ADELAIDE BRIGHTON LTD ANNUAL REPORT 2017
PERFORMANCE SUMMARY
Revenue
NPAT
attributable to members
$1,560m
$182.0m
11.7%
2.3%
Underlying NPAT
ex-property
attributable to members
$189.3m
5.3%
Performance summary
Company profile and map of operations
Chairman’s report
Chief Executive Officer and Managing Director review
Finance report
Cement and Lime
Concrete and Aggregates
Concrete Products
Joint Ventures
Sustainability report
> Health and safety
> People and diversity
> Tax transparency report
Diversity report
Corporate governance overview
Directors
Information for shareholders
Financial statements
Directors’ report
Remuneration report
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Statement of cash flows
Notes to the financial report
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report to the Members of Adelaide Brighton Ltd
Financial history
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3
5
8
10
12
14
16
18
25
26
28
30
32
34
36
37
39
50
70
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75
115
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121
Adelaide Brighton Ltd
ABN 15 007 596 018
Level 1, 157 Grenfell Street
Adelaide, South Australia 5000
GPO Box 2155, Adelaide SA 5001
Telephone 08 8223 8000
Facsimile 08 8215 0030
Web www.adbri.com.au
Basic EPS
Final ordinary
dividend
Special
dividend
28.0c
2.4%
12.0c
4.3%
4.0c
Unchanged
c/share
Dividends
32
24
16
8
Return on
funds employed
%
20
15
10
5
Gearing: net
debt to equity
%
40
30
20
10
$M
300
225
150
75
Cash flow from
operations
Times
Interest cover
EBITDA basis
32
24
16
8
13 14 15 16 17
13 14 15 16 17
13 14 15 16 17
13 14 15 16 17
13 14 15 16 17
Ordinary interim
Ordinary final
Special
Adelaide Brighton Ltd Annual Report 2017
COMPANY PROFILE AND MAP OF OPERATIONS
Adelaide Brighton is a leading integrated
In addition to domestic production, the
Concrete Products
construction materials and lime producer
Company is the largest importer of cement,
which supplies a range of products into
clinker and slag into Australia with an
building, construction, infrastructure and
unmatched supply network that enables
mineral processing markets throughout
efficient access to every mainland capital
Australia.
Adelaide Brighton origins go back to 1882
and today it is an S&P/ASX100 company
with 1,500 employees and operations in all
Australian states and territories.
The Company’s principal activities include
the production, importation, distribution and
marketing of clinker, cement, industrial lime,
premixed concrete, construction aggregates
and concrete products.
Cement
Adelaide Brighton is the second largest
city market. This network includes significant
distribution joint ventures in Victoria, New
South Wales and Queensland.
Lime
Adelaide Brighton is the largest producer
of lime in Australia, with production assets
in Western Australia, South Australia and
the 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.
supplier of cement and clinker products in
Concrete and Aggregates
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
significant 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
(Mawsons); and a 30% investment in a
Malaysian white cement and clinker producer
(Aalborg Portland Malaysia), which supplies
Adelaide Brighton has a growing presence
to the south east Asian market in addition
in the premixed concrete and aggregates
to Australia.
industry in South Australia, Victoria, New
South Wales, south east and northern
Sustainability
Queensland and the Northern Territory. It has
strategic aggregate reserves west of Sydney,
mid northern coast of New South Wales,
south east Queensland, South Australia,
Victoria and the Northern Territory through its
wholly owned and joint venture operations.
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.
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.
Cement
Lime
Concrete and aggregates
Concrete products
2
Adelaide Brighton Ltd Annual Report 2017 CHAIRMAN’S REPORT
Adelaide Brighton reported record sales
Board
in 2017 of $1,560 million but due to a
number of one-offs, net profit after tax
(NPAT) declined 2.3% to $182.0 million.
This represented basic earnings per share
of 28.0 cents. Excluding the one-offs, NPAT
increased 5.4% and earnings before interest
and tax (EBIT) increased 7.8%, reflecting a
positive underlying earnings performance.
The Board recognises the importance of
maintaining an appropriate mix of skills and
experience that align with our corporate
strategy. As part of our ongoing renewal
program the Board appointed Vanessa
Guthrie as an independent non-executive
director in 2018. Geoff Tarrant, nominated
by our major shareholder Barro Properties
In 2017 we progressed our strategy of
Pty Ltd, was also appointed as a non-
growing our concrete and aggregates
executive director.
business through three attractive concrete
and aggregates acquisitions in Victoria,
South Australia and the Northern Territory.
Adelaide Brighton also continued to invest in
organic growth initiatives and worked hard
The majority of the Board remains
independent, which is consistent with the
Principles and Recommendations of the
ASX Corporate Governance Council.
on operational improvement, both important
This is my final report as Chairman
aspects of our long term strategy.
of Adelaide Brighton following the
I am pleased to report to shareholders the
Board declared and paid an increased final
ordinary dividend of 12.0 cents per share
and a final special dividend of 4.0 cents
per share. Dividend payments for the 2017
financial year totaled 24.5 cents per share.
announcement in February 2018 that I will
retire as Chairman at the conclusion of the
Annual General Meeting, but will remain
a Director. The Board has named Zlatko
Todorcevski as Chairman Elect to take
over from me. Zlatko was appointed an
independent non-executive director in March
Adelaide Brighton maintains a strong balance
2017. He has more than 30 years of finance,
sheet with the flexibility to fund acquisitions
strategy and planning experience in the oil
or other growth initiatives that add value for
and gas, logistics and manufacturing sectors
shareholders. Should the Board determine
and had made a strong contribution to the
the Company has surplus capital we will, as
Board in his time at Adelaide Brighton.
a matter of policy, return it to shareholders.
I joined the Company as a Director in 2003
We have strong employment and
and was appointed Chairman in 2012.
safety practices and we work with local
During almost six years as Chairman,
communities, government and regulatory
Adelaide Brighton has delivered exceptional
bodies to earn our social license to operate
returns to shareholders while at the same
and ensure the business and its returns
time entering new markets and diversifying
are sustainable.
vertically.
Adelaide Brighton is committed to
It has been my privilege to serve as Adelaide
maintaining a safe, productive and
Brighton’s Chairman and I pass this honor
healthy work environment. In 2017 our
to my successor, Zlatko Todorcevski, with
safety performance was impacted by the
confidence.
recognition of injuries within the acquisitions
we made in the year. We have now
In conclusion
introduced our safety training and systems
to these business to bring them in line
with the Group.
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. I also thank our customers,
shareholders and joint venture partners for
their continuing loyalty and support.
Leslie Hosking
Chairman
3
Adelaide Brighton Ltd Annual Report 2017
#1 LIME PRODUCER IN MINERALS PROCESSING INDUSTRY IN AUSTRALIA
#1 CONCRETE PRODUCTS PRODUCER IN AUSTRALIA
#1 CEMENT AND CLINKER IMPORTER WITH UNMATCHED MARKET CHANNELS
#2 CEMENT AND CLINKER SUPPLIER IN AUSTRALIAN CONSTRUCTION INDUSTRY
#4 CONCRETE AND AGGREGATES PRODUCER IN AUSTRALIA
4
Adelaide Brighton Ltd Annual Report 2017
CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR REVIEW
Adelaide Brighton’s strategy of operating a
geographically diverse, vertically integrated
construction materials company has
positioned the company to benefi t from the
strong demand within the industry.
The business continued to perform well in
2017, with full year revenue growing 11.7%
to $1,560.0 million, a record for Adelaide
Brighton and a full 10% above the previous
record in 2015.
Revenue was driven by strong east coast
demand and the contribution of the concrete
and aggregates acquisitions completed in
2017 in Victoria, South Australia and the
Northern Territory, which will add further
to revenue in the current year. Excluding
the newly acquired businesses, 2017
revenue increased 5.9%, representing
encouraging growth.
Net profi t after tax (NPAT) declined 2.3% to
$182.0 million and earnings before interest
and tax (EBIT) increased 0.2% from the prior
year to $266.5 million. NPAT and EBIT were
impacted by an unexpected $17.7 million
increase in doubtful debts provisions and
costs associated with underpayment for
products supplied by Adelaide Brighton.
The underpayments were detected by our
compliance and risk management systems
and processes. We have taken steps to
further strengthen these systems and
processes. While the fi nancial impact of
these underpayments has been quantifi ed,
investigations are ongoing, and Adelaide
Brighton will continue its efforts to
recover amounts due.
Excluding these provisions and other
signifi cant items, underlying EBIT increased
7.8% in 2017 to $288.8 million, while
underlying NPAT increased 5.4% to
$197.7 million, refl ecting the benefi ts of
strong revenue growth.
East coast construction materials markets
were supported by robust residential
activity in Victoria, New South Wales and
Queensland, and increased non-residential
building and infrastructure activity. The
South Australian market was also lifted
by infrastructure demand.
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 - reported
2017
2016
1,560.0
1,396.2
(82.5
)
(78.1
)
266.5
(12.1
)
254.4
(72.3
)
182.1
0.1
266.1
(11.5
)
254.6
(68.4
)
186.2
0.1
182.0
186.3
28.0
24.5
371.6
29.8%
16.7%
28.7
28.0
288.5
23.6%
17.5%
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 4.0 cents per share for FY 2017 and 8.0 cents per share for FY 2016.
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.
Total shareholder returns (share price + dividend reinvested)
and S&P/ASX200 Accumulation Index returns
d
t
L
y
t
P
s
r
o
s
v
d
A
i
t
s
r
i
F
:
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c
r
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S
%
200
160
120
80
40
3
1
n
a
J
3
1
r
p
A
3
1
l
u
J
3
1
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4
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ABC S&P/ASX200 Accum
$M
Total assets
2400
1800
1200
600
Net profi t
after tax
$M
240
180
120
60
13 14 15 16 17
13 14 15 16 17
Adelaide Brighton Ltd Annual Report 2017
5
South east Queensland markets continue
Adelaide Brighton’s New South Wales quarry
We are also investing in organic growth
to improve, particularly the Gold Coast
operations are well positioned to meet this
projects which deliver attractive shareholder
and Sunshine Coast regions.
demand and benefit from strengthening
returns with low risk. In 2017 we invested
Western Australia demand stabilised in the
second half while demand declined further
prices driven by the higher transport costs
a further $29 million in organic projects,
faced by many suppliers.
giving a total investment over the past
across the Northern Territory, although
Concrete and Aggregate revenue, EBIT
regional infrastructure projects provided
and EBIT margins all improved significantly
some offset.
Cement and clinker sales volume increased
in FY2017 as a result of higher volumes,
stronger prices and control of costs.
a healthy 9% compared to 2016, assisted
Lower sales volumes and resulting lower
by a particularly strong second half. Strong
production efficiency in Concrete Products
volume growth continued in 2017 in
led to a revenue decline of 1.1% to
Queensland, Victoria and New South Wales.
$147.6 million, with EBIT of $10.2 million
down from $11.4 million in 2016. Sales
and earnings recovered in the second
While cement selling prices increased
ahead of inflation across almost all markets,
weighted average cement prices were
stable due to geographic mix changes, with
revenue lifted by higher volumes. Cement
margins declined due to higher energy
Our joint venture and associative operations
costs, a cement quality issue in the first half
(including joint operations) also benefited
and unplanned costs associated with the
from strong demand on the east coast
Company’s limestone carrying vessel in
with improvements in volumes, prices and
5 years of over $91 million.
Cost reduction and
continuous improvement
We realised $23 million in cost reductions
in 2017 from our operational improvement
program, which included the rationalisation
of speciality cement production at the
Angaston plant in South Australia, and
lower material costs.
for the supply of gas and electricity to our
South Australian operations giving certainty
of energy supply at competitive prices.
Growth of the lime business
half helping offset weakness in the multi-
Important progress was made in managing
residential sector and in the first half wet
energy costs in 2017, with new agreements
weather delayed projects.
the second half.
margins driving a 22.3% increase in joint
Adelaide Brighton’s Western Australian lime
Overall demand for lime moderated
slightly in both Western Australian and
the Northern Territory.
Sales volumes for concrete increased
by more than one-third in 2017 because
of strong demand in the eastern states,
strengthening infrastructure demand in
South Australia and the contribution
of acquisitions.
venture profits in 2017.
Strategy
Adelaide Brighton continues to execute
against its long-term growth strategy
by investing in:
>
Cost reduction and operational
improvement across the Company;
>
Growth of the lime business to supply
business is underpinned by low cost, long
term raw material reserves secured by State
Agreement and statutory approvals. At our
Munster plant near Perth we produce lime
for the globally competitive Australian mineral
processing industry. This is one of the largest
and lowest cost lime operations in the world
with capacity of 1.25 million tonnes per
annum, which is currently about 80% utilised.
the resources sector in Western Australia,
Costs and efficiency remain a key focus in
Aggregates volumes also were strong in
South Australia and the Northern Territory;
the lime business, with costs stabilising in
2017 due to acquisitions and supported
and
2017 after a significant reduction in energy
by a recovery in South Australian
>
Focused and relevant vertical integration
costs in 2016.
infrastructure demand.
into aggregates, concrete, logistics and
Sydney aggregates returns continue to
masonry businesses.
This business benefits from a unique cost
position, proximity to major customers, long
be supported by the increasing reliance
This strategy has successfully delivered
term environmental approvals and strong
on product from new operations further
growth in shareholder returns. We have
customer relationships.
from the market.
invested more than $240 million in the last
five years on acquisitions. Each have met
returns targets, diversified earnings and
provided integration benefits.
Revenue by
product group
Revenue by
market
Revenue by
state
Cement
Lime
Concrete and aggregates
Concrete products
Non- residential
Residential
Engineering
Mining operations
Western Australia
South Australia
Victoria
New South Wales
Queensland
Other
6
Adelaide Brighton Ltd Annual Report 2017
It is well placed to remain the leading lime
Outlook
supplier to the Australian resources sector,
manage emerging competitors in the import
market and has capacity to support further
significant growth in the industry over the
medium to long term.
Vertical integration
In 2018, Adelaide Brighton expects strong
demand for construction materials, improved
pricing and further efficiency improvements.
Sales volumes of cement and clinker are
anticipated to be higher, with stable demand
in Western Australia and the Northern
Territory and improving demand in South
Vertical integration has been an important
Australia and the east coast.
driver of growth in the last five years. It
has improved geographic and industry
diversification and supported the full
utilisation of existing Adelaide Brighton
assets.
Three aquisitions were completed in
2017 on attractive financial metrics:
>
Central Pre-Mix Concrete and Quarry, an
integrated concrete and aggregate operation
The improving demand profile is expected
to lift sales volumes of premixed concrete
and aggregates, supported by further sales
growth from the 2017 acquisitions.
Lime sales volumes are expected to be
slightly lower in the non-alumina sector,
although prices are anticipated to improve
under contractual arrangements.
with five concrete plants and a hard rock
Our joint venture operations in Australia
aggregate quarry serving the metropolitan
are anticipated to continue to benefit from
Melbourne market, the largest premixed
stronger demand and higher prices on the
concrete market in Australia;
east coast.
>
Davalan Concrete, an independent concrete
operator in the greater Adelaide market; and
>
The concrete and aggregate assets of
Holcim Northern Territory, consisting of four
concrete plants, two operating quarries
Our costs are expected to improve with
further savings from the Angaston plant
cement rationalisation and rolling operational
improvement program.
and access to further potential quarry sites
Import costs are likely to be $3 million higher
via mining leases.
These transactions added value to the
concrete and aggregates businesses by
providing access to strategically located
in 2018, with increased materials costs offset
by favourable foreign currency outcomes,
and energy costs are expected to rise
$6 million in 2018.
high quality assets, entry to the Melbourne
Estimated proceeds from the sale of land in
aggregates market and an increase in
the next 10 years could realise in excess of
the scale of Adelaide Brighton’s existing
$100 million, however due to project timing,
concrete and aggregates business.
no significant land sales are expected until
They are performing to expectations.
2019.
Land sales program
Adelaide Brighton aims to optimise
shareholder returns by maintaining an
Adelaide Brighton has been actively
efficient balance sheet, while retaining
engaged in selling and preparing for sale
the flexibility to fund long term growth
properties released by the rationalisation and
opportunities. Prudent capital management
improvement program. In many cases, this
will remain an important part of this
includes re-zoning to realise greater value
approach.
over time.
Since the beginning of 2013, cash proceeds
Our people
from the property program total $97 million.
Finally, I would like to thank all our employees
This includes transactions in 2017 that
for their hard work and dedication in 2017.
realised $13.9 million in cash proceeds and
Together we continue to deliver strong
$8.4 million NPAT.
returns to shareholders and a sustainable
future for Adelaide Brighton.
Estimated proceeds from the sale of
properties in the next 10 years could realise
in excess of $100 million with an expected
EBIT margin on these sales of circa 85% and
an effective tax rate of approximately 20%.
Martin Brydon
Chief Executive Officer
and Managing Director
Adelaide Brighton Ltd Annual Report 2017
7
FINANCE REPORT
In 2017 Adelaide Brighton delivered record
This was partially offset by a cement
Higher energy costs put pressure on cement
revenue of $1,560.0 million up 11.7% on
quality issue in South Australia; additional
margins, which were also affected by a
the previous year. Underlying net profit after
remediation related to the closure of our
number of one offs and lower volumes in the
tax (NPAT) was up 5.4% to $197.7 million.
North Melbourne concrete plant; unplanned
Western Australia and the Northern Territory
Underlying earnings before interest and tax
costs associated with the Company’s
markets. Our cement business receives
(EBIT) increased 7.8% to $288.8 million.
limestone carrying vessel; and higher
a lower price on the east coast where
Sales and profits
energy costs.
Property profits of $8.4 million after tax
Record revenues of $1,560.0 million were
increased slightly on the $7.9 million
growth is currently strongest, but some of
this comes back to us through the equity
accounted earnings of our joint ventures.
driven by acquisitions and improved demand
achieved in 2016. Excluding property profits
Concrete and Aggregates revenue, EBIT
for construction materials, notably in the
underlying EBIT growth was 7.0% in 2017
and EBIT margins all improved significantly
eastern states and from infrastructure
to $277.7 million.
projects in South Australia. When the
acquisitions completed in 2017 are
excluded, revenues were up a strong 5.9%.
Joint arrangements and associate
(including joint opeartions) earnings increased
from $30.9 million in 2016 to $37.8 million
Adelaide Brighton reported NPAT was
in 2017 reflecting improved demand and
down 2.3% to $182.0 million, impacted by
higher construction materials prices on the
a number of one-off items, which included
east coast of Australia.
a doubtful debt provision and associated
costs of $17.7 million. The Company has
now completed its analysis of the debt
and is actively seeking to recover the
underpayments.
Earnings before interest and tax (EBIT)
increased 0.2% from the prior year to
$266.5 million on an EBIT margin of 17.1%.
Underlying EBIT grew 7.8% to $288.8 million,
reflecting the strong growth in sales.
Net finance costs increased from $11.5
million to $12.1 million in 2017 as a result
of a slight increase in borrowing margins
and higher average net debt.
Tax expense of $72.3 million representing
a $3.9 million increase over 2016 and an
effective tax rate of 28.4% compared to
26.9% in 2016. The increased effective tax
rate in 2017 is due recognition of capital
losses in the prior year and the true-up
Underlying EBIT was supported by: higher
of prior year tax return.
construction materials volumes and pricing;
operational improvements and lower import
EBIT margins
in FY2017 despite the $3.3 million in
rehabilitation costs at North Melbourne site
in the first half. This improvement reflects
price and volume growth in all states and
a solid performance on costs. The 2017
acquisitions have contributed in line
with expectations.
Our import margins have also increased
due to savings in shipping, currency
and procurement.
In our lime business margins are down
slightly but remain healthy. We have long
term contracts in place with major
customers and a strong competitive position
as the primary supplier to the Western
Australian and Northern Territory mineral
processing sector.
Concrete Products margins have been
pressured by reduced sales to commercial
projects but the business is performing well.
costs; and acquisitions completed during
the year.
Revenue and net
profit after tax
$M
250
200
150
100
50
$Bn
1700
1400
1100
800
500
Underlying EBIT margin declined from
Net profit from our joint venture operations
19.1% to 18.5% in 2017 impacted by
increased by 22.3% driven by volume
higher energy costs, a cement quality issue
increases and price rises, with the ICL
at the Birkenhead plant early in the year
joint venture performing strongly across
and higher site remediation costs associated
volumes, prices and costs control.
with the closure of our North Melbourne
concrete plant.
%
Payout ratio
c/share
Earnings
per share
100
85
70
55
40
40
30
20
10
13 14 15 16 17
13 14 15 16 17
13 14 15 16 17
NPAT
Revenue
Ordinary dividend
Special dividend
8
Adelaide Brighton Ltd Annual Report 2017
Our operational improvement program
TSR over the last 12 months was 24.6%,
continued with the rationalisation of
again reflecting an improved share price,
laboratory facilities and specialty cement
increased ordinary dividends and the
production at the Angaston facility resulting
payment of special dividends and an
in annualised EBIT savings of approximately
improvement in the underlying
$3.8 million, of which approximately
performance of the business.
$2.8 million was achieved in 2017. Adelaide
Brighton also signed new agreements for
Cash flow and debt
the supply of gas and electricity in South
Australia to give certainty of supply
at competitive prices.
Operating cash flow decreased 9.7%
from the prior year to $224.2 million, due
to lower cash conversion of revenues and
Adelaide Brighton incurred an additional
increased tax payments partially offset by
$17.1 million provision for doubtful debts
an increase in dividends from joint ventures.
plus $0.6 million costs in 2017 relating to
Nonetheless, underlying cash flow
transactions identified for which Adelaide
generation remains robust.
Brighton was underpaid.
Working capital increased $22.2 million
The Company has completed its analysis
as a result of acquisitions and the timing
of these transactions, with the help of
of receipts from customers and import
forensic accountants KPMG. While the
shipments at year end.
financial impact of the discrepancies
has been quantified, investigations
are continuing.
Capital expenditure of $169.3 million was
$82.8 million higher than the prior year,
largely due to $80.2 million in acquisitions.
The issues around underpayments were
Stay in business capital expenditure of
identified under Adelaide Brighton’s existing
$60.1 million represents 73% of depreciation
compliance and risk management systems
and amortisation. In addition, the Company
and processes. The Company has taken
invested $29.0 million on organic growth
steps to further strengthen these and
projects in 2017.
is continuing its efforts to recover
amounts owed.
Shareholder returns
Cash proceeds from the sale of assets of
$17.7 million includes $13.9 million from the
disposal of land, bringing sales in the last
five years to $97 million. The estimate of the
A final ordinary dividend of 12.0 cents
sales value of the remaining property pipeline
per share (fully franked) and a final special
over the next decade exceeds $100 million.
dividend of 4.0 cents per share (fully
Net debt increased $83.1 million, with net
franked) have been declared.
debt to equity gearing increasing to 29.8%
Total dividends declared with respect to
the 2017 financial year are 24.5 cents per
share, fully franked, compared to 28.0 cents
per share (fully franked) with respect to
2016.The Dividend Reinvestment Plan
from 23.6% over the year as a result of
acquisitions. However, due to healthy cash
flow gearing declined from 34.3% at 30 June
2017 and remains at the lower end of the
target range of 25% to 45%.
remains suspended given the Company’s
Dividends paid to shareholders decreased
strong cash flows and low gearing.
13% to $156.0 million due to lower special
While underlying EBIT margins declined
slightly in 2017, underlying EBIT return
on funds employed increased from 17.6%
to 18.1% in 2017, reflecting strong returns
on capital employed. This rate of return
remains significantly ahead of the
Company’s cost of capital.
Adelaide Brighton has achieved a Total
Shareholder Return over the last five
years of 166% and has outperformed the
ASX200 Accumulation Index. This is due
to a sustained year on year improvement
in share price and increased dividends.
dividend payments in 2017. The 4.0 cents
per share special dividend declared with
respect to the 2017 financial year reflects
Adelaide Brighton’s strong cash flows,
current capex plans and low balance sheet
gearing compared to the target range.
The special dividend is consistent with
Adelaide Brighton’s strategy to distribute
surplus capital to shareholders while
maintaining an efficient and resilient capital
structure with the flexibility to investment
for long term growth.
Michael Kelly
Chief Financial Officer
Adelaide Brighton Ltd Annual Report 2017
9
CEMENT AND LIME
Cement production, import and distribution
Adelaide Brighton imports 2.4Mt pa cementitious
materials and sells more than 4.0Mt pa of
cementitious materials
International imports
Domestic imports
Clinker production at Adelaide
Cement terminals at Port Headland,
Townsville and Melbourne
Cement milling at Darwin, Brisbane,
Port Kemba, Adelaide and Perth
EAST COAST MARKETS REMAINED STRONG IN 2017 SUPPORTED BY ROBUST
RESIDENTIAL ACTIVITY IN VICTORIA, NEW SOUTH WALES AND QUEENSLAND,
AND INCREASED NON-RESIDENTIAL BUILDING AND INFRASTRUCTURE ACTIVITY.
THE SOUTH AUSTRALIAN MARKET WAS ALSO LIFTED BY INFRASTRUCTURE DEMAND.
WESTERN AUSTRALIA CEMENT DEMAND STABILISED IN THE SECOND HALF.
10
Adelaide Brighton Ltd Annual Report 2017
Northern Territory demand declined further
The new supply agreements provide our
although regional infrastructure projects
South Australian operations continued
provided some offset. Overall demand for
certainty of energy supply at competitive
lime moderated slightly.
prices and underpin our leading position
Cement and clinker
in this important market.
In addition to energy supply agreements,
Cement and clinker sales volume increased
the rationalisation of oil well cement
9% compared to 2016, assisted by a
production at Angaston in South Australia
particularly robust second half. Strong
improved the energy efficiency of the South
volume growth continued in 2017 in
Australian cement operations in 2017.
Queensland, Victoria and New South Wales.
Alternative fuels have been a key focus
Volume in Western Australia and Northern
for reducing reliance on traditional energy
Territory declined in the first half but
sources and lowering costs over the
stabilised in the second half to be modestly
last decade.
lower for the year. Cement sales in South
Australia improved, supported by the ramp
Imports
up of major infrastructure projects in
the second half.
Adelaide Brighton is Australia’s largest
importer of cement clinker and other
While cement selling prices increased
cementitious materials with our imports
ahead of inflation across most markets,
increasing to approximately 2.4 million
weighted average cement prices were
tonnes in 2017. Our flexible import
stable due to geographic mix changes.
infrastructure network gives us significant
Overall cement margins declined due to
higher energy costs, a cement quality issue
capacity at competitive cost to meet further
demand growth with existing assets.
in the first half and costs associated with
Import profitability improved by $12 million
the Company’s limestone carrying vessel,
before tax compared to 2016 due to
although higher volumes lifted revenue.
reduced shipping and material procurements
We continued to drive operational
efficiencies in cement and lime in 2017,
including $2.8 million from the rationalisation
costs and the higher Australian dollar.
Lime
of Angaston oil well cement and laboratory
Lime sales volumes in 2017 were slightly
facilities. We expect further savings of
down on 2016 due to reduced sales to
$1 million from these projects in 2018.
the non-alumina sector due to competition
Energy
from importers.
Lime margins were slightly lower in 2017
Higher energy costs in 2017 were partly
due to lower average prices and marginally
mitigated through our energy management
higher operating costs which followed cost
strategies, such as the use of alternative
improvements in the prior year.
fuels, alternative cementitious products,
demand management and securing
competitive long term supply contracts.
Adelaide Brighton’s unique and highly cost
competitive operations place it in a strong
position to supply the Western Australian
During 2017 Adelaide Brighton strengthened
lime market in the long term.
its energy supply portfolio with new gas
and electricity supply contracts. The supply
agreements allow Adelaide Brighton to
continue its focus on energy efficient
and sustainable operations in South
Australia through a portfolio approach to
energy supply and procurement benefits;
consumption management and
operational efficiency.
‘000
tonnes
3200
2400
1600
800
Adelaide Brighton
cement milled
(inc. imported clinker)
‘000
tonnes
Adelaide Brighton
lime production
1200
900
600
300
13 14 15 16 17
13 14 15 16 17
Brad Lemmon
Executive General Manager
Cement and Lime
Munster plant, Western Australia, lime kiln and raw material storage
11
Adelaide Brighton Ltd Annual Report 2017 CONCRETE AND AGGREGATES
SALES VOLUMES FOR CONCRETE INCREASED IN 2017 DUE TO ROBUST DEMAND
IN THE EASTERN STATES AND AQUISITIONS. EXCLUDING AQUISITIONS, CONCRETE
VOLUME INCREASED STRONGLY SUPPORTED BY BUOYANT DEMAND IN VICTORIA,
NEW SOUTH WALES AND QUEENSLAND, AND STRENGTHENING INFRASTRUCTURE
DEMAND IN SOUTH AUSTRALIA. LIKE FOR LIKE CONCRETE PRICES INCREASED BY 3%.
12
Adelaide Brighton Ltd Annual Report 2017
Aggregates volumes also were higher in
These three acquisitions are consistent
2017 due to acquisitions. A recovery in
with Adelaide Brighton’s long term vertical
South Australian infrastructure demand offset
integration strategy and are performing in
reduced project volumes in other markets.
line with expectations.
Aggregates prices increased by more than
5% reflecting price increases, stronger
demand for high quality product and a
reduction in sales of lower value products.
