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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Performance summary
Company profile and map of operations
Chairman’s report
Chief Executive Officer review
Finance report
Cement and Lime
Concrete and Aggregates
Concrete Products
Joint Ventures
Sustainability report
> Health and safety
> People and diversity
> Diversity report
> Tax transparency report
Corporate governance overview
Directors
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
> Financial performance overview
> Balance sheet items
> Capital structure and risk management
> Group structure
> Other
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report to the Members of Adelaide Brighton Ltd
Financial history
Information for shareholders
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
This report is printed by an independently audited
carbon neutral printer on 100% post consumer
recycled carbon neutral manufactured stocks
accredited by the Forest Stewardship Council R
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.
Performance summary
Revenue
$1,631m
NPAT attributable to members
$185.3m
4.6%
1.4%
Underlying NPAT ex-property attributable to members
$190.1m
Basic EPS
28.5c
Final ordinary dividend
11.0c
Special dividend
4.0c
0.1%
1.4%
1 cent
Unchanged
Adelaide Brighton Ltd Annual Report 2018
c/share
Dividends
32
24
16
8
0
%
20
15
10
5
0
14 15 16 17 18
Ordinary interim
Ordinary fi nal
Special
Return on
funds employed
14 15 16 17 18
%
Gearing: net
debt to equity
40
30
20
10
0
14 15 16 17 18
$M
Cash fl ow from
operations
300
225
150
75
0
14 15 16 17 18
Times
Interest cover
EBITDA basis
32
24
16
8
0
14 15 16 17 18
1
Company profi le and map of operations
Adelaide Brighton is a leading integrated
Lime
Joint ventures and associates
construction materials and lime producer
which supplies a range of products into
building, construction, infrastructure and
mineral processing markets throughout
Australia.
Adelaide Brighton is the largest producer
Adelaide Brighton has a number of
of lime in Australia, with production assets
signifi cant investments in joint ventures
in Western Australia, South Australia and
and associates in construction materials
the Northern Territory. Lime is an important
production and distribution. These include
product for the mineral processing industry
major cement distribution joint ventures
Adelaide Brighton origins go back to 1882
in resource rich markets, particularly for
in Queensland (Sunstate Cement), Victoria
and today it is an S&P/ASX100 company
the production of alumina and gold, of
and New South Wales (Independent
with 1,500 employees and operations in
which Australia is a leading producer.
Cement and Lime); regional concrete
all Australian states and territories.
The Company’s principal activities include
Concrete and Aggregates
New South Wales (Mawsons); and a 30%
and aggregates positions in Victoria and
the production, importation, distribution
Adelaide Brighton has a growing presence
and marketing of clinker, cement, industrial
in the premixed concrete and aggregates
lime, premixed concrete, construction
industry in South Australia, Victoria, New
investment in a Malaysian white cement
and clinker producer (Aalborg Portland
Malaysia), which supplies to the south east
Asian market in addition to Australia.
Sustainability
South Wales, south east and northern
Queensland and the Northern Territory.
It has strategic aggregate reserves west of
Sydney, mid northern coast of New South
Adelaide Brighton’s commitment to
Wales, south east Queensland, South
sustainable development is demonstrated
Australia, Victoria and the Northern
through a range of actions implemented
Territory through its wholly owned
across a balanced program of initiatives.
and joint venture operations.
Concrete Products
Adelaide Brighton holds the leading
position in the Australian concrete products
market, with operations in Queensland,
New South Wales, Victoria, Tasmania
and South Australia.
Adelaide Brighton believes that setting
and achieving sustainability objectives
throughout the organisation assists
long term competitive business
performance.
aggregates and concrete products.
Cement
Adelaide Brighton is the second largest
supplier of cement and clinker products in
Australia with major production facilities
and market leading positions in the resource
rich states of South Australia and Western
Australia. It is also market leader in the
Northern Territory.
In addition to domestic production, the
Company is the largest importer of cement,
clinker and slag into Australia with an
unmatched supply network that enables
effi cient access to every mainland capital
city market. This network includes signifi cant
distribution joint ventures in Victoria, New
South Wales and Queensland.
Cement
Lime
Concrete and aggregates
Concrete products
2
Adelaide Brighton Ltd Annual Report 2018
Chairman’s report
On behalf of all Directors, it is my pleasure to present you with the 2018 Annual
Report for Adelaide Brighton Ltd. The year ended 31 December 2018 was a year
of strong operational performance for your Company. Revenue increased 4.6%
to $1,630.6 million, reflecting the benefit of acquisitions made in 2017 as well as
demand across the residential, non-residential and infrastructure sectors and
stable lime demand. Your Company reported net profit after tax of $185.3 million
and basic earnings per share of 28.5 cents, both up 1.4% on the prior year.
Zlatko Todorcevski
Chairman
Although the final profit result was slightly
Leadership
below our initial market guidance due to
weather impacts and timing of customer
activity, we are pleased with how the
management team responded to these
and other challenges throughout the year.
Adelaide Brighton continues to deliver
against its long term strategy of cost
reduction and operational improvement;
growth of the lime business and vertical
integration into downstream aggregates,
concrete, logistics and masonry businesses.
Capital management
These results were achieved during a
period of leadership transition for Adelaide
Brighton and are a testament to the
strength of your business and the
resilience of its people.
Chief Executive Officer of Fulton Hogan
from 2010 to 2017, and more recently at
Broadspectrum (a subsidiary of Ferrovial
Group) who operate within the civil
construction, major project and asset
management industries. I encourage
you to read Nick’s review of 2018
On behalf of the Board and all shareholders,
performance within this report.
I would once again like to extend thanks
to former CEO and Managing Director,
During the year, we were also pleased
Martin Brydon. Martin announced his
to promote Brett Brown to the role of
retirement at last year’s AGM following a
Executive General Manager Concrete
distinguished 30-year career with Adelaide
and Aggregates. Brett has over 20 years’
Brighton. He has delivered exceptional
experience in the construction materials
results over his tenure, both as CEO and
industry and joined Adelaide Brighton
The Board continues to take the view
Managing Director and as a member of
through our acquisition of Direct Mix
that capital surplus to the Company’s
the senior executive team. In addition,
Concrete and Southern Quarries in 2014.
requirements to implement its strategy
Martin was very flexible in accommodating
His internal promotion underscores the
should be returned to shareholders
the Board’s request for him to continue in
quality of operational experience within
through an efficient capital management
his role to ensure a smooth and seamless
our ranks and the pathways to promotion
mechanism. The Board has utilised
transition to new leadership - including
that Adelaide Brighton can offer.
special dividends in this regard, which has
deferring his retirement plans. Martin
contributed to strong total shareholder
has been an integral part of the Adelaide
returns.
A final ordinary dividend of 11.0 cents per
Brighton growth story and we wish him
all the best for the future.
We are also looking forward to welcoming
our new Chief Financial Officer, Theresa
Mlikota, in April 2019. Theresa is a highly
regarded finance executive with 30 years’
share and final special dividend of 4.0 cents
We have been delighted to welcome Nick
experience in resources and construction
per share were declared for 2018, bringing
Miller as Adelaide Brighton’s new CEO
(including CFO roles at Ausdrill Limited,
total dividends declared to 28.0 cents per
in January 2019. Nick is a high calibre
Fulton Hogan, Thiess, Macmahon
share, fully franked, for 2018, representing
and experienced Managing Director and
Holdings and Barminco Ltd).
a payout ratio of 98.2%.
CEO, including Managing Director and
3
Adelaide Brighton Ltd Annual Report 2018 The addition of Nick and Theresa
In March 2019, your Board announced
between Barro Group and the independent
compliment Adelaide Brighton’s highly
that Raymond Barro would transition to
Directors according to the Board Protocol -
experienced and skilled management
the role of Chairman after the 2019 Annual
Potential Conflicts and Interests.
team, which will support the Company’s
General Meeting. Raymond has significant
continued development and growth.
industry experience and has made a great
With high quality assets, a positive culture
contribution to Adelaide Brighton as both a
and great people, we are excited about
Director and as a long term representative
the opportunities before us to further
of our major shareholder.
The independent Directors are pleased
with this outcome, which ensures stability,
and are strongly of the view that this is in
the best interests of all shareholders. With
this framework in place, I look forward to
enhance shareholder value.
Board Composition and
Board Governance Framework
Your Board also confirmed that all
working with Raymond to ensure a smooth
Directors recognise the importance of
transition of the Chairmanship.
effective independent Board oversight
for the benefit of all shareholders, in line
Conclusion
In 2018, Graeme Pettigrew and Les Hosking
with ASX Corporate Governance Council
retired from the Board. On behalf of the
recommendations. As a result, your
Board and all shareholders, I thank them
Directors have agreed a Board Governance
both for their significant contribution.
Framework that ensures Adelaide Brighton’s
Martin Brydon also retired from the Board
future Board composition will remain
On behalf of your Directors, I acknowledge
the hard work of all our employees in 2018,
a year in which Adelaide Brighton delivered
record revenues and strong dividends.
in January 2019.
majority independent for the foreseeable
Adelaide Brighton takes its responsibilities
future (four independent Directors, three
as a corporate citizen very seriously.
During the year, Vanessa Guthrie joined
the Board as an independent non-executive
Barro Group nominees).
Director and Geoff Tarrant joined as non-
Furthermore, the Governance Framework
executive Director and nominee of the
includes an enhanced Board Protocol -
Barro Group. I look forward to working
Potential Conflicts and Interests governing
interactions between the business interests
of Adelaide Brighton and the Barro Group.
I will take on the role of Lead Independent
We have strong employment and safety
practices, have maintained a strong focus
on reducing our emissions while improving
energy efficiency and we work closely
with local communities, government and
regulatory bodies to ensure our business
is sustainable.
with them going forward.
The majority of the Board remains
independent, which is consistent with the
Principles and Recommendations of the ASX
Corporate Governance Council. Your Board
has a strong mix of skills, experience and
perspectives that are appropriate to our long
term strategy to build shareholder value.
During 2018, we made some changes to
the way we organise Board priorities and
time to better reflect Adelaide Brighton’s
>
objectives:
People and Culture Committee - The
People and Culture Committee replaces
the former Nomination, Remuneration
and Governance Committee, reflecting
our commitment to prioritise our people
>
and set the culture from the top.
Safety, Health, Environment and Community
Committee - The Safety, Health and
Environment Committee has been
expanded to now also reflect the focus
we have always had on the communities
in which we operate.
The Board monitors and reports on
sustainability performance and is
responding to increasing expectations of
our stakeholders on the disclosure of our
sustainability risks. The Board is assessing
the impact of climate change in accordance
with recommendations of the Financial
Stability Board’s Task Force on Climate-
related Financial Disclosures (TCFD) and
proposes reporting on TCFD as part of the
Company’s 2019 Sustainability Report.
4
Director and Deputy Chairman following
I would like to thank all our shareholders,
this year’s AGM. In this role, I will continue
our joint venture partners and, of course,
to ensure that conflicts of interest are
our customers for their continuing support
addressed and managed as agreed
of Adelaide Brighton.
Financial Summary
($ million)
2018
1
2017
Revenue1
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation
1,630.6
352.8
)
(87.4
1,559.6
350.1
(82.5
)
Earnings before interest and tax
Net finance cost 2
Profit before tax
Tax expense
Net profit after tax
Non-controlling interests
Net profit attributable to members
Underlying net profit after tax
Underlying net profit after tax excluding property
Basic earnings per share (“EPS”) (cents)
Ordinary dividends per share - fully franked (cents)
Special dividends per share - fully franked (cents)
Net debt 3 ($ million)
Leverage ratio (times) 4
Gearing 5 (%)
Return on funds employed 6 - reported (%)
265.4
)
(14.4
251.0
)
(65.8
185.2
)
(0.1
185.3
191.0
190.1
28.5
20.0
8.0
424.8
1.2
34.1
16.1
267.6
(12.1
)
255.5
)
(72.7
182.8
0.1
182.7
198.4
190.0
28.1
20.5
4.0
371.6
1.1
29.8
16.7
1 Restated numbers are due to a change in accounting policy on adoption of
AASB15 Revenue from Contracts with Customers applied from 1 January 2018.
As a result of the changes, prior year financial statements were restated.
2 Net finance cost is the net of finance costs shown gross in the Income
Statement with interest income included in other income.
3 Net debt is calculated as total borrowings less cash and cash equivalents.
4 Leverage ratio is net debt / trailing 12 months EBITDA.
5 Net debt/equity.
6 Return on funds employed = EBIT / average monthly funds employed.
Adelaide Brighton Ltd Annual Report 2018 Chief Executive Officer review
I was delighted to take up the role of Chief Executive Officer of Adelaide Brighton
in January 2019. In the short time I’ve been at the Company, it has been evident that
the quality of its people and the very successful long term strategy, underpinned
strong growth and shareholder returns. The 2018 performance provides further
evidence that the strategy to diversify the business by product and geography,
driving vertical integration through both acquisition and organic growth and
continual focus on cost reduction and operational improvement is working well.
Nick Miller
Chief Executive Officer
Following the retirement of the former
Net profit after tax increased 1.4% to
Operational highlights
CEO and Managing Director, Martin Brydon,
$185.3 million, while EBIT of $265.4 million
I’m pleased to provide a report on the
was 0.8% lower than 2017.
Overall cement and clinker sales volume
increased 1.1% compared to 2017.
2018 year.
Underlying EBIT, which disregards one-off
Sales were stronger into east coast markets
In 2018, construction markets were
items, declined 5.7% to $273.5 million,
but declined in South Australia and Western
strongest in New South Wales and Victoria.
reflecting softer cement and lime earnings
Australia, which also impacted average
Queensland, Northern Territory and
and lower property profits, not fully offset
realised prices.
South Australia experienced stable demand
by improved concrete, aggregates and joint
during the year, while demand in Western
venture earnings. Excluding earnings from
Australia eased. Lime demand from the
property sales, which are variable from a
resources sector was stable.
timing perspective, underlying EBIT was
Excluding Western Australia and Northern
stable in 2018.
Cement selling prices increased in most
markets but margins declined in the second
half on reduced cement volumes, lower
average realised prices and increased import
costs. Increased competition from bagged
Territory, residential construction activity
Strong cash flow was a feature of the
imports in South Australia was observed in
remained healthy during the year and the
2018 results, which supported our healthy
the second half of the year.
non-residential and infrastructure sectors
balance sheet and provided the capacity to
continued to improve.
The business continued to perform well
in 2018, with full year revenue growing
4.6% to $1,630.6 million. Our revenue
growth reflects Adelaide Brighton
capitalising on the favourable demand
environment for construction materials
and lime as well as the concrete and
aggregates acquisitions, made in 2017,
delivering to expectations.
fund growth projects while continuing to
provide attractive shareholder returns in the
form of dividends. A lift in total dividends
paid to shareholders for the 2018 financial
year reflects the Board’s confidence in the
financial position and the outlook.
Sales of concrete improved 14% compared
to 2017, or 9% when the impact of
acquisitions is excluded, with east coast
markets particularly strong. Aggregate
volumes increased 10%, assisted by the
strong east coast markets and acquisitions.
Concrete margins increased on higher
volumes and prices. Pricing in aggregates
improved in the majority of markets,
however margins were impacted by sales
of lower value fill to the early stages of
infrastructure projects.
5
Adelaide Brighton Ltd Annual Report 2018 Revenue by
product group
Cement
Lime
Concrete and aggregates
Concrete products
Revenue by
market
Non- residential
Residential
Engineering and infrastructure
Mining operations
Revenue by
state
Western Australia
South Australia
Victoria
New South Wales
Queensland
Other
Focus on energy efficiency
and sustainability
Optimising efficiency will remain an
important element of our approach
to long term growth to underpin our
competitiveness and the sustainability
of our business.
Adelaide Brighton has a proactive
strategy to deliver long term reductions in
operational energy consumption, as well
as lower costs and operating risk, through
measures including:
>
A portfolio approach to energy supply
and procurement benefits;
>
Long term contracts that lower electricity
costs and improve sustainability;
>
Increased use of alternative fuels to
reduce reliance on traditional sources
(targeting more than 30% substitution
of 6PJ of fuel supply in South Australia
in the medium term);
>
Increased use of alternative cementitious
materials e.g. blast furnace slag; and
>
Hedging and other financial strategies
to manage risk, where it adds value
for shareholders.
In 2018, Adelaide Brighton made a
number of operational improvements to
mitigate rising energy costs and reduce
its carbon footprint, including:
>
The realisation of energy efficiency
improvements from the 2017 rationalisation
of oil well cement production at Angaston
in South Australia, and the leveraging of
the import supply network.
>
Lifting sales of granulated blast furnace
slag as an alternative cementitious material
to reduce both the consumption of natural
resources and the environmental impact
from disposal of these industrial by-
products.
>
Following an investment in a second
wood firing plant undertaken in 2015,
approximately 25% of energy at Birkenhead
was sourced from alternative fuels in 2018.
>
Establishing new energy supply contracts
in South Australia, that include one of the
country’s largest renewable electricity supply
contracts, to improve costs while increasing
supply security and sustainability.
Lime sales were stable in 2018 as Adelaide
Brighton continued to supply the market
with reliable, high quality and cost
competitive product. While improving in
the second half, average lime prices were
lower over the year due to a combination
of sales mix and contractual pricing
arrangements.
