2017
ANNUAL REPORT
Southern Cross Electrical
Engineering Limited
ABN: 92 009 307 046
Established 1978
CONTENTS
About SCEE
Chairman’s Message
Managing Director’s Review
Directors’ Report (including remuneration report)
2
8
10
14
Consolidated Statement of Comprehensive Income 28
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Index to Notes to the Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Lead Auditor’s Independence Declaration
ASX Additional Information
29
30
31
32
33
64
71
76
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2017 Annual Report 2017
IN SUMMARY
Diversified national
electrical contractor
Net cash
Underlying
NPAT
Revenue
Record order book
$40.3m
$1.4m*
$199.9m
$480m
Organic diversification
into defence, transport, renewable and utilities
Acquisition of Heyday
East Coast commercial and infrastructure markets
Growth of order book
Size and geography
* A discussion of the items excluded from Underlying NPAT can be found in
the Managing Director’s Review on pages 10-13.
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2017 Annual Report
About
SCEE
Southern Cross Electrical Engineering (SCEE)
is an ASX listed Australian-based electrical,
instrumentation, communication and
maintenance services company recognised for
our industry leading capabilities.
SCEE’s long-term success has resulted from combining
knowledge and experience with talented and committed
people, and adaptive commercial approaches that consistently
deliver value for clients, and sustainable returns for our
shareholders.
At the heart of our business are employees who are committed
to living our values of safety, quality, reliability, trust and
loyalty. Our operations are characterised by strong safety,
technical and project delivery performance whether in capital
and major cities, regional towns or remote and challenging
locations or overseas.
We recognise that long-term meaningful relationships with
clients, partners and suppliers are fundamental to our success,
and we work to build mutually beneficial relationships in all
locations where we operate.
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2017 Annual Report
SCEE
BUSINESS MODEL
SCEE delivers life-of-project electrical, instrumentation and communications services to
enterprises whose operations span several diverse markets.
In recent years we have successfully taken our delivery model
to new markets and geographies. An integral component
of our strategy has been the acquisition of Datatel and
Heyday, bringing complementary capabilities, knowledge and
experience.
The joining of Heyday’s capability in the commercial and
infrastructure market sectors, together with SCEE’s resources
and heavy industry capability, and Datatel’s communications
and technology expertise, has created a contractor capable of
servicing diverse markets.
Our presence extends across projects ranging from Australia’s
largest infrastructure developments to technology centres,
local schools and commercial developments. We are well
positioned to support clients locally, nationally or globally, and
able to bring experience gained in one region or discipline to the
challenges faced in another.
The following diagram illustrates three core elements of our
business model.
2017 Annual Report
3
Our
OPERATIONAL BUSINESSES
Our group combines the three operating businesses of Southern Cross Electrical Engineering,
Datatel and the recently acquired Heyday.
SCEE
SCEE was founded in 1978, and has grown to become one of Australia’s leading electrical,
instrumentation, communication and maintenance services companies.
Traditionally, SCEE’s primary business has centred on the successful delivery of electrical,
instrumentation, communication and maintenance services to the mining, industrial,
utilities and oil and gas markets.
As the resources market has transitioned from construction to operations and
maintenance and sustaining capital, we have adapted our business model to
meet our clients’ changing needs. Our invaluable experience in the construction
phase has positioned us to successfully transition to working in live operating
environments, and supporting clients in the optimal operation and maintenance
of their assets.
SCEE has a proven capability in delivering multi-disciplined brownfield
operational support, programmed and breakdown maintenance, planned
shutdown management, and sustaining capital projects throughout
Australia and overseas.
SCEE continues to successfully expand into the transport, energy,
utilities and defence markets, and increasing its experience in
the water and waste water sectors. The renewables sector is
an emerging market which is currently presenting SCEE with
opportunities in solar and wind farms.
SCEE is proud to be an integral part of the Australian
construction industry having strong relationships
with many leading civil and specialist engineering
construction and engineering companies.
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2017 Annual Report
OUR OPERATIONAL BUSINESSES (CONTINUED)
HEYDAY
Heyday was established in 1978 specialising in electrical contracting and is a leading
electrical contractor based in New South Wales and the ACT. Its core business is
focused on providing a wide range of electrical design, construction and maintenance
services within the infrastructure, commercial construction and fit-out sectors
throughout Australia.
As a contracting and service enterprise, Heyday provides expertise in designing,
supplying, installing and maintaining a wide range of electrical services.
These services cover a comprehensive range of electrical infrastructure,
building controls, energy management systems, security, communications
networking and structured cabling systems.
Heyday has successfully developed its expertise through the provision of
services encompassing commercial and industrial developments, office
fit-out, data centres, hotel and residential properties, retail, health
and education facilities.
Heyday is successful in delivering both small and large projects
on time, within budget and with a high level of customer
satisfaction. This commitment compels clients to repeat and
refer further business, which continues to strengthen the
company’s reputation for its outstanding performance.
5
2017 Annual Report OUR OPERATIONAL BUSINESSES (CONTINUED)
DATATEL
Established in 1998, Datatel combines a specialist electrical and communications
contracting capability with a national presence.
The company has grown steadily and operates in the telco, mining, commercial,
health, education and aged care sectors providing a variety of specialist services
and solutions.
Datatel is competent in the installation of technologically advanced products,
such as electronic communication equipment, data cabling and fibre optics.
As part of the SCEE Group, Datatel is growing to become one of the largest
Tier 2 telecommunications infrastructure construction partners in Australia
providing survey, civil works, fibre optic, copper, power and integration
activities for many of Australia’s leading carriers, including NBN Co,
Telstra, Optus, TPG and many others.
Datatel has completed a large variety of telecommunications
infrastructure projects including Passive Optical Networks (PON),
data centres, mining communications backbone, rail signalling,
roadside communications, and campus distribution networks.
Additionally, it continues to deliver outstanding specialist
services involving technologies for fire detection, security,
lighting, UPS and power and energy management.
Datatel strives to be at the cutting edge of industry
knowledge and to be recognised as leaders in the
integration and installation of electrical and
communications technologies.
6
2017 Annual Report Our
APPROACH
Building a High Performing and
Collaborative Business
We continue to transform our business to find new ways to offer innovative
solutions for our clients and deliver greater value to our stakeholders.
SCEE continues to integrate its three businesses to provide a consistent and
seamless service to our clients.
Our integration plans focus on fostering a culture that brings together the
high performing elements of each business into a common best practice
approach. We start with strong cultural foundations and a positive attitude
towards working together. Our challenge is to build a collaborative and
cohesive organisation that is well respected by our clients, industry partners
and our staff.
OUR VALUES
Safety
It’s in everything we do.
Quality
Exceeding customer expectations through continuous improvement.
Reliability
We are dependable and consistently deliver high quality services.
Trust
Entrust and empower our team to take ownership.
Loyalty
We believe in harmonious relationships and building
these through integrity and mutual respect.
2017 Annual Report
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2017 Annual Report
Chairman’s
MESSAGE
DEAR SHAREHOLDERS,
The 2017 financial year has seen SCEE achieve a number
of key milestones which have transformed the business
in response to changes in the resources sector, through
progressing the delivery of the Board’s strategy of growing by
expansion into adjacent and complementary sectors.
In March we completed the acquisition
of Heyday, a leading electrical contractor
in the commercial and infrastructure
sectors, based in New South Wales
and the ACT. With a strong cultural
alignment and buoyant markets
in those states the acquisition is
transformational for the group. This,
together with the expansion of Datatel,
our telecommunications focussed
subsidiary, into the East Coast and
organic initiatives to enter new sectors
from the original SCEE business, has
given us, at the start of 2018, the largest
order book in the company’s history at
$480m.
We remain proud of our unrelenting
focus on safety, with 2017 being
SCEE’s thirteenth consecutive
LTI-free year in Australia.
RESULTS
After a slow first half I am pleased to
report a turnaround in the second half,
resulting in an underlying second half
net profit after tax of $4.1m. For the full
year, the Company’s Statutory NPAT
was a loss of $0.4m which included
absorbing significant restructuring,
M&A and investment costs through
that period. The consequential
underlying result for the year was a
profit after tax of $1.4m.
The Company continues to maintain a
strong balance sheet and ended fiscal
2017 with net cash of $40.3m. Additional
discussion of the current year result
is provided in the Managing Director’s
Review on the following pages.
Given the size of the order book the
Board has decided not to declare a
dividend for the year in order to fund
anticipated working capital requirements.
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2017 Annual Report
OUTLOOK
SCEE’s reach now straddles multiple
sectors providing an effective strategic
hedge to the ebb and flow of business
cycles within our area of specialisation.
Further, the transformed nature of
the group creates the opportunity
to pursue upcoming large scale
infrastructure projects and bring our
offerings into new states.
The telecommunications sector is
constantly driven by change and
innovation and we expect to further
expand and grow our offerings and
capability in this area. Our recent initial
entries into the renewables sector with
solar farm work in NSW and for utilities
in WA and Queensland, positions us
well with the emerging energy sector
issues in Australia.
Whilst commodity prices currently are
expected to remain relatively stable,
the company is well positioned for the
next turn of the resources cycle, for
which there is now some visibility of
more projects in the medium term.
THE BOARD OF DIRECTORS
In March 2017 we welcomed David
Hammond, Executive Director and one
of the vendors of Heyday, onto the
Board as an Executive Director. David’s
extensive experience in the electrical
contracting industry makes him an
ideal addition and we particularly
enjoyed our first Board meeting at
Heyday’s new offices in Sydney in July.
As we now build on these initiatives,
the Board of Directors will continue to
work closely with Graeme Dunn and
his management team in progressing
the implementation of our ongoing
strategy.
On behalf of the Board I would like to
thank our shareholders, clients and
employees for their ongoing support.
Derek Parkin
Chairman
2017 Annual Report
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9
2017 Annual Report Managing
DIRECTOR’S REVIEW
DEAR SHAREHOLDERS,
This has been a transformational year for SCEE in which a
number of key milestones in our diversification and growth
strategy have been achieved.
This was against a backdrop of the
first year after the completion of the
major iron ore expansion projects which
had supported our historic resources
business for some years.
Consequently, activity in the first
half was slow, but in the second
half there was a strong turnaround
with contributions from organic
diversification into projects in the
transport, defence and renewables
sectors, the expansion of Datatel into
the East Coast and the impact of the
acquisition of Heyday.
The Heyday acquisition is
transformational for the business,
combining two well-established,
culturally aligned electrical contracting
businesses operating in complementary
sectors and geographies. It is pleasing
Heyday has continued to win awards
since the date of acquisition with
$140m of new projects announced or
in advanced stages of negotiations
since March.
In the financial year we have also
incurred significant costs to restructure
sections of the business to generate
future savings, absorbed the expense of
the M&A activity and in turn, invested in
various organic initiatives and Datatel’s
East Coast expansion to drive future
growth.