Over the last decade Adelaide Brighton has
built a concrete and aggregates business of
scale that offers strong regional positions and
strategic aggregates reserves that underpin
Sydney aggregates prices continue to be
returns to shareholders. The business is
supported by the increasing reliance by the
complementary to the cement operations
market on product from operations further
and provides attractive diversification
from the market, which incur higher transport
benefits as well as the ability to capture a
costs to market. Adelaide Brighton’s
greater share of the construction materials
New South Wales quarry operations
production and distribution value chain.
are competitively positioned to supply
demand growth in Sydney and benefit from
strengthening prices.
Over the last five years the Concrete and
Aggregates Division has more than doubled
in size and it now accounts for almost 40%
Concrete and Aggregates revenue, earnings
of Group revenue and a significant and
and margins all improved in 2017 as a result
growing share of profit.
of higher volumes and prices and control
of costs. Revenue and earnings were also
positively impacted by the three acquisitions
completed in 2017: Central Pre-Mix Concrete
and Quarry - an integrated concrete and
aggregate operation in Melbourne; Davalan
Concrete - an Adelaide based concrete
business; and the concrete and aggregates
assets of Holcim in the Northern Territory.
Concrete and aggregates footprint
Established operations
Aquisitions in 2017
George Agriogiannis
Executive General Manager
Concrete and Aggregates
Hy-Tec
Direct Mix Concrete
Southern Quarries
Davalan Concrete
Central
Top: Hy-Tec Alexandria concrete batch plant raw material delivery into underground storage
Water tanks holding 300,000 litres of rain water (see page 22 in Sustainability Report) Bottom:
Hy-Tec Alexandria batch plant control room Southern Quarries Sellicks Hill quarry operations
13
Adelaide Brighton Ltd Annual Report 2017 CONCRETE PRODUCTS
REVENUE DECREASED MARGINALLY IN 2017 AS THE BUSINESS WAS AFFECTED BY WET
WEATHER AND DELAYED PRODUCTS IN THE FIRST HALF BUT RECOVERED MOST OF
THIS IN THE SECOND HALF. WHILE RETAIL SALES REMAINED POSITIVE THERE WAS A
WEAKNESS IN THE MULTI-RESIDENTIAL SECTOR RESULTING IN OVERALL LOWERS SALES
VOLUMES, REDUCED PRODUCTION EFFICIENCY AND DECLINE IN EARNINGS.
14
Adelaide Brighton Ltd Annual Report 2017
During 2017 Adelaide Brighton made
a $3 million investment in an automated
sleeper walling plant at our Stapylton
site in Queensland. This establishes
Adbri Masonry as a leading automated
sleeper wall manufacturer in Australia
and improves our capability of concrete
sleeper retaining walls to complement the
existing segmental retaining wall products.
Adbri Masonry is Australia’s largest
manufacturer of concrete masonry
products, servicing the eastern seaboard
and South Australia residential and
commercial markets.
Concrete Products is an important
and growing customer for the cement,
aggregates and sand business, which
offers vertical integration benefits to
Adelaide Brighton.
We remain optimistic about the outlook
for Concrete Products given the new
sleeper walling plant offers significant
operating efficiencies and sales growth
potential in new market segments and
there are opportunities for reductions in
transport costs and efficiencies from
toll manufacturing arrangements in
the medium term.
Andrew Dell
Executive General Manager
Concrete Products
Adbri Masonry concrete pavers, bricks and retaining walls
used in a variety of architectural and garden applications
15
Adelaide Brighton Ltd Annual Report 2017 JOINT VENTURES
THE POSITIVE TRENDS IN JOINT VENTURES CONTINUED IN 2017. THESE
BUSINESSES OFFER VERTICAL INTEGRATION WITH OUR FULLY OWNED
OPERATIONS AND PROVIDE US WITH ACCESS TO IMPORTANT MARKETS
AND PRODUCTS. THE OUTLOOK FOR THE AUSTRALIAN JOINT VENTURE
OPERATIONS IS POSITIVE GIVEN STRONG DEMAND ON THE EAST COAST.
16
Adelaide Brighton Ltd Annual Report 2017
Independent Cement and Lime
Pty Ltd (ICL) (50%)
Sunstate Cement Limited
(Sunstate) (50%)
ICL, a joint venture between Adelaide
Sunstate is a joint venture between Adelaide
Brighton and Barro Group Pty Ltd, is a
Brighton and Boral Limited. A leading
specialist supplier of cement and cement
supplier to Queensland’s construction
blended products throughout Victoria and
industry, Sunstate has a cement milling,
New South Wales and is the exclusive
storage and distribution facility at Fisherman
distributor of cement for Adelaide Brighton
Islands, Port of Brisbane. Clinker is supplied
and any related body corporate in these
to Sunstate via seaborne shipments from
states.
the Adelaide Brighton Angaston plant and
Continued strength in construction activity
imports from Asia.
across the New South Wales and Victoria
Sunstate’s contribution to Group earnings
markets led to higher volumes, higher selling
increased as demand across south east
prices and increasing demand supported
Queensland remained healthy with residential
a 40% increase in profi t contribution. ICL
demand improving in the Gold Coast and
benefi ted late in the second half of 2017 from
Sunshine Coast regions. Volumes, prices
a price rise to recoup higher input costs.
and margins were all higher than the prior
Burrell Mining Services (50%)
Burrell Mining Services is an unincorporated
corresponding period.
Batesford Quarry
joint venture between Adelaide Brighton and
Batesford Quarry is an unincorporated
Burrell Mining Products. With operations in
joint venture between Adelaide Brighton,
New South Wales and Queensland, Burrell
E&P Partners and Geelong Lime Pty Ltd.
Mining Services manufactures a range of
Batesford Quarry, situated at Fyansford
concrete products exclusively for the coal
Quarry near Geelong in Victoria, undertakes
mining industry.
An improvement in the outlook for coal mines
during the year combined with expansion
quarrying and manufacturing, marketing
and distribution of limestone and quarry
products.
of the product range led to an improvement
Agricultural lime volumes are again strong,
in sales revenue and contribution to Group
supported by demand from other sectors.
earnings.
Mawson Group (Mawsons) (50%)
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
Cost control maintained margins, leading to
an improved contribution to Group earnings.
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.
producer in the region, generally holding the
Earnings from APM declined as result of
number one or number two position in the
higher costs from energy.
markets it serves.
Earnings improved signifi cantly as strong
demand to major projects lifted volumes and
margins with improved pricing for high value
aggregate products.
Michael Miller
Executive General Manager
Marketing and
International Trade
Top: Independent Cement and Lime facility at Port Melbourne Brightonlite® off-white cement
is used to create visually interesting aesthetic appeal on curved walkway Bottom: Sunstate
Cement facility at Fishermans Island in the Port of Brisbane Low heat cement (LH) used
in bridge structures to minimise risk of thermal cracking in mass concrete pours
Adelaide Brighton Ltd Annual Report 2017
17
SUSTAINABILITY REPORT
THIS SUSTAINABILITY REPORT SHOULD BE READ IN CONJUNCTION WITH OTHER
SECTIONS OF THIS REPORT AND ITS FINANCIAL STATEMENTS. THE DIRECTORS’
REPORT, CORPORATE GOVERNANCE OVERVIEW AND REPORTS ON REMUNERATION,
PEOPLE AND DIVERSITY AND HEALTH AND SAFETY ALL CONTAIN INFORMATION
RELEVANT TO THE SUSTAINABILITY PERFORMANCE OF THE GROUP.
2018
Adelaide Brighton Ltd Annual Report 2017
At Adelaide Brighton, sustainability is about managing our business to ensure success for the long term. Our
commitment to sustainability is built on a sound business strategy that supports continuous improvement in the social,
environmental, and economic performance of the Company. We do this by continually analysing our activities and
considering the needs of all stakeholders to identify key opportunities for improvement and sustainable development.
Environment
Eco-effi ciency
Impact management
Product life cycle
Emission reduction
Waste utilisation
Site rehabilitation
Process waste reduction
Mains water effi eciency
Local environmental effects
Greenhouse gas reduction
Energy effi ciency
Alternative fuels
Alternative raw materials
Supplementary cementitious materials
Sustainable
business
Social
Employee resources
Stakeholder relations
Community interaction
Diversity and inclusion
Economic
Economic viability
Assurance of supply
Shareholders
Government
Customers
Product development
Corporate citizenship
Developing a skills base
Safety
Governance
Integrity
Compliance
Risk management
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.
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.
Source: Cement Industry Federation
Birkenhead plant, South Australia, Schroder Park wetland Top: Phyllota Humifusa (see page 22
Sustainability Report - Concrete and Aggregates environmental innovation) Shell grit, a by-product of
dredging operations, is used as mulch in revegetation programs at the Munster site in Western Australia -
an innovative and cost-effective way to address waste while also assisting with dust suppression.
Prenzlau State School participated in the revegetation program at Coominya Quarry in Queensland
Adelaide Brighton Ltd Annual Report 2017
19
The Adelaide Brighton Group includes
Adelaide Brighton Limited and the entities
Key performance indicator
Alternative fuels and energy consumption
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 22
Discussion in Annual Report
it controls (the Group), as well as a number
Alternative raw materials
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 22
of joint ventures. This report excludes
Carbon emissions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 21
information about the joint ventures as their
Employee turnover by age group
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 25
operations are not material to the Group’s
Employee turnover by gender
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 25
sustainability reporting.
Employee turnover by geography
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 26
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 2017, unless otherwise
indicated.
Employment by contract status
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 27
Employment by employment status
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 27
Employment by geography
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 26
Energy by source
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 22
Lost time injury frequency rate
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 25
Mains water usage
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 22
Participation of women in the Company
. . . . . . . . . . . . . . . . . . . . . .
Page 31 - Diversity Report
% of employees on EBAs vs staff
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 27
Restricted duties injury frequency rate
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 25
Other reports
Coverage of organisation defined benefit plan obligations
. . . . . . . . . .
Page 106 -109 - Note 26
In developing this report, the following
Direct economic value added (sales, costs, employee
resources have been considered:
compensation)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 70 - Income Statement
>
The Global Reporting Initiative
Page 79-80 - Note 5 and 6
G4 Sustainability Reporting Guidelines.
Monetary value of fines and total number of non-monetary
>
ESG Reporting Guide for Australian
sanctions for non-compliance with laws and regulations
. . . . . . . . .
Page 47 - Directors’ Report
Companies prepared by the Australian
Council of Superannuation Investors
Environment Performance
and the Financial Services Council.
Tax Transparency Report
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pages 28-29
>
The Cement Sustainability Initiative
of the World Business Council for
For further information about the sustainability report email
>
>
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.
Tax Transparency Report
In 2017 Adelaide Brighton advised
the Australian Taxation Office that the
Company would sign up to the voluntary
Tax Transparency Code. This Sustainability
Report includes Adelaide Brighton’s initial
report under this Code.
adelaidebrighton@adbri.com.au or telephone 02 8248 9911.
Sustainable principles and practises, innovation and continuous
improvement in environmental performance are a natural part of
business at Adelaide Brighton and help to ensure the Company’s
long term success in a changing world. We are aware that our
operations are fuelled by natural resources from the environment
in which we live and we are always respectful of the local
communities we operate in close proximity to.
The CEO and Managing Director oversees
The business adheres to strict licensing and
These process emissions account for
and approves the Company’s sustainability
mandatory reporting conditions but, just as
approximately half of total carbon emission,
framework, the Group’s key performance
importantly, continually undertakes voluntary
with the balance generated directly through
indicators and the scope of this report.
measures to ensure the natural environment
the use of thermal fuels as well as indirectly
The key performance indicators listed below
and local communities we operate within are
through the use of electricity.
have been assessed to be material to the
not adversely affected by our activities.
Group’s sustainability performance.
Carbon emissions
Expanding the use of mineral additions
(limestone and shellsand) as a cement
clinker substitute is a key focus area within
Our manufacturing process is energy
the business. Mineral additions reduce the
intensive, requiring temperatures between
volume of clinker required therefore lowering
1000C and 1400C degrees for the
the greenhouse gas footprint without
calcination process to produce lime and
compromising product.
cement clinker (an intermediary product
in the process to manufacture cement).
20
Adelaide Brighton Ltd Annual Report 2017
Over a period of seven years Adelaide
Environmental Management Standards
Additionally the combustible waste no
Brighton has recorded reduced carbon
emissions as a result of delivered projects
that reduced greenhouse gases (scope
1 and 2). Following the completion of
these initiatives our carbon emissions
plateaued in 2017.
The Group Environmental Management
Standards (EMS) Project will align the
longer ends up in landfill, further abating
greenhouse gas emissions.
business with what has been determined
Adelaide Brighton continually refines the
as the most important requirements of the
process to increase the burning rate of the
Environments Standard ISO 14001:2016.
fuel and is seeking an amendment to the
The Project, launched in 2017, is designed
product specification to allow an increase
In addition, Adelaide Brighton will continue
to achieve the following goals:
in plastic content of the fuel which will
To enhance environmental performance.
increase the calorific factor of the fuel and
Provide confidence to stakeholders that we
at the same time removing additional non-
are an environmentally responsible business.
recyclable plastic from landfill.
is support changes to the Australian
Standard to allow for higher mineral
addition in cement manufacture to assist in
transitioning to lower emissions cement.
Total carbon
emissions
13 14 15 16 17
Process waste
to landfill
‘000
tonnes
3600
3200
2800
2400
2000
‘000
tonnes
200
150
100
50
>
>
>
>
>
>
Minimise the risk of environmental breaches.
Standardise our documentation to create
a consistent approach across the Group.
Drive measurable continual improvement.
Improve Adelaide Brighton’s culture of
commitment to achieving environmental
improvement and sustainability.
The key components of work include:
>
Integrating Environmental Standards with
the Health and Safety Standards.
>
Strengthening the connectivity between
the incident management procedure and
the risk management procedure.
>
Initial Environmental Review (IER) - The
Utilisation of recycled waste oil
Waste oil from the commercial, mining
and resources industries, once filtered
and prepared to specification, is a valuable
energy source - as a replacement for
natural gas - in a cement and lime kiln.
The rate of utilisation of waste oil can
be restricted by the availability of reliable
and economic supply to quality
specifications. Quality specification is
important to ensure the integrity and
maintenance of our equipment and limit
the impact on our products.
EMS Project has implemented the IER
>
Angaston plant in South Australia
for conducting environmental review of
consistently utilised waste oil, increasing
the aspects and impacts related to the
their usage in 2017 by 28% over the
Company’s activities, products and
previous year. We are targeting a further
services at operating sites. The aspects
15% increase in the use of waste oil at
and impacts at a site can then be evaluated
the Angaston plant in 2018, dependent
with the risk management process and to
on availability of a reliable source of
determine the effectiveness of our controls
waste oil that meets our specification.
to manage environmental impacts.
>
Dongara plant in Western Australia
13 14 15 16 17
Cement and lime
Concrete and aggregates
Concrete products
Cement and Lime
Process engineered fuel
The burning of waste derived fuel (recycled
construction and demolition waste) in the
clinker production process at the Birkenhead
plant in South Australia displaces natural
Environmental improvement
gas thereby reducing the site’s greenhouse
initiatives
gas emissions.
reintroduced the use of waste oil in their
lime kiln in 2017 following access to supply
from the mining and resources sector.
>
Mataranka plant in Northern Territory
continues to use waste oil as a kiln fuel
albeit usage was marginally down in
2017 as a result of reduced market
demand for lime.
Continuous improvement is embedded in
the culture at Adelaide Brighton. We strive
to continually improve our environmental
performance through innovative processes
to reduce our environmental footprint.
Our Divisions identify environmental aspects
impacting our sites and Environmental
Improvement Plans are formalised with
target outcomes and timelines. A range of
initiatives were undertaken throughout
the year.
Adelaide Brighton’s target is to increase
the utilisation of process engineered
fuel to 30% of the Birkenhead plant’s
kiln fuel requirement.
Adelaide Brighton Ltd Annual Report 2017
21
Energy efficiency
Reduced power system losses, increased
load availability using existing equipment
and a reduction in carbon emissions were
achieved following power factor correction
implementation at the Angaston plant.
Concrete and aggregates
Water efficiency
Water is a valuable resource, and essential to
the production of concrete and aggregates.
To improve water efficiency, the following
projects were undertaken during the year:
>
The new Hy-Tec concrete batch plant at
Larapinta in Brisbane has been designed to
capture all rainfall events on site and hold
this water for recycling through the plant for
premixed concrete production. In addition,
the wedge pits around the plant allow for
capture of fines generated at the site.
The underground water tanks hold 266,000
litres allowing for washing down of the plant
and premixed concrete production.
>
The Hy-Tec concrete batch plant at
Alexandria in metropolitan Sydney is unique
in that it is a purpose built concrete plant
retrofitted into a fully enclosed building. All
rainwater from the building roof is captured
and stored in 300,000 litre capacity tanks
and is used in the premixed concrete
production process.
Environmental innovation
Phyllota Humifusa - a vulnerable plant under
the Environmental Protection and Diversity
Conservation Act 1999 and a threatened
species under Section 2, The Threatened
Species Conservation Act 1995, was
identified with the approved extraction zone
of the Hy-Tec Penrose Quarry located in the
southern highlands of New South Wales.
Hy-Tec established an onsite Phyllota
Humifusa nursery and has succeeded in
transplanting the vulnerable shrub and
incorporating its re-establishment in the
quarry rehabilitation process.
Megalitres
Mains water
usage
800
600
400
200
13 14 15 16 17
Cement and lime
Concrete and aggregates
Concrete products
Terajoules
Alternative fuels
energy consumption
1600
1200
800
400
13 14 15 16 17
Demolition material
Industrial waste
Waste oil
% alternative fuels
of total energy
%
substitution
Alternative raw
materials
‘000t GHG
saving
30
25
20
15
10
900
750
600
450
300
13 14 15 16 17
GHG saving
% SCM substitution
(by-products of
industrial processes -
slag from the steel
manufacturing
industry and fly ash
from coal fired
power stations)
Noise abatement improvement program
Our Birkenhead plant is located in an
industrial zone but adjacent to a residential
area. A focus of the Birkenhead plant’s
Environmental Improvement Plan has been
the implementation of projects to reduce
noise emission. Our objective has been to
discuss and review with our Community
Liaison Group our priorities for noise impact,
and then take a range of actions to reduce
noise. In 2017, two new silencers were
installed on dust collectors.
To establish a baseline of noise level and
to assess the success following completion
of the noise abatement projects, regular
monitoring and noise mapping are
undertaken in and around the plant.
Dust mitigation measures
The Birkenhead manufacturing process
involves the movement of materials, leading
to the risk of fugitive dust emission. The
following initiatives were undertaken to
reduce the risk of dust emission outside
of the site:
>
Bitumen sealing of all heavy traffic
areas at the Birkenhead plant completed.
>
All traffic movements are now on sealed
surfaces thereby reducing fugitive
particulate emissions and allowing for
regular road sweeping.
>
A dedicated cart used to apply dust
suppressant and road sealing agents to
all external raw material stockpiles and
unsealed access roads whenever they are
being worked on regularly and reclaimed.
>
Installation of a new fully enclosed conveyor
system at the Birkenhead plant to allow
all internal site clinker movement to occur
without the use of trucks to reduce the
risk of fugitive particulate emissions
from the site.
Energy by source
Liquid fuels
Coal
Natural gas
Demonlition material
Industrial waste
Waste oil
Electrcity
22
Adelaide Brighton Ltd Annual Report 2017
Concrete products
Quarry vegetation program
Community
A range of improved initiatives were
undertaken across the Concrete
Products division.
Energy efficiency
Queensland - school based training
Our Calcium quarry near Townsville and
Coominya quarry near Toowoomba in
Queensland facilitated a program with
Adelaide Brighton is committed to being
a socially responsible member of the
communities in which we operate.
school children from local primary schools
Through our community support program
>
Replacement of mercury vapour lights
to educate them on geology, quarry activities,
we aim to make a valued and sustainable
across our plants in Queensland and
environment and products which forms
contribution to the communities in which we
New South Wales with energy efficient
part of their curriculum. The children were
operate by investing in primarily community
LED lighting.
involved in tree planting rehabilitated parts
based organisations and children services;
>
Design of the new concrete sleeper plant
at the quarry with trees native to the area.
supporting specialised higher education
at Stapylton in Queensland incorporated
Planting has been focussed on eucalyptus
programs and environmental education
increased use of natural lighting in
trees to provide a habitat and food
through local school’s participation in
operational areas and increased air flow
for koalas.
to facilitate ventilation of the space resulting
in reduced reliance on lighting and fans.
>
Power factor correction was implemented at
the Maroochydore plant resulting in reduced
power system losses, increased load
availability using existing equipment and
a reduction in carbon emissions.
Dust minimisation
Smoking seed trials at Munster
The Munster plant in Western Australia
have trailed and successfully revegetated a
significant node using smoking techniques
for seed which promotes quicker germination
of seedlings and produces healthier plants.
Scientists have found that chemicals in
smoke, rather than fire or heat, are the main
An upgrade of the raw material storage
catalyst in germinating hard to grow species
area at the Campbellfield site in Victoria to
of Australian natives. Over 1,000 seeds were
incorporate a covered raw material conveyor
treated with smoke and spread to previously
loading location to significantly reduce the
mulched areas on site with positive
risk of raw material dust being released
germination results.
vegetation programs and wetland education:
>
In 2017, Adelaide Brighton partnered
with the South Australian Little Athletics
Association, an organisation which promotes
happy, healthy communities and young
people, as well as assisting families and
children across the State.
>
We supported Variety the Children’s
Charity - benefitting sick, disabled and
disadvantaged children.
>
Our Cement and Lime Division in Western
Australian provided support to the
Indigenous Basketball Academy.
Investing in education
Our investment in education includes:
>
The South Australian Indigenous Law
Student Mentoring Program. This program
supports indigenous law students during
study and to facilitate transition as
graduates to legal practice.
Penrice quarry visual concealment
The Penrice Quarry in Angaston north
of Adelaide implemented a native species
vegetation project to ensure the natural
appearance of the quarry area is
maintained through the minimisation of
the visual starkness of the quarry excavation
>
St Peter’s College / Adelaide Brighton Ltd
area and of quarry product stockpiles.
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.
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.
Scholarship. An indigenous secondary
school scholarship to provide tuition and
boarding for an indigenous student.
>
Support for the STEM Program (Science,
Technology, Engineering and Math) for
Year 10 and 11 secondary school students
through the University of Wollongong.
>
Women in Engineering Scholarship at the
University of Wollongong which provides
both a financial benefit and work
placement opportunity.
>
University of Technology Sydney
Women in Engineering Scholarship.
>
University of Adelaide Engineering
Scholarship.
>
Participation in the Kwinana Industries
Council iWomen and iScience projects
and an inaugural Women in Industry
Open Day in Adelaide.
>
Vacation employment program in
Adelaide, Perth and Sydney.
Adelaide Brighton Ltd Annual Report 2017
23
off site.
Reduction of gas use for curing
Operational changes and modifications to
concrete products plants in Maroochydore,
Queensland, and Ottoway, South Australia,
have led to the reduction of natural gas
usage for curing of concrete products.
Landcare and rehabilitation
Geelong Quarry rehabilitation
Rehabilitation works are continuing at the
Geelong Quarry to prepare the site for future
usage post quarry activities. Stable slopes of
significant height and length to support future
urban development have been constructed.
Previously a significant liability, the site is
undergoing a significant transformation to
prepare the area for future development,
along with a lake and open public area
integrating the site into the Geelong
urban area.
Austen Quarry vegetation program
The Austen Quarry in the Blue Mountains
west of Sydney undertakes progressive
rehabilitation of quarried areas focusing
on vegetation native to the area. In 2017,
about 2,000 native trees were planted in
and around the quarry and the adjacent
Cox’s River area.
24
Adelaide Brighton Ltd Annual Report 2017
HEALTH AND SAFETY
Adelaide Brighton employs a diverse
The increase in the RDIFR is attributable
Employee well-being
workforce of more than 1500 people across
to our continued strong focus on early
approximately 130 locations throughout
intervention injury management. This practice
Australia. Our commitment to health and
ensures that even minor injuries receive
safety is an essential and integral part
medical attention as soon as is possible.
of the way we do business.
While the negative outcome of this can
Safety remains a key performance indicator
at the business and Group level. In 2017
year we recorded a Lost Time Injury
be an increase in short duration restricted
duty injuries, the positive outcomes are a
reduction in injury severity and duration.
Focused effort has been applied to
increase the awareness and take up of
the Employee Assistance Program (EAP),
offered to employees and their families
resulting in increased utilisation of the
service. The Program is a voluntary,
work based program that offers free and
confi dential assessments, short term
Frequency Rate (LTIFR) of 2.6 compared
Our continued focus on contractor
counselling, referrals and follow up services
to 1.7 at December 2016.
management and the utilisation of SitePass,
to employees and their families who have
One of the main contributing factors was
the three acquisitions made in the 2017 -
where the maturity level of safety processes
and systems in those businesses lagged
behind Adelaide Brighton. As part of our
the contractor management system
personal and/or work related problems.
implemented late in 2016, has provided
EAP counsellors also work in a consultative
focus in managing this area of critical risk.
role with managers and supervisors to
Drug and alcohol screening
challenges and needs.
address employee and business
post aquisition strategy, we quickly embed
Our Group drug and alcohol screening
In addition, Adelaide Brighton supports
our safety systems and processes into the
program resulted in nearly 7,000 tests
R U OK? Day dedicated to remind
aquired businesses.
of workers across 81 sites for drugs
our workers to ask family, friends and
Notwithstanding the rise in LTIFR in 2017,
the continuing low level of LTIs underlines
Adelaide Brighton’s determination to have
a safe workplace. Safety is not just about
processes and procedures, it is a culture.
and alcohol during 2017. Our screening
colleagues the question, R U OK? in
program extends to contractors on site
a meaningful way, because connecting
including during our major maintenance
regularly and meaningfully is one thing
programs. Results of our testing revealed
everyone can do to make a difference
positive drug results of 0.63% compared
to anyone who might be struggling.
to 3.4% of benchmark data. Alcohol
We recorded a Restricted Duty Injury
screening resulted in a 0.3% positive result.
Frequency Rate (RDIFR) of 19.0 at
These results confi rm that the design of
December 2017 compared to 12.3 the
the program is acting as a deterrent to
prior year.
prevent workers arriving for work at our
sites in an impaired state, improving the
safety of all stakeholders.
%
turnover
Employee turnover
by age group
% of
employees
Employee turnover
by gender
Frequency
Restricted duties
injury frequency rate
Frequency
Lost time
injury frequency rate
80
60
40
20
100
75
50
25
40
30
20
10
6.0
4.5
3.0
1.5
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
Female Male
Continuers
Turnover
13 14 15 16 17
13 14 15 16 17
Concrete and aggregates
Concrete products
Cement and lime
Total
Concrete and aggregates
Concrete products
Cement and lime
Total
Adelaide Brighton Cement Birkenhead public multi-purpose park Concrete testing in laboratory
and in fi eld Southern Quarries Sellicks Hill Quarry donated a 6 tonne marble rock to the Sellicks
Community for an ANZAC Memorial. After quarrying the marble rock, Southern Quarries arranged
for polishing of the rock and the plaque before presentation at the Anzac Day service Adelaide
Brighton Cement Birkenhead inaugural Women in Industry Open Day participants Students
from Prenzlau State School participating in the revegetation program at Coominya Quarry in
Queensland Adelaide Brighton Cement sponsors South Australian Little Athletics Association
Adelaide Brighton Ltd Annual Report 2017
25
PEOPLE AND DIVERSITY
Adelaide Brighton is committed to being
As employees of Adelaide Brighton,
an inclusive workplace that values and
we know it’s the abilities of our people,
Leadership talent priorities
promotes diversity of skills, experience and
applied every day that contributes to our
cultural background. We recognise that an
success. Our growth provides constant
inclusive culture enables us to attract and
opportunities for people to progress and
retain the best people with the appropriate
take on challenges and responsibilities,
skills to contribute to the continuing success
or the satisfaction of a job well done.
of our business. The core objectives which
form the foundation of our approach
to diversity and on which we measure
performance are:
>
Promotion of a culture of diversity
and inclusion.
We want more of our potential employees
employees.
to know what it is like to work at Adelaide
Brighton. To help spread this message we
have added two employment videos to
the Adelaide Brighton Careers page
>
Recruitment and selection processes
which seek out candidates from a diverse
Training
Inclusive leadership
Build understanding and accountability
>
for leaders to demonstrate inclusiveness,
adapting leadership style to obtain
maximum contribution from all our
Build a capability and retain
company knowledge
Continue to monitor and invest in
>
talent/growth plans for executive
successors and future leaders.
>
Provide opportunities for mentoring,
background and with selection decision
The executive team and 50 senior
secondments and cross Division
being based on merit.
leaders from within the business completed
collaboration.
Development of inclusive leaders.
inclusion training; what can we learn from
Building talent pipelines.
others, what needs to be different and
Rewarding and remunerating fairly.
what commitments will we make.
>
>
>
>
>
Inclusive leadership enables:
Diversity
Increased employee engagement
Greater collaboration, less silos
Engagement
Ensure appropriate strategies and
>
in place for Executive successors
and future leaders to maximise
development, engagement and
retention.
>
Continue to improve employee
Providing fl exible work practices.
Understanding the diversity of our workforce.
Adelaide Brighton’s target
of 30% female board
representation by the end
of 2018 is consistent with
the aim of the 30% club
for ASX200 Companies
>
>
>
>
>
>
Diversity and inclusion
Our goal is to establish a culture across
our business where diversity is the norm
and where women feel they can thrive and
actually do so - and the business sees the
winning results.