The Australian joint venture operations
benefited from the strong demand in
east coast states for cement, clinker,
concrete and aggregates to support an
overall 6.1% increase in joint venture
earnings in 2018.
Strategic developments
Adelaide Brighton’s long standing strategy
remains highly relevant. But there’s always
room to improve at the operational level.
The Company continues to deliver against
its long term growth strategy of cost
reduction and operational improvement;
growth of the lime business and vertical
integration opportunities into downstream
aggregates, concrete, logistics and
masonry businesses.
Improving energy efficiency and reducing
carbon footprint remain a key focus.
In 2018, Adelaide Brighton benefited
from savings in an electricity supply
agreement with a renewables generator,
increased utilisation of alternative fuels
in its production plants, and greater use
of environmentally friendly alternative
cementitious materials in its key products.
Lime demand is expected to grow over
the medium term, in line with incremental
output improvements and growth in
the Western Australian resources sector.
Adelaide Brighton’s leading cost position
and substantial capacity means it is well
placed to benefit from this growth.
In addition to its active pursuit of further
downstream opportunities, organic
projects remain a driver of growth. Organic
projects recently completed include two
concrete plants to service the southeast
Queensland market, a new upgraded
drymix packaging plant to service the
Western Australian market, and increased
cement storage capacity at the Morgan
site to improve service to the New
South Wales market.
6
Adelaide Brighton Ltd Annual Report 2018 Safety
Conclusion
Safety is a key performance indicator across
In summary, Adelaide Brighton is in a
all divisions and at Group level. In 2018
fantastic position to go forward - it has
we saw a decrease in our lost time injury
privileged assets which are difficult to
frequency rate by 33% to 26.0, primarily
replicate. In 2018 the Company achieved
as a result of focussed injury prevention
good revenue growth with the underlying
programs which were also embedded into
revenue increasing excluding acquisitions.
the acquisitions made in 2017.
The company has a very strong cash flow
An increase in proactive safety reporting,
and the balance sheet is in great shape.
up 65% at year end, is an indication of
There is always room for operational
employee engagement and improved
improvement and I look forward to
awareness of potential hazards.
working with the management team on
Safety is not just about processes and
applying my experience and perspective
procedures within a business, it is a
to explore and define new opportunities
culture. We will continue to invest in our
for improvement and growth at Adelaide
safety development to deliver further
Brighton, within the current successful
improvements in our safety performance.
long term strategy.
Outlook
Finally, a significant thank you to all
our employees for their hard work and
In 2019, Adelaide Brighton expects overall
dedication in 2018 for the delivery of
demand for construction materials to be
strong returns to shareholders and a
stable, with growth in non-residential
sustainable future for Adelaide Brighton.
engineering and infrastructure demand
largely offset by declines in residential.
Construction demand in east coast
markets is expected to remain healthy
and with stable demand in Western
Australia and the Northern Territory.
Volumes in South Australia are likely to
be assisted by demand from projects and
mining. While variation in sector demand
is likely, overall, Adelaide Brighton’s east
coast markets are anticipated to remain
at healthy levels in 2019.
The demand environment appears
favourable for further construction materials
price increases, but, as always, this will be
dependent on local market conditions.
The outlook for the joint venture
operations in Australia remains positive,
although Sunstate Cement may face
increased competition in the southeast
Queensland market.
While there are regional variances in
the outlook, we are expecting a broadly
stable demand environment in construction
materials and lime in 2019. This should
be supportive of our efforts to implement
our strategy and continue to grow long
term value for shareholders.
Australian
industry position
#1
Lime producer
in the minerals
processing industry
Concrete products
producer
Cement and
clinker imported
with unmatched
channels to market
#2
Cement and
clinker supplier
to the Australian
construction industry
#4
Concrete and
aggregates
producer
7
Adelaide Brighton Ltd Annual Report 2018 Finance report
Full year reported NPAT increased 1.4%,
Earnings before interest and tax (EBIT)
EBIT margins
to $185.3 million. Underlying EBIT, which
decreased 0.8% from the prior year to
excludes one-offs, eased 5.7% on 2017
$265.4 million on an EBIT margin of
to $273.5 million. Underlying NPAT of
16.3%. Underlying EBIT, which excludes
$191.0 million was down 3.7% on 2017.
restructuring and transaction costs,
declined 5.7% to $273.5 million.
Sales and profi ts
Revenue increased 4.6% to a record of
increased from $37.8 million in 2017 to
$1,630.6 million, refl ecting continued
$40.1 million in 2018, refl ecting improved
growth in east coast markets, improved
demand and higher construction material
pricing and the fi rst full year contribution
prices on the east coast of Australia.
Underlying EBIT margins declined from
18.5% to 16.8% in 2018, refl ecting
reduced cement and lime earnings and
lower property profi ts more than offsetting
earnings growth in concrete, aggregates
Increased import costs, and a lower
average selling price due to geographic
sales mix, impacted cement margins.
Our cement business receives a lower
Joint arrangements and associate earnings
and joint ventures.
of acquisitions completed in 2017.
Excluding the acquisitions, revenue
increased 2.6% on 2017.
Adelaide Brighton’s reported net profi t
after tax (NPAT) increased 1.4% to
$185.3 million in 2018. Underlying NPAT
of $191.0 million, which excluded
restructuring and transaction costs, was
down 3.7% on 2017. Property profi ts
contributed $0.9 million to NPAT in
2018, compared to $8.4 million in 2017.
Excluding property profi ts, Underlying
NPAT was essentially fl at compared to
2017 at $190.1 million.
Net fi nance costs increased from
price on the east coast where growth is
$12.1 million to $14.4 million in 2018
currently strongest, but some of this
due to higher market interest rates and
comes back to us through the equity
higher average borrowings.
accounted earnings of our joint ventures.
The effective tax rate decreased from
In Lime, the renewal of a contract for coal
28.5% to 26.2% in 2018 due to the higher
in Western Australia resulted in higher
contribution from post-tax earnings of joint
energy costs from 1 January 2018, which
ventures and lower non-deductible expenses
impacted lime margins in 1H18. However,
associated with acquisitions, compared to
these were partially offset by higher prices
2017. Adelaide Brighton continues to expect
and the benefi t from renegotiated gas
its effective tax rate to be in the range of
supply contract in 2H18.
27% to 28%, although it may be lower
in periods when capital losses related to
property sales are recognised.
In Concrete and Aggregates, margins
increased in 2018 on higher volumes and
prices. While average aggregates margins
declined due to strong sales of low value
fi ll products, margins increased in premium
aggregates for concrete and asphalt making,
supported by higher volume and prices.
$M
Revenue and net
$Bn
profi t after tax*
250
200
150
100
50
1700
1400
1100
800
500
%
100
85
70
55
40
Payout
ratio
c/share
Earnings
per share
40
30
20
10
0
14 15 16 17 18
14 15 16 17 18
14 15 16 17 18
Ordinary dividend
Special dividend
NPAT
Revenue
*Restated numbers are due
to a change in accounting
policy on adoption of
AASB15 Revenue from
Contracts with Customers
applied from 1 January
2018. As a result of the
changes, prior year fi nancial
statements were restated
8
Adelaide Brighton Ltd Annual Report 2018
In Concrete Products, EBIT increased
Strong balance sheet
4.9% to $10.7 million, but this included
$1.3 million in property profi ts (2017: nil).
Adelaide Brighton’s low gearing, strong
cash fl ow and consistent returns provide
Strong demand on the east coast
it with stability and funding fl exibility.
Total dividends (ordinary and special)
declared with respect to the 2018
fi nancial year were 28.0 cents per share,
fully franked, an increase of 14% on
24.5 cents per share (fully franked) with
In total, Adelaide Brighton has bank debt
respect to 2017.
of Australia supported an increased
contribution from the joint venture
operations.
Strong Cash Flow
facilities of $590 million spread across
three of Australia’s major trading banks.
The average tenure of the facilities has
increased from 2.2 to 2.4 years as a
Ordinary dividends declared of 20.0 cents
represented a payout of 70% of 2018
basic earnings per share (EPS) of 28.5 cents.
This is consistent with Adelaide Brighton’s
dividend policy of ordinary dividends of
Cash fl ow from operations increased by
result of a facility renegotiation in 2018.
$20.5 million on 2017 to $244.7 million,
supported by strong sales performance
and improvements to working capital
management.
The Board considers a leverage ratio of
65-75% of basic EPS.
between 1.0 to 2.0 times 12-month trailing
Underlying EBITDA is an appropriate target
range. Under this measure, net debt was
Enhanced processes and management
1.2 times 12-month trailing Underlying
of collections from customers resulted
EBITDA at 31 December 2018.
Including special dividends of 8.0 cents,
total dividends declared for 2018 of
28.0 cents represent a payout of 98%
of 2018 basic EPS. The Dividend
Reinvestment Plan remains suspended
in a reduction in trade debtor balances
despite higher revenue in the period.
The net debt to book equity gearing ratio
given the Company’s strong cash fl ow
was 34.1% at 31 December 2018 and
and low gearing.
Capital expenditure of $115 million
remains close to the midpoint of the target
declined $55 million compared to 2017,
range for that measure of 25% to 45%.
due to the timing of acquisition spending
during the year, partially offset by a higher
Attractive shareholder returns
Return on funds employed, while slightly
down on 2017, remained healthy at
16.6%. This refl ects a strong return on
capital employed and remains signifi cantly
ahead of the Company’s cost of capital.
investment spending on development
capital. In 2018, capital expenditure
occurred on 27 projects above $1 million
in value, comprising stay in business capex
of $55 million, development projects of
$58 million and acquisitions of $2 million.
Adelaide Brighton has a conservative
approach to capital management with
the following broad objectives:
Reconciliation of underlying net
>
Ensure an effi cient balance sheet to
profi t after tax excluding property
optimise cost of capital and thereby
shareholder returns through utilisation
$ million 2018 2017
Proceeds from the sale of assets were
of a prudent level of debt;
Underlying net profi t after tax 191.0 198.4
$5.3 million, a decline of $12.4 million
>
Maintain an investment grade rating
on 2017, driven by the reduced property
to optimise funding cost;
Property profi t
0.9 8.4
sales. Dividend payments increased by
>
Retain balance sheet fl exibility to fund
Underlying net profi t after
$32.6 million over 2017 as a result of
capital projects and acquisitions; and
tax excluding property
190.1 190.0
the higher dividends declared.
>
Distribute surplus capital to shareholders
in an effi cient manner.
$M
2400
1800
1200
600
0
Total
assets
$M
Net profi t
after tax*
240
180
120
60
0
14 15 16 17 18
14 15 16 17 18
*Restated numbers are due
to a change in accounting
policy on adoption of
AASB15 Revenue from
Contracts with Customers
applied from 1 January
2018. As a result of the
changes, prior year fi nancial
statements were restated
Adelaide Brighton Ltd Annual Report 2018
9
Cement and lime
Brad Lemmon
Brad Lemmon
Brad Lemmon
Brad Lemmon
Executive General Manager
Executive General Manager
Executive General Manager
Executive General Manager
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and clinker
In South Australia, a fi ve year agreement
Total cement sales volumes increased
1.1% compared to 2017. 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
for the supply of electricity from a
renewable energy generator delivered
cost savings, more than offsetting higher
gas costs.
Adelaide Brighton continues to pursue its
strategy of increasing the use of alternative
infrastructure activity. The South Australian
fuels and alternative cementitious
market was also lifted by infrastructure
demand.
products to reduce energy costs, led by
the Birkenhead plant in South Australia.
Demand remained strong in Melbourne
and Sydney, with continued demand
from residential construction, supported
by the commencement of the construction
phase of major infrastructure projects.
Non-residential development, such as
offi ce towers, further supported sales in
these markets.
Sales volumes declined in South Australia,
as higher mining volumes were offset
by subdued project volumes. Western
Australian volumes were lower, as the
market remained subdued.
Northern Territory demand was stable with
regional infrastructure projects providing
support for underlying demand, with the
overall market stable resulting in overall
fl at sales volumes.
Prices were higher compared to 2017
in the majority of markets, particularly
the eastern states. Increased competitive
pressures emerged in the South Australian
market from imported bulk bag product.
Adelaide Brighton’s average weighted
cement price declined in 2018 as a
result of sales mix.
Margins
Lower average realised prices and
increased import costs resulted in a
decline in cement margins in 2018.
Following an investment in a second
wood fi ring plant constructed in 2015,
approximately 25% of energy at
Birkenhead was sourced from alternative
fuels in 2018.
During the fi rst half of 2018, cement
milling was disrupted due to the temporary
failure of a mill bearing in the Birkenhead
plant. The fi nancial impact of this was
largely offset by an insurance claim and the
settlement receipts of $4.6 million for an
unrelated claim on a supplier of refractory
that caused damage at the Birkenhead
operation in 2014.
Import costs increased, due to higher
shipping and material procurement costs.
Lime
Lime sales volumes were stable in 2018.
Adelaide Brighton continued to successfully
defend its market position with reliable,
high quality and cost competitive domestic
production. Average Lime prices were lower
compared to 2017, due to both sales mix
and contractual pricing arrangements.
The renewal of a coal supply contract in
Western Australia resulted in higher energy
costs from 1 January 2018 which impacted
lime margins in 1H18, however these were
partially offset by higher prices in 2H18 and
the benefi t from a renegotiated gas supply
contract. Nonetheless, sales mix restrained
average realised lime prices.
10
Adelaide Brighton Ltd Annual Report 2018
Investment for growth
Capital investment in effi ciency and
growth projects continued during the
year with the completion of a state of the
art cement packing plant to support the
Western Australian market, expansion of
cement silo capacity at the Morgan site to
improve effi ciency in the strong New South
Wales market, expansion in the number
of specialised train carriages to transport
product to regional distribution terminals
and fi nalisation of a dryer upgrade
for the production of slag based
cementitious products for the
Western Australian market.
These investments will provide
improvement to production
effi ciency, expand product
offerings to customers and
increase production capacity
to match customer demand
in strong markets.
Photographs, top to bottom: Adelaide
Brighton Cement Birkenhead plant
limestone reclaimer shed / MV
Accolade II bulk limestone carrying
vessel / Cement and Lime Quality
Manager, Mars Capasso,
instructing our 2018 iWomen
program participants on
laboratory testing techniques
Adelaide Brighton
‘000
cement milled
tonnes
(inc. imported clinker)
3200
2400
1600
800
0
14 15 16 17 18
‘000
Adelaide Brighton
tonnes
lime production
1200
900
600
300
0
14 15 16 17 18
Concrete production,
import and distribution
Adelaide Brighton imports
2.4Mt pa cementitious materials
and sells more than 4.0Mt pa
of cementious materials
International imports
Domestic imports
Clinker production
Cement terminals
Cement milling
11
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
11
Concrete and aggregates
Brett Brown
Brett Brown
Brett Brown
Brett Brown
Executive General Manager
Executive General Manager
Executive General Manager
Executive General Manager
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
CONCRETE
In 2018, the Concrete and Aggregates
Investing in growth
business continued its strong growth, driven
by strong markets for our products, effi cient
operations and the benefi t of acquisitions
made in 2017.
Over the last 5 years Adelaide Brighton
has invested more than $262 million in
acquisitions, expanding the geographic
footprint of the Concrete and Aggregates
Concrete sales volumes increased by 14%,
division as part of the Company’s vertical
compared to 2017. Excluding the impact
integration strategy.
of acquisitions completed in 2017,
concrete volumes grew approximately 9%.
All markets improved, with volume growth
strongest in the east coast markets.
Average concrete prices increased by
more than infl ation, compared to 2017.
The most recent acquisition of Central
Pre-Mix, Davalan Concrete and the Northern
Territory concrete and aggregates assets of
Holcim in 2017, and ResourceCo Concrete
in South Australia in 2018, added further
scale to Adelaide Brighton’s business. In
Aggregate volumes were also strong,
2018, the 2017 acquisitions provided the
growing 10% in 2018, assisted by strong
east coast markets and acquisitions.
fi rst full year contribution to revenue and
EBIT, and signifi cant vertical integration
Aggregates prices increased in the majority
benefi ts to the Group.
of markets over the year, but the supply
of a signifi cant volume of lower value fi ll
material to the early stages of infrastructure
projects resulted in slightly lower average
realised prices and a decline in average
aggregates margins. Sales of higher value
aggregates are expected to increase in
2019 as these projects progress, assisting
average selling prices and margins.
Organic growth projects have also led to
improved performance. Major investments
during the 2018 year included construction
and commissioning of two concrete plants
to service the Brisbane market, with
further investment anticipated in 2019 for
a third plant. These plants provide infi ll to
our existing operations in the south east
Queensland market. Additional reserves
Concrete margins increased in 2018 on
have been purchased to secure future
higher volumes and prices. While average
development of quarry operations.
aggregates margins declined due to
signifi cant sales of lower value fi ll products,
margins increased in premium aggregates
for concrete and asphalt making, supported
by strong volumes and prices.
Investment in a new quarry at Scotchy
Pocket to service our Sunshine Coast
concrete sales as well as the local market.
Commencement of supply from the
quarry is anticipated during 2019.
