1 Financial Statements for the year ended 30 June 2024 2024
2 for the year ended 30 June 2024 Portfolio Breakdown Revenue by Business Unit Consistent project execution performance, diversity and technical capability continues to position the company well. 5% 13% 11% 71% Australia South East Asia New Zealand Built Environs
3 as at year ended 30 June 2024 13% 17% 61% Revenue by Type 2% 33% 27% 38% 24% 36% 36% Design & Construction Service Relationship Service 9% Work in Hand by Business Unit Australia South East Asia New Zealand Built Environs Construction only Relationship Design & Construction Work in Hand by Type 4% Construction only 36%
for the year ended 30 June 2024 4 The Directors present their report on the company consisting of McConnell Dowell Corporation Limited (the Company) and its controlled entities for the year ended 30 June 2024. DIRECTORS AND COMPANY SECRETARY The following persons were Directors of McConnell Dowell Corporation Limited during the financial year and up to the date of this report: Directors S.V. Cummins, D.J. Morrison, A.H. Macartney Company Secretary D.J. Morrison PRINCIPAL ACTIVITIES The principal activity of the company is construction. There were no significant changes in the principal activities of the company during the year. CONSOLIDATED RESULT For the year ended 30 June 2024, the Group achieved a 27% growth in revenue to A$2.8 billion (2023: A$2.2 billion), mainly attributable to revenue growth in its businesses in Australia and New Zealand & Pacific Islands. The business continues to focus on specialised projects in Australia, New Zealand & Pacific Islands, and Southeast Asia, offering engineering and infrastructure solutions in the transport, water & wastewater, ports & coastal, energy, resources and commercial building sectors. KEY FINANCIAL HIGHLIGHTS IN FY24 • Revenue grew by 27% to $2.8 billion (2023: $2.2 billion). • Restoration of operational earnings by more than 100% to a profit after tax of by $50 million compared to a loss of $66 million profit in the comparative period. • Work in hand comparatively lower to $2.6 billion with $1.9 billion new work secured during the period. • Stable liquidity position with $233 million in the bank. All the business units exceeded budget cashflow with term debt fully settled in the current year. • Bonding & bank facilities available of $535.7 million ($466.7 million utilised) with dedicated support from our financial partners. • Preferred positions on prospects worth over $2.5 billion plus a further $3.0 billion live tenders outstanding. OPERATIONAL RESULT McConnell Dowell’s Australian business unit achieved a double-digit increase in revenue, however, recorded lower comparable operational earnings. The effects of the COVID-19 pandemic, continued global conflicts and the ensuing period of hyper escalation of costs have eroded margins on key projects entered into during this period. These higher costs are mitigated through the alliance model on key projects, which ensures that costs are reimbursed. The management of the business unit continues to focus on restoring margin on these projects. The New Zealand & Pacific Islands business unit reported an increase of 17% in revenue to A$305 million and a 29% increase in operating earnings to A$22 million compared to the year ended 30 June 2023. This marks the second consecutive year in which the business unit has operated above its plan. Similarly to the Australian business unit, work in hand fell in the period to A$339 million (2023: A$434 million). New project awards and changes to existing projects to the value of A$209 million were won in the year. The Southeast Asia business unit curtailed the substantial operating losses in the year ended 30 June 2023 (A$129 million loss), primarily from the BLNG contract, to record a modest operating loss of A$6.3 million for the year ended 30 June 2024. The BLNG project contract is now practically complete, with no further losses anticipated. The resumption of tendering activities, halted during the peak of COVID-19, has secured A$226 million of new work in the year. The approach to tendering is highly selective, within our disciplines and for clients who recognise the value we contribute. We continue to focus on reducing risks and working to improve margins on projects awarded prior to COVID-19. The Built Environs business unit increased its revenue by 83% to A$419 million as compared to A$229 million reported in the prior year ended 30 June 2023. This revenue growth is in line with the business unit’s growth agenda enabling