Adelaide Brighton Ltd
ABN 15 007 596 018
Level 1, 157 Grenfell Street
Adelaide, South Australia 5000
PO Box 2155, Adelaide SA 5001
Telephone 08 8223 8000
Facsimile 08 8215 0030
Web www.adbri.com.au
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Performance summary
Company profi le and map of operations
Chairman’s report
Chief Executive Offi cer and Managing Director review
Finance report
Cement and Lime
Concrete and Aggregates
Concrete Products
Joint ventures
Sustainability report
People, health and safety
Diversity report
Directors
Information for shareholders
Financial statements contents
Directors’ report
Remuneration report
Remuneration report contents
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Statement of cash fl ows
Notes to the consolidated fi nancial statements
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report to the Members of Adelaide Brighton Ltd
Financial history
Munster cement
and lime plant,
Western Australia
Performance summary
c/share
Dividends
Revenue
$1,396m
1.2%
2015: $1,413m
NPAT ex-property
attributable to members
$178.4m
3.1%
2015: $173.0m
Final
ordinary dividend
11.5c
4.5%
2015: 11.0c
NPAT
attributable to members
$186.3m
10.4%
2015: $207.9m
Basic EPS
28.7c
10.3%
2015: 32.0c
Final
special dividend
4.0c
2015: 4.0c
ADEL AIDE BRIGHTON LTD ANNUAL REPORT 2016
1
40
30
20
10
0
12 13 14 15 16
Interim
Final
Special
%
Return on funds
employed
20
15
10
5
0
%
40
30
20
10
0
12 13 14 15 16
Gearing: net
debt to equity
12 13 14 15 16
$M
Cash fl ow from
operations
300
225
150
75
0
12 13 14 15 16
Times
Interest cover
EBITDA basis
40
30
20
10
0
12 13 14 15 16
* In line with changes to accounting
policies effective 1 January 2013,
comparative numbers for 2012
have been restated
Company profile and map of operations
Adelaide Brighton is the largest producer of lime
in Australia, with production assets in Western
Australia, South Australia and Northern Territory.
Lime is an important product for the mineral
processing industry in resource rich markets,
particularly for the production of alumina and
gold, of which Australia is a leading producer.
Concrete and Aggregates
Adelaide Brighton has a growing presence in
the premixed concrete and aggregates industry
extending from South Australia, through Victoria
and New South Wales to south east and northern
Queensland. It has strategic aggregates reserves
west of Sydney in regional New South Wales,
south east Queensland, South Australia and
Victoria through its wholly owned and joint
venture operations.
delaide Brighton is a leading
integrated construction materials
and lime producer which supplies
a range of products into building,
construction, infrastructure and
mineral processing markets throughout Australia.
A
Adelaide Brighton originated in 1882 and is now
an S&P/ASX100 company with 1,400 employees
and operations in all Australian states
and territories.
Cement
Lime
Adelaide Brighton is the second largest supplier of
cement and clinker products in Australia with major
production facilities and market leading positions
in the resource rich states of South Australia and
Western Australia. It is also market leader in the
Northern Territory.
In addition to domestic production, the Company
is the largest importer of cement, clinker and slag
into Australia with an unmatched supply network
that enables efficient access to every mainland
capital city market. This network includes significant
distribution joint ventures in Victoria and Queensland.
The Company’s principal activities include
the production, importation, distribution
and marketing of clinker, cement, industrial
lime, premixed concrete, construction
aggregates and concrete products.
Southern Quarries
quarry at Sellicks Hill,
South Australia
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
2
Concrete Products
Sustainability
Adelaide Brighton’s commitment to sustainable
development is demonstrated through a range of
actions implemented across a balanced program
of initiatives. Adelaide Brighton believes that setting
and achieving sustainability objectives throughout
the organisation assists long term competitive
business performance.
Adelaide Brighton holds the leading position in
the Australian concrete products market, with
operations in Queensland, New South Wales,
Victoria, Tasmania and South Australia.
Joint ventures and associates
Adelaide Brighton has a number of signifi cant
investments in joint ventures and associates in
construction materials production and distribution.
These include major cement distribution joint
ventures in Queensland (Sunstate Cement), Victoria
and New South Wales (Independent Cement and
Lime); regional concrete and aggregates positions
in Victoria and New South Wales; and a 30%
investment in a Malaysian white cement and
clinker producer (Aalborg Portland Malaysia),
which supplies the Australian market.
Cement
Concrete and
aggregates
Lime
Concrete
products
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
3
Chairman’s report
he success of Adelaide
Brighton’s consistent long term
strategy is reflected in increased
shareholder returns. The Company
reported a 10.4% decrease in net
profit after tax (NPAT) to $186.3 million primarily
due to lower property profits compared to the
previous year. Excluding the impact of property
sales, which were lower due to the timing of land
transactions, NPAT increased 3.1% and EBIT
increased 1.6% on the strong levels of 2015.
Basic earnings per share were 28.7 cents.
Adelaide Brighton’s diversified business model and
focus on operational improvement supported the
Group’s long term growth strategy despite weaker
markets in Western Australia and the Northern
Territory and higher energy costs.
We made good progress during the year on growing
long term shareholder value through our strategy of
organic improvement and profitable acquisitions and
continue to examine new opportunities for growth.
I am pleased to report to shareholders that the
Board declared and paid an increased final ordinary
dividend of 11.5 cents per share and a final
special dividend of 4.0 cents per share, taking total
dividends paid for 2016 to 28.0 cents per share,
fully franked.
Adelaide Brighton seeks to maximise financial
stability while at the same retaining the flexibility
to fund accretive acquisitions and other growth
initiatives. When the Board determines that the
Group has surplus capital, as a matter of policy
we act to return it to shareholders, which may
take the form of special dividends.
%
140
120
100
80
60
40
20
0
Total shareholder returns (share price + dividend reinvested)
and S&P/ASX200 Accumulation Index returns
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Adelaide Brighton is committed to maintaining
a safe, productive and healthy work environment.
We believe safe businesses also deliver the best
returns for shareholders and I’m pleased to report
our safety performance improved in 2016.
On behalf of your Directors, I acknowledge the
hard work and commitment of the executive
management team led by Martin Brydon and of
all employees over the last year which has been
one of steady growth for Adelaide Brighton.
A proactive approach to sustainability, working with
our local communities, government and regulatory
bodies also optimises outcomes for the Company
and its stakeholders.
The Board is especially pleased that we have
been able to further increase rewards to our
loyal shareholders through the payment of
higher ordinary dividends.
I thank our shareholders, our joint venture
partners and of course our customers
for their continuing support.
The Board recognises the importance of Board
renewal and maintaining an appropriate mix of
skills, experience, and perspectives that aligns
with corporate strategy.
In March 2017, Zlatko Todorcevski was appointed
a non-executive Director. Mr Todorcevski has
more than 30 years finance, strategy and planning
experience in the oil and gas, logistics and
manufacturing sectors in Australia and overseas,
and will be a valuable addition to the Board.
Leslie Hosking
Chairman
4
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2016
Chief Executive Offi cer and Managing Director review
espite a downturn in cement
demand in Western Australia
and the Northern Territory,
Adelaide Brighton’s other
markets grew strongly,
supported by strong residential activity and a
ramp up in infrastructure projects.
This meant that Group revenue of $1,396.2 million,
was only 1.2% lower than the record level of 2015,
a pleasing result given the extent of the downturn
in Western Australia and Northern Territory.
Earnings before interest and tax (EBIT) decreased
10.9% from the prior year to $266.1 million and
net profi t after tax (NPAT) declined 10.4% to
$186.3 million. However, this decline was entirely
due to a reduction in earnings from our property
sales program, which remains an important
contributor to cash fl ow.
Property contributed $7.9 million to NPAT in 2016
compared with $34.9 million the previous year.
This fi gure can vary from year to year as it is
dependent on the timing of sales transactions
as we prepare and develop the land pipeline.
We were pleased to confi rm this year that the total
land sales program, which is part of our operational
improvement strategy, is now expected to exceed
$200 million in proceeds when complete.
Excluding property, NPAT increased 3.1% to
$178.4 million and EBIT rose 1.6 % to
$257.7 million. These fi gures are more refl ective
of the core operational performance of the business.
EBIT margins (excluding property) improved as
a result of price increases, cost reduction and
higher joint venture earnings, although a weaker
Australian dollar lifted cement, clinker and
slag import costs.
Adelaide Brighton’s performance in 2016
demonstrated the benefi ts of the strategy to
operate a geographically diverse, vertically
integrated construction materials company.
Financial summary
($ Million)
Revenue
Depreciation, amortisation and impairments
Earnings before interest and tax (“EBIT”)
Net fi nance cost1
Profi t before tax
Tax expense
Net profi t after tax
Non-controlling interests
Net profi t attributable to members (“NPAT”)
Basic earnings per share (“EPS”) (cents)
Dividends per share - fully franked (cents)2
Net debt3 ($ million)
Gearing4(%)
Return on funds employed5(%) - including property
Return on funds employed5(%) - excluding property
2016
1,396.2
2015
1,413.1
)
(78.1
266.1
)
(11.5
254.6
)
(68.4
186.2
0.1
186.3
28.7
28.0
288.5
23.6
17.5
16.9
(77.8
)
298.6
(13.0
)
285.6
(77.8
)
207.8
0.1
207.9
32.0
27.0
297.2
24.6
19.8
16.8
1 Net fi nance cost is the net of fi nance costs shown gross in the Income Statement with interest income included in revenue.
2 Includes special dividends of 8.0 cents per share for FY 2016 and 8.0 cents per share for FY 2015.
3 Net debt is calculated as total borrowings less cash and cash equivalents.
4 Net debt/equity.
5 Return on funds employed = EBIT/average monthly funds employed.
$M
240
180
120
60
0
Net profi t
after tax
12 13 14 15 16
$M
Total assets
1900
1800
1700
1600
1500
12 13 14 15 16
* In line with changes to accounting
policies effective 1 January 2013,
comparative numbers for 2012
have been restated
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
5
A $10 million investment
in a new slag dryer at the
Kwinana plant, Western
Australia will deliver
increased output and
reduced double handling
to improve the efficiency
of the drying process
The electricity market disruptions in South
Australia, which were outside the company’s
control, led to increases in operating costs.
The various disruptions in 2016 caused higher
electricity and gas prices, production loss at
some plants and reduced sales to customer
facilities impacted by the disruptions.
As mentioned, demand in east coast markets
was stronger in 2016. Residential activity was
robust in Victoria, New South Wales and
Queensland and, despite the electricity issues,
South Australia returned to growth.
In New South Wales, non-residential building
and transport infrastructure projects augmented
residential activity. In Victoria, multi-residential
projects were a key source of demand.
In south east Queensland, markets are
improving, particularly in the Gold Coast and
Sunshine Coast regions, and in South Australia
demand was driven by several infrastructure
projects and improved demand from several
important mining customers.
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
6
As mentioned, cement sales declined sharply
in Western Australia and the Northern Territory
because of weak residential and non-residential
activity and lower volumes to resource
construction projects.
On the other hand, lime sales volumes in
Western Australia and the Northern Territory were
similar to 2015 thanks to stable demand from
the minerals processing sector. Demand from the
non-alumina sector stabilised after a period of
recovery and demand from the globally competitive
alumina sector improved slightly in the second half.
Eastern states concrete and aggregate volumes
were strong, with average selling prices for
concrete and aggregates increasing signifi cantly
more than infl ation. Margins were enhanced by
cost control, logistical improvements and
increased pricing.
In Sydney, aggregates markets continue to be
supported by the depletion of traditional reserves
and increasing reliance on product from farther
afi eld. We are very well positioned in this market
with high quality reserves to take advantage
of these long term supply trends.
The recovery in concrete and aggregate volumes
in South Australia continued in the second half
and the outlook appears favourable given the
major infrastructure projects which are underway.
In Concrete Products, operational improvement
initiatives have introduced fl exibility into the
operations, contributing to a signifi cant increase
in gross margins, compared to 2015, despite a
small reduction in volumes. Excluding property
profi ts, Concrete Products earnings increased
20% in 2016.
Through our investment in the Concrete
Products business over the past decade, we
have consolidated an oversupplied and unstable
industry, dramatically improved effi ciency and
lifted product innovation to get the market
growing again.
This business can improve further with ongoing
opportunities for reductions in transport costs and
effi ciencies from toll manufacturing arrangements.
Concrete Products is also an important and
growing customer for cement, aggregates and
sand, which offers vertical integration benefi ts
to Adelaide Brighton.
Our joint venture operations in cement, clinker,
concrete and aggregates, also delivered a strong
increase in profi t contribution with earnings
growing 44% in 2016.
Strategy
Adelaide Brighton’s long term strategy is
based on three areas of focus:
Vertical integration in concrete, aggregates,
concrete products and logistics operations;
Growth in lime - to take advantage of our
unique resource position; and
Continuous operational improvement.
>
>
>
It’s a simple strategy which hasn’t required much
change over the past decade but, demonstrably,
it has served us well and, more importantly, has
delivered added value for our shareholders.
Concrete and aggregates downstream
integration delivers benefi ts
The returns from our investment in aggregates and
concrete businesses in the last three years is a
feature of the 2016 results, refl ecting the realisation
of our long term vertical integration strategy as a
major contributor to shareholder returns.
In March 2017, we continued this approach by
acquiring the Central Pre-Mix Concrete and Quarry
(Central) business for $61 million, an integrated
operation with fi ve concrete plants and a hard rock
aggregate quarry serving metropolitan Melbourne,
the largest premixed concrete market in Australia.
The acquisition provides Adelaide Brighton with
access to strategically located, high quality assets,
entry to the Melbourne aggregates market and an
increase in scale of the existing business.
Australian
industry position
#1
Lime producer
in the minerals
processing industry
Concrete products
producer
Cement and
clinker imported
with unmatched
channels to market
#2
Cement and
clinker supplier
to the Australian
construction industry
#4
Concrete and
aggregates
producer
A DE L AIDE BRIGHTON LTD ANNUA L REPORT 2016
7
I’m pleased to report the premixed concrete and
aggregates acquisitions in 2014 and 2015 in South
Australia and Queensland are exceeding earnings
expectations with a positive outlook.
Lime Growth
Adelaide Brighton’s Western Australian lime business
is underpinned by low cost, long term raw material
reserves secured by State Agreement and statutory
approvals. Long term demand growth is driven by
the state’s globally competitive resources sector.
We produce lime for the globally competitive
Australian mineral processing industry, at our
Munster plant near Perth where we have one of
the largest and lowest cost lime operations in the
world with capacity of 1.25 million tonnes per
annum, which is about 80% utilised. To put this in
perspective, a typical world class lime operation
would have capacity of 200-300 thousand tonnes
per annum - many are much smaller.
Lime sales volumes have grown 50% since Adelaide
Brighton acquired the business in 1999 and this
expansion has been an important driver of growth
and returns for the Company. The reduced cost
of energy in Western Australia in 2016 and the
Munster plant’s low cost position delivered
improved operating margins.
Lime sales volumes were similar to 2015
and pleasingly the non-alumina sector recovered,
which represents about 30% of lime demand
in Western Australia. In the alumina sector,
production expansions have the potential to add
15% to lime demand in Western Australia in
the medium to longer term.
Cost reduction and continuous improvement
Adelaide Brighton has a constant focus on cost
reduction, efficiency and improved operational
performance. We take a long term view of customer
and market trends in order to match operational
capacity with those trends. In 2016, we achieved
savings of $16 million by reducing expenses in a
range of areas including a significant reduction in
natural gas costs in Western Australia, reduced
transport costs and other operational efficiencies.
Import strategy delivers competitive
supply into key markets
Adelaide Brighton is Australia’s largest importer of
cementitious materials (cement, clinker and blast
furnace slag), utilising more than 2 million tonnes
of imported product per annum across multiple
import facilities in key locations across Australia.
The Company’s industry leading position maximises
efficiency in procurement, transport, storage and
distribution. As well, the use of imported material
enables the supply of competitively priced products
in markets where demand exceeds the Company’s
production capacity. As a result, Adelaide Brighton’s
domestic assets are fully utilised.
The benefits of the Company’s highly effective
import strategy are evident in Western Australia.
There, the business has greater operational flexibility
and now operates at lower cost than before the
rationalisation. Accordingly, we are very well
positioned to benefit from any recovery in demand.
Land sales program
Adelaide Brighton continues to sell, and prepare for
sale, properties released by the rationalisation and
improvement program. In many cases, this includes
re-zoning to realise greater value over time.
In 2016, sales realised $20.6 million and added
$7.9 million NPAT. Since 2013, property sales
have realised proceeds of $85 million and the sale
of properties in the next 10 years could realise
a further $120 million or more.
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
8
Left: Adelaide Brighton
Cement’s Birkenhead plant
supplied cement for the new
Royal Adelaide Hospital
in South Australia
Right: Part of the Central
Pre-Mix Concrete truck
fleet, acquired by Adelaide
Brighton in March 2017
Far right: Concrete products
manufactured by Adelaide
Brighton used in decorative
architectural applications -
grey Besser blocks and were
used in the design of Adelaide
Brighton’s Sydney office
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Photograph courtesy of @tobypeet
Outlook
Our business and strategy are sound and we will
strive to maintain attractive growth and returns to
shareholders while retaining a strong balance sheet.
In 2017, we expect strong demand for most
products, particularly on the east coast, improved
pricing and further efficiency improvements.
We expect sales volumes of cement and clinker
to be higher than those achieved in 2016 with
strong east coast demand. Western Australia and
the Northern Territory demand is expected to
stabilise and South Australian demand will improve.
Sales volumes of premixed concrete and
aggregates are likely to increase this year due
to infrastructure projects on the east coast and
South Australia and the Central acquisition will
add further sales in Melbourne.
A number of factors are supportive of higher
prices including strengthening demand and
capacity utilisation.
Lime sales volumes are expected to be
higher in 2017, with improved margins from
lower costs. Our import costs are expected to
be lower than 2016 due to savings in shipping,
materials purchasing and favourable foreign
currency outcomes.
Finally, proceeds from property sales could
be $10-15 million over the next two years.
Our people
Finally, I sincerely thank Adelaide Brighton’s
senior management team and all our employees
for their hard work in the past year. Our success
is built on their dedication and commitment
to continual improvement.
As always, our work is never done but Adelaide
Brighton has a strong and sustainable future.
A DE L AIDE BRIGHTON LTD ANNUA L REPORT 2016
Martin Brydon
Chief Executive Officer
and Managing Director
9
Finance report
I
n 2016 Adelaide Brighton grew net
profi t after tax (NPAT) (excluding property)
despite a modest decline in revenue and
earnings before interest and tax (EBIT).
Revenue fell 1.2% to $1,396.2 million.
EBIT declined 10.9% to $266.1 million. NPAT,
excluding property earnings, grew 3.1%
to $178.4 million.
Sales and profi ts
Revenue of $1,396.2 million was 1.2% lower than
in 2015, due to reduced demand for cement from
residential and resource construction projects in
Western Australia and the Northern Territory, which
offset stronger demand in the eastern states and
South Australia. Excluding the impact of lower freight
revenue, Group revenue increased slightly in 2016.
Adelaide Brighton’s long term strategy has
positioned the Company to be resilient to the cyclical
nature of construction markets. Excluding property
profi ts, NPAT grew 3.1%. This was despite a decline
in sales volume of 20% in Western Australia and the
Northern Territory, and electricity market disruptions
which impacted profi t before tax by $9 million.
Reported NPAT attributable to members for the
year ended 31 December 2016 declined 10.4%
to $186.3 million, primarily due to lower property
profi ts compared to the previous corresponding
period. Property contributed $7.9 million to NPAT,
compared to $34.9 million in 2015.
Earnings before interest and tax (EBIT) decreased
10.9% from the prior year to $266.1 million on an
EBIT margin of 19.1%. Excluding property profi ts,
EBIT grew 1.6% on 2015 to $257.7 million, while
the EBIT margin improved from 17.9% in 2015 to
18.5% in 2016.
EBIT margins excluding property were assisted
by price increases, cost initiatives and higher
joint venture earnings.
These more than offset the impact of lower cement
volumes and electricity supply disruptions in South
Australia. Import costs were higher due to the
weaker Australian dollar.
Joint venture arrangements and associate earnings
increased 44% to $30.9 million in 2016, refl ecting
improved demand and higher cement prices on
the east coast of Australia and higher production in
the Malaysian specialty cement operations.
Net fi nance costs decreased from $13.0 million
to $11.5 million in 2016 primarily due to the
continuation of low underlying market interest rates.
Tax expense of $68.4 million decreased
$9.4 million from 2015 and represents an effective
tax rate of 26.9%. Excluding property profi ts or
one-off impacts, the Group’s ongoing tax rate is
expected be in the range of 27% to 28%.
Due to the absence of one-off items, Underlying
NPAT was the same as Reported NPAT in 2016.
EBIT margins
Excluding property profi ts Group EBIT margin
increased to 18.5% compared with 17.9% in 2015.
This increase in margins refl ected lower costs,
higher prices and an improved contribution from
our joint venture operations.
Cement margins declined due to a 4% reduction in
volume (driven by Western Australia and Northern
Territory) and higher energy and import costs.
Energy market disruptions in South Australia lifted
cement operating costs by $9 million. However,
an increase in the use of alternative fuels and
transport effi ciencies provided some offset.
Lime margins improved on stable volume, higher
prices and markedly lower energy costs. Transport
and contractor costs were also improved following
contract renegotiation.
Revenue by product group
Cement
Lime
Lime
Concrete and aggregates
Concrete products
Concrete products
Revenue by market
Non-residential
Residential
Residential
Engineering
Engineering
Mining operations
Mining operations
Revenue by state
Western Australia
South Australia
Victoria
Victoria
New South Wales
New South Wales
Queensland
Queensland
Other
Other
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
10
Cash fl ow and debt
Operating cash fl ow increased 8.0% from the
prior year to $248.4 million, driven by improved
operating profi t and stronger cash conversion.
Working capital increased modestly. Debtor
days sales outstanding declined and doubtful
debt provision was lower.
Capital expenditure was $86.5 million. Stay
in business capital of $49.7 million represents
64% of depreciation and amortisation. Stay
in business expenditure was higher than prior
corresponding period with $19.2 million spent
on concrete plants in Sydney that are being
relocated due to urban growth.
Development capital increased $2.3 million
to $36.8 million for organic projects that will
improve costs and expand production capacity.
Cash proceeds of $23.2 million from the sale
of assets includes $20.6 million from the
disposal of property. So far, we have realised
$85 million in proceeds from property sales
since 2013 and we believe there is more than
$120 million further to come in the next decade.
Dividends paid to shareholders increased
28% to $178.5 million. Despite this, strong
cash fl ow contributed to a reduction in net debt
of $8.7 million to $288.5 million and net debt
to equity gearing declined from 24.6% to
23.6% over the year. This is slightly below the
targeted gearing range of 25% to 45%.
To maximise shareholder returns, Adelaide
Brighton seeks to ensure the balance sheet is
effi ciently utilised while retaining the fl exibility
to fund its long term growth strategy as
opportunities are identifi ed.
Strong volume, higher prices and lower transport
costs contributed to an expansion in concrete
and aggregates margins. This business now
represents 35% of group revenue.
Concrete Products returns were 20% higher
(excluding property), supported by higher prices
and lower costs following restructuring of the
business over recent years.
The profi t contribution from joint venture operations
increased 44% in 2016 driven by healthy demand,
cost improvements and higher prices.
The devaluation of the Australian Dollar against
Adelaide Brighton’s major trading currencies, the
US Dollar and the Japanese Yen, reduced import
profi tability by approximately $7 million before
tax in 2016 compared to 2015.
Operational improvement programs delivered
benefi ts of $16 million (pre-tax) for the 2016 year
compared to 2015. Key initiatives included the
renegotiation of energy and supplier contracts
and operating cost and energy effi ciency programs.
Shareholder returns
A fi nal ordinary dividend of 11.5 cents per
share (fully franked) and a fi nal special dividend
of 4.0 cents per share (fully franked) has been
declared. The full year fully franked dividend
of 28.0 cents is 3.7% higher than 2015.
The ordinary dividend payout ratio is 70%.
Excluding property, return on funds employed
increased from 16.8% to 16.9%. Adelaide
Brighton’s returns continue to exceed its
cost of capital.
Adelaide Brighton has delivered top quantile
Total Shareholder Return over the last decade.
The Company has been included in the
S&P/ASX100 Index since 2012.
The Dividend Reinvestment Plan remains
suspended given the Company’s strong cash
fl ows and low gearing.
$M
Revenue and net
$Bn
profi t after tax
1500
1400
1300
1200
1100
1000
250
200
150
100
50
0
12 13 14 15 16
NPAT
Revenue
%
Payout ratio
100
90
80
70
60
50
12 13 14 15 16
Ordinary dividend
Special dividend
c/share
Earnings
per share
40
30
20
10
0
12 13 14 15 16
* In line with changes to accounting
policies effective 1 January 2013,
comparative numbers for 2012
have been restated
Michael Kelly
Chief Financial Offi cer
A DE L AIDE BRIGHTON LTD ANNUA L REPORT 2016
11
11
Cement and lime
D
emand in east coast markets
remained strong in 2016.
Residential activity was robust
in Victoria, New South Wales
and Queensland, while South
Australia returned to growth. Non-residential
building and infrastructure1 activity also underpinned
demand in these markets. In Western Australia and
the Northern Territory, weaker construction and
resource project activity impacted cement demand,
while lime volumes were similar to 2015 with
cost improvements assisting margins.
Cement and clinker
Cement and clinker sales volumes decreased
4% compared to 2015. Volumes declined in
Western Australia and the Northern Territory
by approximately 20% due to completion of
a number of major resource projects and
weakening residential and commercial activity.
This was partially offset by higher sales to
construction markets in New South Wales, Victoria
and south east Queensland, and a return to normal
sales to a major mining customer in South Australia.
Cement sales in South Australia were also assisted
by the start of major infrastructure projects,
which are anticipated to ramp up over 2017
and continue into 2018.
1 Non-residential building includes
education, health, offi ce, retail, hotels
and factories, while infrastructure
includes roads, bridges and railways
Adelaide Brighton
‘000
cement milled
tonnes
(inc. imported clinker)
3200
2400
1600
800
0
12 13 14 15 16
Adelaide Brighton
‘000
lime production
tonnes
1200
900
600
300
0
12 13 14 15 16
While cement selling prices increased in almost
all markets, geographic mix resulted in lower
weighted average prices predominantly in the
fi rst half of the year.
Overall cement margins declined due to lower
volumes, and higher energy and import costs.
The impact of the Western Australia and Northern
Territory downturn has been moderated by the
strategy to rationalise ineffi cient production, expand
import operations and lower supply costs, as well
as an improvement in the performance of
businesses on the east coast.
Cost initiatives delivered signifi cant incremental
benefi ts compared to 2015. Further savings are
anticipated in 2017 from the rationalisation of
specialty cement production at the Angaston
(South Australia) facility.
Energy
Energy costs in South Australia were higher in
2016 due to an anticipated increase in natural
gas costs and unanticipated market wide
disruptions to electricity supply in that state.
The disruptions caused higher electricity and
gas prices, production losses at Adelaide Brighton
plants and reduced sales to affected customers.
Adelaide Brighton Cement
plant at Birkenhead in South
Australia with the Company’s
limestone carrier “Accolade II”
in the foreground
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
12
Cockburn Cement in Western Australia supplied
Clinker storage at
cement for the construction of the new Perth Stadium,
the Munster plant in
a multi-purpose stadium with capacity for 60,000
Western Australia
people making it the third largest stadium in Australia
The disruption resulted from the closure
of generation capacity in South Australia,
the temporary closure of the Heywood
interconnector in July 2016 and a
severe weather event in September
2016.
The Birkenhead and Angaston
operations were not physically
damaged by the weather events
and electricity market disruption
was mitigated through managing
production and the use of
alternative energy sources.
Elsewhere in Adelaide Brighton, significant
energy cost savings were delivered from a
reduction in natural gas costs in the Western
Australian lime business and the lower cost
of transport fuels.
Imports
Lime
Adelaide Brighton is Australia’s largest importer
of cementitious materials (cement, clinker and
blast furnace slag) utilising more than two million
tonnes of imported product per annum.
Imports remain a key component of the Adelaide
Brighton growth strategy, ensuring utilisation of
domestic production and providing competitive
supply into key markets.
Import volumes declined slightly as a result of
the lower sales volumes in Western Australia and
the Northern Territory. Import costs increased by
$7 million before tax due to the decline in the
Australian dollar compared to the previous year.
Lime sales volumes in 2016 were similar to the
prior year, with demand from the non-alumina
sector stabilising after a period of recovery and
demand from the alumina sector improving
slightly in the second half.
Lime margins improved as a result of lower
operating costs, with natural gas contract
negotiations delivering pre-tax benefits of
$8 million. Maintenance and transport costs
have also benefited from contract
renegotiations.
Brad Lemmon
Executive General Manager
Cement and Lime
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
13
Concrete and aggregates
C
oncrete volumes improved
in 2016, driven primarily by
increased residential demand
in the eastern states. Strong
demand across all major
concrete and aggregates markets pushed selling
prices higher across the board. Investment in recent
years in capacity in South Australia, Queensland and
New South Wales has contributed to a strong lift
in earnings for the business and Adelaide Brighton
continues to identify further opportunities for growth.
Concrete and aggregate volumes increased due
to strong demand in the eastern states, particularly
New South Wales and Queensland. Average selling
prices for concrete were up 3.7% and aggregates
prices increased signifi cantly more than CPI,
with demand from all major concrete and
aggregates markets improving.
Hy-Tec and Direct Mix
Concrete’s experience and
logistical capability support
large and small construction
projects. Direct Mix Concrete
supplied product, including
decorative exposed
aggregate concrete, for
the construction of the
Fleurieu Regional
Aquatic Centre in
regional South
Australia
The recovery in South Australian concrete and
aggregates volumes continued in the second half.
The outlook for demand in South Australia appears
favourable given major infrastructure projects.
Sales volumes were also strong in New South
Wales, Victoria and Queensland.
Sydney aggregates markets continue to be
supported by the depletion of traditional reserves
and increasing reliance on product from further
afi eld. The New South Wales quarry operations
are competitively positioned to supply demand
growth in Sydney.
Improved volumes and cost control measures
resulted in fl at or reduced unit production costs.
Margins were enhanced by cost control, logistical
improvements and increased pricing.
Adelaide Brighton continues to pursue its
strategy of acquiring quality concrete and
aggregate businesses that enhance its long
term competitive position and shareholder value.
Over the last decade it has built a concrete and
aggregates business of scale that offers strong
regional positions and strategic aggregates
reserves that underpin returns to shareholders.
The business is complementary to the cement
operations and provides attractive diversifi cation
benefi ts as well as the ability to capture a greater
share of the construction materials production
and distribution value chain.
P h otographs courtesy Kennett Builders
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
14
P
h
o
t
o
g
r
a
p
h
s
:
S
a
m
N
o
o
n
a
n / In
sta
gra
m:
@
sa
m
_noonan_photo Architect: Swanbury Penglase Architects Builder: Sarah Const r u c t i o n
In continuing with our growth strategy, in March
2017 Adelaide Brighton acquired the Central
Pre-Mix Concrete and Quarry (Central) business
for $61 million. Central is an integrated concrete
and aggregate operation with fi ve concrete
plants and a hard rock aggregate quarry serving
the metropolitan Melbourne market, the largest
premixed concrete market in Australia.
We are confi dent that price increases in 2017 will
be at similar levels to those achieved in 2016.
Top right: Southern Quarries Secondary Crushing
Plant plant at Sellicks Hill, South Australia
Centre and below: Concrete supplied by Direct Mix
Concrete in South Australia polished to a durable
and aesthetically attractive fi nish
P
h
o
t
o
g
r
a
p
h
s
:
S
a
m
N
o
o
n
a
n / In
sta
gra
m:
@
sa
m
_noonan_photo Architect: Swanbury Penglase Architects Builder: Sarah Const r u c t i o n
George Agriogiannis
Executive General Manager
Concrete and Aggregates
A DE L AIDE BRIGHTON LTD ANNUA L REPORT 2016
15
Concrete products
O
perating earnings again
increased in 2016, as price
increases and operating cost
reductions combined with the
continued benefits of structural
improvements in this division. The concrete
products business is an important and growing
customer for the cement, aggregates and sand
business, which offers vertical integration
benefits for the Company.
Adbri Masonry is Australia’s largest manufacturer
of concrete masonry products, servicing the
eastern seaboard and South Australia residential
and commercial markets.
After a solid first half, sales declined slightly
in the second half, and full year revenue was
little changed from 2015.
Volumes were adversely affected in South Australia
and Victoria by weather. There were also delays in
supply to several projects and competitive pressures
in some markets. Adelaide Brighton has taken a
proactive stance to increase returns in the business
through cost reductions and price increases.
This approach has meant in some cases losing
unprofitable business but has contributed
to a significant improvement in earnings.
Operational improvement initiatives have
introduced flexibility into the concrete products
operations, contributing to a significant increase
to gross margins compared to 2015 despite
a small reduction in volumes.
Adelaide Brighton has lifted efficiency in the
masonry business through plant rationalisation,
tolling arrangements, a range of operational
improvements and transport efficiencies.
Equipment upgrades continued during the year,
with components of two manufacturing plants
replaced as part of ongoing operational
improvement initiatives.
In addition, the business has made a significant
investment in product innovation to lift the presence
of masonry within the building products industry,
which offers exciting revenue
opportunities for the
business in the
medium term.
Andrew Dell
Executive General Manager
Concrete Products
16
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2016 A selection of Adbri Masonry
concrete pavers and retaining
wall products
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
17
Joint ventures
A
delaide Brighton’s Joint Ventures,
in conjunction with our own
operations, provide an unmatched
network for the effi cient supply
and distribution of products
across Australia. The businesses delivered a strong
improvement in profi t contribution in 2016 with
a positive outlook.
Independent Cement and Lime Pty Ltd
(ICL) (50%)
ICL, a joint venture between Adelaide Brighton
and Barro Group Pty Ltd, is a specialist supplier of
cement and cement blended products throughout
Victoria and New South Wales and is the exclusive
distributor of cement for Adelaide Brighton and any
related body corporate in these states.
ICL’s sales volumes increased in 2016, refl ecting
continued strength in construction activity across
the New South Wales and Victoria markets. Higher
selling prices, strong demand and an easing of input
cost pressures supported an increased contribution.
Burrell Mining Services (50%)
Burrell Mining Services is an unincorporated joint
venture between Adelaide Brighton and Burrell
Mining Products. With operations in New South
Wales and Queensland, Burrell Mining Services
manufactures a range of concrete products
exclusively for the coal mining industry.
An improvement in the outlook for coal mines
during the year combined with expansion of the
product range led to an improvement in sales
revenue and contribution to Group earnings.