Concrete and Aggregates footprint
Hy-Tec
Central
Davalan Concrete
Direct Mix Concrete
ResourceCo Concrete
Established operations
Aquisitions in 2018
12
Adelaide Brighton Ltd Annual Report 2018
Photographs, top to bottom
and left to right: Austen Quarry
Supervisor, Craig McDonald /
Sellicks Hill Quarry Site Supervisor,
Luke McGowan / Hy-Tec concrete
batch plant / Quarry worker,
Mark Taylor, undertaking water
quality testing at Austen Quarry /
Sellicks Hill Quarry rigid haul truck
Adelaide Brighton Ltd Annual Report 2018
13131313131313131313
13
Concrete products
Andrew Dell
Andrew Dell
Andrew Dell
Andrew Dell
Executive General Manager
Executive General Manager
Executive General Manager
Executive General Manager
Concrete Products
Concrete Products
Concrete Products
Concrete Products
In 2018, Concrete Products continued
The production facility at the Stapylton
to make signifi cant improvements to the
site in Queensland, the largest production
long term strength of the operations,
site in the Concrete Products Division,
within a backdrop of easing demand in
was upgraded with the introduction of
some markets. Revenue was fl at compared
a new curing system. The new system
to 2017 and volumes decreased slightly
will provide an improvement in product
over the prior year, largely due to reduced
quality, in addition to cost savings, as a
commercial sales in Queensland. Sales
result of enhanced energy effi ciency
volumes improved in most other markets.
with a consequential saving in greenhouse
A focus on selling prices resulted in average
prices increasing by more than infl ation,
gas emissions due to lower quantity of
gas used to fuel the system.
with improvement across all regions and
In 2017 the Company invested in
this was evident in fl at sales revenue despite
manufacturing equipment to produce
reduced sales volume.
The Concrete Products business continues
to focus efforts around operational
improvement, product innovation
and developing new market segment
opportunities. In 2H18, a number of plant
upgrades were undertaken to reduce energy
costs, lift plant effi ciencies and facilitate
the launch of a number of products into
emerging market opportunities.
concrete sleeper products. Production
volumes in product have increased over
the period since commissioning with
demand being driven from both internal
and external customers. This product now
represents a key part of our design and
construct offering, a growing part of the
Concrete Product full service offering.
14
Adelaide Brighton Ltd Annual Report 2018
Concrete Products is an
important and growing
customer for the cement,
aggregates and sand business.
Following investment over the
last fi ve years in the Concrete
and Aggregates Division, there
is signifi cant overlap of the
geographic footprint, providing
vertical integration benefi ts to
Adelaide Brighton.
Adelaide Brighton Ltd Annual Report 2018
15
Joint ventures
Michael Miller
Executive General Manager
Marketing and
International Trade
The positive trends in joint ventures
In a competitive market that included
continued in 2018, supported by healthy
reduced offtake from our joint venture
east coast construction markets. These
partner, Sunstate earnings were stable in
businesses offer vertical integration with
2018. Improved pricing and favourable
our fully owned operations and provide
material costs largely offset the impact of
us with access to important markets
the lower volumes.
and products.
Independent Cement and
Lime Pty Ltd (ICL) (50%)
Mawson Group (Mawsons) (50%)
Mawsons is a joint venture between
Adelaide Brighton and BA Mawson Pty Ltd.
ICL, a joint venture between Adelaide
Mawsons is the largest premixed concrete
Brighton and Barro Group Pty Ltd, is a
and quarry operator in northern regional
specialist supplier of cement and cement
Victoria and also operates in southern New
blended products throughout Victoria
South Wales. Mawsons is a signifi cant
and New South Wales and is the exclusive
aggregates producer in the region, generally
distributor for Adelaide Brighton and any
holding the number one or number two
related body corporate in these states.
position in the markets it serves.
Strong demand across Victoria and New
Healthy demand for its products across
South Wales resulted in increased volumes
its supply footprint contributed to
and prices, lifting ICL’s contribution to
improved earnings in 2018.
profi t by 21%.
Sunstate Cement Limited
(Sunstate) (50%)
Sunstate is a joint venture between
Adelaide Brighton and Boral Limited.
A leading supplier to Queensland’s
construction industry, Sunstate has
a cement milling, storage and
distribution facility at Fisherman
Islands, Port Brisbane.
16
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
Aalborg Portland
Malaysia Sdn. Bhd.
(Aalborg) (30%)
Aalborg manufactures and sells
white cement and clinker for the
domestic Malaysian markets and
exports to Australia and markets
throughout south-east Asia.
Earnings softened as improved sales
Stable
demand
volumes were offset by higher costs
from the coal
and adverse movement in regional
industry, particularly
exchange rates.
Burrell Mining Services (50%)
Burrell Mining Services is an
in Queensland, led to fl at
earnings over the prior year.
Batesford Quarry
unincorporated joint venture between
Batesford Quarry is an unincorporated
Adelaide Brighton and Burrell Mining
joint venture between Adelaide Brighton,
Products. With operations in New South
E&P Partners and Geelong Lime Pty Ltd.
Wales and Queensland, Burrell Mining
Batesford Quarry, situated at Fyansford
Services manufactures a range of
Quarry near Geelong in Victoria,
concrete products exclusively for
undertakes quarrying and manufacturing,
the coal mining industry.
marketing and distribution of limestone
and quarry products.
Despite lower demand from the agricultural
lime market due to drought conditions in
parts of Victoria, overall volumes were
only marginally lower than 2017. Earnings
improved as selling prices improved and
operating costs were contained, leading
to an improvement in margins.
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
17
Sustainability report
This Sustainability Report should be read in conjunction with other sections of this Annual Report and its fi nancial
statements. The Directors’ Report, Corporate Governance Statement and reports on Remuneration, People and
Diversity and Health and Safety all contain information relevant to the sustainability performance of the Group.
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.
S u s t a inable business
E nvironment
E co-effi ciency
I m p a c t management
P r o duct life cycle
E m i s s ion reduction
W a s te utilisation
S i t e rehabilitation
a t e ri a l s
as reductio n
entitio us m
e raw m aterials
ative fuels
y effi ciency
n
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A
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Product develo p m e n t
Corporate citiz e n s h i p
Developing a ski l l s b a s e
Safety
G
o
v
ernance Integrity Compl i a n c e
Our environmental
development programs
for the rehabilitation
of quarry areas improves
habitats by planting
local indigenous
species
P
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Stakeholder relatio
Social
E m ployee reso
Diversity and inclusio
munity intera
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k m a
s
R i
18
Adelaide Brighton Ltd Annual Report 2018
The Adelaide Brighton Group includes
Adelaide Brighton Limited and the entities
Key performance indicator
Alternative fuels and energy consumption
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 23
Discussion in Annual Report
it controls (the Group), as well as a number
Alternative raw materials
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 23
of joint ventures. This report excludes
Carbon emissions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 20
information about the joint ventures as their
Employee turnover by age group
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 27
operations are not material to the Group’s
Employee turnover by gender
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 27
sustainability reporting.
Employee turnover by geography
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 29
While the Group’s fi nancial 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 2018, unless otherwise
indicated.
In developing this report, the following
Employment by contract status
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 28
Employment by employment status
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 28
Employment by geography
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 29
Energy by source
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 23
Lost time injury frequency rate
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 27
Mains water usage
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 20
Participation of women in the Company
. . . . . . . . . . . . . . . . . . . . . .
Page 31 - Diversity Report
% of employees on EBAs vs staff
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 29
Restricted duties injury frequency rate
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 27
Total recordable injury frequency rate
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 27
Other reports
Coverage of organisation defi ned benefi t plan obligations
. . . . . . . . . .
Pages 111-112 - Note 26
resources have been considered:
Direct economic value added (sales, costs, employee
>
The Global Reporting Initiative
compensation)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 72 - Income Statement
G4 Sustainability Reporting Guidelines.
Pages 82-83 - Note 5 and 6
>
ESG Reporting Guide for Australian
Details of sanctions for non-compliance with
Companies prepared by the Australian
laws and regulations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pages 46-47 - Directors’ Report
Council of Superannuation Investors
and the Financial Services Council.
Environment Performance
>
The Cement Sustainability Initiative
Tax Transparency Report
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pages 32-33
of the World Business Council for
Sustainable Development.
Relevant industry practice.
Energy and greenhouse gas emissions
information complies with the defi nitions
>
>
For further information about the Sustainability Report email
adelaidebrighton@adbri.com.au or telephone 02 8248 9911.
and boundaries contained in the National
A fundamental part of Adelaide Brighton’s
Greenhouse and Energy Reporting Act.
long term strategy has been the continuous
In 2017 Adelaide Brighton advised
the Australian Taxation Offi ce that the
Company would sign up to the voluntary
Tax Transparency Code, and subsequently
published an initial report under this Code
in the 2017 Sustainability Report. This 2018
Sustainability Report includes the second
report under this Code.
The Chief Executive Offi cer (CEO) oversees
improvement of operational performance,
encompassing the environment, social,
governance and economic factors that
the Group consider is required to operate
a sustainable business. Innovation and
continuous improvement remain a natural
part of business at Adelaide Brighton and
help to ensure the Company’s long term
success in a changing world.
and approves the Company’s sustainability
Climate change
framework, the Group’s key performance
indicators and the scope of this report.
The key performance indicators listed
adjacent have been assessed to be material
to the Group’s sustainability performance.
Adelaide Brighton, as a producer of heavy
construction materials and lime, emits
greenhouse gases as part of its operations.
Emissions are primarily generated by the
production of clinker, an intermediary
product in the production of portland
cement, and lime. The production process
for clinker and lime are similar, with a
carbonate source of limestone heated in
a kiln to high temperature, resulting in
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
emissions from both a chemical reaction
of electricity use.
and the fuel used for heat in the process.
Source: Cement Industry Federation
Adelaide Brighton Ltd Annual Report 2018
19
The Group’s strategy of continuous
improvement has resulted in a reduction
in greenhouse gas emissions over a
sustained period. 2018 emissions of 2.4
million tonnes CO2-e are a reduction of:
3% from 2017;
22% over the 5 years from 2013; and
30% (666,000 tonnes CO2-e) compared
>
>
>
to 2010.
The reduction compared to 2013 is despite
the growth in sales volumes of 4.3% for
cement and clinker over this period.
These savings have been generated by
a focus on effi ciency and investment
in low emission alternate fuels.
In addition to the constant focus on
incremental effi ciency improvements,
Adelaide Brighton’s production footprint
has changed over a number of years, as
a result of closing low effi ciency clinker
production facilities and concentrating
production at more effi cient sites.
An investment in a second fi ring line for
the use of refuse derived fuel (primarily
a wood waste) as an energy source at
the Birkenhead plant in 2015 has led to
a reduction in emissions due to its lower
emissions profi le. The use of refuse
derived fuel has increased over the last
fi ve years, doubling the quantity of
energy from this source since 2013.
‘000
Total carbon
emissions
tonnes
3600
3200
2800
2400
2000
14 15 16 17 18
‘000
Process waste
tonnes
to landfi ll*
200
150
100
50
0
14 15 16 17 18
Cement and lime
Concrete and aggregates
Concrete products
Megalitres
Mains water
usage*
800
600
400
200
0
14 15 16 17 18
Cement and lime
Concrete and aggregates
Concrete products
*Increases due to aquisitions
While not captured in these emission
reduction fi gures, the Group has also:
>
Increased the use of slag, a by-product
from the production of steel, as an
alternate cementitious material that
reduces the overall emissions intensity
of product sold;
>
Increased the use of mineral addition in
the production of cement, lowering the
proportion of clinker used, resulting in
a lower carbon footprint per tonne
of product sold; and
>
Entered into an electricity supply
agreement with a renewables generator
for the provision of electricity to our
South Australian sites, a major
component of our electricity use.
Task Force for Climate Related
Financial Disclosure
The Group recognises that the effect
of greenhouse gas emissions on climate
change and the potential impacts on the
environment have driven a movement
toward a low carbon economy. This
movement has resulted in a range of
actions being undertaken by governments,
the corporate sector and individuals in
recognition of climate change, including
imposing a price on carbon and changes
to product specifi cations.
The Task Force for Climate Related
Financial Disclosure (TCFD), an industry
led taskforce established by the Group of
20 Government’s Financial Stability Board,
was tasked with preparing a framework
for fi nancial reporting on climate change,
with its fi nal report released in 2017.
While the recommendations of the TCFD
are not mandatory, these have been
identifi ed as a standard that companies
should utilise in order to adequately
report the impact of climate change
on their business.
Adelaide Brighton
has reduced C02
emissions by 30% since 2010
via increased effi ciencies
and low emission fuels
while increasing sales
volumes
20
Adelaide Brighton Ltd Annual Report 2018
Construction and
demolition waste is used
as a fuel in the clinker
production process,
reducing both the use of
natural gas and waste
going into landfi ll
Adelaide Brighton is currently assessing
the impact of climate change in
accordance with TCFD recommendations
and intends to provide a report utilising
the TCFD framework as part of its 2019
sustainability report.
Environment and Community
We are aware that our operations are
fuelled by natural resources from the
Concrete and aggregates
environment in which we live and we
School Education Program
are always respectful of the local
communities in which we operate.
Adelaide Brighton’s Concrete and
Similar school education and tree planting
Aggregates Division in Queensland is now
programs have also been established with
The operations of the Group have
entering its third year of engaging schools
schools adjacent to our South Australian
strict licensing and mandatory reporting
located near its quarries to participate in
and New South Wales quarry sites.
conditions that are monitored and
the School Educational Program. The
reported against. In addition we
program is aimed at educating school
undertake voluntary measures to ensure
children about the geological and
the natural environment and local
environmental aspects of quarry activities
communities we operate within are
and how quarries contribute to the local
not adversely affected by our activities.
regional community. In addition, the
Community open days and drop in days
are held to connect with and respond
to the needs of local communities.
Concrete products
Continuous improvement is embedded
in the culture at Adelaide Brighton.
We strive to continually improve our
environmental footprint. Our Divisions
identify environmental aspects impacting
program includes involving the school
Waste diverted from landfi ll
children in tree planting native species
specifi cally chosen to regenerate an
area of the quarry to encourage local
wildlife to the area.
Waste such as defective materials from
production of concrete masonry products,
has historically been disposed of to landfi ll.
A new initiative now sees this material sent
our sites and Environmental Improvement
The Concrete and Aggregates Division
to local recyclers for crushing and re-use,
Plans are formalised with target outcomes
education initiative received a ‘Highly
primarily as road base. This initiative has
and timelines. A range of initiatives
Commended Award’ Community
seen a saving of approximately 900 tonnes
were undertaken in each of our divisions
Leadership Award in the 2018
per annum of concrete waste being
throughout the year.
Queensland Cement, Concrete and
sent to landfi ll.
Aggregates Association awards.
Adelaide Brighton Ltd Annual Report 2018
21
Dust emission reduction
>
The Adelaide Brighton Cement
The off specifi cation material is captured
Our Adbri Masonry production facility
at Maroochydore installed a water
sprinkler systems to the bunker system
for the storage of raw materials to
eliminate the potential for fugitive dust
from the site.
Cement and Lime
Birkenhead plant developed a web page
and recycled into the bagging machine
to display real time ambient air dust
at a controlled variable rate thereby
levels recorded from monitors located
eliminating waste product.
in the local community. The monitors
measure particulate matter present in the
Land rehabilitation
environment which comes from a number
The ongoing Munster plant land
of sources including the Birkenhead plant,
rehabilitation saw 8,000 native species
other industries, motor vehicles, domestic
planted at the site and donated to
and natural sources in the region.
local schools as part of our community
Site beautifi cation Birkenhead plant
The web page is available at
engagement program.
A team of enthusiastic employees at the
Adelaide Brighton Cement Birkenhead
plant formed a working group with the
aim of improving the visual impact of the
Birkenhead site. A program of planting
native trees and shrubs during 2018
included the planting of:
>
50 mature ornamental pear trees
and 200 Nandinas;
600 native trees and shrubs;
35 mature eucalypt trees; and
30 self-propagated eucalyptus trees.
>
>
>
abcmonitoring.katestone.com.au/public/
>
An upgrade to the Gas Conditioning
Environmental reporting
Towers spray systems at the Birkenhead
plant has resulted in further reduced
particular emissions from the stacks.
>
The outcome of a successful trial of dust
suppression products carried out on the
lime kiln dust pond at the Munster plant
has led to the selection and application
of a product with a life span of 12
months at the Company’s Munster and
Kwinana plants in Western Australia.
As set out in the Directors’ Report, a
number of our sites operated outside of
their environmental approvals that resulted
in action from a regulatory body. Adelaide
Brighton take seriously all breaches of its
environmental conditions, assessing the
matter to identify a root cause, reassessing
control processes and implementing
remediation.
This suppressant will provide a reduction
In 2018, the Group had one reportable
Dust management
of fugitive emissions from the sites.
environmental incident, compared to
>
An internal web based Dust Management
Dashboard was implemented at
Waste reduction
Birkenhead plant in South Australia which
monitors on-site dust emissions and records
actions taken in response to alerts to
proactively minimise the potential for an
off-site exceedance of air quality standards.
16 in 2017. In addition, 506 environmental
hazards and 34 environmental near
misses were reported, a 36% increase
An upgrade to a Kwinana plant bagging
compared to 2017. The reporting of
machine which has more than doubled
hazards, near misses and incidents
its total bags per capacity, also includes
continues to improve, indicating an
the installation of a product reclaim
increased awareness of reporting potential
and recycling facility for off specifi cation
and actual environmental impacts within
material produced during product
our operations which underpins improved
changeovers.
environmental performance.
