2015 ANNUAL REPORT
Southern Cross Electrical
Engineering Limited
ABN: 92 009 307 046
Established 1978
Contents
Chairman’s Message
Managing Director’s Review
Director’s Report
Remuneration Report
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Lead Auditor’s Independence Declaration
ASX Additional Information
04
06
14
20
28
29
30
31
33
72
73
75
76
2015 in Summary
Underlying
trading revenue
$240.6m*
Underlying
trading NPAT $4.2m*
Net cash of
$44.6m
Fully franked dividend of
2.7 cents per share
Restructuring initiatives implemented and
overheads reduced
Order book of
$111m
at 30 June 2015
Committed to
targeting growth
organically and through acquisition
* a reconciliation to statutory revenue of $238.3m and statutory loss after tax of $9.8m can be found on page 7
2015 Annual Report
1
SCEE was established as Southern Cross
Electrical Engineering Limited in 1978.
The company is a leading provider of
large-scale specialised electrical, control
and instrumentation services for projects.
SCEE operates through three company divisions -
SCEE Infrastructure, SCEE Construction and
SCEE Services - to provide ‘full life cycle
of project’ electrical services including:
Design and construction of high
voltage power line distribution,
switchyards and substations
Installation and commissioning
of greenfield projects
Operations support, maintenance,
brownfield upgrade and sustaining
capital services
2
2015 Annual Report Our Values
At SCEE, our values are integral to the
organisation and act as internal drivers.
They shape how we conduct our business on
a daily basis and ultimately drive our success.
Safety
It’s in everything we do
Loyalty
We believe in harmonious relationships
and building these through integrity
and mutual respect
Trust
We entrust and empower our
team to take ownership
Reliability
We are dependable and consistently
deliver high quality services
3
2015 Annual Report Chairman’s
Message
Dear Shareholders
2015 has been a challenging year for SCEE, as it has been for the majority of companies servicing the resources sector. Market
conditions throughout the year remained difficult for contractors as clients continued to focus on costs amid increased competition
for a reducing pool of new work in most segments of the sector.
With these conditions expected to endure in the near to medium term, the Board implemented a number of restructuring
initiatives to ensure that the business is appropriately sized and structured to operate efficiently and cost effectively.
Throughout the year we have continued to provide the highest level of client service and performed our work safely without a Lost
Time Incident, SCEE’s eleventh consecutive LTI free year in Australia.
Results
The cost of the restructuring, together with an impairment of goodwill and write-downs to assets and claims, has resulted in the
Company reporting a loss after tax of $9.8m. Adjusting for these one-off items, the Company made an underlying trading profit
after tax of $4.2m. Notwithstanding, we entered the 2016 financial year with a strong balance sheet, including cash of $44.6m and
no debt. Further discussion of the current year result is provided in the Managing Director’s Review on the following pages.
I am pleased to advise that the Board has declared a fully franked dividend of 2.70 cents per share for the year, consistent in
absolute terms with the prior year. The Board believes that this strikes an appropriate balance between delivering returns to
shareholders and ensuring that sufficient capital is retained in the business to allow us to take advantage of growth opportunities.
4
2015 Annual Report Outlook and Strategy
We had an order book at 30 June 2015 of $111m, which excludes recurring revenues under framework agreements and forecast
further work to be performed under already awarded cost reimbursable contracts. This, therefore, gives us a solid baseload of work
for 2016.
Whilst we expect conditions in the sector to remain highly competitive, the continued management of overheads and the
implementation of our restructuring initiatives will help us counter this environment.
The Board remains committed to a strategy of targeting growth, both organically and through acquisition. We are actively
exploring expansion into other geographical areas and adjacent or complementary sectors and continue to view the growth of
recurring revenues as a key objective.
The Board of Directors
There were number of changes to the composition of SCEE’s Board during the year. I would like to take this opportunity to
acknowledge and thank John Cooper, Simon High, Peter Forbes and Jack Hamilton for their valuable contributions to SCEE during
their respective tenures.
Following the addition of Simon Buchhorn and Karl Paganin to the Board, alongside Chris Douglass as interim Managing Director,
the Company now has a Perth based Board that is sized for the market in which we are currently operating and with a skill set well
suited to these conditions and our growth aspirations.
Whilst our search for a CEO was put on hold during the restructuring process, the Board is now actively focused on securing a
business leader who is best equipped to execute both SCEE’s current operations and our future strategy. In this context, I must
acknowledge and commend Chris Douglass on the role he continues to play as our interim CEO.
On behalf of the Board I would like to thank all of our shareholders, clients and employees for their continuing support and in
particular make special mention of our field workforce who have enhanced SCEE’s “can do” reputation which has, over the years,
been a consistent hallmark of our performance.
Derek Parkin
Chairman
5
2015 Annual Report Managing Director’s
Review
Financial Review
The 2015 financial year saw a continuation of the challenging market conditions being faced by contractors in the resources
sector with highly competitive tendering, lower margins and commercially focussed clients and a reduction of work in segments
of the market.
In order to counter the impact of operating in these conditions the Board implemented a number of restructuring initiatives
aimed at ensuring the business will be appropriately organised and efficient to operate in these market conditions. These
measures included:
•
•
•
•
a review of the organisation resulting in redundancies to effect a more streamlined structure;
a reduction of the Company’s property leases;
the sale of plant and equipment that is surplus to forecast activity requirements;
a review of the carrying values of assets resulting in write-downs to plant and equipment, inventory and project claims
recognised in work in progress; and
•
a write-down of the carrying value of goodwill from previous acquisitions.
The costs of these initiatives has been recognised in the current financial year resulting in a net loss after tax of $9.8m compared
to a net profit after tax of $7.7m in 2014.
6
2015 Annual Report Managing Directors’ Review continued
Excluding these costs, the Company made an underlying trading profit after tax of $4.2m as shown below:
Contract revenue
Contract expenses
Gross profit
Other (expense)/income
Employee benefits expenses
Occupancy expenses
Administration expenses
Other expenses
Depreciation expense
Amortisation
Restructuring and impairment
(Loss)/profit from operations
Net finance expense
(Loss)/profit before tax
Income tax expense
(Loss)/profit from continuing
operations
Statutory
$m
238.3
(205.3)
33.0
(1.0)
(15.9)
(1.8)
(4.7)
(1.0)
(6.8)
(0.1)
(11.0)
(9.3)
(0.1)
(9.4)
(0.4)
(9.8)
Organisation
restructuring
$m
Asset
write-downs
and lease
provisions
$m
Claim
write-downs
$m
Impairment
of goodwill
$m
Underlying
trading
(unaudited)
$m
0.3
0.3
1.3
1.4
3.0
(0.6)
2.4
1.1
1.2
2.3
(0.7)
1.6
2.3
2.3
2.3
(0.7)
1.6
240.6
(205.0)
35.6
0.3
(14.8)
(1.8)
(4.7)
(1.0)
(6.8)
(0.1)
-
6.7
(0.1)
6.6
(2.4)
4.2
8.4
8.4
-
8.4
Underlying trading revenue for the year was $240.6m representing a 10% increase from 2014.
SCEE entered the year operating at high activity levels as we completed our work on the Rio Tinto Cape Lambert Port B Phase B
and BHP Billiton Iron Ore Yarnima Power Station projects. Activity early in the second half of the year was low as a result of the
completion of these key projects and a slower than anticipated ramp up of new awards. Towards the end of the period we saw a
marked increase in mobilisations across projects, including CITIC Pacific Sino Iron and Roy Hill, which has continued into the 2016
financial year. At 30 June we had an order book of $111m, excluding recurring revenues under framework agreements and forecast
growth of work under existing cost reimbursable contracts.
A more detailed discussion of SCEE’s 2015 projects is included in the Operations Review which follows.
Underlying trading gross margins for the year were 14.8% compared to 20.1% in 2014. This is reflective of the lower margins being
achieved by contractors in the current environment. The prior year gross margin benefited from strong performance in the early
part of the year when several large lump sum projects, secured prior to the emergence of these tougher market conditions, were
successfully closed out.
Underlying trading overheads as a percentage of revenue were 9.3% compared to 11.9% in 2014. Management has remained
focussed on cost control throughout the period and, following the recent restructuring exercise, we expect that overheads will
reduce further in absolute terms in 2016.
After reporting a first half profit after tax of $4.1m we recorded only a small underlying trading profit after tax in the second
half. Importantly this consisted of a loss of $1.4m in the third quarter and a return to profit of $1.5m in the fourth quarter as
activity increased.
Our balance sheet remained strong throughout the year and at 30 June 2015 we had a cash balance of $44.6m. In addition, all asset
finance debt was paid out prior to the year end leaving the Company debt free.
7
2015 Annual Report Managing Directors’ Review continued
We have made significant progress in settling outstanding project claims. This resulted in a write-down of WIP with an NPAT
impact of $1.6m but the imminent receipt of the settlement amounts will further increase the underlying cash balance. In
particular, all claims relating to projects that operationally completed in previous calendar years were settled before year end.
The Board, as always, will continue to assess recoverability of claims and consequently adjust carrying values when appropriate,
but following these write-downs has enhanced confidence regarding the collectability of the carrying values of current WIP
and Debtors.
Plant, equipment and systems with a book value of $3.3m were deemed to be surplus to requirements for expected activity levels
and were written off or made available for sale. A loss on disposal totalling $2.2m before tax was recognised in the current year.
We will see a significant decrease in our annual depreciation charge in 2016 as a result of this rationalisation. Capital expenditure is
expected to remain low in the near term.
The assessment of the carrying value of goodwill from prior acquisitions resulted in a write-down of $8.4m with the value in use of
the respective cash generating units being impacted by the current market environment.
The Board has declared a final fully franked dividend for the year of 2.7 cents per share which maintains the dividend at the same
absolute level as 2013 and 2014. The franking account balance on hand at 30 June 2015 was $12.0m.