Sunstate Cement Limited (Sunstate) (50%)
Mawson Group (Mawsons) (50%)
Sunstate is a joint venture between Adelaide
Brighton and Boral Limited. A leading supplier
to Queensland’s construction industry, Sunstate
has a cement milling, storage and distribution
facility at Fisherman Islands, Port of Brisbane.
Clinker is supplied to Sunstate via seaborne
shipments from the Adelaide Brighton Angaston
plant and imports from Asia.
Sunstate’s contribution to Group earnings
increased, assisted by improved residential
demand across south east Queensland and
projects, particularly in the Gold Coast and
Sunshine Coast regions. Volumes, prices and
margins were all higher than the prior
corresponding period.
Batesford Quarry (50%)
Batesford Quarry is an unincorporated joint
venture between Adelaide Brighton, E&P Partners
and Geelong Lime Pty Ltd. Batesford Quarry,
situated at Fyansford Quarry near Geelong in
Victoria, undertakes quarrying and manufacturing,
marketing and distribution of limestone and
quarry products.
An increase in volumes due to strong demand
for agricultural lime, higher average selling prices
and control of production costs resulted in an
improvement in contribution to Group earnings.
Mawsons is a joint venture between Adelaide
Brighton and BA Mawson Pty Ltd. Mawsons is
the largest premixed concrete and quarry operator
in northern regional Victoria, and also operates
in southern New South Wales. Mawsons is a
signifi cant aggregates producer in the region,
generally holding the number one or number
two position in the markets it serves.
Earnings improved driven largely by strong
demand for higher margin quarry products
supplied to major projects. Most of this demand
occurred in the second half of the year. This was
moderated by competitive pressure impacting
premixed concrete margins.
Aalborg Portland Malaysia Sdn. Bhd.
(APM) (30%)
APM manufactures and sells white cement and
clinker for the domestic Malaysian market and
exports to Australia and markets throughout
south east Asia.
APM contribution to Group earnings signifi cantly
improved. A lift in production output following
the full commissioning of the kiln upgrade led to
higher sales volumes and better operating cost
performance compared to 2015.
Michael Miller
Executive General Manager
Marketing and International Trade
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
18
Sustainability report
T
he Adelaide Brighton Group
includes Adelaide Brighton
Limited and the entities it controls
(the Group), as well as a number
of joint ventures. This report
excludes information about the joint ventures as
their operations are not material to the Group’s
sustainability reporting.
While the Group’s financial year ends on
31 December, most government sustainability
related reporting requires information to be provided
for the year to 30 June. So that statistical and
graphical data provided in this Sustainability Report
can be compared with other publicly available
information, the information in this sustainability
report relates to the year ended 30 June 2016,
unless otherwise indicated.
>
>
>
>
>
In developing this report, the following
resources have been considered:
The Global Reporting Initiative G4 Sustainability
Reporting Guidelines.
ESG Reporting Guide for Australian Companies
prepared by the Australian Council of
Superannuation Investors and the Financial
Services Council.
The Cement Sustainability Initiative of the World
Business Council for Sustainable Development.
Relevant industry practice.
Energy and greenhouse gas emissions information
complies with the definitions and boundaries
contained in the National Greenhouse and
Energy Reporting Act.
The CEO and Managing Director oversees and
approves the Company’s sustainability framework,
the Group’s key performance indicators and the
scope of this report. The key performance indicators
listed adjacent have been assessed to be material
to the Group’s sustainability performance.
This Sustainability Report should be read in
conjunction with other sections of this Annual
Report and its financial statements. The Directors’
Report, Corporate Governance Statement and
reports on Remuneration and People, Health
and Safety all contain information relevant to
the sustainability performance of the Group.
Key performance indicator
Alternative fuels and energy consumption . . . . . . . . . . . . . . . . . . . . . . . . .
Alternative raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carbon emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee turnover by age group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee turnover by gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee turnover by geography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employment by contract status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employment by employment status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employment by geography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy by source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lost time injury frequency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mains water usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participation of women in the Company . . . . . . . . . . . .
% of employees on EBAs vs staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted duties injury frequency rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discussion in Annual Report
Page 23
Page 23
Page 20
Page 24
Page 25
Page 26
Page 27
Page 27
Page 26
Page 22
Page 25
Page 21
Page 29 - Diversity Report
Page 26
Page 25
Other reports
Coverage of organisation defined benefit plan obligations . .
Direct economic value added (sales, costs,
employee compensation, retained earnings) . . . . . . .
Page 81 - 83 - Note 18
Page 61 - Income Statement
and Page 67- 68 - Note 3 and 4
Monetary value of fines and total number of
non-monetary sanctions for non-compliance
with laws and regulations . . . . . . . . . . . . . . . . . . .
Page 39 - 40 - Directors’ Report
Environment Performance
For further information about the sustainability report email
adelaidebrighton@adbri.com.au or telephone 08 8223 8005.
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
19
‘000
tonnes
3,600
3,200
2,800
2,400
2,000
Innovation and improving operational and energy
effi ciencies ensured Adelaide Brighton continued to
be a sustainable business in 2016. Assessing and
improving current work practices, implementing
innovation solutions and building on our community
relationships saw the business continue to improve
our sustainability performance through the year.
In addition to improving our carbon footprint
of the business through the use of mineral
addition, Adelaide Brighton continues to explore
the use of supplementary cementitious materials,
energy effi ciency practises and alternative fuels
to ensure our emissions profi le is managed
sustainably.
Carbon emmissions
Climate change and carbon emissions
Environmental improvement initiatives
09 10 11 12 13 14 15 16
Carbon emissions related to our day to day
operations are closely monitored and reported.
The business remains committed to continuously
reducing its greenhouse gas footprint and is
pleased to report a reduction in carbon emissions
(scope 1 and 2) from the previous year of 4.5%.
The reduction is due to a number of factors
across the Group including operating effi ciency
improvements, tailored projects to reduce natural
gas use when curing concrete products as well
as an overall decrease in fuel use due to the
reduction in production volumes.
Expanding the use of mineral additions (namely
limestone and shellsand) in our process as a
cement clinker alternative has been an area
of focus within the business. Mineral addition
is added at the fi nal grinding stage of the
cement manufacturing process, reducing the
volume of clinker required in the fi nal
product, and therefore lowering the
greenhouse gas footprint while
maintaining the product
quality.
Improving the way we operate in an environmental
capacity is a continuous process throughout
our business. Each business unit identifi es
environmental aspects impacting our sites, and
improvement plans are developed and initiatives
implemented. Some initiatives undertaken
during the year are provided below.
Cement and Lime
>
>
Recycling waste product
The hydrated lime plant at Kemerton in Western
Australia has historically produced waste lime as
a result of washing down the hydration plant and
from product spills. This waste lime was previously
sent to landfi ll, but is now captured into waste bins,
made into a slurry and then is reintroduced back
into the process. Any product that cannot be
re-used in the production process is removed
from site and used within the agricultural industry.
The main benefi t of this initiative is the reduction
of waste to landfi ll. This project has also been
successful in winning the 2016 Cement,
Concrete and Aggregates Association
Environmental Initiative industry award.
A waste product recycling initiative was
implemented at the bag and dry-mix packaging
plant at the Kwinana operation in Western Australia.
Waste product is now collected and re-used
resulting in signifi cantly less waste material
being sent offsite to landfi ll.
‘000
tonnes
200
150
100
50
0
Process waste
to landfi ll
09 10 11 12 13 14 15 16
Cement and lime
Concrete and aggregates
Concrete products
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
20
Constructed wetlands at the
Munster plant, Western Australia
A sample of construction and demolition
waste used in the Birkenhead plant
clinker production process
Increased capacity to use waste as alternate fuel
2016 saw the completion of design and installation
of a second wood derived fuel storage and fi ring
facility at the Birkenhead plant in South Australia.
Incorporating the successful elements of the
original facility, the additional facility will allow for
a greater volume of wood derived fuel to be burnt
in the clinker production process. The burning
of the wood derived fuel displaces natural gas
thereby reducing the site’s greenhouse gas
emissions. Additionally the combustible wood
waste no longer ends up in landfi ll, further
abating greenhouse gas emissions.
Anemometer installation at Munster
An Anemometer, a device for measuring wind
speed and direction, was installed at the Munster
site in Western Australia. The Anemometer provides
production controllers with live real-time wind speed
and direction data to assist in the mitigation and
investigation of emission events from the site.
>
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Dust mitigation measures
The Kwinana site introduced the use of dust
suppressant on unsealed roads within the site
as part of its dust mitigation measures to reduce
fugitive dust from truck movements. Additional
benefi ts of this initiative included reduced
operation of the site’s water truck with associated
reduction in greenhouse gas emissions and
reduced water usage.
Installation of a new dust collector at the clinker
grinding plant in Darwin has increased dust
collection capability by approximately 25%.
Five metre high storage bunkers were constructed
at the Birkenhead plant to contain raw material
stockpiles as well as lowering of limestone stockpile
heights to reduce fugitive dust from the site.
A dedicated water truck is used to apply dust
suppressant and sealing agent to unsealed roads
and exposed raw materials stockpiles within
the Birkenhead plant site.
Megalitres
Mains water usage
600
450
300
150
0
09
10
11 12 13 14 15 16
Cement and lime
Concrete and aggregates
Concrete products
Source of greenhouse gas emission in a cement plant
50% of greenhouse gas emission occur as the raw meal is heated and carbon dioxide is driven off in order to form
the necessary chemical conversion of limestone to calcium oxide: CaC03>Ca0+C02. As long as cement making
relies on the calcination of limestone, these emissions will be impossible to avoid.
35% of greenhouse gas emissions occur as a result of burning fuels (coal, gas and diesel) to create thermal energy.
35% of greenhouse gas emissions occur as a result of burning fuels (coal, gas and diesel) to create thermal energy.
15% is produced as a result of the indirect emissions resulting from the use of electricity. Cement grinding is the
15% is produced as a result of the indirect emissions resulting from the use of electricity. Cement grinding is the
largest single electricity user in the cement plant. Raw meal grinding and moving material around the plant
are other signifi cant sources of electricity use.
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
21
The initiative involves planting trees and use of
emulsifi ed spray to ensure the natural appearance
of the area is maintained through the minimisation
of the visual starkness of the quarry excavation area
and minimisation of quarry product stockpiles.
Austen Quarry engages with the local community
by holding an annual awareness day to inform
residents and businesses about its operations
and to encourage two way communication.
Dam expansion project
Onsite dams at the Austen Quarry are part of
the operations buffer from the local water system
during rain events. The capacity of two existing
dams was extended to contain a 95th percentile
5-day rainfall event, should it occur. Construction
of an additional dam is planned to support future
expansion of the quarry operations.
Dust suppression
During 2016, Austen Quarry implemented the
following dust suppression initiatives:
A remote controlled roadway sprinkler system was
installed to increase wetting of the haul road and
reduce the time required for water cart operation.
New spray bars were designed in order to suppress
the dust agitated at the end of the conveyor belt
system to limit fugitive dust.
A conveyor belt cover was installed at the exit
of the crusher to slow down the air movement
to limit the amount of dust produced from
the crushing process.
A larger volume water cart was purchased in
order to more effectively suppress the dust from
the haul roads, production and stockpiling areas.
Concrete Products
Reduction in gas usage
Modifi cation of the curing process at the
Ulverstone site in Tasmania enabled the
removal of ineffi cient gas heaters, with product
now cured using natural heat in the environment.
Operational changes were implemented at
the Maroochydore plant in Queensland to
take advantage of the site’s warmer climatic
conditions to naturally cure product. This has
led to the complete removal for the need
to use LPG at the site.
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Noise abatement
The Birkenhead plant undertook numerous
projects under its Environmental Improvement
Plan to reduce noise from its operations - the
replacement of a 200 metre chain drive within
the limestone reclaiming conveyor system and
the installation of an energy effi cient and quieter
motor system in one of the sites cement mill dust
collectors - resulted in a signifi cant reduction in
noise, resulting in positive community response.
Embracing the power of the sun
The cement and lime distribution centre near
Kalgoorlie, Western Australia, has embraced the
power of the sun to reduce costs and improve
effi ciencies. A rail locomotive, which required
constant battery replacements, was converted
to an auxiliary charge system using solar panels
to charge a 24-volt battery. This has resulted
in an improvement in energy and running
effi ciency, improved employee safety as well
as a fi nancial benefi t due to reduced energy
and maintenance costs.
Energy effi ciency at Kwinana
The installation of a new slag dryer at the
Kwinana plant, replacing an existing less effi cient
dryer, has been substantially completed. The new
dryer signifi cantly increases the output per hour,
reduces dust through additional dust collectors
and double handling of material into the dryer,
thereby improving the effi ciency of the
drying process.
Environmental Management System
accreditation in South Australia
The Birkenhead and Angaston sites in South
Australia gained certifi cation under the new
ISO14001:2015 for Environmental Management.
This certifi cation demonstrates the commitment
of the business to environmental management
and continuous improvement.
Concrete and Aggregates
Visual concealment strategy
The Austen Quarry in Hartley west of Sydney,
developed and implemented a strategy to
improve the quarry’s effect on surrounding
communities and the ecosystem.
South Coogee Primary School
children took part in the Munster
plant’s Seedling Program
Terajoules
Alternative fuels
%
energy consumption
1600
1200
800
400
0
09 10 11 12 13 14 15 16
10.0
8.5
5.0
2.5
0
Demolition material
Industrial waste
Waste oil
% Alternative fuels of total energy
‘000 GHG
saving
900
600
300
0
%
Alternative
substitution
raw materials
30
20
10
0
09
10
11 12 13 14 15 16
% SCM* substitution
GHG saving
* By-products of industrial
processes - slag from the
steel manufacturing industry
and fl y ash from coal fi red
power stations
Energy by source
Liquid fuels
Coal
Coal
Natural gas
Natural gas
Demolition material
Demolition material
Industrial waste
Waste oil
Waste oil
Electricity
Electricity
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
22
>
An upgrade of the Townsville manufacturing
plant has seen a signifi cant reduction in LPG
usage at site following the introduction of a new
curing system. The new system still requires the
use of LPG, however the plant operates more
effi ciently by heating air instead of water which
keeps the kilns at the required temperature and
recycles the hot air for product curing.
Landcare and rehabilitation
Geelong Quarry rehabilitation
Adelaide Brighton has progressed the rehabitation
of the former Geelong Quarry to prepare the site
for future sale. Earth works have been undertaken
to build stable slopes of signifi cant height and length
to support future urban development. Previously a
signifi cant liability, the site is undergoing an exciting
transformation that is planned to include a lake,
open public space and residential housing that
will be part of the Geelong urban area.
Austen Quarry vegetation program
In 2016, Austen Quarry’s ongoing commitment
to rehabilitation and conservation has seen over
2,000 trees planted in and around the quarry.
Trees planted in previous years continue to grow
well and it is expected that a further 2,000 trees
will be planted in Autumn 2017.
Rehabilitation program - Calcium and
Coominya Quarries in Queensland
The Calcium Quarry near Townsville in Queensland
initiated a quarry rehabilitation program involving
children from local schools. The program involves
the school children helping plant trees at the quarry
and learning from the quarry staff about the geology
of the site and the day to day running of a quarry.
The children’s’ involvement forms part of their
school curriculum and involves project work on
their experience at the quarry. The success of
this initiative has resulted in the program being
established at our Coominya Quarry, west
of Brisbane.
Munster seedling program
The Munster plant in Western Australian
donated over 2,000 native plants to nine primary
schools in the area surrounding the Munster site.
The Munster
seedling program
supports the schools’
tree planting initiatives and
assists in the education of future
generations regarding the local environment
and importance of revegetation to protect and
nurture local fl ora and fauna.
Annual mandatory reporting
>
>
>
Adelaide Brighton continues to report under the
national environmental schemes detailed below:
National Greenhouse Gas and Energy Reporting
Scheme - providing greenhouse gas emissions,
energy consumption and energy production data.
National Pollutant Inventory. Reports submitted
in 2016 showed no signifi cant variance to
the previous year.
The Renewable Energy Target - an Australian
Government scheme designed to reduce emissions
of greenhouse gases in the electricity sector and
encourage additional generation of electricity
from sustainable sources.
Adelaide Brighton also provides annual reports
to the industry associations of Cement Industry
Federation and National Lime Association as well
as the Australian Government Australian Bureau
of Statistics.
Community interaction and support
Adelaide Brighton is committed to engaging
with the community and supports a broad range
of organisation with donations, public tours
and work experience.
Geelong Quarry rehabilitation underway
with earth works carried out to build stable
slopes to support future urban development
The core purpose of Adelaide Brighton’s
community support program is to make a valued
and sustainable contribution to the communities
in which we operate by investing in carefully
considered donation and sponsorship of primarily
community and children services in the local
communities in which we operate, support of
specialised higher education programs and
environmental education through local school’s
participation in vegetation programs and
wetland education.
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
23
At Adelaide Brighton our commitment to
health, safety and the environment is an essential
and integral part of the way we do business.
We continually work on improving our safety
and environmental management systems and
culture. We believe that good planning and
preparation will minimise risks to health, safety
and the environment.
We achieved Health and Safety Innovation
Awards across three states: New South Wales,
South Australia and Western Australia at the
Cement, Concrete & Aggregates Australia (CCAA)
Environment, Health & Safety Awards this year.
The Awards recognised our commitment to
continual improvement leading to innovation
in our business. In addition, our Kemerton
lime plant in Western Australian won an
Environmental Innovation Award for recycling
of lime hydrate.
Safe Work New South Wales Awards also
recognised our Austen and Grants Head quarries
in New South Wales with a win for the excavator
bucket tooth exchanger, the emergency response
and safety station being a fi nalist and also
winning the Gold Hard Hat Site Safety award
from the Institute of Quarrying Australia.
The investment in our safety culture “the way
things work around here” is driven by our leaders.
We continue to measure the effectiveness of our
programs, like our award winning Safety Leadership
Program. More than 50% of our workforce has
participated in this program which is proving to
be a positive investment in our safety culture.
Leadership Strategic Priorities
>
Our leadership talent priorities, support the
Adelaide Brighton business goals and the
culture we are building. The priorities include:
Leaders who deliver safe, sustainable production
- Our leaders understand the value of safety
to our business and model behaviours that
communicate their understanding of safety
as a value to our people.
- Day to day decisions reinforce safety is
as important as production.
People, health and safety
ollowing the launch of our Safety
Vision and Strategy in 2015 “Safety
Leaders - Everyone, Everyday”,
we continue to see improvement
in our injury frequency rates.
We recorded a Total Recordable Injury Frequency
Rate as at December 2016 of 23.0 compared
to 33.2 at December 2015. We recorded a Lost
Time Injury Frequency Rate as at December 2016
of 1.7 compared to 2.0 at December 2015.
The downward trend in frequency rates can be
attributed to the improved utilisation of our safety
systems and tools, investigating incidents related
to potential risk and the result of investment
in our safety culture and awareness.
As an initiative to improve contractor management,
we launched a contractor Health, Safety and
Environment Compliance System to capture and
retain critical contractor data, as well as facilitating
online inductions. The system provides Group
wide mobile accessibility and visibility of
contractor documentation.
%
Employee trurnover by age group
turnover
50
40
30
20
10
0
0
2
<
5
2
-
1
2
0
3
-
6
2
5
3
-
1
3
0
4
-
6
3
5
4
-
1
4
0
5
-
6
4
5
5
-
1
5
0
6
-
6
5
5
6
-
1
6
0
7
-
6
6
+
0
7
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
24
Frequency
Restricted duties
Frequency
Lost time injury
injury frequency rate
frequency rate
% of
Employee turnover
employees
by gender
40
30
20
10
0
09
10
11 12 13 14 15 16
8
6
4
2
0
09
10
11 12 13 14 15 16
Concrete and aggregates
Concrete and aggregates
Concrete products
Cement and lime
Total
Concrete products
Cement and lime
Total
100
80
60
40
20
0
Female Male
Continuers
Turnover
>
>
>
Engagement
- Appropriate plans are in place to maximise
development, engagement and retention
of employees across the business.
- We continue to develop our employee
engagement activities.
Build capability and retain company knowledge
- We continue to monitor development plans
for Executive successors and future leaders.
- We provide opportunities for mentoring
and secondments across the Group.
Inclusive leadership
- Building understanding and accountability
for leaders to demonstrate inclusiveness
and adapting leadership style to
obtain maximum contribution
from all our employees.
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
25
Employment by geography
Employee turnover by geography
% employees on EBA vs staff
South Australia
New South Wales
New South Wales
Western Australia
Western Australia
Queensland
Queensland
Victoria
Victoria
Northern Territory
Tasmania
ACT
Developing a diverse and
inclusive workforce
Adelaide Brighton continues the promotion of
diversity and inclusion within our organisation.
An employee survey was undertaken to measure
the inclusiveness of our business in the fourth
quarter of 2015. To further understand what
makes Adelaide Brighton a great place to work,
in early 2016 we conducted interviews and focus
groups with employees in key workforce groups.
This included employees in production, technical
professional and corporate professional roles,
at front line and supervisory levels.
Cockburn Cement Munster
Plant apprentices receiving
on the job skills training
South Australia
New South Wales
New South Wales
Western Australia
Western Australia
Western Australia
Queensland
Queensland
Victoria
Victoria
Northern Territory
EBA
Staff
From a strategic perspective, what sets the
Adelaide Brighton employment experience apart
is its ability to enable an individual to grow;
professionally, technically and/or personally through
the supportive connection with those around them.
The consistent themes which underpin this
valuable experience are:
Variety - roles typically include a broad range of
tasks and responsibilities that also shift and change,
to routinely challenge and push an individual out of
comfort zones, to routinely achieve more.
Trust from respect - managers and colleagues
trust in the ability and intention of an individual
to do their job well. This increases the control
people feel they have over how their talents and
judgement are applied, facilitating personal growth
and increasing the ownership and pride they
have in the outcome.
>
>
>
>
Great people - Adelaide Brighton people are
consistently friendly, approachable and supportive,
creating a particularly positive environment where
individuals are motivated to do a good job, and
feel happier and more content.
Organisational stability - the continued strength
and stability of the organisation provides employees
a valuable peace of mind that enables them to
confi dently plan and live a life, in an increasingly
unpredictable world.
In addition, we continue our focus on
gender balance in our business
and the industry through a
number of scholarships
and sponsorships such
as the Women in
Engineering initiatives
at the University of
Wollongong including the
2016 NSW Senior High
Schools STEM Competitions.
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
26
Employment by employment status
Employment by contract status
Full time
Full time
Casual
Part time
Permanent
Fixed term
Our scholarships include: Adelaide Brighton
Engineering Scholarship at the University of
Adelaide where the recipient is a student enrolled
in Bachelor of Chemical Engineering and receives
4 years of fi nancial support, and the Adelaide
Brighton Junior Cooperative Scholarship at the
University of Technology Sydney where the
recipient is a student enrolled in Bachelor of
Engineering and receives fi nancial support in
addition to an internship of 24 weeks.
We are also an active participant on the Australian
Brick and Blocklaying Training Foundation which
supports the skills development of apprentices in
the industry ensuring future skilled labour supply.
Our student vacation program employs
undergraduate student engineers for 12 week
blocks in Adelaide and Perth where they are
supervised and receive mentoring.
The students are assigned operational projects
that are important to the business and aligned
to their degree.
Indigenous diversity has been supported by
our continued active participation in the South
Australian Indigenous Law Student Mentoring
program, and a new initiative to provide a
scholarship for an indigenous secondary school
student at St Peters College in Adelaide.
Formal mentoring programs have been
implemented across our business with mentors
and mentees participating in workshop training,
webinars and individual coaching sessions for
a shared positive mentoring experience.
Dimity Smith
Executive General Manager
Human Resources and
Health, Safety and Environment
A DE L AIDE BRIGHTON LTD ANNUA L REPORT 2016
27
Case study: Mentoring Program
“I’ve got tremendous value from this program.
A strong relationship has been built based
on trust and openness. My mentor, Carolyn
Fisher has been genuinely open in helping
me to deal with specifi c situations. Our
discussions have been truly inspiring and
I’ve been able to get valuable advice
on my career decisions.”
Cindy Liu, Senior Soil and Aggregate Technician
“Assisting Cindy to navigate through day
to day challenges and discuss solutions
to problems as well as being an objective
sounding board has been a large component
of our mentor and mentee relationship.”
Carolyn Fisher, Health, Safety and
Environment Manager, Concrete
and Aggregates
Case study: SitePass
contractor management
“Dominion Industry have over
100 personnel registered with Adelaide
Brighton as contractors. Use of the
SitePass management system allows us
the fl exibility to monitor the status
of Dominion personnel’s induction - we
receive an automated electronic notifi cation
when personnel have been registered;
documentation uploaded; and also when
their induction is due to expire.”
Sharon Hancock - Dominion Industry
“From a Company Approver perspective,
the design and layout of the SitePass
contractor management system is intuitive
and guides the Approver through the
process to approve Contractors induction
applications and is capable of dealing
with unique contractor requirements.”
Daniel Mellor - Process Manager Kiln
(Cement and Lime Birkenhead Mechanical
SitePass representative)
Diversity report
A
delaide Brighton is committed
to being an inclusive workplace
that values and promotes
diversity. For us this
encompasses gender, race,
ethnicity, age, physical ability, mental ability,
religious beliefs, industry and life experience
and thinking styles.
We recognise that an inclusive culture encourages
diversity of thought leading to innovation and
enables us to attract and retain the best people with
the appropriate skills to contribute to the continuing
success of our business. In 2016 we launched the
revised Diversity and Inclusion Policy which outlines
seven core objectives which form the foundations
of our approach to diversity and upon which we
measure our performance in this area.
Objectives
Diversity measures to facilitate achievement of objectives
Progress
An overview of these objectives, and our progress
towards achieving these objectives during the
2016 financial year, are set out below:
To promote a culture of
diversity and inclusion
To ensure that recruitment
and selection processes seek
out candidates from a diverse
background, with selection
decisions being based
on merit
>
Launch of the revised Diversity and Inclusion Policy and
deployment of the plan to deliver progress towards achieving
the objectives which were approved by the Board and
Nomination, Remuneration and Governance Committee of
Adelaide Brighton as being relative to the industry structure
in which the Company operates.
>
Proactively engage with our people to develop inclusion
>
>
Company wide training in workplace policies (including
Diversity and Inclusion, Bullying and Harassment,
Equal Employment Opportunity).
Recruitment sourcing strategies and practices deliver diverse
candidate pools. Employment decisions are made without
regard to factors that are not applicable to the inherent
requirements of a position and unconscious bias does not
influence outcomes.
>
Promote Adelaide Brighton as a diverse employer
with an inclusive culture.
Build talent pipelines
through investment in
skills and capabilities
>
>
Executive Leadership Team sponsored mentoring program
for high potential employees, to continue to develop
inclusive leadership.
Ensure performance, development and succession
management processes support the career progression
of individuals including the identification of future
executive talent.
>
Sponsor or encourage professional networking, coaching
programs and cross divisional projects to give employees
the opportunity to connect with other professionals.
>
In 2016, the Board and the Nomination, Remuneration and
Governance Committee discussed the Company’s diversity
measures and reviewed progress towards achieving the
objectives, to continue to develop a positive workplace
culture that values diversity and inclusion.
>
Externally facilitated focus groups were held in each Division
to gain further insight into our employee value proposition -
what makes Adelaide Brighton a great place to work.
>
Employee and contractor inductions include information
on Company policies.
>
>
>
>
>
>
>
>
Recruitment training continues across the business with
a view to creating diverse candidate pools and to eliminate
any unconscious bias that may occur. 19% of all new hires
in 2016 were female.
Refreshed advertising templates and copy writing training
delivered to ensure job advertisements are attractive to a
diverse pool of job seekers. 62% of roles advertised in
2016 attracted female applicants.
Website page dedicated to career profiles of female
employees, ‘Women in Adelaide Brighton’.
Mentoring program launched with 28 mentors and mentees
attending workshop training, webinars and 1:1 coaching
sessions for a shared positive mentoring experience.
Development programs are provided for individuals and
facilitated via an online portal.
Talent and Succession Management process proactively
challenges and promotes gender representation.
17% of women and 13% of men were promoted
internally in 2016.
Where identified, these programs continue to be
supported across the organisation.
A DE L A IDE BRIGHTON LTD ANNUAL REPORT 2 016
28
Objectives
Diversity measures to facilitate achievement of objectives
Progress
>
>
Sponsor MBA or post-graduate studies for high
potential employees.
In recognition of the low numbers of females entering
into engineering and manufacturing vocations and
to increase the diversity of our workforce:
- implement programs designed to engage graduate
engineers;
- offer undergraduate scholarship opportunities and
sponsor vacation work programs to engage students who
are undertaking tertiary education to consider engineering
as a career option;
- offer opportunities for high school students to become
aware of diverse career opportunities within our industry.
To reward and remunerate
fairly and equitably
>
Adelaide Brighton has a policy to provide equal pay
for equal work.
To provide flexible
work practices
>
>
>
>
>
As part of the annual salary review process, Adelaide
Brighton undertakes a review of pay parity. Pay parity is also
considered at the time of hiring new employees, to eliminate
potential gaps in pay arising from hiring decisions.
Adelaide Brighton seeks to provide suitable working
arrangements for employees returning from maternity leave.
Flexible working arrangements are available to all employees
under our flexible work policy, to recognise that employees may
have different domestic responsibilities throughout their career.
We also offer 12 weeks’ paid parental leave for the
primary carer.
Formal review of all part time work arrangements to ensure
roles are appropriate to maintain career development.
>
>
>
>
>
Adelaide Brighton supports external study and
development for high potential employees.
Continued sponsorship of the Women in Engineering program
at the University of Wollongong in 2016 that provides both a
financial benefit and a work placement opportunity.
Engineering scholarships in place at University of Adelaide
and University of Technology Sydney.
Participation in the STEM Program (Science, Technology,
Engineering and Math) for Year 10 and 11 high school students.
Vacation programs in place in Adelaide, Perth and Sydney.
Participation in WA Kwinana Industries Council “iWomen
project”. Sponsorship of the SA Law Society Indigenous
Law Student Mentoring Program and establishment of a
Scholarship for an indigenous high school student
at St Peter’s College in Adelaide.
>
A gender pay parity review was completed in 2016 as
part of Adelaide Brighton’s annual remuneration
review processes.
>
As per previous years, 100% of the women who commenced
and finished maternity leave in 2016 have returned to work
in either a full or part time capacity.
>
3% of the workforce have a part time work arrangement.
>
60% of employees who returned from maternity leave
are still with Adelaide Brighton three years later.
>
16% of employees have taken ‘Paternity Leave’ in 2016.
Understand the diversity
of our workforce
>
Measure age, gender, and cultural identity of our workforce.
>
Results of employee survey of cultural identity plus
diversity data is collected from candidates during
the recruitment process.
Adelaide Brighton is committed to the regular review
of its objectives to ensure that these continue to be
appropriate and relevant. This commitment includes
the completion of the workplace profile report as
required by the Workplace Gender Equality Act 2012.
A copy of the workplace profile report is
available from our website:
www.adbri.com.au/ourresponsibilities#reporting.
The Board is committed to build upon the
achievements to date and reinforce the continued
efforts in promoting and cultivating a culture of
diversity and inclusiveness.
The proportion of women across Adelaide Brighton’s
workforce is reflective of the generally low level of
female representation in the building, manufacturing
and construction materials industries in which
we operate.
We recognise that the available pool of female
candidates in manufacturing and engineering roles
relevant to our business operations is limited,
and this impacts our ability to increase the
number of female new hires. In an effort to make
our Company (and industry) more attractive to
women, we have focused on measures designed
to increase the proportion of female candidates
and graduates and to support the development of
female employees who are recognised as having
future potential. We believe that, over time, our
diversity objectives and measures will achieve an
improvement in the level of female representation
and inclusiveness across the organisation.
The following table shows the proportional
representation of women employees at various
levels within the Adelaide Brighton Group (as at
31 December 2016 and 2015 respectively).
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
29
We are pleased to report that improvements have
been made at the senior executive and senior
manager level contributing to an overall gender
improvement between 2015 and 2016.
% Females
31 Dec 2016
31 Dec 2015
Board (1)
Senior executives (2)
Senior managers (3)
Total workforce
17%
14%
21%
13%
17%
0%
17%
12%
(1) Executive and non-executive Directors
(2) Direct reports to the CEO and Managing Director
(Chief Financial Officer, General Counsel and Company
Secretary and Executive General Managers)
(3) Senior managers include a variety of positions which
report directly to the senior executives.
A copy of Adelaide Brighton’s Diversity and
Inclusion Policy is available in the Governance
section of Adelaide Brighton’s website under
Our Responsibilities.
Directors
Les Hosking
Age 72
Raymond Barro
BBus, CPA, FGIA, FCIS
Age 55
Graeme Pettigrew
FIPA, FAIM, FAICD
Age 68
Experience
Experience
Experience
Independent non-executive Director
Non-executive Director since
Independent non-executive Director
since June 2003.
August 2008.
since August 2004.
Extensive experience in commercial
Over 26 years experience in the
Extensive experience in the building
and financial matters with 16 years
premixed concrete and construction
materials industry and former Chief
experience as Chief Executive of
materials industry.
Executive Officer of CSR Building
the Sydney Futures Exchange and
Managing Director of Barro Group
Products and broad management
former Chief Executive Officer of
Pty Ltd.
Axiss Australia, and Managing
Director of National Electricity Market
Special responsibilities
experience gained in South East Asia
and the United Kingdom through
former positions as Managing Director
Management Company (NEMMCO).
Member, Safety, Health and
of Chubb Australia Limited and
Director, AGL Energy Limited
Environment Committee.
(appointed November 2008) and
Australian Energy Market Operator
Limited (appointed July 2009 and
retired November 2014) and Chairman,
Carbon Market Institute Limited
(appointed October 2010 and retired
November 2014).
Adjunct Professor, The University of
Sydney, John Grill Centre for Project
Leadership (appointed May 2016).
Special responsibilities
Appointed Chairman 17 May 2012.
Member, Audit, Risk and Compliance
Committee.
Member, Nomination, Remuneration
and Governance Committee.
Member, Independent Directors’
Committee.
Wormald Security Australia Pty Ltd.
Director, Capral Ltd (appointed June
2010). Former Director, Holocentric
Pty Ltd (appointed September 2012
and retired August 2014).
Special responsibilities
Chairman, Audit, Risk and Compliance
Committee.
Member, Nomination, Remuneration
and Governance Committee.
Member, Safety, Health and
Environment Committee.
Member, Independent Directors’
Committee.
AD EL AID E BRI GHTON LTD ANNUAL REPORT 2016
30
Ken Scott-Mackenzie
BE(Mining), Dip Law
Age 66
Arlene Tansey
FAICD, MBA, JD, BBA
Age 59
Zlatko Todorcevski
MBA, BCom, FCPA, FCIS
Age 49
Experience
Experience
Experience
Martin Brydon
MBA, FAICD, FAIM, Dip Elect Eng,
Dip Elron Eng
Age 61
Experience
Independent non-executive Director
Independent non-executive Director
Independent non-executive Director
Managing Director since
since July 2010.
since April 2011.
appointed in March 2017.