Adelaide Brighton
reduces mains water
consumption via both
recycling and catching
and storing substantial
volumes of rainwater
at multiple sites
22
Adelaide Brighton Ltd Annual Report 2018
Adelaide Brighton Ltd Annual Report 2018
Energy by source
Environmental management system
Confi rmation that we have processes to
Liquid fuels
Coal
Natural gas
Demolition material
Waste oil
Electricity
Terajoules
Alternative fuels
%
energy consumption
2000
1500
1000
500
0
16
12
8
4
0
14 15 16 17 18
Demolition material
Industrial waste
Waste oil
% alternative fuels
of total energy
Improvement initiatives implemented as
part of the integrated Health, Safety and
Environment management system include:
>
Further investment in environmental
protective equipment, upgrading water
management systems, dust suppression;
>
Changes to management procedures
relating to areas that have sensitive
environmental impacts such as
equipment near watercourses;
>
Changes to the production processes
within sites to reduce the potential
for, or eliminate the risk of, an
environmental incident;
manage sites effectively include the review
and classifi cation of the Concrete and
Aggregates Tinda Park Quarry by the New
South Wales Environmental Protection
Authority as ‘Level 1’ for environmental risk,
and ‘A’ for environmental management
category. This classifi cation is the highest
rating achievable, refl ecting the site has
been able to demonstrate they have good
environmental controls and management
procedures in place and therefore are
‘good environmental performers’.
Annual mandatory reporting
>
Increased environmental reporting
Adelaide Brighton continues to report
and investigation;
under the national environmental
>
Improved compliance validity through
schemes detailed below:
onsite dashboard reporting. Individual
>
National Greenhouse Gas and Energy
site compliance dashboards incorporates
Reporting Scheme - providing greenhouse
all compliance requirements including
gas emissions, energy consumption and
development applications and
energy production data; and
environmental protection licence conditions,
>
National Pollutant Inventory.
mining leases, and mine operation plans;
Site-specifi c licence compliance posters
>
displayed in the site offi ce or weighbridge
at each site to provide a summary of the
relevant site compliance requirements; and
>
Improvements to automation of onsite
systems controls.
Adelaide Brighton also provides annual
reports to the industry associations of
Cement Industry Federation and National
Lime Association, in addition to the
completion of various surveys undertaken
by the Australian Bureau of Statistics.
Assessment of our performance against
Community
environmental obligations and regulatory
compliance was reviewed as a specifi c
component of the 2018 internal audit
program across a selection of sites in the
Adelaide Brighton is committed to being
a socially responsible member of the
communities in which we operate.
%
Alternative raw
‘000t GHG
Concrete and Aggregates Division. The
Through our community support program
objective of the audit was to examine
we aim to make a valued and sustainable
the adequacy of processes and controls
contribution to the communities in which
supporting the Company’s environmental
we operate by investing in primarily
obligations and regulatory requirements.
community based organisations and
The results were fed back into a best
children services; supporting specialised
practice initiative to improve overall
higher education programs and
performance across all sites.
environmental education through local
schools participation in vegetation
programs and wetland education.
substitution
materials
30
25
20
15
10
saving
1100
900
700
500
300
14 15 16 17 18
GHG saving
% SCM substitution
(by-products of industrial
processes - slag from the
steel manufacturing
industry and fl y ash from
coal fi red power stations)
Adelaide Brighton Ltd Annual Report 2018
23
iWomen and iMen Program
Adelaide Brighton annually partners with
Community engagement
communications program
the Kwinana Industries Council to deliver
Engagement with, and keeping the local
the iWomen and iMen project, an
community informed on the operations of
educational program promoting career
the Munster plant is an important element
opportunities to year 10 students.
of our day to day operations. We have
In 2018, the Munster plant hosted 29
female year 10 students for an information
session, and 33 year 10 male students
visited the Munster and Kwinana plants
for an information session. The students
were able to experience fi rst-hand the
various parts of our manufacturing
operations and learn from our staff
about the career opportunities available
within our industry.
created a communication program which
includes a dedicated community website
www.cockburncementcommunity.com.
au/, a 24x7 community feedback telephone
service, newsletters and a range of fact
sheets and short videos which aim to
inform and provide answers to key
questions, as well as regular community
meetings with key stakeholders.
Our Munster
and Birkenhead plants
create and maintain
wetlands and involve
students from local schools
in our environmental
programs
24
Adelaide Brighton Ltd Annual Report 2018
School tree planting days
Some of our 2018 recipients included:
>
University of Wollongong - Women
The Munster plant hosted two local schools
for tree-planting days at the Munster site.
We had over 110 students, teachers and
guardians visit the site to learn about the
Munster plant operations and participate
in the planting of over 1,600 native
seedlings across the site.
Community investment program
>
Little Athletics South Australia - sports
in Engineering Scholarship
program for children of all abilities
>
STEM program (Science, Technology,
aged 3-17 years
Engineer and Math - Year 10 and 11
>
Variety the Children’s Charity SA -
secondary students)
supporting disadvantaged or sick
children and their families
>
>
The South Australian Indigenous Law
Student Mentoring Program - supporting
>
>
Science grant to Beeliar Public School
indigenous law students to facilitate
Around the Campfire - organisation
transition as graduates to legal practice.
focused on improving indigenous health
>
St Peter’s College ‘Adelaide Brighton Ltd
and opportunity in remote areas across
Scholarship’ - an indigenous secondary
We aim to make a valued and sustainable
Australia
school scholarship for an indigenous
contribution to the communities in
>
Daniel Morcombe Foundation - educating
student.
which we operate through partnerships,
children on their personal safety
sponsorship and donations to specialised
>
University of Adelaide Engineering
programs at local schools, sporting clubs,
Scholarships
care agencies and community services
as well as higher education support.
Photographs, top to bottom:
Adelaide Brighton supports ‘Little
Athletics’ / Cockburn Cement
Munster plant tree planting day
for local school Coogee Primary
Adelaide Brighton Ltd Annual Report 2018
25
Health and safety
Safe, Sustainable Production is an
Lost time injury frequency rate
Safety initiative ‘Do not disburb’
essential and integral part of the way
we do business.
Our Group Lost Time Injury Frequency
Using a mobile phone while driving
Rate (LTIFR) at December 2018 was 1.70
increases the risk of crashing by at least
To achieve this, we continually work on
compared to 2.8 at December 2017.
four times. Using a mobile phone can
improving our safety and environmental
The reduction in LTIFR is largely attributed
signifi cantly impair a driver’s:
management systems and culture.
to our Concrete Products Division which
recorded Nil LTI in 2018. Our Cement and
Lime Division recorded a 62% reduction
in LTIFR in 2018.
Safety hazards
>
>
>
>
>
Reaction time
Visual search patterns
Ability to maintain speed and
position on the road
Ability to judge safe gaps in the traffi c
General awareness of other road users.
Safety hazard reporting increased in 2018
A large number of our employees drive a
by 65% compared to the same period
motorised vehicle as part of their job - be
the previous year. The proactive reporting
it a heavy haulage truck, concrete agitator
of near misses and hazards has been,
and will continue to be, a key driver for
improvement. Proactive reporting and
shared learnings are being supported by
a refreshed monthly employee dashboard
distributed across the Group, showcasing
‘what good looks like’. This is where we
provide examples of good practice and
learnings across the business.
truck, forklift or a passenger motor vehicle.
A safety campaign was launched to
encourage our employees to use the ‘do
not disturb’ feature on their mobile phone.
This feature senses when the carrier may be
driving a vehicle and prevents notifi cations
being received by the phone.
We believe that good planning and
preparation will eliminate or minimize risks
to health, safety and the environment.
Total recordable injury
frequency rate
Adelaide Brighton’s total recordable injury
frequency rate (TRIFR) at December 2018
was 26.0, compared to 38.1 at December
2017. Our focus across all Divisions has
been the reduction of injuries across all
recordable types - lost time, restricted
duties and medically treated, resulting in
a TRIFR reduction of 43.2% in the Cement
and Lime Division, 33% reduction in the
Concrete and Aggregates Division and
25% reduction in the Concrete
Products Division.
Our sustained focus on key areas of
risk that shapes the design of our
injury prevention programs are driving
sustainable improvements in reducing
harm to our people.
HSE priorities
Operational HSE
excellence
Leaders deliver safe,
sustainable production
Inclusive and
collaborative HSE culture
Loss
prevention
HSE management system that
supports safe, sustainable
operations
ABL focussed indicators to measure
and manage our performance
Data management that supports
environmentally sustainable
decision making
Leadership that visibly
demonstrates safety as a value
Maintain and strengthen the
connections with the communities
in which we work and live
Build HSE capability in
frontline management
Sustain a fi t and agile workforce
to support a more productive
work life
Investigate signifi cant incidents
and identify at risk behaviours to
prevent recurrence
Raise awareness to reduce
adverse environmental impacts
Enable a learning culture that
encourages the sharing of
information and lessons learned
across all sites
Leveraging technology to improve
communication effectiveness with
our employees and inclusive of our
mobile workforce
26
Adelaide Brighton Ltd Annual Report 2018
Using the feature reduces the risk of
motor vehicle accidents that could result
>
>
Build in-house capability with respect to CoR
Frequency
Lost time injury
Create opportunity for sharing CoR
frequency rate
in death, or serious or permanent injury
information and knowledge
to not only drivers, but other road users.
>
Develop a business wide Transport Safety
Chain of Responsibility (CoR)
and heavy vehicle safety
Wellbeing
Standard (framework).
The heavy vehicle supply chain plays an
Adelaide Brighton provides employees and
important role in supporting safe, reliable
their families with a free and confi dential
road transport for all road users. CoR laws
counselling service through our Employee
ensure that everyone on and off the road
Assistance Program (EAP) to help employees
that is involved in the supply chain is
meet life challenges and remain healthy,
equally responsible for complying with
engaged and productive.
Heavy Vehicle National Law.
Annualised utilisation rate as at December
Adelaide Brighton takes CoR seriously
and has managed transport safety as part
2018 is 4.4% which is higher than the
industry benchmark annualised utilisation
of its overall safety practices. On 1 October
of 3.2%. The EAP is promoted at all our
2018 CoR laws were amended to align
work sites to enable greater awareness
more closely with workplace health and
and support for employees’ wellbeing.
safety provisions meaning that all parties
in the chain must reduce risks related to
the safety of transport tasks. In practical
terms, there is an obligation to eliminate
or minimise potential harm or loss (risk)
by doing all that is reasonably practicable
to ensure safety.
As an extension to EAP, Adelaide Brighton
advocates and supports active participation
in R U OK? day, a national day of action
in September each year dedicated
to reminding people to
ask family, friends
and colleagues
To build on our commitment to transport
the question
safety, Adelaide Brighton’s CoR Working
Group successfully delivered on the
“R U OK?”, in a
meaningful way.
following objectives:
6.0
4.5
3.0
1.5
0
14 15 16 17 18
Concrete and aggregates
Concrete products
Cement and lime
Total
Frequency
Restricted duties
injury frequency rate
40
30
20
10
0
14 15 16 17 18
Concrete and aggregates
Concrete products
Cement and lime
Total
%
turnover
Employee turnover
by age group
% of
Employee turnover
employees
by gender
Frequency
Total recordable
injury frequency rate
80
60
40
20
0
100
75
50
25
0
0
2
<
5
2
-
1
2
0
3
-
6
2
5
3
-
1
3
0
4
-
6
3
5
4
-
1
4
0
5
-
6
4
5
5
-
1
5
0
6
-
6
5
5
6
-
1
6
0
7
-
6
6
+
0
7
Female Male
Continuers
Turnover
60
45
30
15
0
14 15 16 17 18
Concrete and aggregates
Concrete products
Cement and lime
Total
Adelaide Brighton Ltd Annual Report 2018
27
People and diversity
Dimity Smith
Executive General Manager
Human Resources and
Heath, Safety and Environment
Our Code of Conduct is based on the key
>
Demonstrate a high level of integrity
values that guide and define how business
and a clear drive to make a difference;
is conducted and provides a set of guiding
>
Build trust and respect through energetic
principles to help us make the right decision
participation and the empowerment
every time.
of others; and
>
>
We act with fairness, honesty and integrity;
We provide a safe and healthy work
environment for all employees;
>
Demonstrate a high level of leadership by
gaining the commitment and confidence
of others at all times
>
We are aware of and abide by laws and
The principles are embedded into the
regulations;
employee lifecycle; recruitment, selection,
>
We maintain the highest standards of
performance, succession and development.
professional behaviour; and
>
We strive to be a good corporate citizen
and to achieve community respect (by
individually and collectively contributing to
the well-being of shareholders, customers,
the economy and the community).
Our employees are expected to behave in
a way that is consistent with the Adelaide
Brighton Code of Conduct. This means
employees:
Regular performance discussions focus
on what employees have achieved and
how they have achieved. The ‘what’ and
the ‘how’ are equally valued. The behaviours
are crucial to the sustainable success of
any team or business.
The performance discussions encourage a
shared understanding of what constitutes
high performance and improves employee
perceptions of fairness which motivates
high performance.
People priorities
HR services
Frontline leadership
Talent management
Enhance shared services capability,
performance and scope to meet business
requirements and self service
Strengthen people management
capability in frontline leaders
Shape and manage talent to enable
high performance sustainable
business operations
nsitio n
Tra
D
e
v
e
l
o
p
m
e
n
t
R e c ruitment
Employee
life cycle
Successi o n
S
e
l
e
c
t
i
o
n
e
c
n
a
P erform
Employment by
employment status
Employee by
contract status
Full time
Part time
Casual
Permanent
Fixed term
28
Adelaide Brighton Ltd Annual Report 2018
Unique gift
An innate gift that:
> is highly observable to
all those around them
> cannot be learned through
others or training
> is used imaginatively
Employee survey
In 2018, more than 80% of our workforce
completed an employee survey. The results
tell us what our workforce values in their
working life; inform us on what we need
to keep doing and the things we need
to start doing.
More than 80% of employees are proud
to work for Adelaide Brighton and 76%
would recommend this company as a
great place to work. 79% of employees
What makes
leaders
stand out ?
Persistence
> A pure
determination
to succeed
> Never gives up
> Resilience
Charisma
> Real charm,
character
and personality
> Magnetism
> Has an impact
on their world
Frontline management
are comfortable voicing their ideas and
More than 50% of our frontline leaders
opinions, even if they are different from
have completed frontline management
others. 75% of employees receive the
training developing essential skills and
information and communication they
need to do their job effectively.
knowledge to enable them to lead their
teams to sustained, improved business
96% of employees believe everyone is
performance.
responsible for safety and 89% state they
Our blended coaching model has proven
have access to the things they need to
to be an effective way to learn and practice
do their job safely. 87% feel free to
new skills leading to more confi dent,
discuss work hazards and safety issues
better organised effective people leaders.
freely and openly.
This has resulted in frontline leaders willing
We are committed to being a safe and
inclusive workplace that values and
promotes diversity. Receiving and acting
on the feedback is an important part
of being an inclusive workplace.
to embrace diffi cult conversations in a
timely manner and be skilful in creating
an inclusive and collaborative work
environment.
Employment by
geography
Employment turnover
by geography
% employees
on EBA vs staff
Adelaide Brighton
survey results
73%
Engagement
Creating opportunities
for our leaders to engage
with our workforce
more regularly
88%
Safety confi dence
Continuing to
increase awareness and
personal ownership of
safety in the workplace
76%
Diversity and inclusion
Creating opportunities
to encourage and respond
to the views of everyone
in our workforce
69%
Communication
Working together to
develop new ways to share
and receive information
South Australia
New South Wales
Western Australia
Queensland
Victoria
Northern Territory
Tasmania
ACT
EBA
Staff
South Australia
New South Wales
Western Australia
Queensland
Victoria
Northern Territory
Tasmania
Adelaide Brighton Ltd Annual Report 2018
29
Diversity report
Adelaide Brighton is committed to being an inclusive workplace that values and promotes diversity of skills, experience and cultural
background. We recognise that an inclusive culture adds significant value through diversity and enables us to attract and retain the best
people with the appropriate skills to contribute to the continuing success of our business. Our Diversity and Inclusion Policy outlines seven
core objectives which form the foundations of our approach to diversity and upon which we measure our performance in this area.
In addition to progress against these specific objectives, the Nomination, Remuneration and Governance Committee was renamed in 2018
to the People and Culture Committee to focus on delivery against its diversity objectives, and included a review and update of the Committee’s
charter. An overview of these objectives, and our progress towards achieving these objectives during the 2018 financial year are set out below:
Objectives Diversity measures to facilitate achievement of objectives Progress
To promote a
culture of diversity
and inclusion
Continue to embed our diversity policy and deployment of
the plan to deliver progress towards achieving the objectives,
approved by the Board and People and Culture Committee
of Adelaide Brighton being relative to the industry
structure in which the Company operates.
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 with employment decisions 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.
ABL mentoring program for high potential
employees facilitated across the divisions to continue
to develop inclusive leadership.
Ensure performance, development and succession
management processes support the career progression
of individuals regardless of gender or cultural background.
Sponsor or encourage professional networking, coaching
programs and cross divisional projects to give employees
the opportunity to connect with other professionals.
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
30
The Board and the People and Culture Committee discussed the
Company’s diversity measures and reviewed progress towards
achieving the objectives, to continue to develop an inclusive
workplace culture that enables diversity to thrive.