OPERATING AND FINANCIAL
REVIEW
Revenue for the year was $199.9m,
down 3.7% on the prior year.
The Heyday acquisition was completed
on 9 March 2017 and their results were
consolidated from that date.
Activity in the first half of the year
was slow due to delayed mobilization
to projects, lower than anticipated
release of sustaining capital work in
the iron ore sector and NBN delays in
WA. Throughout the year we continued
to perform work on BHP Billiton Iron
Ore Sustaining Capital projects, Rio
Tinto Iron Ore Electrical Infrastructure
Replacement and for Bechtel at
Wheatstone.
In the second half there was a strong
turnaround in activity with revenue
in the half of $138.4m, up 125% on
the prior half. Contributions came
from increased activity for Bechtel on
Wheatstone, on the Mitchell Freeway
for CPB, the NSW Solar Farms for
Bouygues and at RAAF Tindal for
Lendlease. Further, the expansion of
Datatel saw contributions on the NBN
on the East Coast from Visionstream
and from Baptistcare in WA. Heyday
activity was strong at the Global Switch
and Air Trunk data centres, St George
and University of Canberra Hospitals
and on various commercial building
construction and fit-out projects.
10
2017 Annual Report
The Company also continues to win
work under its existing framework
agreements with major iron ore clients,
as well as securing a range of minor
awards in the resources, infrastructure
and industrial sectors on both the West
Coast and East Coast.
The acquired order book of Heyday
brought significant amounts of
commercial, data centre, and
infrastructure work and since the date
of acquisition $140m of new projects
have been announced or are in advanced
stages of negotiations.
Tendering is at a high level with over
$400m of submitted tenders with
clients pending decision and the
business development pipeline
is strong with immediate
prospects of a further $900m
currently being estimated in our
tendering departments.
I am pleased to report that we
completed our 2017 operations without
suffering a Lost Time Injury (LTI). This
marks our thirteenth consecutive year
LTI free in Australia.
Underlying gross margins for the year
were 12.1%1 compared to 16.1% in FY16.
FY16 included significant contributions
from large-scale iron ore construction
projects which successfully closed out
with strong gross margins.
Underlying overheads for the year
were $17.8m after adjusting for $1.7m
restructuring costs, $1.7m M&A costs
and $2.2m expansion and diversification
investments, down $3.6m against
underlying overheads2 in the prior year.
These initiatives are expected to generate
future savings and drive growth.
Underlying EBITDA for the year was
$6.8m after adjusting for the above
items and excluding the $5.4m gain from
the reduction in earn out payable to the
vendors of Datatel, down $5.4m against
underlying EBITDA2 in the prior year.
Depreciation expense decreased by
11% to $4.3m as a result of lower capex
spend in more recent years.
Underlying NPAT for the year was $1.4m
after adjusting for the items noted above.
This represents a 74% decrease on FY16
underlying trading NPAT of $5.4m2.
We maintained a strong balance sheet
throughout the year and at 30 June
2017 we had net cash of $40.3m. This
has been achieved after absorbing cash
outflows of $18.0m to complete the
Heyday acquisition.
The acquisition has resulted in the
recognition of additional goodwill of
$52.7m, a $9.2m current liability for the
payment of subsequent cash, a $13.9m
deferred share payments reserve and
an $11.9m non-current liability for the
payment of deferred consideration
which represents our assessment of the
fair value of future earn-out payments
which will be paid under the terms of the
Share Purchase Deed. Approximately
$48,000 of net assets were acquired.
The Board has not declared a dividend
for the year in order to fund working
capital requirements servicing our
increased order book. The franking
account balance on hand at 30 June 2017
was $20.8m.
OUTLOOK
Current Activity and Order Book
SCEE entered FY17 at low activity levels
as a result of successfully completing
our large scale iron ore construction
projects early in the second half of FY16.
Consequently the order book at 30 June
2016 was $55m including near term
growth visible on existing reimbursable
contracts.
There has been transformational
growth of 770% in the order book to
over $480m at 30 June 2017. The order
book has grown organically and by
acquisition in all sectors in which we
operate. Organically we have announced
over $30m of defence work at RAAF
Tindal, over $25m of resources work for
Civmec and Decmil at Rio Tinto’s Amrun
project and further orders from Bechtel
at Wheatstone.
2017 Annual Report
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11
2017 Annual Report MANAGING DIRECTOR’S REVIEW (CONTINUED)
Markets
Conditions in the resources sector are
expected to remain stable in the near
term. In certain commodities we have
seen and are seeing some larger capital
projects return. Whilst SCEE remains a
major supplier, flow of work from iron ore
clients is expected to be subdued in the
short term but there is now visibility of
upcoming replacement tonnage projects
We have ongoing LNG construction
work which we expect to carry on
through FY18 but there is low visibility
of significant workflow in this sector
in Australia thereafter. We retain the
capability and capacity to return to large
scale international work and will tender
strategically appropriate opportunities as
they arise.
Infrastructure is seeing strengthening
growth driven by public and private
sector investment in major road and
rail infrastructure which the enhanced
scale of the SCEE Group enables us
to pursue primarily in WA and NSW.
There is circa $80m of healthcare work
in the order book and other East Coast
hospital opportunities are being pursued.
Having commenced our first project in
the defence sector at RAAF Tindal we
are positioning for significant defence
opportunities in WA, NT and Victoria.
In the commercial sector strong growth
is forecast over the next five years,
particularly in NSW and ACT, with
building developments and fit-outs
and shopping centre refurbishments
driven by population growth. There is
the potential to leverage the combined
Group’s customer relationships and skills
into new states.
In the telecommunications sector Datatel
has twelve framework agreements with
Telcos and Tier 1 contractors across five
states in the NBN, wireless and telco
infrastructure segments and we are
expecting to further expand and grow
offerings and capability. The data storage
services industry is in a growth stage and
further data centre work is in prospect.
In the year we entered the utilities
market with first award from Western
Power in WA and have now commenced
for Ergon Energy in Queensland. Having
started our first renewable energy
project (130MW solar) in NSW there
are further solar and wind farms in the
pipeline and current energy sector critical
issues are expected to present further
opportunities.
Strategy
SCEE primarily sees itself as an electrical
contractor. The Board’s strategic
objective is to create shareholder value
and, recognising the cyclical nature
of the resources construction market
implemented a strategy, from
early 2016 to:
• transition to a sustainable resources
business through exposure to
sustaining capital and maintenance
markets; and
• grow through expansion into adjacent
and complementary sectors and new
geographies.
The acquisition of Datatel provided
a direct and scalable entry into the
telecommunications sector.
The Heyday acquisition was a
transformational milestone combining
two well-established, culturally aligned
electrical contracting businesses
operating in complementary sectors
and geographies.
SCEE will continue to build on these
initiatives to create depth and capability
for the next growth period:
• the enhanced scale of the group
unlocks the opportunity to pursue
upcoming large scale infrastructure
projects;
•
leveraging the combined Group’s
customer relationships and skills into
new states;
• responding to opportunities arising
in telecommunications driven by
continual technological innovation; and
• being positioned for the next turn of
the resources cycle.
CONCLUSION
2017 has been a transformational year
for SCEE in diversifying our business and
undertaking significant restructuring and
investment activities to set a platform
for growth.
Activity in the first half was slow but a
strong second half turnaround showed a
return to profit.
The acquisition of Heyday and organic
entry into new sectors were key
milestones in the diversification and
growth strategy and the order book
has been transformed to a record
$480m at 30 June 2017.
We enter 2018 maintaining a strong
balance sheet and will continue to
build depth and capability for the
next growth period.
12
2017 Annual Report I would like to take this opportunity to thank SCEE’s
management and staff for their commitment and hard
work during the year and our shareholders for their
continued support.
Graeme Dunn
Managing Director
NOTES
1 Statutory gross profit for the year ended 30 June
2017 of $23.9m included the $0.3m of redundancy
costs incurred in restructuring the business
which have been excluded from the calculation
of underlying gross margin.
2 Underlying overheads, EBITDA and NPAT
for the year ended 30 June 2016 were
after adjusting for $0.4m of M&A costs
relating to the acquisition of Datatel.
2017 Annual Report
13
13
2017 Annual Report DIRECTORS’ REPORT
Your Directors submit their report for Southern Cross Electrical Engineering Limited (“SCEE” or “the Company”) for the
year ended 30 June 2017.
DIRECTORS’ REPORT
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.
Back row: Colin Harper, Graeme Dunn, David Hammond, Simon Buchhorn, Karl Paganin and Chris Douglass
Front row: Derek Parkin and Gianfranco Tomasi
Name and independence status
Experience, qualifications, special responsibilities and other directorships
Derek Parkin OAM
Independent Chairman and
Non-Executive Director
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 Institute of Chartered Accountants Australia
(“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 a member of the
Nomination and Remuneration Committee.
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.
Graeme Dunn
Managing Director and
Chief Executive Officer
Graeme has over 25 years international experience in heavy civil infrastructure, mining, oil &
gas and building projects. Graeme’s strong technical knowledge, coupled with his extensive
executive management experience, has seen him hold senior management positions throughout
Australasia and the Middle East.
Graeme has a Bachelor of Civil Engineering from the University of Sydney, an MBA from the
University of Southern Queensland and has completed the Senior Executive Program from the
London School of Business. He is also a graduate of the Australian Institute of Company Directors.
14
2017 Annual Report DIRECTORS’ REPORT (continued)
Name and independence status
Experience, qualifications, special responsibilities and other directorships
Gianfranco Tomasi AM
Non-Executive Director
Simon Buchhorn
Independent Non-Executive
Director
Karl Paganin
Independent 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 to 1978, serving as the National Manager Electrical Department
from 1971 to 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 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 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. He is also a graduate of the Australian Institute of Company
Directors.
Simon is a member of the Audit and Risk Management Committee.
Karl has over 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 the Chairman of the Nomination and Remuneration Committee and a member of the Audit
and Risk Management Committee.
Karl is also a Non-Executive Director of ASX listed Veris Limited and Vice Chairman of Autism
West Support Inc. a not for profit charity supporting families affected by autism.
David Hammond
Executive Director
(appointed 9 March 2017)
David was a vending shareholder of Heyday5 Pty Ltd and was appointed to SCEE’s Board as an
Executive Director on completion of the acquisition by SCEE.
David has more than 35 years’ electrical contracting experience and has been involved in the
Heyday business for over 20 years. During his tenure, David has held various positions up to and
including his current role of Executive Director where his responsibilities include driving business
development.
Executive Officers
The names and details of the Company’s Executive Officers during the financial year and until the date of this report are as follows.
Executive Offciers were in office for this entire period unless otherwise stated.
Name
Experience and qualifications
Chris Douglass
Chief Financial Officer and
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.
