria. It is the intention to conduct regular reviews of each Board member’s performance. The performance criteria against which
directors and executives are assessed are aligned with the financial and non-financial objectives of SCEE.
Trading Policy
Under the company’s Share Trading Policy, a Director, executive or other employee must not trade in any securities of the company at
any time when they are in possession of unpublished, price-sensitive information in relation to those securities. A Director or executive
is not allowed to deal in Securities of the Company as a matter of course in the following periods:
• from balance date to the release of annual or half yearly results;
• within the period of 1 month prior to the issue of a prospectus; and
• where there is in existence price sensitive information that has not been disclosed because of an ASX Listing Rule exception.
Directors and executives should wait at least two hours after the relevant release before dealing in Securities so that the market has
had time to absorb the information.
Before commencing to trade, a Director or any executive or other employee nominated by the Board must first notify the company
secretary of their intention to do so. The notification must state that the proposed purchase or sale is not as a result of access to, or
being in possession of, price sensitive information that is not currently in the public domain. As required by the ASX Listing Rules, the
company notifies the ASX of any transaction conducted by the Directors in the securities of the company.
Directors, executives and employees of the Company must not engage in hedging arrangements, deal in derivatives or enter into
other arrangements which limit the economic risk of any unvested Southern Cross Electrical Engineering Limited entitlements under
any equity based remuneration scheme (such as an incentive or performance based scheme).
Diversity
The Code of Conduct for the Company to its stakeholders commits it to be an equal opportunity employer and to promote and
support a diverse workforce at all levels. However the Board has not yet established a specific policy regarding gender, age, ethnic and
cultural diversity which includes a requirement to establish measurable objectives for achieving diversity. The Board is considering
preparing such a policy for approval in the forthcoming financial year.
34
Southern Cross Electrical Engineering Limited Annual Report 2012
Diversity (continued)
Gender representation in the Company is as follows:
30 June 2012
30 June 2011
Female (%)
Male (%)
Female (%)
Male (%)
Board representation
Senior management representation
Group representation
0%
14%
10%
100%
86%
90%
0%
8%
10%
100%
92%
90%
The Company has also implemented a formal Indigenous strategy in both our Australian and international operations to encourage
community engagement. This strategy outlines the Company’s commitment to providing Indigenous employment opportunities,
ongoing support, training and career development.
Risk
The Board determines the company’s risk profile and is responsible for overseeing and approving risk management strategy and
policies, internal compliance and internal control. The company’s process of risk management and internal compliance and
control includes:
• establishing the company’s goals and objectives, and implementing and monitoring strategies and policies to achieve these
goals and objectives;
• continuously identifying and measuring risks that might impact upon the achievement of the company’s goals and objectives,
and monitoring the environment for emerging factors and trends that affect these risks;
• formulating risk management strategies to manage identified risks, and designing and implementing appropriate risk
management policies and internal controls; and
• monitoring the performance of, and continuously improving the effectiveness of, risk management systems and internal
compliance and controls, including an annual assessment of the effectiveness of risk management and internal compliance
and control. To this end comprehensive practices are in place that are directed towards achieving the following objectives:
- effectiveness and efficiency in the use of the company’s resources;
- compliance with applicable laws and regulations; and
- preparation of reliable published financial information.
Audit and Risk Management Committee
The Board has an Audit and Risk Management Committee which operates under a charter approved by the Board. It is the Board’s
responsibility to ensure that an effective internal control framework exists within the entity to manage its key inherent risks. This
includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of
assets, the maintenance of proper accounting records and the reliability of financial information as well as non-financial considerations
such as the benchmarking of operational key performance indicators. The Board has delegated responsibility for establishing and
maintaining a framework of risk management, internal control and ethical standards to the Audit and Risk Management Committee.
The committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the
financial reports. All members of the Audit and Risk Management Committee are Non-Executive Directors. The members of the audit
committee during the year were:
D Parkin (Chairman)
J Cooper
F Tomasi
P Forbes
J Hamilton
(resigned 30 September 2011)
(resigned 30 September 2011)
(appointed 1 October 2011)
(appointed 1 October 2011)
35
Southern Cross Electrical Engineering Limited
Directors’ report (continued)
Corporate governance statement (continued)
Southern Cross Electrical Engineering Limited Annual Report 2012
Corporate Governance Statement
(continued)
For the year ending 30 June 2012
Audit and Risk Management Committee (continued)
Qualifications of audit committee members
D Parkin is currently Professor of Accounting at the University of Notre Dame Australia. Previously he was an assurance partner with
Arthur Andersen and Ernst & Young.
J Cooper has over 35 years experience in the management of risks associated with the industry in which we operate.
G Tomasi understands all facets of the business being the founder. His appointment to the Audit and Risk Management Committee
was on a temporary basis until the appointment of the additional Independent Non-Executive Directors was completed.
P Forbes is a Fellow of Certified Practicing Accountants and a Fellow of Chartered Secretaries Australia.
J Hamilton has a Doctorate of Philosophy (Engineering) from the University of Melbourne and many years experience in the
management of risks associated with the industry in which we operate.
For details on the number of meetings of the Audit and Risk Management Committee held during the year and the attendees at those
meetings, refer to page 17 of the Directors’ Report.
Managing Director and CFO Certification
The Managing Director and Chief Financial Officer have provided a written statement to the Board that:
• their views provided on the company’s and consolidated entity’s financial reports are founded on a sound system of
risk management and internal compliance and control which implements the financial policies adopted by the Board; and
• that the company’s and consolidated entity’s risk management and internal compliance and control systems are
operating effectively in all material respects.
Nomination and Remuneration Committee
It is the company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team
by remunerating Directors and key executives fairly and appropriately with reference to relevant employment market conditions. To
assist in achieving this objective, the Nomination and Remuneration Committee links the nature and amount of executive directors’
and officers’ emoluments to the company’s financial and operational performance. The expected outcomes of the remuneration
structure are:
• retention and motivation of key executives;
• attraction of quality management to the Company; and
• performance incentives which allow executives to share the rewards of the success of SCEE.
For full discussion of the company’s remuneration philosophy and framework and the remuneration received by Directors and
executives in the current period, please refer to the Remuneration Report, which is contained within the Directors’ Report.
In relation to the issuing of options and performance rights, discretion is exercised by the Board, having regard to the overall
performance of SCEE and the performance of the individual during the period. The SCEE Senior Management Long Term Incentive
Plan rules have been approved by shareholders.
There is no scheme to provide retirement benefits, other than statutory superannuation, to Directors.
36
Southern Cross Electrical Engineering Limited Annual Report 2012
Nomination and Remuneration Committee (continued)
The Board is responsible for determining and reviewing compensation arrangements for the Directors themselves and the executive
team. The Board has established a Nomination and Remuneration Committee, comprising three Non-Executive Directors including
two Independent Directors. Members of the Nomination and Remuneration Committee throughout the year were:
J Cooper
P Forbes
F Tomasi
D Parkin
J Hamilton
(Chairman, resigned 30 September 2011)
(appointed Chairman 1 October 2011)
(resigned 30 September 2011)
(appointed 1 October 2011)
The committee is also responsible for ensuring that the Board continues to operate within the established guidelines, including when
necessary, selecting candidates for the position of Director.
For details of Directors’ attendance at Nomination and Remuneration Committee meetings, refer to page 17 of the Directors’ Report.
Signed in accordance with a resolution of the Directors.
John Cooper
Director
27 August 2012
37
Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
Financial
Statements
38
38
Southern Cross Electrical Engineering Limited Annual Report 2012
Statement of Comprehensive Income
For the year ended 30 June 2012
Note
2012
$’000
2011
$’000
Contract revenue
Contract expenses
Gross profit
Other income/(loss)
Employee benefits expenses
Occupancy expenses
Administration expenses
Other expenses
Business combination expenses
Depreciation expense
Amortisation of customer contract intangibles
Results from operations
Finance income
Finance expenses
Net finance income/(expenses)
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) after income tax from continuing operations
Attributable to:
Owners of the Company
Other comprehensive income:
Foreign currency translation gains for foreign operations
Income tax on other comprehensive income
Other comprehensive income, net of income tax
Total comprehensive income/(loss)
Attributable to:
Owners of the Company
Earnings/(loss) per share:
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
6
7
8
9
11
35
10
10
10
12
13
13
219,983
(176,568)
43,415
538
(14,805)
(1,405)
(4,507)
(1,050)
-
(2,669)
(151)
19,366
1,162
(790)
372
101,780
(85,598)
16,182
(64)
(10,096)
(733)
(3,414)
(774)
(456)
(1,605)
(151)
(1,111)
170
(970)
(800)
19,738
(1,912)
(6,030)
13,708
260
(1,652)
13,708
(1,652)
(659)
-
(659)
13,049
358
-
358
(1,293)
13,049
(1,293)
8.50
8.50
(1.28)
(1.28)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
39
Southern Cross Electrical Engineering Limited Annual Report 2012
Balance Sheet
As at 30 June 2012
Assets
Current assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Tax receivable
Inventories
Construction work in progress
Prepayments
Assets held for sale
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Unearned revenue
Loans and borrowings
Employee entitlements
Tax payable
Total current liabilities
Non-current liabilities
Loans and borrowings
Employee entitlements
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
The above balance sheet should be read in conjunction with the accompanying notes.