As a member of the Cement Concrete & Aggregates Australia
(CCAA) and their Diversity Working Group, the Company contributed
to the development of the CCAA Diversity Statement: Diversity and
Inclusion in the Construction Materials Industry and the Diversity
and Inclusion Action Plan to attract a diverse group of people
to work in our industry.
Online learning platform embedded across the business to provide
an effective and accessible way for employees and contractors
to complete inductions and training, complimenting face to face
sessions. In addition, specific offerings launched also to support
Company policies such as bullying and harassment.
Recruitment coaching continues across the business to support
and enable diverse candidate pools and increase awareness of
unconscious bias. 19.5% of all new hires in 2018 were female
with 16.8% of staff roles filled by successful female candidates.
Initiatives to increase the number of female applicants applying
for typically male dominated roles included; online videos showcasing
our female employees on the job, advertising our flexibility options
and the availability of training for candidates without prior experience.
83.9% of roles advertised in 2018 attracted female applicants,
more than a 17% increase compared to 2017.
Mentoring program embedded across the business to develop,
inspire and support the next generation. Mentors and mentees
attend workshop training, webinars and 1:1 coaching sessions
for a shared positive mentoring experience.
Leadership talent priorities include building understanding and
accountability to demonstrate inclusiveness and adapting leadership
style to obtain maximum contribution from all employees.
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.
Investment in frontline management has enabled more than
50% of frontline leaders to complete FastLead training building
confidence, capability and an openness to learning.
When needs are identified, coaching programs are
supported across the business.
Pilot program successfully delivered in the Concrete Products
Division where identified high performers were provided with a
program to inspire curiosity, innovation and networking with site
visits across the entire business. An ABL program with CEO
sponsorship will be launched in 2019.
Adelaide Brighton Ltd Annual Report 2018 Objectives Diversity measures to facilitate achievement of objectives Progress
Sponsor MBA or post-graduate studies for
high potential employees.
Adelaide Brighton supports external study and
development for high potential employees.
Build talent
pipelines through
investment in skills
and capabilities
(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.
To reward and
remunerate fairly
Adelaide Brighton has a policy to provide equal pay
for equal work.
As part of the annual salary review process, Adelaide
Brighton undertakes a review of pay parity. Pay parity is
also considered at the time of hiring new employees, to
eliminate potential gaps in pay arising from hiring decisions.
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.
Understand the
diversity of our
workforce
Measure age, gender, and cultural identity
of our workforce.
Electrical Engineering scholarship in place at University of
Wollongong in 2018 that provides a female student both a
financial benefit and a work placement opportunity.
Engineering scholarships across multiple year groups are in
place at University of Adelaide for female students.
Sponsorship of STEM Program (Science, Technology, Engineering
and Math) for Year 10 and 11 high school students.
Vacation programs in place in Adelaide, Perth and Sydney.
Participation in Kwinana Industries Council iWomen and
iScience projects.
Sponsorship of the SA Law Society Indigenous Law Student
Mentoring Program and establishment of a Scholarship for an
indigenous high school student at St Peter’s College in Adelaide.
Support of the Aurora Foundation Aspiration Initiative designed
to enhance academic achievement for Aboriginal and Torres
Strait Islander secondary school students.
The gender pay parity review was completed in 2018 as part
of Adelaide Brighton’s annual remuneration review processes
indicating that within groupings, the Group achieved pay parity.
Methodology and training supporting the staff remuneration
framework, the Mercer International Position Evaluation (IPE),
is embedded in the hiring process.
Flexibility is offered to women returning from maternity leave
including reduced hours to assist the transition back to the
workplace. Flexibility is also offered to employees who may
have temporary domestic responsibilities and require a
change in working arrangements.
7.3% of the workforce have a part time or casual
work arrangement.
16 employees have taken ‘Paternity Leave’ in 2018.
Analysis of results from 2018 employee survey of cultural
identity, plus diversity data is collected from candidates
during the recruitment process.
Member of Cement Concrete & Aggregates Australia
(CCAA) Diversity Working Group.
Adelaide Brighton is committed to the
in the building, manufacturing and
The following table shows the proportional
regular review of its objectives to ensure
construction materials industries in which
representation of women employees at
that these continue to be appropriate and
we operate. We recognise that the available
various levels within the Adelaide Brighton
relevant. This commitment includes the
pool of female candidates in manufacturing
Group (as at 31 December 2018):
completion of the workplace profile report
and engineering roles relevant to our
as required by the Workplace Gender
business operations is limited, and this
% Male Female
Equality Act 2012.
impacts our ability to increase the number
Board
29.0
A copy of the workplace profile report is
available in the ‘Our Responsibilities’ section
of our website at www.adbri.com.au/
ourresponsibilities#reporting. The Board is
committed to build upon the achievements
to date and reinforce the continued efforts
in promoting and cultivating a culture of
diversity and inclusiveness.
5
7
2
1
of female new hires. In an effort to
make our Company (and industry) more
Senior executives
12.5
attractive to women, we have focused
Senior managers
26.8
30
11
on measures designed to increase the
(direct reports to senior executives)
proportion of female candidates, graduates
and to support the development of female
employees who are recognised as having
Total workforce
13.5 1,357 211
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
The proportion of women across Adelaide
will achieve an improvement in the level
corporate governance section of
Brighton’s workforce is reflective of the
of female representation and inclusiveness
Adelaide Brighton’s website.
generally low level of female representation
across the organisation.
31
Adelaide Brighton Ltd Annual Report 2018
Tax transparency report
This Report is prepared in accordance with
The ETR is presented under three scenarios
Effective tax rate
Adelaide Brighton’s voluntary adoption of
below: accounting profi t; accounting profi t
the Tax Transparency Code and provides
excluding equity accounted earnings;
%
2018
2017
information regarding Adelaide Brighton’s
and accounting profi t excluding equity
Australian operations
26.7
27.7
tax contribution, its approach to tax strategy
accounted earnings and income tax
and governance, and its international
expense excluding capital losses recognised.
related party dealings during the year ended
The reason for this is to provide maximum
31 December 2018. Adelaide Brighton
transparency.
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 profi ts generated
by Adelaide Brighton’s joint ventures and
associates is recognised by the Group in
Australian operations -
excluding equity
accounted earnings
29.7
29.8
Australian operations -
excluding equity accounted
earnings and capital losses
recognised
29.8
29.9
The Australian full company tax rate is
the income statement. Adelaide Brighton
Global operations
26.7
27.5
currently 30% of taxable income. Taxable
also maintains a balance of capital losses
income represents gross income minus
that may be recouped to offset capital gains
amounts that are treated as deductible
incurred for tax purposes. During the year
or exempt under the tax law.
ended 31 December 2018 $0.3m of capital
Global operations -
excluding equity
accounted earnings
29.7
29.8
The Effective Tax Rate (“ETR”), that is
expense divided by profi t before tax, for
Adelaide Brighton’s Australian operations
is 26.7% for the year ended 31 December
2018.
losses were recognised to offset capital
Global operations -
gains. The inclusion of equity accounted
excluding equity accounted
earnings in accounting profi t, and the
earnings and capital losses
inclusion of capital losses recognised in
recognised
29.8
29.9
income tax expense, may distort the ETR
and removing these items from the ETR
The ETR differs to the company tax rate
provides a more transparent representation.
due to non-temporary differences, which
represent amounts that are recognised as
assessable or deductible for accounting
purposes or tax purposes, but not both.
The global ETR recognises the accounting
profi t/loss attributable to Adelaide
Brighton’s minority interest in our Malaysian
based associate. During the year ended
Income tax expense is an accounting
31 December 2018, the accounting
concept that is different to income tax
profi t attributable to our Malaysian based
payable. Income tax expense refl ects the
associate had only a minor effect on the
amount of income that is assessable for
ETR, which is not visible due to rounding.
tax purposes regardless of the timing of
For this reason, the ETR for the Australian
the assessability. In contrast, income tax
operations and the global operations
payable refl ects the amount of income that
appears the same for the year ended
is assessable in the current year.
31 December 2018. Additional information
in relation to Adelaide Brighton’s
international related party dealings is
provided under Part B of this Report.
%
Adelaide Brighton Ltd
2018 effective tax rate
40
30
20
10
0
ETR
ETR
excluding
equity
accounted
earnings
ETR
excluding
equity
accounted
earnings
and losses
recognised
Australian operations
Global operations
Australian corporate tax rate
Adjusting for equity accounted earnings
and capital losses not previously recognised,
Adelaide Brighton has an effective tax rate
of 29.8% percent for the year ended 31
December 2018.
32
Adelaide Brighton Ltd Annual Report 2018
Reconciliation of accounting profit to
income tax expense 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 2018 Financial Statements.
As Adelaide Brighton holds a minority
interest 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
$ million
2018
2017
agreements, arrangements or dealings must
Accounting profit before tax
251.0
254.2
be on arm’s length terms as if conducted
by two independent parties. As a result
Prima facie tax payable (at 30 percent)
75.3
76.3
of these measures, Adelaide Brighton’s
Tax effect of non-temporary differences (at 30%):
Non-allowable expenses
Non-assessable income
Rebateable dividends
Non assessable non-exempt dividends
Other deductions
Previously unrecognised capital losses
Income tax expense
Tax effect of temporary differences (at 30%):
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
Foreign currency income not yet realised for tax
Other timing differences
Income tax payable
0.5
(2.2)
(5.3)
(0.4)
(0.8)
(0.1)
67.0
1.5
(2.6)
(0.8)
0
(0.2)
(0.1)
0.1
(0.4)
64.5
2.6
(3.4)
(4.6)
0
(0.7)
(0.3)
69.9
1.2
(0.7)
0.1
(0.3)
0.6
(2.5)
0
3.5
71.8
Identification of material temporary
Adelaide Brighton is committed to being
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 2018 year.
Taxes borne by Adelaide Brighton
$ million
2018
2017
Corporate income tax1
Fringe benefits tax2
Payroll tax 3
Property tax
Total
64.5
1.2
9.0
0.9
71.0
4
1.2
8.8
2.2
5
75.6
83.2
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 2018 is
due for lodgement in mid-2019.
2 Fringe benefits tax paid in respect of the year
and non-temporary differences
a responsible corporate citizen and actively
ended 31 March 2018.
Material adjustments for non-temporary
items that reduce income tax expense relate
primarily to differences in the accounting
seeks to contribute to the well-being of
shareholders, customers, the economy
and the community.
and tax treatment of income derived from
Adelaide Brighton reflects these
joint ventures and associated entities as
commitments in its approach to taxation,
outlined above.
with a high focus on meeting its various
3 Payroll tax paid in respect of the year ended
30 June 2018.
4 Prior year income tax paid has been updated from
the amount shown in the 2017 Report to reflect
the final income tax liability per the income tax
return which was due and lodged in mid-2018
(after the 2017 Report was published).
5 Prior year property tax paid has been updated
tax obligations. Strong internal expertise
from the amount shown in the 2017 Report to
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 differences
primarily related to differences in the
timing of deductions for expenses such
as depreciation, provisions, accruals,
prepayments and consumables.
and internal processes, combined with
engagement of expert advisers, ensures
Adelaide Brighton is fully compliant with
its taxation obligations. Adelaide Brighton
also seeks to maintain a professional and
transparent relationship with taxation
authorities.
International related party dealings
Adelaide Brighton has limited international
Tax strategy and governance
related party dealings. The Group holds a
Adelaide Brighton is committed to the
highest standards of corporate governance
and its approach to taxation aligns with
its Tax Risk Management and Governance
Policy and Code of Conduct.
30% equity interest in Aalborg Portland
Malaysia Sdn Bhd (APM), a manufacturer
of white clinker and cement based in Ipoh,
Malaysia. The majority 70% owner of APM
is 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.
reflect a stamp duty refund received after the
2017 Report was published.
Adelaide Brighton also collected
$55.3 million in net GST after input tax
credits on behalf of taxation authorities.
In this Report references to ‘Adelaide
Brighton’, ‘the Group’ and ‘our’ refer to
Adelaide Brighton Limited and its wholly
owned subsidiaries.
This Report has not been independently
audited; however, disclosures made in
Part A of this Report are consistent
with disclosures made in the audited
financial statements.
33
Adelaide Brighton Ltd Annual Report 2018
Corporate governance overview
Marcus Clayton
General Counsel and
Company Secretary
The Adelaide Brighton Ltd Board is
Adelaide Brighton’s Corporate Governance
committed to conducting the Company’s
Statement which provides detailed
business ethically and in accordance with
information about governance at Adelaide
high standards of corporate governance.
Brighton is available on Adelaide Brighton
To this end, the Board (together with the
website at www.adbri.com.au
Company’s management) regularly reviews
the Company’s policies, practices and other
Role of the Board
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).
Adelaide Brighton confi rms it has followed
The Board takes accountability for
the ASX Corporate Governance Council’s
reviewing and approving strategic direction,
Principles and Recommendation (3rd edition)
establishing policy, overseeing the fi nancial
during the 2018 fi nancial year.
position assessing approach to risk and
monitoring the business and affairs of the
Group on behalf of shareholders.
Board Committees
To assist the Board in fulfi lling its
responsibilities, the Board has established
a number of committees with responsibility
for particular areas. Each committee has a
specifi c charter, which are each available on
the governance section of the Company’s
website at www.adbri.com.au
Adelaide Brighton’s
Governance framework
Shareholders
Adelaide Brighton Ltd Board
Safety, Health,
Environment and
Community Committee
>
>
Monitors and oversees
effectiveness of health, safety
and environmental practices
Corporate Social Responsibility
and Sustainability
Audit, Risk and
Compliance Committee
People and Culture
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
Adelaide Brighton CEO
>
>
Day-to-day management
of the Company
Development and
implementation of the
Company’s strategy
Adelaide Brighton
executive management
34
Adelaide Brighton Ltd Annual Report 2018
The Board is structured to add
Timely and balanced disclosure
In all cases, Directors and Offi cers are
prohibited from trading in 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 succession planning
The Board regularly reviews the size and
composition of the Board to ensure the
appropriate skills, perspective and expertise
are represented. The skills matrix set out
below demonstrates the skills, experience
and diversity of the non-executive Directors
in offi ce as at the date of this report.
The Board will also utilise the Board skills
matrix review process to identify areas
where non-executive Directors would benefi t
from further professional development.
Diversity
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 page 30-31 of this
Annual Report.
value and Board decision making
is enhanced through education
and support
The Company is committed to providing
relevant and timely information to its
shareholders and to the broader market,
>
The Board ensures that its members
in accordance with its obligations under
have the time and commitment to
the Corporations Act 2001 and the ASX
devote to the role.
continuous disclosure regime.
>
The Board is committed to a majority
of independent views being brought
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 improvement.
>
The Board keeps informed of
The Company’s Continuous Disclosure Policy
is available on the Company’s website at
www.adbri.com.au. It sets out guidelines
and processes to be followed in order to
ensure that the Company’s continuous
disclosure obligations are met. These policies
and procedures are supplemented by the
Shareholder Communications Policy which
includes arrangements the Company has
in place to promote communication with
shareholders and encourage effective
participation at general meetings.
Shareholdings of Directors
and employees
regulatory and industry developments
Directors and Offi cers may not buy or sell
to challenge status quo and strengthen
Adelaide Brighton shares except during
knowledge base.
specifi ed periods (known as ‘Trading
Windows’) provided that prior approval
is obtained. Our Share Trading Policy also
defi nes certain periods where trading is
not permitted under any circumstances
(known as ‘Blackout Periods’).
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
Non-executive Directors
Adelaide Brighton Ltd Annual Report 2018
35
Directors
Zlatko Todorcevski
Raymond Barro
Ken Scott-Mackenzie
Arlene Tansey
Vanessa Guthrie
Geoff Tarrant
MBA, BCom, FCPA, FGIA
Age 51
BBus, CPA, FGIA, FCIS
Age 57
BE(Mining), Dip Law
Age 68
FAICD, MBA, JD, BBA
Age 61
Hon DSc, PhD, BSc (Hons)
Age 58
BBus
Age 50
Experience
Experience
Experience
Experience
Experience
Experience
Non-executive Director
since 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.
Special responsibilities
Member, Audit, Risk
and Compliance
Committee (appointed
4 July 2018).
Non-executive Director
since August 2008.
Over 28 years’
experience in the
premixed concrete and
construction materials
industry. Managing
Director of Barro Group
Pty Ltd.
Special responsibilities
Member, Safety, Health,
Environment and
Community Committee.
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 Brambles,
Oil Search Limited and
BHP Billiton’s Energy
business. Director, The
Star Entertainment
Group Limited (appointed
in May 2018) and Coles
Group Limited (appointed
November 2018).
Special responsibilities
Appointed Chairman
17 May 2018. Member,
Audit, Risk and
Compliance Committee.
Member, People and
Culture Committee
(appointed 16 November
2017 - ceased 4 July
2018).
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 Australia, the
holding company of
Abigroup, Baulderstone
and Bilfinger Berger
Services.
Special responsibilities
Chairman, Safety,
Health, Environment and
Community Committee.
Member, People and
Culture Committee.
Independent non-
executive Director since
February 2018. Extensive
experience in the mining
and resources industry.