the business unit to operate at scale across its three regions. Operating earnings of A$8.6 million, largely as a result of good project execution on key projects, is A$8.5 million higher than the prior period ended 30 June 2023. Work in hand fell by A$121 million from the reported highest historical value of A$564 million at 30 June 2023, however the business unit continues to pursue selective projects, with specific focus on the healthcare sector. Work in hand fell to $2.6 billion (2023: $3.5 billion) as a result of a slowdown in infrastructure awards in Australia and New Zealand, which is expected to continue into FY25, primarily due to the effects of cost escalations on our client’s available budgets. New projects to the value of $1.9 billion were won in the year. The business continues to focus on quality projects which will enhance the consistency of operational margins. The business also has $2.5 billion of preferred tender positions under negotiation, with a strong visible pipeline. While the Group has secured 86% of FY25 revenue, there are some complexities emerging, especially in its largest market, Australia. Recent government change at the federal and state level has led to a review of priorities and major projects. Investment in social infrastructure (schools, hospitals, public housing) is set to increase in key states such as Victoria and New South Wales, with some of this investment likely to replace transport infrastructure funding. Similarly, all regions are planning for the inevitable energy transition and future climate and water resilience investment requirements. The Group’s Horizon 2030 Strategy is aligned with these trends, and the business is well placed to participate in these next waves of growth. DIVIDENDS A dividend of $3.4 million (2023 – $15.8 million) was declared and paid during the year ended 30 June 2024 to the parent company shareholder. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of affairs of the company other than that referred to in the financial statements and notes following. In addition to the items discussed under going concern and liquidity, refer to note 27: Events after the reporting period. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the financial year the company indemnified and paid an insurance premium in respect of a D&O policy insuring the directors and officers of the group companies for certain liabilities and legal costs and expenses that may be incurred by those individuals in their capacity as directors or officers, to the extent permitted by law. The contract of insurance prohibits disclosure of the amount of the premium paid by the company. SAFETY AND ENVIRONMENTAL REGULATIONS The company is committed to the highest standard of environmental and workplace safety performance reasonably practicable. Directors' Report
5 The company’s performance in respect to its compliance with its policies and operating procedures to ensure its obligations in this regard are met is reported to the Executive Committee (Exco). The company is subject to various environmental and safety regulations under either Commonwealth, State or other international legislation. The Board believes the company has adequate systems in place for the management of its environmental and workplace safety compliance and operational risks and is not aware of any material breach of relevant legal and regulatory requirements as they apply to the company other than those already disclosed in this report. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF COMPANY In the opinion of the directors, it would prejudice the interests of the company if any further information on reasonable and material developments in the operations of the company and the expected results of operations were included herein, and the omission of such information is hereby disclosed. EVENTS SUBSEQUENT TO BALANCE DATE No significant events have occurred subsequent to balance date. ROUNDING The amounts contained in this report and in the financial report have been rounded to the nearest thousand dollars (where rounding is applicable) and where noted ($’000’s) under the option available to the company under ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191. The company is an entity to which the Corporations Instrument applies. NON-AUDIT SERVICES The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. KPMG Australia has not received or are not due to receive any amounts for the provision of non-audit services. AUDITOR INDEPENDENCE DECLARATION The company has obtained an Auditor’s