November 2015.
Mining Engineer with over 40 years
Extensive experience as a senior
Experienced global executive with
More than 30 years experience in
experience in infrastructure,
executive in business and the financial
more than 30 years experience in the
the construction materials industry
construction and mining services
services industry gained in Australia and
oil and gas, logistics and manufacturing
with training in electrical and
gained in Australia and Africa, as well
the United States with a background in
sectors gained in Australia and overseas
electronic engineering. Experience
as extensive experience in financial,
investment banking and securities law.
with a background in finance, strategy
in manufacturing and general
legal and commercial aspects of
Director, Primary Health Care Limited
and planning.
management, marketing, strategy
projects.
(appointed August 2012), Aristocrat
Former Chief Financial Officer of
and business development in
Former Chairman, Macmahon
Leisure Limited (appointed July 2016),
Brambles, Oil Search Limited and
various roles within the Adelaide
Holdings Limited (appointed Chairman
Lend Lease Real Estate Investments
BHP Billiton’s Energy business.
Brighton group of companies.
in November 2009 and a Director in
Limited (appointed October 2010),
President of the Group of 100 and
Appointed Chief Executive Officer
May 2009 and retired March 2014).
Hunter Phillip Japan Limited (appointed
Chairman of the Accounting and
of Adelaide Brighton Limited in
March 2013), External Member of
Auditing Standing Committee of the
May 2014.
Special responsibilities
Infrastructure New South Wales
Australian Securities and Investments
Chairman, Safety, Health and
(appointed June 2014) and Serco Asia
Commission.
Environment Committee.
Pacific Advisory Board. Member of Board
Member, Nomination, Remuneration
of Advice,The University of Sydney
and Governance Committee.
Business School (appointed May 2016).
Member, Independent Directors’
Former Chairman of Future Fibre
Special responsibilities
Member, Independent Directors’
Committee.
Committee.
Technologies Limited (appointed March
2015 and resigned in October 2016)
and Urbanise.com Limited (appointed
June 2014 and resigned in October
2016). Former Director, Lend Lease
Funds Management Limited (appointed
October 2010 and ceased January
2015), Urbanise.com (Mena) Pty Ltd
(appointed June 2015 and resigned in
October 2016), Mystrata Holdings Pty
Ltd (appointed June 2015 and ceased
in October 2016), Mystrata Pty Ltd
(appointed June 2015 and ceased in
October 2016) and Australian Research
Alliance for Children and Youth Limited
(appointed September 2013 and
ceased October 2015).
Special responsibilities
Chairman, Nomination, Remuneration
and Governance Committee.
Member, Audit, Risk and Compliance
Committee.
Member, Independent Directors’
Committee.
A DE L A IDE BRIGHTON LTD ANNUA L REPORT 2016
31
Information for shareholders
Annual general meeting
Direct credit of dividends
On market buy back
The annual general meeting of shareholders
will be held at the InterContinental,
North Terrace, Adelaide, South Australia
on Thursday 25 May 2017 at 10.00 am.
Securities exchange listing
Adelaide Brighton Ltd is quoted on the
official list of the Australian Securities
Exchange and trades under the symbol
“ABC”. Adelaide is Adelaide Brighton
Ltd’s home exchange.
Dividends can be paid directly into
an Australian bank or other financial
institution. Payments are electronically
credited on the dividend payment
day and subsequently confirmed by
mailed payment advice.
Application forms are available from our
share registry, Computershare Investor
Services Pty Ltd or visit the website at:
www.computershare.com.au/easyupdate/abc
to update your banking details.
Registered office
Dividend Reinvestment Plan (DRP)
Level 1, 157 Grenfell Street
Adelaide SA 5000
Telephone 08 8223 8000
Facsimile 08 8215 0030
Adelaide Brighton’s DRP is currently
suspended until further notice. In future,
if the DRP is reactivated, it will be notified
by way of an ASX announcement.
At 11 April 2017 there is no on-market buy back of the Company’s shares being undertaken.
Twenty largest shareholders shown in the Company’s
Register of Members as at 11 April 2017
Number of ordinary
shares held
% of issued
capital
Shareholder
Barro Properties Pty Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Ltd
Barro Group Pty Ltd
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Ltd
National Nominees Limited
Argo Investments Ltd
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
Enquiries about your shareholding
Change of address
Milton Corporation Limited
Enquiries or notifications by
shareholders regarding their
shareholdings or dividends should
be directed to Adelaide Brighton’s
share registry:
Computershare Investor Services
Pty Limited
Level 5, 115 Grenfell Street
Adelaide SA 5000
Telephone 1800 339 522
International 613 9415 4031
Facsimile 1300 534 987
International 613 9473 2408
When communicating with the share
registry, shareholders should quote
their current address together with
their Security Reference Number (SRN)
or Holder Identification Number (HIN)
as it appears on their Issuer
Sponsored/CHESS statement.
Shareholders who are Issuer Sponsored
should notify any change of address
to the share registry, Computershare
Investor Services Pty Limited, by
telephone or in writing quoting your
security holder reference number,
previous address and new address.
Broker Sponsored (CHESS) holders
should advise their sponsoring
broker of the change.
Investor information other than that
relating to a shareholding can be
obtained from:
Group Corporate Affairs Adviser
Adelaide Brighton Ltd
GPO Box 2155
Adelaide SA 5001
Telephone 08 8223 8005
Facsimile 08 8215 0030
Email adelaidebrighton@adbri.com.au
Online services
Communications
Shareholders can access information
and update information about their
shareholding in Adelaide Brighton
Limited via the internet by visiting
Computershare Investor Services Pty Ltd
website: www.investorcentre.com
Some of the services available online
include: check current holding balances,
choose your preferred annual report
option, update address details, update
bank details, confirm whether you have
lodged your TFN, ABN or exemption,
view your transaction and dividend
history or download a variety of forms.
Our internet site www.adbri.com.au
offers access to our ASX
announcements and news releases
as well as information about our
operations.
Substantial shareholders
Barro Properties Pty Ltd, by a notice
of change of interests of substantial
shareholder dated 15 September
2016, informed the Company that it
or an associate had a relevant interest
in 227,526,486 ordinary shares or
35.0% of the Company’s issued
share capital.
186,549,322
80,972,504
60,492,677
43,752,619
43,156,346
14,434,637
10,983,592
7,681,385
6,202,871
5,885,677
5,239,152
2,835,886
1,994,254
1,956,170
1,000,000
782,791
780,251
28.72
12.46
9.31
6.73
6.64
2.22
1.69
1.18
0.95
0.91
0.81
0.44
0.31
0.30
0.19
0.15
0.12
0.12
755,000
0.12
738,137
477,440,275
172,213,824
0.11
73.48
26.52
Sandhurst Trustees Ltd
IOOF Investment Management Limited
RBC Investor Services Australia Nominees Pty Ltd
1,247,004
Diversified United Investment Limited
BNP Paribas Noms (NZ) Ltd
Bond Street Custodians Limited
Geoff and Helen Handbury Foundation Pty Limited
HSBC Custody Nominees (Australia) Limited
Total top 20 shareholders
Total remaining shareholders balance
Voting rights
All shares at 11 April 2017 were of one class with equal voting rights being one vote
for each shareholder and, on a poll, one vote for each fully paid ordinary share.
Shares held as at 11 April 2017
Number of shareholders % of issued capital
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - over
Total shareholders
Less than a marketable parcel of 89 shares
Unquoted securities
4,254
10,115
4,396
3,567
154
22,486
702
0.33
4.32
5.01
12.26
78.08
100.00
2,919,824 Awards issued to the Chief Executive Officer and Managing Director and
other members of the senior executive team under the Adelaide Brighton Ltd Executive
Performance Share Plan as part of the Company’s long term incentive program.
The Awards are not quoted and do not participate in the distribution of dividends and
do not have voting rights. The total number of participants in the Adelaide Brighton Ltd
Executive Performance Share Plan and eligible to receive the Awards is eight.
32
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2016
A DE LA IDE BRIGHTON LTD ANNUA L REPORT 2016
33
Financial statements contents
Inventories
Income tax
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Directors’ report
Remuneration report
Remuneration report contents
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Statement of cash flows
Notes
1 Summary of significant accounting policies
2 Critical accounting estimates and assumptions
3 Revenue and other income
4 Expenses
5
6 Cash and cash equivalents
7 Trade and other receivables
8
9 Assets classified as held for sale
10 Joint arrangements and associate
11 Property, plant and equipment
12 Intangible assets
13 Impairment tests
14 Trade and other payables
15 Borrowings and lease commitments
16 Provisions
17 Other liabilites
18 Retirement benefit obligations
19 Share Capital
20 Reserves and retained earnings
21 Dividends
22 Financial risk management
23 Fair value measurements
24 Contingencies
25 Commitments for capital expenditure
26 Share-based payment plans
27 Remuneration of auditors
28 Related parties
29 Subsidiaries and transactions with non-controlling interests
30 Deed of cross guarantee
31 Reconciliation of profit after income tax to net cash inflow from operating activities
32 Earnings per share
33 Segment reporting
34 Parent entity financial information
35 Events occurring after the balance sheet date
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report to the members of Adelaide Brighton Ltd
Financial history
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A DE LAID E BRI GHTON LTD ANNUAL REPORT 2 016
35
42
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71
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34
Directors’ report
Directors’ report
Statutory Results
The Directors present their report on the
consolidated entity (the Group) consisting of
Adelaide Brighton Limited (the Company) and
the entities it controlled at the end of, or during,
the year ended 31 December 2016.
Directors
The Directors of the Company, at any time during
or since the end of the financial year and up to the
date of this report, are:
LV Hosking
RD Barro
GF Pettigrew
KB Scott-Mackenzie
AM Tansey
M Brydon
Principal activities
During the year the principal activities of the Group
consisted of the manufacture and distribution of
cement, and cementitious products, lime, premixed
concrete, aggregates, sand and concrete products.
Review of operations
A summary of the financial results for the year
ended 31 December 2016 is set out below:
Revenue
Depreciation, amortisation and impairments
Earnings before interest and tax (“EBIT”)
Net finance cost
Profit before tax
Income tax expense
Net profit after tax
Attributable to:
Members of Adelaide Brighton Ltd (“NPAT”)
Non-controlling interests
Basic earnings per share (cents)
Ordinary dividend per share (cents)
Special dividend per share (cents)
Franking (%)
Net debt ($ million)
Net debt/equity (%)
Net profit after tax
Adelaide Brighton’s long term strategy has
positioned the Company to be resilient to the cyclical
nature of construction markets and in 2016 has
seen the Group grow net profit after tax (excluding
property) by 3.1%. This was despite a decline in
sales volume of 20% in Western Australia and the
Northern Territory, and electricity market disruptions
which impacted profit before tax by $9 million.
Reported net profit after tax attributable to members
(NPAT) for the year ended 31 December 2016
declined 10.4% to $186.3 million primarily due
to lower property profits compared to the previous
corresponding period. Property contributed
$7.9 million to NPAT, compared to $34.9 million
in 2015.
Revenue
Revenue of $1,396.2 million was 1.2% lower than
in 2015, due to reduced demand for cement from
residential and resource construction projects in
Western Australia and the Northern Territory. By
contrast, continued strength in the residential sector
and a ramp up in infrastructure projects in the
eastern states and South Australia lifted demand
for cement, clinker, concrete and aggregates in
these markets. Excluding the impact of lower freight
revenue, Group revenue increased slightly versus
previous corresponding period.
A DE LA IDE BRIGHTON LTD ANNUA L REPORT 2016
35
Consolidated
2016
$ million
1,396.2
2015
$ million
1,413.1
(78.1)
266.1
(11.5)
254.6
(68.4)
186.2
186.3
(0.1)
28.7
20.0
8.0
100
288.5
23.6
(77.8)
298.6
(13.0)
285.6
(77.8)
207.8
207.9
(0.1)
32.0
19.0
8.0
100
297.2
24.6
Earnings before interest and tax
Earnings before interest and tax (EBIT) decreased
10.9% from the prior year to $266.1 million on an
EBIT margin of 19.1%. Excluding property profits,
EBIT grew 1.6% on 2015 to $257.7 million, while
the EBIT margin improved from 17.9% in 2015 to
18.5% in 2016.
Margins
EBIT margins excluding property improved as a
result of price increases, cost initiatives and higher
joint venture earnings. These more than offset the
impact of lower cement volumes and electricity
supply disruptions in South Australia. Import
costs were higher due to the weaker Australian
dollar. Joint arrangements and associate earnings
increased from $21.5 million in 2015 to
$30.9 million in 2016 reflecting improved
demand and higher cement prices on the east
coast of Australia.
Operating cash flow and debt
Operating cash flow increased 8.0% from the prior
year to $248.4 million, driven by improved operating
profit and stronger cash conversion. Property sales
contributed $20.6 million to cash flow, bringing
sales in the last four years to $85 million. The
estimate of the sales value of the remaining property
pipeline over the next decade exceeds $120 million.
Gearing reduced to 23.6% at year end, assisted
by strong operating cash flows and property sale
proceeds.
Earnings per share
Earnings per share (EPS) were 28.7 cents, while EPS
excluding property profits increased 3.0% from the
prior year to 27.5 cents.
Cement sales in South Australia were also assisted
by the start of major infrastructure projects, which
are anticipated to ramp up over 2017 and continue
into 2018.
Dividends
A final ordinary fully franked dividend of 11.5 cents
per share and a fully franked special dividend of
4.0 cents per share were declared, bringing total
dividends for FY 2016 to 28.0 cents fully franked.
The record date for the final 2016 dividend is
28 March 2017 with payment on 12 April 2017.
The special dividend takes into consideration
Adelaide Brighton’s strong cash flow, low gearing,
current capital expenditure outlook and availability
of franking credits.
Demand overview
Demand in east coast markets remained strong in
the second half of 2016. Residential activity was
robust in Victoria, New South Wales and
Queensland, while South Australia returned to
growth. Non-residential building and infrastructure
activity also underpinned demand in these markets.
In New South Wales, strong residential activity was
augmented by non-residential building and transport
infrastructure projects. In Victoria, multi-residential
activity remained a key source of demand and was
further supported by non-residential building.
South east Queensland markets continue to improve,
particularly the Gold Coast and Sunshine Coast
regions. Increasing South Australian demand was
driven by several infrastructure projects and stronger
demand from mining operations.
Cement demand declined sharply in Western
Australia and the Northern Territory, given weak
residential and non-residential activity and lower
sales volumes to resource construction projects.
Western Australian lime demand was stable over
the year, with a small improvement in the second
half, while Northern Territory lime demand was
also stable.
Cement and clinker
Cement and clinker sales volumes decreased
4% compared to 2015. Volumes declined in Western
Australia and the Northern Territory by approximately
20% due to completion of a number of major
resources projects and weakening residential and
commercial activity.
This was partially offset by higher sales to
construction markets in New South Wales, Victoria
and south east Queensland, and a return to normal
sales to a major mining customer in South Australia.
While cement selling prices increased in almost
all markets, geographic mix resulted in a lower
weighted average price predominantly in the first
half of the year.
Overall cement margins declined due to lower
volumes, and higher energy and import costs.
The impact of the Western Australia and Northern
Territory demand downturn has been moderated
by the company’s strategy to rationalise inefficient
production, expand import operations and
lower supply costs, and an improvement in the
performance of businesses on the east coast.
(i) Energy disruptions
Energy in South Australia had an unfavourable
pre-tax impact of $13 million versus pcp.
$9 million of this was a result of the market wide
disruptions to electricity supply in that state. The
disruptions caused higher electricity and gas prices,
production losses at Adelaide Brighton plants and
subsequent reduced sales to customers whose
production facilities were temporarily suspended.
The disruption resulted from the closure of
generation capacity in South Australia, the
temporary closure of the Heywood interconnector
in July 2016 and the severe weather event that
disrupted electricity supplies in September 2016.
The Birkenhead and Angaston operations were not
physically damaged by the weather events and
electricity market disruption was mitigated through
managing production and the use of alternative
energy sources.
(ii) Imports
Imports remain a key component of the Adelaide
Brighton growth strategy, leveraging the domestic
production footprint of the Group and providing
highly competitive supply into key markets. Import
volumes declined slightly to 2.0 million tonnes
as a result of the lower sales volumes in Western
Australia and the Northern Territory. Import costs
increased by $7 million before tax, due to the
decline in the Australian dollar compared to the
previous year.
(iii) Operational Improvement
Adelaide Brighton continues to identify opportunities
for operational improvement including the
rationalisation of inefficient production, reducing
energy costs and other efficiency improvements to
ensure the operations achieve optimal performance.
Lime
Lime sales volumes in 2016 were similar to the
prior year, with demand from the non-alumina sector
stabilising after a period of recovery and demand
from the alumina sector improving slightly in the
second half.
Lime margins improved as a result of lower
operating costs, with natural gas contract
negotiations delivering pre-tax benefits of $8 million.
A small investment in loading capability delivered
benefits through more efficient use of rail transport.
Maintenance and transport costs have also benefited
from contract renegotiations.
Concrete and Aggregates
Concrete and aggregate volumes increased due to
strong demand in the eastern states, particularly
New South Wales and Queensland. Average selling
prices for concrete were up 3.7% and aggregates
prices increased significantly more than CPI, with
demand from all major concrete and aggregates
markets improving.
The recovery in South Australian concrete and
aggregates volumes continued in the second half.
The outlook for demand in South Australia appears
favourable given major infrastructure projects. Sales
volumes were also strong in New South Wales,
Victoria and Queensland.
Sydney aggregates markets continue to be
supported by the depletion of traditional reserves
and increasing reliance on product from further
afield. The New South Wales quarry operations are
competitively positioned to supply demand growth
in Sydney.
Improved volumes and cost control measures
resulted in flat or reduced unit production costs.
Margins were enhanced by cost control, logistical
improvements and increased pricing.
Concrete Products
After a solid first half, sales declined slightly in the
second half so that full year revenue increased
0.9% to $149.2 million. Volumes were affected
in South Australia and Victoria by weather. There
were also delays in supply to several projects and
competitive pressures in some markets. Adelaide
Brighton has taken a proactive stance to increase
returns in the business through cost reductions
and price increases. This approach has meant in
some cases losing unprofitable business but has
contributed to a significant improvement in earnings.
36
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2016
Operational improvement initiatives have introduced
flexibility into the Concrete Products operations,
contributing to a significant increase to gross
margins compared to 2015 despite a small reduction
in volumes.
Adelaide Brighton has lifted efficiency in the masonry
business through plant rationalisation, tolling
arrangements, a range of operational improvements
and transport efficiencies. Equipment upgrades
continued during the year, with components of two
manufacturing plants replaced as part of ongoing
operational improvement initiatives.
In addition, the business has made a significant
investment in product innovation to lift the presence
of masonry within the building products industry,
which offers exciting revenue opportunities for the
business in the medium term.
The concrete products business is also an important
and growing customer for the cement, aggregates
and sand business, which offers vertical integration
benefits for the Company.
Excluding property profits (nil 2016, pre-tax
$1.9 million 2015), EBIT improved 20% compared
to 2015, reflecting a significant lift in EBIT margins
in the second half.
Joint arrangements and associates
Independent Cement and Lime’s sales volumes
increased reflecting continued strength in
construction activity across the New South Wales
and Victoria markets. Higher selling prices, strong
demand and an easing of input cost pressures
supported an increased contribution from
$7.9 million to $10.5 million profit after tax,
a 33% increase.
Sunstate’s contribution to Group earnings increased
by 33% from $8.3 million to $11.0 million, helped
by residential demand across south east Queensland
and projects, particularly in the Gold Coast and
Sunshine Coast regions. Volumes, prices and margins
were all higher than the prior corresponding period.
Mawsons earnings improved by 45% on 2015
driven largely by strong demand for higher margin
quarry products to major projects. Most of this
demand occurred in the second half of the year. This
was moderated by competitive pressure impacting
premixed concrete margins.
Aalborg Portland Malaysia Sdn. Bhd. contribution
to Group earnings improved by more than 200%.
An improvement in production output following
the full commissioning of the kiln upgrade led to
higher sales volumes and better operating cost
performance compared to 2015.
Strategic developments
Adelaide Brighton continues its successful long
term strategy to grow shareholder returns through
investment in three key areas:
1 Cost reduction and operational improvement
across the Group;
2 Growth of the lime business to supply the
resources sector in WA, SA and NT; and
3 Focused and relevant vertical integration into
downstream aggregates, concrete, logistics
and masonry.
Growing shareholder value
In implementing its growth strategy,
Adelaide Brighton pays particular attention
at the business and corporate level to certain
important drivers of long term shareholder value:
> Financial performance - delivering attractive
return on capital.
> Market leadership - to maximise operating
efficiencies in production, logistics and marketing.
> Risk management - maintaining a strong balance
sheet and minimising operational risks.
> Capital management - efficient utilisation of capital
and returns to shareholders.
> Governance and social licence - licence to operate
on behalf of shareholders and stakeholders.
1 Cost reduction and continuous improvement
Consistent focus on operational
improvement initiatives
Adelaide Brighton has focussed on improving the
operational performance of its business, taking a
long term view of customer and market trends to
match operational capacity and resilience along
with efficiency and cost performance.
Cost initiatives delivered incremental benefits of
$16 million on a pre-tax basis compared to 2015.
These initiatives related to:
> Energy
Incremental cost savings of $9 million were
delivered during the year primarily driven by an
$8 million reduction in natural gas costs in the WA
lime business. Electricity load management, and
the ramp-up in usage of alternative fuels at the
Birkenhead operations as a substitute for natural
gas, also delivered benefits.
> Operational rationalisation
Headcount reductions resulted in savings of
$1 million in 2016. The full benefit from this
rationalisation will be realised in 2017 with an
additional $1 million of incremental savings.
> Other
Benefits of $6 million were achieved through a range
of other initiatives, including improved efficiency in
transport and usage of alternative materials.
Import strategy delivers competitive
supply into key markets
Adelaide Brighton is Australia’s largest importer of
cementitious materials (cement, clinker and blast
furnace slag) utilising more than two million tonnes of
imported product per annum, across multiple import
facilities located in key markets across Australia.
This industry leading position enhances supply chain
efficiency in procurement, transport, storage and
distribution. The use of imported materials allows the
supply of competitively priced product into a range
of markets where demand exceeds the Company’s
manufacturing capacity. It enables Adelaide
Brighton’s domestic production assets to operate
at full utilisation, which underpins its competitive
position and shareholder returns.
The import strategy is supported by long term
agreements with two Japanese suppliers for grey
clinker, Aalborg Portland Malaysia Sdn. Bhd. for white
clinker and a major Japanese trading house for the
supply of granulated blast furnace slag.
The benefits of this strategy have been evident in
the Western Australian cement business. While
demand has turned down, the business has
greater operational flexibility and now operates at
lower cost than before the rationalisation. As a result,
it is very well positioned to benefit from any recovery
in demand.
Investment in operational improvement
Further savings are anticipated in 2017 from the
rationalisation of specialty cement production at
the Angaston (South Australia) facility.
The rationalisation of speciality cement production
from the Angaston facility, leveraging the extensive
importation network of the Group, will result in
annualised EBIT savings of approximately $3 million.
Earnings will be adversely impacted in 2017 by
one-off charges associated with this initiative of
$2.9 million before tax.
Land sales program
Adelaide Brighton has been actively engaged in
selling and preparing for sale properties released
by the rationalisation and improvement program.
In many cases this includes re-zoning to realise
greater value over time.
Since the beginning of 2013, cash proceeds
from the property program have been $85 million.
This includes transactions in 2016 that realised
$20.6 million in cash proceeds and $7.9 million
NPAT.
Estimated proceeds from the sale of properties
in the next 10 years could realise in excess of
$120 million in proceeds with an expected EBIT
margin on these sales of circa 85% and an
effective tax rate of approximately 20%.
37
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2016
2 Lime growth
Positioned for demand growth
Adelaide Brighton’s Munster, Western Australia,
lime business is underpinned by low cost long term
resource reserves secured by State Agreement and
long term statutory approvals. Long term demand
growth is driven by the globally competitive Western
Australian resources sector.
The two lime kilns are amongst the largest globally
and are currently at 80% operating capacity. Through
the Munster plant’s low cost position and reduction
in the cost of energy in Western Australia, operating
margins improved significantly in 2016.
Lime sales volume has recently improved due to a
recovery in the non-alumina sector, which represents
about 30% of Western Australia’s lime demand. This
sector achieves higher selling prices, but remains the
most exposed to ongoing import competition. There
has been increased demand in particular from gold
projects but there has also been improvement in the
broader resources sector.
The Western Australian alumina sector remains
among the lowest cost globally, underpinning its
long term growth. There are currently a number
of production expansions slated for the alumina
producers, that once fully operational have the
potential to add 15% to lime demand in Western
Australia in the medium to longer term. The timing of
these proposed expansions remains dependent on
the dynamics of the alumina sector, but an increase
in alumina fundamentals appears to be underway.
3 Downstream integration
Further downstream acquisitions
Adelaide Brighton continues to pursue its strategy of
acquiring quality concrete and aggregate businesses
that enhance its long term competitive position and
shareholder value. Over the last decade it has built a
concrete and aggregates business of scale that offers
strong regional positions and strategic aggregates
reserves that underpin returns to shareholders.
The business is complementary to the cement and
lime operations and provides attractive diversification
benefits as well as the ability to capture a greater
share of the construction materials production and
distribution value chain.
Continuing this strategy, Adelaide Brighton has
agreed to acquire the Central Pre-Mix Concrete and
Quarry business (Central), an integrated concrete and
aggregate operation with five concrete plants and a
hard rock aggregate quarry serving the metropolitan
Melbourne market, the largest premixed concrete
market in Australia.
The purchase price of approximately $61 million,
including transaction costs, represents 7.0 times
2016 calendar year EBITDA. Adelaide Brighton
completed the acquisition effective 1 March 2017
and it is expected to be earnings accretive (excluding
transaction costs) in 2017.
Working capital increased modestly. Debtor
days sales outstanding reduced versus the prior
corresponding period and doubtful debt provision
reduced to $1.2 million (0.09% of revenue)
compared to $1.8 million (0.13% of revenue) in the
prior corresponding period.
It is expected that 2017 EBITDA for the acquired
business will increase on 2016. After funding and
transaction costs the purchase will be earnings
neutral in 2017. Transaction costs of circa $3 million
(mainly stamp duty) will be expensed in 2017.
Central will provide access to strategically located
and high quality assets, entry to the Melbourne
aggregates market and an increase in the scale of
Adelaide Brighton’s concrete and quarry business
in Melbourne. The acquired business also offers
operating synergies with the existing Melbourne
operations and the prospect of further bolt on
investments to enhance the overall regional position.
The premixed concrete and aggregates acquisitions
in 2014 and 2015 in South Australia and Queensland
are exceeding earnings expectations with a
positive outlook.
Operational results
Cash flow
Operating cash flow increased by $18.5 million
to $248.4 million in 2016. The increase was
attributable to stronger cash conversion of revenues
and dividends from joint ventures, partially offset by
increased tax payments.
Capital expenditure was $86.5 million. Stay in
business capital of $49.7 million represents 64%
of depreciation and amortisation. Stay in business
expenditure was higher than prior corresponding
period with $19.2 million spent on concrete plants in
Sydney that are being relocated due to urban growth.
Development capital increased $2.3 million to
$36.8 million for organic projects that will improve
costs and expand production capacity. Cash
proceeds of $23.2 million from the sale of assets
includes $20.6 million from the disposal of property.
Dividends paid to shareholders increased 28% to
$178.5 million. Despite this, strong cash flow, which
included property proceeds, reduced net debt by
$8.7 million to $288.5 million and net debt to equity
gearing fell from 24.6% to 23.6% over the year.
Balance sheet
Net assets increased $12.8 million to
$1,220.1 million as a result of the $186.2 million
net profit after tax for the year less the payment
of dividends of $178.5 million.
Strong cash flows reduced net debt by $8.7 million
to $288.5 million. Net debt to equity gearing of
23.6% at year end was below the targeted range
of 25% to 45%.
To maximise shareholder returns, Adelaide Brighton
seeks to ensure the balance sheet is efficiently
utilised while retaining the flexibility to fund the long
term growth strategy as opportunities are identified.
Total debt facilities of $540 million have the following
maturity profile:
Facility expiry date January 2018 January 2019
Facility value
$330 million
$210 million
Income statement
Freight revenue declined by $28.5 million due to
a decrease in sales volumes of cement to remote
resource projects. Freight and distribution costs on
these sales declined by a similar amount. However,
offsetting this reduction, increased deliveries of
premixed concrete increased freight and distribution
costs. Premixed concrete is sold on a delivered basis
and as such concrete freight revenue is included in
total segment operating revenue and not identified
separately as freight revenue.
The 71.8% decrease in other income to
$14.5 million was driven by pre-tax property profits
in 2016 of $8.4 million, a decline of $36.6 million
from 2015 property profits of $45.0 million.
Net finance costs decreased from $13.0 million to
$11.5 million in 2016 primarily as a result of the
continuation of low underlying market interest rates.
Tax expense of $68.4 million decreased $9.4 million
from 2015 and represents an effective tax rate
of 26.9% (2015: 27.2%). The lower effective tax
rate in 2016 is due to the higher contribution from
equity accounted joint ventures in the Group’s profit
before tax and the recognition of $1.9 million of tax
losses associated with property disposals. Excluding
property profits or one-off impacts, the Group’s
ongoing tax rate is expected be in the range of
27% to 28%.
The movement in the value of the Australian Dollar
against the Malaysian Ringgit during the year
resulted in a $0.9 million loss being recognised
in other comprehensive income. The loss reflects
movements in the Australian Dollar value of the
Group’s investment in Aalborg Portland Malaysia
Sdn. Bhd.
A DE LAID E BRI GHTON LTD ANNUAL REPORT 2 016
38
An unrealised gain of $1.3 million on the fair value
of cash flow hedges used by Adelaide Brighton
as part of its foreign currency risk management
approach was recognised in other comprehensive
income (2015: $1.3 million loss). The unreaslised
gain is the result of a decline in the value of the
Australian Dollar against the United States Dollar
at year end compared to the rates at the time the
hedge contracts were entered into.
An actuarial gain of $1.7 million (2015: $4.5 million)
related to the defined benefit superannuation plan
was recognised through other comprehensive
income. The gain was primarily due to the
improvement in value of investments held by the
fund up to the end of the year and an increase
in discount rate used to calculate the defined
superannuation benefit liability.
Dividends paid or declared by the Company
During the 2016 financial year, the following
dividends were paid:
> A final dividend in respect of the year ended
31 December 2015 of 15.0 cents per share
(fully franked) was paid on 12 April 2016.
This dividend totalled $97,332,862; and
> An interim dividend in respect of the year ended
31 December 2016 of 12.5 cents per share
(fully franked) was paid on 12 October 2016.
This dividend totalled $81,206,796.
Since the end of the financial year the Directors
have approved the payment of a final dividend of
15.5 cents per share (fully franked), comprising
an ordinary dividend of 11.5 cents per share and
a special dividend of 4 cents per share. The final
dividend is to be paid on 12 April 2017.
State of affairs
Other than set out in the Review of Operations, no
significant changes occurred in the state of affairs
of the Group during the financial year.
Events subsequent to the end of the
financial year
Subsequent to reporting date, Adelaide Brighton
had agreed to acquire the Central Pre-Mix Concrete
(Central) business, an integrated concrete and
aggregate operation with five concrete plants
and a hard rock aggregate quarry serving the
metropolitan Melbourne market. The purchase
price of approximately $61 million, including
transaction costs of $3 million, represents 7.0 times
2016 calendar year earnings before interest, tax,
depreciation and amortisation.
Adelaide Brighton completed the acquisition
effective 1 March 2017.
Other than the purchase of Central, no matter or
circumstance has arisen since 31 December 2016
that has significantly affected, or may significantly
affect the Group’s operations, the results of those
operations, or the Group’s state of affairs in future
financial years.
Foreign currency exchange rates for the expected
cost of cement, clinker and slag imports have been
hedged through to October 2017.
Efficiency remains a key operational priority as part
of a rolling program of cost reduction to sustain
leading margins and shareholder returns.
Likely developments and expected
results of operations
Proceeds from property sales could be
$10 - $15 million over the next two years.
2017 is expected to see strong demand for most
products particularly on the east coast, improved
pricing and further efficiency improvements.
2017 sales volumes of cement and clinker is
expected to be higher than 2016. It is expected
that demand in Western Australia and the Northern
Territory will stabilise and that demand will improve
in South Australia due to major infrastructure
projects. Cement and clinker demand on the east
coast is expected to benefit from increasing demand
from infrastructure projects.
Sales volumes of premixed concrete and
aggregates are expected to increase in 2017 due to
infrastructure projects on the east coast and South
Australia. The Central acquisition will also
add further sales.
Price increases have been announced for the first
half of 2017 in cement, aggregates, concrete
and concrete products. Geographic mix change
is anticipated to have a more limited impact on
weighted average cement prices in 2017.
To maximise shareholder returns, Adelaide Brighton
seeks to ensure the balance sheet is efficiently
utilised while retaining the flexibility to fund long
term growth as opportunities are identified. Prudent
capital management remains an important part of
this approach.
Environmental performance
The Group is subject to various Commonwealth,
State and Territory laws concerning the
environmental performance of Adelaide Brighton’s
operations.
Environmental performance is monitored by site
and business division, and information about the
Group’s performance is reported to and reviewed by
the Group’s senior management, the Board’s Safety,
Health & Environment Committee, and the Board.
The Group’s major operations have ongoing
dialogue with the relevant authorities responsible for
monitoring or regulating the environmental impact of
Group operations.
A number of factors are supportive of higher prices
including strengthening demand and capacity
utilisation.
Group entities respond as required to requests made
by regulatory authorities, including requests for
information and site inspections.
Concrete prices are expected to again increase by
more than CPI. Aggregate prices are anticipated
to increase significantly above CPI, particularly in
Sydney where average delivered costs have risen
substantially as the industry moves to supply from
further afield as traditional sources have depleted.
Lime sales volumes are expected to be higher in
2017. Margin increases are expected in 2017
however, the threat of small scale lime imports
in Western Australia and the Northern Territory
remains.
The joint venture operations in Australia are
anticipated to benefit from stronger demand and
higher prices on the east coast, while Aalborg
Portland Cement should continue to see the benefit
of expanded production.
Import costs are expected to be lower in 2017 due
to savings in shipping, materials purchasing and
favourable foreign currency outcomes.