40
Note
2012
$’000
2011
$’000
14
15
16
17
18
19
20
23
35
24
25
28
26
28
26
12
29
29
31,545
-
21,665
1,558
1,166
35,751
262
-
91,947
17,147
17,551
34,698
126,645
26,988
4
388
4,806
1,192
33,378
1,176
383
4,841
6,400
39,778
86,867
57,554
261
29,052
86,867
26,280
5,000
17,196
312
1,301
5,931
173
3,610
59,803
9,083
17,701
26,785
86,588
7,001
600
3,486
2,623
-
13,710
-
205
3
209
13,919
72,668
56,984
340
15,344
72,668
Southern Cross Electrical Engineering Limited Annual Report 2012
Statement of Changes in Equity
As at 30 June 2012
Share
Capital
$’000
Retained
Earnings
$’000
Share Based
Payments
Reserve
$’000
Translation
Reserve
$’000
Total
Equity
$’000
Balance as at 1 July 2010
24,964
22,584
321
(450)
47,420
Total comprehensive income for the
period
Loss for the period
Foreign currency translation gain
Total comprehensive income/(loss)
Transactions with owners, recorded
directly in equity
Issue of ordinary shares
Dividends to equity holders
Cost of share-based payment
Total transactions with owners
Balance as at 30 June 2011
-
-
-
32,020
-
-
32,020
56,984
(1,652)
-
(1,652)
-
(5,588)
-
(5,588)
15,344
-
-
-
-
-
110
110
432
-
358
358
-
-
-
-
(92)
(1,652)
358
(1,293)
32,020
(5,588)
110
26,542
72,668
Share
Capital
$’000
Retained
Earnings
$’000
Share Based
Payments
Reserve
$’000
Translation
Reserve
$’000
Total
Equity
$’000
Balance as at 1 July 2011
56,984
15,344
432
(92)
72,668
Total comprehensive income for the
period
Profit for the period
Foreign currency translation loss
Total comprehensive income/(loss)
Transactions with owners, recorded
directly in equity
Issue of ordinary shares
Dividends to equity holders
Cost of share-based payment
Total transactions with owners
-
-
-
-
-
570
570
13,708
-
13,708
-
-
-
-
Balance as at 30 June 2012
57,554
29,052
-
-
-
-
-
580
580
1,012
-
(659)
(659)
-
-
-
-
(751)
13,708
(659)
13,049
-
-
1,150
1,150
86,867
The above statement of changes in equity should be read in conjunction with the accompanying notes.
41
Southern Cross Electrical Engineering Limited Annual Report 2012
Statement of Cash Flows
For the year ended 30 June 2012
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Interest received
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from the sale of assets
Acquisition of property, plant and equipment
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares (net of costs)
Repayment of borrowings
Dividends paid
Proceeds/(Payment) for term deposits
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 30 June
Note
2012
$’000
2011
$’000
185,859
(175,060)
1,162
(790)
(1,192)
9,979
3,732
(9,740)
(6,008)
-
(2,915)
-
5,000
2,085
6,056
26,280
(791)
31,545
105,142
(103,531)
170
(970)
(599)
212
-
(1,779)
(1,779)
32,020
(1,448)
(5,588)
(5,000)
19,984
18,417
7,498
366
26,280
30
29
14
The above cash flow statement should be read in conjunction with the accompanying notes.
42
Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited Annual Report 2012
Index to notes
to the Financial
Report
For the year ending 30 June 2012
44
1. Reporting entity
44
2. Basis of preparation
45
3. Significant accounting policies
53
4. Determination of fair values
54
5. Segment reporting
55
6. Contract revenue
55
7. Other income/(loss)
55
8. Employee benefits expenses
55
9. Other expenses
10. Finance income and expenses
55
11. Depreciation and amortisation expenses 56
56
12. Income tax expense
57
13. Earnings per share
58
14. Cash and cash equivalents
58
15. Term deposits
58
16. Trade and other receivables
58
17. Inventories
59
18. Construction work in progress
59
19. Prepayments
59
20. Assets held for sale
59
21. Investments in subsidiaries
60
22. Parent entity disclosures
61
23. Property, plant and equipment
62
24. Trade and other payables
62
25. Unearned revenue
62
26. Employee entitlements
62
27. Financial instruments
68
28. Loans and borrowings
29. Capital and reserves
69
30. Reconciliation of cash flows
from operating activities
31. Related parties
32. Share-based payments
33. Commitments
34. Contingencies
35. Intangible assets – goodwill
and customer contracts
36. Subsequent events
37. Auditor’s remuneration
71
72
76
79
79
80
81
81
43
43
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
1. Reporting entity
Southern Cross Electrical Engineering Limited (“the Company”, “the parent”) is a company incorporated and domiciled in Australia.
The company’s shares are publicly traded on the Australian Stock Exchange.
The consolidated financial statements for the year ended 30 June 2012 comprise the Company and its subsidiaries (together
referred to as the “Group” and individually as “Group entities”). The Group is a for-profit entity and the nature of the operations
and principal activities of the Group are described in the Directors’ Report.
2. Basis of preparation
(a) Statement of compliance
The consolidated financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting Standards (“AASBs”) (including Australian Accounting Interpretations) adopted by the Australian Accounting
Standards Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group complies with
International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards
Board (IASB). A listing of new standards and interpretations not yet adopted is included in note 3(u).
The consolidated financial statements were authorised for issue by the Board of Directors on 27 August 2012.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following material
items in the statement of financial position:
•
Share-based payment arrangements are measured at fair value.
The methods used to measure fair values are discussed further in note 4.
(c) Functional and presentation currency
(i)
Functional and presentation currency
Both the functional and presentation currency of Southern Cross Electrical Engineering Limited and its Australian subsidiaries
are Australian dollars ($). The functional currency for the Peruvian subsidiary is Neuvos Soles. Overseas functional currencies
are translated to the presentation currency (see below).
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of
exchange ruling at the balance sheet date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined.
(iii) Translation of Group Entities functional currency to presentation currency
The results of the overseas subsidiaries are translated into Australian Dollars as at the date of each transaction. Assets and
liabilities are translated at exchange rates prevailing at balance date.
Exchange variations resulting from the translation are recognised in other comprehensive income and presented in the
foreign currency translation reserve in equity.
44
Southern Cross Electrical Engineering Limited Annual Report 2012
2. Basis of preparation (continued)
(d) Use of estimates and judgements
The preparation of financial statements in conformity with AASBs requires management to make judgements, estimates and
assumptions that affect the application of 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
in the period in which the estimate is revised and in any future periods affected. Information about accounting estimates is
included in the following notes:
•
•
Note 32 – measurement of share based payments; and
Note 35 – recoverable amount for testing goodwill.
Critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the
financial statements relate to contract revenue (note 3(m)(i) and 6) and contract work in progress (note 3(h)(i) and 18).
Revenue from construction contracts is recognised using the percentage of completion method. Judgement is exercised
in determining the stage of completion of the contract and in reliably estimating the total contract revenue and contract
costs to completion. The stage of contract completion is generally measured by reference to physical completion. An
assessment of total labour hours and other costs incurred to date as a percentage of estimated total costs for each contract
is used if it is an appropriate proxy for physical completion. Task lists and milestones are also used to calculate or confirm the
percentage of completion if appropriate.
3. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements, and have been applied consistently by Group entities.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date control ceases. The accounting policies of
subsidiaries have been changed when necessary to align them with the policies adopted by the Group.
(ii) Transactions eliminated on consolidation
Intra-group balances and any unrealised income and expenses arising from intra-group transactions are eliminated in
preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted
investees are eliminated against the investments to the extent of the Group’s interest in the investee. Unrealised losses
are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange
rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting
date are retranslated to the functional currency at the foreign exchange rate at that date. The foreign currency gain or
loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period,
adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at
the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are
measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was
determined. Foreign currency differences arising on retranslation are recognised in profit or loss.
45
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
3. Significant accounting policies (continued)
(ii) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to Australian dollars at exchange rates at the reporting date. Income and expenses of foreign operations are
translated to Australian dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency
translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency
translation reserve is transferred to profit or loss.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the
settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment
in a foreign operation and are recognised in other comprehensive income and presented in the foreign currency
translation reserve in equity.
(c) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and on hand and short term deposits with an original
maturity 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 fair value.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.
(d) Financial instruments
(i) Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial
assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which
the Group becomes a party to the contractual provisions of the instrument.
