ANNUAL REPORT 2024 2024 Highlights 03 Chairman’s Report 04 About SCEE Group 05 Our Businesses 06 Acquisition of MDE Group 08 Data Centres 09 Electrification and Decarbonisation 10 Infrastructure 11 Sustainability 12 Managing Director’s Review 14 Directors’ Report 20 Remuneration Report 27 Financial Statements 35 ASX Additional Information 92 Corporate Directory 94 CONTENTS PAGE LOST TIME INJURY (“LTI”) FREE across the group for the second year running WORKFORCE OVER 1,700 with growth of 300 in FY24 WESTERN SYDNEY INTERNATIONAL AIRPORT at peak levels of activity COLLIE BATTERY ENERGY STORAGE SYSTEM AWARD largest initial ever and now over $200m VERY STRONG NEAR-TERM PIPELINE of Data Centre and infrastructure projects in NSW MDE GROUP ACQUISITION completed 31 May 2024 Operational Highlights REVENUE $551.9m FY24 $551.9m FY23 FY22 $464.7m $553.3m RECORD EBITDA $40.1m FY24 $40.1m FY23 FY22 $38.2m $35.3m RECORD NPAT $21.9m FY24 $21.9m FY23 FY22 $20.1m $15.3m FULLY FRANKED DIVIDENDS DECLARED 6.0cps FY24 6.0cps FY23 FY22 5.0cps 5.0cps RECORD ORDER BOOK $720m FY24 $720m FY23 FY22 $610m $565m RECORD CASH $84.1m FY24 $84.1m FY23 FY22 $77.7m $53.1m Record Financial Results 2024 HIGHLIGHTS REMUNERATION REPORT CHAIRMAN’S REPORT ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS HIGHLIGHTS 01 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 2 3 I am pleased to report a second consecutive year of record profits, cash and order book. EBITDA of $40.1m was up 5% on the prior year’s record and exceeded our earnings guidance. EBIT of $32.7m and NPAT of $21.9m were also both records, up 10.4% and 9.1% respectively on the prior record year. We ended the year with a record cash balance of $84.1m and a record order book of $720m. Our ability to identify and integrate highly accretive acquisitions has been a key pillar of our success in recent years. In May we completed the acquisition of Sydney based communications specialist MDE Group and the Board remains committed to our strategy of pursuing further acquisitions offering increased geographic diversification and new capabilities. As a diversified national electrical contractor we expect the three structural tailwinds of Data Centres, electrification and decarbonisation and infrastructure to fuel our continued growth over the coming years. The demand for Data Centres is increasing exponentially with the proliferation of artificial intelligence and data storage needs. Electrical work forms the largest component of Data Centre construction cost and we currently have over $500m of Data Centre works in our tender and opportunity pipeline. The electrification and decarbonisation of the economy presents multiple opportunities across all of our businesses and markets. The energy transition requires huge investment in renewable energy. The recent award of the Collie Battery Energy Storage System project in Western Australia was the largest initial award in our history and we have now secured over $200m of work at that project. Infrastructure spend is expected to remain at high levels with health and transport being particularly strong areas for the group. Our work at the Western Sydney International Airport is now at peak activity levels and we continue to tender for further work on the project and see a long-term pipeline across the broader Aerotropolis. Against this backdrop we are forecasting an increase in EBITDA in FY25 of over 30% to at least $53m with expectations of further growth in the following years. Delivering strong returns to our shareholders is a key priority of the Board. It was very pleasing to see the share price increase by 158% in the year from $0.67 at 30 June 2023 to $1.73 at 30 June 2024. The Board has resolved to increase our fully franked final dividend by 25% to 5.0 cents per share, to be paid on 9 October 2024, having already paid a fully franked interim dividend of 1.0 cents per share in April. Derek Parkin, who I replaced as Chair on 31 October 2023, has announced that he will retire from the Board on 1 September 2024 after over 13 years as a director. The Board would like to acknowledge the vast contribution that Derek has made to SCEE Group during his tenure and we wish him well in his retirement. As previously announced to the ASX, Michael McNulty will join the Board as an independent Non‑Executive Director and Chairman of the Audit and Risk Committee on 1 September 2024. I would like to close by thanking our managers and employees across our SCEE Group businesses for their contribution to another record-breaking year. Karl Paganin Chairman CHAIRMAN'S REPORT ABOUT SCEE GROUP Southern Cross Electrical Engineering Limited (“SCEE Group”) was founded in 1978 and listed in 2007 (ASX:SXE). Over time we have grown to be a leading and trusted national provider of specialised electrical, instrumentation, communications, security and maintenance services and products and are diversified across three broad sectors of resources, commercial and infrastructure. Our diversification is supported by a successful track record of acquiring value accretive businesses: Datatel in 2016, Heyday in 2017, the Trivantage Group (S.J. Electric, SEME Solutions, and Trivantage Manufacturing) in 2020, and the MDE Group in 2024. We are positioned to service the electrification and decarbonisation initiatives shaping our markets. Diversified across markets and operations Financial strength and dividend yield Long-standing blue-chip client base Track record of successful acquisitions Recurring revenue and earnings growth Electrification and decarbonisation, Data Centres, infrastructure REMUNERATION REPORT MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP 03 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 4 5 NSW and ACT-based electrical contractor servicing the commercial and fit-out sectors, and the retail, education, health, hotel, transport, datacentre, and residential sectors. Historically focused on resources and industrial work, but now also diversified into transport, infrastructure, defence, utilities and renewables. Telecoms and communication specialists providing services to the education, health, government, commercial, resources and transport sectors. National provider of electrical and maintenance services to supermarkets, retail and commercial sectors. OUR BUSINESSES OUR BUSINESSES Visit www.sceeelectrical.com.au to find out more Visit www.datatel.com.au to find out more Visit www.heyday5.com.au to find out more Visit www.sjelectric.com.au to find out more Communications, data and electrical services provider to commercial buildings, data centres, healthcare and transport infrastructure sectors. Provider of electronic security services to the resources, law enforcement, custodial, industrial, and health sectors. Leading manufacturer of premium quality switchboards and power distribution systems to a range of end users both internally within the Group and to external customers. Visit www.seme.com.au to find out more Visit www.trivantage.com.au to find out more Visit www.mde.net.au to find out more REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS ABOUT SCEE GROUP 03 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 6 7 Acquired on 31 May 2024 for an enterprise value of up to $10.55m and forecasting an EBIT contribution of at least $5m for FY25 and beyond Consistent with our strategy to broaden our geographic diversity through expanding our core competencies and adding adjacent and complementary capabilities Strong operational synergies with Heyday and currently working together at Western Sydney International Airport Growing Data Centre project pipeline contains significant communications elements Positions Heyday to offer a combined electrical, data and communications service and maintenance proposition on completion of its construction projects Potential for further growth into other states and to support other SCEE Group businesses Vendors are incentivised to grow business on long-term employment arrangements To find out more visit www.mde.net.au ACQUISITION OF MDE GROUP Founded in 2006, MDE Group are a Sydney-based provider of communications, data, and electrical services across a range of sectors including commercial buildings, Data Centres, healthcare and transport infrastructure NEXTDC Artarmon Data Centre Client: Multiplex Delivered by: Heyday Scope of Work: The NEXTDC Artarmon Data Centre in NSW is a Tier IV facility with 20,000m2 of technical space, 80MW of IT capacity, and 10,800 rack spaces. Heyday began work in February 2021 with the design and construction of Phase 1 electrical and communications infrastructure and has since secured four additional contracts, including one in April 2024 for Hyperscale Data Hall 8. Over $90m of work has been secured to date across the five contracts with further opportunities for expansion expected as the project continues. DATA CENTRES SCEE Group businesses have worked on Data Centres for over twenty years. Having already been a strong area for the group in recent years, the sector is now showing exponential growth with cloud computing and AI developments. Data Centres are electrically dense, with electrical work comprising the largest component of construction cost, and typically require triple power supplies to satisfy uptime requirements. SCEE businesses have multiple touch points in the sector: • Heyday hold a very strong position in general construction in NSW • Trivantage Manufacturing builds and supplies sophisticated electrical equipment • Across SCEE Group have announced seventeen Data Centre awards totaling circa $190m over last five years • Over $150m of our circa $700m order book is Data Centre related • Currently tendering on or positioning for over $500m of work to be awarded in next two years for extensions at existing or new builds of multiple Data Centres REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS ABOUT SCEE GROUP 03 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 8 9 Collie Battery Energy Storage System Client: Synergy Delivered by: SCEE Electrical Scope of Work: In May 2024 SCEE Electrical was awarded the Balance of Plant (“BOP”) contract for Synergy’s Collie Battery Energy Storage System, a key project in Western Australia’s 2030 decarbonisation strategy, supporting the transition from coal to renewable energy. At a value of circa $160m it was the group’s largest ever initial award. The scope includes civil and structural works, advanced firewater systems, extensive cabling, battery installations, and the construction of key infrastructure such as kiosk substations and switch rooms. SCEE Electrical has subsequently secured a contract variation for the 330kV Switchyard Package, which expands the BOP contract to include civil works, overhead line gantries, transformer installations, and integration with Western Power’s SCADA system and takes the total value of works awarded to date to circa $210m. ELECTRIFICATION & DECARBONISATION Australia is undergoing an energy transition to achieve net zero emissions by 2050. Targets are enshrined in law and require delivery of climate change and energy transformation priorities, including: • Transforming Australia’s electricity supply to run mainly on renewables which requires huge investment in solar and wind developments supported by battery storage and grid reconfiguration • Supporting the development of new, clean energy industries • Supporting the decarbonisation of existing industries, transport network and domestic environment SCEE Group’s exposures to the electrification and decarbonisation of society is becoming all‑encompassing in our work and includes: • Decarbonising our clients’ operations • Meeting the demand for commodities and products required for decarbonisation • Movement to sustainable buildings • Offering services across a diverse and growing range of electrification and decarbonisation initiatives Western Sydney International (Nancy Bird Walton) Airport Client: Multiplex Delivered by: Heyday Scope of Work: Western Sydney International (Nancy Bird Walton) Airport will provide a full-service international and domestic airport handling 10 million passengers by 2031. In 2021 Heyday was awarded a contract valued at over $100m for designing and constructing electrical and communications systems for the airport, covering the terminal building, plaza, transport hub connections, car parks, and ancillary structures. The scope includes high voltage infrastructure, lighting, power systems, and communications networks. Additionally, Heyday are managing electrical and communications services for the airport’s Fuel Farm, including site-wide infrastructure and systems for support buildings like administration, control rooms, and fuel pump shelters. In August 2023 Heyday was awarded a further works package for the Australian Border Force’s integrated fit out within the main terminal building to provide electrical and communications services to enable Border Force’s operations at the airport to commence once the airport is functioning, including baggage screening, passenger screening, interview rooms, passport processing areas and office space for operational staff. INFRASTRUCTURE Infrastructure is very wide sector for SCEE Group and spans federal, state, and private investment in transport (road, rail, airports, ports), defence, Data Centres, education, agriculture, water, energy, renewables, utilities, health and aged care. In addition to Data Centres and renewables, particularly strong Infrastructure segments for the group include: • Health care – we have ongoing works at Shoalhaven Hospital with multiple major hospital development opportunities presenting in the near and medium-term in NSW and ACT • Western Sydney International Airport and Aerotropolis – The airport was the group’s largest revenue contributor in FY24. Multiple packages have already been received by Heyday who are also tendering on cargo handling, command and maintenance facilities. We expect a long-term pipeline of works with further airport expansion and in the surrounding Aerotropolis region • Sydney Metro - we are currently working at Pitt Street Metro and are positioning for various opportunities around the airport line and Sydney Metro West station developments REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS ABOUT SCEE GROUP 03 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 10 11 SUSTAINABILITY SCEE Group is dedicated to achieving sustainable and profitable growth while upholding our environmental, social, and community responsibilities. Our approach to sustainability encompasses: We seek to promote best environmental practices within our areas of operation through our policies and procedures. Highlights include: We consider the wellbeing of our people to be of paramount importance and are committed to providing a workplace that achieves zero harm. Highlights include: We are committed to providing a safe workplace for our people and investing in their growth. We engage with the communities in which we operate seeking to create a positive legacy through maximising local employment opportunities. Highlights include: The SCEE Group has a Board-endorsed Corporate Governance Framework aimed at ensuring the business is managed effectively and ethically and that risks are appropriately identified, monitored and addressed. Highlights include: SUSTAINABILITY • Environmental Management Systems accredited to ISO 14001 • We continue to voluntarily monitor our GHG emissions and maintain a low emissions base. Our FY24 operational emissions (Scope 1 and 2) totalled 3,697 tCO2-e • Contributing to the decarbonisation of Australia through our delivery of renewables, recycling and energy efficiency projects • Dedicated Health and Wellbeing Advisor and access to an Employee Assistance Provider • Regular training and development opportunities • Diversity Policy encouraging and supporting diversity in our workforce • Indigenous Employment Policy facilitating sustainable employment opportunities • Human Rights Policy and Modern Slavery Statement • Health and Safety Management Systems are accredited to ISO 45001 • 5 Star Commitment safety approach addressing the highest critical risk areas • Lost Time Injury (LTI) free across the Group’s operations for the second year running • Experienced and appropriately structured Board and Committees • Code of Conduct governing our dealings with stakeholders • Anti-Bribery and Corruption and Whistleblower Policies E N V I R O N M E N T H E A LT H A N D S A F E T Y P E O P L E A N D C O M M U N I T Y CORPOR ATE GOVERNANCE REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS ABOUT SCEE GROUP 03 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 12 13 MANAGING DIRECTOR’S REVIEW CONT’D Results for the year ended 30 June 2024 Revenue for the year of $551.9m was up 18.8% on prior year revenue of $464.7m and exceeded guidance of targeting full year revenue of over $500m. Revenue contribution by sector was as follows: • Infrastructure – revenue for the year was $233.7m, a record for the sector and up from $141.0m in the prior year. Infrastructure became the largest section in the year and comprised 42.3% of total revenue. Work on the Multiplex Western Sydney International Airport project ramped up during the period and is now at peak levels of activity. Other ongoing significant contributors include the Next DC SYD03 and other Data Centres, the Pitt Street Sydney Metro station project in NSW and the Ergon Energy Queensland Service Agreement. The supply of the Westgate Tunnel switchboards in Victoria was completed in the year. • Commercial – revenue for the year was $171.1m, compared to $154.9m in the prior year. Trivantage’s national supermarket services business continues to deliver strong results. Heyday has various ongoing projects in NSW and the ACT including the Pitt Street Sydney Metro station commercial and residential towers. • Resources – revenue for the period was $147.0m, down from $168.8m in the prior year with the large-scale construction projects at Rio Tinto Gudai-Darri and the MARBL JV Kemerton lithium plant having successfully completed in FY23. Key projects in the period included the security upgrade works at the Dysart, Moranbah and Stayover Dysart accommodation villages in the Bowen Basin in Queensland, the CPB Mount Keith debottlenecking project and various ongoing works for BHP, Rio Tinto and Sino Iron. Recurring revenues from services, maintenance and framework agreements contributed over one- third of activity in the period. Gross profit for the period of $82.7m was up on the prior year gross profit of $76.3m. Gross margin percentages were 15.0% compared to the prior year gross margins of 16.4%. Overheads of $43.3m were up 8.8% on the prior year overhead