Colin Harper
Company Secretary
Colin is a Chartered Accountant with over 15 years experience in public company 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.
15
2017 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
Graeme Dunn
Gianfranco Tomasi
Simon Buchhorn
Karl Paganin
David Hammond1
Ordinary shares
Rights over
ordinary shares
Options over
ordinary shares
100,000
101,000
65,227,131
800,000
822,668
-
-
1,685,185
-
-
-
-
-
-
-
-
-
-
1 David Hammond has an entitlement to 6,870,040 ordinary shares as part consideration for the acquisition of Heyday5 Pty Ltd.
Directors’ Meetings
The number of Directors’ meetings and meetings of committees of Directors held and attended by each of the Directors of the
Company during the financial year are:
Director
Board Meetings
Audit and Risk
Management
Committee Meetings
Nomination and
Remuneration
Committee Meetings
Derek Parkin
Graeme Dunn
Gianfranco Tomasi
Simon Buchhorn
Karl Paganin
David Hammond
Held
Attended
Held
Attended
Held
Attended
15
15
15
15
15
4
15
15
11
14
14
4
4
-
-
4
4
-
4
-
-
4
4
-
3
-
3
-
3
-
3
-
2
-
3
-
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 electrical,
instrumentation, communication and maintenance services to a diverse range of sectors across Australia.
Significant Changes in the State of Affairs
On 9 March 2017 the Company acquired 100% of the share capital of Heyday5 Pty Ltd, a leading Sydney-based specialist electrical
contractor with a strong position in the east coast commercial and infrastructure markets. Further details are provided in note 23
to the accounts.
16
2017 Annual Report DIRECTORS’ REPORT (continued)
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 10.
Operating results for the year were:
Contract revenue
(Loss)/Profit after income tax from continuing operations
Dividends
Dividends for the year were
Declared and paid during the period (fully franked at 30%)
Final franked dividend for 2016
Interim franked dividend for 2017
Declared after balance date and not recognised as a liability
(fully franked at 30%)
Final franked dividend for 2017
2017
$’000
199,915
(369)
2016
$’000
207,623
5,051
Cents per share
Total amount
$’000
1.35c
2,152
-
-
-
-
Significant Events after Balance Sheet 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 2017 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 25 to the accounts.
Indemnification and Insurance of Directors and Officers
During or since the end of the financial year, the Company has paid premiums in respect of a contract insuring all the directors
of the Company against a liability incurred in their role as directors of the Company, except where:
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 $91,509 (2016: $71,016).
17
2017 Annual Report DIRECTORS’ REPORT (continued)
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
There were no non-audit services provided by the external auditors during the year.
Auditor’s Independence Declaration
The lead auditor’s independence declaration is set out on page 76 and forms part of the Directors’ report for the financial year
ended 30 June 2017.
Remuneration Report
The Remuneration Report is set out on pages 19 to 27 and forms part of this report.
Rounding off
The Company is of a kind referred to in ASIC Instrument 2016/191 dated 24 March 2016 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
29 August 2017
18
2017 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.
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.
19
2017 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 2017, the financial KPIs accounted for 60% of the executive team’s STI and set specific profit and
order book targets.
The non-financial KPIs accounted for 40% of the executive team’s STI and comprised the achievement of strategic objectives.
The strategic objectives 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.
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.
The annual fee paid to the Chairman of the Board is $110,000. The fee paid to other Non-Executive Directors is $80,000 per annum.
No additional fees are paid to Directors who sit on Board 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.
20
2017 Annual Report REMUNERATION REPORT – AUDITED (continued)
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
2017
$’000
(369)
2,152
4%
0%
2016
$’000
5,051
6,408
87%
7%
2015
$’000
(9,801)
4,361
(38%)
(10%)
2014
$’000
7,723
4,361
(42%)
10%
2013
$’000
17,341
3,633
(31%)
24%
21
2017 Annual Report REMUNERATION REPORT – AUDITED (continued)
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22
2017 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 achievement of personal goals and satisfaction of specified performance criteria in respect of the
previous financial year but which vested in the current 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
The following executives have non-fixed term employment contracts. The company may terminate the employment contract by
providing the other party notice as follows:
Executive
Notice Period
Graeme Dunn
Chris Douglass
Andy Ozolins
6 months
6 months
6 months
The following executives have fixed term employment contracts. The company may terminate the employment contract by
providing the other party notice as follows:
Executive
Fixed term end date
Notice Period
David Hammond
1 October 2019
3 months
The Group retains the right to terminate a contract immediately by making a payment in lieu of the notice period or where the
executive is employed under a fixed term contract all remuneration that the executive would have earned during the balance of
the fixed term. 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:
Executive
Graeme Dunn
David Hammond
Chris Douglass
Andy Ozolins
Held at
1 July 2016
Granted as
remuneration
Exercised
Forfeited
Held at
30 June
2017
Vested
during the
year
Vested and
exercisable
at 30 June
2017
-
-
1,501,515
685,204
1,685,185
-
356,481
225,000
2,186,719
2,266,666
-
-
-
-
-
-
-
(184,678)
-
1,685,185
-
1,673,318
910,204
(184,678)
4,268,707
-
-
-
-
-
-
-
-
-
-
23
2017 Annual Report REMUNERATION REPORT – AUDITED (continued)
Performance rights granted as remuneration in 2017
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
Instrument
Number
Grant date
Graeme Dunn1
2016 Rights
541,667
18/11/16
Graeme Dunn2
2016 Rights
541,666
18/11/16
Graeme Dunn1
2017 Rights
300,926
18/11/16
Graeme Dunn2
2017 Rights
300,926
18/11/16
Chris Douglass1
2017 Rights
178,241
18/11/16
Chris Douglass2
2017 Rights
178,240
18/11/16
Andy Ozolins1
2017 Rights
112,500
18/11/16
Andy Ozolins2
2017 Rights
112,500
18/11/16
1. Performance rights granted with EPS growth as the vesting condition
2. Performance rights granted with Absolute TSR as the vesting condition
2,266,666
Fair value per
performance
right at grant
date ($)
Exercise
price per
performance
right ($)
Performance
testing date
Expiry
Date
0.28
0.43
0.19
0.40
0.19
0.40
0.19
0.40
0.00
30 June 2018
0.00
30 June 2018
0.00
30 June 2019
0.00
30 June 2019
0.00
30 June 2019
0.00
30 June 2019
0.00
30 June 2019
0.00
30 June 2019
30 June
2019
30 June
2019
30 June
2020
30 June
2020
30 June
2020
30 June
2020
30 June
2020
30 June
2020
24
2017 Annual Report REMUNERATION REPORT – AUDITED (continued)
2016 Financial Year Performance Rights
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 2015 to 30 June 2018 (“Performance Period”);
• No performance rights will vest until 30 June 2018;
•
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 18.5% per annum compounded over the Performance Period
and for stretch performance of 26.5% per annum compounded over the Performance Period. The vesting schedule is as follows for
TSR performance over the Performance Period:
Less than 18.5% per annum compounded
18.5% per annum compounded
0% vesting
50% vesting
Between 18.5% and 26.5% per annum compounded
Pro-rata vesting between 50% and 100%
At or above 26.5% per annum compounded
100% vesting
EPS will be assessed against targets for threshold performance of 2.8 cents per share in the 2018 financial year and for stretch
performance of 3.6 cents per share in the 2018 financial year. The vesting schedule is as follows for EPS performance in the 2018
financial year:
Less than 2.8 cents per share
2.8 cents per share
0% vesting
50% vesting
Between 2.8 and 3.6 cents per share
Pro-rata vesting between 50% and 100%
At or above 3.6 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.
2017 Financial Year Performance Rights
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 2016 to 30 June 2019 (“Performance Period”);
• No performance rights will vest until 30 June 2019;
•
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.
25
2017 Annual Report REMUNERATION REPORT – AUDITED (continued)
The TSR formula is:
((Share Price at Test Date – Share Price at Start Date) + (Dividends Reinvested))/Share Price at Start Date
TSR will be assessed against targets for threshold performance of 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
EPS will be assessed against targets for threshold performance of 4.0 cents per share in the 2019 financial year and for stretch
performance of 4.9 cents per share in the 2019 financial year. The vesting schedule is as follows for EPS performance in the
2019 financial year:
Less than 4.0 cents per share
4.0 cents per share
0% vesting
50% vesting
Between 4.0 and 4.9 cents per share
Pro-rata vesting between 50% and 100%
At or above 4.9 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
Details of the vesting profiles of the rights and options held by each key management person are as follows:
Executive
Instrument
Number
Grant date
Graeme Dunn
2016 Rights
1,083,333
18 November 2016
2017 Rights
601,852
18 November 2016
Chris Douglass
2014 Rights
2015 Rights
2016 Rights
2017 Rights
Andy Ozolins
2015 Rights
2016 Rights
2017 Rights
184,678
341,837
8 October 2013
4 November 2014
975,000
16 November 2015
356,481
18 November 2016
260,204
425,000
225,000
4 November 2014
16 November 2015
18 November 2016
% vested
in year
%
forfeited
in year
Performance
testing date
(A)
Expiry Date
-
-
-
-
-
-
-
-
-
-
-
30 June 2018
30 June 2019
30 June 2019
30 June 2020
100%
30 June 2016
30 June 2017
-
-
-
-
-
-
30 June 2017
30 June 2018
30 June 2018
30 June 2019
30 June 2019
30 June 2020
30 June 2017
30 June 2018
30 June 2018
30 June 2019
30 June 2019
30 June 2020
A.
Performance rights are performance tested following completion of the performance period. Subsequent to 30 June 2017 the vesting conditions in
respect of the 2015 performance rights have been performance tested and it has been determined that 110,348 performance rights held by Mr Douglass
and 83,996 held by Mr Ozolins have vested and are now exercisable and that 231,489 performance rights held by Mr Douglass and 176,208 held by Mr
Ozolins have not vested and have been forfeited.
26
2017 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
Held at
30 June 2016
Purchases
Net change
other
Held at
30 June 2017
Directors
Derek Parkin
Graeme Dunn
70,000
-
Gianfranco Tomasi
65,227,131
Simon Buchhorn
Karl Paganin
David Hammond1
Executives
Chris Douglass
Andy Ozolins
765,108
330,168
-
-
-
30,000
101,000
-
34,892
492,500
-
95,395
-
-
-
-
-
-
-
-
-
100,000
101,000
65,227,131
800,000
822,668
-
95,395
-
1 David Hammond has an entitlement to 6,870,040 ordinary shares as part consideration for the acquisition of Heyday5 Pty Ltd.
Transactions with key management personnel
The Group has entered into rental agreements over the following properties in which Gianfranco Tomasi has an ownership interest:
• F & A Tomasi Superannuation Fund owns the properties at 41 and 44 Macedonia St, Naval Base WA.