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 on the financial asset in a transaction which substantially all the risks and
rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or
retained by the Group is recognised as a separate asset or liability.
Financial assets and 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 on a net basis or to realise the
asset and settle the liability simultaneously.
Financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest rate method.
The Group has the following non-derivative financial assets:
•
•
Loans and receivables (including restricted term deposits).
Cash and cash equivalents.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any
impairment losses.
Loans and receivables comprise trade and other receivables (see note 16).
46
Southern Cross Electrical Engineering Limited Annual Report 2012
3. Significant accounting policies (continued)
(ii) Non-derivative financial liabilities
Financial liabilities are recognised initially on the trade date at which the Group becomes party to the contractual
provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged
or cancelled or expire. Financial assets and 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 on a net basis
or to realise the asset and settle the liability simultaneously.
Financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest rate method.
The Group’s non-derivative financial liabilities comprise Loans and borrowings and Trade and other payables.
(iii) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share
options are recognised as a deduction from equity, net of any tax effects.
(e) 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.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets
includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working
condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they
are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that
equipment. Borrowing costs related to the acquisition or construction of qualifying assets are recognised as part of
the asset.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income”
in profit or loss.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item
if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be
measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of
property, plant and equipment are recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for
cost, less its residual value.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful life of each part of an item
of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future
economic benefits embodied in the asset. 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.
Land is not depreciated.
47
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
3. Significant accounting policies (continued)
The estimated useful lives for the current and comparative periods are as follows:
Buildings
Leasehold improvements
Plant and equipment
Motor vehicles
Office furniture and fittings
40 years
6 – 38 years
2 – 10 years
2 – 10 years
2 – 10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
(f) Intangible assets
(i) Goodwill
Goodwill is measured at cost less accumulated impairment losses. The Group measures goodwill at the acquisition
date as:
•
•
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is
achieved in stages, the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
•
(ii) Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated
amortisation and accumulated impairment losses.
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific
asset to which it relates. All other expenditure including expenditure on internally generated goodwill and brands is
recognised in profit or loss as incurred.
(iv) Amortisation
Amortisation is calculated over the cost of the asset, or another amount substituted for cost, less its residual value.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets,
other than goodwill, from the date that they are available for use, since this most closely reflects the expected pattern of
consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current period
are as follows:
•
Customer contracts
2012
1 – 5 years
2011
1 – 5 years
Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted
if appropriate.
(g) Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases.
Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the net present
value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the
accounting policy applicable to that asset.
Other leases are operating leases and are not recognised in the Group’s Balance Sheet.
48
Southern Cross Electrical Engineering Limited Annual Report 2012
3. Significant accounting policies (continued)
(h) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out
principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs
incurred in bringing them to their existing location and condition. In the case of work in progress, cost includes an
appropriate share of production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses.
(i) Construction work in progress
Construction work in progress represents the gross unbilled amount expected to be collected from customers for contract
work performed to date. It is measured at cost plus profit recognised to date (see note 3(m)(i)) less progress billings and
recognised losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable
overheads incurred in the Group’s contract activities based on normal operating capacity.
If payments received from customers exceed the income recognised, then the difference is presented as deferred income in
the balance sheet.
(j) Impairment
(i) Financial assets
A financial asset not carried at fair value through the profit or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a
loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the
estimated future cash flows of the asset that can be estimated reliably.
Objective evidence that a financial asset (including equity securities) is impaired can include 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, the disappearance of an active market for a security. In addition, for an
investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence
of impairment.
The Group considers evidence of impairment for receivables at both a specific asset level and collective level. All
individually significant receivables are assessed for specific impairment. All individually significant receivables found not
to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified.
Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables
with similar risk characteristics.
In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and
the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit
conditions are such that actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its
carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest
rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. When a
subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed
through profit or loss.
49
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
3. Significant accounting policies (continued)
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then
the asset’s recoverable amount is estimated. For goodwill the recoverable amount is estimated each year at the
same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For the purpose of 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 groups of assets (the
“cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is
allocated to cash-generating units that are expected to benefit from the synergies of the combination.
The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may
be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating
units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the
carrying amount of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in
prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
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.
(k) Employee benefits
(i) Long-term 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 plus related on costs; that benefit is discounted
to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the
reporting date on AAA credit-rated or government bonds that have maturity dates approximating the terms of the
Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid.
The calculation is performed using the Projected Unit Credit method.
(ii) Termination benefits
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date or
to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits
for voluntary redundancies are recognised as an expense if the Group has made an offer encouraging voluntary
redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.
(iii) Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related
service is provided.
50
Southern Cross Electrical Engineering Limited Annual Report 2012
3. Significant accounting policies (continued)
A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans 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.
(iv) Share-based payment transactions
The fair value of performance rights and share options granted to employees is recognised at grant date as an employee
expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled
to the performance rights and share options. The amount recognised as an expense is adjusted to reflect the number
of awards for which the related service and non-market performance conditions are expected to be met, such that
the amount ultimately recognised as an expense is based on the number of awards that meet the related service and
non-market performance conditions at the vesting date.
(l) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. 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. The unwinding of the discount is recognised as finance cost.
(m) Revenue
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable
that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific
recognition criteria must also be met before revenue is recognised:
(i) Construction contracts
Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and
incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably.
As soon as the outcome of a construction contract can be estimated reliably, contract revenue is recognised in profit or
loss in proportion to the stage of completion of the contract. Contract expenses are recognised as incurred unless they
create an asset related to future contract activity.
The stage of completion is assessed by reference to surveys of work performed. When the outcome of a construction
contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that
are likely to be recoverable. An expected loss on a contract is recognised immediately in profit or loss.
(ii) Services
Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction
at the reporting date. The stage of completion is assessed by reference to surveys of work performed.
All revenue is stated net of the amount of goods and services tax (GST).
(n) Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease.
Lease incentives received are recognised as an integral part of the total expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of
the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability.
51
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
3. Significant accounting policies (continued)
(o) Finance income and expenses
Finance income comprises interest income on funds invested and dividend income. Interest income is recognised as it
accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that
the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.
Finance expenses comprise interest expense on borrowings, bank charges and lease payments. Borrowing costs that are
not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss
using the effective interest rate method.
Foreign currency gains and losses are reported on a net basis.
(p) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected
tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for 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 the following temporary differences: the initial recognition of assets or liabilities in a transaction that
is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments
in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future.
In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse,
based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities
are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied
by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities
and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilised. 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.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay
the related dividend is recognised.
(q) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount
of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the
cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable
to, the ATO is included as a current asset or liability in the balance sheet.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from
investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.
(r) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary
shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary
shares, which comprise performance rights and share options granted to employees.
52
Southern Cross Electrical Engineering Limited Annual Report 2012
3. Significant accounting policies (continued)
(s) Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s components.
All operating segments’ operating results are reviewed regularly by the Group’s Managing Director to make decisions about
resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the Managing Director include items directly attributable to a segment as well as those
that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and
intangible assets other than goodwill.
(t) Financial guarantees
Financial guarantee contracts are initially measured at their fair values and subsequently measured at the higher of:
-
-
the amount of obligation under the contract, as determined in accordance with AASB 137 Provisions, Contingent
Liabilities and Contingent Assets; and
the amount recognised initially less cumulative amortisation recognised in accordance with AASB 118 Revenue.
The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach.
The probability has been based on:
-
-
-
the likelihood of the guaranteed party defaulting in a year period;
the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and
the maximum loss exposed if the guaranteed party were to default.
(u) New standards and interpretations issued but not yet effective
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after
1 July 2011 and have not been applied in preparing these consolidated financial statements. None of these are expected to
have a significant effect on the consolidated financial statements of the consolidated entity, except for:
(i) AASB 9 Financial Instruments which becomes mandatory for the consolidated entity’s 2014 consolidated financial
statements and could change the classification and measurement of financial assets and investments in jointly
controlled entities. The consolidated entity does not plan to adopt this standard early and the extent of the impact
has not been determined.
(ii) AASB 13 Fair Value Measurement which becomes mandatory for the consolidated entity’s 2014 consolidated financial
statements and explains how to measure fair value when required to by other accounting standards.
In the current year, the consolidated entity has adopted all of the new and revised standards and interpretations issued by the
AASB that are relevant to its operation and effective for the current annual reporting period. None of these have had any
significant impact on the consolidated financial statements.
4. Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on
the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed
in the notes specific to that asset or liability.
53
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
4. Determination of fair values (continued)
(i) Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is the estimated amount
for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s
length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without
compulsion. The fair value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for
similar items.
(ii) Inventories
The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the
ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the
effort required to complete and sell the inventories.
(iii) Trade and other receivables
The fair value of trade and other receivables acquired in a business combination, excluding construction work in progress,
but including service concession receivables, is estimated as the present value of future cash flows, discounted at the market
rate of interest at the reporting date.