In 2015, the New South Wales Environment
Protection Authority (“NSW EPA”) investigated
Hurd Haulage Pty Ltd’s (“Hurd Haulage”) disposal
of concrete wash-out. That investigation was
concluded and resulted in Hurd Haulage and the
NSW EPA entering into an Enforceable Undertaking
on 2 December 2016. The Enforceable Undertaking
requires Hurd Haulage to implement agreed
environmental measures such as developing a
training module and updating its written compliance
systems regarding waste disposal requirements
under the Protection of the Environment Operations
Act 1997 (NSW). Hurd Haulage was also required
to provide $72,000 funding to two local LandCare
groups for environmental works and pay the
NSW EPA’s legal and investigation costs in the
amount of $16,250.
A DE LA IDE BRIGHTON LTD ANNUA L REPORT 2016
39
On 6 January 2016, Hurd Haulage provided the
NSW EPA with a report about exceedance (57mg/L
reported compared with 30mg/L permitted) of the
Total Suspended Solids limit from discharges made
from the Grants Head Quarry on 24 December
2015 and 4 January 2016. In April 2016, the NSW
EPA issued a “show cause” letter to Hurd, inviting it
to provide written submissions and Hurd provided
these. After taking into account the various matters
put by Hurd Haulage, on 6 September 2016, the
NSW EPA issued an official caution with no penalty
or other sanction.
In 2015, the NSW EPA also investigated Morgan
Cement International Pty Ltd (“MCI”) concerning
the unexpected overflow of ground granulated blast
furnace slag from a storage silo at MCI’s premises
at Port Kembla, New South Wales, on Saturday
14 March 2015. MCI cooperated with the NSW
EPA’s investigation which concluded in March 2016.
The NSW EPA determined to commence prosecution
proceedings in the Land and Environment Court
of New South Wales regarding the incident. It
alleged that MCI committed an offence against
section 64(1) of the Protection of the Environment
Operations Act 1997 (NSW) in that MCI breached
a condition of its environment protection licence by
failing to maintain a certain item of plant in a proper
and efficient condition. MCI pleaded guilty to the
alleged offence at the earliest opportunity and the
sentencing hearing was held on 31 October 2016.
On 2 November 2016, the Court delivered judgment
convicting MCI of the offence as charged, fining MCI
$50,250 and ordering MCI to pay the NSW EPA’s
agreed legal and investigation costs of $55,492.50.
MCI was also ordered to publish a notice regarding
its conviction in specified newspapers and an
industry publication. This was MCI’s first conviction
for an environmental offence. MCI has since
complied with the Court’s orders and implemented
equipment and system upgrades at the premises to
minimise the risk of a similar incident in the future.
The South Australian Environment Protection
Authority (“EPA SA”) investigated Adelaide Brighton
Cement Ltd (“ABCL”), in relation to an emission
from the ship loading boom at ABCL’s Birkenhead
plant in South Australia in March 2016. ABCL
cooperated with the EPA SA’s investigation,
and no further action has been undertaken by
the EPA SA in relation to the incident to date.
Directors’ meetings
The number of Directors’ meetings and meetings of committees of Directors held during the financial year and
the number of meetings attended by each Director is as follows:
Director
Board Meetings
Audit, Risk and
Compliance
Committee
Nomination,
Remuneration &
Governance
Committee
Independent
Directors’
Committee
Safety, Health &
Environment
Committee
A
11
LV Hosking
11
R Barro
GF Pettigrew
11
KB Scott-Mackenzie 9
11
AM Tansey
M Brydon (1)
11
H
11
11
11
11
11
11
A
4
-
4
-
4
-
H
4
-
4
-
4
-
A
4
-
4
4
4
-
H
4
-
4
4
4
-
A
0
-
0
0
0
0
H
0
-
0
0
0
0
A
-
2
2
2
-
-
H
-
2
2
2
-
-
A Number of meetings attended.
H Number of meetings held during period of office.
(1) Mr Brydon was appointed as a member of the Independent Directors’ Committee from 23 February 2016.
Director profiles
Information relating to Directors’ qualifications,
experience and special responsibilities are set out
on pages 30 and 31 of the Annual Report.
Directors’ interests
The relevant interest of each Director in the share
capital of the Company at the date of this report is
as follows:
LV Hosking
RD Barro
GF Pettigrew
KB Scott-Mackenzie
AM Tansey
M Brydon
Ordinary shares
4,851
227,579,355
7,739
5,000
10,000
39,296
Full details of the interests in share capital of
Directors of the Company are set out in the
Remuneration Report on pages 42 to 60
of this report.
Director and executive remuneration
Details of the Company’s remuneration policies and
the nature and amount of the remuneration of the
Directors and certain senior executives are set out
in the Remuneration Report on pages 42 to 60
of this report.
Company Secretaries
The Company’s principal Company Secretary is
Marcus Clayton, who has been employed by the
Company in the two separate offices of General
Counsel and Company Secretary since
24 February 2003. He is a legal practitioner
admitted in South Australia with 28 years
experience.
Two other employees of the Company also hold
the office of Company Secretary to assist with
secretarial duties should the principal Company
Secretary be absent: the Company’s Chief Financial
Officer, Michael Kelly, a Certified Practising
Accountant who has been a Company Secretary
since 23 November 2010 and the Group’s Corporate
Affairs Adviser, Luba Alexander, who has been a
Company Secretary since 22 March 2001.
Indemnification and insurance of officers
Rule 9 of the Company’s constitution provides that
the Company indemnifies each person who is or
who has been an “officer” of the Company on a full
indemnity basis and to the full extent permitted by
law, against liabilities incurred by that person in their
capacity as an officer of the Company or of a related
body corporate.
Rule 9.1 of the constitution defines “officers”
to mean:
> Each person who is or has been a Director, alternate
Director or executive officer of the Company or of a
related body corporate of the Company who in that
capacity is or was a nominee of the Company; and
> Such other officers or former officers of the
Company or of its related bodies corporate as the
Directors in each case determine.
Additionally the Company has entered into Deeds of
Access, Indemnity and Insurance with all Directors
of the Company and its wholly owned subsidiaries.
These deeds provide for indemnification on a full
indemnity basis and to the full extent permitted
by law against all losses or liabilities incurred by
the person as an officer of the relevant company.
The indemnity is a continuing obligation and is
enforceable by an officer even if he or she has
ceased to be an officer of the relevant company or
its related bodies corporate.
The Company was not liable during 2016 under
such indemnities.
A DE LAID E BRI GHTON LTD ANNUAL REPORT 2 016
40
Rule 9.5 of the constitution provides that the
Company may purchase and maintain insurance
or pay or agree to pay a premium for insurance for
“officers” (as defined in the constitution) against
liabilities incurred by the officer in his or her capacity
as an officer of the Company or of a related body
corporate, including liability for negligence or
for reasonable costs and expenses incurred in
defending proceedings, whether civil or criminal.
During the year the Company paid the premiums
in respect of Directors’ and Officers’ Liability
Insurance to cover the Directors and Secretaries of
the Company and its subsidiaries, and the General
Managers of each of the divisions of the Group,
for the period 1 May 2016 to 30 April 2017. Due
to confidentiality obligations under that policy, the
premium payable and further details in respect of
the nature of the liabilities insured against cannot
be disclosed.
Proceedings on behalf of the Company
No person has applied for leave of the Court to
bring proceedings on behalf of the Company or to
intervene in any proceedings to which the Company
is a party for the purpose of taking responsibility on
behalf of the Company for all or any part of those
proceedings. The Company was not a party to any
such proceedings during the year.
Non-audit services
The Company may decide to employ the auditor on
assignments additional to their statutory audit duties
where the auditor’s experience and expertise with
the Company and the Group are important.
Details of the amounts paid or payable to
PricewaterhouseCoopers for audit and non-audit
services provided during the year are set out in
Note 27 to the Financial Statements on page 92
of this report.
The Board of Directors has considered the position
and, in accordance with the advice received
from the Audit, Risk and Compliance Committee,
is satisfied that the provision of the non-audit
services is compatible with the general standard
of independence for auditors imposed by the
Corporations Act 2001. The Directors are satisfied
that the provision of non-audit services by the
auditor, as set out in Note 27, did not compromise
the auditor’s independence requirements of the
Corporations Act 2001 for the following reasons:
> All non-audit services have been reviewed by the
Audit, Risk and Compliance Committee to ensure
they do not impact the impartiality and objectivity
of the auditor; and
> None of the services undermine the general
principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional
Accountants.
Auditor’s independence declaration
A copy of the auditor’s independence declaration
as required under section 307C of the Corporations
Act 2001 is set out on page 100.
Rounding off
The Company is of a kind referred to in ASIC
Corporations (Rounding in Financial/Directors’
Reports) instrument 2016/191 relating to the
“rounding off” of amounts in the Directors’ report.
In accordance with that instrument, amounts in the
financial report and Directors’ report have been
rounded off to the nearest one hundred thousand
dollars, unless otherwise stated.
Shares under option
Unissued ordinary shares under option relate to
Awards associated with the Company’s Executive
Performance Share Plan. Outstanding Awards at the
date of this report are as follows:
Date Awards
granted
Expiry date
Number of
Awards
1 January 2013 30 September 2017 745,955
1 January 2014 30 September 2018 676,219
1 January 2015 30 September 2019 795,761
1 Janaury 2016 30 September 2020 701,889
2,919,824
The exercise price for these Awards is nil. Further
details of Awards are set out in Note 26 and the
Remuneration Report.
Registered office
The registered office of the Company is
Level 1, 157 Grenfell Street, Adelaide,
South Australia 5000.
Corporate governance statement
The corporate governance statement is available on
the Adelaide Brighton Limited website and may be
accessed via the following URL:
adbri.com.au/ourresponsibilities#governance-exp
Signed in accordance with a resolution
of the Directors
M Brydon
Director
Dated 17 March 2017
A DE LA IDE BRIGHTON LTD ANNUA L REPORT 2016
41
Remuneration report
Dear Fellow Shareholders
Adelaide Brighton Ltd
On behalf of the Board and as Chair of the Nomination, Remuneration and Governance Committee, I am pleased to present the
Adelaide Brighton 2016 Remuneration Report.
Our remuneration framework incorporates robust performance measures linked to our strategic plans and which provide remuneration
outcomes that reflect our business performance over the annual cycle and the longer term. The remuneration policies of Adelaide Brighton
continue to focus on attracting and retaining the best talent to deliver our strategic objectives and align executive rewards with the
creation and delivery of shareholder value.
2016 performance
Adelaide Brighton’s long term strategy of product and geographic diversification has repositioned the Company to benefit from the strong
infrastructure and residential market on the east coast of Australia. This strategy includes vertical integration into premixed concrete and
concrete products, the development of a meaningful quarry business and a focus on ongoing operational improvement.
This repositioning has sustained the Company to be resilient to the cyclical nature of construction markets and in 2016 the Group grew
net profit after tax (excluding property) by 3.1%. This was despite a decline in sales volume of 20% in the key Northern Territory and
Western Australian markets and electricity market disruptions which impacted profit before tax by $9 million.
We continue to generate strong cash flows allowing us to invest in a number of growth projects, pay increased dividends while retaining
a strong balance sheet with gearing near the bottom of the Board’s target range.
We were pleased to reward shareholders by paying fully franked ordinary dividends for the 2016 year of 20 cents per share and
special dividends of 8.0 cents per share, bringing total dividends for 2016 to 28.0 cents fully franked.
Overall our long term strategy of diversification has continued to support continued improvement in returns despite some difficult markets.
2016 Remuneration Initiatives
During the year we conducted a remuneration benchmarking review of the annual fixed remuneration for the CEO and Managing Director
and Key Management Personnel. This review took into account comparison of the role to market benchmarks and market trends in relation
to fixed remuneration and the competency and capability of the individual in relation to the requirements of the role. The comparator
group for the benchmark review was the ASX51-150. Adelaide Brighton, at a market capitalisation of approximately $3.5bn, sits at the
65th percentile of the ASX51-150 by market capitalisation. Following from this positioning within the ASX51-150, the focus for Adelaide
Brighton should be on remuneration levels that sit between the median and the 75th percentile of the comparator group. The CEO and
Managing Director total remuneration sits at the 65th percentile, with the average total remuneration of other key management personnel
sitting below the median.
As discussed above, fixed remuneration levels remain modest relative to peers of a similar market capitalisation. Executive salary increases
were between 5 to 7 percent from 1 January 2016 and the increases recognised a number of the executives were relatively new in their roles.
Non-executive Director base and Committee fees were increased by approximately 4% for the 2016 financial year to ensure the
fees paid to non-executive Directors remain competitive with fees paid by comparable companies.
A DE LAID E BRI GHTON LTD ANNUAL REPORT 2 016
42
Short Term Incentive
Adelaide Brighton delivered a strong financial performance in 2016 despite difficult market conditions. Net profit after tax (the measure
used for assessment of short term incentive outcomes), excluding property transactions, was up 3.1% compared to the prior year.
Short term incentive outcomes for executives were lower than in the prior year reflecting the Board’s discretion to exclude property
transactions from NPAT. Excluding property, NPAT was 99.1% of target.
The Board set relevant and challenging non-financial targets for the individual KMP in 2016. Performance against these non-financial
targets was assessed impacting individual KMP outcomes.
The overall result was short term incentives for KMP vesting in the range of 48.9% to 68.9% of their potential maximum, recognising the
strong management performance during the year, which delivered an increase in NPAT (excluding property) despite a significant downturn
in the Company’s key markets of Western Australia and the Northern Territory, and difficulties in the South Australian energy market.
2016 saw the introduction of a short term deferred element into our annual short term incentive program. For the 2016 year, 25% of the
short term incentive will be deferred, increasing to 50% from 2017. The short term incentive deferral is intended to emphasise the need
for management to continue to make decisions that deliver our annual targets in a manner that is consistent with delivering sustainable
growth in value for our shareholders.
Long Term Incentive
Tranche 2 of the 2012 long term incentive grant was tested. This vested at 100%, having exceeded the 75th percentile against the
relative total shareholder return (TSR) performance condition and having achieved 100% vesting against the compound annual growth
in earnings per share (EPS) target based on EPS growth of 10.1% over the performance period. These LTI outcomes are consistent
with delivery of long term value to shareholders with the Company achieving a TSR of 92.3% over the measurement period.
Board renewal
The Directors recognise the importance of Board renewal. Directors have reviewed the Board’s composition and continue their
commitment and focus on Board renewal and increased diversity.
Taking into consideration the Board skills matrix and matching those skills to our strategic plans, the Board has considered new
Director appointments and expects to announce a new appointment to the Board in the near future.
Conclusion
These remuneration outcomes reflect the level of performance achieved against our applicable targets during 2016.
We have prepared the 2016 Remuneration Report in line with our objective of transparency in explaining our remuneration framework
and practices and the link between Company and individual performance and incentive remuneration outcomes.
We continue to seek feedback on our Remuneration Report and continually look at ways to improve and include this feedback
into our remuneration practices and this report. We look forward to welcoming you to the 2017 Annual General Meeting.
Arlene Tansey
Chairman of Nomination, Remuneration and Governance Committee
A DE LA IDE BRIGHTON LTD ANNUA L REPORT 2016
43
Remuneration report contents
Introduction and Key Management Personnel
1 Executive remuneration policy and framework
2 Overview of Company performance
Financial performance in 2016
Long term financial highlights
2.1
2.2
1.1
1.2
1.3
Remuneration policy
Remuneration framework
Remuneration governance - responsibility for setting remuneration
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3 Linking remuneration to Company performance
Short Term Incentive
3.1
3.1.1 Short Term Incentive - performance measures
3.1.2 Short Term Incentive - financial outcomes
3.2
3.2.1 Long Term Incentive - outcomes
Long Term Incentive
4 Executive remuneration
4.1
4.2
4.3
Fixed annual remuneration
At-risk remuneration - Short Term Incentive
At-risk remuneration - Long Term Incentive
5 Executive Service Agreements
6 Non-executive Directors’ fees
6.1
Policy and approach to setting fees
7 Key Management Personnel disclosure tables
7.1
7.2
7.3
Non-executive Directors’ statutory remuneration
Executive statutory remuneration
Equity holdings of Key Management Personnel
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
44
Remuneration report
The Directors of Adelaide Brighton Limited (the
Company) present the Remuneration Report (Report)
for the Company and the Group for the financial year
ended 31 December 2016. The Report outlines the
remuneration arrangements in place for the Key
Management Personnel (KMP) of the Company and
is prepared in accordance with section 300A of the
Corporations Act 2001. This Report, which forms
part of the Directors’ Report, has been audited by
PricewaterhouseCoopers.
The KMP of Adelaide Brighton comprises all
Directors and those Executives who have authority
and responsibility for the planning, directing and
controlling of the activities of the Group. In this
Report, ‘Executives’ refers to members of the
Group executive team identified as KMP.
During the year, Brad Lemmon, former Regional
Executive General Manager, Cement and Lime
(WA/NT) was appointed Executive General Manager,
Cement and Lime, and Michael Miller, former
Regional Executive General Manager, Cement and
Lime (SA/NSW) was appointed Executive General
Manager, Marketing and International Trade. This
organisational restructure resulted in a review of
KMP, with the Board determining that Michael Miller,
in his role as Executive General Manager, Marketing
and International Trade, no longer meets the
definition of KMP. Following from this, Michael Miller
is disclosed as a KMP for part of the 2016 financial
year only.
The KMP detailed in this Report for the 2016
financial year are:
Table 1
Name
Executives
M Brydon
M Kelly
G Agriogiannis
AL Dell
BD Lemmon
Former KMP
MF Miller
Directors
LV Hosking
RD Barro
GF Pettigrew
KB Scott-Mackenzie
AM Tansey
Role
CEO and Managing Director (CEO & MD)
Chief Financial Officer (CFO)
Executive General Manager, Concrete and Aggregates
Executive General Manager, Concrete Products
Executive General Manager, Cement and Lime (1)
Former Regional Executive General Manager, Cement and Lime SA/NSW (2)
Non-executive Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
(1) Appointed Executive General Manager, Cement and Lime on 1 May 2016, previously Regional Executive Manager, Cement and Lime (WA/NT).
(2) Appointed Executive General Manager, Marketing and International Trade on 1 May 2016.
Section 1 - Executive remuneration policy
and framework
1.1 Remuneration policy
The Board ensures remuneration policies are clearly
aligned with the Group strategy, which is focused
on maintaining and growing long term shareholder
value. In determining executive remuneration, the
Board has adopted a policy that aims to:
> Be competitive in the market place in which the
Group operates in order to attract, reward, motivate
and retain a highly capable executive team;
> Reward individual performance, responsibility and
potential;
> Drive leadership performance and behaviours that
reinforce the Group’s short and long term strategic
and operational objectives;
> Provide a common interest between executives and
shareholders by linking the rewards that accrue to
executives to the creation of long term value for
shareholders;
> Have regard to market practice and market
conditions; and
> Provide transparency and clarity on what, to whom
and on what basis remuneration has been paid.
The governance of remuneration outcomes is
a key focus of the Board and the Nomination,
Remuneration and Governance (NRG) Committee.
Remuneration policies are regularly reviewed to
ensure that remuneration for executives continue to
remain aligned with Company performance.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
45
1.2 Remuneration framework
In order to meet the aims of our remuneration policy, our executive remuneration framework consists of the
following three components:
> Fixed annual remuneration
> An annual short term incentive
> A long term incentive
Adelaide Brighton’s mix of fixed and at risk components for the Executives disclosed in this Report,
as a percentage of potential maximum total annual remuneration for the 2016 and 2017 financial years,
is shown below.
CEO and MD
2016
Fixed annual
remuneration
331/3%
Short term
incentive
Long term
incentive
25%
81/3%
331/3%
Cash 581/3%
Equity 412/3%
2017
Fixed annual
remuneration
Short term
incentive
331/3%
162/3%
162/3%
Long term
incentive
331/3%
Cash 50%
Equity 50%
Key management personel
2016
2017
Fixed annual
remuneration
46%
Short term
incentive
Long term
incentive
24%
8%
22%
Cash 70%
Equity 30%
Fixed annual
remuneration
Short term
incentive
Long term
incentive
46%
16%
16%
22%
Cash 62%
Equity 38%
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
46
The table below provides a summary of our remuneration framework for the 2016 financial year, and illustrates the way in which each element of remuneration has been
structured to support our Group business objectives and to align with the generation of shareholder wealth.
Component
Performance measure
‘At risk’ weight
Strategic objective/performance link
Fixed Annual
Remuneration
(FAR)
Salary and other benefits
(including statutory
superannuation)
Considerations:
N/A
>
Long term individual performance
>
Role, responsibility and potential
>
Benchmarked to competitive
market rate
>
Remuneration set at competitive levels in the
market to attract, retain and engage key talent
>
Motivate to achieve outstanding performance
Maximum:
60%-80% of FAR
(100% of FAR for CEO)
Annual Short Term Incentive
(STI)
Cash
+
Deferred rights to receive
fully paid ordinary shares
Financial targets (80%) -
CEO and CFO - 80% relating to
Group NPAT
Other Executives (Division
Executive General Managers) -
60% relating to Group NPAT and
20% relating to Divisional EBIT
Non-financial targets (20%)
Relating to personal performance
against individual objectives
Long Term Incentive
(LTI)
Rights to receive fully
paid ordinary shares
Earnings Per Share (EPS) (50%)
and
CEO:
50%-100% of FAR
Total Shareholder Return (TSR)
(50%)
Other Executives:
20%-70% of FAR
Measured over a four year
performance period
>
>
>
>
>
Alignment to Group budget through NPAT
and Divisional budget through Divisional EBIT
performance
Non-financial targets drive leadership
performance and behaviours consistent
with achieving the Group’s short and
long term objectives and commitments
including safety, strategic plans, individual
business targets and other specific personal
or non-financial performance objectives
which align the interest of Company
executives and shareholders
Ensure strong link with the creation of long
term shareholder value to encourage the
achievement of growth of the Company’s
business
EPS was chosen as a performance
hurdle as it:
- Links executive reward to a fundamental
indicator of financial performance; and
- Links directly to the Group’s long term
objectives of maintaining and improving
earnings
TSR was chosen because it:
- Ensures alignment between comparative
shareholder return and reward for the
executive; and
- Provides a relative, external market
performance measure having regard to a
peer group of companies (Comparator
Group) with which the Group competes for
capital, customers and talent
Total Remuneration
The total remuneration mix is designed to attract, retain and motivate a highly capable executive team, encourage
and drive leadership performance that reinforces the Group’s short and long term strategic objectives and provides
a common interest between executives and shareholders by linking the rewards that accrue to executives to the
creation of value for shareholders
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
47
1.3 Remuneration governance - responsibility for setting remuneration
Our governance framework for determining executive remuneration is outlined below:
Consultation with shareholders
and other stakeholders
>
>
>
Remuneration consultants and
other external advisors
Provide independent advice, information
and recommendations relevant to
remuneration decisions
In performing its duties and making
recommendations to the Board, the Chairman
of the NRG Committee seeks independent
advice from external advisors on various
remuneration related matters
Any advice or recommendations provided
by external advisers are used to assist
the Board - they do not substitute for the
Board and NRG Committee process
Board
The Board approves:
>
The overall remuneration policy
>
>
Non-executive Director remuneration
and senior executive remuneration; and
The remuneration of the CEO, including
his participation in the short term and
long term incentive schemes
Nomination, Remuneration and
Governance (NRG) Committee
The NRG Committee is delegated
responsibility by the Board to review
and make recommendations on:
>
The remuneration policies and
framework for the Group
>
Non-executive Director remuneration
>
Remuneration for senior executives; and
>
Executive incentive arrangements
Management
>
>
Provides information relevant to
remuneration decisions and makes
recommendations to the NRG Committee
Obtains remuneration information from
external advisors to assist the NRG
Committee (i.e. factual information, legal
advice, accounting advice, tax advice)
In 2016, 3 degrees consulting was engaged by the NRG Committee to provide assistance in relation to a
review of Adelaide Brighton’s remuneration arrangements for its non-executive Directors. Remuneration
recommendations from 3 degrees consulting were provided directly to the Chairman of the NRG Committee.
3 degrees consulting’s fees that related to a remuneration recommendation were $25,000 (exclusive of GST).
3 degrees consulting provided other services to Adelaide Brighton including general remuneration and corporate
governance advice, benchmarking and assistance with corporate disclosures including with the preparation
of the remuneration report. The total amount for 3 degrees consulting’s fees for these services, which did not
contain a remuneration recommendation, was $189,325 (exclusive of GST). The Board is satisfied that all
remuneration recommendations were made free from undue influence of management. In addition, 3 degrees
consulting provided a declaration to the Chair of the NRG Committee that the remuneration recommendations it
made were free from undue influence.
Section 2 - Overview of Company
performance
2.1 Financial performance in 2016
The Directors are pleased to present Adelaide
Brighton Limited’s financial performance for 2016.
> NPAT (excluding property) increased by 3.1%,
despite a decline in sales volume of 20% in Western
Australia and Northern Territory, and electricity
market disruptions which impacted profit before tax
by $9 million.
> Revenue of $1,396.2 million was 1.2% lower than
2015 due to reduced demand for cement from
residential and resource construction projects
in Western Australia and the Northern Territory
which was balanced by continued strength in the
residential sector and increase in infrastructure
projects in the eastern states and South Australia.
> Excluding property profits, EBIT grew 1.6% on 2015
to $257.7 million.
Adelaide Brighton’s diversified business model and
focus on operational improvement supported the
Group’s long term growth strategy despite a decline
in cement volumes in the key markets of Western
Australia and Northern Territory. Strategic initiatives
which contributed to the Company’s financial
performance in 2016 included:
> Delivery of $16 million in cost initiatives on a
pre-tax basis compared to 2015 which included
$9 million in energy cost savings through the
reduction in natural gas costs in the Western
Australian lime business; electricity load
management and increased use of alternative
fuels at the Birkenhead operations as a substitute
for natural gas; operational rationalisation savings
of $1 million through headcount reductions and
$6 million in benefits from a range of initiatives
including improved efficiency in transport and usage
of alternative materials.
> Competitive supply into key markets through the
Company’s import strategy. The benefits have been
evident in the Western Australian cement business
where the Company was able to scale back imports
when market demand turned down giving the
business greater operational flexibility at a lower
cost structure than before the rationalisation.
> Our land sales program has delivered cash proceeds
since 2013 of $85 million. This includes transactions
in 2016 that realised $20.6 million in cash proceeds
and $7.9 million NPAT.
> The contribution from our longer term investments
in aggregates is a feature of the 2016 results and
reflects the realisation of our long term vertical
integration strategy as a major contributor to
shareholder returns.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
48
On an excluding property basis, key profit measures
Table 2
for 2016 versus 2015 show an improvement of
between 1.3% and 3.1% (depending on the metric),
on a revenue decline of 1.2%, as shown in Table 2.
2.2 Long term financial highlights
Adelaide Brighton has delivered 3.9% (excluding
property transactions) compound annual growth
in reported NPAT over the last five years. The
Company’s long term strategy of cost reduction
and continuous improvement; growth in the lime
business and vertical integration into quality
aggregates, concrete, and logistics and masonry
businesses has positioned the Company to be
resilient to the cyclical nature of construction
markets and in 2016, the Group grew net profit
after tax (excluding property) by 3.1%.
$M
180
175
170
165
160
155
150
145
140
Net profit after tax
(Reported excluding property)
n
o
t
h
g
i
r
B
e
d
a
e
d
A
i
l
12
13
14
15
16
:
e
c
r
u
o
S
The TSR achieved over the last five years of 117.9%
has outperformed the Comparator Group* and the
S&P/ASX200 Accumulation Index. This is due to a
sustained year on year improvement in share price
and increased dividends.
Despite difficulties in some markets and pressure
from energy costs, TSR over the last 12 months was
20.2%, again reflecting an improved share price,
increased ordinary dividends and the payment of
special dividends.
Table 3 provides an overall view of the Company’s
financial performance and operating cash flow over
the past five financial years to 31 December 2016.
* Comparator Group is the companies in the S&P/ASX200
Accumulation Index, excluding all GICS financial companies
and selected resources companies.
2016
$m
2015
$m
Variance
%
2016
$m
2015
$m
Variance
%
Reported
Reported (excluding property)
1,396.2
1,413.1
344.2
376.4
(1.2)
(8.6)
266.1
298.6
(10.9)
186.3
207.9
(10.4)
1,396.2
1,413.1
(1.2)
335.8
257.7
178.4
331.4
253.6
173.0
1.3
1.6
3.1
Revenue
EBITDA
EBIT
NPAT
Table 3 - Financial performance and shareholders’ wealth improvement from 2012 to 2016
Financial year ended 31 December
2012
2013
2014
2015
CAGR (1)
%
2016
Sales
NPAT
NPAT
$m
1,183.1
1,228.0
1,337.8
1,413.1
1,396.2
Including property $m
% change
Excluding property $m
% change
153.0
3.1
153.0
3.1
151.1
(1.2)
150.2
(1.8)
172.7
14.3
172.0
14.5
207.9
20.4
173.0
0.6
186.3
(10.4)
178.4
3.1
4.2
5.0
3.9
Share price(2)
$/share
3.12
3.67
3.52
4.75
5.43 14.9
Dividends
Franking
Cents/share
16.5
19.5 (3)
17.0
27.0 (4)
28.0 (4) 14.1
%
100
100
100
100
100
Operating cash flow $m
186.9
227.3
194.0
229.9
248.4
24.0
13.7
23.7
23.9
26.9
0.5
32.0
42.6
28.7
20.2
117.9
Earnings per share
Cents
TSR - 1 year
Total Shareholder
Return
%
%
(1) Compound Annual Growth Rate.
(2) At 31 December.
(3) Includes 3.0 cents special dividend.
(4) Includes 8.0 cents total special dividend.
As can be seen in the graph below, Adelaide Brighton’s TSR growth over the
last five years has outperformed the S&P/ASX200 Accumulation Index.
%
140
120
100
80
60
40
20
0
Total shareholder returns (share price + dividend reinvested)
and S&P/ASX200 Accumulation Index returns
2
1
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2
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A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
49
Section 3 - Linking remuneration to Company performance
This section explains how the Group’s performance has driven Short Term Incentive and Long Term Incentive outcomes for our Executives during 2016.
Strong Company performance across key indicators is reflected in the remuneration outcomes during the year.
3.1 Short Term Incentive
3.1.1 Short Term Incentive - performance measures
Performance measures
Reason chosen
Financial performance
The “financial metrics” for the Group is
NPAT and EBIT for Divisions. Actual financial
metrics are compared to target. The Board
has discretion to adjust NPAT for target
assessment.
l
a
i
c
n
a
n
i
F
The Board believes the financial measure aligns the interests of Executives with shareholders, ensuring the KMP are
rewarded on the Group’s annual business objectives, ensuring Executives create sustainable value for shareholders.
The comparison to budget allows for recognition of the cyclical nature of the industry in which the Company operates
and forward looking factors that can be incorporated into a budget, while the stretch targets provide incentives
beyond budget to enhance shareholder returns.
Non-financial performance
The strategic initiatives focus on three
interdependent areas: operational excellence,
market leadership and vertical integration,
with key foundation drivers being growth in
our core business and opportunities for
transformational deals.
A range of metrics focused on safety,
engagement, building capability, retaining
company knowledge and diversity with
specific metrics for:
> Leadership in safety
> Employee engagement
> Development of capability
> Deepening succession pools
> Increasing diversity of candidate pools.
Proactively responding to market developments and implementing strategies to drive sustainable growth
are critical to delivering the strategy and the creation of shareholder value.
Having the right people in management and senior leadership roles is critical to our long term success.
The CEO and Managing Director plays an important role in this process and he is assessed on his ability to
manage talent and succession risks at senior management levels.
Specific operational targets focused on
productivity gains, cost reduction, operational
improvement and improved asset management
towards achieving improved return
on investment.
Specific measures and initiatives were identified to ensure the delivery of sustainable operations
and shareholder return.
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A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
50
Performance assessment Result
Target included a financial stretch The 2016 target was set at 4% above 2015 actual, which was a challenging
target given the outlook in the Company’s major markets of Western Australia and the Northern Territory.
Group financial performance was 99.1% of target, resulting
in 58% achievement of the Group financial component.
NPAT of $178.4 million, excluding property, was at 99.1% of target, and exceeded 2015 NPAT by 3.1%. The Board
exercised discretion and determined that for assessment purposes, property profits will be excluded.
The Board’s view is that the performance of the Group continues to be strong with contribution from recent concrete and
aggregate acquisitions (part of the Company’s vertical integration strategy) delivering profitability which offset the impact
of a 20% reduction in cement demand from residential and resource construction projects in Western Australia and the
Northern Territory.
Concrete and Aggregates Division financial performance
was greater than 110% of target, resulting in 100%
achievement of the concrete and aggregates financial
component.
Cement and Lime and Concrete Products Divisions financial
performance was less than 95% of target, resulting in the
financial component for these Divisions not being achieved.
Acquisitions Position the Company to take advantage of potential “bolt-on” and transformational acquisitions to ensure
readiness when the opportunity becomes available.
60%-80% achievement of strategic
non-financial objectives.
The CEO and Managing Director and management team progressed potential acquisition opportunities which culminated in the
Central Pre-Mix concrete and quarry acquisition on 1 March 2017.
Organic growth Strategy and planning including acquisition of property progressed for potential greenfields expansion.
Acquisition performance Performance from concrete and aggregates acquisitions - Direct Mix Concrete, Southern
Quarries, Penrice Quarry & Mineral and ITS Sand and Gravel - exceeded expectations due to better outcomes on
pricing and delivery of integration synergies.
Leadership in safety The Lost Time Injury Frequency Rate (LTIFR) is 1.7 compared to 2.0 for the previous year
reflecting management’s focus on processes, procedures and culture.
50-70% achievement of people non-financial objectives.
Safety Leadership Workshop The Group introduced Safety Leadership Workshops which lead participants in their
understanding of how their actions influence our workplace safety culture, ‘safety leaders, everyone, every day’. More than
60% of employees participated in the workshops.
The CEO and management demonstrate their visible and active leadership through active participation in site safety committee
meetings throughout the Company’s Australia wide operations.
Employee engagement Focus groups were facilitated across the Company to understand the results of the
employee survey where 77% of employees stated Adelaide Brighton was a great place to work.
Development of capability Implementation of a Group Mentoring Program to support personal and career
growth opportunities for high potential employees in addition to building capability across the mentor group.
Deepening succession pools and identification of future executive talent The CEO and management exceeded
targets set in respect of succession plans for key leadership roles, including the identification of future executive talent.
Increasing diversity Targeted sourcing strategies increased the gender diversity of candidate pools with
62% of roles advertised in 2016 attracting female applicants.
Operational improvement Significant operational improvements benefits of $16 million were delivered and progressed to
deliver further savings in 2017:
> Cost savings of $9 million in energy costs, of which $8 million benefit resulted from renegotiation of gas contracts
in Western Australia.
> Headcount reductions resulted in $1 million in savings.
> Benefit of $6 million achieved through a range of initiatives, including improved efficiency in transport and usage
of alternative materials. Successful commissioning of second alternative fuels storage, receival and firing plant at the
Birkenhead plant to support increased usage of alternative fuel, less reliance on gas and financial cost benefits.