• G & A Tomasi own the properties at 45, 47, 49 & 51 Macedonia Street, Naval Base WA.
• Frank Tomasi Nominees Pty Ltd owns the property at 43 Hope Valley Road, Naval Base WA.
The Group has entered into rental agreements over the following properties in which David Hammond has a partial ownership
interest:
• David Hammond has a part ownership interest in 9-13 Waterloo Road, North Ryde NSW with the lease expiring on 30 June 2017.
• David Hammond has a part ownership interest in Level1, 3 Apollo Place, Lane Cove West NSW with the lease commencing 1
January 2017.
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 with no rent increases passed through during the 2017 year.
Total rent paid by SCEE in the 2017 financial year in respect of the above agreements was $974,000.
There are no loans between the company and Key Management Personnel.
27
2017 Annual Report
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 30 June 2017
Contract revenue
Contract expenses
Gross profit
Other income
Employee benefits expenses
Occupancy expenses
Administration expenses
Other expenses
Reduction in earn out payable
Depreciation expense
Amortisation of customer contract intangibles
Profit from operations
Finance income
Finance expenses
Net finance income/(expense)
Profit/(loss) before tax
Income tax benefit/(expense)
Profit/(loss) from continuing operations
Other comprehensive income/(loss)
Items that are or may be reclassified to the profit and loss:
Foreign currency translation gain/(loss) for foreign operations
Other comprehensive income/(loss) net of income tax
Total comprehensive income/(loss)
Total comprehensive income attributable to:
Owners of the Company
Earnings per share:
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
Note
4
6
5
8
8
7
7
7
9
10
10
2017
$’000
199,915
(176,011)
23,904
300
(12,900)
(3,348)
(6,336)
(688)
5,411
(4,254)
(2,045)
44
463
(1,090)
(627)
(583)
214
(369)
305
305
(64)
(64)
(0.23)
(0.23)
2016
$’000
207,623
(174,208)
33,415
146
(14,466)
(1,826)
(4,504)
(980)
-
(4,798)
-
6,987
791
(582)
209
7,196
(2,145)
5,051
(442)
(442)
4,609
4,609
3.19
3.15
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
28
2017 Annual Report CONSOLIDATED BALANCE SHEET
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Construction work in progress
Prepayments
Assets held for sale
Tax receivable
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Unearned revenue
Provisions
Loans and borrowings
Deferred acquisition consideration
Tax payable
Total current liabilities
Non-current liabilities
Deferred acquisition consideration
Provisions
Loans and borrowings
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
Note
2017
$’000
2016
$’000
11
12
13
14
12
15
9
16
17
18
19
23
23
19
9
20
20
40,553
33,316
2,328
21,890
898
155
-
99,140
1,358
19,416
734
77,433
98,941
198,081
49,697
12,899
8,882
59
9,180
723
81,440
15,321
1,377
187
-
16,885
98,325
99,756
56,656
15,018
28,082
99,756
41,833
21,550
2,379
9,229
667
-
3,267
78,925
478
21,183
-
21,082
42,743
121,668
18,089
1,387
4,844
-
-
-
24,320
8,659
324
-
684
9,667
33,987
87,681
56,656
422
30,603
87,681
The above balance sheet should be read in conjunction with the accompanying notes.
29
2017 Annual Report CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2017
Note
Balance as at 1 July 2015
Total comprehensive income for the period
Profit for the period
Foreign currency translation loss
Total comprehensive income
Transactions with owners, recorded directly in equity
Dividends to equity holders
Issue of ordinary shares
Cost of share-based payments
Total transactions with owners
Balance as at 30 June 2016
620
-
620
56,656
Deferred
Payments
Reserve
$’000
Share
Based
Payments
Reserve
$’000
Translation
Reserve
$’000
Total
Equity
$’000
-
-
-
-
-
-
-
-
-
1,180
(478)
88,698
-
-
-
-
-
162
162
1,342
-
(442)
(442)
-
-
-
-
5,051
(442)
4,609
(6,408)
620
162
(5,626)
(920)
87,681
Share
Capital
$’000
Retained
Earnings
$’000
Note
Deferred
Payments
Reserve
$’000
Share
Based
Payments
Reserve
$’000
Translation
Reserve
$’000
Total
Equity
$’000
Balance as at 1 July 2016
56,656
30,603
Total comprehensive income for the period
Loss for the period
Foreign currency translation gain
Total comprehensive income
Transactions with owners, recorded directly in equity
Dividends to equity holders
Deferred share consideration
23
Cost of share-based payments
Total transactions with owners
Balance as at 30 June 2017
56,656
-
-
-
-
-
13,850
-
13,850
13,850
1,342
(920)
87,681
-
-
-
-
-
441
441
1,783
-
305
305
-
-
-
-
(615)
(369)
305
(64)
(2,152)
13,850
441
12,139
99,756
Share
Capital
$’000
56,036
Retained
Earnings
$’000
31,960
-
-
-
-
-
-
-
-
-
-
-
5,051
-
5,051
(6,408)
-
-
(6,408)
30,603
(369)
-
(369)
(2,152)
-
-
(2,152)
28,082
The above statement of changes in equity should be read in conjunction with the accompanying notes..
30
2017 Annual Report CONSOLIDATED STATEMENT OF
CASH FLOWS
For the year ended 30 June 2017
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Interest received
Interest paid
Income taxes received/(paid)
Net cash (used in)/from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
Loans to related parties
Proceeds from the sale of assets
Acquisition of property, plant and equipment
Net cash from/(used in) investing activities
Cash flows from financing activities
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 30 June
The above cash flow statement should be read in conjunction with the accompanying notes.
Note
2017
$’000
2016
$’000
216,243
(221,184)
463
(733)
2,238
(2,973)
5,537
-
80
(2,062)
3,555
(15)
(2,152)
(2,167)
(1,585)
41,833
305
40,553
238,872
(218,244)
791
(582)
(8,538)
12,299
(5,577)
(981)
518
(2,125)
(8,165)
-
(6,408)
(6,408)
(2,274)
44,550
(443)
41,833
26
23
15
20
11
31
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
13. Inventories
4. Contract revenue
9. Income tax expense
10. Earnings per share
11. Cash and cash equivalents
12. Trade and other receivables
14. Construction work in progress
15. Property, plant and equipment
1. Reporting entity
2. Basis of preparation
3. Segment reporting
5. Other income/(expense)
6. Employee benefits expenses
7. Finance income and expenses
8. Depreciation and amortisation expenses
33
33
34
35
35
35
36
36
37
39
40
40
40
40
41
16. Intangible assets – goodwill and customer contracts 42
17. Trade and other payables
43
43
44
44
45
50
50
52
53
56
57
57
57
57
58
58
60
69
18. Unearned revenue
19. Provisions
20. Capital and reserves
21. Financial Instruments
22. Investments in subsidiaries
23. Business Combinations
24. Interest in joint operations
25. Share-based payments
26. Reconciliation of cash flows from operating activities
27. Commitments
28. Contingencies
29. Subsequent events
30. Auditor’s remuneration
31. Parent entity disclosures
32. Related parties
33. Significant accounting policies
34.Determination of fair values
32
2017 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
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 2017 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 33(v).
These financial statements have been rounded to the nearest thousand dollars where permitted by ASIC Instrument 2016/191
dated 24 March 2016.
The consolidated financial statements were authorised for issue by the Board of Directors on 29 August 2017.
(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.
• Assets and liabilities acquired in a business combination are initially recognised at fair value.
The methods used to measure fair values are discussed further in note 34.
(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.
2017 Annual Report
33
NOTES TO THE
FINANCIAL STATEMENTS
(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 25 – measurement of share based payments;
• Note 16 – recoverable amount for testing goodwill;
• Note 23 – measurement of deferred consideration; and
• Note 23 – measurement of customer intangibles
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 33(m)(i) and 4) and contract work in progress (note 33(i)) and 14).
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 Group’s accounting policies are included in notes 33 and 34.
3. Segment reporting
Revenue is principally derived by the Group from the provision of electrical services to the commercial, infrastructure, resources and
energy sectors. The Group provides its services through three key segments; SCEE, Datatel and Heyday. For the year ended 30 June
2017, the SCEE segment contributed revenue of $108 million (2016: $208 million), the Datatel segment contributed revenue of $30
million (2016: nil) and the Heyday segment contributed revenue of $62 million (2016: nil).
The directors believe that the aggregation of the operating segments 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 segments have therefore been aggregated to form one operating segment.
34
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
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
2017
2016
Revenue
$’000
199,674
241
199,915
Non-current
assets
$’000
98,941
-
98,941
Revenue
$’000
207,509
114
207,623
Non-current
assets
$’000
42,450
293
42,743
Revenues from the four largest customers of the Group’s Australian segment generated respectively $39 million, $21 million,
$17 million and $17 million of the Group’s total revenue (2016: $120 million generated from the three largest customers).
4. Contract revenue
Contract revenue
199,915
207,623
Note
2017
$’000
2016
$’000
5. Reduction in earn out payable
Reduction in earn out payable
Note
2017
$’000
5,411
2016
$’000
-
The reduction in earn out payable relates to the prior year acquisition of Datatel Communications Pty Ltd and represents a reduced
assessment of the amount of deferred consideration that is expected to be payable on achievement of earnings targets in the 2017
to 2019 financial years.
6. Employee benefits expenses
Note
Remuneration, bonuses and on-costs
Superannuation contributions
Amounts provided for employee entitlements
Share-based payments expense
25
2017
$’000
(10,641)
(1,007)
(811)
(441)
2016
$’000
(13,016)
(879)
(409)
(162)
(12,900)
(14,466)
The above employee benefits expenses do not include employee benefits expenses recorded within contract expenses.
Employee benefits included in contract expenses were $83.7m (2016: $143.0m).