Independence Declaration from KPMG Australia. The Auditor’s Independence Declaration is located on the following page. The annual financial statements which appear on pages 7 to 58 were approved by the directors by resolution dated 19 August 2024 and are signed on their behalf. GOING CONCERN AND LIQUIDITY In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the near future. The Company enters the new year with 86% of FY25 revenue secured despite the lower levels of work in hand of $2.6 billion. At the date of this report the Company also has $2.5 billion of opportunities (based on current contract value) that are in sole source negotiations or in Early Contractor involvement stage and therefore it is probable these will be converted into contracted projects. In addition, there are a further $3.0 billion of tenders outstanding and a further $7.5 billion tenders expected in FY25 which will provide a solid base for future growth. The Directors have reviewed the business plans and detailed financial budgets for the year ending 30 June 2025 and beyond. The construction markets of Australia, New Zealand and Built Environs are healthy, however there is a level of uncertainty. The Built Environs pipeline in social infrastructure remains strong, however Government Civil infrastructure spend in New South Wales and in Victoria (all Australian regions) is decreasing. A reducing market will increase the competitiveness in tendering for work. The Company benefits from having diversity in locations and type of work performed allowing the Company to position itself to maximise the opportunities best fit for the organisation. These detailed financial budgets and business plans that are being implemented by management indicate that the Group will have sufficient liquidity resources for the near future. The Company repaid its term debt prior to 30 Jun 24 and has no secured lenders at this date. The company therefore has no banking covenants at 30 June 2024 and did not have any breaches prior to this date. The group retains the support of its bond and guarantee providers. The Directors have considered the business plans and detailed financial budgets, including all available information, and whilst significant estimates and judgements including the impacts of the wider economic environment are always and will continue to be required, the Directors are of the opinion that the going concern assumption is appropriate in the preparation of the financial statements. S. V. Cummins Group Chief Executive Officer and Director 19 August 2024 D. J. Morrison Director 19 August 2024
6 Auditor's Independence Declaration 6 Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of McConnell Dowell Corporation Limited I declare that, to the best of my knowledge and belief, in relation to the audit of McConnell Dowell Corporation 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 Duncan McLennan Partner Sydney 19 August 2024
7 for the year ended 30 June 2024 Statement of Profit or Loss All figures are in A$000's Note 2024 2023 Revenue 2 2,785,724 2,161,489 Other income 2 4,294 1,798 Total revenue and other income 2,790,018 2,163,287 Operating expenses 3 (2,721,380) (2,204,421) Depreciation 9(a), 9(b) (27,146) (25,988) Share of loss of an associate 10 (102) (182) Tax recoupment from Parent 19,777 20,743 Finance income 4 7,615 4,620 Finance expense 4 (4,411) (3,889) Profit / (Loss) before tax 64,371 (45,830) Income tax expense 5 (14,611) (20,743) Profit / (Loss) after tax for the year 49,760 (66,573) Attributable to: Members of the parent entity 49,767 (66,428) Non-controlling interest 23 (7) (145) Profit / (Loss) after tax for the year 49,760 (66,573) Consolidated The above Statement of Proft or Loss is to be read in conjunction with the accompanying notes.
8 for the year ended 30 June 2024 Statement of Other Comprehensive Income All figures are in A$000's Note 2024 2023 Profit / (Loss) after tax for the year 49,760 (66,573) Other comprehensive income Items that may be reclassified subsequently to profit or loss in subsequent period (net of tax) Foreign currency translation (355) 3,680 Other comprehensive (loss) / income for the year, net of tax (355) 3,680 Total comprehensive income / (loss) for the year, net of tax 49,405 (62,893) Attributable to: Members of the parent entity 49,427 (62,720) Non-controlling interest 23 (22) (173) Total comprehensive (loss) / income for the year, net of tax 49,405 (62,893) Consolidated The above Statement of Other Comprehensive Income is to be read in conjunction with the accompanying notes.
