2020 Annual Report Strength. Community. Resilience
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2020 STRENGTH. ANNUAL COMMUNITY. REPORT RESILIENCE. Seven Group Holdings Limited (SGH) is a leading Australian diversified operating and investment group with market leading businesses and investments in industrial services, oil and gas, and media. SGH Strategic Framework Purpose Recognising and serving exceptional businesses Strategic objective Maximise return to stakeholders through long term sustainable value creation Values Owner’s Respect Courage Agility mindset Pillars Exceptional Operational Financial Assets people excellence returns Contents Overview Directors’ Report Strength. Community. Resilience. 2 Directors’ Report 77 Chairman’s Letter 4 Remuneration Report 80 MD & CEO’s Letter 6 Financial Report Group Highlights 10 Primary Statements 103 Five Year Results 11 Notes to the Financial Statements 107 Our Businesses Directors’ Declaration 169 Group Structure 14 Independent Auditor’s Report 170 Investing in Health, Safety and Wellbeing 16 Other Information Industrial Services 18 Shareholder Information 175 Energy 24 Investor Information 176 Media & Other Investments 26 Company Information 176 Operating and Financial Review Corporate Directory 176 Operating and Financial Review 30 Cover image Risk Factors Associated with SGH 36 First Next Generation CAT Corporate Governance Dozer delivered in country by SGH Sustainability Report 42 WesTrac Tomago Team. Climate Change 52 Photographer Board of Directors 60 Brock McFayden, Executive Management 62 Boilermaker – Newcastle General Workshop Corporate Governance Statement 64 @boily_2381 SGH Annual Report 2020 1 This year has been one of unique challenges, with Overview extraordinary events such as the Black Summer bushfires and the COVID-19 pandemic testing us as individuals, as an Our Businesses organisation and as a society. In responding to these events, Financial Review our priority has been the safety Operating and and welfare of our people who are critical to supporting our customers and protecting our businesses. Governance Corporate In all, FY20 represents another successful year for the Group. We are proud of the result that delivered growth in our revenue and underlying profit as we supported our customers to achieve their objectives in a difficult environment. Report Directors’ The results also reflect the benefits of our diversified portfolio, our financial discipline and our commitment to the strategic objective of maximising return to you, our shareholders, through long-term sustainable value creation. Financial Report Ryan Stokes AO, Managing Director & CEO Other Information STRENGTH. COMMUNITY. RESILIENCE. 2 Overview STRENGTH. COMMUNITY. RESILIENCE. Our purpose: Recognising and serving exceptional businesses. The Group’s strength from our exceptional people, market leading businesses and balance sheet have ensured we support our customers and continue to serve our community. Strength in diversity Through innovation and our diverse workforce, we look to create long-term sustainable value and serve the community in which we operate. 11.7% Page Increase in the proportion of female managers 28 SGH Annual Report 2020 3 Investing in Overview our future Investing in our new Autonomous Training Facility in Collie, the first of its kind outside CAT’s proving ground in Arizona. Our Businesses Page NSW RFS Commissioner Mr Rob Rogers presenting Mr Ryan Stokes with a Certificate of Appreciation for SGH’s support. 19 Financial Review Supporting our Operating and community $5 million pledged and incredible work undertaken by 35 of our brave and committed employees, as well as our businesses, to help restore communities devastated by the bushfires. Page Governance Corporate $2.6m SGH contribution FY20 12 Navigating Report Directors’ COVID-19 Managing the impact of the pandemic on the safety and productivity of our Financial Report people while continuing to provide essential services and equipment for our customers. Other Information Page 56 4 Overview Chairman’s Letter This year I wanted to reflect on three areas the Board has focused on in the last 12 months, being refining the strategy for the Group, our commitment to community and consideration of director tenure. Firstly, in relation to the Group’s strategy, the As part of serving our businesses we know Board and Management undertook to update our businesses are intimately involved in our purpose as a conglomerate holding the communities in which we operate. We company to better articulate what we work committed to making a positive contribution to achieve. By recognising and serving to these communities. The Board wants exceptional businesses, our objective is to acknowledge the devastating impacts to maximise return to our stakeholders of the bushfires which