of $39.8m. Overheads as a percentage of revenue were 7.8% compared with 8.6% in the prior year. Record EBITDA for the year of $40.1m was up 5% on the prior year’s record $38.2m and exceeded guidance to match FY23. Record EBIT of $32.7m was up 10.4% on the prior year’s record $26.7m Net profit after tax of $21.9m was also a record result and was up 9.1% on the prior year. Included in the NPAT for the year was $2.2m of amortisation of intangibles relating to the FY21 acquisition of Trivantage (FY23 $2.1m) and a $1.1m post tax expense from the revaluation of the liability for the component of the group’s long term incentive scheme that may be cash-settled in order to reflect the impact of the 158% growth in share price in the year on the fair value of the performance rights. The Board has declared a fully franked final dividend of 5.0 cents per share to be paid on 9 October 2024. Total dividends declared for the year, including the interim dividend of 1.0 cents per share paid in April, were 6.0 cents per share, up from 5.0 cents per share in the prior year. The cash balance at 30 June 2024 increased to a record $84.1m from $77.7m at the start of the year. The record cash balance was achieved after incurring significant cash outflows in the year for the final Trivantage acquisition earn-out which was achieved in full ($7.3m), the initial acquisition consideration (net of cash acquired) for the acquisition of MDE Group ($4.9m), a record fully franked dividend pay-out ($12.7m) and income tax instalments ($17.3m) of which a significant portion related to the successful close out of the major FY23 resources projects. A $15.1m advance payment related to the Collie Battery Energy Storage System project was received prior to year end. The group remains debt free. The group’s total available project bonding capacity was increased during the year from $100m to $150m in order to service the record order book while providing further headroom for the significant opportunities presenting in the markets in which we operate. At 30 June 2024 there was $94.1m of bank guarantees and surety bonds on issue. Health, Safety and Environment Delivering our work safely is our highest priority and we are extremely proud of our strong safety culture. We were Lost Time Injury (“LTI”) free across the group’s operations in FY24 for the second year running. This represented over 2.3 million manhours LTI-free in the year delivered by our workforce of over 1,700 employees which has grown by 300 in the year. Our SCEE Electrical business is now over 20 years LTI free in Australia. We continue to voluntarily monitor our greenhouse I am pleased to be reporting another record‑breaking year for SCEE Group where we delivered our largest ever profits for the second consecutive year and ended with a record cash balance and a record order book MANAGING DIRECTOR’S REVIEW REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP DIRECTORS’ REPORT FINANCIAL STATEMENTS MD REVIEW 04 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 14 15 MANAGING DIRECTOR’S REVIEW CONT’D MANAGING DIRECTOR’S REVIEW CONT’D gas emissions and maintain a low emissions base. In FY24, our operational emissions (Scope 1 and 2) totalled 3,687 tCO2-e (FY23: 3,288tCO2-e), significantly below the National Greenhouse and Energy Reporting (“NGER”) scheme mandatory reporting threshold of 50,000tCO2-e. Acquisition of MDE Consistent with our strategy to broaden our geographic diversity through expanding our core competencies and adding adjacent and complementary capabilities, we completed the acquisition of east coast communications specialist MDE Group on 31 May 2024 for an enterprise value of up to $10.55m. Founded in 2006 and based in Sydney, MDE provides communications, data, and electrical services for construction and fit out projects across a range of sectors including commercial building developments, Data Centres, and healthcare and transport infrastructure. MDE have worked successfully with our Heyday business for several years on a variety of major projects, and are currently delivering the communications components of Heyday’s projects at the Western Sydney International Airport. I have been pleased to see MDE establishing a good relationship with our other group entities in order to explore cross-selling and growth opportunities, a number of which have already been identified and are being explored. We are forecasting an EBIT contribution of at least $5m from MDE in FY25 and see potential for growth beyond this in future years. We have a successful track record of acquiring value accretive businesses. The three Trivantage businesses SJ Electric, SEME Solutions and Trivantage Manufacturing each delivered record profits in FY24 building on their record prior year results. Outlook The group is anticipating FY25 EBITDA of at least $53m, an increase of 32% on FY24, with expectations of further growth in FY26 onwards. The order book at 30 June 2024 was $720m, up 18% on the prior year’s record $610m. Infrastructure makes up the largest component of the order book at 67% with commercial contributing 16% and resources 17%. In May SCEE Electrical were awarded the balance of plants work for the Collie Battery Energy Storage System (“CBESS”). At an initial contract value of circa $160m it was the largest award by value in the group’s history. We have subsequently been awarded a variation for the CBESS 330kV Switchyard Package taking the total value awarded to date to circa $210m. Other notable projects secured in the year included various awards at the Next DC SYD03 and other Data Centres, the Australian Border Force’s integrated fit out at Western Sydney International Airport, the City Tattersall’s Club redevelopment project in NSW, and various works for BHP Iron Ore. We continue to secure regular works under our key framework agreements including various supermarket roll-outs. The confidence in our growth forecasts is underpinned by this record order book and by the three structural tailwinds of the growth in Data Centre construction, the electrification and decarbonisation of the economy, and infrastructure. The Data Centre sector is showing exponential growth driven by cloud computing and AI developments. Data Centres are electrically dense, with electrical work comprising the largest component of construction cost, and typically require triple power supplies to satisfy uptime requirements. SCEE Group businesses have worked on Data Centre projects for over twenty years and have multiple touch points into the sector including Heyday’s very strong position in general construction, Trivantage Manufacturing building and supplying sophisticated electrical equipment, Datatel and MDE providing communications services and SEME offering security solutions. Over $150m of our order book is Data Centre related and we are forecasting revenues of at least $100m per annum in FY25 and beyond. We are currently tendering on or positioning for over $500m of work to be awarded in the next two years for extensions at existing or new builds of multiple Data Centres. Australia is undergoing an energy transition to achieve net zero emissions by 2050. SCEE’s exposure to the electrification and decarbonisation of society is becoming all- encompassing in our work and presents the group with huge opportunities across all the markets in which it operates. These include decarbonising our client’s operations, helping client’s meet the demand for commodities and products required for decarbonisation, the movement to sustainable buildings to comply with building codes and sustainability standards, and offering our services across a diverse and growing range of electrification and decarbonisation initiatives, examples including battery recharging solutions, LED lighting in education facilities and manufacturing solar-powered security gates. The transition of Australia’s electricity supply to run mainly on renewables requires huge investment in solar and wind developments supported by battery storage and grid reconfiguration. We have previous experience in delivering solar, wind and battery projects and the recent award of the CBESS project marks a significant step change in our exposure to the battery sector where we are positioning for further battery developments across Australia. The broader infrastructure market is a very wide sector for SCEE and spans federal, state, and private investment in transport (road, rail, airports, ports), defence, Data Centres, education, agriculture, water, energy, renewables, utilities, health and aged care. Outside of the Data Centre and renewables opportunities discussed above, there are a number of particularly strong infrastructure segments for the group. The Western Sydney International Airport and Aerotropolis was our largest revenue contributor in FY24 with multiple packages awarded to date. Tendering is currently in progress on the cargo handling, command and maintenance facilities REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP DIRECTORS’ REPORT FINANCIAL STATEMENTS MD REVIEW 04 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 16 17 MANAGING DIRECTOR’S REVIEW CONT’D MANAGING DIRECTOR’S REVIEW CONT’D and we are expecting a long-term pipeline of works with further airport expansion and in the surrounding Aerotropolis region. On the Sydney Metro programme we have ongoing work at the Pitt Street Metro station and tower projects and are positioning for other opportunities around the airport line and Sydney Metro West station developments. In health care we are delivering the Shoalhaven Hospital, with multiple major hospital developments presenting in NSW and ACT. Activity in the commercial sector is expected to continue at similar levels in FY25 with work ongoing on a number of construction and fit- out projects across NSW and ACT and for the major supermarkets. Resource sector volumes will remain at lower levels in the near term in the absence of large construction opportunities The ability to deliver our growth forecasts could be adversely affected by delays to current and future projects or by project delivery issues, however we do not anticipate any impact at the current time and note that opportunities exist outside the current forecasts that could mitigate against any shortfalls or even exceed these forecasts. Macro factors including economic and geopolitical uncertainty have the potential to destabilise or change the markets in which we operate. The group continues to monitor and manage the broader economic environment. There have been no material impacts on our operations from inflationary cost pressures or labour market issues to date. Strategy SCEE Group primarily sees itself as an electrical contractor diversified across the resources, commercial and infrastructure markets. Our growth strategy continues to be to deepen our presence in those sectors and broaden our geographic diversity through expanding our core competencies and adding adjacent and complementary capabilities, either organically or by acquisition. We have increasing exposure to service and maintenance style work with recurring revenues now over one-third of our activity. We are actively exploring a range of acquisition targets offering further geographic diversification and new capabilities. The electrification and decarbonisation of the Australian and global economies present SCEE with opportunities across all its operations. Conclusion I am delighted to have been able to report on a year in which we achieved record profits for a second consecutive year. We have also delivered a record year end cash balance and a record order book and secured the largest initial contract award in our history at the Collie Battery Energy Storage System project. We anticipate further growth in FY25 and beyond driven by our high levels of exposure across the group to an extremely strong and growing pipeline of Data Centre, electrification and decarbonisation, and broader infrastructure opportunities. I would like to take this opportunity to thank our employees across the SCEE Group for their contribution to our record results and I thank our clients and shareholders for their continued support. REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP DIRECTORS’ REPORT FINANCIAL STATEMENTS MD REVIEW 04 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 18 19 DIRECTORS’ REPORT Karl has over 25 years senior experience in Investment Banking. He specialises in transaction structuring, equity capital markets, mergers and acquisitions and strategic management advice to ASX listed companies. Karl practised with major national law firms and was then appointed as Senior Legal Counsel for the family company of the Holmes a Court family, Heytesbury Holdings Pty Ltd, where he spent 11 years in roles varying from Senior Legal Counsel to Director of Major Projects. Subsequently Karl spent 15 years as a senior investment banker in Perth. Karl holds degrees in Law (B.Juris, LLB) and Arts (BA) from the University of Western Australia. Karl was appointed Chairman of the Board on 31 October 2023 and is the Chairman of the Nomination and Remuneration Committee. Karl is currently Non-Executive Chairman of ASX listed Veris Limited and was a founding director of not-for-profit charity Spectrum Space (formerly Autism West). Graeme has over 30 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. Derek is a Fellow and Life Member of Chartered Accountants Australia and New Zealand (“CAANZ”) and a Fellow of the Australian Institute of Company Directors. Derek’s accounting experience has spanned over 50 years and four continents. He was most recently Professor of Accounting at the University of Notre Dame Australia, having previously been an assurance partner with Arthur Andersen and Ernst & Young. Derek is a past national Board member of CAANZ’s predecessor body in Australia, 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 and in 2015 was awarded the Medal of the Order of Australia for services to accountancy. Derek is the Chairman of the Audit and Risk Management Committee, a member of the Nomination and Remuneration Committee and served as Chairman of the Board until 31 October 2023. Derek will retire from the Board on 1 September 2024. Simon has a comprehensive understanding of SCEE Group’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 Group’s LNG focused joint venture KSJV. Simon brings to the Board significant experience in electrical contracting 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. Paul has over 40 years of experience in the electrical industry. Paul was a significant shareholder and Chairman of Trivantage Holdings Pty Ltd prior to the acquisition by SCEE Group in December 2020. He was the founder of SCADA Group Pty Ltd which was a global company servicing the energy, mining, utility and defence sectors with automation and control products and services solutions. Paul has also been the Chairman of a number of private companies and is an advisor for private equity funds. Paul is a member of the Audit and Risk Management Committee and of the Nomination and Remuneration Committee. 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. Your Directors submit their report for Southern Cross Electrical Engineering Limited (“SCEE Group” or “the Company”) for the year ended 30 June 2024. Karl Paganin INDEPENDENT CHAIRMAN AND NON-EXECUTIVE DIRECTOR Graeme Dunn MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER Simon Buchhorn INDEPENDENT NON-EXECUTIVE DIRECTOR Derek Parkin OAM INDEPENDENT NON-EXECUTIVE DIRECTOR Paul Chisholm INDEPENDENT NON-EXECUTIVE DIRECTOR DIRECTORS’ REPORT CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW FINANCIAL STATEMENTS DIRECTORS’ REPORT 05 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 20 21 Prior to joining SCEE Group 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, commenced his finance career with Deloitte in London. Prior to his time with Deloitte, Chris qualified and practiced as a solicitor in London. Colin has over 20 years of experience in public company finance and governance and is a Chartered Accountant and member of the Governance Institute of Australia. Prior to joining SCEE Group in 2012 Colin was the Chief Financial Officer and Company Secretary of an ASX listed oil & gas exploration company and previously worked for EY in both Australia and the UK. 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 Officers were in office for this entire period unless otherwise stated. Chris Douglass CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY Colin Harper COMPANY SECRETARY DIRECTORS’ REPORT CONT’D 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 Ordinary shares Rights over ordinary shares Options over ordinary shares Karl Paganin 1,831,549 - - Graeme Dunn1 2,424,300 2,526,143 - Derek Parkin 138,588 - - Simon Buchhorn 807,660 - - Paul Chisholm 2,758,460 - - 1. Included in the Performance Rights held by Graeme Dunn are 605,821 2022 Performance Rights which have been performance tested on finalising the 2024 results and it has been determined that 100% of these 2022 Performance Rights have vested. 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: Board Meetings Audit and Risk Management Committee Meetings Nomination and Remuneration Committee Meetings Director Held Attended Held Attended Held Attended Karl Paganin 13 13 - - 2 2 Graeme Dunn 13 13 - - - - Derek Parkin 13 13 4 4 2 2 Simon Buchhorn 13 13 4 4 - - Paul Chisholm 13 12 4 4 2 2 The number of meetings held represents the time the director held office and 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, communications, security and maintenance services to a diverse range of sectors across Australia. Significant Changes in the State of Affairs There have been no significant changes in the state of affairs of the Company or consolidated group during this financial year. Operating and Financial Review A review of operations of the consolidated group during the financial year, the results of those operations and the likely developments in the operations are set out in the Managing Director’s Review on page 14. Operating results for the year were: 2024 2023 $’000 $’000 Contract revenue 551,870 464,708 Profit after income tax 21,915 20,091 DIRECTORS’ REPORT CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW FINANCIAL STATEMENTS DIRECTORS’ REPORT 05 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 22 23 DIRECTORS’ REPORT CONT’D Dividends Cents per share Total amount $’000 Declared and paid during the period (fully franked at 30%) Final franked dividend for 2023 4.0 10,507 Interim franked dividend for 2024 1.0 2,631 Declared after balance date and not recognised as a liability (fully franked at 30%) Final franked dividend for 2024 5.0 13,161 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 2024 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 1,173,518 shares were issued from the exercise of performance rights previously granted as remuneration. Further details are contained in note 26 to the financial statements. 