Import strategy Management has undertaken a range of initiatives that will decrease import costs in 2017
including savings in shipping and materials purchasing.
Investment in operational improvement Workforce planning for consolidation of Angaston operation through
the cessation of oilwell cement production. Initiatives to give benefit from 2017.
Land sales program Preparation and negotiation of sale of land at a price that exceeded expectations during
2016, and ongoing progress on delivery of value from the long term land sales program.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
51
60-80% achievement of operational excellence
non-financial objectives.
3.1.2 Short Term Incentive - financial outcomes
Adelaide Brighton achieved a strong financial result for 2016 delivering NPAT, excluding property transactions,
that was up 3.1% compared to the previous year. This was seen as a strong result given market conditions
in the Company’s major markets of Western Australia and Northern Territory and continuing pressure on
South Australian energy costs.
Short term incentive outcomes were lower than the previous year as a result of the Board’s discretion to
exclude property transactions. Overall, the achievement of the financial and non-financial targets resulted
in the STI opportunity being awarded at 48.9% to 68.9% of their potential maximum.
As you can see from the table below, in 2016 EBIT and NPAT increased over the previous year on
lower revenue.
Table 4
Revenue
EBITDA
EBIT
NPAT
Reported (excluding property)
2015
$m
1,413.1
331.4
253.6
173.0
variance
%
(1.2)
1.3
1.6
3.1
2016
$m
1,396.2
335.8
257.7
178.4
The short term incentive payments shown in the table below reflect the performance achieved and amounts
payable to Executives for the 2016 financial year.
Table 5
For the year ended
ended
31 Dec 2016
Executives
M Brydon
M Kelly
G Agriogiannis
AL Dell
BD Lemmon
Former KMP
Maximum
potential
STI
opportunity (1)
$
1,397,000
594,400
424,000
247,200
358,111
Actual STI
as % of
STI
maximum
%
61.4
61.4
68.9
48.9
49.5
STI actual (2)
Cash STI
$
$
857,470
364,839
292,282
120,966
177,440
643,102
273,629
219,212
90,725
133,080
Deferred
STI
(2 years)
$
107,184
45,605
36,535
15,121
22,180
Deferred
STI
(3 years)
$
107,184
45,605
36,535
15,121
22,180
Deferred
STI
(Total)
Deferred STI
awarded
$
No. of rights
214,368
91,210
73,070
30,241
44,360
39,610
16,854
13,502
5,588
8,197
MF Miller
80,000
55.1
44,078
33,059
5,510
5,510
11,020
2,036
(1) Where the actual STI payment is less than the maximum potential, the difference is forfeited and does not become payable in subsequent years.
(2) The 2016 STI was determined in conjunction with the finalisation of 2016 results and paid in February 2017.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
52
3.2 Long Term Incentive
3.2.1 Long Term Incentive - outcomes
During 2016, Tranche 2 of the 2012 Awards was tested for earliest exercise in May 2016 and vested at 100.0%:
> The Total Shareholder Return component vested at 100.0% with the Company achieving a Total Shareholder
Return of 92.3% being the 77th percentile of the Comparator Group.
> The compound annual EPS growth rate over the 2013 to 2015 financial period was 10.1% with the EPS
component fully vesting at 100.0%.
The chart below illustrates Adelaide Brighton’s total shareholder return over the measurement period for
Tranche 2 of the 2012 Award. The Total Shareholder Return of 92.3% resulted from share price growth and
payment of ordinary and special dividends totalling 77.5 cents fully franked over the period.
ABC shareholder returns - share price growth and TSR
(Jul 2011 to Dec 2015) (Index Jul 11 = 100)
Source: ASX /First Advisers Pty Ltd
Dividends = 24.4%
ABC TSR
= 92.3%
Share price
growth = 67.9%
200
180
160
140
120
100
80
1
1
l
u
J
1
1
t
c
O
2
1
n
a
J
2
1
r
p
A
2
1
l
u
J
2
1
t
c
O
3
1
n
a
J
3
1
r
p
A
3
1
l
u
J
3
1
t
c
O
4
1
n
a
J
4
1
r
p
A
4
1
l
u
J
4
1
t
c
O
5
1
n
a
J
5
1
r
p
A
5
1
l
u
J
5
1
t
c
O
ABC share price growth ABC TSR (share price growth + dividends reinvested)
Details of the movement in Awards held by Executives during the 2016 financial year are set out below.
Table 6
For the financial
year ended
31 Dec 2016
Executives
M Brydon
M Kelly
G Agriogiannis
AL Dell
BD Lemmon
Former KMP
MF Miller
Number
held at
1 Jan 2016
Number
granted
during
the year (1)
Number
exercised/
vested
during the
year (2)
Number
lapsed/
foreited
during
the year (3)
Number
held at
31 Dec 2016 (4)
Value of
Awards at
grant date (5)
Value per
share at
the date of
exercise (6)
$
$
1,271,514
652,119
336,964
47,059
213,550
325,482
121,176
61,741
38,396
53,302
265,896
189,306
99,277
-
61,416
177,859
37,278
50,578
-
-
-
-
-
-
1,331,100
583,989
299,428
85,455
205,436
929,251
359,287
189,235
112,884
161,505
5.42
5.48
5.48
5.48
5.48
164,559
110,715
5.48
(1) This represents the maximum number of Awards granted in 2016 that may vest to each Executive. As the Awards granted in 2016 only vest on satisfaction of performance conditions which are to be tested in future
financial periods, none of the Awards as set out above vested or were forfeited during the year. At the end of the applicable performance period, any Awards that have not vested will expire.
(2) These Awards which were exercisable during 2016 were in fact exercised, being Tranche 2 of the 2012 Awards. The number of Awards that vested during the period and exercisable at 31 December 2016 is NIL.
The number of Awards that vested but not yet exercisable at 31 December 2016 is NIL.
(3) No Awards lapsed or were forfeited during the year.
(4) Awards subject to performance conditions which remain unvested (2013, 2014, 2015 and 2016 Awards), and which will be tested for vesting during the period 2017 to 2020.
(5) Fair value of Awards granted during 2016 as at grant date.
(6) The value per share at the date of exercise is the Volume Weighted Closing Price which is the average of the closing price and number of Adelaide Brighton Limited shares traded on the Australian Securities Exchange for
the five trading days before the exercise date, but not including the day of exercise. The aggregate value of Awards that vested during the year is $3,636,735 based on the Volume Weighted Closing Price.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
53
Section 4 - Executive remuneration
4.1 Fixed annual remuneration
Fixed remuneration is reviewed annually having
From 1 January 2016 the Board resolved to
The amount of fixed remuneration for an individual
executive (expressed as a total amount of salary
and other benefits, including superannuation
contributions) is set with regard to the size and
nature of an executive’s role, the long term
performance of an individual, his or her future
potential within the Group and market practice.
The Company’s stated approach is also to set fixed
remuneration levels at relatively modest levels
compared to peers for executives who are new
to their roles and to then progressively increase
remuneration based on individual performance in
that role.
Form and purpose of the STI
Who participates in the STI?
Why does the Board consider the STI
an appropriate incentive?
regard to relevant factors including performance,
market conditions (both generally and in the
markets in which the Group operates), growth
and comparable roles within peer companies and
similar roles across a comparator group comprising
those companies in the ASX 51-150. For someone
who has performed successfully in their role for
a number of years, FAR set between the median
and 75th percentile of the comparator would be
expected.
increase fixed remuneration across the executive
team by 5 to 7 per cent, in line with the Company’s
policy of setting remuneration levels based on the
size and nature of an executive’s role (and impact of
the role on the business) and individual performance
in roles. Fixed remuneration levels continue to
remain conservative relative to peer companies of a
similar market capitalisation.
4.2 At-risk remuneration - Short Term Incentive
Adelaide Brighton’s STI is the Company’s at risk
short term incentive component of the remuneration
mix for senior executives, including Executives.
A summary of the key features of the 2016 STI is
as follows:
Participation in the STI is generally offered to the CEO and Managing Director and senior executives who are
able to have a direct impact on the Group’s performance against the relevant performance hurdles.
The STI is designed to put a meaningful proportion of senior executives’ remuneration at risk, to be delivered
on the achievement of performance targets linked to the Group’s annual business objectives, ensuring senior
executives create sustainable value for shareholders.
Does the STI comprise a deferred component?
Yes.
For STI awards for the 2016 financial year, 25% of awards will be deferred into rights to receive fully paid
ordinary shares in Adelaide Brighton (issued at no cost to the executive) subject to disposal restrictions
(Deferred Rights) (see below).
For STI awards for the 2017 financial year onwards, 50% of STI awards will be deferred (unless otherwise
determined by the Board).
Performance conditions
When and how are the STI performance conditions set?
All performance conditions are set by the Board and agreed with the executive, in general, by the end of
February in each year.
In approving financial targets under the STI, the Board considers a number of factors, including the industry in
which we operate and the extraneous factors including market conditions that impact our financial performance
and those of our competitors. These include the dynamics of the construction and resources industries,
exchange rates and energy considerations.
Our management team has responded well to external pressures over recent years, and has generated positive
return for longer term shareholders in a challenging environment.
Accordingly, the Board strongly believes that our STI targets need to be set in this context in order to continue
to attract and motivate a highly capable senior executive team who can drive the continued delivery of strong
results for shareholders over the longer term.
Reward opportunity
What level of reward can be earned under the STI?
STI outcomes of financial targets vest progressively in accordance with the following scale:
Financial target achieved
STI % for financial target
Below 95%
95%
Between 95% and 110%
110% or above
Nil
50%
Pro rata
100%
Non-financial objectives are set at a stretch level of performance.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
54
Governance
How is performance against the performance
conditions assessed?
When is performance against the
performance conditions determined
and the award made available?
What disposal restrictions apply to the
Deferred Rights (and to dividends and
voting rights attached)?
All performance conditions under the STI are clearly defined and measurable.
Historically, the STI scheme used budgeted PBT as the metric for determining financial performance. The
measure was changed to NPAT for the 2016 year for target setting and measuring Group financial performance
for the purposes of the STI as this more closely reflects the shareholder experience. Divisional financial
performance will continue to be based on EBIT performance.
In respect of the financial targets, the Board compares the actual NPAT earned against the budgeted NPAT for
the year, and assesses the degree to which the Group met these targets. The Board may adjust for exceptional,
abnormal or extraordinary factors which may have affected the Group’s performance during the year.
There were no significant items during the year and reported profit equalled statutory profit. However, in
assessing the 2016 STI, the Board adjusted the NPAT used for STI purposes to exclude property profits.
The Board also considers the NRG Committee’s assessment of the CEO and Managing Director’s performance
against the agreed non-financial targets, and that of the senior executives (based on the recommendation of the
CEO and Managing Director).
Assessment of performance against the performance hurdles for the relevant year is determined at the February
meeting of the NRG Committee and the Board, in conjunction with finalisation of the Group’s full year results.
The cash award is paid following the release of the Company’s full year results in February. The remainder of the
award (the Deferred Rights) is made available as reasonably practical after the announcement of the Company’s
full year result.
The Deferred Rights will be divided into two equal tranches:
> the Deferred Rights in Tranche 1 and the shares acquired on their exercise may not be sold or otherwise
disposed of until after 31 December 2018 (2 year disposal restriction); and
> the Deferred Rights in Tranche 2 and the shares acquired on their exercise may not be sold or otherwise
disposed of until after 31 December 2019 (3 year disposal restriction).
No dividends (or voting rights) are received on the Deferred Rights during the disposal restrictions.
Does the Board have an overriding discretion?
The Board has absolute discretion in relation to assessing performance and determining the amount, if any,
of STI awards.
Is there an ability to ‘claw back’
in appropriate circumstances?
Cessation of employment or a change of control
What happens to STI awards on
cessation of employment?
Yes. The STI Plan Rules provide the Board with a broad ability to claw back awards if considered appropriate.
In addition to the STI Plan Rules, the Board also has a formal Clawback Policy which provides the Board with
the ability to reduce, forfeit or require repayment of incentives which vest (or may vest) in the case of a material
misstatement in Company financial results, serious misconduct by a participant or in circumstances where
incentive awards or vesting is based on incorrect information not of a financial nature.
Generally, if an Executive resigns or is terminated for cause, all STI entitlements will be forfeited.
The STI Plan Rules provide that in other circumstances, and at the discretion of the Board, award opportunities
will be pro-rata reduced to reflect the proportion of the measurement period not worked. Any disposal
restrictions applicable to shares acquired upon the exercise of Deferred Rights will be lifted on cessation of
employment.
How would a change of control of the
Group impact on STI entitlements?
In the event of a takeover bid (or other transaction likely to result in a change in control of the Company),
the Board has absolute discretion to take any action as provided under the STI Plan Rules.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
55
4.3 At-risk remuneration - Long Term Incentive
The Company makes annual grants of Awards under the Executive Performance Share Plan (Plan) to all senior executives who are eligible to participate.
A summary of the key features of the Plan as it applies to the 2016 LTI Award is as follows:
Driving performance
Who participates and how does the
Plan drive performance and align
participants’ interests with shareholders?
The LTI is offered to senior executives whose behaviour and performance have a direct impact on the Group’s
long term performance. Its purpose is to focus executives on the Group’s long term business strategy to create
and protect shareholder value over a four year performance period, thus aligning executives’ interests more
closely with shareholders.
Vesting, performance conditions and reward opportunity
What is the vesting / performance period?
The 2016 Awards will be tested and become exercisable to the extent of any vesting from 1 May 2020.
What happens on the exercise of Awards?
Shares are delivered to the executive on the exercise of the Awards. Awards are granted at no cost to the
executive and no amount is payable by the executive on the exercise of the Awards.
Any unexercised 2016 Awards will expire on 30 September 2020.
How is the TSR performance condition measured
and what amount can be earned?
The Company’s TSR performance must equal or exceed the growth in the returns of the median companies of
the S&P/ASX 200 Accumulation Index (XJO Al), excluding all GICS Financial companies and selected resources
companies over the period from 31 December 2015 to 31 December 2019.
The 2016 Awards vest progressively in accordance with the following scale:
TSR growth relative percentile ranking
% of Awards subject to TSR hurdle to vest
Below 50%
50%
Between 50% and 75%
75% or above
Nil
50%
Pro rata
100%
How is the EPS performance condition calculated
and what amount can be earned?
The EPS performance hurdle requires the compound annual growth in EPS of the Company over the relevant
performance period to equal or exceed 5% per annum before any Awards will vest.
Awards under the 2016 Award are to vest progressively in accordance with the following scale:
Compound annual growth in EPS
% of Awards subject to EPS hurdle to vest
Below 5% per annum
5% per annum
Between 5% and 10% per annum
10% per annum or above
Nil
50%
Pro rata
100%
Is re-testing permitted?
No. Re-testing of either of the performance conditions applicable to a tranche of Awards is not permitted.
Governance
Is there ability to ‘claw back’
in appropriate circumstances?
Yes. The rules of the Plan have, for some time, provided the Board with a broad ability to claw back Awards
if considered appropriate.
In addition to the rules of the Plan, the Board also has a formal Clawback Policy which provides the Board with
the ability to reduce, forfeit or require repayment of incentives which vest (or may vest) in the case of a material
misstatement in Company financial results, serious misconduct by a Participant or in circumstances where
incentive awards or vesting is based on incorrect information not of a financial nature.
What other conditions apply to the Awards
(including voting rights and dividends)?
An executive’s entitlement to shares under an Award may also be adjusted to take account of capital
reconstructions and bonus issues.
The rules of the Plan contain a restriction on removing the ‘at-risk’ aspect of the instruments granted to
executives. Plan participants may not enter into any transaction designed to remove the ‘at-risk’ aspect of an
instrument before it becomes exercisable (eg. hedging the Awards).
Until the Awards vest, executives have no legal or beneficial interest in Adelaide Brighton Limited shares, no
entitlement to receive dividends and no voting rights in relation to any securities granted under the 2016 Award,
or any of the other Awards.
Any shares allocated to the executive following exercise of an Award may only be dealt with in accordance with
the Company’s Share Trading Policy and subject to the generally applicable insider trading prohibitions.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
56
Cessation of employment or a change of control
What happens to Awards that are not yet
exercisable on cessation of employment?
If an Executive resigns or is terminated for cause, the Awards in respect of any tranche that is not exercisable
will generally be forfeited.
The rules of the Plan provide that in other circumstances, and at the discretion of the Board, a pro rata number
of Awards, reflecting the part of the LTI earned or accrued up to termination, may become exercisable either at
the time of termination of employment or at the end of the original performance period applicable to a tranche.
In the event of a takeover bid (or other transaction likely to result in a change in control of the Company), an
executive will only be allowed to exercise his or her Awards to the extent determined by the Board as provided
under the rules of the Plan.
How would a change of control of the
Group impact on LTI entitlements?
Section 5 - Executive Service Agreements
The remuneration and other terms of employment for Executives are set out in formal employment contracts referred to as Service Agreements. All Service Agreements
are for an unlimited duration and details of Executives’ entitlements on termination are set out below. All Service Agreements may be terminated immediately for serious
misconduct, in which case Executives are not entitled to any payment on termination other than remuneration and leave entitlements up to the date of termination.
Table 7
Name
M Brydon
M Kelly
G Agriogiannis
AL Dell
BD Lemmon
Notice periods
Separation payments (1)
6 months’ notice by either party
(or payment in lieu)
3 months’ notice by either party
(or payment in lieu)
3 months’ notice by either party
(or payment in lieu)
6 months’ notice by either party
(or payment in lieu)
6 months’ notice by either party
(or payment in lieu)
6 months fixed annual remuneration where the Company terminates on notice.
12 months fixed annual remuneration where the Company terminates on notice.(2)
9 months fixed annual remuneration where the Company terminates on notice.
6 months fixed annual remuneration where the Company terminates on notice.
6 months fixed annual remuneration where the Company terminates on notice.
(1)
In the case of resignation, no separate payment is made to the Executive (only amounts due and payable up to the date of ceasing employment including accrued leave entitlements and unpaid salary).
(2) No separation payment will exceed the limit under the Corporations Act 2001.
On termination of employment for any reason, the CEO and Managing Director and other Executives are prohibited from engaging in any activity that would compete with
the Group for a period of six months in order to protect the Group’s business interests. In the event of resignation, at the option of the Company, Mr Brydon and Mr Kelly
may be paid a monthly amount equivalent to the Executive’s monthly fixed remuneration at the time of termination during the period of restraint to support the enforceability
of the restraint.
Section 6 - Non-executive Directors’ fees
6.1 Policy and approach to setting fees
Overview of policy
Non-executive Directors receive a base fee in relation to their service as a Director of the Board, and an
additional fee for membership of, or for chairing a committee.
The Chairman, taking into account the greater time commitment required, receives a higher fee but does not
receive any additional payment for service on the respective committees.
The total amount of fees paid to non-executive Directors is determined by the Board on the recommendation of
its NRG Committee within the maximum aggregate amount approved by shareholders. The remuneration of the
non-executive Directors consists of Directors’ fees, committee fees and superannuation contributions. These
fees are not linked to the performance of the Group in order to maintain the independence and impartiality of
the non-executive Directors.
In setting fee levels, the NRG Committee takes into account:
> Independent professional advice;
> Fees paid by comparable companies;
> The general time commitment and responsibilities involved; and
> The level of remuneration necessary to attract and retain Directors of a suitable calibre.
Aggregate fees approved by shareholders
Total fees, including committee fees, were set within the maximum aggregate amount of $1,300,000 per
annum approved at the 2013 Annual General Meeting.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
57
Base fees for 2016
Fees for the Chairman of the Board and the non-executive Director base fee were increased by approximately
4% for the 2016 financial year.
Fees payable to non-executive Directors are inclusive of contributions to superannuation.
Base fees (Board)
Non-executive Chairman (1)
Non-executive Director
Committee fees
Audit, Risk and Compliance Committee
Nomination, Remuneration and Governance Committee
Safety, Health and Environment Committee
(1) The Chairman of the Board receives no additional fee for Committee work.
$
330,000
110,000
$
Committee chair
Committee member
25,411
25,411
25,411
14,294
14,294
14,294
In accordance with the Company’s constitution, Directors are also permitted to be paid additional fees for special
duties or exertions. Such fees may or may not be included in the aggregate amount approved by shareholders,
as determined by the Directors. No such fees were paid during the year.
Directors are also entitled to be reimbursed for all business related expenses, including travel, as may be
incurred in the discharge of their duties.
Section 7 - Key Management Personnel disclosure tables
7.1 Non-executive Directors’ statutory remuneration
Details of non-executive Directors’ remuneration are set out in the following table:
Table 8
Directors’
base fees (incl.
superannuation)
Fees and allowances
Committee fees
(incl.
superannuation)
$
330,000
317,642
110,000
105,881
110,000
105,881
110,000
105,881
110,000
105,881
770,000
741,166
$
-
-
14,294
14,294
53,999
53,999
39,705
39,705
39,705
39,705
147,703
147,703
Year
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Post-employment
benefits
Superannuation
contributions (1)
$
23,449
23,449
10,783
10,426
14,909
14,535
12,998
12,631
12,998
12,631
75,137
73,672
Total
$
330,000
317,642
124,294
120,175
163,999
159,880
149,705
145,586
149,705
145,586
917,703
888,869
Non-executive Director
LV Hosking
(Chairman)
RD Barro
GF Pettigrew
KB Scott-Mackenzie
AM Tansey
Total non-executive
Directors’ remuneration
(1) Superannuation contributions are made on behalf of non-executive Directors which satisfy the Group’s obligations under applicable Superannuation Guarantee Charge legislation.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
58
7.2 Executive statutory remuneration
Table 9
Short term
benefits
Post employment
benefit
Equity based
benefit
Executives
M Brydon
M Kelly
G Agriogiannis
AL Dell (6)
BD Lemmon
Former KMP
MF Miller (7)
Cash salary
(FAR)
Cash
STI (1)
Other
benefits
Super-
annuation (2)
$
$
$
1,362,000
1,294,900
643,102
1,287,343
166,667 (5)
166,667 (5)
Year
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
713,000
677,386
510,000
474,631
388,000
243,173
458,333
404,775
273,629
545,536
219,212
378,294
90,725
141,361
133,080
252,517
$
35,000
35,000
30,000
30,000
20,000
20,000
24,000
16,000
30,000
30,000
8,800
32,534
147,800
176,034
-
-
-
-
-
-
-
-
-
-
2016
2015
124,533
342,466
33,059
205,362
Total
executive remuneration 2015 (8)
2016
3,555,866
3,631,436
1,392,807
2,810,413
166,667
166,667
% of
remuneration
consisting of
awards (4)
Total
Long term
incentive (3)
Deferred
STI (1)
$
$
$
214,368
-
403,849
383,498
91,210
-
73,070
-
30,241
-
44,360
-
248,090
233,303
122,531
129,811
15,622
-
134,623
313,269
11,020
-
111,082
258,243
464,269 1,035,797
1,281,856
-
2,824,986
3,167,408
1,355,929
1,486,225
944,813
1,002,736
534,528
400,534
800,396
1,000,561
288,494
838,605
6,763,206
8,160,244
%
14
12
18
16
13
13
3
-
17
31
39
31
(1) STI payment includes payments relating to 2016 performance accrued but not paid as at 31 December 2016.
(2)
Includes Company contributions to superannuation and allocations by employees made by way of salary sacrifice of fixed remuneration.
(3)
In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the notional value of equity compensation granted or outstanding during the year. The notional value of equity
instruments is determined as at the grant date and is progressively allocated over the vesting period. The amount included as remuneration is not related to or indicative of the benefit (if any) that the individual Executives
may ultimately realise should the equity instruments vest. The notional value of Awards as at the date of their grant has been determined in accordance with the accounting policy Note 26.
(4) % of remuneration for the financial year which consists of the amortised annual value of Awards issued under the Adelaide Brighton Limited Executive Performance Share Plan.
(5) Living Away from Home Allowance payment made pursuant to Mr Brydon’s Service Agreement to assist him in discharging his duties from the Company’s Sydney office.
(6) Mr Dell commenced in the position of Executive General Manager, Concrete Products, on 1 May 2015.
(7) From 30 April 2016, Mr Miller took up the position of Executive General Manager, Marketing and International Trade and ceased to be a KMP.
(8) Total KMP remuneration for 2015 includes total remuneration of $264,175 for former KMP Mr Rogers. Refer to the 2015 Remuneration report for full details of the Remuneration.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
59
7.3 Equity holdings of Key Management Personnel
A summary of Executives’ and non-executive Directors’ current shareholdings in the Company as at 31 December 2016 is set out below.
While the Board has considered minimum shareholding guidelines for non-executive Directors, it has continued to determine that it is not appropriate to require a particular
holding, given that this is a matter for individual preference. The Board considers that Executives’ interests are sufficiently aligned to those of our shareholders through the
LTI and STI Deferral (as the LTI and STI Deferral are subject to share price fluctuation).
Table 10 (1)
Executives
M Brydon
M Kelly
G Agriogiannis
AL Dell (2)
BD Lemmon
Former KMP
MF Miller
Non-executive Directors
LV Hosking
RD Barro (3)
GF Pettigrew
KB Scott-Mackenzie
AM Tansey
Balance at
beginning of year
8,400
5,500
-
-
-
-
4,851
217,869,876
7,739
5,000
10,000
Net movement due
to other changes
Balance at
end of year
Granted as
remuneration
during the year
265,896
189,306
99,277
-
61,416
(235,000)
(189,806)
(99,277)
-
(61,416)
50,578
(50,578)
-
-
-
-
-
-
9,709,479
-
-
-
39,296
5,000
-
-
-
-
4,851
227,579,355
7,739
5,000
10,000
(1) The balances reported in Table 10 include shares held directly, indirectly or beneficially by each KMP or close members of their family or an entity over which the person or the family member has either direct or indirect
control, joint control or significant influence as at 31 December 2016.
(2) Mr Dell commenced in the position of Executive General Manager, Concrete Products effective from 1 May 2015. He was not eligible for shares granted under the LTI Tranche 2 of 2012 Award.
(3) The balances relating to Mr Barro include shares owned by entities over which Mr Barro has a significant influence, or which he jointly controls, but he does not control these entities himself.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
60
Income statement
For the year ended 31 December 2016
($ Million)
Revenue from continuing operations
Cost of sales
Freight and distribution costs
Gross profit
Other income
Marketing costs
Administration costs
Finance costs
Share of net profits of joint ventures and associate accounted for using the equity method
Profit before income tax
Income tax expense
Profit for the year
Profit attributable to:
Owners of the Company
Non-controlling interests
Earnings per share for profit from continuing operations attributable to the
ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
Notes
3
3
4
10(a)
5(a)
32
32
Consolidated
2016
1,396.2
(885.8)
(195.5)
314.9
14.5
(21.9)
(68.4)
(13.0)
28.5
254.6
(68.4)
186.2
186.3
(0.1)
186.2
Cents
28.7
28.6
2015
1,413.1
(884.1)
(211.2)
317.8
51.4
(20.7)
(68.1)
(14.7)
19.9
285.6
(77.8)
207.8
207.9
(0.1)
207.8
Cents
32.0
31.9
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
THE ABOVE INCOME STATEME NT S HOULD B E REA D
I N CONJUNCTION WITH THE AC COMPA NYING NOT ES
61
Statement of comprehensive income
For the year ended 31 December 2016
($ Million)
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Changes in the fair value of cash flow hedges
Income tax relating to these items
Items that will not be reclassified to profit or loss
Actuarial gain/(loss) on retirement benefit obligation
Income tax relating to these items
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income for the year
Notes
20(a)
20(a)
5(c)
18(b)
5(c)
Consolidated
2016
186.2
2015
207.8
(0.9)
1.3
(0.4)
1.7
(0.5)
1.2
(1.3)
(1.3)
0.4
4.5
(1.4)
0.9
187.4
208.7
187.5
(0.1)
187.4
208.8
(0.1)
208.7
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
TH E A BOVE STATEMENT OF COMPREHENSIVE INC OME S HO ULD BE RE AD
I N C ON JUN CTION WITH THE ACCOMPANYI NG N OT ES
62
Balance sheet
As at 31 December 2016
($ Million)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets classified as held for sale
Total current assets
Non-current assets
Receivables
Retirement benefit asset
Joint arrangements and associate
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Capital and reserves attributable to owners of the Company
Non-controlling interests
Total equity
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
THE ABOVE BALANCE SHEET S HOU LD B E REA D IN CONJUNCTION
W IT H THE ACCOMPANYING NOTE S
63
Consolidated
Notes
2016
2015
6
7
8
9
7
18(b)
10
11
12
14
15
16
17
15
5(f)
16
19
20(a)
20(b)
21.5
204.6
160.2
3.8
390.1
34.4
2.3
151.2
978.4
270.3
33.3
208.3
161.5
-
403.1
32.9
1.3
142.2
986.1
272.9
1,436.6
1,826.7
1,435.4
1,838.5
117.0
0.4
15.4
31.9
3.3
168.0
309.6
89.9
39.0
0.1
438.6
606.6
122.9
1.0
15.0
33.6
6.8
179.3
329.5
85.4
36.9
0.1
451.9
631.2
1,220.1
1,207.3
731.4
2.9
483.3
1,217.6
2.5
1,220.1
729.2
1.2
474.3
1,204.7
2.6
1,207.3
Statement of changes in equity
For the year ended 31 December 2016
Consolidated
($ Million)
Notes
Balance at 1 January 2016
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Deferred hedging gains and losses and
cost of hedging transferred to the carrying
value of inventory purchased in the period
Transactions with owners in
their capacity as owners:
Dividends provided for or paid
Executive performance share plan
21
19(b)/20(a)
Balance at 31 December 2016
Balance at 1 January 2015
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in
their capacity as owners:
Dividends provided for or paid
Executive performance share plan
21
19(b)/20(a)
Balance at 31 December 2015
Share
capital
729.2
-
-
-
-
-
2.2
2.2
731.4
727.9
-
-
-
-
1.3
1.3
729.2
Attributable to owners of Adelaide Brighton Limited
Reserves
Retained
earnings
Non-controlling
interests
Total
Total
equity
1.2
474.3
1,204.7
2.6
1,207.3
-
-
-
186.3
1.2
187.5
186.3
1.2
187.5
0.9
-
0.9
(0.1)
-
(0.1)
-
-
-
-
186.2
1.2
187.4
0.9
(178.5)
3.0
(175.5)
-
0.8
0.8
2.9
3.3
-
(2.2)
(2.2)
-
0.1
0.1
1.2
(178.5)
-
(178.5)
3.0
(178.5)
(175.5)
483.3
1,217.6
2.5
1,220.1
402.8
207.9
3.1
211.0
1,134.0
207.9
0.9
208.8
(139.5)
-
(139.5)
1.4
(139.5)
(138.1)
2.7
(0.1)
-
(0.1)
-
-
-
1,136.7
207.8
0.9
208.7
(139.5)
1.4
(138.1)
474.3
1,204.7
2.6
1,207.3
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
TH E A BOVE STATEMENT OF CHANGES IN EQUIT Y SH OUL D BE READ
I N C ON JUN CTION WITH THE ACCOMPANYI NG N OT ES
64
Statement of cash flows
For the year ended 31 December 2016
($ Million)
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Joint venture distributions received
Interest received
Interest paid
Other income
Income taxes paid
Income taxes refunded
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant, equipment and intangibles
Payments for acquisition of businesses, net of cash acquired
Proceeds from sale of property, plant and equipment
Loans to joint venture entities
Repayment of loans from other parties
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Repayment of borrowings
Dividends paid to Company’s shareholders
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
Consolidated
Notes
2016
2015
1,536.1
(1,239.1)
18.6
1.5
(12.1)
6.2
(67.2)
4.4
1,545.8
(1,272.1)
16.2
1.7
(13.0)
5.6
(58.5)
4.2
31
248.4
229.9
(86.5)
-
23.2
(2.0)
0.6
(64.7)
4.0
(21.0)
(178.5)
(195.5)
(11.8)
33.3
-
21.5
(74.3)
(6.5)
50.8
(0.9)
0.6
(30.3)
2.8
(61.5)
(139.5)
(198.2)
1.4
31.8
0.1
33.3
21
6
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
THE ABOVE STATEMENT OF C AS H F LOWS SH OUL D BE READ
I N CONJUNCTION WITH THE AC COMPA NYING NOT ES
65
Notes to the consolidated financial statements
1 Summary of significant accounting policies
AASB 15 Revenue From Contracts
Adelaide Brighton Limited (the Company) is a
company limited by shares, incorporated and
domiciled in Australia whose shares are publicly
traded on the Australian Securities Exchange (ASX).
The financial report was authorised for issue by
the Directors on 17 March 2017. The Directors
have the power to amend and reissue the financial
statements.
The principal accounting policies adopted in
the preparation of these consolidated financial
statements are either set out below or included in
the accompanying notes. These policies have been
consistently applied to all the years presented.
Unless otherwise stated the financial statements
are for the consolidated entity consisting of Adelaide
Brighton Limited and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have
been prepared in accordance with Australian
Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board and the
Corporations Act 2001. The Company is a for-profit
entity for the purpose of preparing the financial
statements.
Comparative information has been re-stated where
appropriate to enhance comparability.
Historical cost convention
These financial statements have been prepared
under the historical cost convention, except for the
circumstances where the fair value method has
been applied as detailed in the accounting policies.
Compliance with IFRS
The consolidated financial statements of the
Adelaide Brighton Limited group also comply with
International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards
Board (IASB).
New accounting standards and interpretations
Certain new accounting standards and
interpretations have been published that are not
mandatory for 31 December 2016 reporting periods.
The Group’s assessment of the impact of these new
standards and interpretations is set out below.
With Customers
AASB 15 Revenue From Contracts With Customers
will replace AASB 118 which covers contracts
for goods and services and AASB 111 which
covers construction contracts. The new standard
replaces the existing notion of risk and rewards
with the notion of control to recognise when a
good or service transfers to a customer. The Group
performed a preliminary assessment of the impact
of the new standard and based on the results do
not believe that the standard will have a material
impact on the financial statements. The standard
is mandatory for financial years commencing on
or after 1 January 2018 and Adelaide Brighton will
adopt the standard at that time.
AASB 16 Leases
AASB 16 Leases will replace the current standard
on lease accounting, AASB 117. AASB 16 introduces
a single lessee accounting model and requires
the lessee to recognise assets and liabilities for
all leases with a term of more than 12 months,
unless the underlying asset is of low value.
A lessee is required to recognise a right-of-use
asset representing its right to use the underlying
leased asset and a lease liability representing its
obligations to make lease payments. A preliminary
assessment of the impact of the standard has
been undertaken by the Group. Based upon
current leases, adopting the standard would
result in the recognition of a right of use asset
with a value of $14.0 million and a corresponding
liability at 31 December 2016, and reduce
2016 net profit after tax by $0.7 million.