occurred across through long-term sustainable value creation. the country. The loss of life, property, Our values of respect, owner’s mindset, wildlife and the destruction of whole courage, and agility define us, help determine communities was heartbreaking for us our priorities, guide our actions, and drive all. I want to acknowledge the incredible our decisions. This supports the SGH team work undertaken by 35 of our brave and to determine the direction and right path in committed employees within both WesTrac fulfilling our goals by creating a clear sense and Coates, who utilised their own personal of purpose. leave to serve in the RFS and other volunteer services to fight the fires and provide Whilst respect, courage and agility are community support. self-evident, owner’s mindset requires greater consideration. This embodies the Their bravery and commitment inspired the entrepreneurial spirit inspiring us to embrace Board to reflect on what more we could do risk and then manage it effectively. It also as an organisation. Merely refunding their reflects the obligation of stewardship in personal leave utilised was not enough, but spending shareholders money but more their community mindedness galvanised importantly reflects the pride and ownership and inspired the Group to consider a of the outcomes of our decisions. greater contribution. Through the objective of maximising On behalf of all our people at SGH, returns to stakeholders we are focused on WesTrac, Coates Hire, Allight, SGH Energy how our activities support the interests of and you as shareholders, the Board pledged our shareholders, employees, customers, $5 million to directly support firefighting business partners, the environment and the efforts, disaster recovery and the long-term communities in which our diverse set of task of rebuilding communities and businesses operate. infrastructure whilst supporting the mental health of those impacted. To allow us to achieve this purpose, we rely on outstanding people, operational The Group was uniquely positioned to excellence, and a commitment to delivering provide not only financial support, but also financial returns whilst optimising the Group’s the equipment and services required by assets. These pillars have been seminal the RFS and communities to support the in supporting the team to deliver a strong recovery and rebuilding effort. result despite the extraordinary disruption all business experienced during FY20. SGH Annual Report 2020 5 In addition, Australian Capital Equity, my private investment vehicle, matched SGH’s contribution with an additional $5 million commitment. Between both SGH and ACE, Overview I was honoured to make such a substantial $10 million donation to support the affected communities. We strongly believe that the combination of our financial resources, our industry-leading equipment and our team’s motivation and skills reflect our commitment to our community. To date our program has already committed Our Businesses and spent half this as part of our commitment to responding to the immediate requirements of the bushfires. Over the next 12 months we are committing the rest of the funds to support the rebuild of key communities. Our team have been directly involved in working with a number of volunteer agencies to ensure we can have maximum impact. It was pleasing to see the Company deliver Kerry Stokes AC Financial Review Board assessments coupled with Director Operating and a strong financial result for the year and Executive Chairman growth in revenue, underlying EBIT, and competencies highlight that SGH has a high cash flow. I am buoyed by the strength and functioning Board and given the complexities resilience of our conglomerate operating of our operations the Group is better model. This was further exemplified through supported by retaining long serving directors COVID-19 where our diversity was a core whilst continuing to introduce the next wave strength. Through these challenges our of talented directors. leadership responded with a nerve centre There are also two key milestones to at Group and very dynamic management celebrate this year. The first is the listing to ensure we could protect our people and of your company a decade ago which has Governance Corporate support our customers. The successful grown substantially over this time. The response highlighted the effectiveness of second is WesTrac having just celebrated our operating model. 30 years of operations in WA and over Overall the Group benefited from continued 17 years in NSW/ACT. Through Caterpillar, growth in mining production, including WesTrac is recognised as a strong dealer planned expansions in iron ore, and on-going across nearly every major industry sector State and Federal government investment and we pride ourselves on our ability to in infrastructure.