Operations Review
During the year SCEE continued to provide life of project electrical and instrumentation (E&I) services to the resources sector,
primarily within Australia. The business is divided into the three divisions of SCEE Infrastructure, SCEE Construction and
SCEE Services.
An overview of the operations during the year is provided below.
SCEE Infrastructure earned revenues of $45.7m in 2015 (2014: $50.9m). Key projects during the year were:
BHP Billiton Iron Ore Yarnima Power Station
In the year SCEE completed its work at BHP Billiton Iron Ore’s Yarnima Power Station near Newman in Western Australia with the
work growing from its original awarded scope of $25m.
BHP Billiton Iron Ore Sustaining Capital
During the year we performed various projects under the framework agreement in which SCEE is one of a panel of contractors
providing electrical and instrumentation services to BHP Billiton Iron Ore’s Australia-wide Sustaining Capital program.
Queensland Coal Seam Gas Works
On the East Coast we have been performing powerline installation work for the Roma Stage 2a and Fairview Eastern Flank coal
seam gas projects.
8
2015 Annual Report Managing Directors’ Review continued
SCEE Construction earned revenues of $123.9m in 2015 (2014: $133.8m). Key projects during the year were:
Rio Tinto Cape Lambert Port B Phase B
During the year SCEE successfully completed work on Phase B of Rio Tinto’s Cape Lambert Port B expansion. SCEE’s scope included
the E&I works on the car dumpers and screenhouse and had a peak manning of 480. The project commenced in 2014 at an award
value in excess of $80m.
Civmec Nammuldi
SCEE was subcontracted to perform the Electrical and Instrumentation component of Civmec’s stockyard and train load out works
at Rio Tinto’s Nammuldi Below Water Table project 60km north of Tom Price in Western Australia. The work, with an award value
in excess of $10m, was successfully completed during the year.
CITIC Pacific Sino Iron
During the year CITIC Pacific awarded SCEE over $70m of E&I works at the Sino Iron project in Cape Preston, Western Australia.
The scope covers the installation and commissioning of all E&I works across process lines 3 to 6 and follows SCEE’s successful
completion of work on lines 1 and 2 and the central processing plant in prior years. Activity has ramped up significantly in recent
months and SCEE currently has a workforce of over 400 on site.
SCEE Services earned revenues of $68.7m in 2015 (2014: $33.5m). Key projects during the year were:
Rio Tinto Electrical Infrastructure Replacement Program
SCEE continued to perform work throughout the year at Rio Tinto’s Cape Lambert and East Intercourse Island sites as part of the
Electrical Infrastructure Replacement Program.
BHP Billiton Iron Ore Sustaining Capital
SCEE Services also performed work under the Sustaining Capital framework agreement discussed in the SCEE Infrastructure
section above.
SCEE’s LNG focussed joint venture, KSJV, continued to work throughout the year for Bechtel at Curtis Island on the Australia Pacific
LNG project. The work is ongoing and being performed on a cost reimbursable basis. During the year KSJV was also awarded work
by Bechtel on the GLNG Plant project on Curtis Island. SCEE’s 50% share of revenues from KSJV of $37.6m are included in the
Construction division revenues noted above.
9
2015 Annual Report Managing Directors’ Review continued
International
We continue to perform ongoing maintenance work in Peru and are actively monitoring selected opportunities overseas.
Health and Safety
Performing our work safely remains our highest priority and I am delighted to report that we completed our 2015 operations
without suffering a Lost Time Injury (LTI). This is the eleventh consecutive year LTI free in Australia.
NECA WA Awards
At the 2015 NECA WA Excellence and Apprentice Awards, SCEE received a Certificate of Commendation in the ‘Industrial – Large
Project’ category for our work on the Rio Tinto Cape Lambert Phase B Project and Daniel Cocker won the ‘Industrial’ category 4th
year apprentice award, the third consecutive year that he has won his category. On behalf of the Board, I would like to congratulate
Daniel on this outstanding achievement and wish him the best of luck representing SCEE and WA in the national NECA awards.
2015 Projects
Rio Tinto CLB Port B
CITIC Pacific Sino Iron
Rio Tinto Electrical Infrastructure Replacement
Curragh ROM Upgrade
Rio Tinto Services
Roy Hill
Rockhampton Services
Queensland Coal Seam Gas
Bechtel Australia
Pacific LNG
Bechtel GLNG
BP services
Civmec
Nammuldi
Rio Tinto
West Angelas
BHP Billiton Iron Ore Yarnima Power Station
BHP Billiton Iron Ore Sustaining Capital
Karara Mining
Power Line
Contract Value
>$75m
$25m-$75m <$25m Recurring
framework
agreements
10
2015 Annual Report Managing Directors’ Review continued
Outlook
Current Activity and Order Book
As we enter 2016 the volume of activity at CITIC Pacific Sino Iron is now significantly increased and we continue to work at Curtis
Island for Bechtel on the Australia Pacific LNG project through KSJV. We have also recently commenced work at Roy Hill both for
Decmil and directly to Samsung. The group workforce currently totals around 1000 employees and recruitment is continuing.
All current projects are progressing well and are profitable.
Our order book at 30 June 2015 was $111m which is a similar level to the start of the year. In addition to this we estimate that we
will perform approximately $30m of work under existing cost reimbursable contracts which has not been included in the year
end order book.
The figures above exclude recurring revenues which currently run at approximately $2m per month.
Tendering activity remains high across the business but as previously discussed market conditions continue to be challenging in the
domestic resources construction sector.
Markets
Current market conditions are expected to continue for the foreseeable future as clients are faced with depressed commodity prices.
The pipeline of large scale construction work has decreased significantly as a result. We expect this to be offset in part by an increase
in operations and maintenance and sustaining capital opportunities as capital projects are completed.
Iron Ore remains a core commodity for the Company and we expect this to continue to provide the majority of our revenues in 2016.
We have existing construction work on the CITIC Pacific Sino Iron and Roy Hill projects and continue to build our relationship with
BHP Billiton Iron Ore under our sustaining capital framework agreement. We also have a long standing relationship with Rio Tinto.
We continue to target increased operations and maintenance work and have recently been awarded a framework agreement for this
work at an Iron Ore project.
In the LNG sector we have ongoing work for Bechtel on Curtis Island through KSJV. With multiple Australian LNG plants currently
in construction we expect to see the requirement for electrical contractors on these projects hit its peak during 2016. We remain
hopeful that KSJV can secure work on one or more of these other projects.
During the year we performed some work on Queensland Coal Seam Gas projects. We continue to see opportunity for growth in this
sector as once the LNG projects become operational there is a continued requirement for new gas supply to provide throughput to
the plants.
We expect the coal market to remain depressed in the near term and continue to view metals and minerals as a spot market and will
tender opportunities as they arise.
Internationally we have resumed limited tendering for work through our Peruvian subsidiary and we are currently evaluating a
number of other overseas opportunities.
Strategy
With the volume of available work in the domestic resources construction sector expected to remain low in the near to medium
term, we continue to evaluate the entry into other potential revenue streams, both geographical and in other adjacent or
complementary sectors.
Increasing revenue from operational maintenance and sustaining capital programs remains a core strategic target.
Management continues to monitor and evaluate merger and acquisition opportunities that are consistent with this strategy.
We will continue to monitor and manage overheads closely to ensure that the business is appropriately sized for activity levels.
11
2015 Annual Report Managing Directors’ Review continued
Conclusion
While it was disappointing to report a loss in the current year we enter 2016 with a strong balance sheet, streamlined structure and
healthy order book.
The Board has a strategy in place that we hope will see the Company expand beyond its historic core market as a resources
focussed E&I construction player.
As always we will continue to focus on delivering the exceptional service that our clients associate with SCEE.
I would like to thank the management and staff of SCEE for their hard work and dedication during what has been a difficult year
and our shareholders for their continued support.
Chris Douglass
Interim Managing Director
12
2015 Annual Report We will continue to focus on
delivering the exceptional
service that our clients
associate with SCEE.
13
2015 Annual Report Directors’ Report
For the year ended 30 June 2015
Your Directors
submit their report
for Southern Cross
Electrical Engineering
Limited (“SCEE” or
“the Company”) for
the year ended 30
June 2015.
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.
14
Derek Parkin OAM
Independent Chairman and
Non-Executive Director
Derek has been a Non-Executive
Director of SCEE since March 2011 and
was appointed Chairman in May 2015.
Derek is a Fellow of the Institute of
Chartered Accountants Australia and
New Zealand (CAANZ) 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.
Derek is a past national Board
member of the ICAA and has served
on a number of the ICAA’s national
and state advisory committees. In
2011, he was a recipient of the ICAA’s
prestigious Meritorious Service Award.
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 became a member of the
Nomination and Remuneration
Committee on 6 May 2015.
Derek was awarded the Medal of
the Order of Australia in the 2015
Australia Day honours list. The
award recognised Derek’s service
to accountancy through a range of
professional, academic, business and
advisory roles.
Chris Douglass
Interim Managing Director
and Chief Executive Officer
(appointed 30 March 2015)
Chris was appointed as Interim
Managing Director and Chief
Executive Officer in March
2015 when the Board
commenced the recruitment
of a permanent appointment.
Chris is also the Company’s
Chief Financial Officer and Joint
Company Secretary.
Prior to joining SCEE in 2011 Chris was
the Chief Financial Officer at Pacific
Energy Ltd and has previously held a
number of senior finance roles with
Clough Ltd.
Chris, a Chartered Accountant and
member of the Governance Institute
of Australia, commenced his finance
career with Deloitte. Prior to his time
with Deloitte, Chris qualified and
practiced as a solicitor in London.