9 as at 30 June 2024 All figures are in A$000's Note 2024 2023 Assets Current assets Cash and cash equivalents 8 232,469 176,908 Inventories 6 3,185 1,665 Trade and other receivables 7 357,195 273,410 Contract assets 7(c) 187,257 150,593 Prepayments 2,815 2,799 Income tax receivable - 2,014 Total current assets 782,921 607,389 Non-current assets Property, plant and equipment 9(a) 62,887 49,996 Right of use assets 9(b) 35,910 27,077 Deferred tax assets 12 18,256 9,623 Related party receivable - tax consolidation 17 49,941 45,004 Total non-current assets 166,994 131,700 Total assets 949,915 739,089 Liabilities Current liabilities Trade and other payables 13 442,890 342,922 Contract Liabilities 7(c) 212,759 165,830 Income tax payable 4,934 - Interest bearing loans and borrowings 15 21 25,139 Lease liabilities 18 13,122 11,897 Provisions 16 81,198 52,055 Total current liabilities 754,924 597,843 Non-current liabilities Interest bearing loans and borrowings 15 - 21 Lease liabilities 18 26,603 18,746 Provisions 16 4,064 4,424 Total non-current liabilities 30,667 23,191 Total liabilities 785,591 621,034 Net assets 164,324 118,055 Equity Issued capital 21 277,765 277,765 Reserves 22 6,499 6,575 Accumulated losses (120,104) (166,471) Parent interests 164,160 117,869 Non-controlling interests 23 164 186 Total equity 164,324 118,055 Consolidated The above Statement of Financial Position is to be read in conjunction with the accompanying notes. Statement of Financial Position
10 for the year ended 30 June 2024 All figures are in A$000's Ordinary shares Preference shares Foreign currency translation reserve Asset revaluation reserve Capital and other reserves Non- controlling interest Retained earnings Total equity Balance as at 1 July 2022 267,765 - (2,013) 385 4,151 359 (84,293) 186,354 Loss for the period - - - - - (145) (66,428) (66,573) Other comprehensive income - - 3,708 - - (28) - 3,680 Total comprehensive loss for the period - - 3,708 - - (173) (66,428) (62,893) Preference share issuance* - 10,000 - - - - - 10,000 Share based payment - - - - 344 - - 344 Dividend paid - - - - - - (15,750) (15,750) Balance as at 1 July 2023 267,765 10,000 1,695 385 4,495 186 (166,471) 118,055 Profit for the period - - - - - (7) 49,767 49,760 Other comprehensive loss - - (340) - - (15) 0 (355) Total comprehensive income for the period - - (340) - - (22) 49,767 49,405 Share based payment - - - - 264 - - 264 Dividend paid - - - - - - (3,400) (3,400) Balance as at 30 June 2024 267,765 10,000 1,355 385 4,759 164 (120,104) 164,324 The above Statement of Changes in Equity is to be read in conjunction with the accompanying notes. * Refer to Note 21 Issued Capital for additional information Consolidated Statement of Changes in Equity
11 for the year ended 30 June 2024 All figures are in A$000's Note 2024 2023 Cash flows from operating activities Receipts from customers (inclusive of goods & service tax) 3,006,341 2,301,206 Payments to suppliers and employees (inclusive of goods & service tax) (2,886,424) (2,327,473) Cash generated from / (used in) operating activites 119,917 (26,267) Interest received 7,615 4,620 Finance costs 4 (4,411) (3,889) Income tax and other taxes paid (1,634) (1,897) Net cash inflow / (outflow) from operating activities 8 121,487 (27,433) Cash flows from investing activities Purchase of property, plant and equipment 9 (a) (26,734) (19,221) Proceeds from the disposal of property, plant and equipment 3,976 2,394 Net cash used in investing activities (22,758) (16,827) Cash flows from financing activities Proceeds from issuance of preference shares - 10,000 Proceeds from borrowings - 35,457 Repayment of borrowings (25,139) (10,597) Payment of principal portion of lease liabilites (14,128) (9,469) Dividends paid to the equity holders of the parent (3,400) (15,750) Net cash (used in) / generated from financing activities (42,667) 9,641 Net increase / (decrease) in cash and cash equivalents 56,062 (34,619) Cash and cash equivalents at the beginning of the period 176,908 210,112 Exchange movements on cash (501) 1,415 Cash and cash equivalents at the end of the period 8 232,469 176,908 The above Statement of Cash Flows is to be read in conjunction with the accompanying notes. Statement of Cash Flows Consolidated
for the year ended 30 June 2024 12 Notes to the annual financial statements COMPANY DETAILS McConnell Dowell Corporation Limited (the Company) is a public unlisted for-profit company incorporated and domiciled in Australia. The Company’s registered place of business is Level 10, 480 Swan Street, Richmond, Victoria, Australia. The ultimate Australian parent is Aveng Australia Holdings Pty Ltd. The ultimate parent is Aveng Limited (a company incorporated in South Africa). BASIS OF PREPARATION The financial report is a general-purpose financial report, which has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). The financial report of the Consolidated Entity also complies with International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board (IASB). The financial report has also been prepared on a historical cost basis, except for certain financial instruments (when applicable) which have been measured at fair value. Where necessary, comparative figures have been reclassified and repositioned for consistency with current year disclosures. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand ($000’s) except when otherwise indicated in accordance with ASIC Corporations (Rounding in Financial/ Directors' Reports) Instrument 2016/191. The financial report was approved by a resolution of the Directors of the Company on 19 August 2024. Going Concern In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The Company enters the new year with 86% of FY25 revenue secured despite the lower levels of work in hand of $2.6 billion. At the date of this report the Company also has $2.5 billion of opportunities(based on current contract value) that are in sole source negotiations or in Early Contractor involvement stage and therefore it is probable these will be converted into contracted projects. In addition, there are a further $3.0 billion of tenders outstanding and a further $7.5 billion tenders expected in FY25 which will provide a solid base for future growth. The Directors have reviewed the business plans and detailed financial budgets for the year ending 30 June 2025 and beyond. The construction markets of Australia, New Zealand and Built Environs are healthy, however there is a level of uncertainty. The Built Environs pipeline in social infrastructure remains strong, however Government Civil infrastructure spend in New South Wales and in Victoria (all Australian regions) is decreasing. A reducing market will increase the competitiveness in tendering for work. The Company benefits from having diversity in locations and type of work performed allowing the Company to position itself to maximise the opportunities best fit for the organisation. These detailed financial budgets and business plans that are being implemented by management indicate that the Group will have sufficient liquidity resources for the near future. The Company repaid its term debt prior to 30 Jun 24 and has no secured lenders at this date. The company therefore has no banking covenants at 30 June 2024 and did not have any breaches prior to this date. The group retains the support of its bond and guarantee providers. The Directors have considered the business plans and detailed financial budgets, including all available information, and whilst significant estimates and judgements including the impacts of the wider economic environment are always and will continue to be required the Directors are of the opinion that the going concern assumption is appropriate in the preparation of the financial statements. STATEMENT OF COMPLIANCE The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). BASIS OF CONSOLIDATION The consolidated financial statements include the financial statements of McConnell Dowell Corporation Limited and its subsidiaries as at 30 June each year (the Group). Control over a subsidiary is achieved when the Group is exposed or has the rights to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Specifically, the Group deems it controls a subsidiary if and only if the Group has: • Power over the subsidiary (i.e., existing rights that give it the current ability to direct the relevant activities of the subsidiary) • Exposure, or rights, to variable returns from its involvement with the subsidiary, and • The ability to use its power over the subsidiary to affect its returns When the Group has less than a majority of the voting or similar rights of a subsidiary, the Group considers all relevant facts and circumstances in assessing whether it has power over a subsidiary, including; • The contractual arrangement with the other vote holders of the subsidiary • Rights arising from the other contractual arrangements • The Group’s voting rights and potential voting rights The Group reassess whether or not it controls a subsidiary if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. The parent's investments in controlled entities are initially recognised at cost and subsequently measured at cost, less any impairment charges. Non-controlling interests not held by the Group are allocated their share of net profit after tax and each component of other comprehensive income and are presented within equity in the consolidated statement of financial position, separately from parent shareholders’ equity. All intercompany transactions and balances, income and expenses, and profits and losses resulting from intra-group transactions are eliminated on consolidation. 1. Material Accounting Policies
13 BUSINESS COMBINATIONS Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 9 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured. FOREIGN CURRENCY TRANSLATION Functional and presentation currency Both the functional and presentation currency of McConnell Dowell Corporation Limited and its Australian subsidiaries is Australian dollars ($). Where a subsidiary’s functional currency is a different denomination it is translated to the presentation currency (see below). Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. All differences arising on settlement or translation of monetary items are taken to the statement of profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation of group companies’ functional currency to group presentation currency On consolidation the assets and liabilities of foreign entities are translated into Australian dollars at rates of exchange prevailing at the reporting date. Income, expenditure and cash flow items are translated into Australian dollars at weighted average rates. Exchange variations arising on translation for consolidation are recognised in the foreign currency translation reserve in equity, through other comprehensive income. If a subsidiary were sold, such translation differences are recognised in the statement of profit or loss as part of the cumulative gain or loss on disposal. FINANCIAL INSTRUMENTS Financial Assets