One of our initiatives to enable this is our
Careers page on our Adelaide Brighton
website to showcase “Women in Adelaide
Brighton”. The objective of the page is
to highlight to potential candidates the
opportunities that our organisation offers
women. We have profi led a selection of
women from across our business, including
those who have demonstrated internal
career progression, those who work in
non-traditional roles and high potential
employees.
26
Adelaide Brighton Ltd Annual Report 2017
Innovation - asking questions that initiate
engagement.
further exploration, problem solving,
value creation, adaptability
Increases customer engagement
Improvements to safety.
Talent review - succession planning
Leaders who deliver safe,
sustainable production
Ensure our leaders understand the
>
value of safety to our business and
model behaviours that communicate
their understanding of safety as a
Succession planning identifi es and develops
value to our people.
new leaders through a number of initiatives
>
Day to day communications and
including cross Divisional development
decisions reinforce safety is as
opportunities and increases the availability
important as production.
of experienced and capable employees.
Employment
by geography
Employee turnover
by geography
South Australia
New South Wales
Western Australia
Queensland
Victoria
Northern Territory
Tasmania
ACT
South Australia
New South Wales
Western Australia
Queensland
Victoria
Northern Territory
Tasmania
Frontline management training
Adelaide Brighton’s Mentoring Program
Our investment in frontline management
Formal mentoring programs are in place
builds the capability and effectiveness
across our business with mentors and
of our managers so they can bring
mentees participating in workshop training,
out the best in our employees.
webinars and individual coaching sessions.
CASE STUDY
CASE STUDY
Kerryn Girdler - Human Resources
Mathew McEwan - Mentee - Plant Manager,
Business Partner, Concrete Products
Euro and Wetcast, Concrete Products
“The frontline management training
“During the mentoring period, the role of
program is aimed at potential people
Manager for the Euro and Wetcast plants
leaders. We have found there is huge
became available at our Stapylton plant in
value for experienced leaders to expand
Queensland. Having Michael as a mentor
the number of tools that they use.
at the time and knowing I had his guidance
This has created an awareness that
sometimes there are alternatives to the
approach previously taken that will
deliver an improved result.”
Thomas Garrick - participant
and support gave me the confidence to
apply for and ultimately take on the new
and challenging position.
The relationship I built with Michael, the
advice and insights he has shared have
been enlightening and invaluable to my
(Promoted to Maintenance Manager
development and success in my new role.”
Stapylton, Concrete Products)
“I have learnt a great deal from the frontline
management program. During training I
Michael Dorrough - Mentor - National
Operations Manager, Concrete Products
realised I can be a direct person - this
“In 2017 the Concrete Products Division
can be positive and negative. I communicate
increased the focus on identifying, supporting
with quite diverse groups of people each
and developing talent within the business to
day. I now approach them differently.
strengthen our succession planning profile.
I was recently appointed to a Manager
In addition to Mathew’s success, another
position. Applying what I have learnt in
success story came to light during the sleeper
the frontline management training sessions
walling project at Stapylton in Queensland. An
has allowed me to efficiently transition
onsite mechanical fitter allocated to the project
out of being ‘one of the boys’ to being a
continually exhibited excellent leadership,
Manager. Learning the difference between
communication and project management skills.
leadership vs management has highlighted
strategies and techniques to being a
more effective leader.
His actions highlighted his abilities, indicating
an exceptional talent within the business.
With our current people development
I have learnt a lot about myself and there
programs, this is another example of how
are plenty of opportunities for me to work
we are strengthening our frontline
on and I now realise that my personal
management capabilities and promotion
development will be ever evolving.”
potential within the organisation.”
% employees
on EBA vs staff
Employment by
employment status
Employee by
contract status
EBA
Staff
Full time
Casual
Part time
Permanent
Fixed term
Dimity Smith
Executive General Manager
Human Resources and
Heath, Safety and
Environment
27
Adelaide Brighton Ltd Annual Report 2017 TAX TRANSPARENCY REPORT
This Report is prepared in accordance with
The ETR is presented under three scenarios
Adelaide Brighton’s voluntary adoption of
below: accounting profit; accounting profit
the Tax Transparency Code and provides
excluding equity accounted earnings; and
information regarding Adelaide Brighton’s
accounting profit excluding equity accounted
tax contribution, its approach to tax strategy
earnings and income tax expense excluding
and governance, and its international
capital losses recognised. The reason for this
related party dealings during the year ended
is to provide maximum transparency.
31 December 2017. Adelaide Brighton
publishes this Report on a voluntary basis as
part of its commitment to tax transparency.
Effective company tax rate
In accordance with accounting standards,
the share of after tax profits generated
by Adelaide Brighton’s joint ventures and
associates is recognised by the Group in
the income statement. Adelaide Brighton
The Australian company tax rate is currently
also maintains a balance of capital losses
30% of taxable income. Taxable income
that may be recouped to offset capital
represents gross income minus amounts
gains incurred for tax purposes. During
that are treated as deductible or exempt
the year ended 31 December 2017,
%
40
30
20
10
Adelaide Brighton Ltd
2017 effective tax rate
ETR
ETR
excluding
equity
accounted
earnings
ETR
excluding
equity
accounted
earnings
and losses
recognised
Australian operations
Global operations
Australian corporate tax rate
under the tax law.
The Effective Tax Rate (“ETR”), being tax
expense divided by profit before tax, for
Adelaide Brighton’s Australian operations
is 27.7% for the year ended 31 December
2017.
The ETR differs to the company tax rate
due to non-temporary differences, which
represent amounts that are recognised as
assessable or deductible for accounting
purposes or tax purposes, but not both.
Income tax expense is an accounting
concept that is different to income tax
payable. Income tax expense reflects the
amount of income that is assessable for
$1.1 million of capital losses were
recognised to offset capital gains.
The inclusion of equity accounted earnings
Adjusting for equity accounted earnings
in accounting profit, and the inclusion of
and capital losses not previously recognised,
capital losses recognised in income tax
Adelaide Brighton has an effective tax rate
expense, may distort the ETR and removing
of 29.9% percent for the year ended
these items from the ETR provides a more
31 December 2017.
transparent representation.
The global ETR recognises the accounting
profit attributable to Adelaide Brighton’s
minority interest in our Malaysian based
associate. Additional information in relation
to Adelaide Brighton’s international related
party dealings is provided later this Report.
tax purposes regardless of the timing of
Effective tax rate
the assessability. In contrast, income tax
payable reflects the amount of income
that is assessable in the current year.
Australian operations
Australian operations - excluding equity accounted earnings
%
27.7
29.8
Australian operations - excluding equity accounted earnings and capital losses recognised 29.9
Global operations
Global operations - excluding equity accounted earnings
27.5
29.8
Global operations - excluding equity accounted earnings and capital losses recognised
29.9
28
Adelaide Brighton Ltd Annual Report 2017
Reconciliation of accounting profit to income tax expense
As Adelaide Brighton holds a minority interest
and income tax payable
The reconciliation of accounting profit to income tax expense and income tax payable contained
in this Report is published in a summarised form in Note 7 in the 2017 Financial Statements.
$ million
Accounting profit before tax
Prima facie tax payable (at 30 percent)
Tax effect of non-temporary differences:
Non-allowable expenses
Non-assessable income
Rebateable dividends
Other deductions
Previously unrecognised capital losses
Income tax expense before prior year true up
Tax effect of temporary differences:
Higher accounting depreciation compared to tax depreciation
Timing of deduction for consumables
Timing of deduction for provisions
Recognised tax losses deductible against taxable income
Deduction for accruals on payment
Timing of deduction of prepayments
Other timing differences
Income tax payable
in APM, it does not have effective control
of APM nor is it involved in the day to day
management of the company. In addition,
the Shareholders’ Agreement specifically
requires that any related party agreements,
arrangements or dealings must be on
arm’s length terms as if conducted by two
independent parties. As a result of these
measures, Adelaide Brighton’s dealings with
APM, which are limited to the purchase of
clinker, are conducted on a commercial
arm’s length basis.
Tax contribution summary
Adelaide Brighton paid/will pay in excess
of $85 million in Commonwealth, state and
territory taxes in respect of the 2017 year.
Taxes borne by Adelaide Brighton
$ million
Corporate income tax1
Fringe benefits tax 2
Payroll tax 3
Property tax
71.8
Total
2017
2016
71.8
70.8
1.2
8.8
3.6
1.3
8.2
3.7
85.4
84.0
254.2
76.3
2.6
(3.4
)
(4.6
)
(0.7
)
(0.3
)
69.9
1.2
(0.7
)
0.1
(0.3
)
0.6
(2.5
)
3.5
Identification of material temporary
Adelaide Brighton is committed to being a
and non-temporary differences
responsible corporate citizen and actively
Material adjustments for non-temporary
items that reduce income tax expense relate
primarily to differences in the accounting and
seeks to contribute to the well being of
shareholders, customers, the economy
and the community.
tax treatment of income derived from joint
Adelaide Brighton reflects these
ventures and associated entities as outlined
commitments in its approach to taxation
above. Non-assessable income in relation to
with a high focus on meeting its various tax
1 Corporate income tax paid is based on the year end
provision and will be finalised when the income tax
return for the year ended 31 December 2017 is
due for lodgement in mid-2018.
2 Fringe benefits tax paid in respect of the year ended
31 March 2017
3 Payroll tax paid in respect of the year ended 30 June 2017
Adelaide Brighton also collected
$61.4 million in net GST after input tax
credits on behalf of taxation authorities.
an accounting gain on a bargain purchase
obligations. Strong internal processes and
In this Report references to ‘Adelaide
was also recognised in respect of a
engagement of expert advisers ensures
Brighton’, ‘the Group’ and ‘our’ refer to
business acquisition.
Adelaide Brighton is fully compliant with
Adelaide Brighton Limited and its wholly
Adjustments for temporary differences
relate to differences in the timing between
an amount being derived/incurred for
accounting purposes and the amount
being assessable/deductible for tax
purposes. During the year, temporary
its taxation obligations. Adelaide Brighton
owned subsidiaries.
also seeks to maintain a professional and
transparent relationship with
taxation authorities.
International related party dealings
This Report has not been independently
audited, however, disclosures are consistent
with the audited financial statements.
differences primarily related to differences
Adelaide Brighton has limited international
in the timing of deductions for expenses
related party dealings. The Group holds
such as depreciation, provisions, accruals,
a 30% equity interest in Aalborg Portland
prepayments and consumables.
Malaysia Sdn. Bhd. (“APM”), a manufacturer
of white clinker and cement based in Ipoh,
Tax strategy and governance
Malaysia. The majority 70% owner of APM is
Adelaide Brighton is committed to the
highest standards of corporate governance
and its approach to taxation aligns with
its corporate governance strategy and
Code of Conduct.
Aalborg Portland A/S, a Danish subsidiary of
an Italian multinational cement and concrete
producer, Cementir SpA. Adelaide Brighton
is not related to Cementir SpA.
Adelaide Brighton Ltd Annual Report 2017
29
DIVERSITY REPORT
Adelaide Brighton is committed to being an
In 2017, we continued to embed our
The appointment of Dr Guthrie was also
inclusive workplace that values and promotes
performance delivery enabling our Diversity
in line with Adelaide Brighton’s goal of
diversity of skills, experience and cultural
and Inclusion Policy which outlines seven
improving diversity across all levels
background. We recognise that an inclusive
core objectives which form the foundations
of the Company.
culture enables us to attract and retain the
of our approach to diversity and upon
best people with the appropriate skills to
which we measure our performance in
contribute to the continuing success
this area.
of our business.
An overview of these objectives, and
our progress towards achieving these
objectives during the 2017 financial year,
As part of the board’s renewal program,
are set out below:
following an assessment of the Board’s skills
matrix, in February 2018 Dr Vanessa Guthrie
was appointed a non-executive Director.
Objectives Diversity measures to facilitate achievement of objectives Progress
To promote a culture of
diversity and inclusion
Continue to align our business activities with our Diversity
and Inclusion Policy to achieve the objectives approved by
the Board and Nomination, Remuneration and Governance
Committee of Adelaide Brighton.
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 an inclusive workplace culture.
Proactively engage with industry to enhance inclusion and
increase diversity.
Company-wide training in workplace policies
(including diversity, anti-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 gender bias
does not influence outcomes.
Promote Adelaide Brighton as a diverse employer with
an inclusive culture.
As a member of the Cement Concrete & Aggregates
Australia (CCAA) and their Diversity Working Group, have contributed
to the development of inclusive strategies to attract a diverse group
of people to work in heavy construction materials industry including:
Revised CCAA Diversity Statement for approval of the Extractive
Industries Committee and the CCAA National Council.
Launch of on-line management systems provide effective platforms
for employee and contractor inductions and training, complimenting
face to face workshops including content on Company policies
such as equal employment opportunity and anti-bullying.
Recruitment training continues across the business to support and
enable diverse candidate pools and to eliminate any unconscious
bias that may occur. 15% of all new hires in 2017 were female
with 31% of staff roles filled by female candidates.
Advertising templates for vacancies refreshed to ensure ads are
attractive to a diverse pool of job seekers with an increased offering
of on-the-job training. 66% of roles advertised in 2017 attracted
female applicants.
ABL mentoring program for high potential employees
facilitated across the divisions to continue to develop
inclusive leadership.
Mentoring program deployed across all divisions with 28 mentors
and mentees attending workshop training, webinars and
1:1 coaching sessions for a shared positive mentoring experience.
Executive and 50 senior leaders completed inclusion training; what
can we learn from others, what needs to be different and what
commitments will we make.
To ensure that
recruitment and
selection processes
seek out candidates
from a diverse
background, with
selection decisions
being based on merit
Develop inclusive
leaders who value
diversity of opinions
and challenge the
status quo
Build talent pipelines
through investment in
skills and capabilities
Ensure performance, development and succession
management processes support the career progression of
individuals regardless of factors that are not applicable to the
inherent requirements for the position.
Development programs are provided for individuals as part
of ‘Our Business My Potential’ program.
Talent and succession management process proactively
challenges and promotes gender representation.
4.3% of women and 2.3% of men were promoted internally in 2017.
Sponsor or encourage professional networking, coaching
programs and cross divisional projects to give employees
the opportunity to connect with other professionals.
Where identified, these programs continue to be supported
across the organisation.
(continued next page)
(continued next page)
30
Adelaide Brighton Ltd Annual Report 2017
Objectives Diversity measures to facilitate achievement of objectives Progress
(continued)
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 entering
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.
Continued sponsorship of the Women in Engineering program
at the University of Wollongong in 2017 that provides both a
financial benefit and a work placement opportunity.
Engineering scholarships in place at University of Adelaide
and University of Technology Sydney.
Sponsorship of STEM Program (Science, Technology, Engineering
and Math) for Year 10 and 11 high school students.
Vacation employment programs in place in Adelaide, Perth and
Sydney; Participation in Kwinana Industries Council iWomen
and iScience projects; and inaugural Women in Industry
Open Day in Adelaide.
Sponsorship of the SA Law Society Indigenous Law Student
Mentoring Program and established of a Scholarship for an
indigenous high school student at St Peter’s College in Adelaide.
To reward and
remunerate fairly
Adelaide Brighton has a policy to provide equal pay
for equal work.
Refresher training in the remuneration framework, Mercer International
Position Evaluation (IPE), was conducted and all staff positions were
re-evaluated to ensure the ABL framework is appropriate.
As part of the annual salary review process, Adelaide
Brighton undertakes a review of pay parity.
The gender pay parity review was completed in 2017 resulting
in an improvement due to the recalibration of the IPE.
Pay parity is also considered at the time of hiring new
employees, to eliminate potential gaps in pay arising
from hiring decisions.
To provide flexible
work practices
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.
Adelaide Brighton offers 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.
Measure age, gender, and cultural identity of our workforce.
Understand the
diversity of our
workforce
As per previous years, 100% of the women who commenced
and finished maternity leave in 2017 have returned to work in
either a full or part time capacity.
7% of the workforce have a part time or casual work arrangement.
3% of employees have taken ‘Paternity Leave’ in 2017.
Results of employee survey of cultural identify plus diversity
data is collected from candidates during the recruitment process.
Having identified that we have an ageing workforce, succession
and workforce planning strategies have been implemented
to ensure business sustainability.
As a member of (CCAA) Diversity Working Group understand
diversity of workforce in our industry via the CCAA Benchmarking
(Gender Survey) project.
Adelaide Brighton is committed to the
The proportion of women across Adelaide
The following table shows the proportional
regular review of its objectives to ensure
Brighton’s workforce is reflective of the
representation of women employees at
that these continue to be appropriate and
generally low level of female representation in
various levels within the Adelaide Brighton
relevant. This commitment includes the
the building, manufacturing and construction
Group (as at 31 December 2017):
completion of the workplace profile report
materials industries in which we operate.
as required by the Workplace Gender
We recognise that the available pool of
Male Female
Equality Act 2012. A copy of the workplace
female candidates in manufacturing and
Board
14%(1)
6
profile report is available in the investor
engineering roles relevant to our business
relations section of our website at
operations is limited, and this impacts our
Senior executives
14%
6
www.adbri.com.au/
ability to increase the number of female new
Senior managers 20%
32
ourresponsibilities#reporting.
hires. In an effort to make our Company
(direct reports to senior executives)
1
1
8
The Board is committed to build upon the
(and industry) more attractive to women,
achievements to date and reinforce the
we have focused on measures designed to
Total workforce
12% 1,349 188
continued efforts in promoting and cultivating
increase the proportion of female candidates,
(1) Following the appointment of Dr Vanessa Guthrie and
a culture of diversity and inclusiveness.
graduates and to support the development
Mr Geoff Tarrant as a non-executive Directors in February
2018, the percentage of female Board members is 22%.
of female employees who are recognised as
having future potential. We believe that, over
A copy of Adelaide Brighton’s Diversity
time, our diversity objectives and measures
and Inclusion Policy is available in the
will achieve an improvement in the level of
corporate governance section of
female representation and inclusiveness
Adelaide Brighton’s website.
across the organisation.
31
Adelaide Brighton Ltd Annual Report 2017
CORPORATE GOVERNANCE OVERVIEW
The Adelaide Brighton Ltd Board is
Role of the Board
committed to conducting the Company’s
business ethically and in accordance with
high standards of corporate governance.
To this end, the Board (together with the
Company’s management) regularly reviews
the Company’s policies, practices and other
arrangements governing and guiding the
conduct of the Company and those
acting on its behalf.
The role of the Board of Directors is to
protect and optimise the performance of the
Company and its subsidiaries (Group). The
The Board is structured to add
value and Board decision making
is enhanced through education
and support
Board takes accountability for reviewing and
>
The Board ensures that its members
approving strategic direction, establishing
have the time and commitment to
policy, overseeing the fi nancial position and
devote to the role.
monitoring the business and affairs of the
>
The Board is committed to a majority
Group on behalf of shareholders.
of independent views being brought
Adelaide Brighton confi rms it has followed
Board Committees
the ASX Corporate Governance Council’s
Principles and Recommendation (3rd edition)
during the 2017 fi nancial year.
To assist the Board in fulfi lling its
responsibilities the Board has established
a number of committees with responsibility
Adelaide Brighton’s Corporate Governance
for particular areas. Each committee has a
Statement which provides detailed
specifi c charter, which are each available on
information about governance at Adelaide
the governance section of the Company’s
Brighton is available on Adelaide Brighton
website at www.adbri.com.au.
website at www.adbri.com.au
to bear in decision making.
>
Comprehensive induction processes
equip Directors to perform in their role.
>
Confl icts are managed - protocols around
disclosure, and procedures around
management of potential confl icts have
been adopted.
>
Board members have access to
management and independent advice
to assist in discharge of their duties.
>
Board and Director performance is
regularly evaluated to facilitate continuous
Adelaide Brighton’s
Governance framework
Shareholders
improvement.
>
The Board keeps informed of regulatory and
industry developments to challenge status
quo and strengthen knowledge base.
Adelaide Brighton Ltd Board
Audit, Risk and
Compliance Committee
Nomination, Remuneration
and Governance Committee
Safety, Health and
Environment Committee
>
>
Financial reporting, internal
and external audit
Risk management
>
>
>
Assists and advises the Board
on matters relating to Board
and Committee membership
Remuneration - Board, CEO
and Managing Director and
senior executives
Diversity objectives
>
>
Monitors and oversees
effectiveness of health, safety
and environmental practices
Corporate Social Responsibility
and Sustainability
Adelaide Brighton CEO
and Managing Director
>
>
Day-to-day management
of the Company
Development and
implementation of the
Company’s strategy
Adelaide Brighton
executive management
32
Adelaide Brighton Ltd Annual Report 2017
Continuous Disclosure
Shareholdings of Directors
Adelaide Brighton is committed to providing
and employees
relevant and timely information to its
Directors and Officers may not buy or sell
shareholders and to the broader market,
Adelaide Brighton shares except during
in accordance with its obligations under
specified periods (known as ‘Trading
the Corporations Act 2001 and the ASX
Windows’) provided that prior approval is
continuous disclosure regime.
obtained. Our Share Trading Policy also
The Board is committed
to promoting ethical and
defines certain periods where trading is not
permitted under any circumstances (known
as ‘Blackout Periods’). In all cases, Directors
responsible decision making
and Officers are prohibited from trading in
Adelaide Brighton’s Code of Conduct
requires that all Directors and employees
act with the utmost integrity and honesty.
It aims to further strengthen the Company’s
ethical climate by promoting practices
that foster the Company’s key values of:
securities when they are in possession of
‘inside information’. The Share Trading Policy
is available on the Company’s website at
www.adbri.com.au
Board and CEO succession planning
>
>
Acting with fairness, honesty and integrity;
The Board regularly reviews the size
Providing a safe and healthy work
and composition of the Board to ensure
environment for all employees;
the appropriate skills, perspective and
>
Being aware of and abiding by laws
expertise are represented. The skills matrix
and regulations;
set out below demonstrates the skills,
>
Individually and collectively contributing to
experience and diversity of the non-
the wellbeing of shareholders, customers,
executive Directors in office as at the date
the economy and the community;
of this report. The Board is satisfied that its
>
Maintaining the highest standards of
present composition is appropriate for the
professional behavior;
circumstances of the Company.
>
Avoiding or managing conflicts of interest;
and
Diversity
>
Striving to be a good corporate citizen,
and to achieve community respect.
The Board, having adopted a Diversity and
Inclusion Policy, has established measurable
diversity objectives to enhance gender and
other diversity across the organisation.
Information about the Group’s diversity
objectives and progress is set out in the
Diversity Report on pages 30-31 of this
Annual Report.
Marcus Clayton
General Counsel and
Company Secretary
Skills, experience and diversity
Management and leadership
Experience in relevant industries
Strategy / Risk
Financial understanding and capability
Global experience
Governance, compliance and regulatory
Remuneration
Male
Female
1
2
3
4
5
6
7
8
Non-executive Directors
33
Adelaide Brighton Ltd Annual Report 2017
DIRECTORS
Les Hosking
Age 73
Graeme Pettigrew
FIPA, FAIM, FAICD
Age 69
Raymond Barro
BBus, CPA, FGIA, FCIS
Age 56
Ken Scott-Mackenzie
BE(Mining), Dip Law
Age 67
Experience
Experience
Experience
Experience
Independent non-executive
Director since June 2003.
Extensive experience in
commercial and financial
matters with 16 years’
experience as Chief Executive
of the Sydney Futures
Exchange and former Chief
Executive Officer of Axiss
Australia, and Managing
Director of National Electricity
Market Management
Company (NEMMCO).
Independent non-executive
Director since August 2004.
Extensive experience in the
building materials industry
and former Chief Executive
Officer of CSR Building
Products and broad
management experience
gained in South East Asia
and the United Kingdom
through former positions
as Managing Director of
Chubb Australia Limited
Non-executive Director
since August 2008.
Over 27 years’ experience
in the premixed concrete
and construction materials
industry.
Managing Director of
Barro Group Pty Ltd.
Special responsibilities
Member, Safety, Health and
Environment Committee.
Independent non-executive
Director since July 2010.
Mining Engineer with over
40 years’ experience in
infrastructure, construction
and mining services gained
in Australia and Africa, as
well as extensive experience
in financial, legal and
commercial aspects of
projects. Former Chief
Executive Officer of Abigroup
and then Bilfinger Berger
Director, AGL Energy Limited
(appointed November 2008).
Special responsibilities
Appointed Chairman
17 May 2012.
Member, Nomination,
Remuneration and
Governance Committee
(ceased 16 November 2017)
Member, Audit, Risk and
Compliance Committee
(ceased 16 November 2017).
and Wormald Security
Australia Pty Ltd.
Director, Capral Ltd
(appointed June 2010).
Special responsibilities
Chairman, Audit, Risk and
Compliance Committee
Member, Nomination,
Remuneration and
Governance Committee.
Member, Safety, Health and
Environment Committee.
Australia, the holding
company of Abigroup,
Baulderstone and Bilfinger
Berger Services.
Special responsibilities
Chairman, Safety, Health
and Environment Committee
Member, Nomination,
Remuneration and
Governance Committee.
34
Adelaide Brighton Ltd Annual Report 2017
Arlene Tansey
FAICD, MBA, JD, BBA
Age 60
Zlatko Todorcevski
Vanessa Guthrie
Geoff Tarrant
Martin Brydon
MBA, BCom, FCPA, FGIA
Age 49
Hon DSc, PhD, BSc (Hons)
Age 57
BBus
Age 49
Experience
Experience
Experience
Experience
Independent non-executive
Director since April 2011.
Extensive experience as a
senior executive in business
and the financial services
industry gained in Australia
and the United States with
a background in investment
banking and securities law.
Director, Primary Health Care
Limited (appointed August
2012) and Aristocrat Leisure
Limited (appointed July 2016).
Appointed Chairman Elect
from 19 February 2018.
Independent non-executive
Director since March 2017
Experienced global
executive with more than
30 years’ experience in the
oil and gas, logistics and
manufacturing sectors gained
in Australia and overseas
with a background in finance,
strategy and planning. Former
Chief Financial Officer of
Independent non-executive
Director from February 2018.
Extensive experience in
the mining and resources
industry. Previous CEO and
Managing Director of Toro
Energy Limited (ceased
December 2016) and Vice
President Sustainable
Development at Woodside
Energy.
Director of Santos Limited
(appointed July 2017)
Non-executive Director
from February 2018.
Finance executive with
over 25 years’ experience
gained in Australia, the
United Kingdom and Asia.
Currently engaged in a
corporate finance
consultancy role with
Deutsche Bank.
MBA, FAICD, FAIM, Dip Elect Eng,
Dip Elron Eng
Age 62
Experience
Managing Director since
November 2015.
More than 30 years’
experience in the construction
materials industry with training
in electrical and electronic
engineering. Experience in
manufacturing and general
management, marketing,
strategy and business
development in various roles
within the Adelaide Brighton
Group of companies.
and Vimy Resources
Limited (appointed
October 2017).
Appointed Chief Executive
Officer of Adelaide Brighton
Limited in May 2014.
Former Chairman of Future
Fibre Technologies Limited
(appointed March 2015 and
resigned in October 2016)
and Urbanise.com Limited
(appointed June 2014 and
resigned in October 2016).
Special responsibilities
Chairman, Nomination,
Remuneration and
Governance Committee
Member, Audit, Risk and
Compliance Committee.
Brambles, Oil search Limited
and BHP Billiton’s Energy
business.
Appointed a non-executive
Director of The Star
Entertainment Group in
October 2017, subject to
casino regulatory approvals
being obtained.
Special responsibilities
Member, Nomination,
Remuneration
and Governance
Committee (appointed
16 November 2017).
Member, Audit, Risk
and Compliance
Committee (appointed
16 November 2017).
Adelaide Brighton Ltd Annual Report 2017
35
INFORMATION FOR SHAREHOLDERS
Annual general meeting
Direct credit of dividends
The annual general meeting of
shareholders will be held at the
InterContinental, North Terrace,
Adelaide, South Australia on
Thursday 17 May 2018 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.
Registered office
Level 1, 157 Grenfell Street
Adelaide SA 5000
Telephone 08 8223 8000
Facsimile 08 8215 0030
Enquiries about your
shareholding
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.
Online services
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.
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.
Dividend Reinvestment
Plan (DRP)
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.
Change of address
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
Level 9 Aurora Place
88 Phillip Street
Sydney NSW 2000
Telephone 02 8248 9911
Email adelaidebrighton@adbri.com.au
Substantial shareholders
Barro Properties Pty Ltd, by a notice
of change of interests of substantial
shareholder dated 15 March 2018,
informed the Company that it or an
associate had a relevant interest
in 266,521,124 ordinary shares or
41.0% of the Company’s issued
share capital.
Commonwealth Bank of Australia,
by a notice of chnage of interests
of substantial shareholder dated
18 July 2017, informed the
Company that it or an associate
had relevant interest in 39,308,939
ordinary shares or 6.05% of the
Company’s issued share capital.
36
Adelaide Brighton Ltd Annual Report 2017
9.65
9.63
8.26
5.63
2.51
1.89
1.18
1.00
0.64
0.60
0.51
0.45
0.27
0.27
0.26
0.19
0.18
0.15
0.15
Communications
Our internet site www.adbri.com.au offers access to our ASX announcements
and news releases as well as information about our operations.