2015 Annual Report Back row (left to right): Karl Paganin, Simon Buchhorn, Chris Douglass, Colin Harper
Front (left to right): Gianfranco Tomasi, Derek Parkin
Gianfranco Tomasi AM
Non-Executive Director
Frank is the founder of the Company.
He was the Chairman of SCEE from
1978 until he retired from that role in
March 2011.
Frank has over 40 years experience in
the electrical construction industry.
Prior to founding SCEE he worked at
Transfield from 1968 – 1978, serving
as the National Manager Electrical
Department from 1971 – 1978.
Frank holds an Electrical Engineering
Certificate (NSW) and is a Fellow of
the Australian Institute of Company
Directors.
Frank is a member of the Nomination
and Remuneration Committee. Frank
was also a member of the Audit and
Risk Management Committee from
the 6 May 2015 to 30 June 2015.
Frank was awarded the Order of
Australia in the 2013 Australia Day
Honours list. The award recognised
Frank’s service to business through
leadership roles in the electrical
contracting industry and his
contribution to the community.
Simon Buchhorn
Non-Executive Director
(appointed 6 May 2015)
Simon was appointed to the Board in
May 2015.
Simon has a comprehensive
understanding of SCEE’s operations
having been employed by the Company
for over 30 years prior to retiring in
2014.
During this time he worked in a
number of key positions across the
business including over 6 years as
Chief Operating Officer and a period as
interim Chief Executive Officer. He was
also the General Manager of SCEE’s
LNG focussed Joint Venture KSJV.
Simon brings to the Board significant
experience in contract delivery
and operational performance both
domestically and internationally.
Karl Paganin
Independent
Non-Executive Director
(appointed 4 June 2015)
Karl was appointed to the Board in
June 2015.
Karl has 15 years of senior executive
experience in Investment Banking,
specialising in transaction structuring,
equity capital markets, mergers and
acquisitions and providing strategic
management advice to listed public
companies. Prior to that, Karl was
Director of Major Projects and Senior
Legal Counsel for Heytesbury Pty Ltd
(the private company of the Holmes a
Court family) which was the proprietor
of John Holland Group Pty Ltd. Karl is
also a board member of Autism West
Support Inc. a non for profit charity
supporting families affected
by autism.
Simon is a member of the Audit and
Risk Management Committee. Simon
was also a member of the Nomination
and Remuneration Committee from
the 6 May 2015 to 30 June 2015.
On 30 June 2015 Karl was appointed
as Chairman of the Nomination and
Remuneration Committee and as
a member of the Audit and Risk
Management Committee.
15
2015 Annual Report Directors’ Report continued
Company Secretaries
Colin Harper
Colin is a Chartered Accountant
with over 15 years experience of
resources sector finance. Colin is
also a member of the Governance
Institute of Australia.
Prior to joining SCEE in 2012 Colin
was the Chief Financial Officer and
Company Secretary of FAR Limited
and previously worked for Ernst &
Young in both Australia and the UK.
Chris Douglass
Details provided on page 14.
John Cooper
Independent Chairman
and Non-Executive Director
(resigned 5 May 2015)
John resigned from the Board in May
2015 having served as a Director since
2007 and as Chairman since 2011.
John is a Non-Executive Director of
NRW Holdings Limited, Aurizon
Holdings Limited and UGL Limited.
Simon High
Managing Director
(resigned 27 March 2015)
Simon resigned from the Board
in March 2015 having served as
Managing Director and Chief Executive
Officer since 2010.
Peter Forbes
Independent Non-Executive Director
(resigned 5 May 2015)
Peter resigned from the Board in
May 2015 having served as a Director
since 2011. Peter was also Chairman
of the Nomination and Remuneration
Committee and a member of
the Audit and Risk Management
Committee.
Peter served as a Non-Executive
Director of Dart Energy Limited for
part of financial year 2014.
John (“Jack”) Hamilton
Independent Non-Executive Director
(resigned 5 May 2015)
Jack resigned from the Board in May
2015 having served as a Director since
2011. Jack was also a member of both
the Nomination and Remuneration
Committee and the Audit and Risk
Management Committee.
Jack is a Non-Executive Director of
Geodynamics Ltd and DUET Group
and the Non-Executive Chairman of
Antilles Oil And Gas NL.
16
2015 Annual Report Directors’ Report continued
Directors’ interests
As at the date of this report, the relevant interests of the directors in the shares and rights or options over shares issued by the
Company are as follows:
Director
Derek Parkin
Chris Douglass
Gianfranco Tomasi
Simon Buchhorn
Karl Paganin
Directors’ meetings
Ordinary shares
Rights over ordinary shares
Options over ordinary
shares
70,000
-
65,227,131
765,108
22,668
-
526,515
-
-
-
-
-
-
-
-
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:
Board Meetings
Audit and Risk
Management Committee
Meetings
Nomination and
Remuneration Committee
Meetings
Held
Attended
Held
Attended
Held
Attended
15
5
15
3
1
12
10
12
12
15
5
14
3
1
10
10
11
12
4
-
1
1
-
-
-
3
3
4
-
1
1
-
-
-
3
3
2
-
4
1
1
-
-
2
2
2
-
4
1
1
-
-
2
2
Director
Derek Parkin
Chris Douglass
Gianfranco Tomasi
Simon Buchhorn
Karl Paganin
John Cooper
Simon High
Peter Forbes
Jack Hamilton
The number of meetings held represents the time the director held office or was a member of the committee during the year.
Principal Activities
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.
17
2015 Annual Report Directors’ Report continued
Significant Changes in the State of Affairs
There have been no significant changes in the state of affairs of the Company or consolidated group during this financial year.
Operating and Financial Review
A review of operations of the consolidated group during the financial year, the results of those operations and the likely
developments in the operations are set out in the Managing Director’s Review on page 6.
Operating results for the year were:
Contract revenue
(Loss)/Profit after income tax from continuing operations
2015
$’000
238,329
(9,801)
2014
$’000
218,220
7,723
Dividends
Operating results for the year were:
Cents per share
Declared and paid during the period (fully franked at 30%)
Final franked dividend for 2014
Interim franked dividend for 2015
Declared after balance date and not recognised as a liability
(fully franked at 30%)
Final franked dividend for 2015
2.70c
-
2.70c
Total amount
$’000
4,361
-
4,272
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
The operations of the Group are subject to the environmental regulations that apply to our clients. During 2015 the Group complied
with the regulations.
Share Options and Performance Rights
At the date of this report there are no unissued ordinary shares of the Company under options.
During the reporting period, no shares were issued from the exercise of options or performance rights previously granted as
remuneration.
Further details are contained in note 26 to the accounts.
18
2015 Annual Report Directors’ Report continued
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:
a) the liability arises out of conduct involving a wilful breach of duty; or
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 $72,492 (2014: $81,679).
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 is satisfied that the provision of non-audit services during the year was compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that such services will not
compromise the external auditor’s independence for the following reasons:
•
•
all non-audit services are reviewed and approved by the Audit and Risk Management 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.
Auditor’s Independence Declaration
The lead auditor’s independence declaration is set out on page 75 and forms part of the Directors’ report for the financial year
ended 30 June 2015.
Remuneration Report
The Remuneration Report is set out on pages 20 to 27 and forms part of this report.
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.
Signed in accordance with a resolution of the directors.
Derek Parkin
Chairman
25 August 2015
19
2015 Annual 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.
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.
Remuneration Structure
In accordance with best practice corporate governance, the structure of executive and non-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:
•
•
•
•
attract, motivate and retain highly skilled executives;
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
The Company has entered into contracts of employment with the Managing Director and the executives. 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 on page 23.
Fixed Remuneration
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.
Fixed remuneration is reviewed annually by the Nomination and Remuneration Committee. There are no guaranteed base pay
increases for any executive. For the 2016 financial year the Board has accepted management’s recommendation that pay levels are
held at existing levels other than in exceptional circumstances.
20
2015 Annual Report Remuneration Report – Audited continued
Variable Remuneration – Short Term Incentive (STI)
The objective 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.
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 measures of performance.
For the year ended 30 June 2015, the financial KPIs accounted for 70% of the executive team’s STI and set specific profit and order
book targets.
The non-financial KPIs comprised the achievement of strategic objectives. The strategic objectives set for each executive
were chosen to align with the key drivers for the short term success of the business and provide a framework for delivering
long term value.
The assessment of performance against KPIs is based on the audited financial results for the company. For each component of
the STI against a KPI no award is made where performance falls below the minimum threshold for that KPI. The Nomination and
Remuneration Committee recommends the STI to be paid to the individuals for approval by the Board.
Variable Remuneration – Long Term Incentive (LTI)
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.
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.
The Key Performance Indicators (“KPIs”) used to measure performance for these incentives are earnings per share growth and
absolute total shareholder return. These KPIs are measured over a three year performance period and were chosen because they
are aligned to shareholder wealth creation.
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.
21
2015 Annual Report Remuneration Report – Audited continued
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 Non-Executive Director fee structure is reviewed annually. The Board considers external market surveys as well as the fees paid
to Non-Executive Directors of comparable companies in our sector when undertaking the annual review process.
Effective May 2015, the Board agreed to reduce the annual fee paid to the Chairman of the Board from $130,000 to $110,000. The
base fee paid to other Non-Executive Directors was maintained at $80,000 per annum but it was agreed to indefinitely suspend
the payment of additional fees to Directors who sit on Board Committees.
Prior to May 2015 an additional fee of $7,500 per annum was 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 in recognition of the additional time commitment
required by the Non-Executive Directors who serve on one or more Sub-Committees.
Directors also receive superannuation at the statutory rate in addition to their Director and Committee fees.
The Non-Executive Directors do not receive retirement benefits, nor do they participate in any incentive programs.