Previous CEO and
Managing Director of
Toro Energy Limited
(ceased Dec 2016),
and former Director
Vimy Resources Limited
(appointed October
2017 and ceased
November 2018)
and former Vice
President Sustainable
Development at
Woodside Energy.
Director of Santos Limited
(appointed July 2017).
Special responsibilities
Chairman, People and
Culture Committee
(appointed 16 May
2018). Member, Safety,
Health, Environment
and Community
Committee (appointed
4 July 2018).
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, Healius Limited
(formerly Primary Health
Care Limited - appointed
August 2012) and
Aristocrat Leisure
Limited (appointed
July 2016). 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, Audit, Risk
and Compliance
Committee (appointed
16 May 2018). Member,
People and Culture
Committee.
36
Adelaide Brighton Ltd Annual Report 2018
Financial
statements
Adelaide Brighton Ltd Annual Report 2018
37
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Financial statements contents
Directors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
Remuneration report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Statement of comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73
Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74
Statement of changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Statement of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Notes to the financial report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77
1
Summary of significant accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Financial performance overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
2
Segment reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80
3 Critical accounting estimates and assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81
4
5
6
7
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
Revenue from contracts with customers and other income . . . . . . . . . . . . . . . . . . . . . .
82
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84
8 Note to statement of cashflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87
Balance sheet items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89
9
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
10
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90
11 Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90
12 Assets classified as held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92
13
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
14
Impairment tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
15 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94
Capital structure and risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96
16 Borrowings and lease commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96
17 Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
18 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
98
19 Reserves and retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
20 Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99
Group structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
21 Joint arrangements and associate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
104
22 Subsidiaries and transactions with non-controlling interests . . . . . . . . . . . . . . . . . . . . . 105
23 Deed of cross guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
24 Parent entity financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
107
25 Retirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
108
26 Share-based payment plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
112
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
27 Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
28 Events occurring after the balance sheet date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
29 Commitments for capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
30 Remuneration of auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
31 Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Directors’ declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Auditor’s Independence Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Independent auditor’s report to the members of Adelaide Brighton Ltd . . . . . . . . .
118
Information for shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
38
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Directors’ report
The Directors present their report on the
Statutory results
consolidated entity (the Group) consisting
of Adelaide Brighton Limited (the Company)
and the entities it controlled at the end of, or
during, the year ended 31 December 2018 .
Directors
The Directors of the Company, at any time
during or since the end of the financial year
and up to the date of this report, are:
Z Todorcevski
RD Barro
VA Guthrie (appointed 8 February 2018)
KB Scott-Mackenzie
AM Tansey
GR Tarrant (appointed 8 February 2018)
LV Hosking (retired 16 May 2018)
GF Pettigrew (retired 17 May 2018)
M Brydon (retired 30 January 2019)
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 .
Consolidated
2018
$ million
Restated 1
2017
$ million
1,559 .6
Revenue from contracts with customers
Earnings before interest, tax, depreciation and amortisation
350 .1
Earnings before interest, tax, depreciation and amortisation 352.8 350 .1
(82 .5)
Depreciation and amortisation
1,630.6
352.8
(87.4)
Earnings before interest and tax (“EBIT”)
Net finance cost2
Profit before tax
Income tax expense
Net profit after tax
Attributable to:
Members of Adelaide Brighton Ltd (“NPAT”)
Non-controlling interests
Basic earnings per share (cents)
Ordinary dividend per share (cents)
Special dividend per share (cents)
Franking (%)
Net debt 3 ($ million)
Leverage4 ratio (times)
Net debt/equity (%)
265.4
(14.4)
251.0
(65.8)
185.2
185.3
(0.1)
28.5
20.0
8.0
100.0
424.8
1.2
34.1
267 .6
(12 .1)
255 .5
(72 .7)
182 .8
182 .7
0 .1
28 .1
20 .5
4 .0
100 .0
371 .6
1 .1
29 .8
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 2018 which have been adjusted
for the significant items . An explanation of the significant items and reconciliation to statutory
results is provided on page 44 .
Review of operations
Underlying results
A summary of the financial results for
the year ended 31 December 2018 is set
out below:
Consolidated
2018
$ million
Restated 1
2017
$ million
Revenue from contracts with customers
1,630.6
1,559 .6
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation
Earnings before interest and tax (“EBIT”)
Net finance cost
Profit before tax
Income tax expense
Net profit after tax
Attributable to:
Members of Adelaide Brighton Ltd (“NPAT”)
Non-controlling interests
Basic earnings per share (cents)
Net profit after tax
360.9
(87.4)
273.5
(14.4)
259.1
(68.2)
190.9
191.0
0.1
29.4
372 .4
(82 .5)
289 .9
(12 .1)
277 .8
(79 .3)
198 .5
198 .4
(0 .1)
30 .5
Full year reported net profit after tax (NPAT) increased 1 .4% on 2017, to $185 .3 million .
Underlying NPAT declined 3 .7% from $198 .4 million in 2017 to $191 .0 million . Property profits
contributed $0 .9 million to NPAT in the year, compared to $8 .4 million in 2017 .
1 Restated numbers are due to a change in accounting policy on adoption of AASB15 Revenue from Contracts with
Customers applied from 1 January 2018 . As a result of the changes, prior year financial statements were restated .
2 Net finance cost is the net of finance costs shown gross in the Income Statement with interest income included in
other income .
3 Net debt is calculated as total borrowings less cash and cash equivalents .
4 Leverage ratio is net debt / trailing 12 months EBITDA .
39
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
Revenue from contracts with customers
> Senior management appointments -
Prices were higher compared to 2017 in the
Full year revenue of $1,630 .6 million, was
Chief Executive Officer, Chief Financial
majority of markets, particularly the eastern
4 .6% higher than 2017, supported by
Officer and internal promotion of
states . Increased competitive pressures
continued growth in east coast markets,
Executive General Manager - Concrete
emerged in the South Australian market
improved pricing and the contribution of
and Aggregates .
from imported bulk bag product . Adelaide
acquisitions completed in 2017 . Excluding
> Demand expected to be broadly
Brighton’s weighted average cement price
the acquisitions completed in 2017, revenue
stable in 2019, with lower demand
declined in 2018 as a result of sales mix
increased 2 .6% on 2017 .
from residential construction offset by
toward lower price markets .
Volumes for granulated blast furnace slag
increased following the securing of further
long term contracts, albeit at lower prices .
Operations - Margins pressured by lower
volumes and import costs
Lower cement volumes in 2H18, combined
with a change in product sales mix and
increased import costs resulted in a decline
in cement margins .
In South Australia, a five year agreement
for the supply of electricity delivered savings
during 2018 that more than offset higher
gas costs .
Adelaide Brighton continues to pursue its
strategy of increasing the use of alternative
fuels and alternative cementitious products
to reduce energy costs and carbon
emissions, led by the Birkenhead plant in
South Australia .
During the first half of 2018, cement
milling was disrupted due to the temporary
failure of a mill bearing in the Birkenhead
plant . The financial impact of this was
largely offset by an insurance claim and the
settlement receipts of $4 .6 million .
Import costs increased, due to higher
shipping and material procurement costs .
The value of expected imports is hedged
through to the end of June 2019 .
Clinker sales volumes declined, due to
Sunstate Cement’s other shareholder
electing to supply their 50% entitlement
to the Joint Venture’s clinker requirements .
Offsetting this, Adelaide Brighton now
supplies all of the clinker via import
contracts to its own wholly owned grinding
facility in Port Kembla, New South Wales .
Earnings before interest and tax
Earnings before interest and tax (EBIT)
decreased 0 .8% in 2018 to $265 .4 million .
Underlying EBIT, which excludes
restructuring and transaction costs, declined
5 .7% to $273 .5 million . Underlying EBIT
was impacted by lower cement earnings,
improved demand from infrastructure
and non-residential projects .
> Stable demand environment anticipated to
be supportive of announced price increases .
Demand overview
In 2018, the demand environment remained
due to market mix changes and the increase
generally favourable, with demand for
in energy costs more than offsetting
earnings growth in concrete, aggregates
and joint ventures .
Cash flow and debt
Operating cash flow increased 9 .1% to
$244 .7 million - higher sales coupled
with improved receivables processes and
working capital management . Net debt
increased to $424 .8 million at year end, as a
consequence of ongoing capital investment
and a high dividend payout ratio . Net debt
to equity gearing was 34 .1% at period end,
up from 29 .8% at 31 December 2017 . The
leverage ratio of net debt to earnings before
interest, tax, depreciation and amortisation
(EBITDA) was 1 .2 times at year end . This
leverage ratio is towards the bottom end of
the board’s target range, while gearing is
near the mid-point .
Shareholder returns
Basic earnings per share (EPS) increased
1 .4% on 2017 to 28 .5 cents, reflecting
underlying EPS of 29 .4 cents . Final ordinary
dividend of 11 .0 cents per share (franked to
100%), compared to 12 .0 cents per share
for FY17 . Final special dividend of 4 .0 cents
per share (franked to 100%), compared to
4 .0 cents for FY17 .
Strategy and outlook
> Focus on realising further benefits from
unchanged corporate strategy: cost
reduction and operational improvement;
growth of the lime business; and focussed
and relevant vertical integration . Strategy
on track and relevant to growing
shareholder value .
construction materials in New South Wales
and Victoria robust . Demand in South
Australia, Queensland and Northern Territory
was stable, while demand in Western
Australia declined . Overall, residential
construction activity remained healthy
during the year and the non-residential,
engineering and infrastructure sectors1
continued to improve, with several major
infrastructure projects moving from early
stage works to construction . Demand for
lime from the resources sector was stable
on 2017 .
In 2018, Adelaide Brighton is estimated to
have generated revenue from key sectors of
the Australian economy as follows:
> Engineering and infrastructure
construction 32%
> Residential building 32%
> Non-residential building 22%
> Mining and resources 14%
Cement and clinker
Sales - Demand strong on east coast
In 2018, total cement sales volumes
increased 1 .1% compared to 2017 .
Demand remained strong in Melbourne
and Sydney, with continued demand from
residential construction supported by
the commencement of the construction
phase of major infrastructure projects .
Non-residential development such as
office towers, further supported sales in
these markets .
Sales volumes declined in South Australia,
as higher mining volumes were offset
by subdued project volumes . Western
Australian volumes were lower as the
market remained subdued .
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 2018. Lime
Concrete Products
Mawson Group (Mawsons) (50%)
Sales - Volumes stable
Sales - Mixed demand across regions
Lime sales volumes were stable in
Concrete Products revenue was flat
2018 . Adelaide Brighton continued to
compared to 2017 . Volumes decreased
successfully defend its market position with
slightly over the prior year largely due to
reliable, high quality and cost competitive
reduced commercial sales in Queensland .
domestic production .
Sales volumes improved in the majority of
Average lime prices were lower compared to
other markets .
Mawsons is the largest premixed concrete
and quarry operator in northern regional
Victoria, and also operates in southern
regional New South Wales . Mawsons
is a significant aggregates producer in
the region, holding number one and
number two positions in the markets it
serves . Mawsons’ contribution to earnings
2017, due to both sales mix and contractual
A focus on selling prices resulted in average
improved 4 .3% to $7 .2 million . Concrete
pricing arrangements .
prices increasing across all regions .
sales volumes improved during the year
Operations - Energy costs increase
Operations - Business enhancements
The renewal of a contract for coal fuel in
continue
Western Australia resulted in higher energy
The Concrete Products business continues
costs from 1 January 2018 which impacted
to focus efforts around operational
lime margins in 1H18, however these were
improvement, product innovation
due to demand from major regional
infrastructure projects, while aggregate
volumes were in line with the prior year .
Aggregate selling prices improved while
concrete prices moderated marginally .
partially offset by higher prices in 2H18
and developing new market segment
Aalborg Portland Malaysia Sdn. Bhd.
and the benefit from renegotiated gas
opportunities . In 2H18, a number of plant
(Aalborg) (30%)
supply contract .
upgrades were undertaken to reduce energy
Aalborg manufactures and sells white
Concrete and Aggregates
Sales - Strong growth in sales volumes
In 2018, concrete volumes increased by
14%, compared to 2017 . Excluding the
impact of acquisitions completed in 2017,
concrete volumes grew by approximately
9% . All markets improved, with volume
growth strongest in the east coast markets .
Average concrete prices increased compared
to 2017 .
In 2018, aggregate volumes increased 10%,
costs, lift plant efficiencies and facilitate
cement and clinker for the domestic
the launch of a number of products into
Malaysian markets and exports to Australia
emerging market opportunities .
and markets throughout south east Asia .
Lower revenue and the calibration of
production volumes to match sales led
to higher costs due to reduced fixed cost
recovery, offsetting the benefits from cost
controls . While overall EBIT increased 4 .9%
to $10 .7 million, this included $1 .3 million
in property profits (2017: nil) .
Improved sales volumes were offset by
higher distribution and materials costs, as
well as adverse movement in regional
exchange rates .
Strategic Developments
Adelaide Brighton continues a successful
long term strategy to grow shareholder
Joint arrangements and associates
returns through investment in three
assisted by strong east coast markets and
Independent Cement and Lime Pty Ltd
key areas:
acquisitions . Aggregate prices increased in
(ICL) (50%)
1 Cost reduction and operational
the majority of markets over the year, but
ICL is a specialist supplier of cement and
improvement;
the supply of a significant volume of lower
cement blended products to a wide variety
value fill material to the early stages of
of industries and retail outlets throughout
infrastructure projects resulted in slightly
Victoria and New South Wales and is
2 Growth of the lime business to supply
the resources sector; and
lower average realised prices and a decline
Adelaide Brighton’s distributor in those
3 Focussed and relevant integration into
in quarry margins . Sales of higher value
markets . Strong demand across Victoria
aggregates, concrete, logistics and
aggregates are expected to increase as these
and New South Wales resulted in increased
masonry businesses .
projects progress, assisting average selling
volumes and prices, resulting in ICL’s
prices and margins .
contribution increasing 21% on 2017 to
Operations - Acquisitions delivering
$17 .8 million .
Efficiency has remained a driver of
shareholder returns with ongoing
improvements in the cement manufacturing
Concrete margins increased in 2018 on
Sunstate Cement Limited (Sunstate) (50%)
and logistics operations .
higher volumes and prices . While average
Sunstate is a joint venture with a cement
aggregate margins declined due to fill sales,
milling, storage and distribution facility
margins increased in premium aggregates
at Fisherman Islands, Port Brisbane . In a
for concrete and asphalt making, supported
competitive market that included reduced
by increased volume and prices .
offtake from our joint venture partner,
The acquisition of the Central Pre-Mix,
Davalan Concrete and the Northern
Territory concrete and aggregates assets
of Holcim in 2017 added further scale to
Adelaide Brighton’s business . In 2018, these
acquisitions provided growth in revenue and
EBIT, and pull through benefits to the Group .
Sunstate equity accounted earnings were
in line with the prior year at $11 .6 million .
Improved pricing and favourable material
costs largely offset the impact of the
lower volumes .
Managing energy costs across the Adelaide
Brighton operations remains an important
focus and a significant opportunity for
shareholder value creation, which includes
the growing utilisation of alternative fuels
and cementitious materials .
41
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. The lime business continues to benefit from
The Company’s unique distribution network
The portfolio of properties targeted for sale
an emphasis on costs and efficiency . The
affords significant scale economies and
is projected to realise proceeds in excess of
business is well positioned for long term
opportunities to further improve efficiency .
$100 million over the next 10 years . The
growth in resources sector demand .
A new long term contract with a domestic
EBIT margin on these sales is anticipated to
In addition to downstream acquisitions,
pursuing organic opportunities has also
been a driver of growth . In particular, the
Group has a well established record of
taking long term positions in strategic
quarry resources and other greenfields
investments that complement Adelaide
Brighton’s operations .
1 Cost reduction and operational
improvement
Cost competitive manufacture and
import model
Adelaide Brighton remains Australia’s largest
importer of cementitious materials (cement,
clinker and blast furnace slag) . Utilising
its import facilities in key markets across
Australia, the company sources more than
2 .5 million tonnes of imported product
per annum .
shipping provider and the commissioning
be circa 85% with an effective tax rate of
of a new vessel by the supplier for
approximately 20% .
cement deliveries between Adelaide and
Melbourne, together provide significant
2 Lime growth
benefits to the logistics operations . The new
Efficient operations with strong
contract delivered savings of approximately
competitive position
$2 .0 million during 2018 and is expected to
rise to $2 .5 million annually from 2019 .
Adelaide Brighton’s Munster, Western
Australia, lime business is underpinned
Energy efficiency remains a key focus
by low cost mineral resources secured
Adelaide Brighton has a proactive strategy
to manage energy costs and operating risks,
by a State Agreement Act and long term
statutory approvals .
through measures including:
The Munster lime plant is a low cost
> A portfolio approach to energy supply and
procurement benefits;
> Long term contracts that lower electricity
operation with two lime kilns, which are
among the largest globally, and currently
operates at 80% of capacity .
costs i .e . a new five year contract signed for
The Western Australian alumina sector,
electricity from renewables;
which includes some of the lowest cost
> Increased use of alternative fuels to reduce
alumina production in the world, represents
reliance on traditional sources (targeting
increased substitution of fuel supply in
about 70% of Western Australian lime
demand . Lime demand is expected to
This industry leading position enhances
South Australia in the medium term);
grow over the medium term, in line with
supply chain efficiency in procurement,
> Increased use of alternative cementitious
incremental output improvements and
transport, storage and distribution . The
materials e .g . slag;
growth in the Western Australian resources
use of imported materials allows the
> Short term consumption management
sector . Adelaide Brighton’s leading cost
supply of competitively priced product
through operational adjustments;
position and substantial capacity means it is
into a range of markets where demand
> A proactive approach to cost recovery in
well placed to benefit from this growth .
exceeds the Company’s manufacturing
the marketplace, supported by vertical
capacity . It enables Adelaide Brighton’s
integration, and through partnership
3 Downstream integration
domestic production assets to operate at full
contracts with long term customers; and
Growth continues in concrete
utilisation, which underpins its competitive
> Hedging and other financial strategies,
and aggregates
position and shareholder returns .
where it adds value for shareholders .