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 $310,930 (2023: $349,515). Proceedings on Behalf of the 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. DIRECTORS’ REPORT CONT’D Auditor’s Independence Declaration The lead auditor’s independence declaration is set out on page 92 and forms part of the Directors’ report for the financial year ended 30 June 2024. Remuneration Report The Remuneration Report is set out on pages 27 to 34 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. Karl Paganin Chairman 20 August 2024 REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW FINANCIAL STATEMENTS DIRECTORS’ REPORT 05 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 24 25 REMUNERATION REPORT 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 some or all of 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. For the 2024 financial year, the Committee approved an increase to KMP remuneration commensurate with the growth in the size and scope of the Group’s operations and their consequential responsibilities in recent years. Details of remuneration received in the 2024 financial year can be found in Table 1 of this report. CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS REMUNERATION REPORT 06 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 26 27 REMUNERATION REPORT CONT’D Executive Remuneration (continued) Variable Remuneration – Short Term Incentive (“STI”) The objective of the Group STI program is to link the achievement of the Group’s short term 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. Graeme Dunn and Chris Douglass are the only KMPs who participate in the Group STI program and in the 2024 financial year STI scheme could earn up to a maximum of 75% of their fixed remuneration, paid in cash. 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 2024, the financial KPIs accounted for 70% of the executive team’s STI and were achievable on outperforming specific targets for both EBITDA (50%) and forward order book (20%). The non-financial KPIs accounted for 30% of the executive team’s STI and comprised the achievement of strategic goals aligned with the group’s growth and development 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 to the Board for their approval. For the 2024 financial year STI it has been determined that 100% of the available bonus will vest. 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, which was last approved by shareholders at the 2021 Annual General Meeting. Graeme Dunn and Chris Douglass are the only KMPs who participate in the LTI plan and in the 2024 financial year LTI scheme were issued with performance rights equal to 75% of their fixed remuneration converted at the 5 day volume weighted average price of the Company’s ordinary shares prior to the start of the three year performance period. 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. For each component of the LTI against a KPI no award is made where performance falls below the minimum threshold for that KPI. The Nomination and Remuneration Committee assesses the performance against KPIs and recommends the LTI vesting to the Board for their approval. For the 2022 financial year performance rights, which have been performance tested at 30 June 2024, it has been determined that 100% of the available performance rights will vest. Under the terms of the LTI Plan up to 50% of vested performance rights may be exercised for cash at the participant’s discretion with the balance exercised for ordinary shares in the Company. REMUNERATION REPORT CONT’D 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. There were no changes to Non-Executive Director fees during the year as these were last increased effective 1 January 2023. The annual fee paid to the Chairman of the Board was $144,796 plus superannuation at the statutory rate. The annual fee paid to other Non-Executive Directors was $90,498 per annum plus superannuation at the statutory rate. No additional fees are paid to Directors who sit on Board Committees. The Non-Executive Directors do not receive retirement benefits, nor do they participate in any incentive programs. The remuneration paid to Non-Executive Directors in the year is detailed in Table 1 of this report. Consequences of performance on shareholder wealth In considering the impact of the Group’s performance on shareholder wealth and the related rewards earned by executives, the Nomination and Remuneration Committee had regard to the following measures over the years below: 2024 2023 2022 2021 2020 $’000 $’000 $’000 $’000 $’000 Profit attributable to owners of the company 21,915 20,091 15,269 13,761 10,870 Dividends declared and paid during the year 13,138 13,055 12,982 7,428 7,042 Change in share price 158% 14% 9% 23% (19%) Total shareholder return 166% 22% 19% 30% (13%) Basic earnings per share (cents) 8.34 7.69 6.10 5.55 4.46 Return on capital employed 16% 15% 13% 11% 10% CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS REMUNERATION REPORT 06 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 28 29 REMUNERATION REPORT CONT’D REMUNERATION REPORT CONT’D Table 1 Remuneration of Key Management Personnel Details of the nature and amount of each major element of remuneration of each director of the Company and each of the named Company executives who are key management personnel are: Short-term Post- employment Share-based payments2 Total remuneration $ Performance related remuneration % Salary & fees $ STI cash bonus $ Other short-term benefits $ Total $ Superannuation benefits $ Equity-settled performance rights3 $ Cash-settled performance rights4 $ Non-Executive Directors Non-Executive Directors Karl Paganin – Chairman1 2024 126,697 - - 126,697 Karl Paganin – Chairman1 2024 13,937 - - 140,634 - 2023 85,047 - - 85,047 2023 8,930 - - 93,977 - Derek Parkin1 2024 109,711 - - 109,711 Derek Parkin1 2024 12,068 - - 121,779 2023 126,729 - - 126,729 2023 13,306 - - 140,035 - Simon Buchhorn 2024 90,497 - - 90,497 Simon Buchhorn 2024 9,955 - - 100,452 2023 85,047 - - 85,047 2023 8,930 - - 93,977 - Paul Chisholm 2024 90,497 - - 90,497 Paul Chisholm 2024 9,955 - - 100,452 2023 85,047 - - 85,047 2023 8,930 - - 93,977 - Executive Directors Executive Directors Graeme Dunn 2024 781,000 606,375 22,676 1,410,051 Graeme Dunn 2024 27,500 220,2405 1,116,8406 2,774,631 70% 2023 742,500 498,031 - 1,240,531 2023 27,500 182,469 182,469 1,632,969 53% Executives Executives Chris Douglass – CFO 2024 455,500 362,250 6,337 824,087 Chris Douglass – CFO 2024 27,500 121,7885 665,4446 1,638,819 70% 2023 432,500 297,457 - 729,957 2023 27,500 107,610 107,610 972,677 53% Total 2024 1,653,902 968,625 29,013 2,651,540 Total 2024 100,915 342,028 1,782,284 4,876,767 63% Total 2023 1,556,870 795,488 - 2,352,358 Total 2023 95,096 290,079 290,079 3,027,612 45% 1. Karl Paganin replaced Derek Parkin as Chairman on 31 October 2023. 2. Under the terms of the Group’s LTI Plan up to 50% of vested performance rights may be exercised for cash at the participant’s discretion with the balance equity-settled for ordinary shares in the Company. The value disclosed in Table 1 is the fair value of the performance rights recognised in the financial year. The fair value of the performance rights with market related vesting conditions are valued using a Monte Carlo simulation model. The performance rights with non-market related vesting conditions are valued using the Binomial Tree option model. 3. For equity-settled performance rights the fair values derived at grant date are allocated to each reporting period evenly over the service period. The amount recognised as an expense in a period 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. 4. The 50% of performance rights that are available for exercise as cash are deemed to be cash-settled for accounting purposes regardless of whether they are ultimately settled for cash or equity. Cash-settled share-based payment arrangements are fair valued at each reporting date with the cumulative revaluation recognised as an expense in the period. The large increase in expense in 2024 is attributable to the significant share price appreciation during the year from $0.67 at 30 June 2023 to $1.73 at 30 June 2024 which was a 158% increase and is a key input in the determination of the fair value of the rights at 30 June 2024. 5. The equity-settled performance rights share-based payment expenses recognised in the year include accounting expenses of $168,745 (2023: $130,169) for Graeme Dunn and $91,233 (2023: $77,576) for Chris Douglass relating to performance rights that have not yet vested and may never vest depending on the outcomes for the 2023 and 2024 Financial Year Performance Rights which will be performance tested at 30 June 2025 and 30 June 2026 respectively. 6. The cash-settled performance rights share-based payment expenses recognised in the year include accounting expenses and fair value adjustments of $704,125 (2023: $130,169) for Graeme Dunn and $420,550 (2023: $77,576) for Chris Douglass relating to performance rights that have not yet vested and may never vest depending on the outcomes for the 2023 and 2024 Financial Year Performance Rights which will be performance tested at 30 June 2025 and 30 June 2026 respectively. The significant fair value uplift in 2024 was as a result of the 158% share price increase in the year from $0.67 at 30 June 2023 to $1.73 at 30 June 2024 Table 1 Remuneration of Key Management Personnel (continued) CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS REMUNERATION REPORT 06 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 30 31 REMUNERATION REPORT CONT’D 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 6 months Chris Douglass 6 months The Group retains the right to terminate a contract immediately by making a payment in lieu of the notice period. An executive may be terminated immediately for a breach of their employment conditions. Upon termination the executive is entitled to receive their accrued annual leave and long service leave together with any superannuation benefits. There are no other termination payment entitlements. Performance rights over equity instruments The movement during the reporting period in the number performance rights over ordinary shares in Southern Cross Electrical Engineering Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows: Performance Rights over equity instruments Executive Held at 30 June 2023 Granted as remuneration Vested and exercised1 Forfeited Held at 30 June 2024 Vested and exercisable at 30 June 2024 Graeme Dunn 2,414,783 915,974 (804,614) - 2,526,143 - Chris Douglass 1,421,860 547,205 (462,383) - 1,506,682 - 3,836,643 1,463,179 (1,266,997) - 4,032,825 - 1. Graeme Dunn elected to exercise 50% of his vested 2021 performance rights for cash and 50% for ordinary shares in accordance with the LTI Plan Rules. Chris Douglass elected to exercise 100% of his vested 2021 performance rights for ordinary shares. Performance rights granted as remuneration in 2024 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 Fair value per performance right at grant date ($) Exercise price per performance right ($) Performance testing date Expiry Date Graeme Dunn1 2024 Rights 457,987 1/11/23 0.48 0.00 30/6/26 1/11/27 Graeme Dunn2 2024 Rights 457,987 1/11/23 0.70 0.00 30/6/26 1/11/27 Chris Douglass1 2024 Rights 273,603 25/8/23 0.35 0.00 30/6/26 25/8/27 Chris Douglass2 2024 Rights 273,602 25/8/23 0.62 0.00 30/6/26 25/8/27 1,463,179 1. Performance rights granted with Absolute TSR as the vesting condition 2. Performance rights granted with EPS growth as the vesting condition REMUNERATION REPORT CONT’D 2024 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 2023 to 30 June 2026 (“Performance Period”); • No performance rights will vest until 30 June 2026; • 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 Received))/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 12% 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 0% vesting 8% per annum compounded 50% vesting Between 8% and 12% per annum compounded Pro-rata vesting between 50% and 100% At or above 12% per annum compounded 100% vesting EPS performance will be measured in the 2026 financial year. For the purposes of performance testing the Performance Rights, EPS in the 2025 financial year will be the Basic EPS for the year, as prescribed by the accounting standards and set out in the Company’s Financial Reports, adjusted to remove the following non-cash items from the calculation of profit or loss attributable to ordinary shareholders in the year, in order to reflect the company’s underlying profitability: (a) amortisation of acquired intangibles; (b) unwinding of interest on deferred acquisition consideration payments; (c) adjustments to the assessment of deferred consideration payable; and (d) acquisition costs. EPS performance in the 2026 financial year, as described above, will be assessed against targets for threshold performance of 8% compound annual growth from EPS in the 2023 financial year and for stretch performance of 12% compound annual growth from EPS in the 2023 financial year. The vesting schedule is as follows for EPS performance in the 2026 financial year: Less than 8% compound annual growth from EPS in FY23 0% vesting 8% compound annual growth from EPS in FY23 50% vesting Between 8% and 12% compound annual growth from EPS in FY23 Pro-rata vesting between 50% and 100% At or above 12% compound annual growth from EPS in FY23 100% vesting Under the terms of the LTI Plan up to 50% of vested performance rights may be exercised for cash at the participants discretion with the balance exercised for one ordinary share per vested performance right. 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 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. CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS REMUNERATION REPORT 06 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 32 33 REMUNERATION REPORT CONT’D Details of equity incentives affecting current and future remuneration Details of the vesting profiles of the performance rights held by each key management person are as follows: Executive Instrument Number Grant Date % vested in year % forfeited in year Performance testing date Expiry Date Graeme Dunn 2021 Rights 804,614 4/12/20 100% - 30/6/23 4/12/24 2022 Rights (A) 605,821 5/11/21 - - 30/6/24 5/11/25 2023 Rights (B) 1,004,348 4/11/22 - - 30/6/25 5/11/26 2024 Rights (C) 915,974 1/11/23 - - 30/6/26 1/11/27 Chris Douglass 2021 Rights 462,383 4/12/20 100% - 30/6/23 4/12/24 2022 Rights (A) 359,477 5/11/21 - - 30/6/24 5/11/25 2023 Rights (B) 600,000 4/11/22 - - 30/6/25 5/11/26 2024 Rights (C) 547,205 25/8/23 - - 30/6/26 25/8/27 A. 50% of the 2022 performance rights have TSR as the vesting condition with a threshold target of 8% per annum compounded and a stretch target of 12% per annum compounded. These performance rights have a fair value of $0.41 each. 50% of the 2022 performance rights have EPS growth as the vesting condition with a threshold target of 8.57 cents per share and a stretch target of 9.55 cents per share. These performance rights have a fair value of $0.61 each. The 2022 financial year performance rights have been performance tested at 30 June 2024 and it has been determined that 100% of the available performance rights will vest. B. 50% of the 2023 performance rights have TSR as the vesting condition with a threshold target of 8% per annum compounded and a stretch target of 12% per annum compounded. These performance rights have a fair value of $0.37 each. 50% of the 2023 performance rights have EPS growth as the vesting condition with a threshold target of 9.70 cents per share and a stretch target of 10.82 cents per share. These performance rights have a fair value of $0.58 each. The maximum employee benefit expense that may be recognised over the remaining service period in respect of these performance rights in the event that all rights vest is $251,348. C. The vesting conditions and fair values of the 2024 performance rights are set out on page 13. The maximum employee benefit expense may be recognised over the remaining service period in respect of these performance rights in the event that all rights vest is $537,212. 