The remuneration paid to Non-Executive Directors 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
Dividends declared and paid during the year
Change in share price
Return on capital employed
2015
$’000
(9,801)
4,361
(38%)
(10%)
2014
$’000
7,723
4,361
(42%)
10%
2013
$’000
17,341
3,633
(31%)
24%
2012
$’000
13,708
-
43%
21%
2011
$’000
(1,652)
5,588
(20%)
(2%)
22
2015 Annual Report Remuneration Report – Audited continued
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23
2015 Annual Report
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 which was set out for the previous financial year. The amount is finally determined after
performance reviews are completed and approved by the Nomination and Remuneration Committee.
B. 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 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. The value disclosed is the fair value of the
options and performance rights recognised in this reporting period.
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
Chris Douglass
Andy Ozolins
Notice Period
6 months
6 months
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.
Options and rights over equity instruments
The movement during the reporting period in the number of options and rights 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:
Performance Rights over equity instruments
Executive
Held at
1 July 2014
Granted as
remuneration
Exercised
Forfeited
Held at 30
June 2015
Vested
during the
year
Vested and
exercisable
at 30 June
2015
Chris Douglass
Andy Ozolins
Simon High
470,270
-
1,230,829
1,701,099
341,837
260,204
842,026
1,444,067
-
-
-
-
(164,868)
-
(2,072,855)
647,239
260,204
-
(2,237,723)
907,443
-
-
-
-
-
-
-
-
Subsequent to 30 June 2015 it was determined that the vesting conditions in respect of the 2013 performance rights held by Mr
Douglass have not been met and 120,724 performance rights have been forfeited.
24
2015 Annual Report
Remuneration Report – Audited continued
Performance rights granted as remuneration in 2015
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:
Executive
Number
Grant date
Fair value per
performance
right at grant
date ($)
Exercise
price per
performance
right ($)
Vesting Date
Expiry Date
Chris Douglass1
Chris Douglass2
Andy Ozolins1
Andy Ozolins2
Simon High1, 3
Simon High2, 3
170,919
170,918
130,102
130,102
421,013
421,013
1,444,067
4/11/14
4/11/14
4/11/14
4/11/14
4/11/14
4/11/14
0.42
0.25
0.42
0.25
0.42
0.25
0.00
0.00
0.00
0.00
0.00
0.00
30 June 2017
30 June 2018
30 June 2017
30 June 2018
30 June 2017
30 June 2018
30 June 2017
30 June 2018
30 June 2017
30 June 2018
30 June 2017
30 June 2018
1.
2.
3.
Performance rights granted with EPS growth as the vesting condition
Performance rights granted with Absolute TSR as the vesting condition
All performance rights granted to Simon High were forfeited during the year on cessation of employment
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 2014 to 30 June 2017 (“Performance Period”);
No performance rights will vest until 30 June 2017;
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 8% 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 8% per annum compounded
8% per annum compounded
0% vesting
50% vesting
Between 8% and 15% per annum compounded
Pro-rata vesting between 50% and 100%
At or above 15% per annum compounded
100% vesting
25
2015 Annual Report
Remuneration Report – Audited continued
EPS will be assessed against targets for threshold performance of 5.7 cents per share in the 2017 financial year and for stretch
performance of 7.3 cents per share in the 2017 financial year. The vesting schedule is as follows for EPS performance in the 2017
financial year:
Less than 5.7 cents per share
5.7 cents per share
0% vesting
50% vesting
Between 5.7 and 7.3 cents per share
Pro-rata vesting between 50% and 100%
At or above 7.3 cents per share
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.
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 in the event of retirement, permanent disablement or death the Board, at their at their
absolute discretion, waive the exercise and vesting conditions associated with the performance rights or allow the performance
rights to continue to be assessed over the original performance assessment period. In the event of a change of control of the
Company, all options and performance rights that have not lapsed may be exercised.
Details of equity incentives affecting current and future remuneration
Executive
Instrument
Number
Grant date
% vested in
year
% forfeited in
year
Vesting Date
Expiry Date
(A)
Chris Douglass
2012 Rights
164,868
2 May 2012
2013 Rights
120,724
25 September 2012
2014 Rights
184,678
8 October 2013
2015 Rights
341,837
4 November 2014
Andy Ozolins
2015 Rights
260,204
4 November 2014
Simon High
2012 Rights
419,664
29 October 2012
2013 Rights
323,396
29 October 2012
2014 Rights
487,769
28 October 2013
2015 Rights
842,026
4 November 2014
-
-
-
-
-
-
-
-
-
100%
30 June 2014
30 June 2015
-
-
-
-
30 June 2015
30 June 2016
30 June 2016
30 June 2017
30 June 2017
30 June 2018
30 June 2017
30 June 2018
100%
100%
100%
100%
30 June 2014
30 June 2015
30 June 2015
30 June 2016
30 June 2016
30 June 2017
30 June 2017
30 June 2018
A.
Performance rights are performance tested following completion of the performance period, which ends on the vesting date. Subsequent to 30 June
2015 it has been determined that the vesting conditions in respect of the 2013 performance rights have not been met and all 2013 performance rights
have been forfeited. Simon High forfeited all remaining performance rights on cessation of employment.
26
2015 Annual Report
Remuneration Report – Audited continued
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
Ordinary shares
Directors
Derek Parkin
Chris Douglass
Gianfranco Tomasi
Simon Buchhorn
Karl Paganin
John Cooper
Simon High
Peter Forbes
Jack Hamilton
Executives
Andy Ozolins
Held at 30
June 2014
Purchases
Net change
other (A)
Held at
30 June 2015
70,000
-
65,227,131
-
-
116,667
500,000
200,000
114,670
-
-
-
-
-
-
-
-
90,000
-
-
-
765,108
22,668
(116,667)
(500,000)
(200,000)
(204,670)
-
-
-
70,000
-
65,227,131
765,108
22,668
-
-
-
-
-
A. Net change other represents shares held at the date of appointment or resignation. Refer to Table 1 above
for the relevant dates for each director and executive.
Transactions with key management personnel
The Group has entered into rental agreements over the following properties:
•
•
•
F & A Tomasi Superannuation Fund owns the properties at 41 and 44 Macedonia St, Naval Base WA, which are leased to Southern
Cross Electrical Engineering Limited.
G & A Tomasi own the properties at 45, 47, 49 & 51 Macedonia Street, Naval Base WA which are leased to Southern Cross Electrical
Engineering Limited.
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.
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 Ltd.
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 July 2014 except for 41
Macedonia Street which is due to be reviewed in October 2016.
Total rent paid by SCEE in the 2015 financial year in respect of the above agreements was $834,000.
27
2015 Annual Report Consolidated Statement of Comprehensive Income
For the year ending 30 June 2015
Contract revenue
Contract expenses
Gross profit
Other (expense)/income
Employee benefits expenses
Occupancy expenses
Administration expenses
Other expenses
Depreciation expense
Amortisation of customer contract intangibles
Restructuring and impairment expenses
(Loss)/profit from operations
Finance income
Finance expenses
Net finance expense
(Loss)/profit before tax
Note
4
5
6
9
9
7
8
8
8
2015
$’000
2014
$’000
238,329
218,220
(205,319)
(174,378)
33,010
(1,025)
(15,886)
(1,817)
(4,651)
(982)
(6,817)
(75)
(10,984)
43,842
103
(18,161)
(1,988)
(4,794)
(1,097)
(7,124)
(151)
-
(9,227)
10,630
846
(988)
(142)
993
(1,143)
(150)
(9,369)
10,480
Income tax expense
(Loss)/profit from continuing operations
10
(432)
(9,801)
(2,757)
7,723
Other comprehensive income
Items that are or may be reclassified to the profit and loss:
Foreign currency translation gain for foreign operations
Other comprehensive income net of income tax
Total comprehensive (loss)/income
(Loss)/profit attributable to:
Owners of the Company
Earnings per share:
Basic (loss)/earnings per share (cents)
Diluted (loss)/earnings per share (cents)
297
297
68
68
(9,504)
7,791
(9,504)
7,791
11
11
(6.12)
(6.12)
4.78
4.78
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
28
2015 Annual Report Consolidated Balance Sheet
For the year ending 30 June 2015
As at 30 June 2015
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
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
Provisions
Tax payable
Total current liabilities
Non-current liabilities
Loans and borrowings
Provisions
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
Note
2015
$’000
2014
$’000
12
13
14
15
16
17
18
19
20
21
20
21
10
22
44,550
34,064
2,947
8,556
987
909
37,869
28,461
2,649
28,909
686
-
92,013
98,574
22,863
8,784
31,647
30,741
17,249
47,990
123,660
146,564
21,961
3,163
-
6,005
3,257
23,968
1,134
1,875
5,459
2,117
34,386
34,553
-
353
223
576
820
326
6,612
7,758
34,962
88,698
42,311
104,253
56,036
702
31,960
88,698
57,578
553
46,122
104,253
The above balance sheet should be read in conjunction with the accompanying notes.
29
2015 Annual Report Consolidated Statement of Changes in Equity
For the year ending 30 June 2015
Balance as at 1 July 2013
Total comprehensive income for the period
Profit for the period
Foreign currency translation gain
Total comprehensive income
Transactions with owners, recorded directly in equity
Dividends to equity holders
Cost of share-based payment
Total transactions with owners
Balance as at 30 June 2014
Balance as at 1 July 2014
Total comprehensive income for the period
Profit for the period
Foreign currency translation gain
Total comprehensive income
Transactions with owners, recorded directly in equity
Dividends to equity holders
Buyback of share
Cost of share-based payment
Total transactions with owners
Balance as at 30 June 2015
Share
Capital
Retained
Earnings
Share
Based
Payments
Reserve
Translation
Reserve
Total Equity
$’000
57,578
$’000
42,760
$’000
1,822
$’000
(843)
$’000
101,317
-
-
-
-
-
-
57,578
7,723
-
7,723
(4,361)
-
(4,361)
46,122
-
-
-
-
(494)
(494)
1,328
-
68
68
-
-
-
7,723
68
7,791
(4,361)
(494)
(4,855)
(775)
104,253
Share
Capital
Retained
Earnings
Share
Based
Payments
Reserve
Translation
Reserve
Total Equity
$’000
57,578
$’000
46,122
$’000
1,328
$’000
(775)
$’000
104,253
-
-
-
-
(1,542)
-
(9,801)
-
(9,801)
(4,361)
-
-
(1,542)
(4,361)
56,036
31,960
-
-
-
-
-
(148)
(148)
1,180
-
297
297
-
-
-
-
(9,801)
297
(9,504)
(4,361)
(1,542)
(148)
(6,051)
(478)
88,698
The above statement of changes in equity should be read in conjunction with the accompanying notes.