On market buy back
At 3 April 2018 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 3 April 2018
Shareholder
Barro Properties Pty ltd
HSBC Custody Nominees (Australia) Limited
Barro Group Pty Ltd
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Ltd
No. of
ordinary
shares held
% of
issued
capital
202,096,059 31.08
62,734,726
62,652,619
53,682,442
36,608,447
Citicorp Nominees Pty Ltd
16,291,829
National Nominees Limited
Argo Investments Ltd
HSBC Custody Nominees (Australia) Limited – A./C2
12,260,993
7,681,385
6,484,959
BNP Paribas Nominees Pty Ltd
4,133,650
CS Third Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
Milton Corporation Limited
3,873,059
3,292,997
2,947,554
IOOF Investment Management Limited
1,759,440
Sandhurst Trustees Ltd
Australian Foundation Investment Company Limited
RBM Nominees Pty Ltd
1,759,124
1,720,000
1,218,627
HSBC Custody Nominees (Australia) Limited - GSCO ECA
1,151,148
Diversified United Investment Limited
AMP Life Limited
Total top 20 shareholders
Total remaining shareholders balance
1,000,000
972,359
484,321,417 74.48
165,951,078 25.52
Voting rights
All shares at 3 April 2018 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 3 April 2018
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 81 shares
Unquoted securities
4,452
10,046
4,281
3,309
141
22,229
698
0.33
4.31
4.87
11.50
78.99
100.00
2,767,452 Awards issued to the Chief Executive Office 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.
Adelaide Brighton Ltd Annual Report 2017
37
FINANCIAL STATEMENTS CONTENTS
Directors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Remuneration report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Statement of comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Statement of changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Statement of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Notes to the financial report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
1 Summary of significant accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Financial performance overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
2 Segment reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
3 Critical accounting estimates and assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
4 Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
5 Revenue and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7
Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8 Business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9 Note to statement of cashflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Balance sheet items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10 Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
11
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
12 Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
13 Assets classified as held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
14
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
15
Impairment tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
16 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Capital structure and risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
17 Borrowings and lease commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
18 Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
19 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
20 Reserves and retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
21 Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Group structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
22 Joint arrangements and associate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
23 Subsidiaries and transactions with non-controlling interests . . . . . . . . . . . . . . . . 103
24 Deed of cross guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
25 Parent entity financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
26 Retirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
27 Share-based payment plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
28 Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
29 Events occurring after the balance sheet date . . . . . . . . . . . . . . . . . . . . . . . . . . 113
30 Commitments for capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
31 Remuneration of auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
32 Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Directors’ declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Auditor’s Independence Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Independent auditor’s report to the members of Adelaide Brighton Ltd . . . . . 116
38
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 DIRECTORS’ REPORT
The Directors present their report on
Statutory results
the consolidated entity (the Group)
consisting of Adelaide Brighton Limited
Revenue
(the Company) and the entities it controlled
at the end of, or during, the year ended
31 December 2017 .
Depreciation, amortisation and impairments
Earnings before interest and tax (“EBIT”)
Directors
The Directors of the Company, at any time
during or since the end of the financial year
Net finance cost
Profit before tax
Income tax expense
Net profit after tax
and up to the date of this report, are:
Attributable to:
Consolidated
2017
$ million
2016
$ million
1,560.0
1,396 .2
(82.5)
266.5
(12.1)
254.4
(72.3)
182.1
(78 .1)
266 .1
(11 .5)
254 .6
(68 .4)
186 .2
LV Hosking
RD Barro
GF Pettigrew
KB Scott-Mackenzie
AM Tansey
Z Todorcevski (appointed 22 March 2017)
VA Guthrie (appointed 8 February 2018)
GR Tarrant (appointed 8 February 2018)
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 .
Members of Adelaide Brighton Ltd (“NPAT”)
182.0
186 .3
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 (%)
0.1
28.0
20.5
4.0
100
371.6
29.8
(0 .1)
28 .7
20 .0
8 .0
100
288 .5
23 .6
The results were impacted by a number of significant items . The table below sets out the
underlying financial results for the year ended 31 December 2017 which have been adjusted for
the significant items . An explanation of the significant items and reconciliation to statutory results
is provided on page 44 .
Underlying results
Review of operations
Revenue
A summary of the financial results for the
year ended 31 December 2017 is set
Depreciation, amortisation and impairments
Earnings before interest and tax (“EBIT”)
out below:
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)
Consolidated
2017
$ million
2016
$ million
1,560.0
1,396 .2
(82.5)
288.8
(12.1)
276.7
(78.9)
197.8
(78 .1)
268 .0
(11 .5)
256 .5
(69 .0)
187 .5
197.7
187 .6
0.1
30.4
(0 .1)
28 .9
Net profit after tax
Revenue
Reported net profit after tax attributable
Revenue of $1,560 .0 million was 11 .7%
to members (NPAT) for the year ended
higher than in 2016, as a result of improved
31 December 2017 declined 2 .3% to
demand for construction materials in South
$182 .0 million due to the impact of doubtful
debts, acquisition costs and restructuring
Australia and the eastern states and the
contribution from acquisitions which added
expenses . Underlying NPAT of $197 .7 million
5 .8% to revenue .
was 5 .4% higher than 2016 . Property sales
contributed $8 .4 million to NPAT, compared
to $7 .9 million in 2016 .
39
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017
Earnings before interest and tax
Activity in New South Wales and Victoria
Electricity costs in the cement and clinker
Earnings before interest and tax (EBIT)
improved versus the prior year, with
operations increased by circa $4 million
increased 0 .2% from the prior year to
non-residential building and transport
compared to 2016 . The overall impact of
$266 .5 million on an EBIT margin of 17 .1% .
infrastructure projects adding to demand .
higher energy prices on Adelaide Brighton
On an underlying basis, EBIT grew 7 .8% to
$288 .8 million on an EBIT margin of 18 .5% .
Margins
South east Queensland markets continue
to improve, particularly the Gold Coast and
Sunshine Coast regions . Increasing South
Underlying EBIT margins excluding property
Australian demand was driven by several
has been significantly mitigated through
strategies such as alternative fuels, use of
alternative cementitious products, demand
management and long term contracts .
declined due to higher energy costs, the
infrastructure projects despite reduced
In April 2017, the Birkenhead plant
impact of quality issues at the Birkenhead
demand from mining operations .
experienced an issue with the quality of
site earlier in the year and higher site
remediation costs . Joint arrangements
and associate earnings increased from
$30 .9 million in 2016 to $37 .8 million in
2017 reflecting improved demand and
higher construction materials prices on
the east coast of Australia .
Operating cash flow and debt
Operating cash flow decreased 9 .7% from
the prior year to $224 .2 million, due to higher
tax payments and lower cash conversion .
Property sales contributed $13 .9 million
to cash flow, bringing sales in the last four
years to $97 million . The estimate of the
sales value of the remaining property pipeline
over the next decade exceeds $100 million .
Gearing of 29 .8% at year end remains at the
lower end of the target range .
Earnings per share
Earnings per share (EPS) of 28 .0 cents .
Dividends
A final ordinary fully franked dividend of
12 .0 cents per share and a fully franked
special dividend of 4 .0 cents per share were
declared, bringing total dividends for FY
2017 to 24 .5 cents fully franked . The record
date for the final 2017 dividend is 3 April
2018 with payment on 13 April 2018 .
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
East coast markets remained strong
supported by robust residential activity
in Victoria, New South Wales and
Queensland, and increased non-residential
building and infrastructure1 activity . The
South Australian market was also lifted by
infrastructure demand .
Western Australia cement demand stabilised
in the second half compared to the previous
corresponding period, following a significant
decline over the last two years . Northern
Territory demand declined further across
the territory, although regional infrastructure
projects provided some offset .
Overall demand for lime moderated
slightly in both Western Australia and the
Northern Territory .
Cement and clinker
Sales - Significant volume growth despite
subdued WA and NT demand
Cement and clinker sales volume increased
9% compared to 2016, assisted by a
particularly strong second half . Strong
volume growth continued in 2017 in
Queensland, Victoria and New South Wales .
Volume in Western Australia and Northern
Territory declined in the first half but
stabilised in the second half to be modestly
lower for the year . Cement sales in South
Australia improved, supported by the ramp
up of major infrastructure projects in the
second half .
cement which resulted in rectification costs
of $3 .6 million during the first half . The quality
issue arose due to lower grade feed making
its way into the cement milling process .
Fixes to inventory management and quality
processes were made to address the issue
and production and quality returned to
normal shortly after the incident .
Unplanned costs of $3 million were incurred
in the second half of 2017 associated with
the Company’s limestone carrying vessel the
MV Accolade II .
Operational efficiencies in cement and
lime delivered $8 million in 2017, including
$2 .8 million with the rationalisation of
Angaston oil well cement and laboratory
facilities . Further savings of $1 million from
these projects are expected in 2018 .
Adelaide Brighton is Australia’s largest
importer of cement clinker and other
cementitious materials supplying
approximately 2 .4 million tonnes of imported
product in 2017 . Import profitability improved
by $12 million before tax compared
to 2016 due to reduced shipping and
material procurement costs and the higher
Australian dollar .
While cement selling prices increased ahead
of CPI across almost all markets, weighted
Lime
average cement prices were stable due to
geographic mix changes .
Operations - Operational
improvement continues
Sales - Volumes slightly lower
Lime sales volumes were slightly down
on 2016 due to reduced sales to the
non-alumina sector . Imports continue to
Cement margins declined due to higher
be a threat, but Adelaide Brighton’s highly
energy costs, a cement quality issue in the
cost competitive operations place it in a
first half and higher costs related to the
strong position to supply the market in the
Company’s limestone vessel in the second
long term .
half . Higher volumes on stable average
prices lifted revenue .
1 Non-residential building includes education, health,
office retail, hotels and factories, while infrastructure
includes roads, bridges and railways .
40
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 Average lime selling prices were lower
Operations - Acquisitions add scale
opportunities, a number of which have
because of the pricing mechanisms with
to operations
supported sales in recent years .
long term alumina customers that take into
Concrete and Aggregates revenue, EBIT
account input costs savings . Intensifying
and EBIT margins all improved significantly
competition from importers constrained
in 2017 as a result of higher volumes,
prices in the non-alumina sector in 2017 .
stronger prices and control of costs, partially
Operations - Costs stable in 2017
Lime margins declined slightly because of
the lower average prices, while operating
costs were marginally higher following
offset by $3 .3 million of costs relating to a
compulsory scope change in remediation
related to the closure of our North Melbourne
concrete plant .
significant improvements in the prior year .
Revenue and EBIT were further enhanced
Prices are subject to inflationary increases
in 2018 under long term contract
arrangements . In addition, rising energy
costs, mainly coal, anticipated in 2018 will be
reflected in contract price mechanisms over
subsequent periods .
Concrete and Aggregates
by the acquisition of three businesses
during 2017:
> Central Pre-Mix Concrete and Quarry, a
Melbourne based integrated concrete and
aggregate operation on 1 March 2017;
> Davalan Concrete, an Adelaide based
concrete business on 28 June 2017; and
> The concrete and aggregates assets
of Holcim in the Northern Territory on
Sales - Strong eastern state markets
28 July 2017 .
These three acquisitions are consistent
with Adelaide Brighton’s long term vertical
integration strategy and add scale to
the existing concrete and aggregates
operations, as well as adding synergies in
overhead, logistics and raw materials . The
acquired businesses are performing in line
with expectations .
Concrete Products
Sales - Weaker multi-residential
Revenue decreased 1 .1% to $147 .6 million .
Concrete Products EBIT decreased from
and acquisitions lift sales
Sales volumes for concrete increased by
more than one-third in 2017 because of
strong demand in the eastern states and
acquisitions . Excluding acquisitions, concrete
volume increased strongly supported by
buoyant demand in Victoria, New South
Wales and Queensland and strengthening
infrastructure demand in South Australia .
Like for like concrete prices increased 3% .
Aggregates volumes also were strong in
2017 due to acquisitions . A recovery in
South Australian infrastructure demand offset
reduced project volumes in other markets .
Aggregates price increased by more than 5%
reflecting price increases and strengthening
demand for high quality product and a
Sydney aggregate returns continue to
be supported by the expiry of traditional
reserves and increasing reliance on product
from new operations further from the market .
Adelaide Brighton’s New South Wales quarry
reduction in sales of lower value products .
Sales and earnings are traditionally weighted
$11 .4 million in 2016 to $10 .2 million in 2017
Sunstate Cement Limited (Sunstate) (50%)
due to lower sales volumes and resulting
Sunstate is a joint venture between Adelaide
lower production efficiency .
Brighton (50%) and Boral (50%) with a
cement milling, storage and distribution
facility at Fisherman Islands, Port Brisbane .
to the second half, but first half EBIT was
also impacted by wet weather and delayed
Sunstate’s contribution to Group earnings
projects which recovered in the second half
increased by 8 .1% from $11 .0 million to
helping to offset weakness in the multi-
$11 .9 million as demand across south east
residential sector .
operations are competitively positioned to
Operations - Production efficiency
supply demand growth in Sydney and benefit
After a long period of industry
from strengthening prices as these increase
underinvestment, innovation offers
over time to reflect the higher transport costs
efficiency benefits and exciting new revenue
faced by many suppliers .
Adelaide Brighton made a $3 million
investment during 2017 in an automated
sleeper walling plant located in Stapylton,
Queensland, which offers significant
operating efficiencies and sales growth
potential in new market segments .
The Concrete Products business is also a
growing customer for our cement, sand and
aggregates businesses and the Company
remains optimistic about the outlook given
the impact of the new sleeper walling plant
and opportunities for business improvement
in the medium term .
Joint arrangements and associates
Independent Cement and Lime Pty Ltd
(ICL) (50%)
ICL is a specialist supplier of cementitious
products throughout Victoria and New
South Wales .
Continued strength in construction activity
across the New South Wales and Victoria
markets led to higher volumes . Higher
selling prices, strong demand and an
easing of input cost pressures supported
a 40% increase in profit contribution from
$10 .5 million to $14 .7 million after tax .
The second half 2017 contribution was
22% higher than second half 2016 . ICL
benefited late in second half from a price rise
to recoup higher input costs .
Queensland remained healthy . Volumes,
prices and margins were all higher than the
prior corresponding period . The second half
2017 contribution was up 10% on the prior
comparative period .
41
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 Mawson Group (Mawsons) (50%)
The lime business continues to benefit
> Increased use of alternative cementitious
Mawsons is the largest premixed concrete
from a strong focus on costs and efficiency,
materials;
and quarry operator in northern regional
although after several years of significant
> Short term consumption management
Victoria, and also operates in southern New
cost improvements, costs stabilised in
through operational adjustments;
South Wales . Mawsons is an important
2017 . Competing importers remain active in
> A proactive approach to cost recovery in
aggregates producer in the region, generally
major markets .
holding the number one or number two
position in the markets it serves . Earnings
again improved significantly as strong
demand to major projects lifted volumes
and margins .
With its unique cost position, proximity to
major customers, long term environmental
approvals and strong customer relationships,
the business is well positioned to remain
the marketplace, supported by vertical
integration, and through partnership
contracts with long term customers; and
> Hedging and other financial strategies,
where it adds value for shareholders .
the leading lime supplier to the Australian
The Company has in recent years
Aalborg Portland Malaysia Sdn. Bhd.
Resources sector and has the capacity
foreshadowed the tightening of the South
(APM) (30%)
to support further significant growth in the
Australian gas market and the prospect of
APM manufactures and sells white cement
industry over the medium to long term .
increasing gas prices . The tightening of
and clinker for the domestic Malaysian
market and exports to Australia and markets
throughout south east Asia . Earnings from
APM declined as result of higher costs
from energy, principally petcoke prices
in Malaysia .
Strategic Developments
Adelaide Brighton continues a successful
long term strategy to grow shareholder
returns through investment in three
key areas:
1 Cost reduction and operational improvement
across the Company;
2 Growth of the lime business to supply the
resources sector in Western Australia, South
Australia and the Northern Territory; and
3 Focused and relevant vertical integration into
downstream aggregates, concrete, logistics
and masonry businesses .
Cost reduction continued in 2017 with
the rationalisation of speciality cement
production at the Angaston, South
Australia operation .
Managing energy costs across the Adelaide
Brighton operations remains an important
focus and a significant opportunity for
shareholder value creation . Important
progress was made in a number of areas
in 2017 to improve energy efficiency
and security .
Vertical integration has been part of the
Group’s strategy for over 10 years, driving
growth, sales and earnings in the last five
the market contrasted sharp declines in
many international and some interstate gas
markets, such as Western Australia .
years and benefitting from the improvement
Adelaide Brighton has sought to maintain
in the construction market on the east coast .
diversity and flexibility in energy supply
It has improved geographic and industry
arrangements to take advantage of
diversification and supported the utilisation
the evolving landscape and emerging
of existing Adelaide Brighton assets . Three
opportunities to improve energy costs .
transactions were completed in 2017 on
attractive financial metric of 6 .8 times
EBITDA, and are performing to expectations
to deliver accretive returns in year one
(excluding transaction costs) .
In December 2017, Adelaide Brighton further
strengthened its energy supply portfolio
with the signing of new gas and electricity
contracts in South Australia . Adelaide
Brighton has entered into an agreement with
1 Cost reduction and operational
Beach Energy Limited for the supply of gas
improvement
Energy efficiency
to its South Australian operations .
Adelaide Brighton has also entered into an
Energy remains a key area of strategic
agreement with Infigen Energy Limited for
focus given significant opportunity to
the supply of its electricity requirements
improve the security and competitiveness
to the Birkenhead and Angaston cement
of the operations coupled with security of
manufacturing plants and Klein Point Quarry
supply . Adelaide Brighton’s proactive energy
on the Yorke Peninsula in South Australia .
strategy is designed to manage energy
costs and operating risks through measures
that include:
> A portfolio approach to energy supply and
procurement benefits;
> Reduced medium term energy consumption
through operational improvement, such as
The new agreements with Beach and Infigen
provide our South Australian operations
with continued certainty of energy supply
at competitive prices and underpin
the Company’s leading position in this
important market .
the cement rationalisation at Angaston in
In addition to energy supply agreements, the
South Australia;
rationalisation of oil well cement production
> Increased use of alternative fuels to reduce
at Angaston in South Australia improved
reliance on traditional sources, with the aim
the energy efficiency of the South Australian
of substituting 30% of fuel supply in South
cement operations in 2017 .
Australia in the medium term;
42
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 Alternative fuels have been a key focus
This allows Adelaide Brighton to deliver
Estimated proceeds from the sale of
for reducing reliance on traditional energy
competitively priced product into a range
properties in the next 10 years could realise
sources and lowering costs over the last
of markets where demand exceeds the
in excess of $100 million with an expected
decade . An expansion of alternative fuel
Company’s manufacturing capacity . It
EBIT margin on these sales of circa 85% and
capacity at Birkenhead is now complete
further enables Company owned domestic
an effective tax rate of approximately 20% .
and we are targeting substitution of greater
production assets to operate at full utilisation
than 30% of the South Australian energy
with the import operations responding to
2 Lime growth
requirement of 6 petajoules per annum .
changes in demand . This underpins the
Continuous improvement to underpin
In 2018, Adelaide Brighton expects energy
competitive position and shareholder returns .
long term returns
costs in its cement and lime business to
The import strategy is supported by long
Adelaide Brighton’s Munster, Western
increase by $6 million compared to 2017 .
term agreements with two Japanese
Australia, lime business is underpinned
In South Australia, savings are expected
suppliers for grey clinker, Aalborg for white
by low cost mineral resources secured
in electricity but higher gas costs are
clinker and a major Japanese trading house
by a State Agreement Act and long term
anticipated, while in Western Australia, coal
for supply of granulated blast furnace slag .
statutory approvals . Demand growth in lime
costs are also anticipated to increase .
Adelaide Brighton continues to invest
Operational improvement program
in import infrastructure to underpin
is driven by the globally competitive Western
Australian resources sector .
The rationalisation of laboratory facilities
its competitive position, to grow the
The Munster lime plant is a low cost
and speciality cement production at the
import business, and ensure it remains a
operation with two lime kilns, currently at
Angaston facility, leveraging the extensive
leading supplier into key markets . As the
80% operating capacity, which are among
importation network of the Group, will
construction industry moves to greater
the largest globally .
result in annualised EBIT savings of
reliance on imported cementitious materials
approximately $3 .8 million, of which
there may be competing investments in
approximately $2 .8 million was achieved in
import infrastructure to address some of this
2017 . Earnings were adversely impacted in
demand growth .
The Western Australian alumina sector
represents about 70% of Western Australian
lime demand . The industry remains among
the lowest cost alumina producers in the
2017 by one-off charges associated with
this initiative of $3 .3 million before tax . These
one-off costs are excluded from underlying
earnings measures .
Adelaide Brighton will maintain a measured
world, underpinning its long term growth . In
approach to growing and operating its
the medium term, lime demand is expected
import infrastructure . Industry leading scale,
to move in line with refinery capacity
efficient supply, established markets and
expansion as well as the expansion of the
Competitive import infrastructure
strong customer relationships mean Adelaide
broader Western Australian resources sector .
Rationalisation of Australian clinker
Brighton is well placed to enhance its
production in the face of steady demand
position as an importer and continue to grow
growth, has seen imported cementitious
long term shareholder value .
products grow to represent in excess of
30% of Australian supply . In the absence of
domestic clinker production growth, due to
cost advantages of large scale international
manufacture, imports are expected to
continue to grow in the long term .
importer of cementitious materials (cement,
clinker and blast furnace slag) utilising more
than 2 .4 million tonnes of imported product
in 2017 . This leading position enhances
supply chain efficiency in procurement,
transport, storage and distribution .
Adelaide Brighton remains Australia’s largest
over time .
In the last three years, Adelaide Brighton has
made operational improvements, expanded
capacity and achieved cost savings to the
lime business that have further improved
Land sales program
Adelaide Brighton has been actively
the competitiveness of the business and the
engaged in selling and preparing for sale
opportunity for long term growth .
properties released by the rationalisation and
improvement program . In many cases, this
includes re-zoning to realise greater value
After several years of cost reductions,
costs stabilised in 2017 . The lime business
has a continuous improvement program
that examines opportunities for: further
Since the beginning of 2013, cash proceeds
cost savings; improvements in resource
contributed from the property program
and operational security; and enhancing
total $97 million . This includes transactions
customer relationships .
in 2017 that realised $13 .9 million in cash
proceeds and $8 .4 million NPAT .
Competition continues from imported
lime for use in the non-alumina resources
One of these transactions, which was
sector . Adelaide Brighton’s scale and unique
previously anticipated for settlement in late
cost structure underpins its position in the
2017 or early 2018, closed in late December
industry over the long term . Nonetheless,
2017 and as a consequence no significant
import competition has the potential to
land transactions or profits are now
pressure sales to the non-alumina sector in
expected from the program before 2019 .
the absence of significant market growth,
particularly if the Australian dollar continues
to strengthen .
43
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 3 Downstream integration
The acquired businesses also offer operating synergies with the existing Melbourne and
Further downstream acquisitions
Adelaide Brighton continues to pursue
its strategy of acquiring quality concrete
and aggregates businesses that enhance
its long term competitive position and
shareholder value .
A disciplined approach is undertaken
with acquisitions, with each assessed on
their merits, including fit with the existing
operations of Adelaide Brighton .
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
Adelaide operations and the prospect of further bolt on investments to enhance the overall
regional position .
Overall, the performance of the businesses is in line with expectations .
Operational results
Reconciliation of underlying profit
“Underlying” measures of profit exclude significant items of revenue and expenses in order
to highlight the underlying financial performance across reporting periods . Profits from the
Company’s long term land sales program are included in underlying profit despite the timing
being difficult to predict .
The following table reconciles underlying earnings measures to statutory results .
Full year ended
31 December
$ million
2017
2016
Profit
Income
Profit
Profit
Income
Profit
before tax
tax
after tax
before tax
tax
after tax
Statutory profit
254 .4
(72 .3)
182 .1
254 .6
(68 .4)
186 .2
cement and lime operations and provides
Rationalisation
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, during the year
Adelaide Brighton made three acquisitions:
> Central Pre-Mix Concrete and Quarry,
Other restructuring
Acquisition expenses
Fair value gain
Doubtful debts
3 .3
0 .8
5 .0
(4 .5)
17 .7
(1 .0)
(0 .3)
-
-
(5 .3)
2 .3
0 .5
5 .0
(4 .5)
12 .4
-
1 .9
-
-
-
-
(0 .6)
-
-
-
-
1 .3
-
-
-
Underlying profit
276.7
(78.9)
197.8
256.5
(69.0)
187.5
an integrated concrete and aggregates
Rationalisation of cement production
Cash flow
operation with five concrete plants and a
Cement production and laboratory facilities
Operating cash flow decreased by
hard rock aggregate quarry serving the
in South Australia were rationalised in 2017 .
$24 .2 million to $224 .2 million in 2017 .
metropolitan Melbourne market, the largest
As part of the rationalisation, employee
The decrease was attributable to lower
premixed concrete market in Australia;
redundancy costs of $3 .3 million were
cash conversion of revenues and increased
> Davalan Concrete, an independent concrete
recognised (2016: $nil) .
tax payments partially offset by an increase
operator in the greater Adelaide market; and
> Holcim’s Northern Territory concrete and
aggregates business, consisting of four
concrete plants, two operating quarries and
access to further potential quarry sites via
mining leases .
These three transactions completed
in 2017 are in line with the Company’s
strategy of focused value added vertical
integration in the concrete and aggregates
businesses . Total acquisition costs of the
three businesses of $85 .2 million, including
transaction costs of $5 million, represent a
year one EBITDA multiple of 6 .8 .
Other restructuring costs
in dividends from joint ventures .
Redundancies and one-off employment
Working capital increased $22 .2 million
costs were $0 .8 million (2016: $1 .9 million)
as a result of acquisitions and the timing
for the period . These costs result from staff
of receipts and import shipments at year
restructuring within the Group .
end . Doubtful debt provision increased
Acquisition expenses and fair value gain
Costs recognised as an expense in the
Administration cost line of the Income
by $18 .3 million, including the additional
provision for doubtful debts discussed on
page 45 and in note 10 .
Statement in 2017 were $5 .0 million
Capital expenditure of $169 .3 million,
(2016: $nil) . The costs associated with the
including $80 .2 million on acquisitions, was
three acquisitions completed, including
$82 .8 million higher than the prior year .
stamp duty, legal and other consulting
Stay in business capital of $60 .1 million
costs, fluctuate with transaction activity .
represents 73% of depreciation and
These acquisitions also resulted in a fair
amortisation . Development capital declined
These purchases provide access to
value gain on acquisition of $4 .5 million .
$7 .8 million to $29 .0 million as organic
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 .
Doubtful debts provision
The increased doubtful debts provision
described on page 45 and in note 10 is not
considered to be a part of normal trading
and therefore excluded from underlying profit .
projects started in the prior year were
finalised . Cash proceeds from the sale of
assets of $17 .7 million includes $13 .9 million
from the disposal of land .
44
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017
Dividends paid to shareholders decreased
An actuarial gain of $1 .9 million
13% to $156 .0 million due to lower special
(2016: $1 .7 million) related to the defined
dividend payments in 2017 .
benefit superannuation plan was recognised
Net debt increased $83 .1 million, with net
debt to equity gearing increasing to 29 .8%
from 23 .6% over the year primarily as a
result of acquisitions . Gearing remains at the
lower end of the target range of 25% - 45% .
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 assumed salary
growth rates over the forecast period used
to calculate the defined superannuation
To maximise shareholder returns, Adelaide
benefit liability .
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
January
January
date
2019
2021
Facility value
$210 million
$330 million
Income statement
Net finance costs increased from
$11 .5 million to $12 .1 million in 2017 as
a result of a slight increase in borrowing
margins and higher average net debt .
Tax expense of $72 .3 million increased from
$68 .4 million in 2016 and represents an
effective tax rate of 28 .4% (2016: 26 .9%) .
The increased effective tax rate is due to the
recognition of capital losses in the prior year
and the true-up of the prior year tax return .
The movement in the value of the Australian
Dollar against the Malaysian Ringgit during
Provision for doubtful debts
In late 2017 Adelaide Brighton became
aware of certain financial discrepancies
which relate to transactions whereby it has
been underpaid for products supplied . The
Company has now completed its analysis
with the assistance of forensic accountants
KPMG and as a result the 2017 EBIT
result includes $17 .1 million provision
for the impairment of amounts due and
$0 .6 million for legal, accounting and other
investigation costs .
While the financial impact of the
discrepancies has been quantified,
investigations are continuing . Adelaide
Brighton is also continuing its efforts to
recover amounts due .
The matter was identified under Adelaide
Brighton’s existing compliance and risk
management systems and processes . The
Company has taken steps to strengthen
these further in light of this issue .
the year resulted in a $0 .4 million gain being
Business Risks and Mitigation
recognised in other comprehensive income .
The gain reflects movements in the Australian
Dollar value of the Group’s investment in
Aalborg Portland Malaysia Sdn . Bhd .
Adelaide Brighton’s risk management
framework, as outlined in the Corporate
Governance Statement, incorporates
effective risk management into all facets of
The fair value of cash flow hedges used
the business . Planning processes, including
by Adelaide Brighton as part of its foreign
budgets and strategic plans, incorporate
currency risk management approach
a risk management component . These are
was recognised in other comprehensive
integrated into reports to the Board and
income of $nil (2016: $1 .3 million gain) .
respective Board Committees throughout
The unrealised gain or loss is the result of
the year . The key risks to the Adelaide
movement in the value of the Australian
Brighton Group and mitigation actions are
Dollar against foreign currencies, principally
outlined below . The risks are not set out in
the United States Dollar, at year end
any particular order and do not comprise
compared to the rates at the time the hedge
every risk we encounter in conducting
contracts were entered into .
our business . Rather, they are the most
significant risks that we believe we should
be monitoring and seeking to mitigate or
otherwise manage at this point in time .