Adelaide Brighton continues to actively
The import strategy is supported by long
The 2017 rationalisation of oil well cement
pursue its strategy of building, via
term agreements with two Japanese
production at Angaston in South Australia
acquisitions and organic growth, quality
suppliers for grey clinker: Aalborg for white
and the leveraging of the supply network
concrete and aggregate businesses that
clinker and a major Japanese trading house
has improved the energy efficiency of the
enhance its long term competitive position
for supply of granulated blast furnace slag .
South Australian cement operations as well
and shareholder value . Over the last decade,
Adelaide Brighton also has a leading
as returns .
position in the supply of supplementary
Land sales program to release capital
cementitious materials including ground
over the next decade
granulated blast furnace slag and fly ash .
Adelaide Brighton has been actively
The use of supplementary cementitious
engaged in selling and preparing for sale
materials in the production of concrete can
properties released by its operational
enhance durability, while reducing both the
rationalisation and improvement program .
consumption of natural resources and the
Since the beginning of 2013, proceeds from
environmental impact from disposal of these
the property sale program have totalled
industrial by-products .
$100 million .
it has built a concrete and aggregates
business of scale that offers strong regional
positions and strategic aggregates reserves
that underpin returns to shareholders .
The business is complementary to the
cement and lime operations and provides
attractive diversification benefits as well
as value creation through cost synergies,
logistics benefits and raw materials pull
through . Adelaide Brighton’s investment
approach includes a preference for long
term quarry reserves, identifying clear
opportunities for synergies and a disciplined
approach to investment .
42
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. On a national perspective, Adelaide
Organic projects an important
Net debt and gearing - conservative
Brighton has a number four position in
contributor to growth
approach
concrete and aggregates with operations
in all mainland capitals, excluding Western
Australia, and many significant regional
centres . Given the high cost of transporting
concrete and aggregates long distances, and
the perishable nature of premixed concrete,
markets tend to be highly localised with
In addition to acquisitions, organic
growth has been a key growth driver in
many markets, with a well established
Adelaide Brighton has a conservative
approach to capital management with the
following broad objectives:
strategy of taking long term positions on
> Ensure an efficient balance sheet to
strategic quarry resources and assets that
optimise cost of capital and thereby
complement Adelaide Brighton operations .
shareholder returns through utilisation of a
leading positions in local markets affording
Organic projects recently completed include
scale benefits . As such, Adelaide Brighton
a state-of-the-art indoor concrete plant in
aims to establish a leading market position
Alexandria, New South Wales, servicing
within local markets .
Adelaide Brighton’s Austen Quarry at Hartley,
west of Sydney, is a low cost aggregate
the high growth inner west Sydney market
and a concrete plant in Larapinta, south
of Brisbane .
quarry supplying the Sydney market with
Other projects underway include a concrete
construction materials . Adelaide Brighton
plant at Swanbank in Brisbane and a hard
recently received Development Consent to
rock quarry at Gympie, Queensland, to
prudent level of debt;
> Maintain an investment grade rating to
optimise funding cost;
> Retain balance sheet flexibility to fund
capital projects and acquisitions; and
> Distribute surplus capital to shareholders in
an efficient manner .
Net debt at the end of the period was
$424 .8 million .
increase the sales volume limit of the hard
service the Sunshine Coast market where
When assessing capital requirements and
rock quarry from 1 .2 mtpa to 1 .6 mtpa
Adelaide Brighton already has a leadership
balance sheet risk, Adelaide Brighton also
and extend its hours of operation . The
position in concrete .
efficiency afforded by extended operating
hours, particularly in transportation outside
Financial Review
of peak hour traffic, and the increase in the
allowable annual sales volume, positions
Strong cash flow
Cash flow from operations increased by
the quarry to supply customer demand
$20 .5 million on 2017 to $244 .7 million,
for construction materials in the growing
supported by improvements to working
Sydney market .
capital management .
considers a core measure of leverage ratio .
This is the ratio of period end net debt to
12-month trailing Underlying EBITDA .
This measure compares debt levels to recent
cash generation rather than to historical
book value . As such, it offers a more
responsive measure of capital management
and better reflects the Group’s ability to
Long term diversification strategy
Improved processes and management of
service debt obligations .
The Company’s diversification program
has been underway for more than a
decade, and in the last five years, Adelaide
collections from customers resulted in a
reduction in trade debtor balances despite
higher revenue in the period .
Under this measure, net debt was 1 .2 times
12-month trailing Underlying EBITDA at
31 December 2018 . The Board considers a
Brighton invested more than $262 million
Capital expenditure of $115 million declined
leverage ratio of between 1 .0 to 2 .0 times
in acquisitions . The businesses have
$55 million compared to 2017, due to the
12-month trailing Underlying EBITDA is an
yielded synergy savings from back office,
timing of acquisition spending during the
appropriate target range, which equates
transport and materials pull through . These
year, partially offset a higher investment
to net debt to book equity range of
acquisitions have met financial targets; they
spending on development capital . In 2018,
approximately 30% to 60% .
have also diversified earnings and delivered
capital expenditure occurred on 27 projects
significant strategic benefits .
above $1 million in value, comprising stay in
Three acquisitions in 2017, in Victoria,
South Australia and the Northern Territory,
are in line with the Company’s strategy of
business capex of $55 million, development
projects of $58 million and acquisitions of
$2 million .
focussed value added vertical integration
Proceeds from the sale of assets were
in the concrete and aggregates businesses .
$5 .3 million, a decline of $12 .4 million on
The businesses, acquired at a total cost
2017, driven by the reduction in proceeds
of $85 .2 million, complement existing
from property sales . Dividend payments
Adelaide Brighton operations in these
increased by $32 .6 million over 2017 as a
markets and are meeting earnings and
result of the higher dividends declared .
strategic expectations .
The upper end of the range is within the
intermediate band for credit rating purposes
and therefore well within the investment
grade band .
The net debt to book equity gearing ratio
was 34 .1% at 31 December 2018 and
remains close to the midpoint of the target
range of 25% to 45% .
43
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Funding facilities - financial flexibility
Reconciliation of underlying profit
The Company’s low gearing, strong cash
“Underlying” measures of profit exclude significant items of revenue and expenses, such as
flow and consistent returns provide it with
the costs related to restructuring, rationalisation and acquisitions, in order to highlight the
funding flexibility .
underlying financial performance across reporting periods . Profits from the Company’s long
In August 2018, Adelaide Brighton renewed
its bank debt facilities that were to mature
term land sales program are included in underlying profit despite the timing being difficult
to predict .
in January 2019 . In addition to extending
The following table reconciles underlying earnings measures to statutory results .
the maturity of the renewed facilities to
January 2022, the facility limit was increased
from $210 million to $260 million on
similar pricing . The maturity date for the
$330 million balance of the Company’s
bank debt facilities remains unchanged at
January 2021 .
In total, Adelaide Brighton has bank debt
facilities of $590 million spread across three
of Australia’s major trading banks . The
average tenure of the facilities has increased
2018
2017 Restated
Full year ended
31 December
$ million
Statutory profit
Rationalisation
Corporate restructuring
Acquisition expenses
Fair value gain
Doubtful debts
Profit
before
Income
tax
tax
Profit
after
tax
251.0
(65.8)
185.2
-
6.9
(1.4)
-
2.6
-
(2.0)
0.4
-
(0.8)
-
4.9
(1.0)
-
1.8
Profit
before
Income
tax
255 .5
3 .3
0 .8
5 .0
(4 .5)
17 .7
tax
(72 .7)
(1 .0)
(0 .3)
-
-
(5 .3)
Profit
after
tax
182 .8
2 .3
0 .5
5 .0
(4 .5)
12 .4
from 2 .2 to 2 .4 years as a result of the
Underlying profit
259.1
(68.2)
190.9
277 .8
(79 .3)
198 .5
Doubtful debts provision
The prior year included a fair value gain
In late 2017 Adelaide Brighton became
of $4 .5 million on acquisitions during
aware of certain financial discrepancies
that period .
Business Risks and Mitigation
Adelaide Brighton’s risk management
framework, as outlined in the Corporate
Governance Statement, incorporates
effective risk management into all facets of
the business . Planning processes, including
budgets and strategic plans, incorporate
a risk management component . These are
integrated into reports to the Board and
respective Board Committees throughout
the year . The key risks to the Adelaide
Brighton Group and mitigation actions are
outlined below . The risks are not set out in
any particular order and do not comprise
every risk we encounter in conducting
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 .
facility renegotiation in 2018 .
Maturity
Limit
January 2021
January 2022
$330 million
$260 million
Finance cost and tax - higher financing costs
Net finance costs of $14 .4 million were
$2 .3 million higher than 2017 . The increase
was due to higher market interest rates and
higher average borrowings .
which relate to transactions whereby it had
been underpaid for products supplied . The
Company completed its analysis with the
assistance of forensic accountants KPMG
and recognised a provision for doubtful
debts and costs in its 2017 results . Further
costs relating to the recovery of unpaid
The effective tax rate decreased from 28 .5%
amounts have been incurred in the period of
to 26 .2% due to the higher contribution
$2 .6 million ($17 .7 million pcp inclusive of
from post-tax earnings of joint ventures
provision and costs) .
and lower non-deductible expenses
associated with acquisitions . Adelaide
Brighton continues to expect its effective
tax rate to be in the range of 27% to 28%,
although this may be lower in periods
when capital losses related to property sales
are recognised .
Dividends
The Board has declared a final ordinary
dividend of 11 .0 cents per share (12 .0 cents
2017) and a special dividend of 4 .0 cents
Rationalisation of cement production
Cement production at the Angaston site
was rationalised in 2017 . As part of the
rationalisation, employee redundancy costs
of $3 .3 million were recognised in 2017 .
Corporate restructuring costs
Redundancies and one-off employment
costs of $6 .9 million were recognised in
2018 ($0 .8 million pcp) . These costs result
from staff restructuring within the Group .
per share (4 .0 cents in 2017) . The full year
Acquisition expenses and fair value gain
ordinary dividend represents a payout ratio
A refund of acquisitions costs paid in
of 70 .2% and total dividends of 28 .0 cents
the prior year resulted in the recognition
for the 2018 year .
The record date for the final ordinary
and special dividend is 3 April 2019 with
payment on 15 April 2019 .
of $1 .4 million in the income statement
(costs of $3 .8 million pcp) . The costs were
associated with the acquisitions, including
stamp duty, legal and other consulting costs,
which will fluctuate with transaction activity .
44
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
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 requirements 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 or exceed
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 .
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 focus on improvement has delivered a reduction in total scope 1
and scope 2 emissions of 30% since 2010 .
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 .
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 fly ash and ground granulated slag, has increased .
Adelaide Brighton is also working with partners in the
development of alternate products to replace Portland cement .
The Group is progressing an assessment of the implications of climate
change in line with the recommendations released by the Task Force on
Climate-related Financial Disclosures, and will be incorporated in Adelaide
Brighton’s 2019 Sustainability Report .
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 are factors in the selection of
suitable 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 .7 million
tonnes of product imported in 2018 . 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 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 facilities are efficient and competitive . 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
Production
quality
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 .
Business continuity planning identifies risks with key equipment and
alternate strategies are developed to mitigate the risk including
holding “insurance spares” of key equipment and contractual
arrangements to supplement production where required .
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 financial disadvantaged .
(Continued next page)
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 .
45
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
Risk
Details
Mitigation
Trade credit
Contractual arrangements with customers include the provision
of short term trade credit 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 .
Fraud,
bribery and
corruption
The Group operates in an environment that exposes it to the
risk of loss from fraud, bribery and corruption . Operating in a
commercial environment with the movement of funds into and
out of the Company give rise to the risk that economic benefits
can be obtained through inappropriate acts by employees,
suppliers, customers or third parties .
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 .
The Group’s Code of Conduct outlines the key principles that governs
the Company’s behaviour and actions which make clear there is zero
tolerance for practises considered as bribery, fraud or corruption .
Employees and contractors are required to adhere to this code as
part of their ongoing employment .
Process controls are periodically reviewed to incorporate enhanced
fraud, bribery and corruption prevention measures, which are
tested through the internal audit program .
Dividends paid or declared by
Likely developments and expected
Import material costs are anticipated to
the Company
results of operations
During the 2018 financial year, the
Adelaide Brighton continues to implement
following dividends were paid:
its successful and relevant long term
increase circa $10 million, as a result of
contractual price increases and a forecast
lower value of the Australian Dollar against
other major trading currencies .
> A final dividend in respect of the year ended
31 December 2017 of 16 cents per share
(fully franked) was paid on 13 April 2018 .
This dividend totalled $104,043,599; and
> An interim dividend in respect of the year
ended 31 December 2018 of 13 cents per
strategy for the growth of shareholder
value through cost reduction and
Capital expenditure is anticipated to be
operational improvement; growth of the
between $100 million and $120 million
lime business; and focussed and relevant
in 2019 .
vertical integration, to support growth in
shareholder returns .
The Company will continue to pursue
value accretive acquisitions in line with
share (fully franked) was paid on 11 October
In 2019 Adelaide Brighton expects overall
our strategy .
2018 . This dividend totalled $84,579,379 .
demand for construction materials to be
Since the end of the financial year the
Directors have approved the payment of a
final dividend of 15 .0 cents per share (fully
stable . Residential demand is anticipated
to decline, largely offset by growth in non-
residential, engineering and infrastructure .
franked), comprising an ordinary dividend of
Sales volumes of cement are anticipated
11 .0 cents per share and a special dividend
to be stable . Demand in Western Australia
of 4 .0 cents per share . The final dividend is
and the Northern Territory is expected to
to be paid on 15 April 2019 .
be in line with 2018 . Higher demand from
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
No matter or circumstance has arisen since
31 December 2018 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 .
projects and mining will support volumes
in South Australia . While variation in sector
demand is likely, overall, Adelaide Brighton’s
east coast markets are anticipated to remain
at healthy levels in 2019 .
Lime sales volume is expected to be flat
in 2019, while prices are anticipated to
increase under contractual provisions in
supply contracts . Import pressures are
expected to continue at similar levels .
Adelaide Brighton announced price
increases for all products across its product
range effective 1 April 2019 . The demand
environment is anticipated to be supportive
of these increases .
The joint venture operations in Australia
should continue to enjoy healthy demand
and rising prices, although the competitive
landscape in Queensland could impact
Sunstate Cement .
Proceeds from the sale of land in the next
10 years are expected to realise in excess of
$100 million, however no significant land
sales are anticipated in 2019 .
Adelaide Brighton aims to optimise
shareholder returns by maintaining an
efficient balance sheet, while retaining
the flexibility to fund long term growth
opportunities . Prudent capital management
will remain an important part of
this approach .
Environmental performance
The Group’s operations are subject to
various Commonwealth, State and Territory
environmental regulation .
Environmental performance is monitored
by each business division and site, and
information about the Group’s performance
is reported to and reviewed by the Group’s
senior management, the Board’s Safety,
Health, Environment and Community
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 .
46
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Group entities respond as required to
Hy-Tec Industries (Queensland) Pty Ltd
requests made by regulatory authorities,
(Hy-Tec) self-reported to the Queensland
including requests for information and
Department of Natural Resources and Mines
Directors’ interests
site inspections .
During 2018, Group entities were
issued with regulatory notices issued by
government authorities responsible for
planning and environment matters . Group
companies responded to regulatory notices
(DR&M) that Hy-Tec’s concrete business in
Mundubbera had been extracting sand from
the Burnett River without a Quarry Material
Allocation Notice . DR&M has foreshadowed
it will investigate the matter, and Hy-Tec will
co-operate with the investigation .
as required and addressed issues raised by
Adelaide Brighton Cement Limited (ABCL)
regulatory authorities .
received from the South Australian
Z Todorcevski
RD Barro
VA Guthrie
KB Scott-Mackenzie
AM Tansey
GR Tarrant
M Brydon
Ordinary shares
20,000
279,178,329
-
5,000
10,000
-
53,887
Adelaide Brighton Cement Ltd (ABCL)
notified the NSW Environment Protection
Authority (NSW EPA) in August 2018 of
non-friable asbestos fragments which had
been identified in what was certified to
ABCL as Virgin Excavated Natural Material
Department for Environment and Water a
penalty of $136,059 .66 for taking 32,637 kL
of water in excess of its 102,200 kL
allocation of water at ABCL’s Penrice quarry
for the year ended 30 June 2018 . ABCL has
paid the penalty .
Full details of the interests in share capital of
Directors of the Company are set out in the
Remuneration Report on pages 49 to 71 of
this report .
Director profiles
delivered to the Morgan Ash Vales Point site .