(iv) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of
interest is determined by reference to similar lease agreements.
(v) Share-based payment transactions
The fair value of employee performance rights and share options is measured using an appropriate pricing model.
Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based
on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average
expected life of the instruments (based on historical experience and general holder behaviour), expected dividends, and the
risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the
transactions are not taken into account in determining fair value.
5. Segment reporting
Revenue is principally derived by the Group from the provision of electrical and instrumentation services to the resources, energy
and infrastructure sectors. The results and financial position of the Group’s single operating segment, electrical and instrumentation
services, are prepared for the CEO on a basis consistent with Australian Accounting Standards, and thus no additional disclosures
in relation to the revenues, profit or loss, assets and liabilities and other material items have been made. In presenting information
on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets
are based on the geographical location of the assets.
Australia
South America and Caribbean
Eliminations
2012
2011
Revenue
$’000
Non-current
assets
$’000
Revenue
$’000
Non-current
assets
$’000
198,469
21,514
-
34,396
302
-
94,298
7,482
-
219,983
34,698
101,780
27,607
537
(1,359)
26,785
Revenues from three customers of the Group’s Australian segment generated respectively $50m, $47m and $32m of the Group’s total
revenue (2011: $33m generated from one customer).
54
Southern Cross Electrical Engineering Limited Annual Report 2012
6. Contract revenue
Contract revenue
2012
$’000
219,983
219,983
2011
$’000
101,780
101,780
The contract revenue has been determined based on the percentage of completion using the costs incurred to date and the total
forecast contract costs. The amount of revenue recognised is based on the construction contract, variation notices and claims under
negotiation between the Group and its customers.
7. Other income/(loss)
Net gain/(loss) on sale of non-current assets
Apprenticeship incentive grants
Foreign exchange gains
Other
8. Employee benefits expenses
Remuneration, bonuses and on-costs
Amounts provided for employee entitlements
Share-based payments expense
(221)
124
213
422
538
7
-
-
(72)
(64)
(13,178)
(477)
(1,150)
(9,622)
(364)
(110)
(14,805)
(10,096)
The above employee benefits expenses do not include employee benefits expenses recorded within contract expenses. Employee
benefits included in contract expenses were $87.4m (2011: $56.1m).
9. Other expenses
Repairs and maintenance
Motor vehicles
Other
10. Finance income and expenses
Interest income on bank deposits
Finance income
Interest expense on bank borrowings
Finance charges payable under finance lease contracts
Bank charges
Bank guarantee fees
Finance expense
Net finance income/(expenses)
(279)
(629)
(142)
(1,050)
1,162
1,162
(222)
(99)
(359)
(110)
(790)
372
(191)
(504)
(79)
(774)
170
170
(642)
(33)
(217)
(78)
(970)
(800)
55
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
11. Depreciation and amortisation expenses
Buildings
Leasehold improvements
Plant and equipment
Motor vehicles
Office furniture and equipment
2012
$’000
2011
$’000
(17)
(173)
(1,193)
(826)
(460)
(2,669)
(112)
(81)
(667)
(455)
(289)
(1,605)
Amortisation of customer contract intangibles
(151)
(151)
12. Income tax expense
(a) Income Statement
Current tax (expense)/benefit
Current period
Under provision from prior year
Deferred tax expense
Origination and reversal of temporary differences
Income tax benefit/(expense) reported in the income statement
(b) Amounts charged or credited directly to equity
Expenses relating to capital raising
Income tax expense reported in equity
(c) Reconciliation between tax expense and pre-tax
accounting profit
Accounting profit/(loss) before income tax
Income tax using the Company’s domestic tax rate of 30% (2011: 30%)
Tax effect of permanent differences
Tax losses of foreign operations not recognised
Non-deductible contract intangible amortisation
Other
Deferred Tax Assets not previously recognised now brought to account
Effect of different tax rate applicable to foreign branches 25% (2011: 25%)
Income tax benefit/(expense) reported in the income statement
The applicable effective tax rates are:
56
(1,192)
-
(1,192)
(4,838)
(6,030)
(2,029)
(64)
(2,094)
2,354
260
-
-
(378)
(378)
19,738
(1,912)
(5,921)
(405)
(150)
-
-
208
238
(6,030)
30.6%
574
-
(262)
(45)
(44)
-
38
260
(13.6%)
Southern Cross Electrical Engineering Limited Annual Report 2012
12. Income tax expense (continued)
Deferred tax assets and liabilities
Deferred tax liabilities
Retentions
Work in progress
Property, plant and equipment
Prepayments
Employee Benefits
Deferred tax assets
Accruals
Employee benefits
Property, plant and equipment
Future IPO related tax benefits (Income
statement)
Future IPO related tax benefits
Borrowing costs
Tax losses
Net deferred tax assets/(liabilities)
13. Earnings per share
Basic earnings per share
Balance Sheet
Movement recognised
in Income Statement
Movement recognised
in Equity
2012
$’000
2011
$’000
2012
$’000
2011
$’000
2012
$’000
2011
$’000
(31)
(8,968)
(23)
-
-
-
(1,437)
(23)
(52)
-
31
7,531
-
(52)
-
-
(3,267)
-
40
-
(9,022)
(1,512)
7,510
(3,227)
-
1,998
19
46
227
31
1,860
4,181
(4,841)
-
897
19
214
378
-
-
1,508
(4)
-
(1,101)
169
151
(31)
(1,860)
(2,672)
4,838
435
73
-
214
151
-
-
873
(2,354)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(378)
-
-
(378)
The calculation of basic earnings per share at 30 June 2012 was based on the profit attributable to ordinary shareholders of
$13,708,000 (2011: Loss of $1,652,000) and a weighted average number of ordinary shares outstanding of 161,176,552 (2011:
129,069,542), calculated as follows:
Profit/(loss) attributable to ordinary shareholders
Profit/(loss) for the period
Weighted average number of ordinary shares
Issued ordinary shares at 1 July
Effective new balance resulting from issue of shares in the year
Weighted average number of ordinary shares at 30 June
2012
$’000
2011
$’000
13,708
(1,652)
Note
2012
$’000
2011
$’000
29
160,736,826
124,178,939
439,726
4,890,603
161,176,552
129,069,542
57
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
13. Earnings per share (continued)
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2012 was based on the profit attributable to ordinary shareholders of
$13,708,000 (2011: Loss of $1,652,000) and a weighted average number of ordinary shares outstanding after adjustment for the effects
of all dilutive potential ordinary shares of 161,229,800 (2011: 129,069,542), calculated as follows:
Profit/(loss) attributable to ordinary shareholders (diluted)
Profit/(loss) for the period
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares for basic earnings per share
Effect of dilution:
Share options and performance rights on issue
Weighted average number of ordinary shares at 30 June
14. Cash and cash equivalents
Bank balances
Short term deposits
Cash and cash equivalents in the statement of cash flows
Consolidated
2012
$’000
2011
$’000
13,708
(1,652)
2012
2011
161,176,552
129,069,542
53,248
-
161,229,800
129,069,542
2012
$’000
2011
$’000
15,452
16,093
31,545
5,816
20,464
26,280
The effective interest rate on short-term bank deposits was 1.5% (2011: 1.4%); these deposits are all at call.
15. Term deposits
Restricted term deposit
16. Trade and other receivables
Current
Trade receivables
-
-
5,000
5,000
21,665
21,665
17,196
17,196
Trade receivables are non-interest bearing and are generally on 30 day terms. A provision for impairment loss has not been recognised
due to the collection record of the counterparties with whom the Group transacts.
17. Inventories
Raw materials and consumables – at cost
58
1,166
1,166
1,301
1,301
Southern Cross Electrical Engineering Limited Annual Report 2012
18. Construction work in progress
Costs incurred to date
Recognised profit
Progress billings
Construction work in progress
2012
$’000
134,159
30,035
(128,443)
35,751
2011
$’000
30,239
6,183
(30,492)
5,930
Work in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date.
Cost includes all expenditure related directly to specific projects. Recognised profit is based on the percentage complete method and
is determined using the costs incurred to date and the total forecast contract costs.
19. Prepayments
Prepayments
20. Assets held for sale
Assets held for sale
262
262
-
-
173
173
3,610
3,610
The land and buildings owned by K.J. Johnson & Co Pty Ltd were classified as assets held for sale at 30 June 2011 and were disposed of
in the financial year.
21. Investments in subsidiaries
The consolidated financial statements include the financial statements of Southern Cross Electrical Engineering Ltd and the subsidiaries
listed in the following table.