30
2015 Annual Report Consolidated Statement of Cash Flows
For the year ending 30 June 2015
As at 30 June 2015
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
Repayment of borrowings
Dividends paid
Share buy back
Net cash (used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of exchange rate fluctuations on cash held
Note
2015
$’000
2014
$’000
254,855
220,628
(232,039)
(212,221)
846
(988)
(5,681)
16,993
273
(2,284)
(2,011)
(2,695)
(4,361)
(1,542)
(8,598)
6,384
37,869
297
993
(1,143)
(895)
7,362
113
(4,329)
(4,216)
(1,878)
(4,361)
-
(6,239)
(3,093)
40,865
97
Cash and cash equivalents at 30 June
44,550
37,869
The above cash flow statement should be read in conjunction with the accompanying notes.
31
2015 Annual Report Index to Notes to the Financial Statements
1. Reporting entity
2. Basis of preparation
3. Segment reporting
4. Contract revenue
5. Other (expense)/income
6. Employee benefits expenses
7. Restructuring and impairment expenses
8. Finance income and expenses
9. Depreciation and amortisation expenses
10.
Income tax expense
11. Earnings per share
12. Cash and cash equivalents
13. Trade and other receivables
14.
Inventories
15. Construction work in progress
16. Property, plant and equipment
17.
Intangible assets – goodwill and
customer contracts
18. Trade and other payables
19. Unearned revenue
33
33
35
35
36
36
36
37
37
38
40
40
40
41
41
42
43
44
44
20. Loans and borrowings
21. Provisions
22. Capital and reserves
23. Financial instruments
24.
Investments in subsidiaries
25.
Interest in joint operations
26. Share-based payments
27. Reconciliation of cash flows from
operating activities
28. Commitments
29. Contingencies
30. Subsequent events
31. Auditor’s remuneration
32. Parent entity disclosures
33. Related parties
34. Significant accounting policies
35. Determination of fair values
45
45
45
47
51
52
52
57
57
58
58
58
59
59
61
71
32
2015 Annual Report
Notes to the Financial Statements
For the year ending 30 June 2015
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 2015 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 34(u).
The consolidated financial statements were authorised for issue by the Board of Directors on 25 August 2015.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except as set out below:
•
Share-based payment arrangements are measured at fair value.
The methods used to measure fair values are discussed further in note 35.
(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 sheet date.
Exchange variations resulting from the translation are recognised in other comprehensive income and presented in the
foreign currency translation reserve in equity.
33
2015 Annual Report
Notes to the Financial Statements
For the year ending 30 June 2015
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 26 – measurement of share based payments; and
Note 17 – 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 34(n)(i) and 4) and contract work in progress (note 34(h)(i) and 15).
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.
The key judgement in determining revenue from construction contracts is estimating the unapproved variations and claims
to be included in project forecast revenue. The Company uses its best estimate and its expertise to determine the value
included supported by qualified external experts where necessary. The outcome of the events which are the subject of
these judgements are by nature uncertain such that final positions resolved with clients can differ materially from original
estimates.
Details of the Groups accounting policies are included in notes 34 and 35.
34
2015 Annual Report
Notes to the Financial Statements
For the year ending 30 June 2015
3. 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 Group has branded itself into the following three operating divisions: SCEE Construction, SCEE Infrastructure and SCEE
Services. For the year ended 30 June 2015, the Construction division contributed revenue of $123.9 million (2014: $133.8 million), the
Infrastructure division contributed revenue of $45.7 million (2014: $50.9 million) and the Services division contributed revenue of
$68.7 million (2014: $33.5 million). Excluded from these amounts is $5.8 million (2014: $6.3 million) of inter-entity revenue, which
is eliminated on consolidation. The divisions are exposed to similar operational risks and rewards and are only divisions for the
purposes of addressing target market opportunities and facilitating appropriate project management structures.
The directors believe that the aggregation of the operating divisions for segment reporting purposes is appropriate as they:
•
•
•
•
•
have similar economic characteristics;
perform similar services using similar business processes;
provide their services to a similar client base;
have a centralised pool of shared assets and services; and
operate in similar regulatory environments.
All divisions have therefore been aggregated to form one operating segment.
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
2015
2014
Revenue
Non-current
assets
Revenue
Non-current
assets
$’000
237,964
365
238,329
$’000
31,299
348
31,647
$’000
217,762
458
218,220
$’000
47,675
315
47,990
Revenues from the three largest customers of the Group’s Australian segment generated respectively $90 million, $48 million and $38
million of the Group’s total revenue (2014: $168 million generated from the two largest customers).
4. Contract Revenue
Contract revenue
Note
2015
$’000
2014
$’000
238,329
218,220
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.
35
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
5. Other (expenses)/income
Net (loss)/gain on sale/write-off of non-current assets
Foreign exchange gain/(loss)
Other
Note
2015
$’000
(1,219)
16
178
(1,025)
2014
$’000
29
(167)
241
103
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.
6. Employee benefits expenses
Remuneration, bonuses and on-costs
Amounts provided for employee entitlements
Share-based payments expense
Note
2015
$’000
2014
$’000
(15,637)
(18,375)
(397)
148
(15,886)
(280)
494
(18,161)
The above employee benefits expenses do not include employee benefits expenses recorded within contract expenses.
Employee benefits included in contract expenses were $143.0m (2014: $111.7m).
7. Restructuring and impairment expenses
Impairment of goodwill and intangible assets (a)
Onerous Lease Provision (b)
Asset write-downs (c)
Other restructuring expenses (d)
Note
17
2015
$’000
(8,390)
(498)
(944)
(1,152)
(10,984)
2014
$’000
-
-
-
-
-
a. Goodwill has been impaired to its recoverable amount. Refer to note 17.
b. Onerous lease provision has been recognised at 30 June 2015 against property leases that are not expected to be fully utilised
following the restructure.
c.
Certain assets have been identified as surplus to business requirements. These have been written down to their expected
recoverable value.
d. This represents redundancy costs incurred as part of the restructure
36
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
8. Finance income and expenses
Interest income on bank deposits
Finance income
Interest expense on bank borrowings
Finance charges payable under finance lease
Bank charges
Bank guarantee fees
Finance expense
Net finance expense
9. Depreciation and amortisation expenses
Buildings
Leasehold improvements
Plant and equipment
Motor vehicles
Office furniture and equipment
Note
Note
2015
$’000
846
846
(29)
(142)
(548)
(269)
(988)
(142)
2015
$’000
(14)
(247)
(2,557)
(1,523)
(2,476)
(6,817)
2014
$’000
993
993
(75)
(265)
(559)
(244)
(1,143)
(150)
2014
$’000
(17)
(233)
(2,775)
(1,913)
(2,186)
(7,124)
Amortisation of customer contract intangibles
(75)
(151)
37
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
10. Income tax expense
(a) Income Statement
Current tax expense
Current period
Under provision from prior year
Deferred tax expense
Origination and reversal of temporary differences
Income tax expense reported in the income statement
(b) Reconciliation between tax expense and pre-tax accounting profit
Accounting profit/(loss) before income tax
Income tax (expense)/credit using the Company’s domestic
tax rate of 30% (2014: 30%)
Goodwill impairment
Tax effect of permanent differences
Tax losses of foreign operations not recognised
Research and development
Share based payments
Amortisation of Intangibles
Other
Income tax expense reported in the income statement
The applicable effective tax rates are:
Note
2015
$’000
2014
$’000
(6,774)
(47)
(6,821)
6,389
(432)
(9,369)
2,811
(2,517)
-
(165)
(526)
45
(23)
(57)
(432)
(4.6%)
(5,643)
-
(5,643)
2,886
(2,757)
10,480
(3,144)
-
(156)
(23)
612
-
-
(46)
(2,757)
26.3%
38
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
10. Income tax expense (continued)
Deferred tax assets and liabilities
Balance Sheet
2015
$’000
2014
$’000
Movement recognised in
Income Statement
2015
$’000
2014
$’000
Movement recognised in
Equity
2015
$’000
2014
$’000
Deferred tax liabilities
Retentions
Work in progress
Property, plant and equipment
Deferred tax assets
Provision for onerous lease
Provision assets held for sale value
Accruals
Employee benefits
Property, plant and equipment
Other
Employee share trust LTI equity settlement
Borrowing costs
Net deferred tax liability
-
(2,640)
(23)
(2,663)
149
134
59
1,934
19
144
-
1
2,440
(223)
(36)
(12,512)
(23)
(12,571)
-
-
46
2,023
19
153
-
6
2,247
(6,612)
(164)
(6,033)
-
128
(3,840)
-
(6,197)
(3,712)
(149)
(134)
(12)
89
9
-
-
5
(192)
-
-
(5)
409
12
29
382
(1)
826
(6,389)
(2,886)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
11. Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 30 June 2015 was based on the loss attributable to ordinary shareholders of
$9,801,000 (2014: Profit; $7,723,000) and a weighted average number of ordinary shares outstanding of 160,080,407 (2014:
161,523,130), calculated as follows:
Profit/(loss) attributable to ordinary shareholders
Profit/(loss) for the period
Weighted average number of ordinary shares
Note
2015
$’000
(9,801)
2014
$’000
7,723
Issued ordinary shares at 1 July
Effective new balance resulting from buy back of shares in the year
Weighted average number of ordinary shares at 30 June
Diluted earnings per share
Note
22
2015
2014
161,523,130
161,523,130
(1,442,723)
-
160,080,407
161,523,130
Basic earnings per share and diluted earnings per share are the same at 30 June 2015 and 30 June 2014 as there are no dilutive
potential shares at those dates
12. Cash and cash equivalents
Bank balances
Short term deposits
Cash and cash equivalents in the statement of cash flows
Note
2015
$’000
2,873
41,677
44,550
2014
$’000
10,080
27,789
37,869
The effective interest rate on cash and cash equivalents was 2.5% (2014: 3.1%); these deposits are either at call or on short term
deposit.