Initial recognition and measurement The Group initially recognises financial assets when the Group becomes a party to the contractual provisions of the instrument. Financial assets are initially measured at fair value plus in the case of assets not measured at fair value through profit or loss, directly attributable transaction costs. Subsequently financial assets, excluding derivatives, are classified as measured at amortised cost or fair value, depending on the Group’s business model for managing the financial asset and the contractual cash flow characteristics of the financial asset. Derivatives are subsequently measured at fair value through profit or loss. Changes in the fair value of derivatives used to economically hedge the Group’s foreign exchange exposure are recognised in other earnings in the earnings or loss component of the statement of comprehensive earnings. A financial asset qualifies for amortised cost, using the effective interest method net of any impairment loss if it meets both of the following conditions: - the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and - the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding. If a financial asset does not meet both of these conditions, it is measured at fair value. The assessment of business model is made at portfolio level as this reflects best the way the business is managed, and information is provided to management. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset. The Group’s financial assets are classified as trade and other receivables, amounts due from contract customers, and cash and bank balances. The Group’s financial assets are classified and measured as follows: Trade and other receivables Trade and other receivables are subsequently measured at amortised cost. Amounts due from contract customers Amounts due from contract customers are carried at cost plus margin recognised, less billings and recognised losses at the reporting date in accordance with the revenue recognition policy shown below. Contract receivables and contract retentions are initially recognised at cost plus margin, which approximates fair value, and are subsequently measured at amortised cost. Contract receivables and retentions comprise amounts due in respect of progress billings certified by the client or consultant at the reporting date for which payment has not been received
for the year ended 30 June 2024 14 and amounts held as retentions on certified work at the reporting date. Contract costs include costs that are attributable directly to the contract and costs that are attributable to contract activity. Costs that relate directly to a specific contract comprise: site labour costs (including site supervision); costs of materials used in construction; depreciation of equipment used on the contract; costs of design, technical assistance, and any other costs which are specifically chargeable to the customer in terms of the contract. Contract costs incurred that relate to future activity are recognised as an asset to the extent that it is probable it will be recovered. Such costs represent amounts due from contract customers. Cash and bank balances Cash and bank balances comprise cash on hand and bank balances that are subsequently measured at amortised cost. Cash held in joint arrangements are available for use by the Group with the approval of the joint arrangement partners. Bank overdrafts are offset against positive bank balances where a legally enforceable right of offset exists and there is an intention to settle the overdraft and realise the net cash. For the purposes of the statement of cash flows, cash and bank balances consist of cash and bank balances defined above net of outstanding bank overdrafts. Presentation of Impairment Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the asset. Derecognition A financial asset is derecognised when: • the rights to receive cash flows from the asset have expired; or • the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. Impairment of financial assets Under AASB 9, ECLs are recognised in either of the following stages: • 12 Month ECLs: those are ECLs that result from possible default events within the 12 months after the reporting date; and • Lifetime ECLs: those are ECLs that result from all possible default events over the expected life of the instrument. The Group has elected to measure the loss allowances for trade receivables and contract assets at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs subsequent to initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and an analysis, based on the Group’s historical experience and information, including credit assessment and forward-looking information. Measurement of ECLs ECL are a probability-weighted estimate of credit losses. Credit losses are measured at the present value of all cash shortfalls (i.e., the difference between the contractual cash flows due to the entity in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective interest rate of the financial asset). Credit-impaired financial assets At each reporting date, the Group has assessed whether financial assets within the scope of AASB 9 impairment requirements are credit impaired. Financial assets not carried at fair value through profit or loss are assessed at each reporting date to determine whether there is objective evidence of credit-impairment. A financial asset is credit-impaired when one or more event that have a detrimental impact on the estimated future cash flows of the financial assets have