Cruz Del Sur Ingeniería Electra (Peru) S.A
Southern Cross Electrical Engineering (WA) Pty Ltd
Southern Cross Electrical Engineering Tanzania Pty Ltd
Southern Cross Electrical Engineering Ghana Pty Ltd
K.J. Johnson & Co. Pty Ltd
FMC Corporation Pty Ltd
Southern Cross Electrical Engineering (Australia) Pty Ltd
Hazquip Industries Pty Ltd
Country of
Incorporation
Equity Interest
(%)
2012
2011
Peru
Australia
Tanzania
Ghana
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
59
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
22. Parent entity disclosures
As at, and throughout, the financial year ending 30 June 2012 the parent company of the consolidated entity was Southern Cross
Electrical Engineering Limited.
Result of the parent entity
Profit/(loss) for the period
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the period
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising:
Share capital
Reserves
Retained earnings
Total Equity
Parent entity contingencies:
Company
2012
$’000
2011
$’000
5,521
(119)
5,402
50,630
90,716
16,307
17,737
57,554
603
14,822
72,979
(3,244)
(199)
(3,443)
41,674
75,566
8,934
9,139
56,984
142
9,301
66,427
The parent entity has commitments and contingent liabilities which are included in note 33 and 34. At 30 June 2012 there were in
existence guarantees of performance of a subsidiary.
60
23. Property, plant and equipment
Cost
Balance at 1 July 2010
Additions
Disposals
Reclassification of assets held for sale
Balance at 30 June 2011
Balance at 1 July 2011
Additions
Disposals
Balance at 30 June 2012
Depreciation and impairment losses
Balance at 1 July 2010
Depreciation for the year
Disposals
Reclassification of assets held for sale
Balance at 30 June 2011
Balance at 1 July 2011
Depreciation for the year
Disposals
Balance at 30 June 2012
Carrying amounts
At 1 July 2010
At 30 June 2011
At 1 July 2011
At 30 June 2012
4,716
-
-
(3,800)
916
916
-
-
916
(129)
(112)
-
190
(51)
(51)
(17)
-
(68)
4,587
865
865
848
Land and
Buildings
$’000
Leasehold
Improvements
$’000
Plant and
equipment
$’000
Motor
Vehicles
$’000
Office
Furniture
and
Equipment
$’000
Southern Cross Electrical Engineering Limited Annual Report 2012
2,309
305
-
2,614
(411)
(81)
-
-
2,148
161
-
-
7,114
1,144
-
-
5,093
151
-
-
1,528
323
-
-
2,309
8,258
5,244
1,851
8,258
4,357
-
12,615
5,244
4,118
(13)
9,349
1,851
1,953
-
3,804
29,298
Total
$’000
20,599
1,779
-
(3,800)
18,578
18,578
10,733
(13)
(4,052)
(2,870)
(667)
(455)
-
-
-
-
(618)
(289)
-
-
(8,080)
(1,604)
-
190
(492)
(4,719)
(3,325)
(907)
(9,494)
(492)
(173)
-
(665)
1,737
1,817
1,817
1,949
(4,719)
(1,193)
-
(3,325)
(826)
12
(907)
(460)
-
(9,494)
(2,669)
12
(5,912)
(4,139)
(1,367)
(12,151)
3,062
3,538
2,223
1,919
910
944
12,519
9,083
3,538
6,703
1,919
5,210
944
2,437
9,083
17,147
61
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
24. Trade and other payables
Current
Trade payables
Accrued expenses
Goods and services tax payable
2012
$’000
2011
$’000
10,538
15,097
1,353
26,988
4,743
2,152
106
7,001
Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value. The Group’s exposure to
currency and liquidity risk related to trade and other payables is disclosed in note 27.
25. Unearned revenue
Current
Unearned revenue
4
4
600
600
Unearned revenue arises when the Group has invoiced the client in advance of performing the contracted services.
26. Employee entitlements
Current
Annual leave
Long service leave
Non-current
Long service leave
3,987
819
4,806
383
383
1,919
704
2,623
205
205
A provision has been recognised for employee entitlements relating to long service leave. In calculating the present value of future cash
flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and
recognition accounting policy relating to employee benefits have been included in note 3(k) to this report.
27. Financial instruments
Overview
The Group has exposure to the following risks from their 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, their objectives, policies and processes for
measuring and managing risks, and the management of capital. Further quantitative disclosures are included throughout this
financial report.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board
has established an Audit and Risk Management Committee, which is responsible for overseeing how management monitors risk and
for reviewing the adequacy of the risk management framework in relation to the risks faced by the Group. The committee reports
regularly to the Board of Directors on its activities.
62
Southern Cross Electrical Engineering Limited Annual Report 2012
27. Financial instruments (continued)
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 its training and management standards and procedures, aims to
develop a disciplined and constructive control environment in which all employees understand their roles and obligations in relation
to the management and mitigation of these risks.
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.
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to
credit risk at the reporting date was:
Cash
Term deposits
Trade and other receivables
Trade and other receivables
Carrying amount
2012
$’000
2011
$’000
31,545
-
21,665
53,210
26,280
5,000
17,196
48,476
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the
Group’s customer base, including the default risk of the industry and country, in which customers operate, has less of an influence on
credit risk. Approximately 40 percent (2011: 41 percent) of the Group’s trade receivables are attributable to transactions with two major
customers. Geographically, the concentration of credit risk is within Australia and, by industry, the concentration is within the mining,
and oil and gas industry.
When entering into new customer contracts for service, the Group only enters into contracts with reputable companies. Management
monitors the Group’s exposure on a monthly basis.
In the last five years no provision for impairment loss has been recognised against the customers with whom the Group transacts.
In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an
individual or legal entity, aging profile, maturity and existence of previous financial difficulties.
The Group does not require collateral in respect of trade and other receivables.
The Group has not established an allowance for impairment that represents their estimate of incurred losses in respect of trade and
other receivables as it not considered necessary based on the payment history of its client base.
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Australia
South America and Caribbean
Carrying amount
2012
$’000
2011
$’000
18,386
3,279
21,665
14,684
2,513
17,197
63
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
27. Financial instruments (continued)
Impairment losses
The ageing of the Group’s trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 30-60 days
Past due 60 days and over
More than one year
Gross
2012
$’000
Impairment
2012
$’000
Gross
2011
$’000
Impairment
2011
$’000
17,274
3,432
113
846
-
21,665
-
-
-
-
-
-
2,858
13,968
266
104
-
17,196
-
-
-
-
-
-
Based on historic default rates, the Group believes no impairment allowance is necessary in respect of trade receivables as the customers
have a good credit history with the Group.
There was no renegotiation in credit terms during the period.
64
Southern Cross Electrical Engineering Limited Annual Report 2012
27. Financial instruments (continued)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. 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 project costing to assess the cash flows required for each project currently underway and entered into. Management
monitors cash flow using rolling forecasts and annual budgets that are monitored at a Board level on a monthly basis.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements:
Carrying
amount
$’000
Contractual
cash flows
$’000
6 mths or
less
$’000
6-12 mths
$’000
1-2 years
$’000
2-5 years
$’000
More than
5 years
$’000
30 June 2012
Non-derivative financial assets
Cash and cash equivalents
Trade and other receivables
Non-derivative financial liabilities
Finance lease liabilities
Trade and other payables
30 June 2011
Non-derivative financial assets
Cash and cash equivalents
Term Deposits
Trade and other receivables
Non-derivative financial liabilities
Finance lease liabilities
Bank borrowings
Trade and other payables
Market Risk
31,545
21,665
53,210
1,564
26,988
28,552
26,280
5,000
17,196
48,476
571
2,915
7,001
10,487
31,545
21,665
53, 210
1,629
26,988
28,617
26,280
5,000
17,196
48,476
704
2,915
7,001
31,545
21,665
53, 210
237
26,988
27,225
-
-
-
233
-
233
26,280
-
-
5,000
17,196
43,476
704
2,915
7,001
-
5,000
-
-
-
-
10,620
10,620
-
-
-
519
-
519
-
-
-
-
-
-
-
-
-
-
-
640
-
640
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices 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 on sales, purchases and borrowings that are denominated in a currency other than the functional
currency in which they are measured. The Group has exposures to the United States Dollar (USD) and Peru Nuevo Sol (PEN).
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures 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.
65
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
27. Financial instruments (continued)
Exposure to currency risk
The Group’s exposure to USD risk was as follows:
Cash
Trade receivables
Trade and other payables
Net balance sheet exposure
The following significant exchange rates applied during the year:
AUD:USD
Sensitivity analysis
AUD
2012
$’000
AUD
2011
$’000
207
-
-
207
595
2,824
(604)
2,815
Average rate
Reporting date spot rate
2012
1.03
2011
0.99
2012
1.02
2011
1.06
A 10 percent change of the Australian Dollar against the US Dollar at 30 June would have increased (decreased) equity and profit or loss
by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is
performed on the same basis for 2011.