13. Trade and other receivables
Current
Trade receivables
Cash and cash equivalents in the statement of cash flows
Note
2015
$’000
34,064
34,064
2014
$’000
28,461
28,461
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.
40
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
14. Inventories
Trade receivables
Cash and cash equivalents in the statement of cash flows
15. Construction work in progress
Costs incurred to date
Recognised profit
Progress billings
Construction work in progress
Note
Note
2015
$’000
2,947
2,947
2015
$’000
114,840
19,649
(125,933)
8,556
2014
$’000
2,649
2,649
2014
$’000
133,935
37,961
(125,933)
28,909
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 completion
method and is determined using the costs incurred to date and the total forecast contract costs.
41
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
16. Property, plant and equipment
Land and
Buildings
Leasehold
Improvements
Plant and
equipment
Motor
Vehicles
Office
Furniture
and
Equipment
Total
$’000
$’000
$’000
$’000
$’000
$’000
916
-
-
-
916
916
-
-
(671)
-
245
(85)
(17)
-
-
2,940
412
(11)
-
22,710
15,418
586
(114)
(29)
-
(594)
-
8,069
3,331
(5)
1
50,053
4,329
(724)
(28)
3,341
23,153
14,824
11,396
53,630
3,341
17
(898)
-
-
23,153
14,824
993
(292)
(1,516)
72
26
(1,130)
(479)
-
11,396
1,248
(2,395)
-
4
53,630
2,284
(4,715)
(2,666)
76
2,460
22,410
13,241
10,253
48,609
(826)
(233)
11
-
(8,003)
(2,775)
133
(1)
(5,317)
(1,913)
493
-
(2,173)
(2,186)
3
-
(16,404)
(7,124)
640
(1)
(102)
(1,048)
(10,646)
(6,737)
(4,356)
(22,889)
(102)
(14)
-
115
-
(1)
831
814
814
244
(1,048)
(247)
403
-
-
(10,646)
(2,557)
257
801
(74)
(6,737)
(1,523)
1,004
393
-
(4,356)
(2,476)
1,061
-
-
(22,889)
(6,817)
2,725
1,309
(74)
(892)
(2,219)
(6,863)
(5,771)
(25,746)
2,114
2,293
2,293
1,568
14,707
12,507
12,507
10,191
10,101
8,087
8,087
6,378
5,896
7,040
7,040
4,482
33,649
30,741
30,741
22,863
Cost
Balance at 1 July 2013
Additions
Disposals
Exchange differences
Balance at 30 June 2014
Balance at 1 July 2014
Additions
Disposals/write-downs
Reclassification to assets held for sale
Exchange differences
Balance at 30 June 2015
Depreciation and impairment losses
Balance at 1 July 2013
Depreciation for the year
Disposals
Exchange differences
Balance at 30 June 2014
Balance at 1 July 2014
Depreciation for the year
Disposals/write-downs
Reclassification to assets held for sale
Exchange differences
Balance at 30 June 2015
Carrying amounts
At 1 July 2013
At 30 June 2014
At 1 July 2014
At 30 June 2015
42
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
17. Intangible assets – goodwill and customer contracts
Reconciliation of carrying amount
Cost
Balance as at 1 July 2013
Acquisitions through business combinations
Balance as at 30 June 2014
Balance as at 1 July 2014
Acquisitions through business combinations
Balance as at 30 June 2015
Amortisation and impairment losses
Balance as at 1 July 2013
Amortisation
Balance as at 30 June 2014
Balance as at 1 July 2014
Impairment loss
Amortisation
Balance as at 30 June 2015
Carrying amounts
At 1 July 2013
At 30 June 2014
At 1 July 2014
At 30 June 2015
Note
Goodwill
$’000
Customer
Contracts
$’000
17,174
-
17,174
17,174
-
17,174
-
-
-
-
7
(8,390)
-
1,811
-
1,811
1,811
-
1,811
(1,585)
(151)
(1,736)
(1,736)
-
(75)
Total
$’000
18,985
-
18,985
18,985
-
18,985
(1,585)
(151)
(1,736)
(1,736)
(8,390)
(75)
(8,390)
(1,811)
(10,201)
17,174
17,174
17,174
8,784
226
75
75
-
17,400
17,249
17,249
8,784
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:
Construction
Infrastructure
Services
2015
$’000
-
3,306
5,478
8,784
2014
$’000
7,066
3,616
6,492
17,174
The recoverable amount of the above cash generating units (“CGUs”) was based on their value in use. The group performed
its annual impairment test in June 2015. In June 2015 the carrying amount of all CGUs was determined to be higher than their
recoverable amounts and therefore an impairment charge has been recognised.
43
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
17. Intangible assets – goodwill and customer contracts (continued)
Value in use was determined by discounting the future cash flows generated from the continuing operations of the CGU. Five years
of cash flows were included in the discounted cash flow models together with a terminal value reflecting a long term growth rate
of 2.5% (2014: 2%). 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 in
which the CGUs operate.
EBITDA for 2016 is based on the board approved budget with EBITDA for 2017 – 2020 based on management forecasts. 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 by
projects commencing in 2015.
A post-tax discount rate of 12.15% (2014: 12.4%) was applied. This discount rate was estimated based on past experience and
industry average weighted cost of capital
As a result a total goodwill impairment charge of $8,390,000 (2014: Nil) was recognised for the period ended 30 June 2015
made up of Construction CGU: $7,066,000, Infrastructure CGU: $310,000 and Services CGU: $1,014,000. The impairment
charge is included in the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the financial year 30
June 2015.
•
Any adverse movement in the assumptions above would result in further impairment charge.
18. Trade and other payables
Current
Trade payables
Accrued expenses
Goods and services tax payable
2015
$’000
6,541
12,965
2,455
21,961
2014
$’000
8,100
14,680
1,188
23,968
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 23.
19. Unearned revenue
Current
Unearned revenue
2015
$’000
3,163
3,163
2014
$’000
1,134
1,134
Unearned revenue arises when the Group has invoiced the client in advance of performing the contracted services.
44
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
20. 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 23.
Current liabilities
Finance lease liabilities
Non-current liabilities
Finance lease liabilities
During the year all finance lease liabilities were paid out in full.
21. Provisions
Current
Annual leave
Long service leave
Onerous Lease
Non-current
Long service leave
2015
$’000
-
-
-
-
2015
$’000
4,760
747
498
6,005
2014
$’000
1,875
1,875
820
820
2014
$’000
4,622
837
-
5,459
353
326
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 34(k) to this report.
22. Capital and reserves
Ordinary shares
Issued and fully paid
Movements in shares on issue
2015
2014
Number
$’000
Number
$’000
158,210,370
56,036
161,523,130
57,578
Balance at the beginning of the financial year
161,523,130
57,578
161,523,130
57,578
Share buy backs
(3,312,760)
(1,542)
-
-
Balance at the end of the financial year
158,210,370
56,036
161,523,130
57,578
45
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
22. Capital and reserves (continued)
Translation reserve
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.
Dividends
Dividends recognised in the current year by the Group are:
2015
Final 2014 ordinary
Total amount
2014
Final 2013 ordinary
Total amount
Cents per
share
Total
amount
$’000
Franked
Date of
payment
2.70
2.70
4,361
4,361
4,361
4,361
Franked
14th October 2014
Franked
17th October 2013
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
Declared after end of year
After the balance sheet date a dividend of 2.70 cents per share in the amount of $4.272 million was proposed by the directors. The
dividend has not been provided in the financial statements.
Franking account balance
Company
2015
$’000
12,013
2014
$’000
8,201
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.
46
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
23. 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.
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 and cash equivalents
Trade and other receivables
Cash
Carrying amount
2015
$’000
44,550
34,064
78,614
2014
$’000
37,869
28,461
66,330
The Group’s cash and cash equivalents are held with major banks and financial institutions.
47
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
23. Financial instruments (continued)
Trade and other receivables
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 50 percent (2014: 79 percent) of the Group’s trade receivables are attributable to transactions with
three 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
Impairment losses
The ageing of the Group’s trade receivables at the reporting date was:
Carrying amount
2015
$’000
34,009
55
34,064
2014
$’000
28,349
112
28,461
Not past due
Past due 0-30 days
Past due 30-60 days
Past due 60 days and less than 1 year
More than 1 year
Gross
2015
$’000
26,458
6,909
120
577
-
34,064
Impairment
2015
$’000
-
-
-
-
-
-
Gross
2014
$’000
19,586
7,018
1,684
173
-
28,461
Impairment
2014
$’000
-
-
-
-
-
-
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.