occurred. Accordingly, this accounting policy relates to Amounts due from contract customers, Trade and other receivables and Cash and bank balances. Objective evidence that financial assets are impaired includes, but is not limited to: • default or delinquency by a debtor in interest or principal payments; • 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 or other financial reorganisation; • adverse changes in the payment status of borrowers or issuers; • the disappearance of an active market for a security; or • observable data indicating that there is measurable decrease in expected cash flows from a group of financial assets such as changes in arrears or economic conditions that correlate with defaults. Financial liabilities Initial recognition and measurement The Group initially recognises financial liabilities when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities are classified as measured at amortised cost or fair value, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and in the case of loans and borrowings and other liabilities, less directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, borrowings and other liabilities, bank overdrafts, employee-related payables, amounts due to contract customers and derivatives that are liabilities. The Group has not designated any financial liabilities upon initial recognition as at fair value through profit or loss, except those financial liabilities that contain embedded derivatives that significantly modify cash flows that would otherwise be required under the contract. Notes to the annual financial statements (continued)
15 Amounts due to contract customers Where progress billings exceed the aggregate of costs plus margin less losses, the net amounts are reflected as a liability and is carried at amortised cost. Borrowings and other liabilities Borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in earnings when the liabilities are derecognised as well as through the amortisation process. Trade and other payables Trade and other payables are subsequently measured at amortised cost using the effective interest method. Bank overdraft Bank overdrafts are subsequently measured at amortised cost using the effective interest method. Offsetting of financial instruments Financial assets and financial liabilities are offset, and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in earnings. INVENTORIES Inventories comprise raw materials and consumable stores. Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated costs necessary to make the sale. Write-downs to net realisable value and inventory losses are expensed in the period in which the write-downs or losses occur. INVESTMENTS IN ASSOCIATES The Group’s investment in its associates is accounted for using the equity method of accounting in the consolidated financial statements and at cost in the parent. The associates are entities over which the Group has significant influence. The Group generally deems they have significant influence if they have over 20% of the voting rights. Under the equity method, investments in associates are carried in the statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The Group’s share of its associates’ profits or losses is recognised in the statement of profit or loss, and its share of movements in reserves is recognised in reserves. The cumulative movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the parent entity’s statement of profit or loss as a component of other income, while in the consolidated financial statements they reduce the carrying amount of the investment. After application of the equity method the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in associate is impaired. If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and it’s carrying value and recognises the amount in the statement of profit or loss. When the Group’s share of losses in an associate equal or exceeds its interest in the associate, including any unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The associates’ accounting policies conform to those used by the Group for like transactions and events in similar circumstances. INTEREST IN JOINT ARRANGEMENTS Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about relevant activities require unanimous consent of the parties sharing control. The Group’s interest in joint arrangements are either classified as joint operations or joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. When a Group entity undertakes its activities under joint operation, the Group entity as a joint operator recognises in relation to its interest in a joint operation, its: • Assets, including its share of any assets held jointly • Liabilities, including its share of any liabilities incurred jointly • Revenue from its share of the output arising from the joint operation • Share of the revenue from the output by the joint operation, and • Expenses, including its share of any expenses incurred jointly The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the standards applicable to the particular assets, liabilities, revenues and expenses. When a Group entity transacts with a joint operation in which a group entity is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group’s consolidated financial statements only to the extent of the other parties’ interests in the joint operation. When a Group entity transacts with a joint operation in which a group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, are stated at cost, less accumulated depreciation and accumulated impairment losses.