The standard is mandatory for financial years
commencing on or after 1 January 2019 and
Adelaide Brighton will adopt the standard at
that time.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate
the assets and liabilities of all subsidiaries controlled
by Adelaide Brighton Limited as at 31 December
2016 and the results of all subsidiaries for the
year then ended. The Company and its subsidiaries
together are referred to in this financial report as
“the Group”.
Subsidiaries are entities over which the Group has
control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to
affect those returns through its power to direct the
activities of the entity.
Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
The acquisition method of accounting is used to
account for business combinations by the Group
(refer to Note 1(d)).
Intercompany transactions, balances and unrealised
gains on transactions between Group companies
are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of the
impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where
necessary to ensure consistency with the policies
adopted by the Group.
(ii) Employee Share Trust
The Group has formed a trust to administer the
Group’s employee share scheme. The company that
acts as the Trustee is consolidated as the company
is controlled by the Group. The Adelaide Brighton
employee share plan trust is not consolidated as it is
not controlled by the Group.
(iii) Non-controlling interests
Non-controlling interests in the results and equity
of subsidiaries are shown separately in the
consolidated income statement and balance sheet
respectively. The Group treats transactions with
non-controlling interests that do not result in a loss
of control as transactions with equity owners of
the Group. For changes in ownership interests, the
difference between any consideration paid and the
relevant share acquired of the carrying value of net
assets of the subsidiary is deducted from equity.
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each
of the Group’s entities are measured using the
currency of the primary economic environment in
which the entity operates (‘the functional currency’).
The consolidated financial statements are presented
in Australian Dollars, which is Adelaide Brighton
Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated
into the functional currency using the exchange
rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from
the settlement of such transactions and from the
translation at year end exchange rates of monetary
assets and liabilities denominated in foreign
currencies are recognised in the income statement
or deferred in equity if the gain or loss relate to a
qualifying cash flow hedge.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
66
1 Summary of significant accounting
policies (continued)
(c) Foreign currency translation (continued)
(iii) Foreign operations
The results and financial position of all the foreign
operations that have a functional currency different
from the presentation currency are translated into
the presentation currency as follows:
> Assets and liabilities for each balance sheet
presented are translated at the closing rate at the
date of that balance sheet;
> Income and expenses for each income statement
and statement of comprehensive income are
translated at average exchange rates (unless this is
not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction
dates, in which case income and expenses are
translated at the dates of the transactions); and
> All resulting exchange differences are recognised
The excess of the consideration transferred, the
amount of any non-controlling interest in the
acquiree and the acquisition date fair value of any
previous equity interest in the acquiree over the fair
value of the Group’s share of the net identifiable
assets acquired is recorded as goodwill. If those
amounts are less than the fair value of the net
identifiable assets of the subsidiary acquired and the
measurement of all amounts has been reviewed, the
difference is recognised directly in profit or loss as a
bargain purchase.
Where settlement of any part of cash consideration
is deferred, the amounts payable in the future are
discounted to their present value as at the date of
exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at which
a similar borrowing could be obtained from an
independent financier under comparable terms
and conditions.
in other comprehensive income.
Contingent consideration is classified either as
equity or a financial liability. Amounts classified as
a financial liability are subsequently remeasured to
fair value with changes in fair value recognised in
the income statement.
2 Critical accounting estimates
and assumptions
The Group makes estimates and assumptions in
preparing the financial statements. The resulting
accounting estimates will, by definition, seldom
equal the related actual results. This note provides
an overview of the areas that involved a higher
degree of judgement or complexity and of items
which are more likely to be materially adjusted due
to estimates and assumptions differeing to actual
outcomes. The areas involving significant estimates
and assumptions are listed below.
> Impairment of assets - Note 13
> Provisions for close down and restoration costs -
Note 16(iv)
> Defined benefit superannuation plan - Note 18
Detailed information about each of these estimates
and assumptions is included in Notes 13, 16(iv)
and 18 together with information about the basis of
calculation for each affected line item in the financial
statements.
3 Revenue and other income
Accounting policy - revenue recognition
On consolidation, exchange differences arising
from the translation of any net investment in
foreign entities, and of borrowings and other
financial instruments designated as hedges of such
investments, are recognised in other comprehensive
income.
When a foreign operation is sold or any borrowings
forming part of the net investment are repaid, a
proportionate share of such exchange differences
is reclassified to profit or loss, as part of the gain
or loss on sale where applicable.
(d) Business combinations
The acquisition method of accounting is used to
account for all business combinations, including
business combinations involving equities or
businesses under common control, regardless of
whether equity instruments or other assets are
acquired. The consideration transferred for the
acquisition of a subsidiary comprises the fair values
of the assets transferred, the liabilities incurred
and the equity interests issued by the Group. The
consideration transferred also includes the fair value
of any contingent consideration arrangement and
the fair value of any pre-existing equity interest
in the subsidiary. Acquisition-related costs are
expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a
business combination are, with limited exceptions,
measured initially at their fair values at the
acquisition date. On an acquisition-by-acquisition
basis, the Group recognises any non-controlling
interest in the acquiree either at fair value or at the
non-controlling interest’s proportionate share of the
acquiree’s net identifiable assets.
(e) Rounding of amounts
Revenue is recognised for the major business
activities as follows:
(i) Sales revenue
Revenue from the sale of goods is measured at the
fair value of the consideration received or receivable,
net of returns, trade discounts and volume rebates.
Revenue is recognised when the significant risks
and rewards of ownership have been transferred
to the buyer, recovery of the consideration is
considered probable, the associated costs of goods
can be estimated reliably, there is no continuing
management involvement with the goods and the
amount of revenue can be measured reliably. Sales
of services are recognised in the period in which the
services are rendered.
(ii) Interest income
Interest income is recognised using the effective
interest rate method.
The Company is of a kind referred to in the
Australian Securities and Investments Commission
Corporations (Rounding in Financial / Directors’
Reports) Instrument 2016/191, relating to the
“rounding off’’ of amounts in the financial report.
Amounts in the financial report have been rounded
off in accordance with that instrument to the
nearest one hundred thousand dollars, unless
otherwise stated.
(f) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised
net of the amount of associated GST, unless the
GST incurred is not recoverable from the taxation
authority. In this case it is recognised as part of
the cost of acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of
the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the
taxation authority is included with other receivables
or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or
financing activities which are recoverable from, or
payable to the taxation authority, are presented as
operating cash flows.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
67
($ Million)
3 Revenue and other income (continued)
Revenue from continuing operations
Sales revenue
Interest from joint ventures
Interest from other parties
Royalties
Other income
Net gain on disposal of property, plant and equipment
Fair value accounting gain on business acquisition
Rental income
Other income
Consolidated
2016
2015
1,394.3
0.7
0.8
0.4
1,396.2
8.4
-
2.9
3.2
14.5
1,411.0
0.8
0.9
0.4
1,413.1
45.9
0.2
3.0
2.3
51.4
Total revenue and other income
1,410.7
1,464.5
The Group has a strategy of divesting properties that are released from operational activities as a result of a rationalisation and improvement program.
During the year the Group realised a net gain on the sale of properties of $8.4 million (2015: $45.0 million) which is recognised in other income.
4 Expenses
Accounting policy - borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset
for its intended use or sale. Other borrowing costs are expensed.
Profit before income tax includes the following specific expenses:
Depreciation
Buildings
Plant and equipment
Mineral reserves
Total depreciation
Amortisation of intangibles
Other charges
Employee benefits expense
Defined contribution superannuation expense
Operating lease rental charge
Impairment expense recognised on trade debtors
Provision for inventory
Finance costs
Interest and finance charges paid / payable
Unwinding of the discount on restoration provisions and retirement benefit obligation
Fair value loss/(gain) on forward foreign currency contracts at fair value through profit or loss
Total finance costs
Amount capitalised (1)
Finance costs expensed
4.4
66.5
5.2
76.1
2.0
156.3
11.7
6.6
0.7
0.7
12.3
1.1
0.2
13.6
(0.6)
13.0
4.3
66.0
5.6
75.9
1.9
150.7
11.1
5.2
1.1
0.4
14.5
0.9
(0.2)
15.2
(0.5)
14.7
(1) The rate used to determine the amount of borrowing costs to be capitalised is the average interest rate applicable to the Group’s outstanding borrowings during the year, in this case 2.5% p.a. (2015: 3.1% p.a.).
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
68
5 Income tax
Accounting policy - income tax
The income tax expense or revenue for the period is
the tax payable on the current period’s taxable
income based on the applicable income tax rate for
each jurisdiction adjusted by changes in deferred
tax assets and liabilities attributable to temporary
differences and to previously unrecognised tax
losses. The current income tax charge is calculated
on the basis of tax laws enacted or substantively
enacted at the end of the reporting period.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to
apply when the assets are recovered or liabilities are
settled, based on those tax rates which are enacted
or substantively enacted for each jurisdiction. The
relevant tax rates are applied to the cumulative
amounts of deductible and taxable temporary
differences to measure the deferred tax asset or
liability. An exception is made for certain temporary
differences arising from the initial recognition of an
asset or a liability. No deferred tax asset or liability is
recognised in relation to these temporary differences
if they arose in a transaction, other than a business
combination, that at the time of the transaction did
not affect either accounting or taxable profit or loss.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only
if it is probable that future taxable amounts will be
available to utilise those temporary differences and
losses. Deferred tax liabilities and assets are not
recognised for temporary differences between the
carrying amount and tax bases of investments in
controlled entities where the parent entity is able to
control the timing of the reversal of the temporary
differences and it is probable that the differences
will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred
tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset
where the entity has a legally enforceable right
to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is recognised in profit
and loss, except to the extent it relates to items
recognised in other comprehensive income or
directly in equity. In this case, the tax is also
recognised in other comprehensive income or
directly in equity, respectively.
Tax consolidation
Adelaide Brighton Limited and its wholly owned
Australian subsidiaries implemented the tax
consolidation legislation as of 1 January 2004.
Adelaide Brighton Limited, as the head entity in
the tax consolidated group, recognises current tax
liabilities and tax losses (subject to meeting the
“probable test”) relating to all transactions, events
and balances of the tax consolidated group as
if those transactions, events and balances
were its own.
The entities in the tax consolidated group are part of
a tax sharing agreement which, in the opinion of the
Directors, limits the joint and several liability of the
wholly-owned entities in the case of default by the
head entity, Adelaide Brighton Limited.
Amounts receivable or payable under a tax sharing
agreement with the tax consolidated entities are
recognised separately as tax-related amounts
receivable or payable. Expenses and revenues
arising under the tax sharing agreement are
recognised as a component of income tax expense.
The wholly owned entities fully compensate Adelaide
Brighton Limited for any current tax payable
assumed and are compensated by Adelaide Brighton
Limited for any current tax receivable and deferred
tax assets relating to unused tax losses or unused
tax credits that are transferred to Adelaide Brighton
Limited under the tax consolidation legislation. The
funding amounts are determined by reference to the
amounts recognised in the wholly owned entities’
financial statements.
Individual tax consolidated entities recognise tax
expenses and revenues and current and deferred
tax balances in relation to their own taxable income,
temporary differences and tax losses using the
separate taxpayer within the group method. Entities
calculate their current and deferred tax balances on
the basis that they are subject to tax as part of the
tax consolidated group.
Deferred tax balances relating to assets that had
their tax values reset on joining the tax consolidated
group have been remeasured based on the carrying
amount of those assets in the tax consolidated
group and their reset tax values. The adjustment
to these deferred tax balances is recognised in the
consolidated financial statements against income
tax expense.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
69
Consolidated
2016
2015
254.6
76.4
285.6
85.7
0.7
(1.9)
-
(4.0)
-
(1.3)
(1.9)
0.4
68.4
69.9
(1.7)
0.2
68.4
0.5
(0.5)
(1.3)
(3.9)
(0.1)
-
(3.3)
0.7
77.8
68.1
10.0
(0.3)
77.8
(0.3)
0.3
-
1.4
(0.4)
1.0
0.4
13.4
($ Million)
5 Income Tax (continued)
(a) Numerical reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense
Tax at the Australian tax rate of 30% (2015: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non allowable expenses
Non assessable income
Non assessable capital profits
Rebateable dividends
Fair value adjustment
Other deductions
Previously unrecognised capital tax losses offset against capital gains
Under provided in prior years
Aggregate income tax expense
Aggregate income tax expense comprises:
Current taxation expense
Net deferred tax
Under/(Over) provided in prior year
(b) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly (credited) debited to equity
Current tax
Net deferred tax
(1.1)
(0.9)
(c) Tax expense relating to items of other comprehensive income
Actuarial gain on retirement benefit obligation (Note 18)
Changes in the fair value of cash flow hedges (Note 20(a))
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised:
Revenue losses
Capital losses
This benefit for tax losses will only be obtained if:
(2.0)
0.5
0.4
0.9
0.4
11.6
(i) the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised;
(ii) the Group continues to comply with the conditions for deductibility imposed by tax legislation; and
(iii) no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
70
($ Million)
5 Income Tax (continued)
(e) Non-current deferred tax assets
The balance comprises temporary differences attributable to:
Share based payment reserve
Provisions
Other assets
Tax losses
Deferred tax assets - before offset
Offset deferred tax liability (Note 5(f))
Net deferred tax assets - after offset
Movements:
Opening balance at 1 January - before offset
Recognised in the income statement
Recognised in other comprehensive income
Recognised in equity
Under/(over) provision in prior year
Acquired in business combinations
Closing balance at 31 December - before offset
(f) Non-current deferred tax liabilities
The balance comprises temporary differences attributable to:
Property, plant and equipment
Inventories
Other
Deferred tax liabilities - before offset
Offset deferred tax assets (Note 5(e))
Net deferred tax liabilities - after offset
Net deferred tax liabilities to be settled after more than 12 months
Net deferred tax liabilities to be settled within 12 months
Movements:
Opening balance at 1 January - before offset
Recognised in the income statement
Recognised in equity
Under/(over) provision in prior year
Closing balance at 31 December - before offset
6 Cash and cash equivalents
Accounting policy - cash and cash equivalents
Consolidated
2016
2015
1.7
24.6
1.7
0.9
28.9
(28.9)
-
28.1
2.3
(0.9)
-
(0.6)
-
28.9
101.6
9.7
7.5
118.8
(28.9)
89.9
76.5
13.4
89.9
113.5
0.6
0.4
4.3
118.8
1.3
21.0
5.8
-
28.1
(28.1)
-
31.6
(2.4)
(1.0)
(0.3)
-
0.2
28.1
95.5
9.9
8.1
113.5
(28.1)
85.4
75.1
10.3
85.4
106.3
6.1
-
1.1
113.5
Cash and cash equivalents includes cash on hand, term deposits and deposits held at call with financial institutions, other short term, highly liquid investments with
original maturities 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 value
and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
Current
Cash at bank and in hand
Term deposits
Cash and cash equivalents
19.8
1.7
21.5
31.5
1.8
33.3
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
71
6 Cash and cash equivalents (continued)
(a) Offsetting
The Group has an offsetting agreement with its bank for cash facilities. The agreement allows the Group to manage cash balances on a total basis, offsetting
individual cash balances against overdrafts. The value of overdrafts at 31 December 2016 was $nil (2015: $nil).
(b) Risk exposure
The Group’s exposure to interest rate risk is discussed in Note 22. The maximum exposure to credit risk at the end of the reporting period is the carrying amount
of each class of cash and cash equivalents mentioned above.
7 Trade and other receivables
Accounting policy - trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less loss allowance provision. Trade receivables are typically
due for settlement no more than 30 to 45 days from the end of the month of invoice.
The Group applies the simplified approach to providing for expected credit losses for all trade receivables as set out in Note 22(b).
The amount of the provision is recognised in the income statement. When a trade receivable for which a loss allowance provision has been recognised becomes
uncollectible in a subsequent period, it is written off against the provision account. Subsequent recoveries of amounts previously written off are credited against
expenses in the income statement.
($ Million)
Current
Trade receivables
Loss allowance provision
Amounts receivable from joint ventures
Prepayments
Other receivables
Total current
Non-current
Loans to joint ventures
Other non-current receivables
Total non-current
Movement in loss allowance provision
Opening balance at 1 January
Amounts written off during the year
Loss allowance provision recognised during the year
Closing balance at 31 December
Fair value and credit, interest and foreign exchange risk
Consolidated
2016
2015
167.2
(1.2)
166.0
28.3
5.1
5.2
204.6
32.3
2.1
34.4
1.8
(1.5)
0.9
1.2
168.4
(1.8)
166.6
29.3
6.2
6.2
208.3
30.2
2.7
32.9
1.9
(0.8)
0.7
1.8
Due to the short term nature of current receivables, their carrying value is assumed to approximate their fair value. All receivables are denominated in Australian Dollars.
Information concerning the fair value and risk management of both current and non-current receivables is set out in Note 22.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
72
($ Million)
8 Inventories
Accounting policy - inventories
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost
comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter
being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of
weighted average costs. Cost includes the reclassification from equity of any gains or losses on qualifying cashflow hedges
relating to purchases of raw materials.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
Inventory quantities are verified through stocktakes where inventory is either counted or, in the case of bulk materials,
volumetric surveys are converted to weight using density factors. Certain volumetric surveys are performed by independent
surveyors utilising aerial and laser surveys.
Current
Finished goods
Raw materials and work in progress
Engineering spare parts stores
Inventory expense
Inventories recognised as expense during the year ended 31 December 2016 and included in cost of sales amounted to
$808.3 million (2015: $825.6 million).
9 Assets classified as held for sale
Accounting policy - assets held for sale
Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of their carrying amount
and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than
through continuing use and a sale is considered highly probable.
An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell an asset (or disposal group),
but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the
date of the sale of the noncurrent asset (or disposal group) is recognised at the date of de-recognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are
classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held
for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance sheet.
Signed contracts are in existence for the sale of these assets held for sale and the assets are held at their carrying value.
The timing is normal for the nature of the contract for sale in the Concrete Products segment.
Current
Land and buildings
Plant and equipment
Consolidated
2016
2015
70.6
60.1
29.5
160.2
70.4
60.2
30.9
161.5
1.3
2.5
3.8
-
-
-
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
73
10 Joint arrangements and associate
Accounting policy - joint arrangements and associate
(i) Associate entity
The interest in associate is accounted for using the equity method, after initially being recorded at cost. Under the equity method, the share of the profits or losses of the
associate is recognised in the income statement, and the share of post-acquisition movements in reserves is recognised in other comprehensive income. Profits or losses
on transactions establishing the associate and transactions with the associate are eliminated to the extent of the Group’s ownership interest until such time as they are
realised by the associate on consumption or sale, unless they relate to an unrealised loss that provides evidence of the impairment of an asset transferred.
(ii) Joint arrangements
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of the Group to the joint
arrangement.
Joint operations
Interests in joint operations are accounted for using the proportionate consolidation method. Under this method, the Group has recognised its share of assets, liabilities,
revenues and expenses.
Joint ventures
Interests in joint ventures are accounted for using the equity method. Under this method, the interests are initially recognised in the consolidated balance sheet at cost and
adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income in the income statement and
statement of other comprehensive income respectively. Dividends received are recognised as a reduction in the investment in the joint venture.
When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint venture (which includes any long term interests that, in substance, form part
of the Group’s net investment in the joint venture), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint
venture.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where
necessary, to ensure consistency with the policies adopted by the Group.
(a) Summarised financial information for joint ventures and associate
The following table provide summarised financial information for the joint ventures and associate which are individually immaterial and accounted for using the
equity method.
($ Million)
Investment in joint ventures and associate
Profit from continuing operations
Other comprehensive income
Total comprehensive income
(b) Interests in joint arrangements and associate
Total non-material
Consolidated
Joint ventures
Associate
2016
114.2
25.6
-
25.6
2015
107.2
19.0
-
19.0
2016
37.0
2.9
-
2.9
2015
35.0
0.9
-
0.9
2016
151.2
28.5
-
28.5
2015
142.2
19.9
-
19.9
Name
Principal place of business
Aalborg Portland Malaysia Sdn. Bhd.(1)
Batesford Quarry (2)
Burrell Mining Services JV (2)
E.B. Mawson & Sons Pty Ltd and
Lake Boga Quarries Pty Ltd (3)
Independent Cement and Lime Pty Ltd (3)
Peninsula Concrete Pty Ltd (3)
Sunstate Cement Ltd (3)
Malaysia
Victoria
New South Wales and Queensland
New South Wales and Victoria
New South Wales and Victoria
South Australia
Queensland
(1) Associate
(2) Joint operation
(3) Joint venture
Ownership interest
2016
%
2015
%
Activities
30
50
50
50
50
50
50
30 White clinker and cement manufacture
50
50
Limestone products
Concrete products for the coal mining industry
50
50
50
50
Premixed concrete and quarry products
Cementitious product distribution
Premixed concrete
Cement milling and distribution
Each of the above entities, except Aalborg Portland Malaysia Sdn. Bhd., has a balance sheet date of 30 June which is different to the Group’s balance sheet date of
31 December. Financial reports as at 31 December for the joint arrangements are used in the preparation of the Group financial statements.
(c) Contingent liabilities in respect of joint ventures
The Group has an unrecognised contingent liability to acquire the interest it does not own in certain of its joint ventures. Acquisition of the interest is subject to exercise by
the joint venture partner, the occurrence of which affects the value of the interest. The minimum amount of the contingent liability is $30.8 million (2015: $30.4 million).
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
74
11 Property, plant and equipment
Accounting policy - property plant and equipment
Property, plant and equipment are shown at historical cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly
attributable to the acquisition of the assets.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset
is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
(i) Mineral reserves
Mineral reserves are amortised based on annual extraction rates over the estimated life of the reserves. The remaining useful life of each asset is reassessed at regular
intervals. Where there is a change during the period to the useful life of the mineral reserve, amortisation rates are adjusted prospectively from the beginning of the
reporting period.
(ii) Complex assets
The costs of replacing major components of complex assets are depreciated over the estimated useful life, generally being the period until next scheduled replacement.
(iii) Leasehold property
The cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or the estimated useful life, whichever is the shorter.
Amortisation is over 5 - 30 years.
(iv) Other fixed assets
Freehold land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost or deemed cost amounts, over their
estimated useful lives, as follows:
> Buildings
20 - 40 years
> Plant and equipment
3 - 40 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the income statement.
The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if
there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Consolidated at 31 December 2016
($ Million)
At cost
Accumulated depreciation
Net book amount
Reconciliations
Carrying amount at
1 January 2016
Additions
Disposals
Reclassification
Depreciation/amortisation
Other
Carrying amount at
31 December 2016
Freehold
land
Buildings
Leasehold
property
Plant &
equipment
Asset
Mineral Retirement
cost
reserves
In course of
construction
Total
167.0
-
167.0
145.9
(62.1)
83.8
155.9
21.3
(9.2)
(1.0)
-
-
84.3
0.9
(0.2)
3.2
(4.4)
-
9.5
(3.3)
6.2
6.1
0.7
-
(0.1)
(0.5)
-
1,329.4
(833.6)
204.0
(38.8)
495.8
165.2
497.4
41.9
(5.3)
26.6
(64.8)
-
170.0
0.4
-
-
(5.2)
-
26.3
(6.7)
19.6
21.0
0.1
-
-
(1.2)
(0.3)
40.8
-
1,922.9
(944.5)
40.8
978.4
51.4
21.2
-
(31.8)
-
-
986.1
86.5
(14.7)
(3.1)
(76.1)
(0.3)
167.0
83.8
6.2
495.8
165.2
19.6
40.8
978.4
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
75
11 Property, plant and equipment (continued)
Consolidated at 31 December 2015
($ Million)
At cost
Accumulated depreciation
Net book amount
Reconciliations
Carrying amount at
1 January 2015
Additions
Disposals
Business combinations
Reclassification
Depreciation/amortisation
Other
Carrying amount at
31 December 2015
($ Million)
Freehold
land
Buildings
Leasehold
property
Plant &
equipment
Asset
Mineral Retirement
cost
reserves
In course of
construction
Total
155.9
-
155.9
142.0
(57.7)
84.3
156.0
3.0
(5.2)
2.1
-
-
-
87.7
0.1
(0.1)
0.3
0.6
(4.3)
-
9.2
(3.1)
6.1
6.4
0.1
-
-
-
(0.4)
-
1,300.5
(803.1)
199.0
(29.0)
497.4
170.0
525.3
24.6
(4.2)
2.9
14.4
(65.6)
-
174.2
1.1
(0.9)
0.7
-
(4.8)
(0.3)
26.2
(5.2)
21.0
22.5
-
-
0.1
-
(0.8)
(0.8)
51.4
-
1,884.2
(898.1)
51.4
986.1
22.1
45.4
-
-
(16.1)
-
-
994.2
74.3
(10.4)
6.1
(1.1)
(75.9)
(1.1)
155.9
84.3
6.1
497.4
170.0
21.0
51.4
986.1
Consolidated
2016
2015
1.6
(0.5)
1.1
2.7
(0.5)
2.2
Leased assets
Plant and equipment includes the following amounts where the Group is a lessee under a finance lease:
Cost
Accumulated depreciation
Net book amount
12 Intangible assets
Accounting policy - intangible assets
(i) Goodwill
Goodwill is measured as described in Note 1(d). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of joint ventures is included
in the investment in joint ventures.
Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired,
and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash generating units which are expected to benefit from the business combination for the purpose of impairment testing. Each of those cash
generating units are consistent with the Group’s reporting segments.
(ii) Lease rights
Lease rights acquired have a finite useful life. Amortisation is calculated using the straight-line method to allocate the cost over their estimated useful lives, which varies
from 2 to 20 years.
(iii) IT development and software
Costs incurred in acquiring software and licences that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to
software and systems. Costs capitalised include external direct costs of materials and service and direct payroll and payroll related costs of employees’ time spent on the
project. Amortisation is calculated on a straight-line basis over periods generally ranging from 5 to 10 years.
IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where
the Group has an intention and ability to use the asset.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
76
12 Intangible assets (continued)
($ Million)
31 December 2016
Cost
Accumulated amortisation
Carrying amount at 31 December 2016
Opening balance at 1 January 2016
Reclassification
Additions in current year
Amortisation charge
Closing balance at 31 December 2016
31 December 2015
Cost
Accumulated amortisation
Carrying amount at 31 December 2015
Opening balance at 1 January 2015
Reclassification
Additions in current year
Amortisation charge
Closing balance at 31 December 2015
13 Impairment tests
Consolidated
Other
intangibles
Goodwill
Software
248.7
-
248.7
248.7
-
-
-
248.7
248.7
-
248.7
248.7
-
-
-
248.7
18.0
(8.6)
9.4
11.2
(0.1)
-
(1.7)
9.4
18.1
(6.9)
11.2
11.2
1.1
0.5
(1.6)
11.2
13.3
(1.1)
12.2
13.0
(0.5)
-
(0.3)
12.2
13.9
(0.9)
13.0
6.5
-
6.8
(0.3)
13.0
Total
280.0
(9.7)
270.3
272.9
(0.6)
-
(2.0)
270.3
280.7
(7.8)
272.9
266.4
1.1
7.3
(1.9)
272.9
Goodwill is not subject to amortisation and is tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be
impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows which are largely independent of the cash flows from other assets or groups of assets (cash generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
(a) Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to business segments. A segment level summary of the goodwill allocation
is presented below.
($ Million)
Cement and Lime
Concrete and Aggregates
Cement, Lime, Concrete and Aggregates segment
Concrete Products segment
Consolidated
2016
134.0
105.9
239.9
8.8
248.7
2015
134.0
105.9
239.9
8.8
248.7
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on 2016 actual results
and 2017 financial budgets approved by the Board. Projected cash flows are forecast for a period of greater than 5 years to incorporate the construction cycle
into demand assumptions for modelling purposes. The growth rate does not exceed the long term average growth rate for the industry in which the CGU operates.
(b) Key assumptions used for value-in-use calculations
Cement, Lime, Concrete and Aggregates
Concrete Products
Gross margin (1)
Growth rate (2)
Discount rate (3)
2016
37.5
24.9
2015
36.6
24.5
2016
1.3
1.2
2015
1.4
2.0
2016
10.4
10.9
2015
9.6
10.0
(1) Budgeted gross margin (excluding fixed production costs).
(2) Weighted average growth rate used to extrapolate cash flows beyond the specific market forecast period of up to 11 years.
(3) Pre-tax discount rate applied to cash flow projections.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
77
13 Impairment tests (continued)
(b) Key assumptions used for value-in-use calculations (continued)
Significant estimate - key assumptions used for value-in-use calculations
The Group tests annually whether goodwill, other intangible assets with an indefinite life and other non-current assets have suffered any impairment. The recoverable
amounts of cash generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions detailed above.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a
financial impact on the Group and that are believed to be reasonable under the circumstances.
The assumptions have been used for the analysis of each CGU within the business segment. Management determined budgeted gross margin based on the past
performance and its expectations for the future. The discount rates used are pre-tax and reflect specific risks relating to relevant segments.
14 Trade and other payables
($ Million)
Current
Trade payables and accruals
Trade payables - joint ventures
Consolidated
2016
2015
113.3
3.7
117.0
120.7
2.2
122.9
Information about the Group’s exposure to foreign exchange risk is provided in Note 22.
15 Borrowings and lease commitments
Accounting policy - borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Accounting policy - leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance
leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding
rental obligations, net of finance charges, are included in borrowings. Each lease payment is allocated between the liability and finance charges so as to achieve a constant
rate on the finance balance outstanding.
The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.
($ Million)
Current
Finance lease
Non-current
Bank loans - unsecured
Finance lease
Consolidated
2016
2015
0.4
1.0
309.3
0.3
309.6
328.8
0.7
329.5
The Group complied with the terms of borrowing agreements during the year.
Details of the Group’s exposure to interest rate changes is set out in Note 22. Due to the short term fixed interest rates of the borrowings, the carrying value is
the fair value.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
78
15 Borrowings and lease commitments (continued)
($ Million)
Lease commitments - finance leases
Commitments in relation to finance leases for various plant and equipment are payable as follows:
Within one year
Later than one year but not later than five years
Minimum lease payments
Future finance charges
Total lease liabilities
The present value of finance lease liabilities is as follows:
Within one year
Later than one year but not later than five years
Minimum lease payments
Lease commitments - operating leases
Commitments in relation to operating leases contracted for at the reporting date, but not recognised as liabilities, are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Consolidated
2016
2015
0.4
0.4
0.8
(0.1)
0.7
0.4
0.3
0.7
4.8
12.9
8.0
25.7
1.1
0.7
1.8
(0.1)
1.7
1.0
0.7
1.7
4.4
8.9
9.1
22.4
Commitments for operating lease payments relate mainly to rental leases on property. The Group leases various properties under non-cancellable operating
leases which contain varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are either renegotiated or the expiry date is
extended under pre-negotiated terms.
16 Provisions
Accounting policy - provisions
Provisions are 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.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations
as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date.
Non-employee benefit 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 increase in the provision due to the passage of time is recognised as interest expense.
(i) Short term employee benefit obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months after the end of the
period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the provision for employee benefits.
All other short-term employee benefit obligations are presented as payables.
(ii) Long term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the
related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services
provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on high quality
corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
(iii) Workers’ compensation
Certain entities within the Group are self insured for workers’ compensation purposes. For self-insured entities, provision is made that covers incidents that have occurred
and have been reported together with an allowance for incurred but not reported claims. The provision is based on an actuarial assessment.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
79
16 Provisions (continued)
(iv) Provisions for close down and restoration costs
Close down and restoration costs include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas.
Provisions for close down and restoration costs do not include any additional obligations which are expected to arise from future disturbance. The costs are based on the
net present value of the estimated future costs of a closure plan.
Estimate changes resulting from new disturbance, updated cost estimates including information from tenders, changes to the lives of operations and revisions to discount
rates are capitalised within property, plant and equipment. These costs are then depreciated over the lives of the assets to which they relate.
The amortisation or ‘unwinding’ of the discount applied in establishing the net present value of provisions is charged to the income statement in each period as part of
finance costs.
Significant estimates - future cost to rehabilitate
Restoration provisions are based on estimates of the future cost to rehabilitate currently disturbed areas using current costs, forecast cost inflation factors and rehabilitation
requirements. The Group progressively rehabilitates as part of the quarrying process. Cost estimates are evaluated at least annually on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
Provisions for close down and restoration costs at the end of the year was $38.1 million (2015: $37.7 million).
($ Million)
Current
Employee benefits
Restoration provisions
Workers’ compensation
Other provisions
Non-current
Employee benefits
Restoration provisions
Consolidated
2016
2015
25.9
5.2
0.1
0.7
31.9
6.1
32.9
39.0
28.0
4.0
0.6
1.0
33.6
3.2
33.7
36.9
The current portion of employee benefits includes all of the accrued annual leave, the unconditional entitlements to long service leave where employees are entitled to
pro-rata payments in certain circumstances. However, based on past experience, the group does not expect all employees to take the full amount of accrued leave or
require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months.
($ Million)
Current leave obligations expected to be settled after 12 months
Movements in each class of provision during the financial year, other than employee benefits, are set out below.
($ Million)
Opening balance at 1 January 2016
Additional provision recognised - charged to income statement
Additional provision recognised - charged to asset retirement cost
Charged to income statement - unwind of discount
Credited to income statement - reversal of amounts unused
Payments
Closing balance at 31 December 2016
17 Other liabilities
($ Million)
Current
GST liability
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
80
Consolidated
2016
3.5
2015
3.1
Workers’
compensation
Restoration
provisions
Other
provisions
0.6
-
-
-
(0.1)
(0.4)
0.1
37.7
-
0.1
1.1
(0.2)
(0.6)
38.1
1.0
-
-
-
(0.2)
(0.1)
0.7
Consolidated
2016
2015
3.3
6.8
Defined benefit members receive lump sum benefits
on retirement, death, disablement and withdrawal,
and are guaranteed benefits to the equivalent of
the notional balance they would have received
as accumulation members through additional
contributions from the Group. The defined benefit
section of the Plan is closed to new members.
During the 12 months to 31 December 2016,
all new employees, who are members of this
fund, have become members of the accumulation
category of the Plan.
There are a number of risks to which the Plan
exposes the Company. The more significant risks
relating to the defined benefits are:
> Investment risk - the risk that investment returns will
be lower than assumed and the Company will need
to increase contributions to offset this shortfall.
> Salary growth risk - the risk that wages and salaries
(on which future benefit amounts will be based) will
rise more rapidly than assumed, increasing defined
benefit amounts and thereby requiring additional
employer contributions.
> Legislative risk - the risk that legislative changes
could be made which increase the cost of providing
the defined benefits.
> Timing of members leaving service - a significant
amount of benefits paid to members leaving may
have an impact on the financial position of the Plan,
depending on the financial position of the Plan at
the time they leave. The impact may be positive or
negative, depending upon the circumstances and
timing of the withdrawal.
The defined benefit assets are invested in the
Mercer Growth investment option. The assets
are diversified within this investment option and
therefore the Plan has no significant concentration
of investment risk.