Consolidated
Profit or loss
Equity
10% increase
$000
10% decrease
$000
10% increase
$000
10% decrease
$000
(25)
17
-
(211)
257
(33)
-
40
30 June 2012
USD
30 June 2011
USD
66
Southern Cross Electrical Engineering Limited Annual Report 2012
27. Financial instruments (continued)
Interest rate risk
Profile
At the reporting date the interest rate profile of the Company’s and the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
Carrying amount
2012
$’000
2011
$’000
1,564
571
31,545
-
26,280
2,915
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change in
interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points 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. The analysis
is performed on the same basis for 2012.
Profit or loss
Equity
100bp increase
$’000
100bp decrease
$’000
100bp increase
$’000
100bp decrease
$’000
30 June 2012
Variable rate instruments
Cash flow sensitivity (net)
30 June 2011
Variable rate instruments
Cash flow sensitivity (net)
Fair values
315
315
74
74
(315)
(315)
(74)
(74)
-
-
-
-
Fair values versus carrying amounts
The fair values of financial assets and liabilities equates to the carrying values shown in the balance sheet.
Other Price Risk
The Group is not directly exposed to any other price risk.
-
-
-
-
67
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
27. Financial instruments (continued)
Capital Management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business. The Board of Directors has not implemented a formal capital management policy however they have
implemented a dividend policy.
The Group intends to distribute to shareholders up to approximately 50% of net profit after tax in the form of fully franked dividends,
subject to general business and financial conditions, the Group’s taxation position, its working capital and future capital expenditure
requirements, the availability of sufficient franking credits and any other factors the Board considers relevant.
There were no changes in the Group’s approach to capital management during the year.
The Group is not subject to externally imposed capital requirements.
28. Loans and borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings which are measured
at amortised cost. For more information about the Group’s exposure to interest rate, liquidity and risk, see note 27.
Current liabilities
Secured bank loan (i)
Finance lease liabilities (ii)
Non-current liabilities
Secured bank loan
Finance lease liabilities
2012
$’000
2011
$’000
-
388
388
-
1,176
1,176
2,915
571
3,486
-
-
-
(i) On 28 June 2012 the Group entered into a new financing facility for the provision of bank guarantees and working capital with the
Commonwealth Bank of Australia (“CBA”). As part of this agreement the Group was no longer required to maintain a $5.0 million
restricted term deposit that it had been required to do as a consequence of being non-compliant with its financial covenants at
30 June 2011 (refer note 15).
(ii) The finance lease liabilities are carried in the accounts at their carrying value and are secured over the assets that are subject to the
hire purchase agreement.
68
Southern Cross Electrical Engineering Limited Annual Report 2012
29. Capital and reserves
Share capital
Ordinary shares
Issued and fully paid
Movements in shares on issue
2012
2011
Note
Number
$’000
Number
$’000
161,486,826
57,554
160,736,826
56,984
Balance at the beginning of the financial year
160,736,826
56,984
124,178,939
24,964
Exercise of options
Shares as consideration
Share based payments
Capital raising
Cost of capital raising
-
-
750,000
-
-
(iii)
(i)
(ii)
-
-
570
-
-
-
-
-
36,557,887
-
Balance at the end of the financial year
161,486,826
57,554
160,736,826
-
-
-
32,902
(882)
56,984
(i) On 18 April 2011, Southern Cross announced it had completed a $30 million placement (“Placement”) to institutional and
sophisticated investors and a Share Purchase Plan would be offered to shareholders. The Placement was completed in two
tranches on 27 April 2011 and 27 May 2011 by issuing 18,500,000 ordinary shares and 14,833,334 ordinary shares at $0.90
respectively. The Share Purchase Plan was completed on 31 May by issuing 3,224,553 shares at $0.90.
(ii) The tax effected cost of these issues was $882,366.
(iii) On 30 November 2011 750,000 shares were issued to Simon High for nil consideration.
The Company does not have authorised capital or par value in respect of its issued shares.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
Reserves
Translation reserve
Share based payments reserve
Translation reserve
2012
$’000
2011
$’000
(751)
1,012
261
(92)
432
340
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of
foreign operations.
Share based payments reserve
The share based payments reserve records the fair value of share based payments provided to employees.
69
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
29. Capital and reserves (continued)
Dividends
Dividends recognised in the current year by the Group are:
2012
Final 2011 ordinary
Interim 2012 ordinary
Total amount
2011
Final 2010 ordinary
Interim 2011 ordinary
Total amount
Cents per share
Total amount
$’000
Franked
Date of payment
-
-
-
5,588
-
5,588
4.5
-
Franked
5 November 2010
-
-
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
The Board considered it prudent not to declare a final dividend for 2011 and interim dividend for 2012.
Franking account balance
Company
2012
$’000
2011
$’000
6,299
4,714
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
(a) franking credits that will arise from the payment of the current tax liabilities; and
(b) franking debits that will arise from the payment of dividends recognised as a liability at the year end.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.
70
30. Reconciliation of cash flows from operating activities
Cash flows from operating activities
Profit/(loss) for the year
Adjustments for:
Depreciation and amortisation
Foreign exchange (gain)/loss
(Gain)/Loss on sale of property, plant and equipment
Other non-cash items
Equity-settled share-based payment transactions
(Increase)/decrease in assets:
Trade and other receivables
Income tax receivable
Work in progress
Inventories
Prepayments
Increase/(decrease) in liabilities:
Trade and other payables
Unearned revenue
Provisions and employee benefits
Income tax payable
Deferred income tax
Net cash from operating activities
Southern Cross Electrical Engineering Limited Annual Report 2012
2012
$’000
2011
$’000
13,708
(1,652)
2,820
(213)
221
-
1,150
(4,469)
(1,246)
(29,820)
135
(89)
19,987
(596)
2,361
1,192
4,838
9,979
1,756
-
(7)
-
110
(6,916)
1,873
9,750
(33)
(132)
(2,198)
600
(207)
-
(2,732)
212
71
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
31. Related parties
Details of Key Management Personnel
Key Management Personnel in the period were:
Non-Executive Director
John Cooper
Gianfranco Tomasi
Derek Parkin
Peter Forbes
Jack Hamilton
Executive Director
Simon High
Executive*
Simon Buchhorn
Chris Douglass
Stephen Fewster
Independent Chairman
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Managing Director
Appointed 1 October 2011
Appointed 1 October 2011
Chief Operating Officer
Chief Financial Officer/Company Secretary
Chief Financial Officer/Company Secretary
Appointed 19 September 2011
Resigned 7 October 2011
* Gerard Moody, General Manager Business Development, and Philip Dawson, General Manager Corporate Services, ceased to be regarded as
KMP from 1 July 2011.
There were no other changes of key management people after reporting date and before the date the financial report was authorised
for issue.
Key management personnel compensation
The key management personnel compensation is as follows:
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
2012
$’000
2011
$’000
1,898
163
13
813
2,887
2,175
172
-
95
2,442
Individual directors’ and executives’ compensation disclosures
Information regarding individual directors’ and executives’ compensation and some equity instruments disclosures as permitted by
Corporations Regulations 2M.3.03 are provided in the Remuneration Report section of the Directors’ Report on pages 21 to 29.
Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the
previous financial year and there were no material contracts involving directors’ interests existing at year-end.
72
Southern Cross Electrical Engineering Limited Annual Report 2012
31. Related parties (continued)
Other key management personnel transactions
The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year.
The terms and conditions of the transactions with the related parties were no more favourable than those available, or which might
reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s length basis.
Other related parties
F & A Tomasi Superannuation Fund
G & A Tomasi
Frank Tomasi Family Trust
Frank Tomasi Nominees Pty Ltd
Rental income
Rental income
Rental income
Rental income
Transactions value year ended
30 June
2012
$’000
2011
$’000
235
68
28
272
208
56
27
-
Note
(i)
(ii)
(iii)
(iv)
(i) F & A Tomasi Superannuation Fund owns the properties at 41 and 44 Macedonia Street, Naval Base WA, which are leased to
Southern Cross Electrical Engineering Limited.
(ii) G & A Tomasi own the properties at Lot 2 Covehill Road Tasmania and 45, 47, 49 & 51 Macedonia Street, Naval Base WA which
are leased to Southern Cross Electrical Engineering Limited. During 2011 the lease for Covehill Road property expired and the
company did not renew the lease.
(iii) Frank Tomasi Family Trust owns the property which is leased to the Denver branch of Southern Cross Electrical
Engineering Limited.
(iv) Frank Tomasi Nominees Pty Ltd owns the property at 43 Hope Valley Road, Naval Base WA, which was leased to Southern
Cross Electrical Engineering Limited from 1 July 2011.
Gianfranco Tomasi and spouse are sole directors of Frank Tomasi Nominees Pty Ltd and are the sole shareholders. Frank Tomasi
Nominees Pty Ltd as trustee for the Frank Tomasi Family Trust is a major shareholder of Southern Cross Electrical Engineering Limited.
Under the terms of each of the above property leases, the rent payable is subject to an annual review. This review adjusts the
annual rent by the movement in the consumer price index. At the completion of every third year the annual rent is subject to
a market review.