45
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 Risk
Details
Mitigation
Macro-
economic
conditions
Regulatory
compliance
Adelaide Brighton supplies product to its Australian customers
from local production sites across all states and territories,
supplemented by imported product . Demand and supply
conditions are therefore dependent upon economic conditions .
Adelaide Brighton has diversified its business both geographically within
Australia and through vertical integration . This diversity has balanced
the exposure of the business to fluctuations across its customer base of
construction, infrastructure and mining sectors .
With production and distribution sites across all states and
territories of Australia, Adelaide Brighton is subject to significant
regulatory burden across areas such as environmental, labour,
occupational health and safety, and taxation laws .
Non-compliance with regulatory requirements could lead to
substantial penalties and impositions on operations .
The Group employs a range of initiatives to meet regulatory compliance
including:
Employment of specialists to support operational staff in areas
such as human resources, and health, safety and environment;
Regular training and competency testing of employees;
Inclusion of regulatory compliance within the internal audit scope; and
Policies and procedures designed to instil and foster a culture
going beyond mere compliance .
>
>
>
>
Movement to
a low carbon
economy
(climate
change)
The recognition of the impact of greenhouse gas emissions on
climate change and the potential impacts on the environment
have driven a movement toward a low carbon economy . A range
of actions are being undertaken by governments, the corporate
sector and individuals in recognition of climate change, including
imposing a price on carbon and changes in product specifications .
Production of clinker, an intermediary product in the production of
cement, and lime are carbon emissions intensive . The movement
to a low carbon economy could potentially increase the cost of
production and reduce demand .
Adelaide Brighton’s strategy of cost reduction and operational
improvement includes the focus on improved efficiency in the
manufacturing process for clinker and lime . The program has
delivered savings over a long time period, with further improvements
anticipated which will reduce the emissions intensity of production .
The Group is able to leverage its access to products from emissions
efficient suppliers as a result of the Company’s import strategy .
In addition, the use of alternate products with cementitious properties,
such as flyash and ground granulated slag, has increased .
Adelaide Brighton is also working with partners in the
development of alternate products to replace Portland cement .
Energy
pricing
Foreign
currency
Production of cement and lime are energy intensive and
consequently access to reliable, cost effective energy is required .
Price and reliability factors into the suitability of energy sources
for production .
The Group employs a portfolio approach to energy procurement,
looking to diversify the sourcing risk at competitive prices . This portfolio
approach has resulted in a mix of contracted arrangements for the
supply of energy and spot purchases on trading markets .
The Group imports a range of materials to supplement capacity
of local production facilities, with approximately 2 .4 million tonnes
of product imported in 2017 . As a result of these purchases
primarily being denominated in United States Dollars and Japanese
Yen, the Group is exposed to fluctuations in the strength in the
Australian Dollar against these currencies .
The Group manages exposure to foreign exchange risk through a
formalised hedging policy . Committed purchases that expose the Group
to foreign currency risk are hedged through agreed hedging products
up to a period of nine months . In addition, where practical, contractual
arrangements with suppliers may also include provisions to limit the
risk of foreign currency to Adelaide Brighton .
Competitive
landscape
Australia, with its relatively open access to global participants,
is a competitive market . Heightened competition combined
with fluctuations in the macro economic environment can
impact upon the performance of the Group .
Through a focus on cost control and improvement, the Group’s
production capabilities are efficient . These facilities are supported by
a distribution network throughout Australia, ensuring that Adelaide
Brighton can provide a competitive value offering to customers .
Key
equipment
failure
The production of cement and lime involves large scale
manufacturing sites in order to obtain economies of scale .
The failure of key equipment in the process can disrupt
production .
Production
quality
The Groups key products of cement, lime, concrete, aggregates
and concrete products are sold in accordance with relevant
quality standards . Materials used in production are natural
products and therefore normal variability of the characteristics
could result in fluctuations in quality of the end product .
Products that do not meet the relevant quality standard could
result in end use customers being financially disadvantaged .
Trade credit
Contractual arrangements with customers include the provision of
short term trade redit for product supplied . The Group is therefore
exposed to the credit risk for a portion of its sales .
Changes in macro economic conditions and customer specific
issues impacting cash flows available to settle purchases factor
into the level of risk associated with trade credit outstanding .
The Group undertakes a risk assessment of processes to identify key
equipment . Risk of equipment failure is assessed in conjunction with
repair or replacement alternatives as part of business continuity planning .
Alternate strategies are employed to mitigate the risk including
holding “insurance spares” of key equipment and contractual
arrangements to supplement production where required .
The Group has quality assurance processes across all products,
including the monitoring of inputs into the production process and
testing of final product to ensure compliance with relevant standards .
The skills of internal quality personnel are continually updated and
supplemented by the use of external experts
where required .
Trade credit risk is managed through assessment of individual
customer credit limits in accordance with delegated authority levels
approved by the Board, which is monitored along with ageing of
balances outstanding .
46
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 Dividends paid or declared by
Improved demand on the east coast and
Environmental performance
the Company
During the 2017 financial year, the following
dividends were paid:
> A final dividend in respect of the year ended
South Australia is anticipated to also lift
sales volumes of premixed concrete and
aggregates . The 2017 acquisitions will add
further sales in 2018 .
31 December 2016 of 15 .5 cents per share
Price increases have been announced
(fully franked) was paid on 12 April 2017 .
for the first half of 2018 in cement,
This dividend totalled $100,696,420; and
aggregates, concrete and concrete products .
> An interim dividend in respect of the year
Strengthening demand and utilisation are
ended 31 December 2017 of 8 .5 cents per
supportive of higher prices .
share (fully franked) was paid on 5 October
2017 . This dividend totalled $55,273,195 .
Concrete prices are expected to increase by
more than inflation, while aggregate prices
Since the end of the financial year the
are anticipated to increase significantly above
Directors have approved the payment of a
inflation, particularly as the industry moves to
final dividend of 16 .0 cents per share (fully
supply from further afield .
Lime sales volumes are expected to be
marginally lower in 2018 due to import
competition in the non-alumina sector,
although prices are anticipated to improve
Joint venture operations in Australia are
anticipated to continue to benefit from
stronger demand and higher prices on the
east coast .
Import costs are likely to be $3 million higher
in 2018 with increased materials costs offset
by favourable foreign currency outcomes .
Exchange rates for imports have been
franked), comprising an ordinary dividend of
12 .0 cents per share and a special dividend
of 4 .0 cents per share . The final dividend is
to be paid on 13 April 2018 .
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
31 December 2017 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 .
The Group’s operations are subject to
various Commonwealth, State and Territory
environmental regulation .
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 .
Group entities respond as required to
requests made by regulatory authorities,
including requests for information and site
inspections .
issued with regulatory notices issued by
government authorities responsible for
planning and environment matters . The
Group satisfactorily addressed all of these
regulatory matters .
Aus-10 Rhyolite Pty Ltd (Aus-10) received
three general penalty notices from the NSW
Department of Planning and Environment
(DPE), alleging breaches of development
consent conditions at Aus-10’s Tinda Creek
No matter or circumstance has arisen since
hedged to September 2018 .
Further savings from the Angaston cement
Quarry at Mellong, NSW, setting a fine of
rationalisation and the rolling operational
$15,000 for each notice . Aus-10 addressed
improvement program are expected to
each of the matters raised by the DPE .
improve costs in 2018 .
In 2016, the South Australian Environment
Energy costs are anticipated to increase by
Protection Authority (EPA SA) investigated
Likely developments and expected
$6 million in 2018, with higher gas and coal
Adelaide Brighton Cement Ltd (ABCL), in
results of operations
costs being partially offset by lower electricity
relation to an emission from the ship loading
costs . Contractual arrangements will mitigate
boom at ABCL’s Birkenhead plant in South
under contractual arrangements .
During 2017, Group entities were
In 2018, Adelaide Brighton expects
strong demand for construction materials,
a portion of these costs .
particularly on the east coast and South
Estimated proceeds from the sale of land in
Australia, improved pricing and further
the next 10 years could realise in excess of
efficiency improvements .
Sales volumes of cement and clinker are
anticipated to be higher in 2018 . Demand is
$100 million but, due to project timing, no
significant land sales under the program are
expected until 2019 .
expected to be stable in Western Australia
Capital expenditure of $100-110 million is
and the Northern Territory and improve in
anticipated in 2018, including $50-60 million
South Australia due to major infrastructure
of stay in business capex .
projects . Building and construction activity
is also expected to lift cement and clinker
demand along the east coast .
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 .
Australia in March 2016 . ABCL cooperated
with the EPA SA’s investigation . The internal
consideration by the EPA SA is ongoing .
47
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 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
Audit,
Nomination,
Independent
Safety, Health
Meetings
Risk and
Remuneration
Compliance
& Governance
Committee
Committee
Directors’
Committee (1)
& Environment
Committee
A
10
10
10
9
10
6 (4)
10
H
10
10
10
10
10
7
10
A
4
-
4
-
4
-
-
H
4
-
4
-
4
-
-
A
4
-
4
4
4
-
-
H
4
-
4
4
4
-
-
A
1
-
1
1
1
-
1
H
1
-
1
1
1
-
1
A
-
2
2
2
-
-
-
H
-
2
2
2
-
-
-
LV Hosking (2)
R Barro
GF Pettigrew
KB Scott-
Mackenzie
AM Tansey
Z Todorcevski (3)
M Brydon
A Number of meetings attended .
H Number of meetings held during period of office .
(1) The Independent Directors’ Committee is no longer a standing Committee of the Board .
(2) Mr Hosking ceased as a member of the Audit, Risk and Compliance Committee and Nomination, Remuneration
and Governance Committee with effect from 16 November 2017 .
(3) With effect from 16 November 2017, Mr Todorcevski was appointed as a member of the Audit, Risk and
Compliance Committee and as a member of the Nomination, Remuneration and Governance Committee .
(4) Due to a commitment arranged prior to his appointment, Mr Todorcevski was unable to attend one
Board meeting during the year .
Directors’ interests
Company Secretaries
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 2017
under such indemnities .
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
LV Hosking
RD Barro
GF Pettigrew
KB Scott-Mackenzie
AM Tansey
Z Todorcevski
VA Guthrie
GR Tarrant
M Brydon
Ordinary shares
9,851
246,484,345
16,739
5,000
10,000
20,000
-
-
78,906
Full details of the interests in share capital of
Directors of the Company are set out in the
Remuneration Report on pages 50 to 69
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 50 to 69
of this report .
The Company’s principal Company Secretary
the constitution) against liabilities incurred
is Marcus Clayton, who has been employed
by the officer in his or her capacity as an
by the Company in the two separate offices
officer of the Company or of a related body
of General Counsel and Company Secretary
corporate, including liability for negligence or
since 24 February 2003 . He is a legal
for reasonable costs and expenses incurred
practitioner admitted in South Australia with
in defending proceedings, whether civil or
30 years’ experience .
criminal .
Two other employees of the Company also
During the year the Company paid the
hold the office of Company Secretary to
premiums in respect of Directors’ and
assist with secretarial duties should the
Officers’ Liability Insurance to cover the
principal Company Secretary be absent: the
Directors and Secretaries of the Company
Company’s Chief Financial Officer, Michael
and its subsidiaries, and the General
Kelly, a Certified Practising Accountant
Managers of each of the divisions of the
who has been a Company Secretary
Group, for the period 1 May 2017 to 30 April
since 23 November 2010 and the Group’s
2018 . Due to confidentiality obligations under
Corporate Affairs Adviser, Luba Alexander,
that policy, the premium payable and further
who has been a Company Secretary since
details in respect of the nature of the liabilities
22 March 2001 .
insured against cannot be disclosed .
Indemnification and insurance
Proceedings on behalf of
of officers
the Company
Rule 9 of the Company’s constitution
No person has applied for leave of the
provides that the Company indemnifies each
Court to bring proceedings on behalf of the
person who is or who has been an “officer”
Company or to intervene in any proceedings
of the Company on a full indemnity basis and
to which the Company is a party for the
to the full extent permitted by law, against
purpose of taking responsibility on behalf
liabilities incurred by that person in their
capacity as an officer of the Company or
of a related body corporate .
of the Company for all or any part of those
proceedings . The Company was not a party
to any such proceedings during the year .
48
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 Non-audit services
Shares under option
The Company may decide to employ the
Unissued ordinary shares under option relate
auditor on assignments additional to their
to Awards associated with the Company’s
statutory audit duties where the auditor’s
Executive Performance Share Plan .
experience and expertise with the Company
Outstanding Awards at the date of this report
and the Group are important .
are as follows:
Details of the amounts paid or payable to
PricewaterhouseCoopers for audit and
non-audit services provided during the
year are set out in Note 31 to the Financial
Statements on page 114 of this report .
Date Awards
Expiry date
Number of
granted
Awards
1 January 2014 30 September
676,219
2018
1 January 2015 30 September
795,761
The Board of Directors has considered
2019
the position and, in accordance with the
1 January 2016 30 September
701,889
advice received from the Audit, Risk and
2020
Compliance Committee, is satisfied that
1 January 2017 30 September
593,583
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 in Note 31, 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
2021
2,767,452
The exercise price for these Awards is nil .
Further details of Awards are set out in
Note 27 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
principles relating to auditor independence
The corporate governance statement is
as set out in APES 110 Code of Ethics for
available on the Adelaide Brighton Limited
Professional Accountants .
website and may be accessed via the
following URL:
http://adbri .com .au/
ourresponsibilities#governance-exp
Signed in accordance with a resolution
of the Directors
M Brydon
Director
Dated 16 March 2018
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 115 .
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 .
49
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 REMUNERATION REPORT
Adelaide Brighton Ltd
Dear Fellow Shareholders
On behalf of the Board and as Chair of the Nomination, Remuneration and Governance Committee, I am pleased to
present the Adelaide Brighton 2017 Remuneration Report .
Our remuneration framework incorporates robust performance measures linked to our strategic plans 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 .
2017 performance
Adelaide Brighton continues to pursue its long term growth strategy with ongoing investment in cost reduction and
operational improvement; growth of the lime business to supply the Australian resources sector and vertical integration
of its construction materials business .
In 2017 Adelaide Brighton delivered revenue of $1 .56 billion driven by strong east coast demand, and concrete
and aggregates acquisitions in Victoria, South Australia and the Northern Territory .
Underlying profit excluding property increased 5 .3% to $189 .3 million, with stronger volumes and prices, the benefits from the
operational improvement programs and lower import costs partially offset by higher energy costs and a number of one-offs .
Reported profit declined 2 .3% to $182 .0 million, including $17 .7 million of costs related to doubtful debts .
Adelaide Brighton’s long term strategy of product and geographic diversification has positioned the Company to benefit
from the strong markets on the east coast of Australia . This strategy includes vertical integration into premixed concrete
and concrete products and the development of an aggregates business to underpin sustainability of these operations .
Adelaide Brighton continues to generate strong cash flows allowing the Company to invest in 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 2017 year of 20 .5 cents per
share and special dividends of 4 .0 cents per share, bring total dividends for 2017 to 24 .5 cents per share fully franked .
Remuneration report
Following consideration of an independent benchmark report that revealed non-executive Director fees had fallen out of line with
market peers, in 2017 fees for non-executive Directors were increased to ensure fee levels remain competitive to attract and retain
appropriately qualified Directors . This has been a particular focus of the Board due to its ongoing commitment to Board renewal .
Accordingly, the base fee for the Chairman of the Board and the non-executive Directors was increased by approximately 12% and
18% respectively . Fees for a Committee Chairman and Committee Member increased by approximately 18% and 5% respectively .
The Board does not expect to increase non-executive Director fees in the near future .
The 2017 remuneration increases across the Executive Key Management Personnel team were 3% to 4% percent . This is 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 .
Short Term Incentive
Adelaide Brighton delivered strong underlying financial performance in 2017, with underlying net profit after tax excluding property
up 5 .3% . However, reported net profit after tax (excluding property) declined 2 .7% resulting in the Group financial measure for
the 2017 STI not being met . A contributing factor to this decline in reported net profit after tax was due to the doubtful debt
provision and associated costs relating to underpayment for product supplied that came to light in late 2017 .
50
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 The Board determined that, for the purpose of calculating the STI, no adjustment would be made for the one-off doubtful
debt costs of $17 .7 million .
Notwithstanding good performance against their non-financial targets under the STI Plan, the Board, decided to reduce the
non-financial component of the STI to zero, for the CEO and Managing Director and CFO .
For all other KMP’s, the overall result was short term incentives for KMP vesting in the range of 12 .8% to 31 .4% of their potential
maximum taking into account the Board’s assessment of non-financial objectives and achievement of divisional financial targets .
Finally, as foreshadowed last year, in 2017 the portion of the short term incentive award that was deferred was increased to 50%
(up from 25% in 2016) .
Long Term Incentive
Consistent with strong Company performance over the past four years, the Board is pleased to advise that the 2013 long term
incentive Award was tested during 2017 and vested at 82 .9% . The relative total shareholder return (TSR) performance condition
exceeded the 82nd percentile and vested at 100% and the compound annual growth in earnings per share (EPS) target achieved
65 .9% vesting based on EPS growth of 6 .6% over the performance period .
These LTI outcomes are consistent with delivery of long term value to shareholders with the Company achieving a TSR of
107 .4% over the measurement period .
Board renewal
During the year the Board continued to progress its renewal program taking into consideration the Board skills matrix and
matching those skills to our strategic plans and was pleased to announce the appointment of two new Directors in February 2018 .
Dr Vanessa Guthrie and Mr Geoff Tarrant were appointed non-executive Directors under the Board’s renewal program . The
Board also named Mr Zlatko Todorcevski as Chairman Elect to succeed Mr Leslie Hosking as Chairman at the conclusion of the
Company’s Annual General Meeting on 17 May 2018 .
Dr Guthrie has more than 30 years’ experience in the mining and resources industry and she is considered independent . Mr Tarrant
is a finance executive with over 25 years’ experience primarily in mergers and acquisitions and capital markets . Mr Tarrant was
nominated by the Company’s major shareholder, Barro Properties Pty Ltd, and is not considered independent . Consistent with the
ASX Corporate Governance Council’s Principles and Recommendations, a majority of the Board remains independent .
Conclusion
These remuneration outcomes reflect the level of performance achieved against our applicable targets during 2017 .
We have prepared the 2017 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 2018 Annual General Meeting .
Arlene Tansey
Chairman of Nomination, Remuneration and Governance Committee
51
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 REMUNERATION REPORT CONTENTS
1 Executive remuneration policy and framework . . . . . . . . . . . . . . . . . . . . . . . . . . 53
1 .1
1 .2
1 .3
Remuneration policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Remuneration framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Remuneration governance - responsibility for setting remuneration . . . . . . . . . 56
2 Overview of Company performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
2 .1
2 .2
Financial performance in 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Long term financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
3 Linking remuneration to Company performance . . . . . . . . . . . . . . . . . . . . . . . . . 58
3 .1
Short Term Incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
3 .1 .1 Short Term Incentive - performance measures . . . . . . . . . . . . . . . . . . . . . . . . . 58
3 .1 .2 Short Term Incentive - financial outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
3 .2
Long Term Incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
3 .2 .1 Long Term Incentive - outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4 Executive remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4 .1
4 .2
4 .3
Fixed annual remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
At-risk remuneration - Short Term Incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
At-risk remuneration - Long Term Incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5 Executive Service Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6 Non-executive Directors’ fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6 .1
Policy and approach to setting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7 Key Management Personnel disclosure tables . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7 .1
7 .2
7 .3
Non-executive Directors’ statutory remuneration . . . . . . . . . . . . . . . . . . . . . . . 67
Executive statutory remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Equity holdings of Key Management Personnel . . . . . . . . . . . . . . . . . . . . . . . . 69
52
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 The Directors of Adelaide Brighton Limited
Table 1
(the Company) present the Remuneration
Report (Report) for the Company and
the Group for the financial year ended
31 December 2017 . The Report outlines the
Name
Executives
M Brydon
Role
CEO and Managing Director (CEO & MD)
remuneration arrangements in place for the
M Kelly
Chief Financial Officer (CFO)
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 .
The KMP detailed in this Report for the
2017 financial year are:
G Agriogiannis
Executive General Manager, Concrete and Aggregates
AL Dell
BD Lemmon
Directors (2)
LV Hosking
RD Barro
GF Pettigrew
Executive General Manager, Concrete Products
Executive General Manager, Cement and Lime
Non-executive Chairman
Non-executive Director
Non-executive Director
KB Scott-Mackenzie
Non-executive Director
AM Tansey
Z Todorcevski (1)
Non-executive Director
Non-executive Director
(1) Appointed a non-executive Director on 22 March 2017 .
(2) Since the end of the reporting period VA Guthrie and GR Tarrant were appointed Directors on 8 February 2018 .
1 Executive remuneration policy
The governance of remuneration outcomes
and framework
1.1
Remuneration policy
is a key focus of the Board and the
Nomination Remuneration and Governance
(NRG) Committee . Remuneration policies
The Board ensures remuneration policies
are regularly reviewed to ensure that
are clearly aligned with the Group strategy,
remuneration for executives continue to
which is focused on maintaining and growing
remain aligned with Company performance .
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 .
53
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 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 fi xed and at risk components for the Executives disclosed in this
Report, as a percentage of potential maximum total annual remuneration is shown below .
CEO and MD
2016
Fixed annual
remuneration
Short term
incentive
Long term
incentive
331/3%
25%
81/3%
331/3%
Cash 581/3%
Equity 412/3%
2017
Fixed annual
remuneration
Short term
incentive
Long term
incentive
331/3%
16 2/3%
16 2/3%
331/3%
Cash 50%
Equity 50%
Key management personel
2016
Fixed annual
remuneration
46%
Short term
incentive
Long term
incentive
24%
8%
22%
Cash 70%
Equity 30%
2017
Fixed annual
remuneration
Short term
incentive
Long term
incentive
46%
16%
16%
22%
Cash 62%
Equity 38%
54
Adelaide Brighton Ltd and its controlled entities
for the year ended 31 December 2017
The table below provides a summary of our remuneration framework for the 2017 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
Considerations
(NA)
>
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
Fixed Annual
Remuneration (FAR)
Salary and other benefits
(including statutory
superannuation)
Annual Short Term
Incentive (STI)
Cash
+
Deferred rights to receive
fully paid ordinary shares
Maximum:
60%- 80% of FAR
(100% of FAR for CEO)
Financial targets (80%) -
CEO and CFO - 80% relating
to Group NPAT
Other Executives - 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)
Earnings Per Share (EPS) (50%)
Maximum:
Rights to receive fully paid
ordinary shares
and
Total Shareholder Return (TSR)
(50%)
Measured over a four year
performance period
CEO
100% of FAR
Other executives:
40%-70% of FAR
>
>
>
>
>
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
55
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 1.3
Remuneration governance - responsibility for setting remuneration
2 Overview of Company performance
Our governance framework for determining executive remuneration is outlined below:
2.1
Financial performance in 2017
Consultation with shareholders
and other stakeholders
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
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 advisers
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
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)
The NRG Committee seeks advice from external remuneration consultants on an as required
basis . The NRG Committee did not obtain remuneration recommendations during 2017 .
56
The Directors are pleased to present
Adelaide Brighton Limited’s financial
performance for 2017 .
> Revenue of $1,560 million was up 11 .7%
reflecting strong demand across residential,
non-residential and infrastructure projects in
Victoria, New South Wales and Queensland,
increasing infrastructure demand in
South Australia, and contributions from
acquisitions .
> Underlying NPAT (excluding property)
increased 5 .3% to $189 .3 million due to:
- Higher construction materials volumes
and pricing;
- Operational improvements and lower
import costs; and
- Acquisitions completed during the year .
Partially offset by:
- $3 .6 million associated with a cement
quality issue in South Australia;
- Additional $3 .3 million relating to a
compulsory scope change in remediation
related to the closure of our North
Melbourne concrete plant;
- Costs associated with the Company’s
limestone carrying vessel; and
- Higher energy costs .
> Reported NPAT declined 2 .3% due to a
number of significant items including a
$17 .7 million doubtful debt provision and
associated costs relating to underpayment
for product supplied .
Adelaide Brighton’s diversified business
model and focus on operational improvement
supported the Group’s long term growth
strategy . Strategic initiatives which
contributed to the Company’s financial
performance in 2017 included:
> Strengthening of our energy supply portfolio
with a South Australian five year energy
supply agreement to secure certainty of
supply at competitive prices .
> Operations efficiencies in cement and
lime delivered $8 million in 2017, including
$2 .8 million with rationalisation of speciality
cement production at Angaston in South
Australia and centralisation of laboratory
testing facilities to the Birkenhead Plant .
> Import profitability improved by $12 million
before tax compared to 2016 due to reduced
shipping and material procurement costs and
the higher Australian dollar .
> Our land sales program has delivered
cash proceeds since 2013 of $97 million .
This includes transactions in 2017 that
realised $13 .9 million in cash proceeds and
$8 .4 million NPAT .
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 > The acquisition of three concrete and
Table 2
aggregates businesses in 2017 contributed
5 .8% to revenue and refl ects the realisation
of our long term vertical integration strategy
as a major contributor to shareholder returns .
On an underlying (excluding property) basis,
key profi t measures for 2017 versus 2016
show an improvement of between 5 .3%
and 7 .0% (depending on the metric), on a
revenue increase of 11 .7% (Refer Table 2) .
2.2
Long term fi nancial highlights
As can be seen in the graph below the
2017
$m
2016
Variance
$m
%
2017
$m
2016
Variance
$m
%
Reported (excluding property)
Underlying (excluding property)
1,560 .0
1,396 .2
337 .9
255 .4
173 .6
335 .7
257 .6
178 .4
11 .7
0 .7
(0 .9)
(2 .7)
1,560 .0
1,396 .2
11 .7
360 .2
277 .7
189 .3
337 .6
259 .5
179 .7
6 .7
7 .0
5 .3
Revenue
EBITDA
EBIT
NPAT
The table below provides an overall view of the Company’s fi nancial performance and operating
cash fl ow over the past fi ve fi nancial years to 31 December 2017 .
Table 3 - Financial performance and shareholders’ wealth improvement from 2013 to 2017
underlying NPAT (excluding property)
Financial year ended
2013
2014
2015
2016
has increased from $154 .8 million to
31 December
2017 CAGR (1)
%
$189 .3 million over the last fi ve years
representing compound annual growth rate
(CAGR) of 5 .2% .
This growth has been delivered as
a result of the Company’s long term
strategy of cost reduction and continuous
improvement; growth in the lime business
and vertical integration of the construction
materials business .
Sales
NPAT
$m
1,228 .0 1,337 .8 1,413 .1
1,396 .2 1,560 .0
6 .2
Excluding
Reported
property $m
150 .2
172 .0
173 .0
178 .4
173 .6
3 .7
% change
(1 .8)
14 .5
0 .6
3 .1
(2 .7)
NPAT Underlying
Excluding
property $m
154 .8
159 .6
174 .2
179 .7
189 .3
5 .2
% change
Share price (2)
$/share
8 .9
3 .67
3 .1
9 .1
3 .2
5 .3
3 .52
4 .75
5 .43
6 .52
Cents/share
19 .5(3)
17 .0
27 .0(4)
28 .0(4)
24 .5(5)
15 .5
5 .9
Net profi t after tax
(reported excluding property)
vs net profi t after tax
(underlying excluding property)
Dividends
Franking
Operating
cash fl ow
%
$m
100
100
100
100
100
227 .3
194 .0
229 .9
248 .4
224 .2
23 .7
23 .9
26 .9
0 .5
32 .0
42 .6
28 .7
20 .2
28 .0
24 .6
166 .0
Earnings per share Cents
TSR - 1 year
Total Shareholder
Return
%
%
(1) Compound Annual Growth Rate .
n
o
t
h
g
i
r
i
B
e
d
a
e
d
A
l
:
e
c
r
u
o
S
13
14
15
16
17
NPAT (reported excluding property)
NPAT (underlying excluding property)
The TSR achieved over the last fi ve years
of 166% 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 . TSR over the last 12 months was
24 .6%, again refl ecting an improved share
price, increased ordinary dividends and
the payment of special dividends and an
improvement in the underlying performance
of the business .
* Comparator Group is the companies in the
S&P/ASX200 Accumulation Index, excluding
all GICS fi nancial companies and selected
resources companies .
(2) At 31 December, or last trading day of the year if not 31 December .
(3) Includes 3 .0 cents special dividend .
(4) Includes 8 .0 cents total special dividend .
(5) Includes 4 .0 cents special dividend .
As can be seen in the graph below, Adelaide Brighton’s TSR growth over the last fi ve years has
signifi cantly outperformed the S&P/ASX200 Accumulation Index .
%
200
160
120
80
40
Total shareholder returns (share price + dividend reinvested)
and S&P/ASX200 Accumulation Index returns
d
t
L
y
t
P
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e
s
v
d
A
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ABC
S&P/ASX200 Accum
Adelaide Brighton Ltd and its controlled entities
for the year ended 31 December 2017
57
$M
190
180
170
160
150
140
130
120
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 2017 . 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 .