48
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
23. 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
Contractual
cash flows
6 mths or
less
6-12 mths
1-2 years
2-5 years
$’000
$’000
$’000
$’000
$’000
$’000
-
21,961
21,961
-
21,961
21,961
-
21,961
21,961
2,695
23,968
26,663
2,849
23,968
26,817
1,032
23,968
25,000
-
-
-
974
-
974
-
-
-
796
-
796
-
-
-
47
-
47
More
than 5
years
$’000
-
-
-
-
-
-
30 June 2015
Non-derivative financial liabilities
Finance lease liabilities
Trade and other payables
30 June 2014
Non-derivative financial liabilities
Finance lease liabilities
Trade and other payables
Market Risk
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 no material currency risk exposures at 30 June 2015 or 30 June 2014.
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.
49
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
23. 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
Carrying amount
2015
$’000
2014
$’000
-
2,695
44,550
37,869
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 2015.
Profit or loss
Equity
100bp increase
$’000
100bp decrease
$’000
100bp increase
$’000
100bp decrease
$’000
671
671
630
630
(671)
(671)
(630)
(630)
-
-
-
-
-
-
-
-
30 June 2015
Variable rate instruments
Cash flow sensitivity (net)
30 June 2014
Variable rate instruments
Cash flow sensitivity (net)
Fair values
Fair values versus carrying amounts
The fair values of financial assets and liabilities materially equates to the carrying values shown in the balance sheet.
Other Price Risk
The Group is not directly exposed to any other price risk.
50
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
23. 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 make an annual distribution to shareholders in the form of fully franked dividends, subject to the Group’s
financial results in a given year, 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.
24. 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.
Country of
Incorporation
Equity Interest (%)
2015
2014
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
Peru
Australia
Tanzania
Ghana
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
25. Interest in joint operations
The Group has a 50% interest in KSJV Unincorporated and KSJV Australia Pty Ltd, of which the principal activity is to deliver
electrical, instrumentation and telecommunication works to onshore processing elements of the region’s LNG projects.
These joint arrangements are accounted for as joint operations.
The Group’s share of the underlying assets and liabilities as at 30 June 2015 and 2014 and revenues and expenses of the joint
operations for the year 30 June 2015 and 2014, which are proportionally consolidated in the consolidated financial statements,
is as follows:
Share of the joint operations statement of financial position:
Current assets
Current liabilities
Non-current liabilities
Equity
Share of the joint operations revenue and profit:
Revenue
Contract expenses
Other expenses
Profit before tax
Income tax expense
Profit for the year from continuing operations
2015
$’000
4,400
(1,540)
(1,158)
1,702
37,558
(32,852)
(714)
3,992
(1,198)
2,794
2014
$’000
1,395
(1,197)
(88)
(110)
5,237
(4,654)
(323)
260
(78)
182
The joint operations have no contingent liabilities or capital commitments as at 30 June 2015 and 30 June 2014.
26. Share-based payments
(a) Expense recognised in profit or loss
Share based payments expenses for the year comprises:
2015 Performance Rights
2014 Performance Rights
2013 Performance Rights
(i)
(ii)
(iii)
2015
$’000
110
(203)
(55)
(148)
2014
$’000
297
(136)
(655)
(494)
The amount recognised 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 is based on the number of awards that meet the
related service and non-market performance conditions at the vesting date.
52
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
26. Share-based payments (continued)
(i)
2015 Performance Rights
During the year 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.
Grant date / employees entitled
Performance rights issued to senior
management on 04 November 2014
Performance rights issued to key
management on 04 November 2014
Total /performance rights
Number of
instruments
676,874
1,444,067
2,120,941
Vesting conditions
Contractual life
Employed on 30 June 2017 and
exceed performance hurdles
Employed on 30 June 2017 and
exceed performance hurdles
32 months
32 months
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 2014 to 30 June 2017 (“Performance Period”);
No performance rights will vest until 30 June 2017;
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 8% 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 8% per annum compounded
8% per annum compounded
0% vesting
50% vesting
Between 8% and 15% per annum compounded
Pro-rata vesting between 50% and 100%
At or above 15% per annum compounded
100% vesting
53
2015 Annual Report
Notes to the Financial Statements
For the year ending 30 June 2015
26. Share-based payments (continued)
EPS will be assessed against targets for threshold performance of 5.7 cents per share at the end of the Performance Period and
for stretch performance of 7.3 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 5.7 cents per share
5.7 cents per share
0% vesting
50% vesting
Between 5.7 and 7.3 cents per share
Pro-rata vesting between 50% and 100%
At or above 7.3 cents per share
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.
During the year 1,135,240 of the 2015 performance rights were forfeited.
(ii)
2014 Performance Rights
There were 1,005,211 2014 Performance Rights on issue at 1 July 2014. No 2014 Performance Rights were granted, none vested and
617,399 were forfeited during the year.
The 2014 Performance Rights were performance tested over a three-year period from 1 July 2013 to 30 June 2016. The hurdles used
to determine performance are Relative Total Shareholder Return (TSR) and Earnings per Share (EPS) performance.
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
0% vesting
50% vesting
Between 12% and 15% per annum compounded
Pro-rata vesting between 50% and 100%
At or above 15% per annum compounded
100% vesting
EPS will be assessed against targets for threshold performance of 17 cents per share at the end of the Performance Period and
for stretch performance of 22 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 17 cents per share
17 cents per share
0% vesting
50% vesting
Between 17 and 22 cents per share
Pro-rata vesting between 50% and 100%
At or above 22 cents per share
100% vesting
54
2015 Annual Report
Notes to the Financial Statements
For the year ending 30 June 2015
26. Share-based payments (continued)
(iii)
2013 Performance Rights
There were 579,435 2013 Performance Rights on issue at 1 July 2014. No 2013 Performance Rights were granted, none vested and
323,396 were forfeited during the year.
The 2013 Performance Rights were performance tested over a three-year period from 1 July 2012 to 30 June 2015. The hurdles used
to determine performance are Relative Total Shareholder Return (TSR) and Earnings per Share (EPS) performance.
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
0% vesting
50% vesting
Between 12% and 15% per annum compounded
Pro-rata vesting between 50% and 100%
At or above 15% per annum compounded
100% vesting
EPS will be assessed against targets for threshold performance of 17 cents per share at the end of the Performance Period and
for stretch performance of 22 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 17 cents per share
17 cents per share
0% vesting
50% vesting
Between 17 and 22 cents per share
Pro-rata vesting between 50% and 100%
At or above 22 cents per share
100% vesting
(b) Measurement of fair values
The fair value of the TSR Performance Rights has been measured using the Monte-Carlo simulation. The EPS Performance Rights
has been measured using the Binomial tree methodology.
The inputs used in the measurement of the fair values at grant date were as follows:
2015
The performance rights issued in respect of the 2015 financial year were granted in one tranche as follows:
Grant Date
Vesting date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Fair value of TSR component
Fair value of EPS component
4 November 2014
30 June 2017
$0.49
2.7 years
45%
2.54%
5.40%
$0.25
$0.42
55
2015 Annual Report
Notes to the Financial Statements
For the year ending 30 June 2015
26. Share-based payments (continued)
2014
The performance rights issued in respect of the 2014 financial year were granted in three separate tranches as follows:
Grant Date
Vesting date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Fair value of TSR component
Fair value of EPS component
8 October 2013
30 June 2016
28 October 2013
12 December 2013
30 June 2016
30 June 2016
$1.21
2.7 years
40%
2.88%
2.2%
$0.80
$1.14
$1.10
2.7 years
40%
2.85%
2.4%
$0.68
$1.03
$0.80
2.6 years
40%
2.83%
3.3%
$0.34
$0.73
(c) Reconciliation of outstanding performance rights
The number and weighted average exercise prices of performance rights under the programmes were as follows:
2015
2014
Number of rights
Number of rights
Outstanding at 1 July
Granted during the year
Forfeited during the year
Outstanding at 30 June
Vested and exercisable at 30 June
2,914,382
2,120,941
(3,405,771)
1,629,552
-
2,782,667
1,214,583
(1,082,868)
2,914,382
-
Subsequent to 30 June 2015 it has been determined that the vesting conditions in respect of the 2013 Performance rights have not
been met and 256,039 performance rights included as outstanding above will be forfeited.
56
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
27. Reconciliation of cash flows from operating activities
2015
$’000
2014
$’000
(9,801)
7,723
6,892
1,715
8,390
(148)
(5,603)
-
20,354
(298)
(301)
7,274
(29)
-
(494)
(9,894)
2,632
12,800
(333)
(122)
(2,008)
(10,250)
2,030
1,020
1,140
(6,389)
16,993
(571)
(604)
2,117
(2,887)
7,362
Cash flows from operating activities
(Loss)/profit for the year
Adjustments for:
Depreciation and amortisation
(Profit)/Loss on sale of property, plant and equipment
Impairment expense
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
28. Commitments
Leasing commitments
Operating lease commitments – as lessee
The Group has entered into commercial property leases. These leases have an average life of 3 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 2015
are:
Within one year
After one but no more than five years
After more than five years
Total minimum lease payments
2015
$’000
1,038
2,199
458
3,695
2014
$’000
1,051
2,787
987
4,825
Under the terms of 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.
57
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
29. 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
2015
$’000
20,143
8,493
2014
$’000
19,677
14,641
Total bank guarantee facilities at 30 June 2015 were $60 million and the unused portion was $39.9 million. This facility is subject
to annual review. Total surety bonds facilities at 30 June 2015 were $30 million and the unused portion was $21.5 million. This
facility is subject to annual review. Both facilities are set to mature on 31 August 2015. It is management’s intention to renew these
facilities at level appropriate to support ongoing business.
30. 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.
31. Auditor’s remuneration
Remuneration of KPMG Australia as the auditor of the parent
entity for:
- Auditing or reviewing the financial report
- All other services
2015
$’000
2014
$’000
200,000
105,984
305,984
255,577
-
255,577
58
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
32. Parent entity disclosures
As at, and throughout, the financial year ending 30 June 2015 the parent company of the Consolidated entity was Southern Cross
Electrical Engineering Limited.