35
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
7. Finance income and expenses
Note
Interest income on bank deposits
Finance income
Interest expense on bank borrowings
Finance charges payable under finance lease
Deferred consideration
Bank charges
Bank guarantee fees
Finance expenses
Net finance income/(expenses)
8. Depreciation and amortisation expenses
Note
Buildings
Leasehold improvements
Plant and equipment
Motor vehicles
Office furniture and equipment
Amortisation of customer contract intangibles
2017
$’000
463
463
(39)
(6)
(357)
(455)
(233)
(1,090)
(627)
2017
$’000
(17)
(176)
(2,259)
(1,042)
(760)
(4,254)
(2,045)
2016
$’000
791
791
25
-
-
(400)
(207)
(582)
209
2016
$’000
(17)
(178)
(2,288)
(1,250)
(1,065)
(4,798)
-
36
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
9. Income tax expense
(a) Income Statement
Current tax expense
Current period
(Under)/over provision from prior year
Deferred tax expense
Origination and reversal of temporary differences
Income tax expense reported in the
income statement
Note
2017
$’000
-
2
2
212
214
(b) Reconciliation between tax expense and pre-tax accounting profit
Note
2017
$’000
Accounting profit/(loss) before income tax
Income tax (expense)/credit using the Company’s
domestic tax rate of 30% (2016: 30%)
Change in fair value of deferred consideration
Acquisition costs included in cost base
Non-deductible deferred consideration interest
Share based payments
Amortisation of intangibles
Tax losses of foreign operations not recognised
Research and development
Other
Income tax expense reported in the income
statement
The applicable effective tax rates are:
(583)
175
1,623
(489)
(107)
(132)
(614)
(83)
-
(159)
214
2016
$’000
(2,098)
331
(1,767)
(378)
(2,145)
2016
$’000
7,196
(2,159)
-
-
-
(49)
-
(164)
193
34
(2,145)
(36.9%)
29.8%
37
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
Deferred tax assets and liabilities
Balance Sheet
Movement recognised in
Income Statement
Acquisition of
Subsidiary
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
(274)
(4,850)
(23)
(5,147)
103
39
97
63
197
3,265
19
64
2,034
-
5,881
734
(104)
(2,769)
(23)
(2,896)
49
-
13
-
81
1,798
59
212
-
-
2,212
(684)
170
2,081
-
2,251
(54)
(39)
(84)
(2)
36
(474)
40
148
(2,034)
-
(2,463)
(212)
2
(18)
-
(16)
101
134
(1)
-
(23)
290
(40)
(68)
-
1
394
378
-
-
-
-
-
-
-
61
152
993
-
-
-
-
1,206
1,206
(102)
(147)
-
(249)
-
-
12
-
-
154
-
-
-
-
166
(83)
Deferred tax liabilities
Retentions receivable
Work in progress
Property, plant and equipment
Deferred tax assets
Provision for onerous lease
Provision assets held for sale value
Provision for doubtful debt
Retentions payable
Accruals
Employee benefits
Property, plant and equipment
Other
Tax losses
Borrowing costs
Net deferred tax assets/(liabilities)
Unrecognised deferred tax assets
At 30 June 2017, there was a deferred tax benefit of $3.6 million for tax loss incurred in the Cruz Del Sur Ingenieria Electra (Peru) S.A.
subsidiary which were not recognised because it is not probable that future taxable profit will be available against which the Group
can use the benefits therefrom. These tax losses do not have an expiry date.
38
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
10. Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 30 June 2017 was based on the loss attributable to ordinary shareholders of $369,000
(2016: $5,051,000) and a weighted average number of ordinary shares outstanding of 159,426,058 (2016: 158,213,701), calculated
as follows:
Profit/(loss) attributable to ordinary shareholders
Profit/(loss) for the period
Weighted average number of ordinary shares
Note
2017
$’000
(369)
2016
$’000
5,051
Note
2017
$’000
2016
$’000
Issued ordinary shares at 1 July
20
159,426,058
158,210,370
Effective new balance resulting from share issue
Weighted average number of ordinary shares
at 30 June
-
3,331
159,426,058
158,213,701
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2017 was based on the loss attributable to ordinary shareholders of
$369,000 (2016: $5,051,000) and a weighted average number of ordinary shares outstanding after adjustment for the effects of all
dilutive potential ordinary shares of 159,426,058 (2016: 158,213,701), calculated as follows:
Profit attributable to ordinary shareholders (diluted)
Profit/(loss) for the period
Note
Consolidated
2017
$’000
(369)
2016
$’000
5,051
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares
for basic earnings per share
Effect of dilution:
Contingently issuable shares – acquisition
Share options and performance rights on issue
Weighted average number of ordinary shares
at 30 June
Note
2017
$’000
2016
$’000
159,426,058
158,213,701
-
-
14,039
2,174,804
159,426,058
160,402,544
39
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
11. Cash and cash equivalents
Bank balances
Short term deposits
Cash and cash equivalents in the statement of
cash flows
Note
2017
$’000
39,791
762
40,553
2016
$’000
3,998
37,835
41,833
The effective interest rate on cash and cash equivalents was 1.4% (2016: 1.8%); these deposits are either at call or
on short term deposit.
12. Trade and other receivables
Current
Trade receivables
Provision for impairment of trade receivables
Retentions
Non-current
Loans to vendors
Note
2017
$’000
2016
$’000
32,727
(324)
913
33,316
1,358
21,203
-
347
21,550
478
Trade receivables are non-interest bearing and are generally on 30 day terms. A provision for impairment of trade receivables
relates to specific invoices that the Group considers are at risk of being recovered. The provision account in respect of trade
receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible.
At that point the amount is considered irrecoverable and is written off against the financial asset directly. The Group will continue
to strongly pursue all debts provided for.
Non-current receivables represent loans made in relation to the acquisition in Datatel Communications Pty Ltd, repayable
from future earn out payments.
13. Inventories
Raw materials and consumables
2,328
2,379
Note
2017
$’000
2016
$’000
14. Construction work in progress
Costs incurred to date
Recognised profit
Progress billings
Construction work in progress
Note
2017
$’000
130,362
26,267
(134,739)
21,890
2016
$’000
156,262
34,655
(181,688)
9,229
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.
40
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
15. Property, plant and equipment
Land and
Buildings
$’000
Leasehold
Improve-
ments
$’000
Plant and
equipment
$’000
Motor
Vehicles
$’000
Office
Furniture
and
Equipment
$’000
Total
$’000
Cost
Balance at 1 July 2015
245
2,460
-
-
-
671
-
916
916
-
-
-
-
-
-
(6)
-
-
-
2,454
2,454
1,053
-
205
-
-
916
3,712
(892)
(178)
2
-
-
-
(1)
(17)
-
(115)
-
(133)
(133)
(17)
-
-
-
-
Additions
Disposals
Acquisitions
Reclassification from/(to)
Exchange differences
Balance at 30 June 2016
Balance at 1 July 2016
Additions
Disposals
Acquisitions
Reclassification from assets held
for sale
Exchange differences
Balance at 30 June 2017
Depreciation and impairment losses
Balance at 1 July 2015
Depreciation for the year
Disposals
Acquisitions
Reclassification to assets held for sale
Exchange differences
Balance at 30 June 2016
Balance at 1 July 2016
Depreciation for the year
Disposals
Acquisitions
Reclassification from assets held
for sale
Exchange differences
Balance at 30 June 2017
Carrying amounts
At 1 July 2015
At 30 June 2016
At 1 July 2016
At 30 June 2017
22,410
720
(1,243)
307
(5)
(79)
13,241
10,253
48,609
715
(419)
933
-
-
690
(930)
166
-
-
2,125
(2,598)
1,406
666
(79)
22,110
14,470
10,179
50,129
22,110
474
(1,222)
71
(350)
42
21,125
(12,219)
(2,288)
1,228
(113)
(54)
23
14,470
38
(90)
292
-
-
10,179
497
(1,030)
585
-
-
14,710
10,231
(6,863)
(1,250)
310
(508)
-
-
(5,771)
(1,065)
930
(105)
-
-
50,129
2,062
(2,342)
1,153
(350)
42
50,694
(25,746)
(4,798)
2,470
(726)
(169)
23
(1,068)
(13,423)
(8,311)
(6,011)
(28,946)
(1,068)
(188)
-
-
-
-
(13,423)
(2,019)
1,046
(56)
195
(10)
(8,311)
(1,198)
85
(70)
-
-
(6,011)
(832)
975
(243)
-
-
(150)
(1,256)
(14,267)
(9,494)
(6,111)
244
783
783
766
1,568
1,386
1,386
2,456
10,191
8,687
8,687
6,858
6,378
6,159
6,159
5,216
4,482
4,168
4,168
4,120
(28,946)
(4,254)
2,106
(369)
195
(10)
(31,278)
22,863
21,183
21,183
19,416
41
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
16. Intangible assets – goodwill and customer contracts
Reconciliation of carrying amount
Note
Goodwill
$’000
Customer
Contracts
$’000
Other
$’000
Total
$’000
Cost
Balance as at 1 July 2015
Acquisitions through business combinations
Balance as at 30 June 2016
Balance as at 1 July 2016
Acquisitions through business combinations
23
Balance as at 30 June 2017
Amortisation and impairment losses
Balance as at 1 July 2015
Amortisation
Balance as at 30 June 2016
Balance as at 1 July 2016
Amortisation
Balance as at 30 June 2017
Carrying amounts
At 1 July 2015
At 30 June 2016
At 1 July 2016
At 30 June 2017
17,174
12,298
29,472
29,472
52,697
82,169
(8,390)
-
(8,390)
(8,390)
-
(8,390)
8,784
21,082
21,082
73,779
1,811
-
1,811
1,811
5,680
7,491
(1,811)
-
(1,811)
(1,811)
(2,045)
(3,856)
-
-
-
-
-
-
-
19
19
-
-
-
-
-
-
-
-
-
3,635
19
18,985
12,298
31,283
31,283
58,396
89,679
(10,201)
-
(10,201)
(10,201)
(2,045)
(12,246)
8,784
21,082
21,082
77,433
Impairment testing for cash-generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s operating segments which represent the lowest level
within the Group at which goodwill is monitored for internal management purposes. During the year a Group reorganisation into
three operating segments, SCEE, Datatel and Heyday has resulted in goodwill being reallocated.
The aggregate carrying amounts of goodwill allocated to each segment are as follows:
SCEE
Datatel
Heyday5
2017
$’000
8,784
12,298
52,697
73,779
2016
$’000
8,784
12,298
-
21,082
The recoverable amount of the above segments were based on their value in use with the exception of Heyday in which the
Group has applied the fair value less costs to sell method given the acquisition’s close proximity to the reporting date. The group
performed its annual impairment test in June 2017. The carrying amount of the operating segments were determined to be lower
than their recoverable amounts and therefore no impairment charge has been recognised.
42
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
16. 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 segment. 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% (2016: 2.5%). 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 segments operate.
• EBITDA for 2018 is based on the board approved budget with EBITDA for 2019 – 2022 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 2017.
• A pre-tax discount rate of 16.83% (2016: 11.58%) was applied. This discount rate was estimated based on past experience and
industry average weighted cost of capital.
Sensitivity to changes in assumptions
The value in use assessment for SCEE estimates a recoverable amount $11.2million in excess of its carrying amount. This estimate
is sensitive to the realisation of the budgeted and forecast overall net cash flows to 2022. These forecasts reflect Board and
management’s expectations for future growth. In the event that the overall net cash flows are 25% less, year on year, than those
which have been assumed in calculating the value in use, then the value in use would be less than the carrying value.
The value in use assessment for Datatel estimates a recoverable amount $7.2million in excess of its carrying amount. This
estimate is sensitive to the realisation of the budgeted and forecast overall net cash flows to 2022. These forcasts reflect the
Board and management’s expectations for future growth. In the event that the overall net cash flows are 37% less, year on year,
than those which have been assumed in calculating the value in use, then the value in use would be less than the carrying value.