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:
Proactive safety behaviours
Enhance environmental performance
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 .
l
a
i
c
n
a
n
i
F
c
i
g
e
t
a
r
t
S
l
e
p
o
e
P
e
c
n
e
l
l
e
c
x
e
n
o
i
t
a
r
e
p
O
58
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017
Performance assessment Result
Group result In its assessment of financial performance,
the Board excluded property profits and other significant items
(restructuring costs, transaction costs and fair value gain) .
However no adjustment was made for the one-off item of the
doubtful debt costs of $17 .7 million .
Despite strong underlying Company performance, Group
financial performance was assessed at less than 95% of target
resulting in the Group financial component not being met .
Divisional results Concrete and Aggregates Division financial
performance was greater than 100% of target, resulting in 93%
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 .
KMP other than the CEO and Managing Director and CFO
were assessed at 50-80% achievement of Strategic
non-financial objectives .
KMP other than the CEO and Managing Director and
CFO were assessed at 50-70% achievement of People
non-financial objectives .
Target included a financial stretch The 2017 target was set at 5 .8% above 2016 actual .
This was a challenging target given the market conditions in Western Australia and the
Northern Territory .
For KMP to achieve the maximum outcome under the Group financial performance measure,
2017 NPAT must have exceeded 2016 NPAT by 16%, highlighting the significant stretch
component of the incentive .
Strong underlying performance The Board’s view is that the underlying performance of
the Group continues to be strong with contribution from recent concrete and aggregate
acquisitions highlighting the benefits of the Company’s vertical integration strategy .
Acquisitions Position the Company to take advantage of potential “bolt-on” and
transformational acquisitions to ensure readiness when the opportunity becomes available .
The CEO and Managing Director and management team progressed acquisition opportunities
which culminated in the acquisition of Central Pre-Mix concrete and quarry, Davalan Concrete
and the Holcim concrete and aggregates business in the Northern Territory .
Product innovation Commissioning of automated sleeper walling plant to deliver significant
operating efficiencies, sales growth and potential new market segments .
Organic growth Development approvals and construction of three greenfield concrete plants
in Brisbane to capitalise on growth in this region . Commissioning of an innovative indoor
premixed concrete plant to service demand in the Sydney inner city area .
Proactive safety behaviours Proactive safety behaviours have improved evidenced by
increased reporting in 2017: safety hazard reports increased by 3% and near miss reports
increased by 31% . The CEO and Managing Director and management demonstrated their
visible and leadership through active participation in site safety committee meetings
throughout the Company’s Australia wide operations .
Enhance environmental performance Enhance environmental performance through
training and increased environmental resource capability .
Development of capability Embedded 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 Managing Director and management exceeded targets set in respect of
succession plans for key leadership roles, including the identification of future executive talent .
Increased diversity Targeted sourcing strategies increased the gender diversity of
candidate pools with 66% of roles advertised in 2017 attracting female applicants .
Operational improvement Significant operational improvement benefits of $11 million
from rationalisation of specialty cement production at the Angaston plant, centralisation of
laboratory facilities at the Birkenhead plant and energy savings .
KMP other than the CEO and Managing Director and CFO
were assessed at 60-80% achievement of Operational
Excellence non-financial objectives
Import strategy Significant savings of $12 million from transport, shipping and materials
purchasing . Conclusion of a long term cement and clinker import agreement to deliver significant
savings over a 10 year period in addition to the flexibility to handle a range of supply scenarios .
Investment in operational improvement Achieved targeted efficiencies in relation to the
cessation of oilwell production at the Angaston plant and centralisation of laboratory facilities
at the Birkenhead plant .
Land sales program Preparation and negotiation of sale of land at a price that exceeded
expectations during 2017, and ongoing progress on delivery of value from the long term
land sales program .
59
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 3.1.2
Short Term Incentive - financial outcomes
Adelaide Brighton delivered a strong underlying financial performance in 2017, with underlying
NPAT (excluding property) up 5 .3% on the previous year .
Taking into consideration the impact of one-offs, specifically the $17 .7 million doubtful debt
costs, the Board exercised discretion and did not award an STI payment to the CEO and
Managing Director and CFO for the 2017 financial year .
For the other KMP’s, the overall result was short term incentives for KMP vesting in the range of
12 .8% to 31 .4% of their potential maximum taking into account the Board’s assessment of non-
financial objectives and partial achievement of the financial target in one division .
The Concrete and Aggregates Division financial performance was greater than 100% of
target, resulting in 93% achievement of the financial component for this Division . As financial
performance was less than 95% of target, the financial component was not achieved for the
Group, Cement and Lime Division and Concrete Products Division .
As you can see from the table below, in 2017 underlying (excluding property) EBIT and NPAT
increased over the previous year with an increased revenue of 11 .7% .
Table 4
Revenue
EBITDA
EBIT
NPAT
Underlying (excluding property)
2017
$m
1,560 .0
360 .2
277 .7
189 .3
2016
$m
1,396 .2
337 .6
259 .5
179 .7
Variance
%
11 .7
6 .7
7 .0
5 .3
The short term incentive payments shown in the table below reflect the performance achieved and amounts payable to Executives for the 2017
financial year .
Table 5
For the year ended
Maximum
Actual STI
STI actual(2)
Cash STI Deferred STI
Deferred STI
Deferred STI
Deferred STI
31 Dec 2017
Executives
M Brydon
M Kelly
G Agriogiannis
AL Dell
BD Lemmon
potential STI
opportunity (1)
as % of
STI maximum
$
1,438,910
612,232
436,720
257,088
412,000
%
-
-
31 .4
12 .8
13 .2
(2 years)
(3 years)
(Total)
awarded
$
-
-
$
-
-
$
-
-
$
-
-
$
-
-
No . of rights
-
-
137,005
68,503
34,251
34,251
68,502
10,115
32,907
16,454
8,227
8,226
16,453
54,384
27,192
13,596
13,596
27,192
2,430
4,015
(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 2017 STI was determined in conjunction with the finalisation of 2017 results .
60
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 3.2
Long Term Incentive
3.2.1
Long Term Incentive - outcomes
During 2017, the 2013 Award was tested for earliest exercise in May 2017 and vested at 82 .9%:
> The Total Shareholder Return component vested at 100 .0% with the Company achieving a Total
Shareholder Return of 107 .4% being the 82nd percentile of the Comparator Group .
> The compound annual EPS growth rate over the 2014 to 2016 fi nancial period was 6 .6% with
the EPS component partially vesting at 65 .9% .
The chart below illustrates Adelaide Brighton’s total shareholder return over the measurement period
for the 2013 Award . The Total Shareholder Return of 107 .4% resulted from share price growth and
payment of ordinary and special dividends totalling 101 .5 cents fully franked over the period .
ABC shareholder returns - share price growth and TSR
(October 2012 to December 2016) (Index = 100,
Source: ASX, First Advisers Pty Ltd
Dividends
= 37 .7%
Share
price
growth
= 69 .7%
ABC TSR
= 107 .4%
240
220
200
180
160
140
120
100
80
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
6
1
n
a
J
6
1
r
p
A
6
1
l
u
J
6
1
t
c
O
6
1
n
a
J
ABC share price growth
ABC TSR (share price growth + dividends reinvested)
Details of the movement in Awards held by Executives during the 2017 fi nancial year are set out below .
Table 6
For the year ended
Number held
Number
31 Dec 2017
at 1 Jan 2017
granted during
the year(1)
Number
exercised /
Number
Number held
Value of
lapsed /
at 31 Dec
2017(4)
Awards at
grant date (5)
vested during
the year(2)
forfeited during
the year(3)
Value per
share at
the date of
exercise(6)
$
$
Executives
M Brydon
M Kelly
G Agriogiannis
AL Dell
BD Lemmon
1,331,100
273,188
215,746
44,502
1,344,040
822,296
583,989
101,707
153,601
299,428
85,455
205,436
51,822
32,540
48,888
82,132
-
31,684
16,942
500,411
306,138
252,176
155,984
-
117,995
99,410
45,315
9,347
199,662
147,152
5 .76
5 .76
5 .88
5 .76
5 .76
(1) This represents the maximum number of Awards granted in 2017 that may vest to each Executive . As the Awards granted in 2017 only vest on satisfaction of performance
conditions which are to be tested in future fi nancial 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 2017 were in fact exercised, being the 2013 Award . The number of Awards that vested during the period and exercisable at 31
December 2017 is NIL . The number of Awards that vested but not yet exercisable at 31 December 2017 is NIL .
(3) This includes the portion of 2013 Award that reached the end of its performance period on 31 December 2016 that did not meet the performance conditions and was forfeited .
(4) Awards subject to performance conditions which remain unvested (2014, 2015, 2016 and 2017 Awards), and which will be tested for vesting during the period 2018 to 2021 .
(5) Fair value of Awards granted during 2017 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 fi ve trading days before the exercise date, but not including the day of exercise . The aggregate value of Awards that vested during the
year is $3,087,312 based on the Volume Weighted Closing Price .
Adelaide Brighton Ltd and its controlled entities
for the year ended 31 December 2017
61
4 Executive remuneration
Fixed remuneration is reviewed annually
From 1 January 2017 the Board resolved
4.1
Fixed annual remuneration
having regard to relevant factors including
to increase fixed remuneration across the
performance, market conditions (both
executive team by 3 to 4 per cent, in line with
The amount of fixed remuneration for
generally and in the markets in which the
the Company’s policy of setting remuneration
an individual executive (expressed as a
Group operates), growth and comparable
levels based on the size and nature of an
total amount of salary and other benefits,
roles within peer companies and similar
executive’s role (and impact of the role on the
including superannuation contributions) is
roles across a comparator group comprising
business) and individual performance in roles .
set with regard to the size and nature of an
those companies in the ASX 51-150 . For
Fixed remuneration levels continue to remain
executive’s role, the long term performance
someone who has performed successfully
conservative relative to peer companies of a
of an individual, his or her future potential
in their role for a number of years, FAR set
similar market capitalisation .
within the Group and market practice . The
between the median and 75th percentile of
Company’s stated approach is also to set
the comparator would be expected .
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 .
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 2017
STI is as follows:
Form and purpose of the STI
Who participates in the STI?
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 .
Why does the Board consider the STI an
The STI is designed to put a meaningful proportion of senior executives’ remuneration at risk, to
appropriate incentive?
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 2017 financial year onwards, 50% of STI awards will be deferred (unless
otherwise determined by the Board) . This is an increase from 2016 where 25% of the award
was deferred .
Performance conditions
When and how are the STI performance
All performance conditions are set by the Board and agreed with the executive .
conditions set?
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 .
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
STI outcomes of financial targets vest progressively in accordance with the following scale:
the STI?
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 .
62
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 Governance
How is performance against the performance
All performance conditions under the STI are clearly defined and measurable .
conditions assessed?
NPAT is used for 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 .
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) .
When is performance against the performance
Assessment of performance against the performance hurdles for the relevant year is
conditions determined and the award
determined at the February meeting of the NRG Committee and the Board, in conjunction with
made available?
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 .
What disposal restrictions apply to the
The 2017 Deferred Rights will be divided into two equal tranches:
Deferred Rights (and to dividends and
> the Deferred Rights in Tranche 1 and the shares acquired on their exercise may not be sold or
voting rights attach?)
otherwise disposed of until after 31 December 2019 (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 2020 (3 year disposal restriction) .
No dividends (or voting rights) are received on the Deferred Rights during the
disposal restrictions .
On exercise, the Deferred Rights are converted to shares . The shares issued may not be sold
or otherwise disposed of until the restriction period ends . During the restriction period shares
are eligible to receive dividends and be voted .
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
Yes . The STI Plan Rules provide the Board with a broad ability to claw back awards if
circumstances?
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 .
Cessation of employment or a change of control
What happens to STI awards on cessation of
Generally, if an Executive resigns or is terminated for cause, all STI entitlements will be forfeited .
employment?
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
In the event of a takeover bid (or other transaction likely to result in a change in control of
impact on STI entitlements?
the Company), the Board has absolute discretion to take any action as provided under the
STI Plan Rules .
63
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 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 2017 LTI Award is as follows:
Driving performance
Who participates and how does the Plan drive
The LTI is offered to senior executives whose behaviour and performance have a direct impact
performance and align participants’ interests
on the Group’s long term performance . Its purpose is to focus executives on the Group’s long
with shareholders?
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 2017 Awards will be tested and become exercisable to the extent of any vesting from
1 May 2021 .
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 .
How is the TSR performance condition measured
The Company’s TSR performance must equal or exceed the growth in the returns of the
and what amount can be earned?
median companies of the S&P/ASX 200 Accumulation Index (XJO Al), excluding all GICS
Any unexercised 2017 Awards will expire on 30 September 2021 .
Financial companies and selected resources companies over the period from 31 December
2016 to 31 December 2020 .
The 2017 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
The EPS performance hurdle requires the compound annual growth in EPS of the Company
and what amount can be earned?
over the relevant performance period to equal or exceed 5% per annum before any Awards
will vest .
The Board retains overall discretion to make adjustments in favour of, or against, management
to ensure that they do not enjoy a windfall gain nor suffer an unfair penalty for matters that were
not in their control or reasonable foresight .
Awards under the 2017 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 .
64
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 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
An executive’s entitlement to shares under an Award may also be adjusted to take account of
(including voting rights and dividends)?
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 2017 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 .
Cessation of employment or a change of control
What happens to Awards that are not yet
If an Executive resigns or is terminated for cause, the Awards in respect of any tranche that is
exercisable on cessation of employment?
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 .
How would a change of control of the Group
In the event of a takeover bid (or other transaction likely to result in a change in control of
impact on LTI entitlements?
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 .
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
Notice periods
Separation payments (1)
6 months’ notice by either party
6 months fixed annual remuneration where the Company terminates on notice .
(or payment in lieu)
M Kelly
3 months’ notice by either party
12 months fixed annual remuneration where the Company terminates on notice .(2)
(or payment in lieu)
G Agriogiannis
3 months’ notice by either party
9 months fixed annual remuneration where the Company terminated on notice .
(or payment in lieu)
AL Dell
6 months’ notice by either party
6 months fixed annual remuneration where the Company terminates on notice .
(or payment in lieu)
BD Lemmon
6 months’ notice by either party
6 months fixed annual remuneration where the Company terminates on notice .
(or payment in lieu)
(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 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 .
65
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 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
$1,600,000 per annum approved at the 2017 Annual General Meeting .
Base fees for 2017
Following an independent benchmarking exercise in 2016 that revealed non-executive Director
fees had fallen out of line with market peers, in 2017 fees for non-executive Directors were
increased to ensure fee levels remain competitive to attract and retain appropriately qualified
Directors . This has been a particular focus of the Board due to its ongoing commitment to
Board renewal .
Accordingly for the 2017 financial year the base fee for the Chairman of the Board and the
non-executive Directors was increased by approximately 12% and 18% respectively . Fees
for a Committee Chairman and Committee Member increased by approximately 18% and
5% respectively .
The Board does not expect to increase non-executive Director fees in the near future .
Fees payable to non-executive Directors are inclusive of contributions to superannuation .
Base fees (Board)
Non-executive Chairman(1)
Non-executive Director
$
370,000
130,000
$
Committee fees
Committee chair
Committee member
Audit, Risk and Compliance Committee
Nomination, Remuneration and Governance
Committee
Safety, Health and Environment Committee
30,000
30,000
30,000
15,000
15,000
15,000
(1) The Chairman of the Board receives no additional fee for Committee work .
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 .
66
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 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
L V Hosking
(Chairman)
R D Barro
G F Pettigrew
K B Scott-Mackenzie
A M Tansey
Z Todorcevski (2)
Total non-executive
Directors’ remuneration
Fees and allowances
Directors’ base fees
Committee fees (incl.
Year
(incl. superannuation)
superannuation)
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
$
370,000
330,000
130,000
110,000
130,000
110,000
130,000
110,000
130,000
110,000
101,268
-
991,268
770,000
$
-
-
15,000
14,294
60,000
53,999
45,000
39,705
45,000
39,705
3,750
-
168,750
147,703
Post-employment
benefits
Superannuation
contributions (1)
$
23,449
23,449
12,580
10,783
17,273
14,909
15,183
12,998
15,183
12,998
9,111
-
92,779
75,137
Total
$
370,000
330,000
145,000
124,294
190,000
163,999
175,000
149,705
175,000
149,705
105,018
-
1,160,018
917,703
(1) Superannuation contributions are made on behalf of non-executive Directors which satisfy the Group’s obligations under applicable Superannuation Guarantee Charge legislation .
(2) Z Todorcevski was appointed a non-executive Director on 22 March 2017 . He was appointed a member of the Board’s Audit, Risk and Compliance Committee and Nomination,
Remuneration and Governance Committee effective 16 November 2017 .
67
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 7.2
Executive statutory remuneration
Table 9
Post employment
Equity based
Short term benefits
Cash salary
Other
(FAR)
Cash STI (1)
benefits
benefit
Super-
annuation (2)
benefits
Deferred
Long term
STI (1)
incentive (3)
Total
awards (4)
% of
remuneration
consisting of
Executives
M Brydon
M Kelly
G Agriogiannis
AL Dell
BD Lemmon
Year
$
2017
1,408,910
$
-
$
$
152,941(5)
30,000
$
-
$
$
283,725
1,875,576
2016
1,362,000
643,102
166,667(5)
35,000
214,368
403,849
2,824,986
2017
2016
2017
2016
2017
2016
2017
2016
735,290
-
713,000
273,629
525,900
68,503
510,000
219,212
404,480
388,000
16,454
90,725
485,000
27,192
458,333
133,080
-
-
-
-
-
-
-
-
30,000
30,000
20,000
20,000
24,000
24,000
30,000
30,000
-
113,457
878,747
91,210
248,090
1,355,929
68,502
58,079
740,984
73,070
122,531
944,813
16,454
26,024
487,412
30,241
15,622
534,528
27,192
52,918
622,302
44,360
134,623
800,396
$
15
14
13
18
8
13
5
3
9
17
Total executive
remuneration
2017
3,559,580
112,149
152,941
134,000
112,148
534,203
4,605,021
2016(6) 3,555,866
1,392,807
166,667
147,800
464,269
1,035,797
6,763,206
(1) STI payment includes payments relating to 2017 performance accrued but not paid as at 31 December 2017 .
(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 in Note 27 .
(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) Total executive remuneration for 2016 includes total remuneration of $288,494 for former KMP, M Miller . Refer to the 2016 Remuneration Report for full details of the remuneration .
68
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 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 2017 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
Non-executive Directors
LV Hosking
RD Barro (3)
GF Pettigrew
KB Scott-Mackenzie
AM Tansey
Z Todorcevski (4)
Granted as remuneration during the year
Balance at
beginning of year
LTI
Deferred STI
to other changes
of year
Net movement due
Balance at end
39,296
5,000
-
-
-
4,851
227,579,355
7,739
5,000
10,000
20,000
215,746
153,601
82,132
-
45,315
-
-
-
-
-
-
39,610
16,854
13,502
5,588
8,197
-
-
-
-
-
-
(215,746)
(158,601)
(82,132)
-
(45,315)
78,906
16,854
13,502
5,588
8,197
5,000
9,851
18,904,990
246,484,345
9,000
-
-
-
16,739
5,000
10,000
20,000
(1) The balances reported in this 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 2017 .
(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 2013 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 .
(4) Mr Todorcevski was appointed a non-executive Director on 22 March 2017 .
69
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 INCOME STATEMENT
For the year ended 31 December 2017
($ 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
Consolidated
Notes
2017
5
5
6
22(a)
7(a)
1,560.0
(1,009.9)
(243.8)
306.3
19.6
(20.7)
(72.3)
(13.6)
35.1
254.4
(72.3)
182.1
182.0
0.1
182.1
Cents
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
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
4
4
28.0
27.9
28 .7
28 .6
70
Adelaide Brighton Ltd and its controlled entities for the year
ended 31 December 2017. The above income statement
should be read in conjunction with the accompany notes.
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2017
($ 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 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)
7(c)
26(b)
7(c)
Consolidated
2017
182.1
2016
186 .2
0.4
-
-
1.9
(0.6)
1.7
(0 .9)
1 .3
(0 .4)
1 .7
(0 .5)
1 .2
183.8
187 .4
183.7
0.1
183.8
187 .5
(0 .1)
187 .4
Adelaide Brighton Ltd and its controlled entities for the year
ended 31 December 2017. The above statement of comprehensive
income should be read in conjunction with the accompany notes.
71
BALANCE SHEET
As at 31 December 2017
($ 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
Notes
2017
2016
Consolidated
9(i)
10
11
13
10
26(b)
22
12
14
17
16
17
7(f)
16
18
20(a)
20(b)
57.6
241.0
174.3
1.9
474.8
37.3
3.5
160.3
1,037.2
299.9
1,538.2
2,013.0
145.8
0.3
9.8
33.8
15.1
204.8
428.9
86.0
45.0
0.1
560.0
764.8
21 .5
204 .6
160 .2
3 .8
390 .1
34 .4
2 .3
151 .2
978 .4
270 .3
1,436 .6
1,826 .7
117 .0
0 .4
15 .4
31 .9
3 .3
168 .0
309 .6
89 .9
39 .0
0 .1
438 .6
606 .6
1,248.2
1,220 .1
733.1
1.9
510.6
1,245.6
2.6
1,248.2
731 .4
2 .9
483 .3
1,217 .6
2 .5
1,220 .1
72
Adelaide Brighton Ltd and its controlled entities for the year
ended 31 December 2017. The above balance sheet should
be read in conjunction with the accompanying notes.
STATEMENT OF CHANGES IN EQUITY
Notes
Notes
Notes
19
For the year ended 31 December 2017
Consolidated
For the year ended 31 December 2017
For the year ended 31 December 2017
Consolidated
Consolidated
($ million)
($ million)
Balance at 1 January 2017
($ million)
Balance at 1 January 2017
Profit for the year
Balance at 1 January 2017
Profit for the year
Other comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Other comprehensive income
Total comprehensive income for the year
Deferred hedging gains and losses and cost
Total comprehensive income for the year
of hedging transferred to the carrying value
Deferred hedging gains and losses and cost
Deferred hedging gains and losses and cost
of inventory purchased in the period
of hedging transferred to the carrying value
of hedging transferred to the carrying value
of inventory purchased in the period
Transactions with owners in their
of inventory purchased in the period
capacity as owners:
Transactions with owners in their
Transactions with owners in their
capacity as owners:
Dividends provided for or paid
capacity as owners:
Dividends provided for or paid
Executive performance share plan
Dividends provided for or paid
Executive performance share plan
Executive performance share plan
19
18(b)/20(a)
19
18(b)/20(a)
18(b)/20(a)
Balance at 31 December 2017
Balance at 31 December 2017
Balance at 1 January 2016
Balance at 31 December 2017
Balance at 1 January 2016
Profit for the year
Balance at 1 January 2016
Profit for the year
Other comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Other comprehensive income
Total comprehensive income for the year
Deferred hedging gains and losses and cost
Total comprehensive income for the year
of hedging transferred to the carrying value
Deferred hedging gains and losses and cost
Deferred hedging gains and losses and cost
of inventory purchased in the period
of hedging transferred to the carrying value
of hedging transferred to the carrying value
of inventory purchased in the period
Transactions with owners in their
of inventory purchased in the period
capacity as owners:
Transactions with owners in their
Transactions with owners in their
capacity as owners:
Dividends provided for or paid
capacity as owners:
Dividends provided for or paid
Executive performance share plan
Dividends provided for or paid
Executive performance share plan
Executive performance share plan
19
19
18(b)/20(a)
19
18(b)/20(a)
18(b)/20(a)
Balance at 31 December 2016
Balance at 31 December 2016
Balance at 31 December 2016
Attributable to owners of Adelaide Brighton Limited
Attributable to owners of Adelaide Brighton Limited
Attributable to owners of Adelaide Brighton Limited
Share
capital
Share
Share
capital
731.4
capital
731.4
-
731.4
-
-
-
-
-
-
-
-
-
-
-
-
-
1 .7
-
1 .7
1.7
1 .7
1.7
1.7
733.1
733.1
729.2
733.1
729.2
-
729.2
-
-
-
-
-
-
-
-
-
-
-
-
-
2 .2
-
2 .2
2.2
2 .2
2.2
731.4
2.2
731.4
731.4
Reserves
Reserves
2.9
Reserves
2.9
-
2.9
-
0 .4
-
0 .4
0.4
0 .4
0.4
0.4
(0 .9)
(0 .9)
(0 .9)
-
-
(0 .5)
-
(0 .5)
(0.5)
(0 .5)
(0.5)
(0.5)
1.9
1.9
1.2
1.9
1.2
-
1.2
-
-
-
-
-
-
-
-
0 .9
0 .9
0 .9
-
-
0 .8
-
0 .8
0.8
0 .8
0.8
2.9
0.8
2.9
2.9
Retained
earnings
Retained
Retained
earnings
483.3
earnings
483.3
182 .0
483.3
182 .0
1 .3
182 .0
1 .3
183.3
1 .3
183.3
183.3
-
-
-
(156 .0)
(156 .0)
(156 .0)
-
(156.0)
-
-
(156.0)
(156.0)
510.6
510.6
474.3
510.6
474.3
186 .3
474.3
186 .3
1 .2
186 .3
1 .2
187.5
1 .2
187.5
187.5
-
-
-
(178 .5)
(178 .5)
(178 .5)
-
(178.5)
-
-
(178.5)
483.3
(178.5)
483.3
483.3
Total
Total
1,217.6
Total
1,217.6
182 .0
1,217.6
182 .0
1 .7
182 .0
1 .7
183.7
1 .7
183.7
183.7
(0 .9)
(0 .9)
(0 .9)
(156 .0)
(156 .0)
1 .2
(156 .0)
1 .2
(154.8)
1 .2
(154.8)
(154.8)
1,245.6
1,245.6
1,204.7
1,245.6
1,204.7
186 .3
1,204.7
186 .3
1 .2
186 .3
1 .2
187.5
1 .2
187.5
187.5
0 .9
0 .9
0 .9
(178 .5)
(178 .5)
3 .0
(178 .5)
3 .0
(175.5)
3 .0
(175.5)
1,217.6
(175.5)
1,217.6
1,217.6
Non-controlling
interests
Non-controlling
Non-controlling
interests
2.5
interests
2.5
0 .1
2.5
Total equity
Total equity
1,220.1
Total equity
1,220.1
182 .1
1,220.1
0 .1
-
0 .1
-
0.1
-
0.1
0.1
-
-
-
-
-
-
-
-
-
-
-
-
2.6
2.6
2.6
2.6
2.6
(0 .1)
2.6
(0 .1)
-
(0 .1)
-
(0.1)
-
(0.1)
(0.1)
-
-
-
-
-
-
-
-
-
-
-
2.5
-
2.5
2.5
182 .1
1 .7
182 .1
1 .7
183.8
1 .7
183.8
183.8
(0 .9)
(0 .9)
(0 .9)
(156 .0)
(156 .0)
1 .2
(156 .0)
1 .2
(154.8)
1 .2
(154.8)
(154.8)
1,248.2
1,248.2
1,207.3
1,248.2
1,207.3
186 .2
1,207.3
186 .2
1 .2
186 .2
1 .2
187.4
1 .2
187.4
187.4
0 .9
0 .9
0 .9
(178 .5)
(178 .5)
3 .0
(178 .5)
3 .0
(175.5)
3 .0
(175.5)
1,220.1
(175.5)
1,220.1
1,220.1
Adelaide Brighton Ltd and its controlled entities for the year
ended 31 December 2017. The above statement of changes in
equity should be read in conjunction with the accompany notes.
73
STATEMENT OF CASH FLOWS
For the year ended 31 December 2017
($ 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
Draw down / (repayment) of borrowings
Dividends paid to Company’s shareholders
Net cash outflow from financing activities
Net increase/(decrease) 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
Notes
2017
2016
Consolidated
1,661.3
(1,379.4)
26.4
1.6
(13.0)
8.6
(81.3)
-
224.2
(89.1)
(80.2)
17.7
(3.1)
0.6
(154.1)
3.5
118.5
(156.0)
(34.0)
36.1
21.5
-
57.6
1,536 .1
(1,239 .1)
18 .6
1 .5
(12 .1)
6 .2
(67 .2)
4 .4
248 .4
(86 .5)
-
23 .2
(2 .0)
0 .6
(64 .7)
4 .0
(21 .0)
(178 .5)
(195 .5)
(11 .8)
33 .3
-
21 .5
9(ii)
18
9(iv)
19
9(i)
74
Adelaide Brighton Ltd and its controlled entities for the year
ended 31 December 2017. The above statement of cash flows
should be read in conjunction with the accompany notes.
NOTES TO THE FINANCIAL REPORT
1 Summary of significant accounting
New accounting standards and
(b) Principles of consolidation
policies
interpretations
and reissue the financial statements .
AASB 15 Revenue From Contracts With
Subsidiaries are entities over which the
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 16 March 2018 .
The Directors have the power to amend
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
Accounting Standards Board and the
Corporations Act 2001 . The Company is a
for-profit entity for the purpose of preparing
the financial statements .
Certain new accounting standards and
interpretations have been published that
are not mandatory for 31 December 2017
reporting periods . The Group’s assessment
of the impact of these new standards and
interpretations is set out below .
(i) Subsidiaries
The consolidated financial statements
incorporate the assets and liabilities of all
subsidiaries controlled by Adelaide Brighton
Limited as at 31 December 2017 and the
results of all subsidiaries for the year then
ended . The Company and its subsidiaries
AASB 15 Revenue From Contracts With
together are referred to in this financial report
Customers
as “the Group” .