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 2023 Additions Disposals Other Held at 30 June 2024 Directors Karl Paganin1 1,726,844 104,705 - - 1,831,549 Graeme Dunn2 2,021,993 402,307 - - 2,424,300 Derek Parkin1 130,666 7,922 - - 138,588 Simon Buchhorn1 800,000 7,660 - - 807,660 Paul Chisholm 2,758,460 - - - 2,758,460 Executives Chris Douglass2 2,045,666 462,383 - - 2,508,049 1. Shares acquired through participation in the Company’s Dividend Reinvestment Plan. 2. Shares acquired on exercise of vested FY21 performance rights. Transactions with key management personnel There were no transactions between the company and Key Management Personnel during the year. There are no loans between the company and Key Management Personnel. Consolidated Statement of Comprehensive Income 36 Consolidated Balance Sheet 37 Consolidated Statement of Changes in Equity 38 Consolidated Statement of Cash Flows 39 Notes to the Financial Statements 1. Reporting entity 40 2. Basis of preparation 40 3. Segment reporting 41 4. Contract revenue 42 5. Other income 43 6. Employee benefits expenses 43 7. Depreciation and amortisation expenses 43 8. Finance income and expenses 44 9. Income tax expense 44 10. Earnings per share 45 11. Cash and cash equivalents 46 12. Trade and other receivables 47 13. Inventories 47 14. Contract assets 47 15. Property, plant and equipment 48 16. Right-of-use assets 49 17. Intangible assets 50 18. Trade and other payables 51 19. Lease liability 52 20. Provisions 52 21. Contingent acquisition consideration 53 22. Capital and reserves 53 23. Financial instruments 55 24. Investments in subsidiaries 60 25. Business combination 61 26. Share-based payments 63 27. Reconciliation of cash flows from operating activities 66 28. Contingencies 67 29. Subsequent events 67 30. Auditor’s remuneration 67 31. Parent entity disclosures 68 32. Related parties 68 33. Material accounting policies 69 34. Determination of fair values 82 Consolidated Entity Disclosure Statement 83 Directors’ Declaration 84 Independent Auditor’s Report 85 Lead Auditor’s Independence Declaration 91 FINANCIAL STATEMENTS CONTENTS REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 34 35 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2024 2024 2023 NOTE $’000 $’000 Contract revenue 4 551,870 464,708 Contract expenses 6 (469,202) (388,448) Gross profit 82,668 76,260 Other income 5 785 1,695 Employee benefits expenses 6 (23,799) (22,983) Occupancy expenses (2,949) (2,365) Administration expenses (12,973) (10,995) Depreciation expense 7 (2,708) (3,622) Amortisation expense 7 (2,624) (2,919) Amortisation of customer contracts and relationships 7 (2,113) (2,113) Other expenses from ordinary activities (3,599) (3,407) Profit from operations 32,688 29,551 Finance income 8 2,428 1,241 Finance expenses 8 (3,437) (1,757) Net finance expense (1,009) (516) Profit before tax 31,679 29,035 Income tax expense 9 (9,764) (8,944) Profit from continuing operations 21,915 20,091 Other comprehensive income Items that are or may be reclassified to the profit and loss - - Other comprehensive income net of income tax - - Total comprehensive income 21,915 20,091 Total comprehensive income attributable to: Owners of the Company 21,915 20,091 Earnings per share: Basic earnings per share (cents) 10 8.34 7.69 Diluted earnings per share (cents) 10 8.20 7.61 The above statement of comprehensive income should be read in conjunction with the accompanying notes. CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 30 JUNE 2024 2024 2023 NOTE $’000 $’000 Assets Current assets Cash and cash equivalents 11 84,083 77,652 Trade and other receivables 12 137,554 103,906 Inventories 13 1,966 1,256 Prepayments 3,412 4,850 Total current assets 227,015 187,664 Non-current assets Property, plant and equipment 15 10,909 9,950 Right-of-use assets 16 7,665 10,096 Intangible assets 17 116,085 110,724 Deferred tax asset 9 3,082 - Total non-current assets 137,741 130,770 Total assets 364,756 318,434 Liabilities Current liabilities Trade and other payables 18 129,235 85,969 Lease liability 19 3,564 2,626 Provisions 20 21,186 18,239 Contingent acquisition consideration 21 1,000 7,305 Tax payable 9 9,078 10,349 Total current liabilities 164,063 124,488 Non-current liabilities Lease liability 19 4,532 7,792 Provisions 20 2,264 879 Contingent acquisition consideration 21 2,736 - Deferred tax liability 9 - 3,176 Total non-current liabilities 9,532 11,847 Total liabilities 173,595 136,335 Net assets 191,161 182,099 Equity Share capital 22 117,554 116,651 Reserves 193 811 Retained earnings 73,414 64,637 Total equity 191,161 182,099 The above balance sheet should be read in conjunction with the accompanying notes. REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 36 37 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2024 Share Capital Retained Earnings Share Based Payments Reserve Translation Reserve Total Equity $’000 $’000 $’000 $’000 $’000 Balance as at 1 July 2022 115,953 57,592 1,257 (514) 174,288 Total comprehensive income for the year Profit for the year - 20,091 - - 20,091 Total comprehensive income - 20,091 - - 20,091 Transactions with owners, recorded directly in equity Dividends - (13,055) - - (13,055) Dividend re-investment, net 306 - - - 306 Performance rights (net of tax) 392 9 (586) - (185) Equity-settled share-based payment - - 654 - 654 Total transactions with owners 698 (13,046) 68 - (12,280) Balance as at 30 June 2023 116,651 64,637 1,325 (514) 182,099 Share Capital Retained Earnings Share Based Payments Reserve Translation Reserve Total Equity $’000 $’000 $’000 $’000 $’000 Balance as at 1 July 2023 116,651 64,637 1,325 (514) 182,099 Total comprehensive income for the year Profit for the year - 21,915 - - 21,915 Total comprehensive income - 21,915 - - 21,915 Transactions with owners, recorded directly in equity Dividends - (13,138) - - (13,138) Dividend re-investment, net 450 - - - 450 Performance rights (net of tax) 453 - (1,384) - (931) Equity-settled share-based payment - - 766 - 766 Total transactions with owners 903 (13,138) (618) - (12,853) Balance as at 30 June 2024 117,554 73,414 707 (514) 191,161 The above statement of changes in equity should be read in conjunction with the accompanying notes. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2024 2024 2023 NOTE $’000 $’000 Cash flows from operating activities Cash receipts from customers 589,823 556,200 Cash paid to suppliers and employees (535,994) (502,024) Government grants received 5 367 558 Interest received 2,428 1,241 Interest paid (1,766) (1,551) Income taxes paid (17,293) (6,253) Net cash from operating activities 27 37,565 48,171 Cash flows from investing activities Payment of contingent acquisition consideration 21 (7,333) (5,647) Proceeds from the sale of assets 220 894 Acquisition of property, plant and equipment 15 (3,621) (3,280) Acquisition of subsidiary, net of cash acquired 25 (4,904) - Net cash used in investing activities (15,638) (8,033) Cash flows from financing activities Dividends paid (12,688) (12,749) Payment of lease liabilities principal (2,808) (2,820) Net cash used in financing activities (15,496) (15,569) Increase in cash and cash equivalents 6,431 24,569 Cash and cash equivalents at beginning of period 77,652 53,083 Cash and cash equivalents at 30 June 11 84,083 77,652 The above cash flow statement should be read in conjunction with the accompanying notes. REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 38 39 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 Securities Exchange. The consolidated financial statements for the year ended 30 June 2024 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(w). 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 20 August 2024. (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) 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. The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 June 2023. 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 these accounting estimates is included in the following notes: • Note 4, 14 and 33 (m) – estimation of total contract cost and measurement of variable consideration; • Note 15, 17 and 33 (j) – recoverable amount for testing property, plant and equipment and goodwill; • Note 21 and 33 (t) – measurement of contingent acquisition consideration; and • Note 26 and 33 (k) – measurement of share-based payments. 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) and 4) and contract assets (note 33(j) and 14). Details of the Group’s accounting policies are included in notes 33 and 34. NOTES TO THE FINANCIAL STATEMENTS CONT’D 3. Segment reporting Revenue is principally derived by the Group from the provision of electrical, instrumentation and communications services through construction and services contracts to customers in the following sectors: Commercial, Resources, and Infrastructure. The Group identified its operating segments based on the internal reports that are reviewed and used by the Managing Director in assessing performance and in determining the allocation of resources. Financial information about each of these operating segments is reported to the Managing Director on a recurring basis. Segment Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments. The following reconciles the aggregated segment EBITDA to profit after tax. 2024 2023 $’000 $’000 EBITDA 40,133 38,205 Net Interest expense (1,009) (516) Depreciation and amortisation (7,445) (8,654) Tax expense (9,764) (8,944) Profit after income tax 21,915 20,091 The Group provides its services through the three key segments of SCEE Electrical, Heyday, and Trivantage. The following summary describes the operations of each reportable segment. Reportable segment Operations SCEE Electrical Provision of electrical, instrumentation, communications and maintenance services. This segment comprises SCEE Electrical and Datatel. Heyday Provision of electrical, instrumentation and communications services. This segment comprises Heyday and MDE. Trivantage Provision of electrical, instrumentation, communications, security and maintenance services. This segment comprises SJ Electrical, Trivantage Manufacturing and Seme Solutions. The directors believe that the aggregation of the operating segments is appropriate as to differing extents 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. In presenting information on the basis of geographical location, segment revenue, based on the geographical location of customers, and segment assets, based on the geographical location of the assets, are all located in Australia. Revenues from the two largest customers of the Group’s Australian segment generated $162.8 million of the Group’s revenue (2023: no customers contributed more than 10% of the Group’s revenue). REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 40 41 4. Contract revenue 2024 2023 Disaggregated revenue information NOTE $’000 $’000 Operating sectors Commercial 171,109 154,869 Resources 147,046 168,838 Infrastructure 233,715 141,001 Total revenue 551,870 464,708 Revenue type Construction revenue 399,584 318,265 Services revenue 152,286 146,443 Total revenue 551,870 464,708 Timing of revenue recognition Products and services transferred over time 516,331 434,759 Products and services transferred at a point in time 35,539 29,949 Revenue from contracts with customers 551,870 464,708 Contract balances Trade receivables 12 49,607 39,004 Contract assets 14 87,722 65,010 137,329 104,014 Trade receivables are non-interest bearing and are generally on 30 to 45 days term. In 2024, $0.2m (2023: $0.2m) was recognised as provisions for expected credit losses on trade receivables. Contract assets and revenue includes contract modifications recognised in accordance with the Group’s accounting policy (note 33(m)(iii)) for which amounts are not yet finalised with the customer. The following amounts are included in revenue from contracts for the year ended 30 June 2024: Revenue recognised as a contract liability in prior period 37,973 38,620 Unsatisfied performance obligations Transaction price expected to be recognised in future years for unsatisfied performance obligations at 30 June 2024: Construction revenue 597,195 385,770 Services revenue 87,617 127,408 684,812 513,178 In line with the Group’s accounting policy described in Note 33 (m), the transaction price expected to be recognised in future years excludes variable consideration that is constrained. NOTES TO THE FINANCIAL STATEMENTS CONT’D 4. Contract revenue (continued) The average duration of contracts is given below. However, some contracts will vary from these typical lengths. Revenue is typically earned over these varying timeframes: Construction revenue 1 to 4 years Services revenue up to 5 years Of the unsatisfied performance obligations at 30 June 2024, 85% are expected to be recognised in the next 12 months. 5. Other income 2024 2023 NOTE $’000 $’000 Other income Apprenticeship incentive 367 558 Net gain on disposals 58 486 Other 360 651 785 1,695 6. Employee benefits expenses Remuneration, bonuses and on-costs (18,899) (18,235) Superannuation contributions (2,659) (2,402) Amounts provided for employee entitlements (1,475) (1,692) Share-based payments expense 26 (766) (654) (23,799) (22,983) The above employee benefits expenses do not include employee benefits expenses recorded within contract expenses. Employee benefits included in contract expenses were $121.3m (2023: $124.2m) which included superannuation contributions of $11.9m (2023: $11.3m). The total employee benefits expense is therefore $145.1m (2023: $147.2m). 7. Depreciation and amortisation expenses Buildings (17) (17) Leasehold improvements (260) (225) Plant and equipment (595) (1,234) Motor vehicles (1,010) (1,133) Office furniture and equipment (826) (1,013) Total depreciation expense for the year 15 (2,708) (3,622) Amortisation of ROU asset 16 (2,500) (2,795) Amortisation of customer contract intangibles 17 (2,113) (2,113) Amortisation of intellectual property 17 (124) (124) Total amortisation expense for the year (4,737) (5,032) NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 42 43 8. Finance income and expenses 2024 2023 NOTE $’000 $’000 Interest income on bank deposits 2,428 1,241 Finance income 2,428 1,241 Bank charges (632) (485) Bank guarantee fees (652) (462) Contingent acquisition consideration 21 (28) (206) Lease liability interest (417) (535) Remeasurement of cash-settled share-based payments (1,643) - Other (65) (69) Finance expenses (3,437) (1,757) Net finance expense (1,009) (516) 9. Income tax expense (a) Income Statement Current tax expense Current period (16,423) (16,677) Over provision from prior year 379 228 Other reconciling items 22 - (16,022) (16,449) Deferred tax expense Origination and reversal of temporary differences 6,641 7,759 Under provision from prior year (383) (254) Income tax expense reported in the income statement (9,764) (8,944) (b) Reconciliation between tax expense and pre-tax accounting profit Accounting profit before income tax 31,679 29,035 Income tax expense using the Company’s domestic tax rate of 30% (9,504) (8,711) Under provision from prior year (4) (26) Share based payments (230) (196) Non-deductible contingent acquisition consideration interest (8) (61) Other (18) 50 Income tax expense reported in the income statement (9,764) (8,944) The applicable effective tax rates are: 30.8% 30.8% NOTES TO THE FINANCIAL STATEMENTS CONT’D 9. Income tax expense (continued) Balance Sheet Income Statement Equity 2024 2023 2024 2023 2024 2023 Deferred tax assets and liabilities $’000 $’000 $’000 $’000 $’000 $’000 Deferred tax liabilities Retentions receivable (28) (12) 16 12 - - Contract assets (12,697) (13,008) (311) (7,440) - - Right-of-use assets (2,299) (3,029) (730) (154) - - Intangible assets (1,634) (2,305) (671) (671) - - Property, plant and equipment (908) (729) 179 332 - - (17,566) (19,083) (1,517) (7,921) - - Deferred tax assets Provisions 721 387 159 1,147 - - Employee entitlements 7,589 7,541 (48) (1,468) - - Unearned revenue 9,623 4,648 (4,975) (163) - - Lease liability 2,460 3,232 772 88 - - Tax losses - - - 235 - - Other 255 99 (156) 577 - - 20,648 15,907 (4,248) 416 - - Net deferred tax assets/(liabilities) 3,082 (3,176) (5,765) (7,505) - - 10. Earnings per share Basic earnings per share The calculation of basic earnings per share at 30 June 2024 was based on the profit attributable to ordinary shareholders of $21,915,000 (2023: $20,091,000) and a weighted average number of ordinary shares outstanding of 262,813,312 (2023: 261,117,991), calculated as follows: Profit attributable to ordinary shareholders 2024 2023 NOTE $’000 $’000 Profit for the period 21,915 20,091 Weighted average number of ordinary shares 2024 2023 Issued ordinary shares at 1 July 22 261,498,933 260,006,961 Effective new balance resulting from issue of shares in the year 1,314,379 1,111,030 Weighted average number of ordinary shares at 30 June 262,813,312 261,117,991 NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 44 45 10. Earnings per share (continued) Diluted earnings per share The calculation of diluted earnings per share at 30 June 2024 was based on the profit attributable to ordinary shareholders of $21,915,000 (2023: $20,091,000) and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of 267,352,203 (2023: 263,972,062) as follows: Profit attributable to ordinary shareholders (diluted) 2024 2023 $’000 $’000 Profit for the period 21,915 20,091 Weighted average number of ordinary shares (diluted) 2024 2023 Weighted average number of ordinary shares for basic earnings per share 262,813,312 261,117,991 Effect of dilution: Performance rights on issue 4,538,891 2,854,071 Weighted average number of ordinary shares at 30 June 267,352,203 263,972,062 At 30 June 2024, no performance rights (2023: 1,447,646) were excluded from the diluted weighted average number of ordinary shares calculation because it was estimated that the EPS growth target required for the performance rights to vest was not likely to be achieved. 11. Cash and cash equivalents 2024 2023 $’000 $’000 Bank balances 84,083 77,652 Cash and cash equivalents in the statement of cash flows 84,083 77,652 The effective interest rate on cash and cash equivalents was 3.93% (2023: 2.16%); these deposits are either at call or on short term deposit. NOTES TO THE FINANCIAL STATEMENTS CONT’D 12. Trade and other receivables 2024 2023 $’000 $’000 Trade receivables 49,607 39,004 Sundry debtors 768 265 Provision for impairment of trade receivables (637) (414) Contract assets 14 87,722 65,010 Retentions 94 41 137,554 103,906 Trade receivables are non-interest bearing and are generally on 30 to 45 day terms. The provision for impairment of trade receivables relates to expected credit losses and is used to record impairment losses. When the Group is reasonably certain that no recovery of the amount owing is possible, 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. The movement in the allowance for impairment in respect of Trade receivables during the year was as follows: 2024 2023 $’000 $’000 Balance at start of year 414 197 Impairment losses recognised 223 217 Balance at 30 June 637 414 The ageing of trade receivables and the related provision for expected credit losses are detailed in note 23. All write-offs of bad debts are made when there is no reasonable expectation of recovering the contractual cash flows. 13. Inventories Raw materials and consumables – cost 1,966 1,256 14. Contract assets Costs incurred to date 468,250 280,970 Recognised profit 56,649 82,271 Progress billings (437,177) (298,231) 87,722 65,010 Contract assets comprise unbilled costs subject to instalment payments under contract and unbilled amounts subject to contractual variations and claims. The timing of cash inflows for contract assets is dependent on the status of processes underway to gain acceptance from customers as to the enforceability of recognised modifications resulting from contractual claims and variations. The Group pursues various options with customers to accelerate the inflow of cash which can include, but are not limited to, negotiations, security of payment adjudications and arbitration involving the support of legal counsel and external consultants. Accordingly, there remains a risk that settlement of contract assets takes longer than 12 months. Contract assets, for which revenue was earned longer than 12 months ago and for which cash is yet to be received, is $25.2m (2023: $32.8m). These contract assets are considered recoverable by the Group with no allowance for impairment required. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 46 47 15. Property, plant and equipment Land and Buildings Leasehold Improvements Plant and equipment Motor Vehicles Office Furniture and Equipment Total NOTE $’000 $’000 $’000 $’000 $’000 $’000 Cost Balance at 1 July 2022 916 2,204 16,824 10,969 12,564 43,477 Additions - 180 829 1,767 504 3,280 Disposals - - (1,550) (1,286) - (2,836) Balance at 30 June 2023 916 2,384 16,103 11,450 13,068 43,921 Balance at 1 July 2023 916 2,384 16,103 11,450 13,068 43,921 Additions - 277 556 2,120 668 3,621 Disposals - (41) (8,756) (1,255) (1,390) (11,442) Business combination 25 27 - 57 69 55 208 Balance at 30 June 2024 943 2,620 7,960 12,384 12,401 36,308 Depreciation Balance at 1 July 2022 (235) (846) (14,011) (7,183) (10,502) (32,777) Depreciation for the year 7 (17) (225) (1,234) (1,133) (1,013) (3,622) Disposals - - 1,252 1,176 - 2,428 Balance at 30 June 2023 (252) (1,071) (13,993) (7,140) (11,515) (33,971) Balance at 1 July 2023 (252) (1,071) (13,993) (7,140) (11,515) (33,971) Depreciation for the year 7 (17) (260) (595) (1,010) (826) (2,708) Disposals - 51 8,619 1,221 1,389 11,280 Balance at 30 June 2024 (269) (1,280) (5,969) (6,929) (10,952) (25,399) Carrying amounts At 30 June 2023 664 1,313 2,110 4,310 1,553 9,950 At 30 June 2024 674 1,340 1,991 5,455 1,449 10,909 NOTES TO THE FINANCIAL STATEMENTS CONT’D 16. Right-of-use assets The Group leases assets including property, motor vehicles and office furniture and equipment. Information about leased assets for which the Group is a lessee is presented below: Land and Buildings Motor Vehicles Office Furniture and Equipment Total NOTE $’000 $’000 $’000 $’000 Opening carrying amount at 1 July 2022 10,443 72 99 10,614 Additions 1,958 - 103 2,061 Remeasurement 216 - - 216 Amortisation charged for the year 7 (2,659) (65) (71) (2,795) Closing carrying amount at 30 June 2023 9,958 7 131 10,096 Opening carrying amount at 1 July 2023 9,958 7 131 10,096 Additions 404 - - 404 Remeasurement (335) - - (335) Amortisation charged for the year 7 (2,432) (7) (61) (2,500) Closing carrying amount at 30 June 2024 7,595 - 70 7,665 Some property leases contain extension options exercisable by the Group up to one year before the end of the non-cancellable contract period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at the lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control. For the year ended 30 June 2024, an expense of $0.4m (2023: $0.3m) was recognised for short term or low value leases. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 48 49 17. Intangible assets – goodwill, customer contracts and relationships, and other Goodwill Customer Contracts and Relationships Other $’000 Total NOTE $’000 $’000 $’000 $’000 Cost Balance as at 1 July 2022 111,432 19,749 1,639 132,820 Additions - - - - Balance as at 30 June 2023 111,432 19,749 1,639 132,820 Balance as at 1 July 2023 111,432 19,749 1,639 132,820 Business combination 25 7,598 - - 7,598 Balance as at 30 June 2024 119,030 19,749 1,639 140,418 Amortisation Balance as at 1 July 2022 (8,390) (11,299) (170) (19,859) Amortisation 7 - (2,113) (124) (2,237) Balance as at 30 June 2023 (8,390) (13,412) (294) (22,096) Balance as at 1 July 2023 (8,390) (13,412) (294) (22,096) Amortisation 7 - (2,113) (124) (2,237) Balance as at 30 June 2024 (8,390) (15,525) (418) (24,333) Carrying amounts At 30 June 2023 103,042 6,337 1,345 110,724 At 30 June 2024 110,640 4,224 1,221 116,085 Impairment testing for cash-generating units containing goodwill For the purpose of impairment testing, goodwill is allocated to the Group’s cash generating units (“CGUs”) which represent the lowest level within the Group at which goodwill is monitored for internal management purposes. The aggregate carrying amounts of goodwill allocated to each CGU are as follows: 2024 2023 $’000 $’000 SCEE Electrical 21,082 21,082 Heyday 60,295 52,697 Trivantage 29,263 29,263 110,640 103,042 The recoverable amounts of the above CGUs were based on their value in use with the Group performing its annual impairment test in June 2024. The carrying amount of the operating CGUs were determined to be lower than their recoverable amounts and therefore no impairment charge has been recognised. Value in use was determined by preparing five year discounted cash flow forecasts and extrapolating the cash flows beyond the terminal year using a terminal growth-rate. The recoverable amount is most sensitive to key assumptions including forecast contract revenues, in particular securing new work and forecast contract gross margins. The calculation of value in use was based on the following key assumptions: • Cash flows were projected based on past experience, actual operating results, known and expected contract wins, and independent research on the markets in which the CGUs operate. NOTES TO THE FINANCIAL STATEMENTS CONT’D 17. Intangible assets – goodwill, customer contracts and relationships, and other (continued) • The five year cash flow estimates used in assessments for all CGU’s were based on Board approved budgets for the year ending 30 June 2025. The budget has been prepared based on revenues from secured work and an estimate of unsecured work based on industry estimates and historical growth. Compound average annual growth assumptions on revenue thereafter are SCEE Electrical nil% (2023: 1.0%), Heyday 1.1% (2023: 2.6%), and Trivantage 1.1% (2023: 1.7%) per annum for each future year. The terminal value assumes perpetual growth of 2.5% (2023: 2.5%). • The margins included in the projected cash flow are similar to those achieved historically over the past 5 years. • Pre-tax discount rates applied were SCEE Electrical 13.6% (2023: 14.6%), Heyday 12.5% (2023: 12.6%), and Trivantage 13.2% (2023: 12.9%). This discount rate was estimated based on past experience and industry average weighted cost of capital. Sensitivity to changes in assumptions Management believes that any reasonable change in the key assumptions for the SCEE Electrical, Heyday and Trivantage segments would not cause the carrying value to exceed its recoverable amount. All three CGUs can withstand the high end of the discount rate range without causing the carrying value to exceed its recoverable amount. 18. Trade and other payables 2024 2023 $’000 $’000 Trade payables 56,577 25,063 Contract liabilities 49,226 36,867 Accrued expenses 20,475 20,726 Goods and services tax payable 2,387 2,416 Retentions payable 570 897 129,235 85,969 Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value. The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 23. Contract liabilities Current Unearned revenue 49,226 36,867 Unearned revenue arises when the Company has invoiced the client in advance of performing the contracted services. Contract liabilities fluctuate based on progress of completion of contracts. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 50 51 19. Lease liability 2024 2023 $’000 $’000 Current portion 3,564 2,626 Non-current portion 4,532 7,792 8,096 10,418 The average remaining lease term for the leased assets per underlying asset class as at 30 June 2024 are as follows: 2024 2023 (in years) (in years) Land and building 2.62 3.43 Motor vehicles - 0.50 Office equipment 1.56 1.90 The Group has estimated that the potential future lease payments, should it exercise the extension options contained in existing lease agreements, would result in an increase in the lease liability of $4.8m. 20. Provisions 2024 2023 $’000 $’000 Current Annual leave 13,789 12,630 Long service leave 4,421 3,455 Other employee leave 1,876 2,062 Share-based payments liability 946 - Other 154 92 21,186 18,239 Non-current Long service leave 854 879 Share-based payments liability 1,410 - 2,264 879 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. NOTES TO THE FINANCIAL STATEMENTS CONT’D 21. Contingent acquisition consideration 2024 2023 NOTE $’000 $’000 Current portion 1,000 7,305 Non-current portion 2,736 - Balance at 30 June 3,736 7,305 Contingent acquisition consideration movements Balance at 1 July 7,305 12,746 Finance costs 28 206 Acquisition of MDE Group Pty Ltd 25 3,736 - Payments (7,333) (5,647) Balance at 30 June 3,736 7,305 22. Capital and reserves Share capital 2024 2023 Number $’000 Number $’000 Ordinary shares Issued and fully paid 263,214,994 117,554 261,498,933 116,651 Movements in shares on issue Balance at the beginning of the financial year 261,498,933 116,651 260,006,961 115,953 Exercise of employee performance rights, net of transaction costs 1,173,518 452 1,010,666 392 Issue of ordinary shares under the dividend rein- vestment plan, net of transaction costs 542,543 451 481,306 306 Balance at the end of the financial year 263,214,994 117,554 261,498,933 116,651 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. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 52 53 22. Capital and reserves (continued) Dividends Dividends recognised in the current year by the Group are: Cents per share Total amount $’000 Franked Date of payment 2024 Final 2023 ordinary 4.0 10,507 Franked 11 October 2023 Interim dividend 1.0 2,631 Franked 10 April 2024 Total amount 13,138 2023 Final 2022 ordinary 4.0 10,441 Franked 12 October 2022 Interim dividend 1.0 2,614 Franked 5 April 2023 Total amount 13,055 Franked dividends declared or paid during the year were franked at the tax rate of 30%. Declared after end of year Subsequent to 30 June 2024, a dividend of 5 cents per share in the amount of $13.2 million, including dividends paid to shares anticipated to be issued in respect of vested and exercisable performance rights, was proposed by the directors. The dividend has not been provided in the financial statements. Company 2024 2023 $’000 $’000 Franking account balance 42,751 32,347 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. NOTES TO THE FINANCIAL STATEMENTS CONT’D 23. Financial instruments Overview The Group has exposure to the following risks from their use of financial instruments: • Credit risk • Liquidity risk • Market risk This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risks, and the management of capital. Further quantitative disclosures are included throughout this financial report. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board has established an Audit and Risk Management Committee, which is responsible for overseeing how management monitors risk and for reviewing the adequacy of the risk management framework in relation to the risks faced by the Group. The committee reports regularly to the Board of Directors on its activities. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations in relation to the management and mitigation of these risks. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers including contract assets. 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: Carrying amount 2024 2023 $’000 $’000 Cash and cash equivalents 84,083 77,652 Trade and other receivables (net of provision for impairment) 49,832 38,896 Contract assets 87,722 68,240 221,637 184,788 Cash The Group’s cash and cash equivalents are held with major banks and financial institutions. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 54 55 23. Financial instruments (continued) Trade receivables and contract assets The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer and contract with customer. Geographically, the concentration of credit risk is within Australia and, by industry, the concentration is spread across the commercial, infrastructure and resources sectors, with no single customer within trade receivables contributing more than 10% of the total trade receivables balance. When entering into new customer contracts for service, the Group only enters into contracts with credit-worthy 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 receivables and contract assets. The Group utilises trade credit insurance against certain customers to reduce the Group’s exposure to credit risk. The Group’s maximum exposure to credit risk for trade receivables and contract assets at the reporting date by geographic region was: Carrying amount 2024 2023 $’000 $’000 Australia 137,554 107,136 137,554 107,136 Impairment losses The ageing of the Group’s trade receivables and contract assets at the reporting date was: Gross Allowance for Impairment Gross Allowance for Impairment 2024 2024 2023 2023 NOTE $’000 $’000 $’000 $’000 Contract assets – not past due 14 87,722 - 68,240 - Trade Receivables: Not past due 39,402 - 31,120 - Past due 0-30 days 6,798 - 5,433 - Past due 30-60 days 2,642 - 846 - Past due 60 days and less than 1 year 743 - 1,325 - More than 1 year 884 (637) 586 (414) 50,469 (637) 39,310 (414) 138,191 (637) 107,550 (414) The provision of $637,000 relates to expected credit losses. Impairment provision related to specific debts that are more than one year overdue pertains to a small number of customers. The Group continues to strongly pursue all debts provided for. The Group has established an allowance for impairment that represents their expected credit losses in respect of trade receivables and contract assets. The Group recognises a provision for impairment related to expected credit losses (“ECLs”) for trade receivables, contract assets and other debt financial assets not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. NOTES TO THE FINANCIAL STATEMENTS CONT’D 23. Financial instruments (continued) Impairment losses (continued) For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore the Group does not track changes in credit risk but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group uses a provision matrix to calculate the ECLs. The provision matrix is established based on the Group’s historically observed default rates. The Group calibrates the matrix to adjust historical credit loss experience with forward looking factors specific to debtors and the economic environment where appropriate. At every reporting date, historical default rates are updated and changes in the forward-looking estimates are analysed. The Group considers a financial asset’s potential for default when contractual payments are more than 120 days past due, factoring in other qualitative indicators where appropriate. Exception shall apply to financial assets that relate to entities under common controls or covered by letter of credit or credit insurance. However, in certain cases the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. 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. Cash flow is monitored by management using rolling forecasts and annual budgets that are reviewed monthly at Board level. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: Carrying amount Contractual cash flows 6 months or less More than 6 months up to 1 year More than 1 year up to 2 years More than 2 years up to 5 years More than 5 years 30 June 2024 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Non-derivative financial liabilities Trade and other payables 80,009 80,009 79,479 530 - - - Contingent acquisition consideration 3,736 4,100 1,000 - 1,600 1,500 - Lease liability 8,096 9,801 1,405 1,319 2,096 3,442 1,538 91,841 93,910 81,884 1,849 3,696 4,942 1,538 30 June 2023 Non-derivative financial liabilities Trade and other payables 49,102 49,102 48,222 880 - - - Contingent acquisition consideration 7,305 7,305 7,305 - - - - Lease liability 10,418 12,232 1,517 1,525 2,378 4,584 2,228 66,825 68,639 57,044 2,405 2,378 4,584 2,228 NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 56 57 23. Financial instruments (continued) 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 2024 or 30 June 2023. 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. 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: Carrying amount 2024 2023 $’000 $’000 Variable rate instruments Financial assets 84,083 77,652 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. NOTES TO THE FINANCIAL STATEMENTS CONT’D 23. Financial instruments (continued) 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 as 2024. Profit or loss Equity 100bp increase 100bp decrease 100bp increase 100bp decrease $’000 $’000 $’000 $’000 30 June 2024 Variable rate instruments 1,372 (1,372) - - Cash flow sensitivity (net) 1,372 (1,372) - - 30 June 2023 Variable rate instruments 1,172 (1,172) - - Cash flow sensitivity (net) 1,172 (1,172) - - Fair values Fair values versus carrying amounts The fair values of financial assets and liabilities materially equates to the carrying values shown in the balance sheet. Other Price Risk The Group is not directly exposed to any other price risk. 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 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. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 58 59 24. Investments in subsidiaries The consolidated financial statements include the financial statements of Southern Cross Electrical Engineering Ltd and the subsidiaries listed in the following table. Country of Incorporation Equity Interest (%) 2024 2023 Southern Cross Electrical Engineering (WA) Pty Ltd (i) Australia 100 100 S&DH Enterprises Pty Ltd (i) Australia 100 100 FMC Corporation Pty Ltd (i) Australia 100 100 Southern Cross Electrical Engineering (Australia) Pty Ltd (i) Australia 100 100 Hazquip Australia Pty Ltd (i) Australia 100 100 Datatel Communications Pty Ltd (i) Australia 100 100 Heyday5 Pty Ltd (i) Australia 100 100 Electrical Data Projects Pty Ltd (i) Australia 100 100 Trivantage Holdings Pty Ltd (i) Australia 100 100 Trivantage Group Pty Ltd (i) Australia 100 100 Trivantage Pty Ltd (i) Australia 100 100 S.J. Electric Group Pty Ltd (i) Australia 100 100 S.J. Electric Group (NSW) Pty Ltd (i) Australia 100 100 S.J. Electric Group (QLD) Pty Ltd (i) Australia 100 100 S.J. Electric (SA) Pty Ltd (i) Australia 100 100 S.J. Electric (VIC) Pty Ltd (i) Australia 100 100 S.J. Electric (WA) Pty Ltd (i) Australia 100 100 Seme Solutions Pty Ltd (i) Australia 100 100 Group CCTV Pty Ltd (i) Australia 100 100 Central Control Sheetmetal Pty Ltd (i) Australia 100 100 Positive Systems Pty Ltd (i) Australia 100 100 Ladd Electric Pty Ltd (i) Australia 100 100 SCEE Electrical Pty Ltd (i) Australia 100 100 MDE Group Pty Ltd (i)(ii) Australia 100 - Southern Cross Electrical Engineering Ghana Pty Ltd Ghana 100 100 Cruz Del Sur Ingeniería Electra (Peru) S.A Peru 100 100 Southern Cross Electrical Engineering Tanzania Pty Ltd Tanzania 100 100 (i) These wholly-owned subsidiaries have entered into a deed of cross guarantee with Southern Cross Electrical Engineering Limited pursuant to ASIC Corporations (wholly-owned companies) Instrument 2016/785 (Instrument) and are relieved of the requirement to prepare and lodge an audited financial and Directors’ report. (ii) MDE Group Pty Ltd was acquired on 31 May 2024. The parties to the deed of cross guarantee for the Group as listed in note 24 represent a “majority group” for the purposes of the Instrument, as the parties not subject to the Instrument are dormant entities. A separate consolidated statement of comprehensive income and consolidated balance sheet of the parties to the deed of cross guarantee have not been disclosed separately as it is not materially different to those of the Group. NOTES TO THE FINANCIAL STATEMENTS CONT’D 25. Business combination On 31 May 2024, the Company acquired 100% of MDE Group Pty Ltd (“MDE”). MDE provides communications, data, and electrical services for construction and fit out projects across a range of sectors including commercial building developments, data centres, and healthcare and transport infrastructure. MDE has worked with the Group’s Heyday business for several years on a variety of major projects, and are currently delivering the communications components of Heyday’s projects at the Western Sydney International Airport. The acquisition of MDE will allow Heyday to offer an integrated approach to this work, retaining additional profit within the Group, and derive operational synergies on jointly performed projects. The additional capability also positions Heyday to offer clients a combined electrical, data and communications service and maintenance proposition on completion of its construction projects. The acquisition forms part of SCEE’s strategy of growth through expansion into adjacent and complementary sectors and new geographies. Fair values measured on a provisional basis The initial accounting for the acquisition of MDE has been provisionally determined at the end of the reporting period. Should this assessment change, including in respect of the identification of any intangible assets which may by their nature be amortised over their useful life, then the goodwill arising on acquisition will be adjusted accordingly. Consideration transferred $’000 Purchase price on completion (i) 5,550 Net financial debt (i) 107 Net working capital (i) 112 Contingent consideration arrangement (ii) 3,736 Settlement of pre-acquisition balances (iii) (1,848) 7,657 (i) Initial cash payment comprised the purchase price on completion of $5.55 million plus the aggregate of items defined as Net Financial Debt and Working Capital in the Share Purchase Agreement which included the financial indebtedness, other debt-like items, cash, debtors, creditors and other liabilities of MDE. The purchase price of $5.55m plus $0.1m of the net financial debt and working capital adjustments was paid on completion on 31 May 2024 with the remainder of the net financial debt and working capital adjustment of $0.1m being paid in August 2024. (ii) The Group has agreed to pay the selling shareholders additional consideration of up to $5.0 million subject to MDE’s future earnings before interest and tax (EBIT) achieving the following targets: Contingent acquisition consideration • $1.0 million in cash following confirmation that MDE FY24 EBIT is equal to or greater than $2.3 million. • $1.0 million in cash following confirmation that MDE FY25 EBIT is equal to or greater than $2.6 million. • $1.0 million in cash following confirmation that MDE FY26 EBIT is equal to or greater than $3.0 million. If the respective EBIT targets above are not achieved, the contingent acquisition consideration cash is reduced on a pro-rata basis to nil at EBIT of $1.5 million. Outperformance consideration • 25% of MDE’s EBIT result for FY25 in excess of $2.6m, capped at $1.0m. An FY25 EBIT of $6.6m will achieve the maximum FY25 outperformance consideration of $1.0m. • 25% of MDE’s EBIT result for FY26 in excess of $3.0m, capped at $1.0m. An FY26 EBIT of $7.0m will achieve the maximum FY26 outperformance consideration of $1.0m. The Directors’ assessment of the expected achievement of these earn out targets were estimated to result in a contingent consideration of $4.1 million so the fair value recognised at acquisition date, being the discounted value of these expected future payments, is $3.7 million. Acquisition-related costs amounting to $0.6 million have been excluded from the consideration transferred and have been recognised as an expense in the period, within “Administration expenses”, in the statement of comprehensive income. (iii) On acquisition, MDE had a pre-acquisition net debtor balance owed to SCEE Group totalling $1.85 million. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 60 61 25. Business Combination (continued) Assets acquired and liabilities assumed at the date of acquisition The provisional fair values of the identifiable assets and liabilities of MDE as at the date of acquisition were: $’000 Cash and cash equivalents 743 Trade receivables 1,698 Contract assets 76 Property, plant and equipment 208 Trade and other payables (1,299) Provisions (1,367) Net identifiable assets acquired 59 Goodwill and intangibles arising on acquisition Consideration 7,657 Less: fair value of identifiable net assets acquired 59 Goodwill arising on acquisition 7,598 Goodwill arising on acquisitions in the year comprises the value of expected in-sourced specialist capabilities resulting in new sector opportunities. Net cash outflow on acquisition of subsidiary Consideration paid in cash (5,550) Add back: Cash and cash equivalents balances acquired 743 Less: Settlement of net financial debt and net working capital (97) Net cash flow on acquisition (4,904) Impact of acquisition on the result of the Group Had the business combination been effected at 1 July 2023, management estimates the revenue of the Group would have been $563.8 million and the net profit after tax for the year would have been $23.0 million. The revenue and net profit after tax of MDE for the period since acquisition was not material to the Group’s results for the year ended 30 June 2024. NOTES TO THE FINANCIAL STATEMENTS CONT’D 26. Share-based payments (a) Expense recognised in profit or loss Share based payments expenses for the year comprises: 2024 2023 $’000 $’000 2024 Performance Rights (i) (571) - 2023 Performance Rights (ii) (985) (279) 2022 Performance Rights (iii) (853) (151) 2021 Performance Rights - (224) (2,409) (654) 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. The amount recognised is further adjusted to revalue cash-settled performance rights to their fair value at the reporting date. Of the total share-based payment expense of $2.4m, $0.8m is recognised as an employee benefit expense (refer note 6) and $1.6m is recognised as a finance cost (refer note 8). (i) 2024 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. Grant date / employees entitled Number of instruments Vesting conditions Performance period Performance rights issued to senior man- agement on 4 November 2023 180,419 Employed on 30 June 2026 and exceed performance hurdle 36 months Performance rights issued to key manage- ment on 4 November 2023 1,463,179 Employed on 30 June 2026 and exceed performance hurdle 36 months Total /performance rights granted 1,643,598 During the year none of the 2024 Performance Rights were forfeited. 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 2023 to 30 June 2026 (“Performance Period”); • No performance rights will vest until 30 June 2026; • 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 Received))/Share Price at Start Date NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 62 63 26. Share-based payments (continued) (a) Expense recognised in profit or loss (continued) TSR will be assessed against targets for threshold performance of 8% per annum compounded over the Performance Period and for stretch performance of 12% 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 0% vesting 8% per annum compounded 50% vesting Between 8% and 12% per annum compounded Pro-rata vesting between 50% and 100% At or above 12% per annum compounded 100% vesting EPS performance will be measured in the 2026 financial year. For the purposes of performance testing the Performance Rights, EPS in the 2025 financial year will be the Basic EPS for the year, as prescribed by the accounting standards and set out in the Company’s Financial Reports, adjusted to remove the following non-cash items from the calculation of profit or loss attributable to ordinary shareholders in the year, in order to reflect the company’s underlying profitability: (a) amortisation of acquired intangibles; (b) unwinding of interest on contingent acquisition consideration payments; (c) adjustments to the assessment of contingent acquisition consideration payable; and (d) acquisition costs. EPS performance in the 2026 financial year, as described above, will be assessed against targets for threshold performance of 8% compound annual growth from EPS in the 2023 financial year and for stretch performance of 12% compound annual growth from EPS in the 2023 financial year. The vesting schedule is as follows for EPS performance in the 2026 financial year: Less than 8% compound annual growth from EPS in FY23 0% vesting 8% compound annual growth from EPS in FY23 50% vesting Between 8% and 12% compound annual growth from EPS in FY23 Pro-rata vesting between 50% and 100% At or above 12% compound annual growth from EPS in FY23 100% vesting Under the terms of the LTI Plan up to 50% of vested performance rights may be exercised for cash at the participants discretion with the balance exercised for one ordinary share per vested performance right. 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 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. (ii) 2023 Performance Rights There were 1,802,174 financial year 2023 Performance Rights on issue at 1 July 2023. No 2023 Performance Rights were granted, none vested and none were forfeited during the year. The 2023 Performance Rights will be performance tested over a three-year period from 1 July 2022 to 30 June 2025. The hurdles used to determine performance are Absolute Total Shareholder Return (TSR) and Earnings per Share (EPS) performance. (iii) 2022 Performance Rights There were 1,093,118 financial year 2022 Performance Rights on issue at 1 July 2023. No 2022 Performance Rights were granted, none vested and none were forfeited during the year. The 2022 Performance Rights will be performance tested over a three-year period from 1 July 2021 to 30 June 2024. The hurdles used to determine performance are Absolute Total Shareholder Return (TSR) and Earnings per Share (EPS) performance. Subsequent to the year end it has been determined that 100% of the 2022 Performance Rights have vested. NOTES TO THE FINANCIAL STATEMENTS CONT’D 26. Share-based payments (continued) (b) Measurement of fair values (i) Equity-settled share-based payment arrangements The fair value of the equity-settled TSR Performance Rights has been measured using the Monte-Carlo simulation. The equity-settled EPS Performance Rights have been measured using the Binomial Tree Methodology. The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows: The performance rights issued were granted in one tranche as follows: 2024 2024 2023 Grant date 25 August 2024 1 November 2024 4 November 2022 Vesting date 30 June 2026 30 June 2026 30 June 2025 Share price at grant date $0.735 $0.82 $0.67 Expected life 2.8 years 2.7 years 2.7 years Volatility 30% 30% 32% Risk free interest rate 3.83% 4.39% 3.29% Dividend yield 6.0% 6.0% 5.9% Fair value of TSR component $0.35 $0.48 $0.37 Fair value of EPS component $0.62 $0.70 $0.58 (ii) Cash-settled share-based payment arrangements Cash-settled share-based payment arrangements are fair valued at each reporting date. For the 2022 Performance Rights, which were performance tested at 30 June 2024 and for which the performance conditions have been met, the fair value is deemed to be the share price at the balance date which was $1.73. For the remaining plans, the fair value of the cash-settled TSR Performance Rights has been measured using the Monte-Carlo simulation. The cash-settled EPS Performance Rights have been measured using the Binomial Tree Methodology. The inputs used in the measurement of the fair values at 30 June 2024 of the cash-settled share-based payment plans were as follows: 2023 Performance Rights 2024 Performance Rights Vesting date 30 June 2025 30 June 2026 Share price at valuation date $1.73 $1.73 Expected life 1 year 2 years Volatility 30% 30% Risk free interest rate 4.28% 4.11% Dividend yield 5.2% 5.2% TSR base price $0.576 $0.662 NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 64 65 26. Share-based payments (continued) (c) Reconciliation of outstanding performance rights The number of performance rights under the programmes were as follows: 2024 2023 Number of rights Number of rights Outstanding at 1 July 4,615,246 4,539,453 Granted during the year 1,643,598 2,026,104 Exercised during the year (i) (1,719,954) (1,472,282) Forfeited or withdrawn during the year - (478,029) Outstanding at 30 June 4,538,890 4,615,246 Vested and exercisable at 30 June - - (i) The performance rights exercised during the year were the financial year 2021 Performance Rights which were performance tested on finalisation of the 2023 financial year results with 100% of these performance rights vesting. Included in the total are 546,436 performance rights which were exercised for cash. Subsequent to 30 June 2024, the vesting conditions in respect of the 2022 Performance Rights have been performance tested and it has been determined that all 1,093,118 of the 2022 Performance Rights have vested. 27. Reconciliation of cash flows from operating activities 2024 2023 $’000 $’000 Profit for the year 21,915 20,091 Adjustments for: Depreciation and amortisation 7,445 8,654 Profit on sale of property, plant and equipment and other (58) (486) Equity-settled share-based payment transactions 766 654 Remeasurement of cash-settled share-based payments 1,643 - Other 191 (185) (Increase)/decrease in assets: Trade and other receivables (28,215) 51,680 Inventories (710) 130 Prepayments 1,438 (3,674) Increase/(decrease) in liabilities: Trade and other payables 40,042 (29,758) Provisions and employee benefits 609 (1,832) Contingent acquisition consideration 28 206 Income tax payable (1,271) 10,196 Deferred income tax (6,258) (7,505) Net cash from operating activities 37,565 48,171 NOTES TO THE FINANCIAL STATEMENTS CONT’D 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 and Surety Bonds 94,130 56,583 Bank Guarantees and Surety Bonds are provided to customers for safeguarding contract performance. Total bank guarantee facilities at 30 June 2024 were $74.7 million (2023: $49.7 million) and the unused portion was $31.1 million (2023: $19.0 million). These facilities are subject to annual review. Total surety bonds facilities at 30 June 2024 were $95.5 million (2023: $65.5 million) and the unused portion was $44.9 million (2023: $39.6 million). These facilities are subject to annual review. The Group is restricted to drawing down at any one time to a maximum capacity of $150.0 million (2023: $100.0 million) combined across its bank guarantee and bond facilities meaning there was a headroom of bank guarantee and surety bond capacity of $55.9 million at 30 June 2024 (2023: $43.4 million). All facilities are set to mature prior to 30 June 2025. It is management’s intention to review these facilities at maturity so as to maintain a level appropriate to support the ongoing business of the Group. Other contingent liabilities The Group is currently managing a number of claims in relation to construction contracts. The directors are of the opinion that disclosure of any further information relating to these would be prejudicial to the interests of the Group. 29. Subsequent events Dividend declared On 20 August 2024 the Directors of Southern Cross Electrical Engineering Limited declared a final dividend on ordinary shares in respect of the 2024 financial year. The total amount of the dividend is $13.2 million, which represents a fully franked final dividend of 5 cents per share. This dividend has not been provided for in the 30 June 2024 financial statements. The Southern Cross Electrical Engineering Limited Dividend Reinvestment Plan will apply to the dividend. Otherwise, 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: 2024 2023 $’000 $’000 - Auditing or reviewing the financial report 524,000 499,750 524,000 499,750 For the financial year ending 30 June 2024, the auditor for the Group is engaged by the parent company. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 66 67 31. Parent entity disclosures As at, and throughout, the financial year ending 30 June 2024 the parent company of the consolidated entity was Southern Cross Electrical Engineering Limited. 2024 2023 $’000 $’000 Result of the parent entity Profit for the period 20,244 49,979 Total comprehensive loss for the period 20,244 49,979 Financial position of parent entity at year end Current assets 22,074 22,675 Total assets 166,465 159,076 Current liabilities (31,675) (8,580) Total liabilities (37,197) (37,426) Total equity of the parent entity comprising: Share capital 117,554 116,651 Reserves 372 990 Accumulated profits 11,342 4,009 Total Equity 129,268 121,650 Parent entity contingencies: The parent entity has contingent liabilities which are included in note 28. At 30 June 2024, 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: 2024 2023 $’000 $’000 Short-term employee benefits 2,652 2,352 Post-employment benefits 101 95 Share-based payments 2,124 580 4,877 3,027 Compensation of the Group’s key management personnel includes salaries, short term incentives and non-cash benefits from a long-term incentive scheme (see note 26 (a)(i)). NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies 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 2024. The Group did not early adopt any standard, interpretation or amendment that has been issued but is not yet effective. The Group did not adopt any new standard and amendments or interpretation to standards from 1 July 2023 which had a material effect on the financial position or performance of the Group. (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) Transactions eliminated on consolidation Intra-group balances and any unrealised income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investments to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (b) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss. (ii) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Australian dollars at exchange rates at the reporting date. Income and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to profit or loss. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income and presented in the foreign currency translation reserve in equity. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 68 69 33. Material accounting policies (continued) (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 non-derivative financial assets 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. The Group has the following non-derivative financial assets: • Financial assets at amortised cost • Cash and cash equivalents Financial assets at amortised cost • Financial assets at amortised cost are receivables 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, these financial assets are measured at amortised cost using the effective interest method, less any impairment losses. • Financial assets at amortised cost 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 Lease liability, Contingent acquisition consideration and Trade and other payables. NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies (continued) (d) Financial instruments (continued) (iii) Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and performance rights are recognised as a deduction from equity, net of any tax effects. (e) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self- constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Borrowing costs related to the acquisition or construction of qualifying assets are recognised as part of the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “Other income” in profit or loss. (ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. (iii) Depreciation Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight line or diminishing value basis over the estimated useful life of each part of an item of property, plant and equipment, depending on which method most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leasehold 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 40 years Leasehold improvements 3 – 40 years Plant and equipment 2 – 20 years Motor vehicles 2 – 10 years Office furniture and fittings 2 – 20 years Depreciation methods, useful lives and residual values are reviewed at each reporting date. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 70 71 33. Material accounting policies (continued) (f) Intangible assets (i) Goodwill Goodwill is measured at cost less accumulated impairment losses. The Group measures goodwill at the acquisition date as: • the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus • if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. (ii) Other intangible assets Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses. (iii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure including expenditure on internally generated goodwill and brands is recognised in profit or loss as incurred. (iv) Amortisation Amortisation is calculated over the cost of the asset, or another amount substituted for cost, less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current period are as follows: 2024 2023 • Customer contracts 1 – 5 years 1 – 5 years Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. (g) Leases The Group recognises lease assets and lease liabilities for its leases other than those leases with short-term, i.e. twelve months or less, and/or of low-value, i.e. less than $7,000. Leased assets The right-of-use asset recognised by the Group comprise the initial measurement of the related lease liability, any lease payments made at or before the commencement of the contract, less any lease incentives received and any direct costs. Costs incurred by the Group to dismantle the asset, restore the site or restore the asset are included in the cost of the right-of-use asset. Subsequently, right-of-use asset is measured at cost less any accumulated amortisation and impairment losses and adjusted for certain remeasurements of the lease liability. The Group amortises the right-of- use assets on a straight-line basis from the lease commencement date to the end of the useful life of the underlying asset or the end of the lease term, whichever is earlier. If the recoverable amount of a right-of-use asset is less than its carrying value, an impairment charge is recognised in the profit or loss and the carrying value of the asset is written down to its recoverable amount. Short-term or low-value operating leases subject to recognition exemption under AASB 16 are not recognised in the Balance Sheet. The costs incurred during the period related to these leases are recognised in the profit or loss. NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies (continued) (g) Leases (continued) Lease liabilities The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The lease liability is separately disclosed on the statement of financial position. The liabilities which will be repaid within twelve months are recognised as current and the liabilities which will be repaid in excess of twelve months are recognised as non-current. The lease liability is subsequently measured by reducing the balance to reflect the principal lease repayments made and increasing the carrying amount by the interest on the lease liability. The Group remeasures the lease liability and makes an adjustment to the right-of-use asset in the following instances: • The term of the lease has been modified or there has been a change in the Group’s assessment of the purchase option being exercised, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate; or • A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate; or • The lease payments are adjusted due to changes in the index or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate. However, if a change in lease payments is due to a change in a floating interest rate, a revised discount rate is used. Lease and non-lease components of a contract are accounted for separately. Non-lease components of the lease payments are expensed as incurred and are not included in determining the present value. The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option, under some of its leases to lease the assets for additional periods. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew and considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew. (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. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 72 73 NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies (continued) (i) Contract assets Contract assets represents construction work equal to 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 (note 33(n)) less progress billings and recognised losses. Cost includes all expenditure related directly to 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 contract liabilities in Trade and other payables on the balance sheet. Payments from customers are received based on a billing schedule or milestone basis, as established in our contracts. (j) Impairment (i) Financial assets A financial asset not carried at fair value through the profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of the asset that can be estimated reliably. Objective evidence that a financial asset (including equity securities) is impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy and the disappearance of an active market for a security. The Group considers evidence of impairment for receivables at both a specific asset level and collective level (see note 23). 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 forward-looking economic and credit conditions are such that actual losses are likely to be greater or less than suggested by historical trends (see note 23). 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 (a “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to the cash- generating units that are expected to benefit from the synergies of the combination. NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies (continued) (j) Impairment (continued) (ii) Non-financial assets (continued) 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 based on 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 units on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (k) Employee benefits (i) Long-term benefits The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on- costs. These benefits are then discounted to determine their present value. 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 equity-settled performance rights 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. The fair value of cash-settled performance rights granted to employees is recognised at grant date as an employee expense with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each subsequent reporting date and at settlement date based on its fair value at that date. Any changes in the liability arising from these subsequent remeasurements are recognised in profit or loss as finance income or expense. REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 74 75 NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies (continued) (l) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (m) Revenue Revenue recognition accounting policy The Group applies two approaches to recognising revenue to contracts with customers: either at a point in time or over time, depending on the manner the customer obtains control of the goods or services. Revenue is recognised over time if one of the following is met: • The customer simultaneously receives and consumes the benefits as the Group performs; • The customer controls the asset as the Group creates or enhances it; or • The Group’s performance does not create an asset for which the Group has an alternative use and there is a right to payment for the performance to date. Revenue from contracts is recognised in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the group expects to be entitled in exchange for the goods or services. The following are the steps in determining revenue from contracts as prescribed by the Five (5) Step Revenue Recognition Model introduced by AASB 15: 1) Identify the contract(s) with a customer 2) Identify the performance obligations in the contract 3) Determine the transaction price 4) Allocate the transaction price to the performance obligations in the contract 5) Recognise revenue when (or as) the entity satisfies a performance obligation Judgement is required in determining the timing of the transfer of control, at a point in time or over time, as well as in each of the five enumerated steps in the revenue recognition model above. (i) Construction revenue Construction contracts are assessed to identify the performance obligations contained in the contract. The total transaction price is allocated to each individual performance obligation. The Group’s construction contracts may often contain a single performance obligation. The benefits being provided by the Group’s construction work transfer to the customer as the work is performed and as such revenue is recognised over the duration of the project based on percentage complete. Percentage complete is generally measured according to the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs (input method). Significant judgement is required to estimate total contract costs. If the input method would not be representative of the stage of completion, then it is measured by reference to surveys of work performed (output method). When it is probable that total contract costs will exceed total contract revenue, the unavoidable loss is recognised as an expense immediately. Customers are typically invoiced on a monthly basis and invoices are paid on normal commercial terms. NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies (continued) (m) Revenue (continued) (ii) Services revenue The Group performs maintenance and other services for a variety of different sectors. Typically, under the performance obligations of a service contract, the customer consumes and receive the benefit of the service as it is provided. Performance obligations are fulfilled over time as the Group largely performs maintenance over the assets which the customer controls. Customers are typically invoiced monthly for an amount that is calculated on either a schedule of rates or a cost-plus basis. (iii) Contract modifications Revenue in relation to modifications, such as a change in the scope or price (or both) of the contract, are to be included in the contract price when it is approved by the parties to the contract and the modification is enforceable. Approval of a contract modification can be in writing, by oral agreement or implied by customary business practices. Revenue estimated and recognised in relation to claims and variations is only included in the contract price to the extent that it is highly probable that a significant reversal in the amount recognised will not occur. In making this assessment the Group considers a number of factors, including the nature of the claim, formal or informal acceptance by the customer of the validity of the claim, the stage of negotiations, assessments by independent experts and the historical outcome of similar claims to determine whether the enforceable and “highly probable” thresholds have been met. (iv) Performance obligations Revenue is allocated to each performance obligation and recognised as the performance obligation is satisfied which may be at a point in time or over time. AASB 15 requires a detailed and technical approach to identify the different revenue streams (i.e. performance obligations) in a contract. This is done by identifying the different activities that are being undertaken and then aggregating only those where the different activities are significantly integrated or highly interdependent. Revenue is to be continuously recognised, on certain contracts over time, as a single performance obligation when the services are part of a series of distinct goods and services that are substantially integrated with the same pattern of transfer. The term over which revenue may be recognised is limited to the period for which the parties have enforceable rights and obligations. When the customer can terminate a contract for convenience (without a substantive penalty), the contract term and related revenue is limited to the termination period. The Group has elected to apply the practical expedient to not adjust the total consideration over the contract term for the effect of a financing component if the period between the transfer of services to the customer and the customer’s payment for these services is expected to be one year or less. (v) Variable consideration Variable consideration includes performance or other incentive fees or penalties associated with contracts. If the consideration in the contract includes a variable amount, the Group estimates the amount of the consideration to which it is entitled in exchange for transferring the goods and services to the customer. The variable consideration is estimated at contract inception and constrained to the extent that it is highly probable that a significant reversal in the amount recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. All revenue is stated net of the amount of goods and services tax (GST). REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 76 77 NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies (continued) (n) Finance income and expenses Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method. 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. Remeasurement of cash-settled share-based payments are recognised as a finance expense. (o) 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. Tax consolidation Southern Cross Electrical Engineering Limited has formed a tax consolidated group. The head entity, Southern Cross Electrical Engineering Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate members of the tax consolidated group. (p) Goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies (continued) (q) 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. (r) 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. (s) Financial guarantees Financial guarantee contracts are initially measured at their fair values and subsequently measured at the higher of: • the loss allowance determined in accordance with AASB 9 Financial Instruments; and • the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with AASB 15 Revenue from Contracts with Customers. 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 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. (t) 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 at the acquisition-date of the 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. REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 78 79 NOTES TO THE FINANCIAL STATEMENTS CONT’D 33. Material accounting policies (continued) (t) Business combinations (continued) 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. 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 9 Financial Instruments, 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. (u) Government grants Government grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset. 33. Material accounting policies (continued) (v) New standards and interpretations issued but not yet effective The new standards and amendments to standards and interpretations effective for annual reporting periods beginning after 30 June 2024, such as those disclosed below, have not been applied in preparing these consolidated financial statements. The Group intends to adopt these new standards and amendment to standards and interpretations, if applicable, when they become effective: Amendments to Australian Accounting Standards: AASB 2014-10 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture AASB 2020-1 Classification of Liabilities as Current or Non-current AASB 2021-7 Editorial Corrections to Accounting standards and Repeal of Superseded and Redundant Statements AASB 2022-5 Lease Liability in a Sale and Leaseback AASB 2022-6 Non-current Liabilities with Covenants AASB 2023-1 Supplier Finance Arrangements AASB 18 Presentation and Disclosure in Financial Statements The Group has yet to determine the likely impact of these new standards and amendments to standards. 