17. Trade and other payables
Current
Trade payables
Retentions payable
Accrued expenses
Goods and services tax payable
2017
$’000
30,868
210
16,154
2,465
49,697
2016
$’000
5,896
-
10,913
1,280
18,089
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 21.
18. Unearned revenue
Current
Unearned revenue
2017
$’000
2016
$’000
12,899
1,387
Unearned revenue arises when the Group has invoiced the client in advance of performing the contracted services.
43
2017 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
19. Provisions
Current
Annual leave
Long service leave
Other employee leave
Onerous Lease
Non-current
Long service leave
Bonus
2017
$’000
2016
$’000
6,996
672
871
343
8,882
377
1,000
1,377
4,053
629
-
162
4,844
324
-
324
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 33(k) to this report.
A provision for bonus has been recognised following the acquisition of Heyday5 Pty Ltd for the 2018 and 2019 financial years.
20. Capital and reserves
Share capital
Ordinary shares
Issued and fully paid
Movements in shares on issue
Balance at the beginning of the
financial year
Share issue/(buy-back)
2017
2016
Note
Number
$’000
Number
$’000
159,426,058
56,656
159,426,058
56,656
159,426,058
56,656
158,210,370
56,036
Balance at the end of the financial year
159,426,058
56,656
159,426,058
-
-
1,215,688
620
56,656
The Company does not have authorised capital or par value in respect of its issued shares. All shares have voting rights and
rights to dividends.
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.
Deferred payments reserve
The deferred payments reserve records the expected future issue of shares in relation to the acquisition of Heyday5 Pty Ltd and
Electrical Data Projects Pty Ltd (see note 23 (ii)).
44
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
Dividends
Dividends recognised in the current year by the Group are:
2017
Final 2016 ordinary
Total amount
2016
Final 2015 ordinary
Interim 2016 ordinary
Total amount
Cents per
share
Total
amount
Franked
Date of
payment
1.35
2.70
1.35
2,152
2,152
4,272
2,136
6,408
Franked
13 October 2016
Franked
Franked
13 October 2015
12 April 2016
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
Declared after end of year
No dividends were declared after the balance sheet date. There are no events in the Directors’ opinion subsequent to
the balance sheet date that require disclosure.
Franking account balance
Company
2017
$’000
20,815
2016
$’000
18,469
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.
21. 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.
45
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
21. Financial instruments (Continued)
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 (net of provision for
impairment)
Loans to vendors
Carrying Amount
2017
$’000
40,553
33,316
1,358
75,227
2016
$’000
41,833
21,550
478
63,861
Cash
The Group’s cash and cash equivalents are held with major banks and financial institutions.
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 59 percent (2016: 59 percent) of the Group’s trade receivables are attributable to transactions
with eight major customers. Geographically, the concentration of credit risk is within Australia and, by industry, the concentration is
within the commercial, infrastructure and resources industries.
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 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 established an allowance for impairment that represents their estimate of incurred losses in respect of trade
and other receivables.
46
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
21. Financial instruments (Continued)
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region was::
Australia
South America and Caribbean
Carrying amount
2017
$’000
33,280
36
33,316
2016
$’000
21,370
180
21,550
Impairment losses
The ageing of the Group’s trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 30-60 days
Past due 60 days and less than 1 year
More than 1 year
Gross
2017
$’000
27,539
3,654
743
319
1,385
33,640
Impairment
2017
$’000
-
-
-
(11)
(313)
(324)
Gross
2016
$’000
17,130
2,879
547
933
61
21,550
Impairment
2016
$’000
-
-
-
-
-
-
The movement in the allowance for impairment in respect of Trade receivables during the year was as follows:
Balance at start of year
Impairment losses recognised
Balance at 30 June
2017
$’000
-
324
324
2016
$’000
-
-
-
The impairment loss at 30 June 2017 relates to specific invoices that the Group considers are at risk of being recovered.
The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no
recovery of the amount owing is possible; at that point the amount is considered irrecoverable and is written off against the
financial asset directly.
The impairment provision related to debts that are more than one year relates primarily to one customer. The Group will
continue to strongly pursue all debts provided for.
47
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
21. Financial instruments (Continued)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group uses project costing to assess the cash flows required for each project currently underway and entered into.
Management monitors cash flow using rolling forecasts and annual budgets that are monitored at a Board level on a
monthly basis.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements:
Carrying
amount
$’000
Contractual
cash flows
$’000
6 mths or
less
$’000
6-12 mths
$’000
1-2 years
$’000
2-5 years
$’000
More than
5 years
$’000
30 June 2017
Non-derivative financial liabilities
Trade and other payables
Loans and borrowings
Deferred consideration
30 June 2016
Non-derivative financial liabilities
Trade and other payables
Deferred consideration
49,697
246
24,501
74,444
18,089
8,659
26,748
49,697
246
24,501
74,444
18,089
8,659
26,748
49,697
32
9,180
58,909
18,089
-
18,089
-
32
-
32
-
-
-
-
64
7,536
7,600
-
2,374
2,374
-
118
7,785
7,903
-
3,212
3,212
-
-
-
-
-
3,073
3,073
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 2017 or 30 June 2016.
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.
48
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
21. 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:
Variable rate instruments
Financial assets
Carrying amount
2017
$’000
2016
$’000
41,911
42,311
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 2017.
Profit or loss
Equity
100bp increase
100bp decrease
100bp increase
100bp decrease
641
641
708
708
(641)
(641)
(708)
(708)
-
-
-
-
-
-
-
-
30 June 2017
Variable rate instruments
Cash flow sensitivity (net)
30 June 2016
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.
49
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
21. Financial instruments (Continued)
Other Price Risk
The Group is not directly exposed to any other price risk.
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.
22. Investments in subsidiaries
The consolidated financial statements include the financial statements of Southern Cross Electrical Engineering Ltd and the
subsidiaries listed in the following table.
Cruz Del Sur Ingeniería Electra (Peru) S.A
Southern Cross Electrical Engineering (WA) Pty Ltd
Southern Cross Electrical Engineering Tanzania Pty Ltd
Southern Cross Electrical Engineering Ghana Pty Ltd
K.J. Johnson & Co. Pty Ltd
FMC Corporation Pty Ltd
Southern Cross Electrical Engineering (Australia) Pty Ltd
Hazquip Industries Pty Ltd
Datatel Communications Pty Ltd
Heyday5 Pty Ltd
Electrical Data Projects Pty Ltd
Equity Interest
(%)
Country of Incorporation
2017
2016
Peru
Australia
Tanzania
Ghana
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
23. Business combinations
On 9 March 2017 Southern Cross Electrical Engineering Ltd acquired 100% of Heyday5 Pty Ltd (“Heyday”) and its subsidiary
Electrical Data Projects Pty Ltd (“Electrical Data Projects”). Heyday is a leading east coast electrical contractor in the commercial
and infrastructure markets. Electrical Data Projects is an electrical contracting business established specifically to focus on the
installation of electrical data communication cabling to the building industry and major private clients throughout New South
Wales. The acquisition forms part of SCEE’s strategy of growth through expansion into adjacent and complementary sectors and
new geographies and provides SCEE with a scalable platform to enter the commercial and infrastructure sectors.
50
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
23. Business combinations (Continued)
Consideration transferred
Initial cash
Subsequent cash (i)
Deferred shares (ii)
Contingent consideration arrangement (iii)
$’000
18,000
9,039
13,850
11,856
52,745
(i)
Subsequent cash of $9,039,000 recognised at acquisition date represents the fair value of expected future payments based on
the Directors’ assessment of the expected achievement of 2017 earn out target of an EBIT equal to or greater than $9,800,000.
(ii) Deferred shares of $13,850,000 recognised at acquisition date represents expected future issue based on the Directors’
assessment of the expected achievement of 2017 earn out target of an EBIT equal to or greater than $9,800,000.
(iii) The Group has agreed to pay the selling shareholders additional consideration of up to $13,000,000 subject to future earnings
before interest and tax (EBIT) exceeding the following targets:
• $4,000,000 payable on achieving at least $9,800,000 EBIT in the financial year ended 30 June 2018;
• $4,000,000 payable on achieving at least $9,800,000 EBIT in the financial year ended 30 June 2019;
•
50% of EBIT above $9,800,000 in each of the financial years ended 30 June 2018 and 30 June 2019 capped at $2,500,000 in any
individual financial year.
The contingent consideration of $11,856,000 recognised at acquisition date represents the fair value of expected future payments
based on the Directors’ assessment of the expected achievement of these earn out targets.
Acquisition-related costs amounting to $1,631,597 have been excluded from the consideration transferred and have been
recognised as an expense in the year, within ‘administration expenses’ line item in the statement of comprehensive income.
Assets acquired and liabilities assumed at the date of acquisition
The provisional fair values of the identifiable assets and liabilities of Heyday and Electrical Data Projects as at the date of acquisition
were:
Fair value recognised
$’000
Cash and cash equivalents
Trade and other receivables
Prepayments and other
Property, plant and equipment
Deferred tax assets
Intangible assets acquired (customer contracts)
Trade and other payables
Unearned revenue
Loans and borrowings
Provisions
Tax payable
Net identifiable assets / liabilities acquired
23,537
5,290
377
784
1,167
5,680
(20,373)
(8,366)
(231)
(6,101)
(1,716)
48
51
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
23. Business combinations (Continued)
Goodwill arising on acquisition
Consideration
Less: fair value of identifiable net assets / liabilities acquired
Goodwill arising on acquisition
$’000
52,745
48
52,697
Fair values measured on a provisional basis
The initial accounting for the acquisition of Heyday and Electrical Data Projects has only been provisionally determined at
the end of the reporting period.
Net cash outflow on acquisition of subsidiary
Consideration paid in cash
Less: cash and cash equivalents balances acquired
Net cash flow on acquisition
$’000
(18,000)
23,537
5,537
Impact of acquisition on the result of the Group
Included in the results for the period are revenues and net profit before tax of $62.5 million and $4.1 million respectively.
Had the business combination been effected at 1 July 2016, management estimates the revenue of the Group from continuing
operations would have been $287.7 million and the net profit before tax for the year from continuing operations would have been
$5.2 million.
24. 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 Australian 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 2017 and 2016 and revenues and expenses of the joint
operations for the year 30 June 2017 and 2016, 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
2017
$’000
12,643
(6,683)
(2)
5,958
42,346
(37,534)
(593)
4,219
(1,124)
3,095
2016
$’000
2,669
(631)
(875)
1,163
17,749
(16,103)
(785)
861
(258)
603
The joint operations have no contingent liabilities or capital commitments as at 30 June 2017 and 30 June 2016.