Customers will replace AASB 118 which
Group has control . The Group controls
covers contracts for goods and services
an entity when the Group is exposed to,
and AASB 111 which covers construction
or has rights to, variable returns from its
contracts . The new standard replaces the
involvement with the entity and has the ability
existing notion of risk and rewards with
to affect those returns through its power to
the notion of control to recognise when a
direct the activities of the entity .
good or service transfers to a customer .
The Group performed an assessment of
the impact of the new standard and based
on the results the standard will not 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 .
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 .
AASB 16 Leases will replace the current
Unrealised losses are also eliminated
standard on lease accounting, AASB
unless the transaction provides evidence
117 . AASB 16 introduces a single lessee
of the impairment of the asset transferred .
accounting model and requires the lessee to
Accounting policies of subsidiaries have
Interpretations issued by the Australian
AASB 16 Leases
Comparative information has been
recognise assets and liabilities for all leases
been changed where necessary to ensure
re-stated where appropriate to
with a term of more than 12 months, unless
consistency with the policies adopted by
enhance comparability .
the underlying asset is of low value . A lessee
the Group .
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
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 . An
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 $75 .9 million and
(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 .
The consolidated financial statements
a corresponding liability at 31 December
of the Adelaide Brighton Limited Group
2017, and reduce 2017 net profit after tax
also comply with International Financial
by $1 .2 million . The standard is mandatory
Reporting Standards (IFRS) as issued by
for financial years commencing on or after
the International Accounting Standards
Board (IASB) .
1 January 2019 and Adelaide Brighton will
adopt the standard at that time .
75
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 1 Summary of significant accounting
On consolidation, exchange differences
Where settlement of any part of cash
policies (continued)
(iii) Non-controlling interests
arising from the translation of any net
consideration is deferred, the amounts
investment in foreign entities, and
payable in the future are discounted to their
Non-controlling interests in the results and
of borrowings and other financial
present value as at the date of exchange .
equity of subsidiaries are shown separately
instruments designated as hedges of
The discount rate used is the entity’s
in the consolidated income statement and
such investments, are recognised in other
incremental borrowing rate, being the rate at
balance sheet respectively . The Group
comprehensive income .
which a similar borrowing could be obtained
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
When a foreign operation is sold or
any borrowings forming part of the net
from an independent financier under
comparable terms and conditions .
investment are repaid, a proportionate share
Contingent consideration is classified
of such exchange differences is reclassified
either as equity or a financial liability .
to profit or loss, as part of the gain or loss
Amounts classified as a financial liability
on sale where applicable .
are subsequently remeasured to fair value
with changes in fair value recognised in the
income statement .
(e) Rounding of amounts
of the subsidiary is deducted from equity .
(d) Business combinations
(c) Foreign currency translation
The acquisition method of accounting
is used to account for all business
(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 .
combinations, including business
The Company is of a kind referred to in
combinations involving equities or
the Australian Securities and Investments
businesses under common control,
Commission Corporations (Rounding in
regardless of whether equity instruments or
Financial / Directors’ Reports) Instrument
other assets are acquired . The consideration
2016/191, relating to the ‘’rounding off’’ of
transferred for the acquisition of a subsidiary
amounts in the financial report . Amounts
comprises the fair values of the assets
in the financial report have been rounded
transferred, the liabilities incurred and the
off in accordance with that instrument to
equity interests issued by the Group . The
the nearest one hundred thousand dollars,
consideration transferred also includes the
unless otherwise stated .
(ii) Transactions and balances
fair value of any contingent consideration
Foreign currency transactions are
arrangement and the fair value of any
(f) Goods and Services Tax (GST)
translated into the functional currency
pre-existing equity interest in the subsidiary .
Revenues, expenses and assets are
using the exchange rates prevailing at
Acquisition-related costs are expensed as
recognised net of the amount of associated
the dates of the transactions . Foreign
incurred . Identifiable assets acquired and
GST, unless the GST incurred is not
exchange gains and losses resulting from
liabilities and contingent liabilities assumed
recoverable from the taxation authority . In
the settlement of such transactions and
in a business combination are, with limited
this case it is recognised as part of the
from the translation at year end exchange
exceptions, measured initially at their
cost of acquisition of the asset or as part of
rates of monetary assets and liabilities
fair values at the acquisition date . On an
the expense .
denominated in foreign currencies are
acquisition-by-acquisition basis, the Group
recognised in the income statement or
recognises any non-controlling interest in the
deferred in equity if the gain or loss relate
acquiree either at fair value or at the non-
to a qualifying cash flow hedge .
controlling interest’s proportionate share of
(iii) Foreign operations
the acquiree’s net identifiable assets .
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
The results and financial position of
The excess of the consideration transferred,
in the balance sheet .
all the foreign operations that have a
the amount of any non-controlling interest
functional currency different from the
in the acquiree and the acquisition date
presentation currency are translated into
fair value of any previous equity interest
the presentation currency as follows:
in the acquiree over the fair value of the
> Assets and liabilities for each balance sheet
Group’s share of the net identifiable assets
presented are translated at the closing rate
acquired is recorded as goodwill . If those
at the date of that balance sheet;
amounts are less than the fair value of the
> Income and expenses for each income
net identifiable assets of the subsidiary
statement and statement of comprehensive
acquired and the measurement of all
income are translated at average exchange
amounts has been reviewed, the difference
rates (unless this is not a reasonable
is recognised directly in profit or loss as a
approximation of the cumulative effect
bargain purchase .
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 .
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 in other comprehensive income .
76
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. FINANCIAL PERFORMANCE OVERVIEW
2 Segment reporting
(a) Description of segments
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 and 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:
31 December 2017
($ 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
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
Cement, Lime, Concrete
Concrete
Unallocated
Total
and Aggregates
Products
1,401.4
(95.5)
1,305.9
(69.4)
286.6
147.6
-
147.6
(7.8)
10.2
-
-
-
(5.3)
(30.3)
1,549.0
(95.5)
1,453.5
(82.5)
266.5
35.1
-
-
35.1
Cement, Lime, Concrete
and Aggregates
Concrete
Products
Unallocated
Total
1,216 .6
(74 .9)
1,141 .7
(65 .1)
287 .8
28 .5
149 .2
-
149 .2
(8 .4)
11 .4
-
-
-
(4 .6)
(33 .1)
1,365 .8
(74 .9)
1,290 .9
(78 .1)
266 .1
-
-
28 .5
Sales between segments are carried out at arms length and are eliminated on consolidation .
77
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 2 Segment reporting (continued)
The operating revenue is 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
Revenue from continuing operations
Consolidated
2017
1,549.0
(95.5)
89.5
15.1
1.5
0.4
1,560.0
2016
1,365 .8
(74 .9)
97 .3
6 .0
1 .5
0 .5
1,396 .2
The CEO 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
2017
266.5
(12.1)
254.4
2016
266 .1
(11 .5)
254 .6
Revenues of $268 .5 million (2016: $215 .3 million) are derived from a single customer . These revenues are attributable to the Cement, Lime,
Concrete and Aggregates segment .
3 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 differing to actual outcomes . The areas involving significant
estimates and assumptions are listed below .
> Impairment of assets - Note 15
> Provisions for close down and restoration costs - Note 16(iv)
> Defined benefit superannuation plan - Note 26
Detailed information about each of these estimates and assumptions is included in Notes 15, 16(iv) and 26 together with information about the basis
of calculation for each affected line item in the financial statements .
4 Earnings per share
Accounting policy - earnings per share
(i) Basic earnings per share
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 .
78
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
4 Earnings per share (continued)
(cents)
Basic earnings per share
Diluted earnings per share
(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
Consolidated
2017
28.0
27.9
2016
28 .7
28 .6
Consolidated
2017
2016
650,067,492
649,395,882
2,767,452
2,919,824
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
652,834,944
652,315,706
($ million)
Reconciliation of earnings used in calculating earnings per share
Basic and diluted earnings per share
Profit after tax
(Profit)/loss attributable to non-controlling interests
Profit attributable to ordinary equity holders of the Company used in calculating basic
and diluted earnings per share
5 Revenue and other income
Accounting policy - revenue recognition
Revenue is recognised for the major business activities as follows:
(i) Sales revenue
Consolidated
2017
2016
182.1
(0.1)
186 .2
0 .1
182.0
186 .3
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 .
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
1,558.1
1,394 .3
0.7
0.8
0.4
0 .7
0 .8
0 .4
1,560.0
1,396 .2
10.4
4.5
1.2
3.5
19.6
8 .4
-
2 .9
3 .2
14 .5
Total revenue and other income
1,579.6
1,410 .7
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 $11 .1 million (2016: $8 .4 million) which is recognised in other income .
79
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
6 Expenses
Accounting policy - borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and
prepare the asset for its intended use or sale . Other borrowing costs are expensed .
($ million)
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
Notes
2017
2016
Consolidated
21(b)
4.3
71.4
4.9
80.6
1.9
169.0
11.7
9.2
18.3
-
13.5
1.1
-
14.6
(1.0)
13.6
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
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 .8% p .a . (2016: 2 .5% p .a .) .
7 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 .
80
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
7 Income tax (continued)
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 .
($ million)
(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% (2016: 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 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
(c) Tax expense relating to items of other comprehensive income
Actuarial gain on retirement benefit obligation (Note 26)
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
Consolidated
2017
2016
254.4
76.3
254 .6
76 .4
2.6
(3.4)
-
(4.6)
-
(0.7)
(0.3)
2.4
0 .7
(1 .9)
-
(4 .0)
-
(1 .3)
(1 .9)
0 .4
72.3
68 .4
71.8
(3.5)
4.0
72.3
(0.8)
(0.3)
(1.1)
0.6
-
0.6
69 .9
(1 .7)
0 .2
68 .4
(1 .1)
(0 .9)
(2 .0)
0 .5
0 .4
0 .9
0.5
11.3
0 .4
11 .6
This benefit for tax losses will only be obtained if:
(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 .
81
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
Consolidated
2017
2016
1.4
33.1
3.0
-
37.5
(37.5)
-
28.9
7.4
(1.1)
-
-
2.3
37.5
100.5
10.4
12.6
123.5
(37.5)
86.0
118.8
4.4
(0.3)
(1.6)
2.2
123.5
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
113 .5
0 .6
0 .4
4 .3
-
118 .8
7 Income tax (continued)
($ million)
(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 7(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 7(e))
Net deferred tax liabilities - after offset
Movements:
Opening balance at 1 January - before offset
Recognised in the income statement
Recognised in equity
(Over)/under provision in prior year
Acquired in business combinations
Closing balance at 31 December - before offset
82
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
8 Business combinations
During 2017, the Company acquired the following businesses:
> Central Pre-Mix Concrete in Victoria in February 2017 .
> Davalan Concrete in South Australia in June 2017 .
> Holcim’s concrete and aggregates operations in the Northern Territory in July 2017 .
Each of these businesses is a strategic fit with our existing operations and are in line with Adelaide Brighton Ltd’s business strategy of
vertical integration .
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
Purchase consideration
Cash paid
Contingent consideration
Total purchase consideration
Cash and cash equivalents
Trade and other receivables
Inventories
Joint arrangements
Freehold land
Buildings
Property, plant and equipment
Mineral reserves
Asset retirement cost
Intangibles
Deferred tax asset
Trade and other payables
Employment benefit liabilities, including superannuation
Provision - restoration liability
Current tax liability
Borrowings
Deferred tax liability
Net identifiable asset acquired
Add: goodwill
Less: gain on bargain purchase
Net assets acquired
Fair value
$ million
80 .2
-
80.2
-
-
5.1
-
10.6
8.7
21.7
8.1
3.6
-
2.3
-
(1.0)
(3.6)
-
-
(2.2)
53.3
31.4
(4.5)
80.2
The goodwill is attributable to two acquisitions and relates to the expected synergies expected to arise from the Company’s vertical integration
strategy and the workforce . None of the goodwill is expected to be deductible for tax purposes .
A gain relating to a bargain purchase of $4 .5 million was recognised on one of the acquisitions within other income in the Income Statement .
The gain on acquisition reflects the Group’s overall strategy of completing on acquisitions, where negotiating conditions allow, at values
approximating the fair value of the tangible assets . Transaction costs associated with the acquisitions of $5 .0 million are included in administration
costs in the Income Statement .
The acquired businesses contributed revenues of $80 .3 million and net profit before tax, excluding the gain on acquisitions and acquisition related
expenses, of $2 .5 million .
If the acquisitions had occurred on 1 January 2017, the annualised consolidated revenue and net profit before tax for the year ended 31 December
2017 would have been $108 .3 million and $7 .6 million respectively . These amounts have been calculated using the Group’s accounting policies and
by adjusting the results of the businesses to reflect additional depreciation and amortisation that would have been charged assuming the fair value
adjustments to property, plant and equipment had applied from 1 January 2017, together with the consequential tax effects .
83
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
9 Note to statement of cashflows
(i) Cash and cash equivalents
Accounting policy - cash and cash equivalents
Cash and cash equivalents includes cash on hand, term deposits and deposits held at call with financial institutions, other short term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value and bank overdrafts . Bank overdrafts are shown within borrowings in current liabilities on the balance sheet .
($ million)
Current
Cash at bank and in hand
Term deposits
Cash and cash equivalents
(a) Offsetting
Consolidated
2017
2016
56.0
1.6
57.6
19 .8
1 .7
21 .5
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 2017 was $nil (2016: $nil) .
(b) Risk exposure
The Group’s exposure to interest rate risk is discussed in Note 21 . The maximum exposure to credit risk at the end of the reporting period is the
carrying amount of each class of cash and cash equivalents mentioned above .
(ii) Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Doubtful debts
Depreciation, amortisation and impairment
Share based payments
Finance charges on remediation provision
(Gain) on sale of non-current assets
Share of profits of joint ventures, net of dividends received
Non-cash retirement benefits expense
Non-cash remediation obligation
Fair value accounting gain on acquisition of business
Capitalised interest
Other
182.1
18.3
82.5
(2.9)
1.1
(6.4)
(8.6)
0.7
(4.3)
(4.5)
(1.0)
(0.8)
186 .2
0 .7
78 .1
(2 .9)
1 .1
(8 .4)
(9 .9)
0 .2
0 .8
-
(0 .6)
0 .4
Net cash provided by operating activities before changes in assets and liabilities
256.2
245 .7
Changes in operating assets and liabilities, net of effects from purchase of
business combinations:
Increase / (decrease) in inventories
Increase / (decrease) in prepayments
Increase / (decrease) in receivables
Increase / (decrease) in trade creditors
Increase / (decrease) in provisions
(Decrease) / increase in taxes payable
(Decrease) / increase in deferred taxes payable
Increase / (decrease) in other operating assets and liabilities
Net cash inflow from operating activities
84
(9.0)
(1.8)
(53.0)
27.6
2.3
(5.5)
(4.3)
11.7
224.2
1 .3
1 .1
1 .9
(2 .3)
(0 .7)
0 .4
4 .5
(3 .5)
248 .4
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
9 Note to statement of cashflows (continued)
(iii) Net debt reconciliation
($ million)
Cash and cash equivalents
Borrowings - repayable within one year (including overdraft)
Borrowings - repayable after one year
Net debt
Consolidated
2017
57.6
(0.3)
(428.9)
(371.6)
(iv) Reconciliation of movements of liabilities to cash flows arising from financing activities
($ million)
Net debt as at 1 January 2016
Cash flows
Other non-cash movements
Net debt as at 31 December 2016
Cash flows
Other non-cash movements
Net debt as at 31 December 2017
Other assets
Liabilities from financing activities
Cash/
Bank
Overdraft
Liquid
Investments
Finance
Leases due
within 1 year
Finance
Leases due
After 1 year
Borrowings
Due within
1 year
Borrowings
Due after
1 year
33 .3
(11 .8)
-
21.5
36 .1
-
57.6
-
-
-
-
-
-
-
(1 .0)
0 .6
-
(0.4)
0 .1
-
(0.3)
(0 .7)
0 .4
-
(0.3)
0 .3
-
-
-
-
-
-
-
-
-
(328 .8)
20 .0
(0 .5)
(309.3)
(118 .9)
(0 .7)
(428.9)
2016
21 .5
(0 .4)
(309 .6)
(288 .5)
Total
(297 .2)
9 .2
(0 .5)
(288.5)
(82 .4)
(0 .7)
(371.6)
85
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
BALANCE SHEET ITEMS
10 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 21(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 .
Notes
2017
2016
Consolidated
($ 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
200.1
(19.5)
180.6
50.3
6.5
3.6
241.0
35.4
1.9
37.3
1.2
-
18.3
19.5
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
Loss allowance provision recognised during the year
21(b)
Closing balance at 31 December
Fair value and credit, interest and foreign exchange risk
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 21 .
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above .
86
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
11 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 .
($ million)
Current
Finished goods
Raw materials and work in progress
Engineering spare parts stores
Consolidated
2017
2016
73.6
56.9
43.8
174.3
70 .6
60 .1
29 .5
160 .2
Inventory expense
Inventories recognised as expense during the year ended 31 December 2017 and included in cost of sales amounted to $948 .5 million
(2016: $808 .3 million) .
12 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 from 2 - 50 years . 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 5 - 10 years .
(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 .
87
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
12 Property, plant and equipment (continued)
Consolidated at 31 December 2017
($ million)
At cost
Accumulated depreciation
Net book amount
Reconciliations
Carrying amount at
1 January 2017
Additions
Disposals
Business combinations
Reclassification
Depreciation/amortisation
Carrying amount at
31 December 2017
Freehold
land
Buildings
Leasehold
property
Plant &
equipment
Mineral
reserves
Asset
retirement
cost
In course of
construction
Total
178 .5
154 .4
-
178.5
(65 .4)
89.0
167 .0
1 .3
(0 .9)
10 .6
0 .5
-
83 .8
0 .6
(0 .1)
8 .7
0 .3
(4 .3)
9 .6
(3 .8)
5.8
6 .2
0 .1
-
-
-
(0 .5)
1,383 .7
(865 .8)
517.9
495 .8
42 .6
(3 .2)
21 .7
29 .6
(68 .6)
218 .0
(43 .7)
174.3
165 .2
5 .9
-
8 .1
-
(4 .9)
34 .1
(8 .9)
25.2
19 .6
4 .3
-
3 .6
-
(2 .3)
46 .5
2,024 .8
-
(987 .6)
46.5
1,037.2
40 .8
38 .9
-
-
(33 .2)
-
978 .4
93 .7
(4 .2)
52 .7
(2 .8)
(80 .6)
178.5
89.0
5.8
517.9
174.3
25.2
46.5
1,037.2
Consolidated at 31 December 2016
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
Leased assets
167 .0
145 .9
-
167.0
(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)
495.8
497 .4
41 .9
(5 .3)
26 .6
(64 .8)
-
204 .0
(38 .8)
165.2
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
Plant and equipment includes the following amounts where the Group is a lessee under a finance lease:
($ million)
Cost
Accumulated depreciation
Net book amount
13 Assets classified as held for sale
Accounting policy - assets held for sale
Consolidated
2017
1.2
(0.5)
0.7
2016
1 .6
(0 .5)
1 .1
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 non current asset (or disposal group) is recognised
at the date of de-recognition .
88
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 13 Assets classified as held for sale (continued)
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 .
($ million)
Current
Land and buildings
Plant and equipment
14 Intangible assets
Accounting policy - intangible assets
(i) Goodwill
Consolidated
2017
2016
1.6
0.3
1.9
1 .3
2 .5
3 .8
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) 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 .
($ million)
31 December 2017
Cost
Accumulated amortisation
Carrying amount at 31 December 2017
Opening balance at 1 January 2017
Reclassification
Additions in current year
Amortisation charge
Closing balance at 31 December 2017
Consolidated
Other
Goodwill
Software
intangibles
Total
280.1
-
280.1
248.7
-
31.4
-
280.1
18.9
(10.4)
8.5
9.4
0.9
-
(1.8)
8.5
12.7
(1.4)
11.3
12.2
(0.8)
-
(0.1)
11.3
311.7
(11.8)
299.9
270.3
0.1
31.4
(1.9)
299.9
89
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
14 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
15 Impairment tests
Consolidated
Other
Goodwill
Software
intangibles
Total
248 .7
-
248 .7
248 .7
-
-
-
248 .7
18 .0
(8 .6)
9 .4
11 .2
(0 .1)
-
(1 .7)
9 .4
13 .3
(1 .1)
12 .2
13 .0
(0 .5)
-
(0 .3)
12 .2
280 .0
(9 .7)
270 .3
272 .9
(0 .6)
-
(2 .0)
270 .3
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
2017
134.0
137.3
271.3
8.8
280.1
2016
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
2017 actual results and 2018 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
($ million)
Cement, Lime, Concrete and Aggregates
Concrete Products
2017
35.0
25.8
2016
37 .5
24 .9
2017
1.3
1.2
2016
1 .3
1 .2
2017
11.3
12.1
2016
10 .4
10 .9
Gross margin1
Growth rate2
Discount rate3
1 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 .
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 .
90
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 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 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 .
(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 $43 .1 million (2016: $38 .1 million) .
91
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 16 Provisions (continued)
($ million)
Current
Employee benefits
Restoration provisions
Workers’ compensation
Other provisions
Non-current
Employee benefits
Restoration provisions
Consolidated
2017
2016
27.3
5.1
0.8
0.6
33.8
7.0
38.0
45.0
25 .9
5 .2
0 .1
0 .7
31 .9
6 .1
32 .9
39 .0
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
Consolidated
2017
4.0
2016
3 .5
Movements in each class of provision during the financial year, other than employee benefits, are set out below .
($ million)
Opening balance at 1 January 2017
Additional provision recognised - charged to income statement
Additional provision recognised - business combinations
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 2017
Workers’
Restoration
Other
compensation
provisions
provisions
0.1
1 .2
-
-
-
-
(0 .5)
0.8
38.1
-
3 .6
4 .2
1 .1
(0 .7)
(3 .2)
43.1
0.7
0 .2
-
-
-
-
(0 .3)
0.6
92
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
CAPITAL STRUCTURE AND RISK MANAGEMENT
17 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
2017
2016
0.3
0 .4
428.9
-
428.9
309 .3
0 .3
309 .6
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 21 . Due to the short term fixed interest rates of the borrowings, the
carrying value is the fair value .
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
0.3
-
0.3
-
0.3
0.3
-
0.3
4.9
14.9
128.9
148.7
0 .4
0 .4
0 .8
(0 .1)
0 .7
0 .4
0 .3
0 .7
4 .8
12 .9
130 .2
147 .9
93
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 17 Borrowings and lease commitments (continued)
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 .
18 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
650,272,495 (2016: 649,654,099) ordinary shares, fully paid
(b) Movements in ordinary share capital
Opening balance at 1 January
618,396 shares issued under Executive Performance Share Plan (2016: 768,352) (i)
Closing balance at 31 December
Consolidated
2017
2016
733.1
731 .4
731.4
1.7
733.1
729 .2
2 .2
731 .4
(i) Ordinary shares issued under the Adelaide Brighton Limited Executive Performance Share Plan (refer Note 27) .
(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% .
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Gearing ratio
(f) Employee share scheme and options
429.2
(57.6)
371.6
1,248.2
29.8%
310 .0
(21 .5)
288 .5
1,220 .1
23 .6%
Information relating to the employee share schemes, including details of shares issued under the schemes is set out in Note 27 .
94
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
19 Dividends
($ million)
Dividends paid during the year
2016 final dividend of 15 .5 cents (2015 - 15 .0 cents) per fully paid ordinary share, franked at
100% (2015 - 100%) paid on 12 April 2017
2017 interim dividend of 8 .5 cents (2016 - 12 .5 cents) per fully paid ordinary share, franked
at 100% (2016 - 100%) paid on 5 October 2017
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 16 cents (2016 15 .5 cents) per fully paid share, franked at 100% (2016: 100%) .
The aggregate amount of the proposed final dividend to be paid on 13 April 2018, not
The Company
2017
2016
100.7
97 .3
55.3
156.0
81 .2
178 .5
recognised as a liability at the end of the reporting period, is
104.0
100 .7
Franked dividend
The franked portion of the dividend proposed as at 31 December 2017 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 2018 .
($ million)
Franking credits available for subsequent financial years based on a tax rate of 30% (2016: 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
2017
136.4
2016
120 .8
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 $46 .0 million (2016: $43 .2 million) .
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
(0.3)
2.2
-
1.9
(0.7)
0.4
(0.3)
2.7
0.6
(0.2)
(0.9)
2.2
0.9
-
(1.3)
0.4
-
(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
95
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 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 27 .
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 Financial risk management
Financial risk management
Consolidated
2017
483.3
182.0
1.3
(156.0)
510.6
2016
474 .3
186 .3
1 .2
(178 .5)
483 .3
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
96
Consolidated
2017
2016
24.2
(24.2)
-
35 .4
(36 .7)
(1 .3)
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
21 Financial risk management (continued)
(ii) Electricity price risk
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 2017 and 2016, 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:
Variable rate instruments:
Cash at bank, on hand and at call
Bank facilities
Fixed rate instruments:
Finance leases
(iv) Summarised sensitivity analysis
Consolidated
2017
2016
Weighted
Weighted
average
Balance
average
Balance
interest rate
$ million
interest rate
$ million
2.0%
2.83%
57.6
428.9
2 .0%
2 .93%
21 .5
309 .3
5.51%
0.3
5 .51%
0 .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 .
($ million)
Interest rates - increase by 1%
Interest rates - decrease by 1%
(b) Credit risk
Consolidated
2017
2016
Impact on
Impact on
post-tax
Impact on
post-tax
Impact on
profit
(3.0)
3.0
equity
(3.0)
3.0
profit
(2 .2)
2 .2
equity
(2 .2)
2 .2
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 .
97
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 21 Financial risk management (continued)
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 1 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 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 2017 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 .
Consolidated
2017
Gross
2016
Gross
Expected
Carrying
Expected
Carrying
loss rate
Amount
Provision
loss rate
Amount
Provision
%
0.11
0.22
2.09
73.26
$million
$million
125.7
85.8
13.1
25.8
250.4
0.1
0.2
0.3
18.9
19.5
%
0 .12
0 .24
2 .35
31 .86
$million
$million
112 .9
72 .5
7 .9
2 .2
195 .5
0 .1
0 .2
0 .2
0 .7
1 .2
Current
More than 30 days past due
More than 60 days past due
More than 90 days past due
Total
The gross carrying amount includes external receivables of $200 .1 million (2016: $167 .2 million) and joint venture receivables of $50 .3 million
(2016: $28 .3 million) .
In late 2017 the Group became aware of certain financial discrepancies which relate to transactions whereby it has been underpaid for products
supplied to customers . The Group has now completed analysis with the assistance of forensic accountants KPMG and as a result an additional
provision of $17 .1 million for the impairment of trade receivables was recognised in the balance sheet as at 31 December 2017 .
While the financial impact of the discrepancies has been quantified, investigations are continuing . The Company is also continuing its efforts to
recover amounts due .
(c) Liquidity risk
The ultimate responsibility for liquidity risk management rests with the Board which has established an appropriate risk management framework for
the management of the Group’s short, medium and long term funding and liquidity management requirements . The Group’s Corporate Treasury
Function manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities . Included below is a statement of credit standby
facilities that the Group has at its disposal to further reduce liquidity risk .
98
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 21 Financial risk management (continued)
Financing arrangements
($ 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
6 January 2021
Consolidated
2017
2016
4.0
540.0
544.0
-
430.0
430.0
4.0
110.0
114.0
-
210.0
330.0
540.0
4 .0
540 .0
544 .0
-
310 .0
310 .0
4 .0
230 .0
234 .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 .
Contractual maturities of financial liabilities
Consolidated
($ million)
31 December 2017
Non-derivatives
Trade payables
Bank facilities
Finance leases
Bank guarantees
Derivatives
Gross settled forward foreign exchange
contracts (cash flow hedges):
- (inflow)
- outflow
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
< 6 months
6-12 months
1-2 years
> 2 years
Total
(Assets)/Liabilities
Carrying Amount
145.9
6.4
0.3
6.0
158.6
(23.8)
23.8
-
117 .0
4 .2
0 .4
24 .1
145 .7
(27 .5)
28 .4
0 .9
-
6.4
-
6.3
12.7
(0.4)
0.4
-
-
4 .3
0 .3
-
4 .6
(7 .9)
8 .3
0 .4
-
195.1
-
-
195.1
-
-
-
-
310 .1
0 .3
-
310 .4
-
-
-
-
250.1
-
23.2
273.3
-
-
-
-
-
-
-
-
-
-
-
145.9
458.0
0.3
35.5
639.7
(24.2)
24.2
-
117 .0
318 .6
1 .0
24 .1
460 .7
(35 .4)
36 .7
1 .3
145.8
428.9
0.3
-
575.0
-
-
-
117 .0
309 .3
0 .7
-
427 .0
(1 .3)
-
(1 .3)
99
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 21 Financial risk management (continued)
(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 10 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 .
(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 21(a) for details of the movements in the Group’s reserves relating to hedging activities .
100
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
21 Financial risk management (continued)
(d) Financial instruments, derivatives and hedging activity (continued)
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
Notional amount EURO - $ 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
- Euro
Fair value measurements
Fair value hierarchy
Consolidated
2017
2016
-
20.6
1.7
1.9
Jan - Aug 2018
1:1
-
-
A$1 : US$0.7769
A$1 : Yen 87.9
A$1 : EURO$0.6581
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
-
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 liabilities in relation to forward exchange contracts of $0 .2 million and assets of $0 .2 million (2016: assets of $1 .3 million) at the
end of the reporting period . There were no electricity price caps in place at 31 December 2017 or 31 December 2016 . 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) .