Result of the parent entity
(Loss)/profit for the period
Total comprehensive (loss)/income 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
2015
$’000
(12,390)
(12,390)
81,512
123,605
34,125
41,305
56,036
757
25,507
82,300
2014
$’000
7,564
7,564
93,153
151,790
50,746
58,693
57,578
905
34,613
93,097
The parent entity has commitments and contingent liabilities which are included in note 28 and 29. At 30 June 2015 there were in
existence guarantees of performance of a subsidiary.
33. Related parties
Transactions with key management personnel
(i)
Key management personnel compensation
Key management personnel compensation comprised the following:
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
2015
$’000
1,878
135
729
(134)
2,608
2014
$’000
1,787
107
-
9
1,903
Compensation of the Group’s key management personnel includes salaries and non-cash benefits made up of a short term
incentive and long term incentive scheme (see note 26 (i)).
59
2015 Annual Report
Notes to the Financial Statements
For the year ending 30 June 2015
33. Related parties (continued)
(ii)
Key management personnel transactions
Directors of the Company control 42% of the voting shares of the Company.
The aggregate value of transactions and outstanding balances related to key management personnel and entities over which they
have control or significant influence were as follows:
Transactions value year
ended 30 June
2015
$’000
2014
$’000
Other related parties
Gianfranco Tomasi
Rental income
834
772
The Group has entered into rental agreements over the following properties:
•
•
•
F & A Tomasi Superannuation Fund owns the properties at 41 and 44 Macedonia St, Naval Base WA, which are leased to
Southern Cross Electrical Engineering Limited.
G & A Tomasi own the properties at 45, 47, 49 & 51 Macedonia Street, Naval Base WA which are leased to Southern Cross
Electrical Engineering Limited.
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.
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 Ltd.
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 July 2014 except
for 41 Macedonia Street which is due to be reviewed in October 2016.
60
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies
Except as described below the accounting policies applied by the Group in this financial report are the same as those applied by the
Group in its consolidated financial report as at and for the year ended 30 June 2014.
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to
other standards, with a date of initial application 1 July 2014.
AASB 8 Operating Segments
AASB 119 Employee Benefits
AASB 124 Related Party Disclosures
AASB 2012-3 Amendments to AASB 132 Financial Instruments: Presentation
AASB 2013-3 Amendments to AASB 136 Impairment of Assets
AASB 2013-4 Amendments to AASB 139 Financial Instruments: Recognition and Measurement
AASB 1031 Materiality
Interpretation 21 Levies
AASB 2014 – 1 Part A Annual Improvements 2010-2012 Cycle & 2011-2013 Cycle.
These changes have not had either a material recognition or measurement impact on the financial report however disclosure has
been updated as follows.
(i)
Operating Segment Disclosure
Requires entities to disclose factors used to identify the entity’s reportable segments when operating segments have been
aggregated. An entity is also required to provide a reconciliation of total reportable segments’ asset to the entity’s total assets.
(ii)
Related Party Disclosure
Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements.
This amendment deletes from AASB 124 individual key management personnel disclosure requirements for disclosing entities
that are not companies. It also removes the individual KMP disclosure requirements for all disclosing entities in relation to equity
holdings, loans and other related party transactions.
(a) Basis of consolidation
i.
Subsidiaries
Subsidiaries are entities controlled by the Group. The group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect these returns through power over the
entity. 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.
Interest in a joint venture
The Group has interests in joint arrangements which are classified as joint operations, which are jointly controlled
entities, whereby the venturers have a contractual arrangement that establishes joint control over the economic activity
of the entities. The Group recognises its interest in the joint operations using the proportionate consolidation method.
The Group combines its proportionate share of each of the assets, liabilities, income and expenses which are accounted
for by separately recognising the Group’s share of underlying assets and liabilities of the joint venture with similar
items, line by line, in its consolidated financial statements.
61
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
iii. 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.
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.
62
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
(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 balance sheet 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.
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 13).
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 balance sheet
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.
63
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
(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 diminishing value 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.
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 – 20 years
2 – 10 years
2 – 10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
64
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
(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
1 – 5 years
1 – 5 years
2015
2014
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.
(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.
65
2015 Annual Report
Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
(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 34(n)(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) Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that
they will be recovered primarily through sale rather than through continuing use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any
impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata
basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets which continue
to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale
and subsequent gains and losses on re-measurement are recognised in profit or loss.
Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and
any equity-accounted investee is no longer equity accounted.
(k) 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.
66
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
(k) Impairment (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.
(l) 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.
67
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
iii. Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related
service is provided.
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.
(m) 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.
(n) 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).
68
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
(o) 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.
(p) 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.
(q) 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.
69
2015 Annual Report Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
(r) 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.
(s) 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.
(t) 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.
(u) 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.
-
-
-
70
2015 Annual Report
Notes to the Financial Statements
For the year ending 30 June 2015
34. Significant accounting policies (continued)
(v) New standards and interpretations issued but not yet effective
A number of new standards, amendments to standards and interpretations are effective for annual reporting periods beginning
after 1 July 2014, and have not been applied in preparing these consolidated financial statements. None of these is expected to
have a significant effect on the consolidated financial statements of the Group, except AASB 9 Financial Instruments, which will
become mandatory for the Group’s 2018 consolidated financial statements and could change the classification and measurement
of financial assets. The Group does not plan to adopt this standard early and the extent of the impact has not been determined.
35. 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.
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.
71
2015 Annual Report Directors’ Declaration
For the year ending 30 June 2015
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 2015 and of its 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.
the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a),
C.
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 2015.
This declaration is made in accordance with a resolution of the Board of Directors.
Signed in accordance with a resolution of the directors:
Derek Parkin
Chairman
25 August 2015
72
2015 Annual Report Independent Auditor’s Report
For the year ending 30 June 2015
73
2015 Annual Report Independent Auditor’s Report
For the year ending 30 June 2015
74
2015 Annual Report Lead Auditor’s Independence Declaration
Under Section 307C of the Corporations Act 2001
75
2015 Annual Report ASX Additional Information
Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. The
information is current as at 18 August 2015.
Distribution of equity security holders
Category
Ordinary shares
Performance rights
Number of equity security holders
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
171
330
178
356
53
1,088
-
-
-
-
4
4
The number of shareholders holding less than a marketable parcel of ordinary shares is 194.
Twenty largest shareholders
Name
Frank Tomasi Nominees Pty Ltd
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
Zero Nominees Pty Ltd
UBS Nominees Pty Ltd
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Carman Super Pty Ltd
Ghisa Pty Ltd
Offshore Electrical Services Pty Ltd
Mr Raymond John Wise
Mr Andrew William McKenzie + Mrs Catherine Patricia McKenzie
Chemco Superannuation Fund Pty Ltd
Chemco Superannuation Fund Pty Ltd
Map Capital Pty Ltd
Buchhorn Pty Ltd
ABN Amro Clearing Sydney Nominees Pty Ltd
Ziziphus Pty Ltd
Number of
ordinary shares
% of issued
capital
62,213,231
13,825,530
12,483,128
8,873,000
7,272,664
7,087,346
6,458,540
6,171,443
2,078,396
2,000,000
1,513,900
1,500,000
1,280,846
1,025,052
900,000
830,000
800,000
765,108
537,171
398,667
39.32
8.74
7.89
5.61
4.60
4.48
4.08
3.90
1.31
1.26
0.96
0.95
0.81
0.65
0.57
0.52
0.51
0.48
0.34
0.25
Substantial shareholders
The number of shares held by substantial shareholders and their associates as advised to the Company are set out below:
138,014,022
87.23
Shareholder
Gianfranco Tomasi
Commonwealth Bank of Australia
Celeste Funds Management
Acorn Capital
Number
65,227,131
16,624,675
12,299,349
12,018,795
% of issued capital
41.2%
10.5%
7.8%
7.6%
76
2015 Annual Report Corporate Directory
Directors
Derek Parkin
Chairman
Independent Non-Executive Director
Chris Douglass
Interim CEO and Executive Director
Gianfranco Tomasi
Non-Executive Director
Simon Buchhorn
Non-Executive Director
Karl Paganin
Independent Non-Executive Director
Company Secretaries
Chris Douglass
Colin Harper
Auditors
KPMG
235 St Georges Terrace
Perth WA 6000
Solicitors
K & L Gates
Level 32, 44 St Georges Terrace
Perth WA 6000
Share Registry
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
Perth WA 6000
T: 1300 787 272
F: +618 9323 2033
Registered Office
Southern Cross Electrical
Engineering Limited
41 Macedonia Street
Naval Base WA 6165
T: +618 9236 8300
F: +618 9410 2504
ASX code: SXE
scee.com.au
SCEE Perth Office:
41 Macedonia Street
Naval Base WA 6165
T: +61 (0)8 9236 8300
F: +61 (0)8 9410 2504
SCEE Brisbane Office:
12 Trade Street
Lytton QLD 4178
T: +61 (0)7 3308 8900
F: +61 (0)7 3348 2095
SCEE Newman Office:
6 Shovelanna Street
Newman WA 6753
T: +61 (0)8 9236 8300
E: scee@scee.com.au
SCEE Cruz del Sur, Lima, Peru Office:
Av. Benjamin Franklin #220
(Altura Km 2 ½ Carretera Central)
Ate Lima, Peru
T: +51 1 326 7436
F: +51 1 3267437
E: csiesa@akemiperu.com
scee.com.au
WA EC 001681
QLD 12707
NSW 17066C
NT C 0977
SA PGE 262507
ABN: 92 009 307 046
Established 1978
SCEE Infrastructure, SCEE Construction & SCEE Services are divisions of Southern Cross Electrical Engineering Limited (SCEE)