52
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
25. Share-based payments
(a) Expense recognised in profit or loss
Share based payments expenses for the year comprises:
2017 Performance Rights 18 November 2016
2016 Performance Rights
2015 Performance Rights
2014 Performance Rights
(i)
(ii)
(iii)
2017
$’000
139
372
(70)
-
441
2016
$’000
-
120
51
(9)
162
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.
(i) 2017 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
Number of
instruments
Vesting
conditions
Performance rights issued to senior management on 18
November 2016
Performance rights issued to key management on 18
November 2016
Total /performance rights
235,057
1,183,333
1,418,390
Employed on 30 June 2019 and
exceed performance hurdle
Employed on 30 June 2019 and
exceed performance hurdle
Contractual
life
31 months
31 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 2016 to 30 June 2019 (“Performance Period”);
• No performance rights will vest until 30 June 2019;
•
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
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
25. Share-based payments (Continued)
EPS will be assessed against targets for threshold performance of 4 cents per share at the end of the Performance Period and
for stretch performance of 4.9 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 4 cents per share
4 cents per share
Between 4 and 4.9 cents per share
At or above 4.9 cents per share
0% vesting
50% vesting
Pro-rata vesting between 50% and 100%
100% vesting
Once the performance measurement calculation has been finalised the company will allot and issue the equivalent number of
shares at nil consideration on the basis of one ordinary share per vested performance right for all performance rights exercised.
During the year nil 2017 performance rights were forfeited.
(ii) 2016 Performance Rights
There were 1,594,978 2016 Performance Rights on issue at 1 July 2016. There were 1,083,333 2016 Performance Rights granted,
none vested and none were forfeited during the year.
The 2016 Performance Rights were performance tested over a three-year period from 1 July 2015 to 30 June 2018. 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 18.5% per annum compounded over the Performance Period
and for stretch performance of 26.5% per annum compounded over the Performance Period. The vesting schedule is as follows
for TSR performance over the Performance Period:
Less than 18.5% per annum compounded
18.5% per annum compounded
0% vesting
50% vesting
Between 18.5% and 26.5% per annum compounded
Pro-rata vesting between 50% and 100%
At or above 26.5% per annum compounded
100% vesting
EPS will be assessed against targets for threshold performance of 2.8 cents per share at the end of the Performance Period
and for stretch performance of 3.6 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 2.8 cents per share
2.8 cents per share
0% vesting
50% vesting
Between 2.8 and 3.6 cents per share
Pro-rata vesting between 50% and 100%
At or above 3.6 cents per share
100% vesting
54
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
25. Share-based payments (Continued)
(iii) 2015 Performance Rights
There were 985,701 2015 Performance Rights on issue at 1 July 2015. No 2015 Performance Rights were granted, none vested and
264,286 were forfeited during the year.
The 2015 Performance Rights were performance tested over a three-year period from 1 July 2014 to 30 June 2017. 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 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
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
(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:
The performance rights issued were granted in one tranche for the 2017 year and two tranches for the 2016 year 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
2017
2016
2016
18 November 2016
18 November 2016
16 November 2015
30 June 2019
$0.46
2.6 years
50%
1.82%
5.1%
$0.19
$0.40
30 June 2018
30 June 2018
$0.46
1.6 years
50%
1.72%
5.1%
$0.275
$0.425
$0.35
2.6 years
45%
2.04%
5.7%
$0.15
$0.30
55
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
25. Share-based payments (Continued)
(c) Reconciliation of outstanding performance rights
The number and weighted average exercise prices of performance rights under the programmes were as follows:
Outstanding at 1 July
Granted during the year
Forfeited during the year
Outstanding at 30 June
Vested and exercisable at 30 June
2017
Number of rights
2016
Number of rights
2,635,612
2,501,723
(319,219)
4,818,116
-
1,629,552
1,594,978
(588,918)
2,635,612
-
Subsequent to 30 June 2017 the vesting conditions in respect of the 2015 performance rights have been performance tested and it
has been determined that 232,879 performance rights have vested and are now exercisable and that 488,536 performance rights
have not vested and have been forfeited.
26. Reconciliation of cash flows from operating activities
(Loss)/profit for the year
Adjustments for:
Depreciation and amortisation
Loss on sale of property, plant and equipment
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
Deferred acquisition consideration
Income tax payable
Deferred income tax
Net cash (used in)/from operating activities
2017
$’000
2016
$’000
(369)
5,051
6,298
156
441
(7,357)
3,267
(12,661)
51
127
8,711
3,146
1,514
(5,054)
(993)
(250)
(2,973)
4,798
77
162
18,154
(3,267)
(185)
568
320
(6,846)
(1,776)
(1,631)
-
(3,504)
378
12,299
56
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
27. Commitments
Leasing commitments
Operating lease commitments – as lessee
The Group has entered into commercial property, motor vehicle and office equipment leases. These leases have an average life
of 3-4 years remaining with the property leases containing options to renew at the end of the initial term. Future minimum rentals
payable under non-cancellable operating leases as at 30 June 2017 are:
Within one year
After one but no more than five years
After more than five years
Total minimum lease payments
2017
$’000
2,588
5,022
2,339
9,949
2016
$’000
1,535
2,778
1
4,314
Under the terms of the property leases, the rent payable is subject to annual review. This review adjusts the annual rent by either
the movement in the consumer price index or at specified dates the annual rent is subject to a market review.
28. 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
2017
$’000
39,089
3,107
2016
$’000
11,919
7,544
Total bank guarantee facilities at 30 June 2017 were $46 million and the unused portion was $6.9 million. These facilities are subject
to annual review. Total surety bonds facilities at 30 June 2017 were $29.5 million and the unused portion was $26.4 million. These
facilities are subject to annual review. All facilities are set to mature during the 2017/18 year. It is management’s intention to review
these facilities at maturing to a level appropriate to support the ongoing business of the Group.
29. 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.
30. Auditor’s remuneration
Remuneration of KPMG Australia as the auditor of the
parent entity for:
Auditing or reviewing the financial report
All other services
2017
$’000
2016
$’000
298,000
-
298,000
201,800
-
201,800
57
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
31. Parent entity disclosures
As at, and throughout, the financial year ending 30 June 2017 the parent company of the Consolidated entity was
Southern Cross Electrical Engineering Limited.
Company
Result of the parent entity
Profit/(loss) for the period
Total comprehensive income/(loss) for the period
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising:
Share capital
Reserves
Retained earnings
Total Equity
2017
$’000
(4,317)
(4,317)
31,820
148,112
38,994
58,947
56,656
15,210
17,299
89,165
2016
$’000
4,669
4,669
65,200
119,697
26,729
38,354
56,656
919
23,768
81,343
Parent entity contingencies:
The parent entity has commitments and contingent liabilities which are included in note 27 and 28. At 30 June 2017 there were
in existence guarantees of performance of a subsidiary.
32. 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
Company
2017
$’000
2,047
129
-
415
2,591
2016
$’000
1,500
102
-
197
1,799
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 25 (i)).
58
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
32. Related parties (Continued)
(ii) Key management personnel transactions
Directors of the Company control 42.1% 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:
Other related parties
Gianfranco Tomasi
David Hammond
Rental expense
Rental expense
Transactions value
year ended 30 June
2017
$’000
868
106
2016
$’000
828
-
The Group has entered into rental agreements over the following properties in which Gianfranco Tomasi has an ownership interest:
• F & A Tomasi Superannuation Fund owns the properties at 41 and 44 Macedonia St, Naval Base WA.
• G & A Tomasi own the properties at 45, 47, 49 & 51 Macedonia Street, Naval Base WA.
• Frank Tomasi Nominees Pty Ltd owns the property at 43 Hope Valley Road, Naval Base WA.
The Group has entered into rental agreements over the following properties in which David Hammond has a partial ownership
interest:
• David Hammond has a part ownership interest in 9-13 Waterloo Road, North Ryde NSW with the lease expiring on 30 June 2017.
• David Hammond has a part ownership interest in Level1, 3 Apollo Place, Lane Cove West NSW with the lease commencing
1 January 2017.
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 or at specified dates the annual rent is subject to a market review.
The rental payments made above are all at normal market rates with no rent increases passed through during the 2017 year.
59
2017 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
33. 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 2016.
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 2016.
AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and
Amortisation
AASB 2015-1 Amendments to Australian Accounting Standards - Annual improvements 2012-2014 Cycle
AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101
The application of these amendments does not have any material impact on the disclosures or the amounts recognised in the
Group’s consolidated financial statements.
(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 ventures 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.
(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.
60
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
33. Significant accounting policies (Continued)
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement
of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign
operation and are recognised in other comprehensive income and presented in the foreign currency translation reserve in equity.
(c) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and on hand and short term deposits with an original
maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in fair value.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.
(d) Financial instruments
(i) Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets
(including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group
becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset in a transaction which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the
Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the 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 12).
(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.
61
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
33. 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.
(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.
62
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
33. Significant accounting policies (Continued)
(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
2017
2016
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.
(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 33(m)(i)) less progress billings and recognised
losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred
in the Group’s contract activities based on normal operating capacity.
If payments received from customers exceed the income recognised, then the difference is presented as deferred income in the
balance sheet.
(j) 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.
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2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
33. Significant accounting policies (Continued)
(k) Impairment
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
(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.
(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.
64
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
33. Significant accounting policies (Continued)
(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 high
quality corporate bonds or government bonds that have maturity dates approximating the terms of the Group’s obligations and
that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed using the
Projected Unit Credit method.
(ii) Termination benefits
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of
withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date or to provide termination
benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are
recognised as an expense if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be
accepted, and the number of acceptances can be estimated reliably.
(iii) Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is
provided.
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.
65
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
33. Significant accounting policies (Continued)
(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).
(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.
(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.
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2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
33. Significant accounting policies (Continued)
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.
(v) Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination
is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange
for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the
acquisition date, except that:
•
•
•
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured
in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’ respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in
accordance with AASB 2 ‘Share-based Payment’ at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and
Discontinued Operations’ are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-
date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any),
the excess is recognised immediately in profit or loss as a bargain purchase gain.
67
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
33. Significant accounting policies (Continued)
(v) Business combinations (Continued)
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s
net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate
share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a
transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the
basis specified in another Standard.
Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a
contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in
the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively,
with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional
information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and
circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not
remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration
that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with AASB 139 ‘Financial
Instruments: Recognition and Measurement’, or AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’,
as appropriate, with the corresponding gain or loss being recognised in profit or loss.
Where a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to
fair value at the acquisition date (i.e. the date when the Group attains control) and the resulting gain or loss, if any, is recognised
in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised
in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were
disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are
adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information
obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts
recognised as of that date.
(w) 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 2017, and have not been applied in preparing these consolidated financial statements. There are a number which are
expected to have a significant effect on the consolidated financial statements of the Group.