101
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
GROUP STRUCTURE
22 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
Total
Joint ventures
Associate
Consolidated
2017
121.3
33.6
-
33.6
2016
114 .2
25 .6
-
25 .6
2017
39.0
1.5
-
1.5
2016
37 .0
2 .9
-
2 .9
2017
160.3
35.1
-
35.1
2016
151 .2
28 .5
-
28 .5
102
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 22 Joint arrangements and associate (continued)
(b) Interests in joint arrangements and associate
Name
Principal place of business
Aalborg Portland Malaysia Sdn . Bhd .(1)
Batesford Quarry(2)
Burrell Mining Services JV (2)
Malaysia
Victoria
New South Wales and Queensland
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)
New South Wales and Victoria
New South Wales and Victoria
South Australia
Queensland
Ownership interest
2017
2016
%
30
50
50
50
50
50
50
%
30
50
50
50
50
50
50
Activities
White clinker and cement manufacture
Limestone products
Concrete products for the coal
mining industry
Premixed concrete and quarry products
Cementitious product distribution
Premixed concrete
Cement milling and distribution
(1) Associate
(2) Joint operation
(3) Joint venture
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 $31 .3 million (2016: $30 .8 million) .
23 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
Place of incorporation
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
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest held
by the Group
2017
2016
%
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
Class of
shares
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
103
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 24 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, Southern Quarries Pty Ltd and Central Pre-Mix Concrete 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 ASIC Corporations (Wholly-owned companies)
Instrument 2016/785 (formerly 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 Instrument .
Central Pre-Mix Concrete Pty Ltd was added to the “Closed Group” during 2017 .
Set out below is a consolidated balance sheet as at 31 December 2017 of the Closed Group .
($ 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
104
2017
2016
50.4
242.6
166.4
1.9
461.3
37.3
3.5
91.7
21.4
997.4
293.6
17 .4
203 .7
159 .8
3 .8
384 .7
34 .3
2 .3
90 .3
21 .4
962 .5
268 .2
1,444.9
1,906.2
1,379 .0
1,763 .7
140.9
0.1
9.9
33
14.9
198.8
428.9
85
42.4
0.1
556.4
755.2
140 .2
0 .1
15 .4
31 .8
3 .3
190 .8
309 .4
88 .9
38 .9
0 .1
437 .3
628 .1
1,151.0
1,135 .6
733.1
1.4
416.5
731 .4
2 .9
401 .3
1,151.0
1,135 .6
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 24 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 2017 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
25 Parent entity financial information
2017
240.9
(71.0)
169.9
401.3
169.9
1.3
(156.0)
416.5
2016
247 .1
(69 .4)
177 .7
400 .9
177 .7
1 .2
(178 .5)
401 .3
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 .
(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 .
105
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
25 Parent entity financial information (continued)
(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
($ million)
Bank guarantees
(c) Contingent liabilities of the parent entity
2017
2016
2,277.1
2,674.6
1,298.8
1,762.7
911.9
1,975 .2
2,372 .8
1,130 .7
1,475 .1
897 .7
725.9
724 .3
2.2
183.8
911.9
169.1
169.1
2017
7.4
2 .7
170 .7
897 .7
200 .5
200 .5
2016
10 .3
The parent entity did not have any contingent liabilities as at 31 December 2017 or 31 December 2016 other than the bank guarantees detailed above .
26 Retirement benefit obligations
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 .
106
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 26 Retirement benefit obligations (continued)
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 .
Significant estimate - key assumptions
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 26(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 .
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 2017, 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 .
107
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
26 Retirement benefit obligations (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:
Present value of
Fair value of
Net obligation/
obligation
plan assets
(asset)
51.4
1.7
1.7
0.2
3.6
-
(0.3)
0.9
0.6
-
0.9
(11.7)
44.8
(53.7)
-
(1.8)
(0.2)
(2.0)
(2.5)
-
-
(2.5)
(0.9)
(0.9)
11.7
(48.3)
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)
(2.3)
1.7
(0.1)
-
1.6
(2.5)
(0.3)
0.9
(1.9)
(0.9)
-
-
(3.5)
(1 .3)
1 .8
(0 .1)
-
1 .7
(1 .6)
(0 .1)
-
(1 .7)
(1 .0)
-
-
(2 .3)
($ million)
At 1 January 2017
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 2017
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
108
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 26 Retirement benefit obligations (continued)
(c) Categories of plan assets
The major categories of plan assets are as follows:
Australian equity
International equity
Fixed income
Property
Cash
Other
Total
31 December 2017
Unquoted
$ million
12.6
15.4
10.1
6.3
1.0
2.9
48.3
31 December 2016
Unquoted
in %
26%
32%
21%
13%
2%
6%
100%
$ million
13 .4
16 .1
10 .8
6 .4
3 .8
3 .2
53 .7
in %
25%
30%
20%
12%
7%
6%
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 .
(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
2017
2016
%
3.3
2.0
3.5
3.0
%
3 .7
2 .0
3 .5
3 .8
31 December 2017
Discount rate
Future salary increases
31 December 2016
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 .6%
Increase by 1 .2%
Increase by 1 .7%
Decrease by 1 .1%
Decrease by 1 .7%
Increase by 1 .4%
Increase by 1 .8%
Decrease by 1 .3%
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 2018 are $0 .7 million (2017: $0 .8 million) .
The weighted average duration of the defined benefit obligation is 6 years (2016: 6 years) .
109
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
27 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 (2016 - 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 50 to 69 .
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
Consolidated
2017
2016
2,919,824
2,986,287
593,583
-
(618,396)
(127,559)
701,889
-
(768,352)
-
2,767,452
2,919,824
-
-
The average value per share at the earliest exercise date during the year was $5 .76 (2016: $5 .08) . 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 .
110
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 27 Share-based payment plans (continued)
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 2017 - 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
2017 Awards
$5 .62
$0 .79
1 .97
2 .25
50%
1-May-21
Awards granted in 2016 - weighted average pricing model inputs
2016 Awards
2015 Awards
2014 Awards
2013 Awards
2012 Awards
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
$5 .68
$1 .04
1 .58
2 .75
50%
1-May-20
$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
- Tranche 2
$3 .84
$0 .35
1 .88
2 .50
50%
1-May-16
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 $619,965 during the year (2016: $1,149,092) .
The weighted average remaining contractual life of Awards outstanding at the end of the period was 1 .8 years (2016: 1 .8 years) .
111
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements.
OTHER
28 Related parties
(a) Compensation of Key Management Personnel
($ million)
Short-term employee benefits
Post employment benefits
Share-based payments
Consolidated
2017
2016
5.3
0.1
0.5
5.9
6 .6
0 .1
1 .0
7 .7
(b) Other transactions with Key Management Personnel
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 Sdn . 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 .
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
Consolidated
2017
$
2016
$
80,951,994
18,967,244
71,983,392
20,818,254
Details of interests in controlled entities are set out in Note 23 . 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 .
112
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 28 Related parties (continued)
(e) Transactions with related parties
The following transactions occurred with related parties:
($’000)
Sales of goods
Joint venture entities
Purchases of materials and goods
Joint venture entities
Associate entities
Interest revenue
Joint venture entities
Dividend and distribution income
Joint venture entities
Superannuation contributions
Consolidated
2017
2016
307,037
242,702
115,210
6,597
84,375
8,142
659
719
26,413
18,582
Contributions to superannuation funds on behalf of employees
12,628
12,707
Loans advanced to:
Joint venture entities
(f) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the reporting date in relation to transactions with related parties:
($’000)
Current receivables
Joint venture entities (interest)
Joint venture entities (trade)
Non-current receivables
Joint venture entities (loans)
Current payables
Joint venture entities (trade)
3,125
2,046
Consolidated
2017
2016
313
49,977
338
28,041
35,049
31,917
7,997
3,686
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 $659,420 (2016: $718,972) .
29 Events occurring after the balance sheet date
No matter or circumstance has arisen since 31 December 2017 that has significantly affected, or may significantly affect the Group’s operations, the
results of those operations, or the Group’s state of affairs in future financial years .
30 Commitments for capital expenditure
($ million)
Capital expenditure contracted for at the reporting date but not recognised as
liabilities is as follows:
Within one year
Consolidated
2017
2016
15.0
12 .6
113
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017. Notes to and forming part of the consolidated financial statements. 31 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:
($)
(a) Audit services
PricewaterhouseCoopers Australian firm
Audit and review of financial statements
(b) Non-audit services
PricewaterhouseCoopers Australian firm
Other assurance services
32 Contingencies
Details and estimates of maximum amounts of contingent liabilities are as follows:
($ million)
(a) Guarantees
Bank guarantees
(b) Litigation
Consolidated
2017
2016
855,313
748,359
20,550
40,949
Consolidated
2017
2016
35.4
24 .1
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 .
114
Adelaide Brighton Ltd and its controlled entities for the year
ended 31 December 2017. Notes to and forming part of
the consolidated financial statements.
DIRECTORS’ DECLARATION
AUDITOR’S INDEPENDENCE DECLARATION
In the Directors’ opinion:
Auditor’s Independence Declaration
(a) the financial statements and notes set out
on pages 70 to 114 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
2017 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 24 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 24 .
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 CEO 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 16 March 2018
As lead auditor for the audit of Adelaide Brighton
Limited for the year ended 31 December 2017,
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 .
MT Lojszczyk
Partner
PricewaterhouseCoopers
Adelaide 16 March 2018
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
Adelaide Brighton Ltd and its controlled entities
for the year ended 31 December 2017
115
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADELAIDE BRIGHTON LTD
Report on the audit of the
financial report
Independence
We are independent of the Group in
> We chose reported profit before tax as
the appropriate metric because, in our
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:
accordance with the auditor independence
view, it is the benchmark against which the
requirements of the Corporations Act
performance of the Group is most commonly
2001 and the ethical requirements of
measured . It is also a generally accepted
the Accounting Professional and Ethical
benchmark in practice . Property profits
Standards Board’s APES 110 Code of Ethics
were removed from materiality calculations
for Professional Accountants (the Code)
on the basis that these transactions are
that are relevant to our audit of the financial
distinguishable from the continuing product
report in Australia . We have also fulfilled our
trading activities of the Group .
other ethical responsibilities in accordance
> We selected 5% based on our professional
(a) giving a true and fair view of the Group’s
with the Code .
financial position as at 31 December 2017
and of its financial performance for the year
Our audit approach
judgement noting that it is also within the
range of commonly acceptable profit related
thresholds in the industry .
then ended
(b) complying with Australian Accounting
Standards and the Corporations
Regulations 2001 .
What we have audited
The Group financial report comprises:
> the consolidated balance sheet as at
31 December 2017
An audit is designed to provide reasonable
assurance about whether the financial
Audit scope
report is free from material misstatement .
> Our audit focused on where the Group
Misstatements may arise due to fraud
made subjective judgements; for example,
or error . They are considered material if
significant accounting estimates involving
individually or in aggregate, they could
making assumptions and considering
reasonably be expected to influence the
inherently uncertain future events .
economic decisions of users taken on the
> We conducted an audit of the most
basis of the financial report .
significant components being Cement
and Lime (primarily focusing on the
South Australian and Western Australian
businesses which comprise the bulk of
these operations) 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 component in the
Northern Territory, Concrete and Aggregates
components in Sydney and Queensland
and Concrete Products . Audit procedures
were also performed over acquisition of the
Central Pre-Mix Concrete, Davalan Concrete
Pty Ltd and Holcim Northern Territory
concrete and aggregates businesses .
> the consolidated income statement for the
We tailored the scope of our audit to ensure
year then ended
> the consolidated statement of
that we performed enough work to be able
to give an opinion on the financial report as
comprehensive income for the year then
a whole, taking into account the geographic
ended
and management structure of the Group, its
> the consolidated statement of changes in
accounting processes and controls and the
equity for the year then ended
industry in which it operates .
> 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
Materiality
responsibilities under those standards
> For the purpose of our audit we used overall
are further described in the Auditor’s
Group materiality of $9 .7 million, which
responsibilities for the audit of the financial
represents approximately 5% of the Group’s
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 .
profit before tax after excluding current year
gains 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 .
116
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017
> Independent Cement and Lime Pty Ltd
> Outside the operations identified above,
Key audit matters are those matters that, in
and Sunstate Cement Ltd were the largest
the Group includes components which
our professional judgement, were of most
contributors to the Group’s share of net
individually and collectively do not
significance in our audit of the financial report
profits from joint ventures and associates .
contribute materially to the overall Group
for the current period . The key audit matters
Other auditors audited the financial reports
result . We have obtained an understanding
were addressed in the context of our audit
for Independent Cement and Lime Pty Ltd
of these operations and performed
of the financial report as a whole, and in
and Sunstate Cement Ltd for the year ended
analytical procedures .
30 June 2017 . We determined the level of
involvement we needed to have to be able to
Key audit matters
forming our opinion thereon, and we do not
provide a separate opinion on these matters .
Further, any commentary on the outcomes
conclude whether sufficient appropriate audit
> Amongst other relevant topics, we
of a particular audit procedure is made in
evidence had been obtained for our opinion
communicated the following key audit
that context .
on the Group financial report as a whole,
matters to the Audit and Risk Committee:
including reviewing the work of these other
- Accounts receivable;
auditors . Due to the different balance dates
- Recoverability of goodwill and property,
utilised by these joint ventures, we performed
plant and equipment;
audit procedures for the period 1 July 2017
- Estimation of restoration provisions;
to (and as at) 31 December 2017, including
- Business combination accounting; and
substantive analytical procedures over the
- Measurement of inventory quantities .
financial results, to obtain sufficient evidence
These are further described in the Key audit
in respect of the results for the year ended
matters section of our report .
and financial position as at 31 December
2017 for our opinion .
Key audit matter
Accounts receivable
(Refer to notes 10 & 21)
The financial report of the Group included trade and other receivables
of $241 .0 million as at 31 December 2017 .
During the year, the Group identified discrepancies whereby it has
been underpaid for products supplied .
How our audit addressed the key audit matter
Our procedures included, amongst others, considering the expert’s
methods, competency objectivity and results of their work . Having
done so, we were satisfied that we could use the work of the Group’s
expert for the purpose of our audit .
We requested confirmation of the outstanding balance directly from
selected customers on interim and year end accounts receivable
balances . Where confirmation requests were not responded to by
The Group engaged an external expert to assist in analysing the
customers, we performed alternative procedures including testing
discrepancies . As a result, the Group identified that $17 .1 million
the balance to proof of delivery and subsequent cash received from
of its accounts receivable was impaired as at 31 December 2017,
the customers .
which has been recognised as a bad debt for the year ended
31 December 2017 .
To test the recoverability of accounts receivable, we assessed the
Group systems’ calculation of the age of the individual balances
This was a key audit matter as the identification of discrepancies
through comparison to a sample of invoices . Based on our
meant there was a higher assessed risk of material misstatement,
assessment of risk and financial significance, we examined cash
resulting in greater audit effort to address the matter, particularly over
received from customers after year end over aged receivables for
the recoverability of accounts receivable .
the purpose of assessing recoverability . We assessed the Group’s
proposed accounting treatment of the provision for doubtful
debts . Where aged balances had not yet been paid by customers
and had not been provided for, we made further enquiries to
assess recoverability .
We assessed the impact of the discrepancies on our broader fraud
risk assessment and response across other key transactions . We also
performed journals testing based on specific risk criteria identified .
117
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 Key audit matter
How our audit addressed the key audit matter
Recoverability of goodwill and property, plant and equipment
We evaluated the Group’s cash flow forecasts and the process by
(Refer to notes 12, 14 & 15)
The financial report of the Group includes goodwill of $280 .1 million
and property, plant and equipment of $1,037 .2 million as at
31 December 2017 .
In order to assess recoverability of these assets, the Group prepared
financial models (hereafter, “the models”) as at 31 December 2017 to
determine if the carrying values of goodwill and property, plant and
equipment were supported by forecast future cash flows, discounted
to present value .
Given the significance of the Group’s recorded goodwill and property,
plant and equipment balances to the financial position of the
which they were developed . We compared the 2018 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 of the discount rate and growth
rate assumptions . No material impairment was identified through
this analysis .
Group, and the judgments and assumptions required in preparing a
The Group engaged an expert to assist them in determining the
discounted cash flow model (including budgeted cash flows, growth
discount rates applied in the impairment models . We assessed them
rates and discount rates), the recoverability of these assets was a key
as Group experts, and considered their methods, competency, and
audit matter .
objectivity . Having done so, we were satisfied that we could rely on
the work of the Group’s expert for the purpose of our audit . We have
assessed that the WACC employed in the cash flow forecasts are
consistent with those recommended by Group’s expert .
Key audit matter
How our audit addressed the key audit matter
Estimation of restoration provisions
(Refer to note 16)
The Group recognised restoration provisions of $43 .1 million in relation
to the rehabilitation of presently operating quarries and concrete plants .
The estimation of rehabilitation provisions was a key audit matter
because the estimation of rehabilitation provisions involves
significant judgement to estimate future costs and to assess
rehabilitation requirements .
We assessed whether a provision was included for all sites that
required rehabilitation based on our knowledge of the Group’s
operations, review of new lease contract agreements, review of
meeting minutes, and discussions with management . We did not
identify any omissions from our procedures .
We focussed our attention on sites where there had been a material
change to the nominal cost from the previous period, or where we
would have expected there to be a material change based on our
knowledge of the business . There were no sites that had a material
The rehabilitation provision for sites being actively remediated is
change to nominal cost to rehabilitate in the current year .
material and reflected tendered cost estimates for future stages
of rehabilitation, as well as costs to complete the current stage
of rehabilitation .
For sites where there was no material change in the nominal cost to
rehabilitate, our procedures were limited to assessing whether the
provisions had been updated to reflect any new knowledge gained
For other quarries not currently being actively remediated, the
from rehabilitation planned in other areas or changes in rehabilitation
provision was determined via the cost estimate process completed
requirements . The provisions for these sites were tested on initial
annually by operational staff . The Group estimates future costs
recognition, or since the last significant change to nominal cost .
to rehabilitate each site (nominal cost) based on rehabilitation
requirements, current costs, and forecast cost inflation factors . These
are then discounted in order to estimate the net present value of the
provision . Cost inflation and discount rates are based on published
government rates .
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 .
118
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 Key audit matter
How our audit addressed the key audit matter
Accounting for business combinations
We performed the following procedures over the acquisitions, based
(Refer to note 8)
on size and risk:
The Group has made three acquisitions in the current year being
> ssessed the independent valuations experts as Group experts,
Central Pre-Mix Concrete (Central), Davalan Concrete and Holcim
and for each expert considered the valuer’s method, competency
Northern Territory’s concrete and aggregates business (Holcim) .
and objectivity .
Accounting for this business combinations was a key audit matter
given that this involved significant judgements to be made .
> agreed the fair value of assets and liabilities acquired to valuation
reports prepared by the Group’s independent valuation experts .
> assessed the appropriateness and completeness of liabilities
Under Australian Accounting Standards, the Group was required
recognised on acquisition .
to estimate the fair value of assets and liabilities acquired . This
Where there were costs incurred which were related to acquisitions,
estimate particularly involved making judgements regarding the fair
we performed audit work to test that such costs were expensed and
value of the assets acquired and the period over which they are
not capitalised, or included in, purchase consideration as required by
expected to provide benefits to the Group . The Group was assisted
Australian Accounting Standards .
by independent valuations experts to determine the fair value of the
assets acquired .
Key audit matter
How our audit addressed the key audit matter
Measurement of inventory quantities for raw materials and
work in progress
(Refer to note 11)
We assessed the independent surveyors as Group experts, and for
each expert considered the surveyor’s method, competency and
objectivity . We were satisfied that we could use their work for the
Of the Group’s $174 .3 million of recorded inventory on hand at
purpose of our audit .
31 December 2017, $56 .9 million comprised raw materials and work
We obtained and inspected the survey results for material stockpiled
in progress .
Raw materials and work in progress inventory is typically stockpiled
prior to consumption or sale . The measurement of these inventories
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 .
is a key audit matter as the measurement of inventory quantities for
We compared the density factors used to results of the Group’s
stockpiled inventory is complex . The Group relies on independent
internal laboratory testing that occurred during the year and (where
surveyors to perform volumetric surveys to estimate the quantity
available) to prior year density factors for the same raw material .
stockpiled for these inventory types . Survey quantity results, which
Given the nature of the inventory, the density factors do not usually
are reported in cubic metres, are converted to tonnages using
vary significantly year on year . We identified no significant changes in
density factors .
these factors in the current year or other factors which would require
a change .
Other information
We expect the remaining other information
In connection with our audit of the financial
The directors are responsible for the
other information . The other information
comprises the information included in the
Group’s annual report for the year ended
31 December 2017, but does not include
the financial report and our auditor’s
report thereon . Prior to the date of this
auditor’s report, the other information we
to be made available to us after the date
report, our responsibility is to read the
of this auditor’s report, including the
other information identified above and,
Performance Summary, Chairman’s Report,
in doing so, consider whether the other
Managing Director and CEO Report, Finance
information is materially inconsistent with the
Report, Map and Review of Operations,
financial report or our knowledge obtained
Sustainability Report, Financial History,
in the audit, or otherwise appears to be
Information for Shareholders and Corporate
materially misstated .
Governance Statement .
obtained included the Director’s Report and
Our opinion on the financial report does not
Diversity Report .
cover the other information and accordingly
we do not express any form of assurance
conclusion thereon .
119
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 If, based on the work we have performed
Auditor’s responsibilities for the audit
on the other information that we obtained
of the financial report
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 .
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
When we read the other information not yet
our opinion . Reasonable assurance is a high
received as identified above, if we conclude
level of assurance, but is not a guarantee
that there is a material misstatement therein,
that an audit conducted in accordance with
we are required to communicate the matter
the Australian Auditing Standards will always
to the directors and use our professional
detect a material misstatement when it exists .
judgement to determine the appropriate
Misstatements can arise from fraud or error
action to take .
Responsibilities of the directors for the
financial report
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 directors of the Company are
the financial report .
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
A further description of our responsibilities
for the audit of the financial report is located
at the Auditing and Assurance Standards
Board website at:
http://www .auasb .gov .au/auditors_
responsibilities/ar1 .pdf . This description
forms part of our auditor’s report .
misstatement, whether due to fraud or error .
Report on the remuneration report
In preparing the financial report, the directors
are responsible for assessing the ability of
Our opinion on the remuneration report
We have audited the remuneration report
the Group to continue as a going concern,
included in pages 50 to 69 of the directors’
disclosing, as applicable, matters related
report for the year ended 31 December 2017 .
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 .
In our opinion, the remuneration report of
Adelaide Brighton Limited for the year ended
31 December 2017 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
MT Lojszczyk
Partner
Adelaide 16 March 2018
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
120
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 FINANCIAL HISTORY
Year Ended
Dec
Dec
Dec
Dec1
Dec
Dec2
Dec
Dec
Dec
Dec
Dec
Dec
Dec
(A$ million unless stated)
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Statements of financial
performance
Sales revenue
Depreciation, amortisation
1,560 .0 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
and impairments
(82 .5)
(78 .1)
(77 .8)
(75 .0)
(70 .6)
(65 .2)
(57 .8)
(52 .8)
(56 .8)
(56 .8)
(52 .4)
(51 .8)
(47 .0)
Earnings before interest and tax
266 .5 266 .1
298 .6
247 .5
222 .7
222 .1
219 .82 216 .2
185 .3
189 .1 171 .3
148 .8
134 .1
Net interest earned (paid)
(12 .1)
(11 .5)
(13 .0)
(15 .0)
(14 .1)
(14 .6)
(17 .0)
(14 .0)
(16 .7)
(33 .8)
(21 .7)
(15 .2)
(14 .0)
Profit before tax, abnormal
and extraordinary items
254 .4 254 .6
285 .6
232 .5
208 .6
207 .5
206 .4
202 .2
168 .6 155 .3
149 .6
133 .6
120 .1
Tax expense
(72 .3)
(68 .4)
(77 .8)
(59 .9)
(57 .5)
(54 .6)
(58 .0)
(50 .8)
(45 .4)
(34 .5)
(35 .7)
(31 .0)
(29 .2)
Non-controlling interests
0 .1
(0 .1)
0 .1
0 .1
-
0 .1
-
0 .1
(0 .1)
-
-
(0 .5)
-
Net profit after tax
attributable to members
182 .0 186 .3
207 .9
172 .7
151 .1
153 .0
148 .4
151 .5
123 .1
120 .8
113 .9
102 .1
90 .9
Group balance sheet
Current assets
474 .8 390 .1
403 .1
387 .4
390 .2
363 .7
307 .8
274 .1
308 .8
290 .8
233 .1
224 .7
211 .0
Property, plant and equipment
1,037 .2 978 .4
986 .1
994 .2
889 .7
902 .5
851 .0
760 .6
774 .3
801 .9
742 .5
694 .2
665 .6
Receivables
Investments
Intangibles
37 .3
34 .4
32 .9
32 .7
31 .4
29 .6
160 .3 151 .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
299 .9 270 .3
272 .9
266 .4
183 .9
184 .8
183 .0
179 .1
169 .0
169 .4
164 .4
164 .6
165 .0
Other non-current assets
3 .5
2 .3
1 .3
0 .0
0 .0
3 .5
0 .0
0 .0
0 .0
0 .0
2 .7
22 .9
19 .0
Total assets
2,013 .0 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
Current borrowings and creditors
146 .1 117 .4
123 .9
122 .7
105 .4
115 .0
99 .2
106 .4
106 .5
98 .4
145 .5
125 .8
323 .5
Current provisions
58 .7
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
428 .9 309 .6
329 .5
390 .1
259 .1
299 .3
258 .7
150 .2
200 .5
410 .5
281 .9
210 .7
1 .0
Deferred income tax and other
non-current provisions
131 .1 129 .0
122 .4
126 .9
101 .6
114 .4
116 .7
88 .4
95 .6
102 .8
94 .3
109 .1
105 .3
Total liabilities
Net assets
Share capital
Reserves
Retained pofits
764 .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
1,248 .2 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
733 .1 731 .4
729 .2
727 .9
699 .1
696 .6
694 .6
692 .7
690 .4
540 .4
514 .0
513 .3
513 .3
1 .9
2 .9
1 .2
3 .3
4 .3
2 .1
2 .3
2 .6
2 .9
3 .5
14 .5
13 .3
510 .6 483 .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
Shareholders' equity attributable
to members of the Company
1,245 .6 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
Non-controlling interests
2 .6
2 .5
2 .6
2 .7
2 .8
2 .8
2 .9
3 .0
3 .1
3 .0
3 .0
8 .6
8 .3
Total shareholders' funds
1,248 .2 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
Share information
Net Tangible Asset Backing
($/share)
1 .46
1 .46
1 .44
1 .34
1 .38
1 .29
1 .22
1 .19
1 .15
0 .97
0 .93
0 .94
0 .87
Return on funds employed
16 .7% 17 .5% 19 .8% 17 .7% 17 .0% 18 .0% 19 .4% 20 .0% 17 .3% 18 .0% 18 .1% 16 .7% 15 .9%
Basic earnings per share (¢/share)
28 .0
Diluted earnings (¢/share)
Total dividend (¢/share) 3
Interim dividend (¢/share)3
27 .9
24 .5
8 .5
28 .7
28 .6
28 .0
8 .5
32 .0
31 .9
27 .0
8 .0
Final dividend (¢/share)3
12 .0
11 .5
11 .0
Special dividend (¢/share)3
4 .0
8 .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
20 .8
16 .4
16 .2
18 .5
18 .5
6 .0
9 .0
3 .5
5 .0
7 .5
6 .0
10 .5
4 .25
6 .25
-
Gearing
29 .8% 23 .6% 24 .6% 31 .6% 23 .4% 30 .9% 26 .0% 15 .9% 19 .6% 55 .3% 48 .4% 33 .6% 35 .8%
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 Fully franked
121
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2017 THIS REPORT IS PRINTED BY AN INDEPENDENTLY AUDITED CARBON
NEUTRAL PRINTER ON 100% POST CONSUMER RECYCLED CARBON
NEUTRAL MANUFACTURED PAPER ACCREDITED BY THE FOREST
STEWARDSHIP COUNCIL USING VEGETABLE BASED INKS MADE FROM
RENEWABLE RESOURCES WITH ALL PAPER WASTE RECYCLED
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 logo, the Penrice Quarry & Mineral logo, the Central Pre-Mix logo, the Central Quarries
logo and the Davalan logo are trade marks of Adelaide Brighton Ltd or its related bodies corporate.
The Sunstate Cement logo is a registered trade mark of Sunstate Cement Ltd used with permission.
The I logo is a registered trade mark of Independent Cement and Lime Pty Limited used with permission.
The Mawson logo is a registered trade mark of E. B. Mawson & Sons Pty Ltd used with permission.
Batesford Quarry logo is a trade mark of Adelaide Brighton Cement Ltd and Geelong Lime Pty Ltd.
The Burrell logo is a trade mark of Burrell Mining Products, Inc used with permission.
The Aalborg Portland logo is a trade mark of Cementir Holding SpA used with permission.
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Adelaide Brighton Ltd
ABN 15 007 596 018
Level 1, 157 Grenfell Street
Adelaide, South Australia 5000
GPO Box 2155, Adelaide SA 5001
Telephone 08 8223 8000
Facsimile 08 8215 0030
Web www.adbri.com.au
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