The rental payments made above are all at normal market rates and were reviewed by an independent valuer in June 2009 except
for 44 Macedonia Street and 43 Hope Valley Road which were reviewed in June 2012.
73
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
31. Related parties (continued)
Options and rights over equity instruments
The movement during the reporting period in the number of options over ordinary shares in Southern Cross Electrical Engineering
Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Options over equity instruments
Held at
1 July 2011
Granted as
compensation
Exercised Forfeited
Held at
30 June
2012
Vested
during
the year
Vested and
exercisable at
30 June 2012
Executives
Simon Buchhorn
Stephen Fewster
Executives
Simon Buchhorn
Stephen Fewster
333,334
250,742
584,076
-
-
-
-
-
-
-
333,334
(250,742)
(250,742)
-
333,334
Held at
1 July 2010
Granted as
compensation
Exercised Forfeited
Held at
30 June
2011
Vested
during
the year
500,000
417,408
917,408
-
-
-
-
-
-
(166,666)
(166,666)
(333,332)
333,334
250,742
584,076
-
-
-
-
-
-
333,334
-
333,334
Vested and
exercisable at
30 June 2011
333,334
250,742
584,706
2011 Performance Rights over equity instruments
Executives
Simon Buchhorn
Stephen Fewster
Executives
Simon Buchhorn
Stephen Fewster
Gerard Moody*
Phil Dawson*
Held at
1 July 2011
Granted as
compensation
Exercised Forfeited
Held at
30 June
2012
Vested
during
the year
Vested and
exercisable at
30 June 2012
60,431
55,191
115,622
-
-
-
-
-
-
(45,323)
(55,191)
(100,514)
15,108
15,108
-
-
15,108
15,108
15,108
-
15,108
Held at
1 July 2010
Granted as
compensation
Exercised Forfeited
Held at
30 June
2011
Vested
during
the year
Vested and
exercisable at
30 June 2011
-
-
-
-
-
60,431
55,191
48,890
44,815
209,327
-
-
-
-
-
-
-
-
-
-
60,431
55,191
48,890
44,815
209,327
-
-
-
-
-
-
-
-
-
-
* Gerard Moody, General Manager Business Development, and Philip Dawson, General Manager Corporate Services, ceased to be regarded
as KMP from 1 July 2011.
74
Southern Cross Electrical Engineering Limited Annual Report 2012
31. Related parties (continued)
2012 Performance Rights over equity instruments
Executive Director
Simon High*
Executive
Simon Buchhorn
Chris Douglass
Held at
1 July 2011
Granted as
compensation
Exercised
Forfeited
Held at
30 June 2012
Vested
during
the year
Vested and
exercisable at
30 June 2012
-
-
-
-
419,664
187,006
164,868
771,538
-
-
-
-
-
-
-
-
419,664
187,006
164,868
771,538
-
-
-
-
-
-
-
-
* Performance rights to be allocated to Simon High are subject to shareholder approval
Where a participant ceases employment prior to the vesting of their share options or performance rights, the share options or
performance rights are forfeited unless cessation of employment is due to termination initiated by the Company or death. In the
event of a change of control of the Company, all options and performance rights that have not lapsed may be exercised.
Movements in shares
The movement during the reporting period in the number of ordinary shares in Southern Cross Electrical Engineering Limited held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at
30 June 2011
Purchases
Received on
exercise of
options
Sales
Share based
payment
Held at
30 June 2012
Directors
Gianfranco Tomasi
65,227,131
Simon High
John Cooper
Derek Parkin
Peter Forbes
Jack Hamilton
Executives
Simon Buchhorn
Stephen Fewster
Chris Douglass
-
116,667
20,000
-
-
727,778
-
-
-
-
-
-
50,000
29,780
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
65,227,131
750,000
-
-
-
-
-
-
-
750,000
116,667
20,000
50,000
29,780
727,778
-
-
75
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
31. Related parties (continued)
Movements in shares (continued)
Held at
1 July 2010
Purchases
Received on
exercise of
options
Sales
Share based
payment
Held at
30 June 2011
Directors
Gianfranco Tomasi
61,200,000
4,027,131
Simon High
Brian Carman
John Cooper
Douglas Fargher
Derek Parkin
Executives
Simon Buchhorn
Stephen Fewster
Gerard Moody
Phillip Dawson
-
2,000,000
100,000
200,000
-
-
200,000
16,667
-
20,000
600,000
127,778
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
65,227,131
-
2,200,000
116,667
200,000
20,000
727,778
-
-
-
32. Share-based payments
Share based payments are as follows:
Issue of ordinary shares to Simon High
2012 Performance Rights
2011 Performance Rights
Options
(i) Issue of ordinary shares to Simon High
(i)
(ii)
(iii)
(iv)
2012
$’000
2011
$’000
570
629
(49)
-
1,150
-
-
13
97
110
On 29 November 2011 750,000 ordinary shares were issued at nil consideration to Simon High as approved by shareholder resolution
at the Company’s Annual General Meeting on 28 November 2011.
(ii) 2012 Performance Rights
In the period Performance Rights were offered to key management personnel and senior management under the terms of the Senior
Management Long Term Incentive Plan. The terms and conditions of the Performance Rights are as follows. All Performance Rights
are to be settled by the physical delivery of shares.
76
Southern Cross Electrical Engineering Limited Annual Report 2012
32. Share-based payments (continued)
Grant date / employees entitled
Performance rights issued to key
management personnel on 2 May 2012*
Performance rights issued to senior
management on 2 May 2012
Performance rights issued to senior
management on 31 May 2012
Performance rights issued to senior
management on 25 June 2012
Number of
instruments
Vesting conditions
Contractual life
771,538 Employed on 30 June 2014 and exceed
26 months
performance hurdle
445,079 Employed on 30 June 2014 and exceed
26 months
performance hurdle
515,000 Employed on 30 June 2014 and exceed
25 months
performance hurdle
205,000 Employed on 30 June 2014 and exceed
24 months
performance hurdle
Total share options
1,936,617
*419,664 of the 2 May 2012 Performance rights are to be allocated to Simon High and are subject to shareholder approval
Up to 100% of the allocated performance rights may vest, subject to the achievement of the performance conditions as set out below.
The key terms of the performance rights are:
To be performance tested over a three year period from 1 July 2011 to 30 June 2014 (“Performance Period”);
•
• No performance rights will vest until 30 June 2014;
•
Performance testing criteria are 50% against Absolute Total Shareholder Return (“TSR”) performance, and 50% against
Earnings Per Share (“EPS”) performance; and
Expiry on the 4th anniversary of the grant date unless an earlier lapsing date applies
•
The TSR formula is:
((Share Price at Test Date – Share Price at Start Date) + (Dividends Reinvested))/Share Price at Start Date
TSR will be assessed against targets for threshold performance of 12% per annum compounded over the Performance Period and
for stretch performance of 15% per annum compounded over the Performance Period. The vesting schedule is as follows for TSR
performance over the Performance Period:
Less than 12% per annum compounded
12% per annum compounded
Between 12% and 15% per annum compounded
At or above 15% per annum compounded
0% vesting
50% vesting
Pro-rata vesting between 50% and 100%
100% vesting
EPS will be assessed against targets for threshold performance of 12 cents per share at the end of the Performance Period and
for stretch performance of 15 cents per share at the end of the Performance Period. The vesting schedule is as follows for EPS
performance at the end of the Performance Period:
Less than 12 cents per share
12 cents per share
Between 12 and 15 cents per share
At or above 15 cents per share
0% vesting
50% vesting
Pro-rata vesting between 50% and 100%
100% vesting
Once the performance measurement calculation has been finalised the company will allot and issue the equivalent number of shares
at nil consideration on the basis of one ordinary share per vested performance right for all performance rights exercised.
77
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
32. Share-based payments (continued)
(iii) 2011 Performance Rights
There were 249,294 2011 Performance Rights on issue at 1 July 2011. No 2011 Performance Rights were granted, 36,304 vested and
212,990 were forfeited during the year.
The 2011 Performance Rights were performance tested over a three-year period from 1 July 2009 to 30 June 2012. The hurdles used to
determine performance are Earnings per Share (EPS) growth and Relative Total Shareholder Return (TSR).
The performance rights based on the three year compound EPS growth of the Company (50% of award) will vest as follows:
Below 7.5%
Between 7.5% and 10%
Above 10%
Nil
Pro-rata vesting between 50% and 100%
100% satisfied
The performance rights based on the relative growth in the TSR of the Company (50% of award) in comparison to the basket of
companies named below, as selected by the Board, will vest as follows:
0 to 49th percentile
50th to 74th percentile
75th to 100th percentile
Nil
Linear scale: 50% to 98% satisfied
100% satisfied
The Comparator Companies Basket comprises the following companies provided that any of the following companies whose shares
are not quoted on the ASX for the relevant three year period will not be included:
Ausenco Ltd
Engenco Ltd
Nomad Ltd
(iv) Options
Campbell Brothers Ltd
Fleetwood Ltd
Sedgman Ltd
Cardno Ltd
Lycopodium Ltd
Worley Parsons Ltd
Clough Ltd
Mermaid Marine Ltd
VDM Group Ltd
Coffey Ltd
Monadelphous Ltd
The options outstanding at 30 June 2012 all have an exercise price of $1.15 and a weighted average contractual life of 5 years. No
options were exercised and 250,742 were forfeited during the year.