AASB 9 Financial Instruments will become mandatory for the Group’s 2018 consolidated financial statements and could change the
classification and measurement of financial assets.
AASB 15 Revenue from Contracts with Customers will become mandatory for the Group’s 2018 consolidated financial statements
and introduces a single revenue recognition model based on the transfer of good and services and the consideration expected to be
received for that transfer.
AASB 16 Leases, will become mandatory for the Group’s 2019 consolidated financial statements and will require entities to
recognise all leases except those that are short term (<12 Months).
AASB 2016-5 amends AASB 2 Share-based Payment, clarifying how to account for certain types.
AASB 2016-2 amendments to AASB 107 Statement of Cash Flows, require entities to provide disclosures about changes in their
liabilities arising from financiang activities, including both changes arising from cash flows and non-cash changes (such as foreign
exchange gains or losses).
The Group does not plan to adopt any of these standards early and the extent of the impact has not been determined.
68
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
34. 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.
69
2017 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
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 2017 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 2017.
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
29 August 2017
70
2017 Annual Report
INDEPENDENT AUDIT REPORT
71
2017 Annual Report KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of Southern Cross Electrical Engineering Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Southern Cross Electrical Engineering Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2017 • Consolidated statement of comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the year then ended • Notes including a summary of significant accounting policies • Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. Key Audit Matters The Key Audit Matters we identified are: • Recognition of Revenue under the percentage of completion method • Valuation of Goodwill • Acquisition Accounting – Heyday5 Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. INDEPENDENT AUDIT REPORT (continued)
72
2017 Annual Report Recognition of revenue under the percentage of completion method (contained with contract revenue of $199.9 million) Refer to Note 4 to the Financial Report The key audit matter How the matter was addressed in our audit We focused on the Group’s contract revenue recognised under the percentage of completion method as a key audit matter due to the degree of judgment involved in its estimation. The Group’s policy for certain contracts is to record revenue over the course of an individual contract, using the percentage of completion method, which is estimated based on costs incurred compared to total expected costs for the individual contract. Auditing this revenue is challenging due to the heightened estimation uncertainty inherent in the Group’s revenue policy for large-scale, complex projects or those subject to variability in scope. We focus on the availability of persuasive audit evidence to independently challenge the Group’s key assumptions. The estimation uncertainty arises due to • the forward looking nature of the remaining costs to complete the contract and associated activities; • the accuracy of unapproved contract variations; • the ability to deliver contracts to the cost expected and within the planned timelines. Our procedures included: • Evaluation of the Group’s contract revenue accounting process. We tested a sample of the controls in this process including the monthly management review and approval of contract status and costs to complete as well as project manager approval of progress claim submissions; • For a sample of contracts: • We read the contracts and other underlying formal documentation relating to inputs to the percentage of completion calculation. • We assessed the cost to complete estimates by (1) understanding the activities required to complete the project from project teams, (2) analysing the costs of those activities compared to recent project cost trends and prices, and (3) using our knowledge of the contract characteristics to challenge the completeness of costs and activities. • We challenged the status and progress of contracts and the percentage completion through discussion with project management. We compared the outcome of our discussions with the underlying records. • We tested a sample of unapproved contract variations recognised by comparing to subsequent customer approvals or customer correspondence. • We assessed the Group’s ability to deliver contracts within budgeted costs, margins and timelines by evaluating the historical accuracy of these forecasting elements. We challenged management’s current process based on any prior inaccuracy and using the knowledge from our procedures testing the costs to complete estimates. INDEPENDENT AUDIT REPORT (continued)
73
2017 Annual Report Valuation of Goodwill $73.8 million Refer to Note 16 to the financial report The key audit matter How the matter was addressed in our audit We focused on the Group’s annual testing of goodwill for impairment as a key audit matter due to the size of the balance, being 37% of total assets. We specifically focused on the significant forward-looking assumptions the Group applied in their value in use models for the SCEE and Datatel segments, including: • forecast cash flows and terminal values. The Group has experienced competitive market conditions, incurring a loss during the current financial year. This impacted the Group through a reduction in revenue in the SCEE segment compared with those achieved in the prior year due to do a reduction in demand for services, particularly in the resources sector. Additionally the Group experienced lower than forecast profitability from the Datatel segment since its acquisition by the Group. These conditions increase the possibility of goodwill being impaired; • forecast growth rates and terminal values. The Group’s models are highly sensitive to small changes in these assumptions, reducing available headroom. This drives additional audit effort specific to their feasibility within the Group’s strategy; and; • discount rate - these are complicated in nature and vary according to the conditions and environment the specific segments are subject to from time to time. The Group’s modelling is highly sensitive to changes in the discount rate. We involve our valuations specialists with the assessment. The Group has a number of operating businesses and service lines and has made a significant acquisition of Heyday 5 Pty Ltd during the year necessitating a reorganisation of its segments. This required our consideration of the Group’s determination of the level at which goodwill is tested based on the requirements of accounting standards. Our procedures included: • Challenging the Group’s significant forecast cash flow and growth assumptions in light of the competitive market conditions and losses generated during the current financial year. We compared forecast growth rates to published studies of industry trends and expectations, and considered differences for the Group’s SCEE and Datatel segments. We used our knowledge of the Group, their past performance, business and customers, and our industry experience. We also compared the forecast cash flows contained in the value in use models to Board approved forecasts. • Considering the sensitivity of the models by varying key assumptions, such as forecast growth rates, terminal values and discount rates, within a reasonably possible range, to identify where the highest risk of impairment resides within the value in use models and to focus our further procedures. • Working with our valuation specialists we independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Group and the industry it operates in. • We considered the Group’s determination of the level at which goodwill is tested based on our understanding of the operations of the Group’s business, the impact of the HeyDay 5 acquisition in the current year and the Datatel acquisition in the prior year, as well as recent Group restructuring activities against the requirements of the accounting standards. INDEPENDENT AUDIT REPORT (continued)
74
2017 Annual Report Acquisition Accounting – Heyday5 Pty Ltd Refer to Note 23 to the Financial Report The key audit matter How the matter was addressed in our audit We focused on the Group’s acquisition of HeyDay 5 Pty Ltd (“HeyDay”) as a key audit matter due to the level of judgment required in evaluating the purchase price allocation (“PPA”) against the criteria in the accounting standards. We specifically focused on the Group’s identification and measurement of intangible assets which form part of the PPA, including: • the forecast revenues and margin assumptions of HeyDay underlying the cash flows used for measurement of the customer contract intangibles. • the discount rate assumptions with the measurement of customer contracts which are complicated in nature and vary according to the conditions and environment of HeyDay. We involved our valuations specialists with the assessment. We also considered the PPA for the inclusion of other intangible assets such as brand names and customer relationships, considering the nature of the HeyDay operations and industry. Our procedures included: • Challenging the forecast revenue and margin assumptions used in the measurement of customer contract intangibles. We compared these forecasts to approved revenue forecasts, historically reported HeyDay results, as well as results during the remainder of the financial year. • Working with our valuation specialists we independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to HeyDey and the industry it operates in. We also considered publically available information on recent transactions in the industry of comparable entities to challenge the Group’s determination that no other intangible assets be recognised in the PPA. Other Information Other Information is financial and non-financial information in Southern Cross Electrical Engineering Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report INDEPENDENT AUDIT REPORT (continued)
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2017 Annual Report Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and • assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and • to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Southern Cross Electrical Engineering Limited for the year ended 30 June 2017 complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 19 to 27 of the Directors’ report for the year ended 30 June 2017. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Trevor Hart Partner Perth 29 August 2017 LEAD AUDITOR’S INDEPENDENCE DECLARATION
76
2017 Annual Report KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Southern Cross Electrical Engineering Limited I declare that both KPMG and I are independent in accordance with professional rules and statutory requirements on auditor independence. To the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2017, the only matter to declare in relation to auditor independence requirements, as set out in the Corporations Act 2001 or any applicable code of professional conduct, is described below: • For a period of 47 days during the financial year, a partner of KPMG acquired, held and disposed of a parcel of 10,000 shares in Southern Cross Electrical Engineering Limited. The partner has provided no services to any entity of the Southern Cross Electrical Engineering Limited Group during this time, was operating from a different division to and was not part of the audit engagement team. KPMG Trevor Hart Partner Perth 29 August 2017 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 at 21 August 2017.
Distribution of equity security holders
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Number of equity security holders
Ordinary
shares
Options/
Performance
rights
163
404
249
445
62
1,323
-
-
-
-
4
4
The number of shareholders holding less than a marketable parcel of ordinary shares is 131.
Twenty largest shareholders
Name
Number of
ordinary shares
held
Percentage
of capital held
FRANK TOMASI NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD
ZERO NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
GHISA PTY LTD
CHEMCO SUPERANNUATION FUND PTY LTD
CARMAN SUPER PTY LTD
SANDHURST TRUSTEES LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
OFFSHORE ELECTRICAL SERVICES PTY LTD
CITICORP NOMINEES PTY LIMITED
MR ANDREW MCKENZIE + MRS CATHERINE MCKENZIE
BNP PARIBAS NOMS PTY LTD
MR RAYMOND JOHN WISE
BOND STREET CUSTODIANS LIMITED
BUCHHORN PTY LTD
ICON HOLDINGS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
61,664,027
24,731,159
11,166,833
7,929,663
4,850,000
3,048,463
2,063,104
2,030,000
2,000,000
1,810,902
1,686,143
1,500,000
1,321,198
1,252,634
1,079,741
1,076,846
800,000
800,000
800,000
759,710
132,370,423
Substantial shareholders
The number of shares held by substantial shareholders and their associates are set out below:
Shareholder
Gianfranco Tomasi
Commonwealth Bank of Australia
TIGA Trading Pty Ltd
Number
Number
65,227,131
22,838,922
10,166,833
40.9%
14.3%
6.4%
38.68
15.51
7.00
4.97
3.04
1.91
1.29
1.27
1.25
1.14
1.06
0.94
0.83
0.79
0.68
0.68
0.50
0.50
0.50
0.48
83.03
77
2017 Annual Report CORPORATE DIRECTORY
Directors
Derek Parkin
Chairman
Independent Non-Executive Director
Graeme Dunn
CEO and Managing Director
Gianfranco Tomasi
Non-Executive Director
Simon Buchhorn
Independent Non-Executive Director
Karl Paganin
Independent Non-Executive Director
David Hammond
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
78
2017 Annual Report 79
2017 Annual Report Registered Office:
41 Macedonia Street, Naval Base
Western Australia 6165
T: +61 (0)8 9236 8300
F: +61 (0)8 9410 2504
scee.com.au
WA EC 001681
QLD 12707
NSW 17066C
NT C0977
SA PGE 262507
VIC 25877
TAS 930255
ABN: 92 009 307 046
Established 1978