18 Retirement benefit obligations
Significant estimate - key assumptions
Accounting policy - retirement benefit
obligations
Except those employees that opt out of the Group’s
superannuation plan, all employees of the Group are
entitled to benefits from the Group’s superannuation
plan on retirement, disability or death. The
Group has a defined benefit section and defined
contribution section within its plan. The defined
benefit section provides defined lump sum benefits
on retirement, death, disablement and withdrawal,
based on years of service and final average salary.
The defined benefit plan section is closed to new
members. The defined contribution section receives
fixed contributions from Group companies and the
Group’s legal or constructive obligation is limited to
these contributions.
A liability or asset in respect of defined benefit
superannuation plans is recognised in the balance
sheet, and is measured as the present value of the
defined benefit obligation at the reporting date less
the fair value of the superannuation fund’s assets at
that date.
The present value of the defined benefit obligation
is based on expected future payments, which arise
from membership of the fund to the reporting
date, calculated by independent actuaries using
the projected unit credit method. Consideration is
given to expected future wage and salary levels,
experience of employee departures and periods of
service.
Expected future payments are discounted using
market yields at the reporting date on high quality
corporate bonds with terms to maturity and currency
that match, as closely as possible, the estimated
future cash outflows.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions
are recognised in the period in which they occur in
the statement of comprehensive income. They are
included in retained earnings in the statement of
changes in equity and in the balance sheet. Past
service costs are recognised immediately in the
income statement.
Contributions to the defined contribution fund are
recognised as an expense as they become payable.
Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in the
future payments is available.
The present value of defined benefit superannuation
plan obligations depends on a number of factors
that are determined on an actuarial basis using a
number of assumptions. These include selection of a
discount rate, future salary increases and expected
rates of return. The assumptions used to determine
the obligations and the sensitivity of balances to
changes in these assumptions are detailed in
Note 18(d).
(a) Superannuation plan details
Other than those employees that have opted out,
employees are members of the consolidated
superannuation entity being the Adelaide Brighton
Group Superannuation Plan (“the Plan”), a sub-
plan of the Mercer Super Trust (“MST”). The MST
is a superannuation master trust arrangement
governed by an independent trustee, Mercer
Investment Nominees Ltd. The Plan commenced in
the MST on 1 August 2001. The Superannuation
Industry (Supervision) legislation (SIS) governs the
superannuation industry and provides a framework
within which superannuation plans operate. The
SIS Regulations require an actuarial valuation to be
performed for each defined benefit superannuation
plan every three years, or every year if the plan pays
defined benefit pensions.
Plan assets are held in trusts which are subject to
supervision by the prudential regulator. Funding
levels are reviewed regularly. Where assets are less
than vested benefits, being those payable upon exit,
a management plan must be formed to restore the
coverage to at least 100%.
The Plan’s Trustee is responsible for the governance
of the Plan. The Trustee has a legal obligation to act
solely in the best interests of Plan beneficiaries.
The Trustee has the following roles:
> Administration of the Plan and payment to the
beneficiaries from Plan assets when required in
accordance with the Plan rules;
> Management and investment of the Plan assets; and
> Compliance with superannuation law and other
applicable regulations.
The prudential regulator, the Australian Prudential
Regulation Authority (APRA), licenses and supervises
regulated superannuation plans.
Membership is in either the Defined Benefit or
Accumulation sections of the Plan. The accumulation
section receives fixed contributions from Group
companies and the Group’s legal or constructive
obligation is limited to these contributions. The
following sets out details in respect of the defined
benefit section only.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
81
18 Retirement benefit obligation (continued)
(b) Balance sheet amounts
The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:
($ Million)
At 1 January 2016
Current service cost
Interest expense/(income)
Transfers in
Remeasurements
Return on plan assets, excluding amounts included in interest expense/(income)
(Gain) from change in financial assumptions
Experience (gain)
Contributions:
Employers
Plan participants
Payments from Plan:
Benefit payments
At 31 December 2016
At 1 January 2015
Current service cost
Interest expense/(income)
Transfers in
Remeasurements
Return on plan assets, excluding amounts included in interest expense/(income)
Gain from change in financial assumptions
Experience losses
Contributions:
Employers
Plan participants
Payments from Plan:
Benefit payments
At 31 December 2015
(c) Categories of plan assets
The major categories of plan assets are as follows:
Australian equity
International equity
Fixed income
Property
Cash
Other
Total
Present value
of obligation
Fair value
of plan assets
Net obligation
/(asset)
52.4
(53.7)
1.8
1.9
0.1
3.8
-
(0.1)
-
(0.1)
-
1.0
(5.7)
51.4
-
(2.0)
(0.1)
(2.1)
(1.6)
-
-
(1.6)
(1.0)
(1.0)
5.7
(53.7)
58.9
(56.7)
2.0
1.4
0.3
3.7
-
(2.8)
(0.2)
(3.0)
-
0.9
(8.1)
52.4
-
(1.4)
(0.3)
(1.7)
(1.5)
-
-
(1.5)
(1.0)
(0.9)
8.1
(53.7)
(1.3)
1.8
(0.1)
-
1.7
(1.6)
(0.1)
-
(1.7)
(1.0)
-
-
(2.3)
2.2
2.0
-
-
2.0
(1.5)
(2.8)
(0.2)
(4.5)
(1.0)
-
-
(1.3)
31 December 2016
Unquoted
31 December 2015
Unquoted
$ Million
13.4
16.1
10.8
6.4
3.8
3.2
53.7
in %
25%
30%
20%
12%
7%
6%
100%
$ Million
15.0
16.1
10.2
6.5
1.1
4.8
53.7
in %
28%
30%
19%
12%
2%
9%
100%
The assets set out in the above table are held in the Mercer Growth investment fund which does not have a quoted price in an active market.
There are no amounts relating to the Company’s own financial instruments, and property occupied by, or other assets used by, the Company.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
82
18 Retirement benefit obligations (continued)
(d) Actuarial assumptions and sensitivity
The significant actuarial assumptions used were as follows:
Discount rate - % p.a.
Future salary increases - % p.a. - first year
Future salary increases - % p.a. - second year
Future salary increases - % p.a. - thereafter
The sensitivity of the defined benefit obligation to changes in the significant assumptions is:
Consolidated
2016
%
3.7
2.0
3.5
3.8
2015
%
3.9
2.0
3.0
4.0
31 December 2016
Discount rate
Future salary increases
31 December 2015
Discount rate
Future salary increases
Change in assumption
Increase in assumption
Decrease in assumption
Impact on defined benefit obligation
0.50 ppts
0.50 ppts
0.50 ppts
0.50 ppts
Decrease by 1.7%
Increase by 1.4%
Increase by 1.8%
Decrease by 1.3%
Decrease by 1.8%
Increase by 1.4%
Increase by 1.9%
Decrease by 1.4%
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and
changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions
the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has
been applied as when calculating the defined benefit liability recognised in the balance sheet.
(e) Defined benefit liability and employer contributions
The Group made contributions to the Plan at rates of between 6% and 9% of member salaries. Expected contributions to the defined benefit plan for the
year ending 31 December 2017 are $0.8 million (2016: $0.9 million).
The weighted average duration of the defined benefit obligation is 6 years (2015: 7 years).
19 Share capital
Accounting policy - share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, for the purpose of acquisition of a business,
are not included in the cost of the acquisition as part of the purchase consideration.
($ Million)
(a) Share capital
Issued and paid up capital
649,654,099 (2015: 648,885,747) ordinary shares, fully paid
(b) Movements in ordinary share capital
Opening balance at 1 January
768,352 shares issued under Executive Performance Share Plan (2015: 618,080) (i)
Closing balance at 31 December
(i) Ordinary shares issued under the Adelaide Brighton Limited Executive Performance Share Plan (refer Note 26).
Consolidated
2016
2015
731.4
729.2
729.2
2.2
731.4
727.9
1.3
729.2
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
83
19 Share capital (continued)
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up the Company in proportion to the number of and amounts paid on the shares
held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote and, on a poll, each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(d) Dividend Reinvestment Plan
Under the Dividend Reinvestment Plan (DRP), holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary
shares rather than by being paid in cash. Shares are issued under the DRP at a price determined by the Board. The operation of the DRP for any dividend is at the
discretion of the Board, which suspended the DRP in February 2015 with immediate effect, and has not been reactivated since that time.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern, continuing to provide returns for shareholders and benefits for
other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue shares as well as issue new debt or redeem
existing debt. The Group monitors capital on the basis of the gearing ratio. Adelaide Brighton’s target gearing ratio is 25% to 45%.
The gearing ratio at 31 December 2016 and 31 December 2015 was as follows:
($ Million)
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Gearing ratio
(f) Employee share scheme and options
Information relating to the employee share schemes, including details of shares issued under the schemes is set out in Note 26.
20 Reserves and retained earnings
(a) Reserves
Foreign currency translation reserve
Share-based payment reserve
Cash flow hedge reserve
Foreign currency translation reserve
Opening balance at 1 January
Currency translation differences arising during the year
Closing balance at 31 December
Share-based payment reserve
Opening balance at 1 January
Awards expense
Deferred tax
Issue of shares to employees
Closing balance at 31 December
Cash flow hedge reserve
Opening balance at 1 January
Revaluation - gross
Reclassified to the carrying amount of inventory
Deferred tax on movement in reserve
Closing balance at 31 December
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
84
Consolidated
2016
310.0
(21.5)
288.5
1,220.1
2015
330.5
(33.3)
297.2
1,207.3
23.6%
24.6%
(0.7)
2.7
0.9
2.9
0.2
(0.9)
(0.7)
1.9
1.0
0.9
(1.1)
2.7
(0.9)
1.3
1.3
(0.8)
0.9
0.2
1.9
(0.9)
1.2
1.5
(1.3)
0.2
1.8
1.3
(0.3)
(0.9)
1.9
-
(1.3)
-
0.4
(0.9)
20 Reserves and retained earnings (continued)
Nature and purpose of reserves
Foreign currency translation
Exchange differences arising on translation of foreign controlled entities and the foreign associate are recognised in other comprehensive income as described in Note 1(c)
and accumulated in a separate reserve within equity. The cumulative amount is reclassified to the income statement when the net investment is disposed of.
Share-based payment
The share-based payment reserve is used to recognise the fair value of awards issued but not exercised. Refer Note 26.
Cash flow hedge reserve
The cash flow hedge reserve is used to recognise the accumulated movement in fair value of instruments that qualify for hedge accounting. The accumulated amount of a
hedging instrument is transferred to the carrying value of inventory on recognition or, for hedges of items that are not non-financial assets or non-financial liabilities, to the
income statement at the time of recognising the item in the income statement.
(b) Retained earnings
($ Million)
Opening balance at 1 January
Net profit for the year
Actuarial gain/(loss) on defined benefit obligation net of tax
Dividends
Closing balance at 31 December
21 Dividends
Dividends paid during the year
($ Million)
2015 final dividend of 15.0 cents (2014 - 9.5 cents) per fully paid ordinary share,
franked at 100% (2014 - 100%) paid on 12 April 2016
2016 interim dividend of 12.5 cents (2015 - 12 cents) per fully paid ordinary share,
franked at 100% (2015 - 100%) paid on 12 October 2016
Total dividends - paid in cash
Dividend not recognised at year end
Since the end of the year the Directors have recommended the payment of a final dividend of 15.5 cents
(2015: 15.0 cents) per fully paid share, franked at 100% (2015: 100%).The aggregate amount of the proposed
final dividend to be paid on 12 April 2017, not recognised as a liability at the end of the reporting period, is
Consolidated
2016
474.3
186.3
1.2
(178.5)
483.3
2015
402.8
207.9
3.1
(139.5)
474.3
The Company
2016
2015
97.3
61.6
81.2
178.5
77.9
139.5
100.7
97.3
Franked dividend
The franked portion of the dividend proposed as at 31 December 2016 will be franked out of existing franking credits or out of franking credits arising from the
payment of income tax in the year ending 31 December 2017.
($ Million)
Franking credits available for subsequent financial years based on a tax rate of 30% (2015: 30%)
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) franking credits that will arise from the payment of any current tax liability;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
Consolidated
2016
120.8
2015
130.3
The impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at year end, will be a reduction
in the franking account of $43.2 million (2015: $41.7 million).
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
85
22 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange, interest rate risk, and commodity price risk), credit risk and liquidity
risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance where the Group’s exposure is material.
The Board approves written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit
risk, use of derivative and non-derivative financial instruments and investment of excess liquidity. The Group does not enter into or trade financial instruments, including
derivative financial instruments, for speculative purposes.
The Group uses different methods to measure different types of risk to which it is exposed, which are reviewed on intervals appropriate to the individual risk. These
methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, and ageing analysis for credit risk.
The Group uses derivative financial instruments in the form of foreign exchange forward contracts to hedge certain currency risk exposures and price caps to hedge the
price risk related to certain electricity purchases.
(a) Market risk
(i) Foreign exchange risk
The Group’s activities, through its importation of cement, clinker, slag and equipment, expose it to foreign exchange risk arising from various currency exposures, primarily
with respect to the US Dollar and the Japanese Yen.
Foreign exchange risk arises from commitments and highly probable transactions, and recognised assets and liabilities that are denominated in a currency that is not the
entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The Group enters into Forward Exchange Contracts (FEC) to hedge its foreign exchange risk on these overseas trading activities against movements in foreign currency
exposure to the Australian Dollar. FECs are entered into for a duration in line with forecast purchases and currency matched to the underlying exposure. Ineffectiveness of
the hedge can arise primarily from changes in the timing of foreign currency payments compared to the duration of the FEC.
The Group treasury risk management policy is to progressively hedge up to 100% of material highly probable purchases for up to nine months forward on a rolling basis.
Longer dated hedge positions are deemed too expensive versus the value at risk due to the respective currencies’ interest rate spread.
As at the end of the reporting period, the Group had the following exposure to foreign exchange risk, expressed in Australian dollar:
($ Million)
Forward foreign exchange contracts:
Buy foreign currency
Sell Australian dollar (cash flow hedges)
Net exposure
(ii) Electricity price risk
Consolidated
2016
2015
35.4
(36.7)
(1.3)
40.9
(40.0)
0.9
The Group’s electricity purchases include market based pricing mechanisms, exposing cash flows to future movements in the underlying price of electricity in certain
markets. Electricity price risk is assessed on the basis of forward projections of the Group’s electricity demand and forecast market pricing to calculate a Value At Risk (VAR)
measure. Hedging the price risk is considered when the VAR outweighs the cost of risk mitigation alternatives.
The Group considers and utilises where effective, futures electricity price caps (Caps) to manage this risk exposure. Caps are available for the relevant markets that
the Group has price risk, matching the underlying price exposure of the Group. Ineffectiveness of the hedge arises from differences in the quantity of actual electricity
purchases compared to the nominal quantity of the hedging instrument.
(iii) Interest rate risk
The Group’s main interest rate risk arises from bank borrowings with variable rates which expose the Group to interest rate risk. Due to the historically low levels of gearing,
Group policy is to take on debt facilities on a one to five year term with fixed bank lending margins associated with each term. Cash advances to meet short and medium
term borrowing requirements are drawn down against the debt facilities on periods up to 90 days, at a variable lending rate comprising the fixed bank margin applied to the
daily bank bill swap rate effective at the date of each cash advance. During both 2016 and 2015, the Group’s borrowings at variable rates were denominated in Australian
Dollars.
The Group analyses its interest rate exposure on a dynamic basis. Periodically, various scenarios are simulated taking into consideration refinancing, renewal of existing
positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on forecast profit and loss of a defined interest rate shift. The
scenarios are run only for liabilities that represent the major interest-bearing positions.
As at the end of the reporting period, the Group had the following exposure to variable and fixed rate financial instruments:
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
86
22 Financial risk management (continued)
Variable rate instruments:
Cash at bank, on hand and at call
Bank facilities
Fixed rate instruments:
Finance leases
(iv) Summarised sensitivity analysis
Consolidated
2016
2015
Weighted
average
interest rate
Balance
$ million
Weighted
average
interest rate
2.0%
2.93%
21.5
309.3
2.50%
3.28%
Balance
$ million
33.3
328.8
5.51%
0.7
5.46%
1.7
Foreign currency risk relating to assets and liabilities at year end is immaterial as the majority of sales and assets are denominated in Australian Dollars, while the Group’s
purchases that are in foreign currency are settled at the time of the transaction. Consequently, liabilities recognised at 31 December are generally in Australian Dollars. All
borrowings are denominated in Australian Dollars.
Electricity price risk impacts on future purchases of electricity, therefore recognised liabilities for electricity purchases are not impacted.
The following table summarises the sensitivity of the Group’s floating rate borrowings to interest rate risk at the end of the reporting period. A 100 basis-point sensitivity has
been selected as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates.
Interest rates - increase by 1%
Interest rates - decrease by 1%
(b) Credit risk
Consolidated
2016
2015
Impact on
post-tax
profit
(2.2)
2.2
Impact on
equity
(2.2)
2.2
Impact on
post-tax
profit
(2.3)
2.3
Impact on
equity
(2.3)
2.3
Credit risk is managed on a Group basis using delegated authority limits. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits
with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions, and financial guarantees.
Financial guarantees are only provided in exceptional circumstances and are subject to approval in accordance with the Board approved delegated authorities.
For banks and financial institutions, only independently rated parties with investment grade rating are accepted. Derivative counterparties and cash transactions are limited
to high credit quality institutions.
For trading credit risk, the Group assesses the credit quality of the customer, taking into account its financial position, past experience, external credit agency reports and
credit references. Individual customer risk limits are set based on internal approvals in accordance with delegated authority limits set by the Board. The compliance with
credit limits by credit approved customers is regularly monitored by line credit management. Sales to non-account customers are settled either in cash, major credit cards
or electronic funds transfer, mitigating credit risk. In relation to a small number of customers with uncertain credit history, the Group has taken out personal guarantees in
order to cover credit exposures. From the 1st of August 2016 the group commenced using credit insurance for selected accounts with a credit limit exceeding $0.25 million.
The maximum liability insured is capped at $14 million.
The Group has no significant concentration of credit risk. As at 31 December 2016, the Group held no collateral over outstanding debts. Consequently, the maximum
exposure to credit risk represents the carrying value of receivables and derivatives.
The Company applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which permits the use of the lifetime expected loss provision
for all trade receivables. The loss allowance provision as at 31 December 2016 is determined as set out below, which incorporates past experience and forward looking
information, including the outlook for market demand and forward looking interest rates.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
87
22 Financial risk management (continued)
(b) Credit risk (continued)
Current
More than 30 days past due
More than 60 days past due
More than 90 days past due
Total
Gross
Carrying
Amount
$m
112.9
72.5
7.9
2.2
195.5
2016
Provision
$m
0.1
0.2
0.2
0.7
1.2
Expected
loss rate
%
0.12
0.24
2.35
31.86
Gross
Carrying
Amount
$m
118.1
67.5
8.4
3.7
197.7
2015
Provision
$m
0.1
0.2
0.2
1.3
1.8
Expected
loss rate
%
0.12
0.24
2.38
34.92
The gross carrying amount includes external receivables of $167.2 million (2015: $168.4 million) and joint venture receivables of $28.3 million (2015: $29.3 million).
(c) Liquidity risk
The ultimate responsibility for liquidity risk management rests with the Board which has established an appropriate risk management framework for the management of
the Group’s short, medium and long term funding and liquidity management requirements. The Group’s Corporate Treasury Function manages liquidity risk by maintaining
adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities. Included below is a statement of credit standby facilities that the Group has at its disposal to further reduce liquidity risk.
Financing arrangements
($ Million)
Unrestricted access was available at balance date to the following lines of credit:
Credit standby arrangements
Total facilities
Bank overdrafts
Bank facilities
Used at balance date
Bank overdrafts
Bank facilities
Unused at balance date
Bank overdrafts
Bank facilities
Maturity profile of bank facilities. Maturing on:
5 January 2018
4 January 2019
Consolidated
2016
2015
4.0
540.0
544.0
-
310.0
310.0
4.0
230.0
234.0
330.0
210.0
540.0
4.0
540.0
544.0
-
330.0
330.0
4.0
210.0
214.0
330.0
210.0
540.0
The table below analyses the Group’s financial liabilities that will be settled on a gross basis. The amounts disclosed are the contractual undiscounted cash flows.
For bank facilities the cash flows have been estimated using interest rates applicable at the end of the reporting period.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
88
22 Financial risk management (continued)
(c) Liquidity risk (continued)
Contractual maturities of financial liabilities
($ Million)
31 December 2016
Non-derivatives
Trade payables
Bank facilities
Finance leases
Bank guarantees
Derivatives
Gross settled forward foreign exchange contracts (cash flow hedges):
- (inflow)
- outflow
31 December 2015
Non-derivatives
Trade payables
Bank facilities
Finance leases
Bank guarantees
Derivatives
Gross settled forward foreign exchange contracts (cash flow hedges):
- (inflow)
- outflow
< 6 months
6-12 months
1-2 years
> 2 years
Total
Consolidated
117.0
4.2
0.4
24.1
145.7
(27.5)
28.4
0.9
122.9
5.1
0.4
22.3
150.7
(29.8)
28.9
(0.9)
-
4.3
0.3
-
4.6
(7.9)
8.3
0.4
-
5.1
0.7
-
5.8
(8.5)
8.3
(0.2)
-
310.1
0.3
-
310.4
-
-
-
-
350.5
0.8
-
351.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
117.0
318.6
1.0
24.1
460.7
(35.4)
36.7
1.3
122.9
360.7
1.9
22.3
507.8
(38.3)
37.2
(1.1)
(d) Financial instruments, derivatives and hedging activity
The Company early adopted AASB 9 Financial Instruments from 1 January 2015 and implemented hedge accounting in late August 2015. Under hedge accounting,
changes in the value of qualifying instruments during the hedging period are recognised in comprehensive income rather than recognised in the income statement as
the previous policy of the Group. The change to hedge accounting is undertaken prospectively, with instruments held by the Group prior to the change accounted for in
accordance with the previous policy.
The change in accounting policy allows the Company to manage risk in an effective manner, without the accounting treatment of the instruments distorting the
reported results.
Information about the impairment of trade and other receivables, their credit quality and the Group’s exposure to credit risk can be found in (b) above.
Accounting policy - financial instruments
The Group classifies its financial assets in the following categories: financial assets at amortised cost, financial assets at fair value through profit or loss and hedging
instruments. The classification depends on the purpose for which the financial assets were acquired, which is determined at initial recognition based upon the business
model of the Group.
(i) Financial assets at amortised cost
The Group classifies its financial assets as at amortised cost if the asset is held with the objective of collecting contractual cash flows and the contractual terms give
rise on specified dates to cash flows that are solely payments of principal and interest. These include trade receivables and bank term deposits. Bank term deposits are
non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are financial assets at amortised cost and are included in
current assets, except for those with maturities greater than 12 months after the balance sheet date. Refer to Note 7 for details relating to trade receivables.
(ii) Financial assets through profit or loss
Forward foreign exchange contracts are derivative instruments entered into by the Group for the purpose of managing foreign currency risk prior to late August 2015 which
do not qualify for hedge accounting. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to
their fair value at each reporting date.
Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement and are included in
finance costs.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
89
22 Financial risk management (continued)
(d) Financial instruments, derivatives and hedging activity (continued)
(iii) Hedging instruments
Financial instruments entered into by the Group for the purpose of managing foreign currency risk associated with its highly probable inventory purchases and electricity
price risk with its highly probable electricity purchases after late August 2015 qualify for hedge accounting. Instruments are initially recognised at fair value on the date a
contract is entered into.
Changes in fair value of instruments that qualify for hedge accounting are recognised in other comprehensive income in the cash flow hedge reserve. Amounts accumulated
in the hedge reserve are recognised as part of the initial carrying amount of an asset or liability or reclassified to the income statement, depending upon the purpose of the
hedging instrument.
Refer to Note 22(a) for details of the movements in the Group’s reserves relating to hedging activities.
The effects of applying hedge accounting on the Group’s financial position and performance are as follows:
Hedging instrument - forward foreign exchange contracts
Carrying amount - $Million
Notional amount US Dollars - $Million
Notional amount Yen - $ Million
Maturity date
Hedge ratio
Change in value of outstanding hedge instruments since 1 January - $Million
Change in value of hedge item used to determine hedge effectiveness - $Million
Weighted average hedge rate - US Dollars
- Yen
Hedging instrument - electricity price caps
Carrying amount - $Million
Notional amount - megawatts
Maturity date
Hedge ratio
Change in value of outstanding hedge instruments since 1 January - $Million
Change in value of hedge item used to determine hedge effectiveness - $Million
Cap price
23 Fair value measurements
Fair value hierarchy
Consolidated
2016
2015
1.3
32.7
2.7
Jan - Sep 2017
1:1
1.3
(1.3)
A$1 : US$0.7511
A$1 : Yen 84.3
-
-
-
-
-
-
-
(1.3)
38.3
-
Jan - Sep 2016
1:1
(1.3)
1.3
A$1 : US$0.7058
-
0.6
10
Jan - Mar 2016
1:1
-
-
$300/MwH
The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure purposes. The carrying amounts of financial instruments
disclosed in the balance sheet approximate to their fair values. AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair
value measurement hierarchy:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
(i) Recognised fair value measurements
The Group measures and recognises derivatives used for hedging foreign currency risk and electricity price risk at fair value on a recurring basis. The Group held assets in
relation to forward exchange contracts of $1.3 million (2015: liabilities of $1.3 million) at the end of the reporting period. There were no electricity price caps in place at
31 December 2016 (2015: asset of $0.6 million). The fair values of the forward exchange contracts are measured with reference to forward interest rates and exchange
rates at balance date and the present value of the estimated future cash flows (level 2).
(ii) Disclosed fair values
The Group also has a number of assets and liabilities which are not measured at fair value, but for which fair values are disclosed in the Notes.
The carrying value less impairment provision of current trade receivables and payables are assumed to approximate their fair values due to their short term nature. For non-
current receivables, the fair values are also not significantly different to their carrying amounts as a commercial rate of interest is charged to the counterparty (level 3).
The interest rate for current and non-current borrowings is reset on a short term basis, generally 30 to 90 days, and therefore the carrying value of current and non-current
borrowings equal their fair values (level 2).
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
90
24 Contingencies
Details and estimates of maximum amounts of contingent liabilities are as follows:
($ Million)
(a) Guarantees
Bank guarantees
(b) Litigation
Consolidated
2016
2015
24.1
22.3
At the time of preparing this financial report some companies included in the Group are parties to pending legal proceedings, the outcome of which is not known.
The entities are defending, or prosecuting, these proceedings. The Directors have assessed the impact on the Group from the individual actions.
No material losses are anticipated in respect of any of the above contingent liabilities.
25 Commitments for capital expenditure
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Within one year
12.6
29.6
26 Share-based payment plans
Accounting policy - share-based payments
Share-based compensation benefits are provided to executives via the Adelaide Brighton Limited Executive Performance Share Plan (“the Plan” or “EPSP”).
The fair value of Awards granted under the Plan is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant
date and recognised over the period during which the employees become unconditionally entitled to the Awards.
The fair value at grant date is independently determined using a pricing model that takes into account the exercise price, the term of the Award, the vesting and
performance criteria, the impact of dilution, the non-tradeable nature of the Award, the share price at grant date, the expected dividend yield and the risk-free interest rate
for the term of the Award.
The fair value of the Awards granted excludes the impact of any non-market vesting conditions (e.g. earnings per share). Non-market vesting conditions are included in
assumptions about the number of Awards that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of Awards
that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision
to original estimates, if any, is recognised in the income statement with a corresponding entry to equity.
The Plan is administered by the Adelaide Brighton employee share plan trust; see Note 1(b)(ii).
(a) Employee Share Plan
The establishment of the Adelaide Brighton Limited Employee Share Plan was approved by special resolution at the Annual General Meeting of the Company held on
19 November 1997. Subject to the Board approval of grants, all full time employees of the Company and its controlled entities who have been continuously employed by
the Company or a controlled entity for a period of one year are eligible to participate in the Plan. Casual employees and contractors are not eligible to participate in the Plan.
No shares were issued under the Employee Share Plan during the year (2015 - nil). In subsequent years, the Board will decide whether, considering the profitability of the
Company and the demands of the business, further invitations to take up grants of shares should be made.
(b) Executive Performance Share Plan
The Plan provides for grants of Awards to eligible executives. This plan was approved by shareholders at the Annual General Meeting held on 19 November 1997.
Under the Plan, eligible executives are granted Awards (each being an entitlement to a fully paid ordinary share of Adelaide Brighton Limited, subject to the satisfaction
of performance conditions) on terms and conditions determined by the Board. On exercise of the Award following vesting, participants are issued shares of the Company.
Detailed discussion of performance conditions is set out in the Remuneration Report on pages 42 to 60.
The exercise price for each Award is $nil.
Movement in number of Awards outstanding
Outstanding at beginning of the year
Granted
Forfeited
Exercised
Expired
Outstanding at the end of the year
Exercisable at the end of the year
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
91
Consolidated
2016
2015
2,986,287
701,889
-
(768,352)
-
3,319,603
795,761
(510,997)
(618,080)
-
2,919,824
2,986,287
-
-
26 Share-based payment plans (continued)
(b) Executive Performance Share Plan (continued)
The average value per share at the earliest exercise date during the year was $5.08 (2015: $4.60). The value per share is calculated using the Volume Weighted Closing
Price which is the average of the closing price and number of Adelaide Brighton Limited shares traded on the Australian Securities Exchange for the five trading days before
the exercise date, but not including the day of exercise.
The fair value of Awards at the grant date are independently determined using a pricing model. For the purposes of pricing model inputs, the share price for calculation of
the Award value is based on the closing published share price at grant date. The impact of the Award’s performance conditions have been incorporated into the valuation
through the use of a discount for lack of marketability and TSR vesting conditions. Volatility of the Company’s share price has been considered in valuing the Awards,
however the independent valuer has reached the conclusion that the volatility is not a factor in assessing the fair value of the Awards.
The tables below set out the key assumptions used by the independent valuer in their valuation model to assess the fair value of the Awards.
Awards granted in 2016 - weighted average pricing model inputs
Share price at grant date - per share
Expected future dividends - per share
Risk-free interest rate - % p.a.
Lack of marketability discount - % p.a.
TSR condition discount
Earliest exercise date
2016 Awards
$5.68
$1.04
1.58
2.75
50%
1 May 20
Awards granted in 2015 - weighted average pricing model inputs
Share price at grant date - per share
Expected future dividends - per share
Risk-free interest rate - % p.a.
Lack of marketability discount - % p.a.
TSR condition discount
Earliest exercise date
2015 Awards
2014 Awards
2013 Awards
2012 Awards
- Tranche 2
2012 Awards
- Tranche 1
$4.43
$0.71
2.35
2.50
50%
1 May 19
$3.84
$0.66
1.87
2.50
50%
1 May 18
$3.84
$0.60
1.87
2.50
50%
1 May 17
$3.84
$0.35
1.88
2.50
50%
1 May 16
$3.84
$0.10
1.88
2.50
-
1 May 15
Comparative information has been updated to reflect the most recent Award valuations undertaken by the independent valuer.
The Plan does not entitle the Participants to participate in any other share issues of the Company and the unexercised Awards do not attract dividend or voting rights.
The Group recognised share based payments expense of $1,149,092 during the year (2015: $1,323,686).
The weighted average remaining contractual life of Awards outstanding at the end of the period was 1.8 years (2015: 1.8 years).
27 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:
($)
(a) Audit services
PricewaterhouseCoopers Australian firm
Audit and review of financial statements
(b) Non-audit services
PricewaterhouseCoopers Australian firm
Other assurance services
Consolidated
2016
2015
748,359
777,498
40,949
132,917
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
92
($ Million)
28 Related parties
(a) Compensation of Key Management Personnel
Short-term employee benefits
Post employment benefits
Share-based payments
(b) Other transactions with Key Management Personnel
Consolidated
2016
2015
6.6
0.1
1.0
7.7
7.5
0.2
1.3
9.0
R D Barro, a Director of Adelaide Brighton Limited, is Managing Director of Barro Group Pty Ltd. Barro Group Pty Ltd and Adelaide Brighton Limited, through its
100% owned subsidiary, Adelaide Brighton Management Ltd, each control 50% of Independent Cement and Lime Pty Ltd, a distributor of cement and lime in
Victoria and New South Wales.
During the year, the Barro Group of companies purchased goods and materials from and sold goods, materials and services to Independent Cement and Lime Pty Ltd
and the Group. The Barro Group of companies also purchased goods and materials from Sunstate Cement Ltd, a company in which the Group has a 50% share.
M Brydon, CEO and Managing Director, and M Kelly, a senior executive of Adelaide Brighton Limited, have been Directors of Sunstate Cement Ltd during the
reporting period. G Agriogiannis, a senior executive of Adelaide Brighton Limited and M Kelly are also Directors of the Mawson Group. During the year, the Group
traded significantly with Independent Cement and Lime Pty Ltd, Sunstate Cement Ltd, the Mawson Group and Aalborg Portland Malaysia Sdn. Bhd., which are all
joint ventures or associates of the Group.
(c) Controlled entities
All transactions involving the Barro Group Pty Ltd and Adelaide Brighton Limited and its subsidiaries, Independent Cement and Lime Pty Ltd and its subsidiaries,
Sunstate Cement Ltd, the Mawson Group and Aalborg Portland Malaysia Sdh. Bhd. were conducted on standard commercial terms.
Transactions entered into during the year with Directors of the Company and the Group, or their related parties, are on standard commercial terms and conditions,
and include the purchase of goods from the Group and the receipt of dividends from the Company.
($)
Consolidated
2016
2015
Aggregate amounts of the above transactions by subsidiaries and joint ventures with the Directors and their related parties:
Sales to Director related parties
Purchases from Director related parties
71,983,392
20,818,254
60,530,291
20,398,478
Details of interests in controlled entities are set out in Note 29. The ultimate parent company is Adelaide Brighton Limited.
(d) Joint arrangement and associate entities
The nature of transactions with joint arrangement and associate entities is detailed below:
Adelaide Brighton Cement Ltd and Morgan Cement International Ltd supplied finished products and raw materials to Sunstate Cement Ltd, Independent Cement
and Lime Pty Ltd and Peninsula Concrete Pty Ltd. Hy-Tec Industries Pty Ltd, Hy-Tec Industries (Victoria) Pty Ltd, Hy-Tec Industries (Queensland) Pty Ltd,
Adbri Masonry Group Pty Ltd, Adelaide Brighton Cement Ltd and Cockburn Cement Ltd purchased finished products, raw materials and transportation services
from Sunstate Cement Ltd, Independent Cement and Lime Pty Ltd and Aalborg Portland Malaysia Sdn. Bhd.