Outstanding at 1 July
Options exercised during the period
Options forfeited during the period
Outstanding at 30 June
Exercisable at 30 June
Weighted average
exercise price 2012
Number of
Options 2012
Weighted average
exercise price 2011
Number of
Options 2011
$1.15
$1.15
$1.15
$1.15
$1.15
584,076
-
(250,742)
333,334
333,334
$1.15
$1.15
$1.15
$1.15
$1.15
917,408
-
(333,332)
584,076
584,076
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Southern Cross Electrical Engineering Limited Annual Report 2012
33. Commitments
Leasing commitments
Operating lease commitments – as lessee
The Group has entered into commercial property leases. These leases have an average life of 6 years remaining with options to renew
at the end of the initial term. Future minimum rentals payable under non-cancellable operating leases as at 30 June 2012 are:
Within one year
After one but no more than five years
After more than five years
Total minimum lease payments
2012
$’000
2011
$’000
776
2,661
1,134
4,571
196
784
257
1,237
Under the terms off the above property leases, the rent payable is subject to annual review. This review adjusts the annual rent by the
movement in the consumer price index. At the end of every third year annual rent is subject to a market review.
34. Contingencies
The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice
of economic benefits will be required or the amount is not capable of reliable measurement.
Bank Guarantees
Surety Bonds
2012
$’000
2011
$’000
14,915
907
13,986
-
Total bank guarantee facilities at 30 June 2012 were $40,250,000 and the unused portion was $ 25,335,000. This facility is subject to
annual review.
79
Southern Cross Electrical Engineering Limited Annual Report 2012
Notes to the Financial Report
(continued)
For the year ending 30 June 2012
35. Intangible assets – goodwill and customer contracts
Reconciliation of carrying amount
Cost
Note
Goodwill
$’000
Customer
Contracts
$’000
Total
$’000
Balance as at 1 July 2010
Acquisitions through business combinations
Balance as at 30 June 2011
Balance as at 1 July 2011
Acquisitions through business combinations
Balance as at 30 June 2012
Amortisation and impairment losses
Balance as at 1 July 2010
Impairment loss
Amortisation
Balance as at 30 June 2011
Balance as at 1 July 2011
Impairment loss
Amortisation
Balance as at 30 June 2012
Carrying amounts
At 1 July 2010
At 30 June 2011
At 1 July 2011
At 30 June 2012
17,174
-
17,174
17,174
-
17,174
-
-
-
-
-
-
-
-
17,174
17,174
17,174
17,174
1,811
-
1,811
1,811
-
1,811
(1,133)
-
(151)
(1,284)
(1,284)
-
(151)
(1,435)
678
527
527
377
18,985
18,985
18,985
18,985
(1,133)
-
(151)
(1,284)
(1,284)
-
(151)
(1,435)
17,852
17,701
17,701
17,551
Impairment testing for cash-generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s operating divisions which represent the lowest level within the
Group at which goodwill is monitored for internal management purpose.
The aggregate carrying amounts of goodwill allocated to each unit are as follows:
FMC Corporation Pty Ltd
K.J. Johnson & Co Pty Ltd
Southern Cross Electrical Engineering (Australia) Pty Ltd
80
2012
$’000
2011
$’000
3,167
3,616
10,391
17,174
3,167
3,616
10,391
17,174
Southern Cross Electrical Engineering Limited Annual Report 2012
35. Intangible assets – goodwill and customer contracts (continued)
The recoverable amount of the above cash generating units (“CGUs”) was based on their value in use. The carrying amount of the
CGUs was determined to be lower than their recoverable amounts and therefore no impairment charge has been recognised.
Value in use was determined by discounting the future cash flows generated from the continuing use of the CGU. The calculation of
value in use was based on the following key assumptions:
• Cash flows were projected based on past experience, actual operating results and independent research on the markets
the CGUs operate.
•
Revenue for 2013 is based on forecast results. The anticipated annual revenue growth included in the cash flow projections
has been based on growth rates that have been estimated by management. The margins included in the projected cash
flow are the same rate that has been achieved historically.
• A pre-tax discount rate of 16% was applied. This discount rate was estimated based on past experience, and industry average
weighted cost of capital, which was based on debt leveraging of 5% at a market rate of 8.6%.
36. Subsequent events
There are no matters or circumstances that have arisen since the end of the financial year which significantly affected or may
significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated
entity in subsequent financial years.
37. Auditor’s remuneration
Remuneration of KPMG Australia as the auditor of the parent entity for:
- Auditing or reviewing the financial report
Other services
- Accounting assistance
2012
$
2011
$
208,000
205,000
69,000
10,000
277,000
215,000
81
Southern Cross Electrical Engineering Limited Annual Report 2012
Directors’ Declaration
Directors’ declaration
1.
In the opinion of the Directors of Southern Cross Electrical Engineering Limited (the “Company”):
a.
The consolidated financial statements and notes, and the Remuneration report in the Directors’ Report are in
accordance with the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of the Group’s financial position as at 30 June 2012 and of the performance,
for the financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001;
b.
c.
the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a),
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.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing
Director and Chief Financial Officer for the financial year ended 30 June 2012.
This declaration is made in accordance with a resolution of the Board of Directors.
Signed in accordance with a resolution of the Directors:
John Cooper
Chairman
Perth
27 August 2012
82
Southern Cross Electrical Engineering Limited Annual Report 2012
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Southern Cross Electrical Engineering Limited Annual Report 2012
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Southern Cross Electrical Engineering Limited Annual Report 2012
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Southern Cross Electrical Engineering Limited Annual Report 2012
ASX additional information
Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below.
Shareholdings (as at 20 August 2012)
Substantial shareholders
The number of shares held by substantial shareholders and their associates are set out below:
Number
65,227,131
12,018,795
10,480,089
10,210,344
Percentage
40.4%
7.4%
6.5%
6.3%
Shareholder
Gianfranco Tomasi
Acorn Capital
Antares Equities
Treasury Group
Voting rights
Ordinary shares
Refer to note 29 in the financial statements
Options
There are no voting rights attached to the options.
Distribution of equity security holders
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Number of equity
security holders
Ordinary shares
Options/
Performance rights
113
220
156
261
45
795
-
-
2
24
5
31
The number of shareholders holding less than a marketable parcel of ordinary shares is 61.
Securities Exchange
The Company is listed on the Australian Securities Exchange. The Home exchange is Perth.
Other information
Southern Cross Electrical Engineering Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
86
Southern Cross Electrical Engineering Limited Annual Report 2012
Twenty largest shareholders
Name
FRANK TOMASI NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
UBS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
JP MORGAN NOMINEES AUSTRALIA LIMITED
CARMAN SUPER PTY LTD
MR JORN WILLIAM HENRY GRANGER
MR RAYMOND JOHN WISE
GWYNVILL TRADING PTY LTD
ZERO NOMINEES PTY LTD
MR ANDREW WILLIAM MCKENZIE + MRS CATHERINE PATRICIA MCKENZIE
CHEMCO SUPERANNUATION FUND PTY LTD
CHEMCO SUPERANNUATION FUND PTY LTD
MR SIMON HIGH
BOND STREET CUSTODIANS LIMITED
Number
of ordinary
shares held
65,227,131
20,394,569
17,730,500
7,608,905
6,904,016
4,019,055
3,790,475
3,451,594
2,587,629
2,214,108
2,200,000
1,398,293
1,398,293
1,350,672
1,139,667
1,025,052
900,000
830,000
750,000
575,000
Percentage of
capital held
40.39
12.63
10.98
4.71
4.28
2.49
2.35
2.14
1.60
1.37
1.36
0.87
0.87
0.84
0.71
0.63
0.56
0.51
0.46
0.36
145,494,959
90.10
Offices and officers
Company Secretary
Chris Douglass
Principal Registered Office
Southern Cross Electrical Engineering Limited
41 Macedonia Street
Naval Base Western Australia 6165
Telephone: +618 9236 8300
Facsimile: +618 9410 2504
Locations of Share Registry
Perth
Computershare Limited
31 Howe Street
Osborne Park Western Australia 6017
Telephone: +618 9323 2000
87
Southern Cross Electrical Engineering Limited Annual Report 2012
Southern Cross Electrical Engineering Limited
ABN 92 009 307 046
EC 001681
41 Macedonia Street, Naval Base WA 6165
Phone: +618 9236 8300
Facsimile: +618 9410 2504
88