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 are determined using market comparison technique and cost technique. The valuation model considers quoted market prices for similar items when available and depreciated replacement cost when appropriate. (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 disposal including a reasonable profit margin for the selling effort. (iii) Trade and other receivables The fair value of trade and other receivables acquired in a business combination, including contract asset as well as 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, if required 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. NOTES TO THE FINANCIAL STATEMENTS CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 80 81 34. Determination of fair values (continued) (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. (vi) Customer contracts and relationships The fair value of customer contracts and relationships acquired in a business combination is estimated as the present value of future cash flows, discounted at the market rate of interest at the acquisition date. NOTES TO THE FINANCIAL STATEMENTS CONT’D Body Corporate, Partnership or Trust Country of Incorporation Equity Interest (%) Australian or Foreign Tax Resident Jurisdiction for Foreign Tax Resident Southern Cross Electrical Engineering Limited Body Corporate Australia 100 Australia N/A Southern Cross Electrical Engineering (WA) Pty Ltd Body Corporate Australia 100 Australia N/A S&DH Enterprises Pty Ltd Body Corporate Australia 100 Australia N/A FMC Corporation Pty Ltd Body Corporate Australia 100 Australia N/A Southern Cross Electrical Engineering (Australia) Pty Ltd Body Corporate Australia 100 Australia N/A Hazquip Australia Pty Ltd Body Corporate Australia 100 Australia N/A Datatel Communications Pty Ltd Body Corporate Australia 100 Australia N/A Heyday5 Pty Ltd Body Corporate Australia 100 Australia N/A Electrical Data Projects Pty Ltd Body Corporate Australia 100 Australia N/A Trivantage Holdings Pty Ltd Body Corporate Australia 100 Australia N/A Trivantage Group Pty Ltd Body Corporate Australia 100 Australia N/A Trivantage Pty Ltd Body Corporate Australia 100 Australia N/A S.J. Electric Group Pty Ltd Body Corporate Australia 100 Australia N/A S.J. Electric Group (NSW) Pty Ltd Body Corporate Australia 100 Australia N/A S.J. Electric Group (QLD) Pty Ltd Body Corporate Australia 100 Australia N/A S.J. Electric (SA) Pty Ltd Body Corporate Australia 100 Australia N/A S.J. Electric (VIC) Pty Ltd Body Corporate Australia 100 Australia N/A S.J. Electric (WA) Pty Ltd Body Corporate Australia 100 Australia N/A Seme Solutions Pty Ltd Body Corporate Australia 100 Australia N/A Group CCTV Pty Ltd Body Corporate Australia 100 Australia N/A Central Control Sheetmetal Pty Ltd Body Corporate Australia 100 Australia N/A Positive Systems Pty Ltd Body Corporate Australia 100 Australia N/A Ladd Electric Pty Ltd Body Corporate Australia 100 Australia N/A SCEE Electrical Pty Ltd Body Corporate Australia 100 Australia N/A MDE Group Pty Ltd Body Corporate Australia 100 Australia N/A Southern Cross Electrical Engineering Ghana Pty Ltd Body Corporate Ghana 100 Foreign Ghana Cruz Del Sur Ingeniería Electra (Peru) S.A Body Corporate Peru 100 Foreign Peru Southern Cross Electrical Engineering Tanzania Pty Ltd Body Corporate Tanzania 100 Foreign Tanzania Key assumptions and judgements Determination of Tax Residency Section 295 (3A) of the Corporation Acts 2001 requires that the tax residency of each entity which is included in the Consolidated Entity Disclosure Statement (CEDS) be disclosed. In the context of an entity which was an Australian resident, “Australian resident” has the meaning provided in the Income Tax Assessment Act 1997. The determination of tax residency involves judgment as the determination of tax residency is highly fact dependent and there are currently several different interpretations that could be adopted, and which could give rise to a different conclusion on residency. In determining tax residency, the consolidated entity has applied the following interpretations: • Australian tax residency The consolidated entity has applied current legislation and judicial precedent, including having regard to the Commissioner of Taxation’s public guidance in Tax Ruling TR 2018/5. • Foreign tax residency The consolidated entity has applied current legislation and where available judicial precedent in the determination of foreign tax residency. CONSOLIDATED ENTITY DISCLOSURE STATEMENT FOR THE YEAR ENDED 30 JUNE 2024 REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 82 83 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. giving a true and fair view of the Group’s financial position as at 30 June 2024 and of its performance for the financial year ended on that date; and ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and b. the Consolidated entity disclosure statement as at 30 June 2024 set out on page 84 to the consolidated financial report is true and correct; and 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 2024. 3. At the date of this declaration, there are reasonable grounds to believe that the Company and the group entities identified in Note 24 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those group entities pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785. 4. The directors draw attention to Note 2 to the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards. This declaration is made in accordance with a resolution of the Board of Directors. Signed in accordance with a resolution of the directors: Karl Paganin Chairman 20 August 2024 TO THE MEMBERS OF SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED INDEPENDENT AUDIT REPORT KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. 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 gives a true and fair view, including of the Group’s financial position as at 30 June 2024 and of its financial performance for the year then ended, in accordance with the Corporations Act 2001, in compliance with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated balance sheet as at 30 June 2024; • Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; • Consolidated entity disclosure statement and accompanying basis of preparation as at 30 June 2024; • Notes, including material accounting policies; and • 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 (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. Key Audit Matters The Key Audit Matters we identified are: • Recognition of Contract Revenue; and • Valuation of Goodwill. Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. DIRECTORS’ DECLARATION REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 84 85 TO THE MEMBERS OF SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED INDEPENDENT AUDIT REPORT CONT’D Recognition of Contract Revenue ($551.9 million) Refer to Note 4 to the Financial Report The key audit matter How the matter was addressed in our audit Recognition of Contract revenue is a key audit matter due to the: Significance of revenue to the financial statements; and Large number of customer contracts with numerous estimation events that may occur over the course of the contract's life. This results in complex and judgemental revenue recognition from rendering of services and construction contracts. Therefore, significant audit effort is required to gather sufficient appropriate audit evidence for revenue recognition. We focused on the Group's assessment of the following elements of revenue recognition for rendering of services and construction contracts, as applicable: The Group's determination of contractual entitlement and assessment of the probability of customer approval of changes in scope and/or price. The Group's consideration of the enforceability or approval of the modification of the terms of a contract may include evidence that is written, oral, or implied by customary business practice and may include involvement from the Group’s legal, time and cost experts. The Group's determination of modifications requires a degree of judgement and can drive different accounting treatments, increasing the risk of inappropriately recognising revenue; Estimating total expected costs at initiation of the customer contract, which have a high level of estimation uncertainty; and Revisions to total expected costs for certain events or conditions that occur during the performance of the contract, or are expected to occur to complete the customer contract, which is difficult to estimate. Our procedures included: We assessed the appropriateness of the Group’s accounting policies related to revenue recognition against the requirements of the accounting standard and our understanding of the business and industry practice; We read key contracts and other underlying documentation such as customer correspondence to evaluate the inputs to the Group’s calculation of revenue; We tested a sample of revenue transactions by checking it to underlying documentation to assess the satisfaction of the performance obligations; We tested a sample of unbilled contract assets to underlying documentation to assess the satisfaction of the performance obligations; For key contracts where revenue is recognised on a percentage of completion basis, we assessed the total expected cost estimates by (1) obtaining an understanding of the activities required to complete the customer contract from the Group’s contract teams, (2) analysing the costs of those activities compared to recent project cost trends and prices, (3) testing a sample of committed expenditure to underlying documentation, and (4) using our knowledge of the contract characteristics to challenge the completeness of costs and activities; We evaluated the Group's assessment of when a modification to the contract scope and/or price for variations and claims is approved and enforceable. This included assessing the recognised modifications against the underlying records, legal documents, and customer correspondence; We assessed the Group's estimation of variations and claims by comparing underlying evidence such as customer correspondence and reports from the Group’s time and cost experts (where applicable) for consistency with contract terms. For a sample of contracts, we compared the recalculated revenue by us, including contract modifications against the amounts recorded by the Group; TO THE MEMBERS OF SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED INDEPENDENT AUDIT REPORT CONT’D We used the Group's legal, time and cost experts' reports received on contentious matters to assess the recognition of variations and claims against the criteria in the revenue accounting standard. We checked the consistency of this to the inclusion or not of an amount in the Group’s estimates used for revenue recognition; We assessed the scope, competency, and objectivity of the legal, time and cost experts engaged by the Group; We evaluated the Group’s ability to recover outstanding variation and claim amounts not yet settled with a sample of customers by assessing the status of contract negotiations, historical recoveries and expert reports obtained by the Group; We tested significant credit notes recognised post year end to check the Group’s recognition of revenue in the correct period; and We assessed the appropriateness of the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standards. REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 86 87 TO THE MEMBERS OF SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED INDEPENDENT AUDIT REPORT CONT’D Valuation of Goodwill ($110.6 million) Refer to Note 17 to the Financial Report The key audit matter How the matter was addressed in our audit The Group’s annual testing of Goodwill for impairment is a key audit matter due to the size of the balance, being 30% of total assets. We focused on the significant forward-looking assumptions the Group applied in their value in use models for the SCEE Electrical, Heyday and Trivantage cash generating units (CGUs), including: Forecast revenue, margins, growth rates and terminal growth rates, as the Group’s valuation models are sensitive to changes in these assumptions, which could reduce or remove available headroom, and increases the possibility of goodwill being impaired. This drives additional audit effort specific to their feasibility within the Group’s strategy; and Discount rates - these are complicated in nature and vary according to the conditions and environment the specific CGUs are subject to from time to time. The Group’s modelling is sensitive to changes in the discount rate. We involve our valuation specialists with the assessment. Our procedures included: Considering the appropriateness of the value in use method applied by the Group to perform the annual test of goodwill for impairment against the requirements of the accounting standards; Assessing the integrity of the value in use models used, including the accuracy of the underlying calculation formulas; Challenging the feasibility of the Group’s revenue and margin assumptions within the forecast cash flows in light of varying competitive conditions in the markets in which the Group operates. We compared revenue growth rates and terminal growth rates to historical trends, published studies of industry trends and expectations, and considered differences for the Group’s operations. We further assessed forecast revenue against the secured contract value of work for those respective years and the level of secured work at similar times in previous years. We used our knowledge of the Group, their past performance, business and customers, and our industry experience; Comparing the forecast cash flows contained in the value in use models to Board approved forecasts; Assessing the accuracy of previous Group forecasting to inform our evaluation of forecasts included in the value in use models. We applied increased scepticism to current period forecasts in areas where previous forecasts were not achieved and/or where future uncertainty is greater or volatility is expected; • Considering the sensitivity of the models by varying key assumptions, such as forecast revenue, margins, terminal growth rates and discount rates, within a reasonable possible range. We did this to identify those CGUs with a higher risk of impairment and to focus our further procedures; TO THE MEMBERS OF SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED INDEPENDENT AUDIT REPORT CONT’D • 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; and We assessed the Group's disclosures of the quantitative and qualitative considerations in relation to the valuation of goodwill, by comparing these disclosures in the financial report using our understanding obtained from our testing and the requirements of the accounting standards. Other Information Other Information is financial and non-financial information in Southern Cross Electrical Engineering Limited’s annual report 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 Renumeration 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. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • Preparing the Financial Report in accordance with the Corporations Act 2001, including giving a true and fair view of the financial position and performance of the Group, and in compliance with Australian Accounting Standards and the Corporations Regulations 2001; • Implementing necessary internal control to enable the preparation of a Financial Report in accordance with the Corporations Act 2001, including giving a true and fair view of the financial position and performance of the Group, and that is free from material misstatement, whether due to fraud or error; and • Assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. 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 and Company or to cease operations, or have no realistic alternative but to do so. REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 88 89 TO THE MEMBERS OF SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED INDEPENDENT AUDIT REPORT CONT’D 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 the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 2024, 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 27 to 34 of the Directors’ report for the year ended 30 June 2024. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG R Gambitta Partner Perth 20 August 2024 LEAD AUDITOR’S INDEPENDENCE DECLARATION KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. 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, to the best of my knowledge and belief, in relation to the audit of Southern Cross Electrical Engineering Limited for the financial year ended 30 June 2024 there have been: i. No contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. No contraventions of any applicable code of professional conduct in relation to the audit. KPMG R Gambitta Partner Perth 20 August 2024 REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 90 91 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 14 August 2024. Distribution of equity security holders Number of equity security holders Category Ordinary shares Performance rights 1 - 1,000 801 - 1,001 - 5,000 1,487 - 5,001 - 10,000 856 - 10,001 - 100,000 1,519 - 100,001 and over 178 3 4,841 3 The number of shareholders holding less than a marketable parcel of ordinary shares is 219. Twenty largest shareholders Category Number of ordinary shares held Percentage of capital held Frank Tomasi Nominees Pty Ltd46,862,764 17.80 UBS Nominees Pty Ltd 45,137,897 17.15 HSBC Custody Nominees (Australia) Limited 23,538,410 8.94 Citicorp Nominees Pty Limited 15,791,509 6.00 J P Morgan Nominees Australia Pty Limited 13,434,877 5.10 Mr Paul Chisholm 2,658,757 1.01 Warbont Nominees Pty Ltd 2,597,148 0.99 Asgard Capital Management Ltd <1109440 Kaleidoscope A/C> 2,424,300 0.92 Alfiedoug Pty Ltd 2,291,007 0.87 BNP Paribas Nominees Pty Ltd 1,862,416 0.71 HSBC Custody Nominees (Australia) Limited - A/C 2 1,841,271 0.70 Westor Asset Management Pty Ltd 1,527,541 0.58 Neweconomy Com Au Nominees Pty Limited <900 Account> 1,400,202 0.53 Poco Asino Investments Pty Ltd 1,166,698 0.44 Mr Roger Edward Koch 1,150,000 0.44 Mr Raymond John Wise 1,076,846 0.41 Felix Ventures Pty Ltd 1,008,112 0.38 Dr Andrew Richard Conway + Dr Vanessa Joy Teague 1,000,000 0.38 Dr Steven Cai 888,578 0.34 Mr Jeffrey Michael Hunt 819,229 0.31 168,477,562 64.00 ASX ADDITIONAL INFORMATION Substantial shareholders The number of shares held by substantial shareholders and their associates as disclosed in substantial holding notices are: Shareholder Number Frank Tomasi Nominees Pty Ltd 46,862,764 TIGA Trading Pty Ltd 41,200,010 The number of shareholders holding less than a marketable parcel of ordinary shares is 219. Corporate Governance Statement The Corporate Governance Statement can be found at https://www.scee.com.au/investors/corporate-governance ASX ADDITIONAL INFORMATION CONT’D REMUNERATION REPORT CHAIRMAN’S REPORT HIGHLIGHTS ABOUT SCEE GROUP MD REVIEW DIRECTORS’ REPORT FINANCIAL STATEMENTS 07 SCEE GROUP – ANNUAL REPORT 2024 SCEE GROUP – ANNUAL REPORT 2024 92 93 Directors Karl Paganin Independent Chairman and Non-Executive Director Graeme Dunn Managing Director and Chief Executive Officer Derek Parkin OAM Independent Non-Executive Director Simon Buchhorn Independent Non-Executive Director Paul Chisholm Independent Non-Executive Director Company Secretaries Chris Douglass Colin Harper ASX Code: SXE Registered Office Level 15, 225 St Georges Terrace Perth WA 6000 T: +618 9236 8300 Share Registry Computershare Investor Services Pty Limited Level 11, 172 St Georges Terrace Perth WA 6000 T: 1300 787 272 Solicitors K & L Gates Level 32, 44 St Georges Terrace Perth WA 6000 Auditors KPMG 235 St Georges Terrace Perth WA 6000 CORPORATE DIRECTORY SCEE GROUP – ANNUAL REPORT 2024 94 SCEE GROUP – ANNUAL REPORT 2024 94 scee.com.au Southern Cross Electrical Engineering Limited ABN: 92 009 307 046 ASX: SXE