for the year ended 30 June 2024 16 Freehold land is not depreciated. Freehold buildings and other fixed assets are depreciated on a straight-line basis over their expected useful lives to an estimated residual value. The following estimated useful lives are used in the calculation of depreciation: Buildings 10 - 30 years Plant and equipment 2 - 15 years Right-of-use assets Shorter of lease period and asset’s useful life An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to rise from the use or disposal of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of profit or loss in the year in which the item is derecognised. The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. LEASES Group as a lessee Determining the lease term The Group has determined the lease term as the non-cancellable period of the lease, together with periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option, and the periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. The lease term includes any rent-free periods provided to the lessee by the lessor. Short-term leases and leases of low value assets The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of property, plant and equipment that have a lease term of 12 months or less and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Separation of lease components At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative standalone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component. Right-of-use assets The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received. Right-of-use assets recognised under AASB 16 are depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of use assets are determined on the same basis as those property, plant and equipment. Where significant components of an item have different useful lives to the item itself, these parts are depreciated separately if the component’s cost is significant in relation to the cost of the remainder of the asset. Lease payments Lease payments included in the measurement of the lease liability comprise: - fixed payments, including in-substance fixed payments; - variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; - amounts expected to be payable under a residual value guarantee; and - the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. The lease liability is measured at amortised cost using the effective interest rate method. Remeasurement A lease liability is remeasured when there is a change in future lease payments arising from a change in and index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee of if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Group as a lessor When the Group acts as a lessor, it determines at lease commencement whether each lease is a finance or operating lease. As part of the assessment, the Group considers certain indicators such as whether the lease is for a major part of the economic life of the asset. Leases whereby the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rental is recognised as revenue during the period in which it is earned. If an arrangement contains lease and non-lease components, the Group applies AASB 15 to allocate the consideration in the contract. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’. Sub-leases When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. The Group assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, now with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease. Group as a lessee Notes to the annual financial statements (continued)
17 Determining whether an arrangement contains a lease At inception of an arrangement, the Group determines whether the arrangement is or contains a lease. At inception or on reassessment of an arrangement that contains a lease, the Group separates payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate payments reliably, then the asset and liability are recognised at an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Group’s incremental borrowing rate. Leased assets Assets held by the Group under leases that transfers to the Group substantially all the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recognised in the Group’s statement of financial position. Lease payments Payments made under operating leases are recognised in earnings or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Sale and leaseback Where a sale and leaseback transaction results in a finance lease, any excess of sales proceeds over the carrying amount is deferred and amortised over the lease term. Where a sale and leaseback transaction results in an operating lease, the gain or loss on sale is recognised in earnings or loss immediately if (i) the Group does not maintain or maintains only minor continuing involvement in the asset other than the required lease payments, and (ii) the transaction occurs at fair value. If the sales price is below fair value, the shortfall is recognised in earnings immediately except where the loss is compensated for by future lease payments at below market price, in which case it is deferred and amortised in proportion to the lease payments over the period for which the assets are expected to be used. If the sale price is above fair value, the excess over fair value is deferred and amortised over the period the assets are expected to be used. Leases whereby the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rental income is recognised as revenue during the period in which it is earned. Rent concessions Where rent concessions granted by a lessee result in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change, are due on or before 30 June 2022, and do not result in a substantive change to other terms and conditions in the lease, the Group elects to account for changes in lease payments from rent concessions in the same way it would account for the change if it were not a lease modification. GOODWILL AND INTANGIBLES Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the consideration transferred over the fair value of the Group’s net identifiable assets acquired and liabilities assumed. If the consideration transferred is lower than the fair value of the net identifiable assets of the subsidiary acquired, the difference is measured in profit and loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes and is not larger than an operating segment determined in accordance with AASB 8 Operating Segments. Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. When the recoverable amount of the cash-generating unit (group of cashgenerating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on relative values of the operation disposed of and the portion of the cash-generating retained unit. Impairment losses recognised for goodwill are not subsequently reversed. Intangibles Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication
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