All transactions are on normal commercial terms and conditions and transactions for the supply are covered by shareholder agreements.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
93
28 Related parties (continued)
($’000)
(e) Transactions with related parties
The following transactions occurred with related parties:
Sales of goods
- Joint venture entities
Purchases of materials and goods
- Joint venture entities
- Associate entities
Interest revenue
- Joint venture entities
Dividend and distribution income
- Joint venture entities
Superannuation contributions
- Contributions to superannuation funds on behalf of employees
Loans advanced to/(from):
Joint venture entities
(f) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables
- Joint venture entities (interest)
- Joint venture entities (trade)
Non-current receivables
- Joint venture entities (loans)
Current payables
- Joint venture entities (trade)
Consolidated
2016
2015
242,702
223,705
84,375
8,142
76,491
11,803
719
762
18,582
16,227
12,707
12,189
2,046
940
338
28,041
345
28,962
31,917
30,212
3,686
2,243
Outstanding balances are unsecured and repayable in cash. No provisions for doubtful receivables have been raised in relation to any outstanding balances.
(g) Loans to related parties
A loan to a joint venture entity, Independent Cement and Lime Pty Ltd, has interest charged at commercial rates on the outstanding balance. Interest revenue
brought to account by the Group during the reporting year on this loan was $718,972 (2015: $762,637).
29 Subsidiaries and transactions with non-controlling interests
The Group’s material subsidiaries at 31 December are set out below. The subsidiaries have share capital consisting solely of ordinary shares, which are held
directly by the Group, and the proportion of ownership interests held equals to the voting rights held by the Group. The country of incorporation or registration
is also their principal place of business.
Name of entity
Adbri Masonry Group Pty Ltd
Adbri Masonry Pty Ltd
Adelaide Brighton Cement Investments Pty Ltd
Adelaide Brighton Cement Ltd
Adelaide Brighton Management Ltd
Aus-10 Rhyolite Pty Ltd
Cockburn Cement Ltd
Exmouth Limestone Pty Ltd
Hurd Haulage Pty Ltd
Hy-Tec Industries Pty Ltd
Hy-Tec Industries (Queensland) Pty Ltd
Hy-Tec Industries (Victoria) Pty Ltd
Morgan Cement International Pty Ltd
Northern Cement Ltd
Premier Resources Ltd
Screenings Pty Ltd
Southern Quarries Pty Ltd
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
Ownership interest
held by the Group
Place of
incorporation
Class of
shares
2016
%
2015
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
94
30 Deed of cross guarantee
As at the date of this report, Adelaide Brighton Limited, Adelaide Brighton Cement Ltd, Cockburn Cement Ltd, Adelaide Brighton Cement Investments Pty Ltd, Adelaide
Brighton Management Ltd, Northern Cement Ltd, Premier Resources Ltd, Hy-Tec Industries Pty Ltd, Hy-Tec Industries (Victoria) Pty Ltd, Hy-Tec Industries (Queensland) Pty
Ltd, Morgan Cement International Pty Ltd, Adbri Masonry Group Pty Ltd, C&M Masonry Products Pty Ltd, Adbri Masonry Pty Ltd, Hurd Haulage Pty Ltd, Aus-10 Rhyolite
Pty Ltd, Screenings Pty Ltd, Southern Quarries Holdings Pty Ltd, Direct Mix Holdings Pty Ltd and Southern Quarries Pty Ltd are parties to a Deed of Cross Guarantee (the
Deed) under which each company guarantees the debts of the others. By entering into the Deed, wholly owned entities classified as a “Closed Group” are relieved from the
requirement to prepare a financial report and Directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
Direct Mix Holdings Pty Ltd is ineligible for relief under the Class Order and is classified as a member of the “Extended Closed Group” for the purposes of the Class Order.
No changes to the Deed were made during 2016.
Set out below is a consolidated balance sheet as at 31 December 2016 of the Closed Group.
Consolidated
2016
2015
17.4
203.7
159.8
3.8
384.7
34.3
2.3
90.3
21.4
962.5
268.2
28.2
207.6
161.2
-
397.0
32.9
1.3
86.5
21.4
958.7
270.7
1,379.0
1,763.7
1,371.5
1,768.5
140.2
0.1
15.4
31.8
3.3
190.8
309.4
88.9
38.9
0.1
437.3
628.1
130.3
0.7
14.9
33.4
6.8
186.1
329.0
85.0
36.9
0.1
451.0
637.1
1,135.6
1,131.4
731.4
2.9
401.3
729.2
1.3
400.9
1,135.6
1,131.4
($ Million)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets classified as held for sale
Total current assets
Non-current assets
Receivables
Retirement benefit asset
Joint arrangements and associate
Other financial assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
95
30 Deed of cross guarantee (continued)
Set out below is a condensed consolidated statement of comprehensive income and a summary of movements in consolidated retained earnings for the year ended
31 December 2016 of the Closed Group.
($ Million)
Profit before income tax
Income tax expense
Profit for the year
Retained earnings 1 January
Profit for the year
Other comprehensive income
Dividends paid
Retained earnings 31 December
31 Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Doubtful debts
Depreciation, amortisation and impairment
Share based payments
Finance charges on remediation provision
(Gain) on sale of non-current assets
Share of profits of joint ventures, net of dividends received
Non-cash retirement benefits expense
Non-cash remediation obligation
Fair value accounting gain on acquisition of business
Capitalised interest
Other
Net cash provided by operating activities before changes in assets and liabilities
Changes in operating assets and liabilities, net of effects from purchase of business combinations:
(Increase) in inventories
(Increase)/decrease in prepayments
(Increase) in receivables
Increase in trade creditors
(Decrease)/increase in provisions
Increase/(decrease) in taxes payable
Increase in deferred taxes payable
(Decrease)/increase in other operating assets and liabilities
Net cash inflow from operating activities
32 Earnings per share
Accounting policy - earnings per share
(i) Basic earnings per share
Consolidated
2016
247.1
(69.4)
177.7
400.9
177.7
1.2
(178.5)
401.3
186.2
0.7
78.1
(2.9)
1.1
(8.4)
(9.9)
0.2
0.8
-
(0.6)
0.4
245.7
1.3
1.1
1.9
(2.3)
(0.7)
0.4
4.5
(3.5)
2015
282.3
(78.1)
204.2
333.4
204.2
2.8
(139.5)
400.9
207.8
0.8
77.8
(1.5)
0.9
(45.9)
(3.7)
1.0
(2.2)
(0.2)
(0.5)
(0.5)
233.8
(6.6)
(1.4)
(7.8)
0.8
(2.2)
13.6
10.9
(11.2)
248.4
229.9
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares,
by the weighted average number of ordinary shares outstanding during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other
financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assuming conversion of all dilutive potential ordinary shares.
(Cents)
Basic earnings per share
Diluted earnings per share
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
96
Consolidated
2016
28.7
28.6
2015
32.0
31.9
32 Earnings per share (continued)
(Number)
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share
Adjustment for calculation of diluted earnings per share:
Awards
Weighted average number of ordinary shares and potential ordinary shares used as
the denominator in calculating diluted earnings per share
($ Million)
Reconciliation of earnings used in calculating earnings per share
Basic and diluted earnings per share
Profit after tax
Loss/(profit) attributable to non-controlling interests
Profit attributable to ordinary equity holders of the Company used in calculating basic and diluted earnings per share
33 Segment reporting
(a) Description of segments
Consolidated
2016
2015
649,395,882
648,680,849
2,919,824
2,986,287
652,315,706
651,667,136
Consolidated
2016
2015
186.2
0.1
186.3
207.8
0.1
207.9
Management has determined the operating segments based on the reports reviewed by the CEO and Managing Director. These reports include segmental information on
the basis of product groups and are used to regularly evaluate how to allocate resources and in assessing performance.
The two reportable segments have been identified as follows:
> Cement, Lime, Concrete and Aggregates
> Concrete Products
The operating segments Cement, Lime, Concrete and Aggregates individually meet the quantitative thresholds required by AASB 8 as well as meeting the aggregation
criteria allowing them to be reported as one segment. The Group considered aggregation of these segments appropriate due to the similarity of the markets that the
products are sold, the consistent regulatory environment for the production, handling and use of the products, distribution method and underlying demand drivers.
Concrete Products meets the quantitative threshold therefore is reported as a separate segment. Joint arrangements and associates related to the reportable segments
form part of the above two reportable segments.
The major end-use markets of the Group’s products include residential and non-residential construction, engineering construction, alumina production and mining.
(b) Segment information provided to the CEO and Managing Director
The segment information provided to the CEO and Managing Director for the reportable segments is as follows:
Cement, Lime,
Concrete and
Aggregates
1,573.5
(74.9)
1,498.6
(65.1)
287.8
28.5
Concrete
Products
149.2
-
149.2
(8.4)
11.4
-
Unallocated
Total
-
-
-
(4.6)
(33.1)
-
1,722.7
(74.9)
1,647.8
(78.1)
266.1
28.5
31 December 2016
($ Million)
Total segment operating revenue
Inter-Company revenue
Revenue from external customers
Depreciation and amortisation
EBIT
Share of net profits of joint venture and associate entities accounted for using the equity method
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
97
33 Segment reporting (continued)
(b) Segment information provided to the CEO and Managing Director (continued)
31 December 2015
($ Million)
Total segment operating revenue
Inter-Company revenue
Revenue from external customers
Depreciation and amortisation
EBIT
Share of net profits of joint venture and associate entities accounted for using the equity method
Sales between segments are carried out at arms length and are eliminated on consolidation.
Cement, Lime,
Concrete and
Aggregates
Concrete
Products
Unallocated
Total
1,536.7
(64.0)
1,472.7
(65.6)
321.7
19.9
147.8
-
147.8
(8.3)
11.4
-
-
-
-
(3.9)
(34.5)
-
1,684.5
(64.0)
1,620.5
(77.8)
298.6
19.9
The operating revenue assessed by the CEO and Managing Director and includes revenue from external customers and a share of revenue from the joint ventures
and associates in proportion to the Group’s ownership interest, excluding freight, interest and royalty revenue. A reconciliation of segment operating revenue to
revenue from continuing operations is provided as follows:
($ Million)
Total segment operating revenue
Inter-Company revenue elimination
Freight revenue
Other production revenue
Interest revenue
Royalties
Elimination of joint venture and associate revenue
Revenue from continuing operations
Consolidated
2016
1,722.7
(74.9)
97.3
6.0
1.5
0.5
(356.9)
1,396.2
2015
1,684.5
(64.0)
125.8
-
1.7
0.4
(335.3)
1,413.1
The Chief Executive Officer and Managing Director assesses the performance of the operating segments based on a measure of EBIT. This measurement basis
excludes the effect of net interest. A reconciliation of the EBIT to operating profit before income tax is provided as follows:
($ Million)
EBIT
Net interest
Profit before income tax
(c) Other segment information
Consolidated
2016
266.1
(11.5)
254.6
2015
298.6
(13.0)
285.6
Revenues of $215.3 million (2015: $193.8 million) are derived from a single customer. These revenues are attributable to the Cement, Lime, Concrete and
Aggregates segment.
34 Parent entity financial information
The financial information for the parent entity, Adelaide Brighton Limited (“the Company”), has been prepared on the same basis as the consolidated financial statements,
except as set out below.
(i) Investments in subsidiaries, associate and joint arrangements
Investments in subsidiaries, associate and joint arrangements are accounted for at cost in the financial statements of the Company. Such investments include both
investments in shares issued by the subsidiary and other parent entity interests that in substance form part of the parent entity’s investment in the subsidiary. These
include investments in the form of interest free loans which have no fixed repayment terms and which have been provided to subsidiaries as an additional source of long
term capital. Trade amounts receivable from subsidiaries in the normal course of business and other amounts advanced on commercial terms and conditions are included
in receivables. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these
investments.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
NO TE S TO A ND FORMING PART OF
TH E C ON SOLI DATED FINANCIAL STATEMENT S
98
34 Parent entity financial information (continued)
(ii) Tax consolidation legislation
The Company and its wholly owned Australian controlled entities have implemented the tax consolidation legislation.
The Company and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each
entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or assets) and the deferred assets arising from unused tax
losses and unused tax credits assumed from controlled entities in the tax consolidated group.
The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate the Company for any current tax payable assumed and
are compensated by Adelaide Brighton Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred
to Adelaide Brighton Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly owned
entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable
after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in
the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution
from) wholly owned tax consolidated entities.
(iii) Financial guarantees
Where the Company has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair values of these guarantees are
accounted for as contributions and recognised as part of the cost of the investment.
(iv) Share based payments
The grant by the Company of options over its equity instruments to employees of subsidiary undertakings in the Group is treated as a receivable from that subsidiary
undertaking.
(a) Summary financial information
The individual financial statements for the Company show the following aggregate amounts:
($ Million)
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Reserves
Share-based payments
Retained earnings
Total shareholders’ equity
Profit for the year
Total comprehensive income
(b) Guarantees entered into by the parent entity
Bank guarantees
(c) Contingent liabilities of the parent entity
Consolidated
2016
2015
1,975.2
2,372.8
1,130.7
1,475.1
897.7
724.3
2.7
170.7
897.7
200.5
200.5
1,750.6
2,114.6
911.7
1,241.9
872.7
722.1
1.9
148.7
872.7
154.2
154.2
10.3
5.9
The parent entity did not have any contingent liabilities as at 31 December 2016 or 31 December 2015 other than the bank guarantees detailed above.
35 Events occurring after the balance sheet date
Subsequent to reporting date, Adelaide Brighton had agreed to acquire the Central Pre-Mix Concrete (Central) business, an integrated concrete and aggregate operation
with five concrete plants and a hard rock aggregate quarry serving the metropolitan Melbourne market. The purchase price of approximately $61 million, including
transaction costs of $3 million, represents 7.0 times 2016 calendar year earnings before interest, tax, depreciation and amortisation.
Adelaide Brighton completed the acquisition effective 1 March 2017.
Other than the purchase of Central, no matter or circumstance has arisen since 31 December 2016 that has significantly affected, or may significantly affect the Group’s
operations, the results of those operations, or the Group’s state of affairs in future financial years.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
N OTES TO AND FORMING PAR T OF
THE CONSOLIDATED FINANCIAL ST AT EMENTS
99
Directors’ declaration
Auditor’s independence declaration
In the Directors’ opinion:
Auditor’s independence declaration
(a) the financial statements and notes set out on pages
61 to 99 are in accordance with the Corporations
Act 2001, including:
(i) complying with Accounting Standards, the
Corporations Regulations 2001 and other
mandatory professional reporting requirements;
and
(ii) giving a true and fair view of the consolidated
entity’s financial position as at 31 December 2016
and of its performance for the financial year ended
on that date; and
(b) there are reasonable grounds to believe that the
Company will be able to pay its debts as and when
they become due and payable; and
(c) at the date of this declaration, there are reasonable
grounds to believe that the members of the
Extended Closed Group identified in Note 30 will be
able to meet any obligations or liabilities to which
they are, or may become, subject by virtue of the
Deed of Cross Guarantee described in Note 30.
Note 1(a) confirms that the financial statements
also comply with International Financial Reporting
Standards as issued by the International Accounting
Standards Board.
The Directors have been given the declarations by
the Chief Executive Officer and Managing Director
and Chief Financial Officer required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a
resolution of the Directors.
M Brydon
Director
Dated 17 March 2017
As lead auditor for the audit of Adelaide Brighton
Limited for the year ended 31 December 2016,
I declare that to the best of my knowledge and
belief, there have been:
(a) no contraventions of the auditor independence
requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of
professional conduct in relation to the audit.
This declaration is in respect of Adelaide Brighton
Limited and the entities it controlled during the
period.
Kevin Reid, Partner
PricewaterhouseCoopers
Adelaide 17 March 2017
Liability limited by a scheme approved under
Professional Standards Legislation.
PricewaterhouseCoopers
ABN 52 780 433 757
Level 11, 70 Franklin Street, Adelaide SA 5000
GPO Box 418, Adelaide SA 5001
Telephone +61 8 8218 7000
Facsimile +61 8 8218 7999
www.pwc.com.au
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
100
Independent auditor’s report to the members of Adelaide Brighton Limited
Report on the audit of the financial report
Our audit approach
Audit scope
Our opinion
In our opinion:
The accompanying financial report of Adelaide
Brighton Limited (the Company) and its controlled
entities (together, the Group) is in accordance with
the Corporations Act 2001, including:
(a) giving a true and fair view of the Group’s financial
position as at 31 December 2016 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and
the Corporations Regulations 2001.
What we have audited
The Group’s financial report comprises:
> the consolidated balance sheet as at
31 December 2016
> the consolidated income statement for the
year then ended
> the consolidated statement of comprehensive
income for the year then ended
> the consolidated statement of changes in equity
for the year then ended
> the consolidated statement of cash flows for
the year then ended
> the notes to the consolidated financial statements,
which include a summary of significant accounting
policies
> the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with
Australian Auditing Standards. 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 believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance
with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements
of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our
audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in
accordance with the Code.
An audit is designed to provide reasonable
assurance about whether the financial report is free
from material misstatement. Misstatements may
arise due to fraud or error. They are considered
material if individually or in aggregate, they could
reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
report.
We tailored the scope of our audit to ensure that
we performed enough work to be able to give an
opinion on the financial report as a whole, taking into
account the geographic and management structure
of the Group, its accounting processes and controls
and the industry in which it operates. As explained
in the Directors’ Report, the Group has four distinct
product groups, being Cement, Lime, Concrete and
Aggregates and Concrete Products which operate
across Australia. The Group also has interests in joint
arrangements and associates.
Materiality
For the purpose of our audit we utilised an overall
Group materiality of $12,700,000, representing
approximately 5% of profit before tax of the Group,
excluding the gain on sale of properties (property
profits).
We applied this threshold, together with qualitative
considerations, to determine the scope of our
audit and the nature, timing and extent of our
audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
We chose profit before tax as the benchmark
because, in our view, it is the metric against which
the performance of the Group is most commonly
measured and is a generally accepted benchmark.
The gain on sale of properties (property profits) was
removed from materiality calculations on the basis
that these transactions are distinguishable from the
continuing product trading activities of the Group.
We selected 5% based on our professional
judgement noting that it is within the range of
commonly acceptable profit related thresholds.
Our audit focused on where the directors made
subjective judgements; for example, significant
accounting estimates involving making assumptions
and considering inherently uncertain future events.
We conducted an audit of the most significant
components being Cement and Lime (primarily
focusing on the South Australian and Western
Australian businesses which comprise the bulk of
these operations) and Concrete and Aggregates,
which, in our view, were financially significant to the
financial report.
Additionally, we performed specific risk focused
audit procedures in relation to the Group’s Cement
and Lime components in the Northern Territory
and New South Wales, and Concrete Products.
The procedures varied across these operations
and included procedures directed at revenue,
debtors, inventory, fixed assets and journals. Audit
procedures were also performed over the gain on
sale of properties (property profits).
Of the Group’s interest in joint arrangements and
associates, Independent Cement and Lime Pty
Ltd and Sunstate Cement Ltd were the largest
contributors to the Group’s share of net profits
from jointventures and associates. As stated in
the Joint Arrangements and Associates Note 10
to the financial report, these joint ventures have
a balance sheet date of 30 June. Other auditors
audited the financial reports for Independent
Cement and Lime Pty Ltd and Sunstate Cement Ltd
for the year ended 30 June 2016. We determined
the level of involvement we needed to have to be
able to conclude whether sufficient appropriate
audit evidence had been obtained for our opinion
on the Group financial report as a whole, including
reviewing the work of these other auditors. Due to
the different balance dates utilised by these joint
ventures, we performed audit procedures for the
period 1 July 2016 to (and as at) 31 December
2016, including substantive analytical procedures
over the financial results, to obtain sufficient
evidence in respect of the results for the year ended
and financial position as at 31 December 2016 for
our opinion.
Outside the operations identified above, the Group
includes components which individually and
collectively do not contribute materially to the overall
Group result. We have obtained an understanding
of these operations and performed analytical
procedures.
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
101
Key audit matters
Amongst other relevant topics, we communicated the following key audit matters to the Audit and Risk Committee:
> Recoverability of goodwill and tangible assets
> Estimation of rehabilitation provisions
> Measurement of inventory quantities
These are further described in the Key audit matters section of our report.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period.
The key audit 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. Further, any commentary on the outcomes of a particular audit procedure is made in that context.
Key audit matter
Recoverability of goodwill and tangible assets
(Refer to notes 11 & 12)
The financial report for the Group includes property, plant and equipment of
$978.4 million and goodwill of $248.7 million as at 31 December 2016.
In order to assess recoverability of these assets, the Group prepared financial
models at 31 December 2016 to determine if the carrying values of goodwill
and property, plant and equipment were supported by forecast future cash
flows, discounted to present value (the models).
The appropriateness of the carrying amount of the goodwill and property,
plant and equipment was a key audit matter due to:
> the significance of these asset balances to the financial position of the Group;
and
> the Group’s assessment of the carrying amount involving judgements,
such as budgeted cash flows, growth rates and discount rate.
Key audit matter
Estimation of rehabilitation provisions
(Refer to note 16)
The Group recognised rehabilitation provisions of $38.1 million in relation to
the rehabilitation of presently operating quarries and concrete plants.
The rehabilitation provisions were a key audit matter because significant
judgement is involved in assessing future costs and rehabilitation requirements
for the estimation of the provision.
The rehabilitation provision for sites being actively remediated is material.
The provision for rehabilitation costs for these sites reflected tendered cost
estimates for future stages of rehabilitation.
For other quarries not currently being actively remediated, the provision is
determined through annual cost estimates. The Group estimates future costs
to rehabilitate each site (nominal cost), based on rehabilitation requirements,
current costs and forecast cost inflation factors, and discounts these estimates
to net present value. Cost inflation and discount rates are based on published
government rates.
How our audit addressed the key audit matter
We evaluated the Group’s cash flow forecasts and the process by which they
were developed. We compared the 2017 forecast in the models to the Board
approved budgets. We checked that prior year budgets have been materially
consistent with actual performance to assess the Group’s ability to make
reliable forecasts. We found that the Group’s previous forecasts had been
materially accurate.
We compared growth rate assumptions with external forecasts for the
industry and found the growth rate assumptions in the models to be
consistent with these.
We performed a sensitivity analysis by recalculating the models using a
range of reasonably possible alternative growth rates and discount rates
assumptions. In particular, we applied the long term growth rate (or perpetual
growth rate) from year 5 as opposed to year 20 (which was utilised by
the Group). No impairment was identified from this analysis.
Management engaged an expert to assist them in determining the discount
rates applied in the impairment models. We assessed them as management
experts, and considered the experts’ method, competency and objectivity.
Having done so, we were satisfied that we could rely on their work for the
purpose of our audit.
We tested the components of the discount rates by comparison to
independent sources.
How our audit addressed the key audit matter
We obtained a listing of all quarries and concrete plants with a rehabilitation
provision. We assessed whether a provision was included for all sites that
required rehabilitation based on our knowledge of the operations, review of
new lease contract agreements, review of meeting minutes and discussions
with management. We did not identify any omissions.
We focussed our attention on sites where there had been a change to the
nominal cost from previous periods, or where we would have expected there
to be a change to the nominal cost based on our knowledge of the business.
We identified that a number of sites had a change to the nominal cost to
rehabilitate, however individually and in aggregate, these changes were not
material. Focusing on those with a greater size and risk, we made inquiries
as to why the change had occurred and corroborated this inquiry by obtaining
supporting evidence, including contracts and quotes for decommissioning and
rehabilitation costs, or evidence of costs incurred for similar sites.
Our procedures were more limited where there was no change in the
underlying cost to rehabilitate, given (1) the movement in the provision year on
year was due to the passing of time as opposed to a change in the future cost
estimate and (2) we had tested the provision on initial recognition, or since the
last significant change to nominal cost. We assessed whether the provisions
had been updated to reflect any new knowledge gained from rehabilitation
planned in other areas or changes in rehabilitation requirements.
For sites being actively remediated, we compared the movement in the
provision recognised with external quotes for the next stage of work to be
performed. We found the provision estimate was consistent with the external
quotes. To assess the Group’s ability to estimate accurately, we also compared
previous period’s estimates of costs to the actual costs and found no material
differences.
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
102
Key audit matter
How our audit addressed the key audit matter
Measurement of inventory quantities for finished goods,
raw materials and work in progress
(Refer to note 8)
The Group had $160.2 million of inventory on hand at 31 December 2016,
which included finished goods, raw materials and work in progress totalling
$130.7 million. Raw materials and work in progress inventory is typically
stockpiled prior to consumption or sale.
The measurement of inventory quantities for these inventory types was a key
audit matter as the measurement process is relatively complex for parts of
the Group. The Group relies on independent surveyors to perform volumetric
surveys to estimate the quantities of certain stockpiled inventory utilising
aerial and laser surveys. The Group converts the survey quantities, which are
reported in cubic metres, to tonnages using density factors.
We assessed the independent surveyors as management experts, and for each
expert considered the surveyor’s method, competency and objectivity. We were
satisfied that we could rely on their work for the purpose of our audit.
We obtained and inspected the survey results for material stockpiled inventory
locations. We reperformed the Group’s conversion of the quantities identified
from the surveyors’ reports to tonnages using the Group’s internally assessed
density factors.
We compared the density factors used to results of the Group’s internal
laboratory testing that occurred during the year and (where available) to
prior year density factors for the same raw material. Given the nature of the
inventory, the density factors do not usually vary significantly year on year. We
identified no significant changes in these factors in the current year or other
factors which would require a change.
Other information
The directors are responsible for the other
information. The other information included in the
Group’s annual report for the year ended
31 December 2016 comprises the Director’s Report
and Diversity Report (but does not include the
financial report and our auditor’s report thereon),
which we obtained prior to the date of this auditor’s
report. The other information also includes the
Performance Summary, Chairman’s Report,
Managing Director and CEO Report, Finance Report,
Map and Review of Operations, Sustainability Report,
Financial History, Information for Shareholders
and Corporate Governance Statement, which are
expected to be made available to us after the date of
this report.
Our opinion on the financial report does not cover the
other information and accordingly we do and will not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report,
our responsibility is to read the other information
identified above and, in doing so, 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.
If, based on the work we have performed on the
other information that we obtained prior to the date
of this auditor’s report, we conclude that there is a
material misstatement of this other information, we
are required to report that fact. We have nothing to
report in this regard.
When we read the other information not yet received
as identified above, if we conclude that there is a
material misstatement therein, we are required to
communicate the matter to the directors and use our
professional judgement to determine the appropriate
action to take.
Responsibilities of the directors for the
financial report
The directors of the Company are responsible for
the preparation of the financial report that gives
a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act
2001 and for such internal control as the directors
determine is necessary to enable the preparation of
the financial report that gives a true and fair view and
is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are
responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as
applicable, matters related to going concern and
using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of the
financial report
Our objectives are 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 the Australian Auditing
Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and 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:
www.auasb.gov.au/auditors_files/ar2.pdf.
This description forms part of our auditor’s report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in
pages 42 to 60 of the directors’ report for the year
ended 31 December 2016.
In our opinion, the remuneration report of Adelaide
Brighton Limited for the year ended 31 December
2016 complies with section 300A of the Corporations
Act 2001.
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 responsibility is to
express an opinion on the remuneration report, based
on our audit conducted in accordance with Australian
Auditing Standards.
PricewaterhouseCoopers
Kevin Reid, Partner
Adelaide 17 March 2017
PricewaterhouseCoopers
ABN 52 780 433 757
Level 11, 70 Franklin Street, Adelaide SA 5000
GPO Box 418, Adelaide SA 5001
Telephone +61 8 8218 7000
Facsimile +61 8 8218 7999
www.pwc.com.au
A DE LA IDE BRIGHTON LTD AND ITS CONT ROL LED ENT ITIES
FOR THE YEAR ENDED 31 DECE MBE R 2016
103
Financial history
Year ended
($ Million unless stated)
Dec
2016
Dec
2015
Dec 1 Dec
2013
2014
Dec 2
2012
Dec
2011
Dec
2010
Dec
2009
Dec
2008
Dec
2007
Dec
2006
Dec
2005
Dec 3
2004
Statements of financial performance
Sales revenue
Depreciation, amortisation
and impairments
1,396.2 1,413.1 1,337.8 1,228.0 1,183.1 1,100.4 1,072.9
987.2 1,022.4
888.4
794.7
717.3
683.4
(78.1)
(77.8)
(75.0)
(70.6)
(65.2)
(57.8)
(52.8)
(56.8)
(56.8)
(52.4)
(51.8)
(47.0)
(51.4)
Earnings before interest and tax
266.1
298.6
247.5
222.7
222.1
219.8 2 216.2
185.3
189.1
171.3
148.8
134.1
119.6
Net interest earned (paid)
(11.5)
(13.0)
(15.0)
(14.1)
(14.6)
(17.0)
(14.0)
(16.7)
(33.8)
(21.7)
(15.2)
(14.0)
(14.7)
Profit before tax, abnormal
and extraordinary items
254.6
285.6
232.5
208.6
207.5
206.4
202.2
168.6
155.3
149.6
133.6
120.1
104.9
Tax expense
(68.4)
(77.8)
(59.9)
(57.5)
(54.6)
(58.0)
(50.8)
(45.4)
(34.5)
(35.7)
(31.0)
(29.2)
(11.8)
Profit from discontinued operations
Non-controlling interests
Net profit after tax attributable
to members
Group balance sheet
Current assets
-
0.1
-
0.1
-
0.1
-
-
-
0.1
-
-
-
0.1
-
(0.1)
-
-
-
-
-
(0.5)
-
-
1.3
(1.1)
186.3
207.9
172.7
151.1
153.0
148.4
151.5
123.1
120.8
113.9
102.1
90.9
93.3
390.1
403.1
387.4
390.2
363.7
307.8
274.1
308.8
290.8
233.1
224.7
211.0
196.2
Property, plant and equipment
978.4
986.1
994.2
889.7
902.5
851.0
760.6
774.3
801.9
742.5
694.2
665.6
613.5
Receivables
Investments
Intangibles
34.4
32.9
32.7
31.4
29.6
151.2
142.2
139.9
138.5
129.0
27.2
97.2
30.4
87.7
30.4
72.5
28.4
67.6
29.5
66.9
27.5
40.8
23.3
38.1
19.1
35.6
270.3
272.9
266.4
183.9
184.8
183.0
179.1
169.0
169.4
164.4
164.6
165.0
165.5
Other non-current assets
2.3
1.3
0.0
0.0
3.5
0.0
0.0
0.0
0.0
2.7
22.9
19.0
19.7
Total assets
1,826.7 1,838.5 1,820.6 1,633.7 1,613.1 1,466.2 1,331.9 1,355.0 1,358.1 1,239.1
1,174.7 1,122.0 1,049.6
Current borrowings and creditors
117.4
123.9
122.7
105.4
115.0
99.2
106.4
106.5
98.4
145.5
125.8
323.5
294.6
Current provisions
50.6
55.4
44.2
105.8
78.5
34.5
52.6
55.4
44.5
49.5
54.1
58.2
Non-current borrowings
309.6
329.5
390.1
259.1
299.3
258.7
150.2
200.5
410.5
281.9
210.7
1.0
48.1
1.1
Deferred income tax and other
non-current provisions
Total liabilities
Net assets
Share capital
Reserves
Retained pofits
Shareholders’ equity attributable
to members of the Company
129.0
122.4
126.9
101.6
114.4
116.7
88.4
95.6
102.8
94.3
109.1
105.3
116.8
606.6
631.2
683.9
571.9
607.2
509.1
397.6
458.0
656.2
571.2
499.7
488.0
460.6
1,220.1 1,207.3 1,136.7 1,061.8 1,005.9
957.1
934.3
897.0
701.9
667.9
675.0
634.0
589.0
731.4
729.2
727.9
699.1
696.6
694.6
692.7
690.4
540.4
514.0
513.3
513.3
512.8
2.9
1.2
3.3
4.3
2.1
2.3
2.6
2.9
3.5
14.5
13.3
483.3
474.3
402.8
355.6
304.4
257.3
236.0
200.6
155.0
136.4
139.8
14.0
98.4
12.8
54.1
1,217.6 1,204.7 1,134.0 1,059.0 1,003.1
954.2
931.3
893.9
698.9
664.9
666.4
625.7
579.7
Non-controlling interests
2.5
2.6
2.7
2.8
2.8
2.9
3.0
3.1
3.0
3.0
8.6
8.3
9.3
Total shareholders’ funds
1,220.1 1,207.3 1,136.7 1,061.8 1,005.9
957.1
934.3
897.0
701.9
667.9
675.0
634.0
589.0
Share information
Net Tangible Asset Backing ($/share)
1.46
1.44
1.34
1.38
1.29
1.22
1.19
1.15
0.97
0.93
0.94
0.87
0.78
Return on funds employed
17.5%
19.8%
17.7%
17.0%
18.0%
19.4%
20.0%
17.3%
18.0%
18.1%
16.7%
15.9%
13.4%
Basic earnings per share (¢/share)
Diluted earnings (¢/share)
Total dividend (¢/share) 4
Interim dividend (¢/share) 4
Final dividend (¢/share) 4
Special dividend (¢/share) 4
28.7
28.6
28.0
8.5
11.5
8.0
32.0
31.9
27.0
8.0
11.0
8.0
26.9
26.8
17.0
7.5
9.5
-
23.7
23.4
19.5
7.5
9.0
3.0
24.0
23.8
16.5
7.5
9.0
-
23.3
23.2
16.5
7.5
9.0
-
23.9
23.7
21.5
7.5
9.0
5.0
20.4
20.3
13.5
5.5
8.0
-
22.2
22.0
15.0
6.5
8.5
-
21.0
18.8
16.8
17.2
20.8
16.4
16.2
14.6
18.5
6.0
7.5
3.5
18.5
5.0
6.25
6.0
10.5
4.25
4.0
-
7.5
3.5
-
Gearing
23.6%
24.6%
31.6%
23.4%
30.9%
26.0%
15.9%
19.6%
55.3%
48.4%
33.6%
35.8%
31.4%
1 Restated for final acquisition accounting values for businesses purchased in 2014
2 Restated for changes to accounting policies (Note 42 to the 2013 Financial Statements)
3 Restated for AIFRS
4 Fully franked
A DE LAID E BRI GHTON LTD AND ITS CONTR OL L ED EN TITIE S
FOR TH E YEA R ENDED 31 DECEMBER 2016
104
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The Adelaide Brighton logo, the MCI logo, the Cockburn Cement logo, the Swan Cement logo, the Northern Cement
logo, the Hy-Tec logo, the Adbri Masonry logo, the Southern Quarries logo, the Direct Mix Concrete logo and the
Penrice Quarry & Mineral logo are trade marks of Adelaide Brighton Ltd or its related bodies corporate
Adelaide Brighton Ltd
ABN 15 007 596 018
Level 1, 157 Grenfell Street
Adelaide, South Australia 5000
PO Box 2155, Adelaide SA 5001
Telephone 08 8223 8000
Facsimile 08 8215 0030
Web www.adbri.com.au
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