Further details of the Group’s environmental
The NSW EPA is investigating .
performance will be published in the 2018
Sustainability Report .
Information relating to Directors’
qualifications, experience and special
responsibilities are set out on page 36
of the Annual Report .
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 and executive
remuneration
Director
Board Meetings
Audit, Risk &
People and
Safety, Health,
Compliance
Committee
Culture
Committee 1
Environment
& Community
Committee 2
Z Todorcevski 3
RD Barro4
VA Guthrie5
KB Scott-Mackenzie 6
AM Tansey 7
GR Tarrant 8
LV Hosking9
GF Pettigrew 10
M Brydon
A
13
12
12
12
12
12
4
7
13
H
13
13
13
13
13
13
6
7
13
A
4
-
-
4
2
-
2
-
A Number of meetings attended.
H Number of meetings held during period of office.
H
4
-
-
4
2
-
2
-
A
2
-
2
4
4
-
2
-
H
2
-
2
4
4
-
2
-
A
-
2
1
2
-
-
1
-
H
-
2
1
2
-
-
1
-
1 People and Culture Committee was formerly named the Nomination, Remuneration and Governance Committee .
Change of name effective 20 November 2018 .
2 Safety, Health, Environment and Community Committee formerly named Safety, Health and Environment
Committee . Change of name effective 26 February 2019 .
3 With effect from 4 July 2018, Mr Todorcevski ceased to be a member of the People and Culture Committee .
4 At the request of the Board, Mr Barro excused himself from a meeting when the Board discussed matters on
which he may have had a conflict .
5 Dr Guthrie was appointed a Director on 8 February 2018; Chairman of the People and Culture Committee on 16
May 2018 and member of the Audit, Risk and Compliance Committee on 4 July 2018 . Due to a pre-appointment
commitment, Dr Guthrie was unable to attend one meeting .
6 Mr Scott-Mackenzie was out of telecommunications range at the time an unplanned Board meeting was
convened at short notice .
7 Ms Tansey had previously informed the Chairman and Directors that she was unable to attend a meeting due to a
prior commitment overseas .
8 Mr Tarrant was appointed a Director on 8 February 2018 and a member of the Audit, Risk and Compliance
Committee on 4 July 2018 . At the request of the Board, Mr Tarrant excused himself from a meeting when the
Board discussed matters on which he may have had a conflict .
9 Mr Hosking retired as a Director on 16 May 2018 . At the request of other Directors, Mr Hosking did not attend
two meetings, excusing himself from the Board’s discussion on Chairman transition matters .
10 Mr Pettigrew retired as a Director on 17 May 2018 .
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 49 to 71
of this report .
Company Secretaries
The Company’s principal Company Secretary
is Marcus Clayton, who has been employed
by the Company in the two separate offices
of General Counsel and Company Secretary
since 24 February 2003 . He is a legal
practitioner admitted in South Australia
in 1987 .
Two other employees of the Company
also held the office of Company Secretary
to assist with secretarial duties should the
principal Company Secretary be absent:
the Company’s former Chief Financial
Officer, Michael Kelly, a Certified Practising
Accountant who had been a Company
Secretary since 23 November 2010 (resigned
on 24 September 2018) and the Group’s
Corporate Affairs Adviser, Luba Alexander,
who has been a Company Secretary since
22 March 2001 .
47
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Indemnification and insurance
Proceedings on behalf of
Rounding off
of officers
the Company
The Company is of a kind referred to in
Rule 9 of the Company’s constitution
No person has applied for leave of the
ASIC Corporations (Rounding in Financial/
provides that the Company indemnifies each
Court to bring proceedings on behalf of the
Directors’ Reports) Instrument 2016/191
person who is or who has been an “officer”
Company or to intervene in any proceedings
relating to the “rounding off” of amounts
of the Company on a full indemnity basis
to which the Company is a party for the
in the Directors’ report . In accordance with
and to the full extent permitted by law,
purpose of taking responsibility on behalf
that instrument, amounts in the financial
against liabilities incurred by that person in
of the Company for all or any part of those
report and Directors’ report have been
their capacity as an officer of the Company
proceedings . The Company was not a party
rounded off to the nearest one hundred
or of a related body corporate .
to any such proceedings during the year .
thousand dollars, unless otherwise stated .
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
Non-audit services
Shares under option
The Company may decide to employ the
Unissued ordinary shares under option
auditor on assignments additional to their
relate to Awards associated with the
statutory audit duties where the auditor’s
Company’s Executive Performance Share
experience and expertise with the Company
Plan . Outstanding Awards at the date of this
and the Group are important .
report 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 30 to the Financial
Statements on page 116 of this report .
The Board of Directors has considered
the position and, in accordance with the
advice received from the Audit, Risk and
Compliance Committee, is satisfied that
the provision of the non-audit services is
Date Awards
Expiry
granted
date
Number
of Awards
1 January 2015
30 September
577,383
1 January 2016
1 January 2017
1 January 2018
2019
30 September
2020
30 September
2021
30 September
2022
518,972
440,054
142,357
1,678,766
liabilities incurred by the person as an officer
compatible with the general standard of
Total
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
The exercise price for these Awards is nil .
Further details of Awards are set out in
Note 26 and the Remuneration Report .
Note 30, did not compromise the
auditor’s independence requirements
Registered office
of the Corporations Act 2001 for the
The registered office of the Company is
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
Level 1, 157 Grenfell Street, Adelaide,
South Australia 5000 .
Corporate governance statement
The corporate governance statement is
available on the Adelaide Brighton Limited
principles relating to auditor independence
website and may be accessed via the
as set out in APES 110 Code of Ethics for
following URL:
Professional Accountants .
Auditor’s independence declaration
A copy of the auditor’s independence
declaration as required under section 307C
of the Corporations Act 2001 is set out on
page 117 .
http://adbri .com .au/
ourresponsibilities#governance-exp
Signed in accordance with a resolution
of the Directors
Zlatko Todorcevski
Chairman
Dated 19 March 2019
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 2018
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
the constitution) against liabilities incurred
by the officer in his or her capacity as an
officer of the Company or of a related body
corporate, including liability for negligence
or for reasonable costs and expenses
incurred in defending proceedings, whether
civil or criminal .
During the year the Company paid the
premiums in respect of Directors’ and
Officers’ Liability Insurance to cover the
Directors and Secretaries of the Company
and its subsidiaries, and the General
Managers of each of the divisions of
the Group, for the period 1 May 2018
to 30 April 2019 . Due to confidentiality
obligations under that policy, the premium
payable and further details in respect of
the nature of the liabilities insured against
cannot be disclosed .
48
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Remuneration report
Dear Shareholders
On behalf of the Board and as Chair of the People and Culture Committee, I am pleased to present the Adelaide Brighton
2018 Remuneration Report . I would like to take this opportunity to thank the previous Chair, Arlene Tansey, for her
leadership of the People and Culture Committee for the preceding five years and congratulate her on her appointment
as the Chair of the Audit Risk and Compliance Committee .
This year has been a year of change and renewal in both the Board and the executive team .
Board changes
As foreshadowed, former Chairman, Mr Leslie Hosking, retired as a Director of the Company and Mr Zlatko Todorcevski
stepped up from Chairman Elect to Chairman to take leadership of the Board at the Company’s Annual General Meeting
on 16 May 2018 . Mr Hosking served as a Director for 15 years and as Chairman for the last seven years .
Consistent with the letter to shareholders in April 2018, longstanding Director Mr Graeme Pettigrew retired at the
conclusion of the Company’s Annual General Meeting on 17 May 2018 after nearly 14 years’ service as a Director .
The Board thank both Mr Hosking and Mr Pettigrew for their committment and years of service to the Company .
Continuing the Board’s renewal program and taking into consideration the Board skills matrix and matching those
skills to our strategic plans, the Board was pleased to announce the appointment of two new Directors in 2018 .
In February 2018, Mr Geoff Tarrant and I were appointed non-executive Directors . 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 . I bring more than 30 years’
experience in mining and resources to the Board and I am considered an independent Director . Consistent with the
ASX Corporate Governance Council’s Principles and Recommendations, a majority of the Board remains independent .
Key Management Personnel changes in 2018
CEO succession
On 17 May 2018 the Company announced that Martin Brydon, CEO and Managing Director, advised the Board of his
intention to retire . To allow for timely succession and handover to the incoming CEO, Mr Brydon will retire no later than
31 March 2019 after more than 30 years of service to the Company . He is leaving the Company in excellent condition
with total shareholder returns over the period from 2014 to 2018 of 48 .2% and the share price of the Company having
increased by 17 .1% . The Board commends him, and is grateful for, his dedication and service to the Company .
Details of Mr Brydon’s arrangements in relation to his retirement are set out in Section 5 of this Remuneration Report .
Following the announcement of Mr Brydon’s retirement, the Board undertook an extensive search process to find a high
calibre executive to lead Adelaide Brighton through its next phase of growth . On 18 October 2018 the Board announced
the appointment of Nick Miller as incoming CEO effective from 30 January 2019 . Mr Miller is a high calibre and experienced
Managing Director and CEO, including Managing Director and Chief Executive Officer Fulton Hogan from 2010 to 2017,
and more recently at Broadspectrum (a subsidiary of Ferrovial Group) who operate within the civil construction, major
project and asset management industries . Consistent with the Company’s past practice, Mr Miller has not been appointed
to the Board in the first instance, in order to enable him to focus on the business operations . The Board will give
consideration to his appointment as Managing Director in due course .
Details of Mr Miller’s remuneration package are set out in Section 5 of this Remuneration Report .
49
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
Other executive changes
Adelaide Brighton announced the appointment of Theresa Mlikota as its new Chief Financial Officer (CFO) on
15 January 2019 with a commencement date no later than 15 April 2019 . Ms Mlikota is a finance executive with
30 years’ experience in the resources and construction sectors . Ms Mlikota was previously CFO of Ausdrill Limited
and prior to that held the role of CFO with Fulton Hogan, Thiess, Macmahon Holdings and Barminco Ltd .
In September 2018, following the departure of George Agriogiannis, the Company promoted Mr Brett Brown to the
position of Executive General Manager, Concrete and Aggregates . Mr Brown joined Adelaide Brighton through our
acquisition of Direct Mix Concrete and Southern Quarries in 2014 . He has over 20 years’ experience in the construction
materials industry having held a range of management roles with Hanson and as General Manager of Direct Mix
and Southern Quarries before its acquisition by Adelaide Brighton .
2018 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 2018, Adelaide Brighton delivered record revenue of $1 .63 billion driven by strong east coast demand, improved
pricing and the contribution of acquisitions from the concrete and aggregates businesses completed in the prior year .
Underlying profit excluding property was stable at $190 .1 million as a result of improved pricing and the contribution from
acquisition offset by higher import costs and a number of one-offs . Reported profit increased 1 .4% to $185 .3 million .
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 performance of these operations .
Adelaide Brighton continues to generate strong cash flows which allows the Company to invest in growth projects and pay
increased dividends while retaining a strong balance sheet with leverage toward the bottom end of the Board’s target range .
We were pleased our performance has enabled us to pay shareholders fully franked ordinary dividends for the 2018 year
of 20 .0 cents per share and special dividends of 8 .0 cents per share, bringing total dividends for 2018 to 28 .0 cents
per share fully franked - an increase of 14% on 2017 .
Remuneration in 2018
Our remuneration framework incorporates robust performance measures linked to our strategic plan and delivers
remuneration outcomes that reflect our business performance over both 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 . Nevertheless,
we are always reviewing our remuneration framework in light of stakeholder consultations .
Fixed annual remuneration
The 2018 remuneration increases across the Executive KMP team averaged 2 .8 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 .
Fees for the Chairman and non-executive Directors are reviewed annually and considered against peer companies .
Following re-alignment of non-executive Director fees during 2017, as foreshadowed, there was no increase in
the Chairman and non-executive Director fees in 2018 .
50
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
Short Term Incentive
As Mr Brydon had announced his intention to retire in May 2018, the Board adjusted Mr Brydon’s short term incentive
targets to focus on a smooth transition to a new Chief Executive . This included assisting with investor and employee
engagement around the change of leadership . Mr Brydon successfully achieved the agreed transition objectives and
was awarded his full (100%) 2018 STI .
For other KMP, short term incentive awards ranged from 13 .6% to 24 .1% of their potential maximum taking into account
the Board’s assessment of non-financial objectives and achievement of divisional financial targets . While Adelaide Brighton
delivered a stable underlying performance on 2017, the Group financial component did not meet target, which resulted
in no payment for the Group financial components of the short term incentive .
Long Term Incentive
Consistent with strong Company performance over the past four years, the Board is pleased to advise that the Company’s
2014 long term incentive Award was tested during 2018 and vested at 50% . The relative total shareholder return (TSR)
performance condition exceeded the 79th percentile and vested at 100% . The compound annual earnings per share (EPS)
growth rate over the measurement period was 1 .3% which was less than the minimum EPS target of 5 .0% and consequently
the EPS component did not vest . These LTI outcomes are consistent with delivery of long term value to shareholders with
the Company achieving a TSR of 106 .9% over the measurement period .
Director share ownership
To enhance Board alignment with shareholder interests, the Board introduced a non-executive Director Minimum
Shareholding Policy during 2018 . The Minimum Shareholding Policy was adopted in order to encourage non-executive
Directors to accumulate and maintain a meaningful level of ownership in Adelaide Brighton .
During their tenure on the Board, non-executive Directors are expected to acquire (within five years of their appointment)
a shareholding equivalent in value to one year’s base fees (Minimum Shareholding) and thereafter to maintain at least
that level of shareholding throughout their tenure . Non-executive Directors who are in office when this policy was
adopted will have five years from July 2018 to achieve the Minimum Shareholding . Further details of non-executive
Director shareholdings are set out in section 8 .3 .
Conclusion
Remuneration outcomes reflect the level of performance achieved against our applicable targets during 2018 .
We have prepared the 2018 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
2019 Annual General Meeting .
Vanessa Guthrie
Chairman of People and Culture Committee
51
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. 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 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 CEO succession arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5 .1
5 .2
5 .3
Outgoing CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Incoming CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Other Executive arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6 Executive Service Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7 Non-executive Directors’ fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7 .1
7 .2
Non-Executive Directors’ minimum shareholding requirement . . . . . . . . . . . . . . . . . 67
Policy and approach to setting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8 Key Management Personnel disclosure tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8 .1
8 .2
8 .3
Non-executive Directors’ statutory remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Executive statutory remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Equity holdings of Key Management Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
52
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. 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 2018 . The Report outlines the
Name
Role
Current Executives
M Brydon1
CEO and Managing Director (CEO & MD)
remuneration arrangements in place for the
BW Brown 2
Executive General Manager, Concrete and Aggregates
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 .
AL Dell
BD Lemmon
Former Executives
Executive General Manager, Concrete Products
Executive General Manager, Cement and Lime
M Kelly 3
Chief Financial Officer (CFO)
G Agriogiannis 4
Executive General Manager, Concrete and Aggregates
The KMP of Adelaide Brighton comprise all
Directors and those Executives who have
authority and responsibility for the planning,
Current Directors
Z Todorcevski5
RD Barro
directing and controlling of the activities of
VA Guthrie6
Chairman
Non-executive Director
Non-executive Director
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
2018 financial year are:
KB Scott-Mackenzie
Non-executive Director
AM Tansey
GR Tarrant 6
Former Directors
LV Hosking7
GF Pettigrew 8
Non-executive Director
Non-executive Director
Former Chairman
Former non-executive Director
1 Mr Brydon has announced his retirement effective
no later than 31 March 2019 . Mr Brydon ceased to
be a Director on 30 January 2019 .
2 Appointed 17 September 2018 .
3 Resigned effective 3 November 2018 .
4 Resigned effective 11 December 2018 .
5 Appointed Chairman on 16 May 2018 .
6 Appointed on 8 February 2018 .
7 Retired on 16 May 2018 .
8 Retired on 17 May 2018 .
1 Executive remuneration policy
and framework
1.1
Remuneration policy
> 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
The Board ensures remuneration policies
are clearly aligned with the Group strategy,
been paid .
which is focused on maintaining and
growing long term shareholder value . In
determining executive remuneration, the
Board has adopted a policy that aims to:
> Be competitive in the market place in which
the Group operates in order to attract,
reward, motivate and retain a highly capable
executive team;
The governance of remuneration outcomes
is a key focus of the Board and the People
and Culture (PC) Committee . Remuneration
policies are regularly reviewed to ensure that
remuneration for Executives continue to
remain aligned with Company performance .
53
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
1.2
Remuneration framework
In order to meet the aims of our remuneration policy, our executive remuneration framework
consists of the following three components:
> Fixed annual remuneration
> An annual short term incentive
> A long term incentive
Adelaide Brighton’s mix of fixed and at risk components for the Executives disclosed in this
Report, as a percentage of potential maximum total annual remuneration is shown below .
CEO
Fixed annual
remuneration
Short term
incentive
Long term
incentive
331/3%
162/3%
162/3%
331/3%
Cash 50%
Equity 50%
Other key management personnel (average)
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 2018. The table below provides a summary of our remuneration framework for the 2018 financial year, and illustrates the way in which each element of
remuneration has been structured to support our Group business objectives and to align with the generation of shareholder wealth .
Component
Performance measure
‘At risk’ weight
Strategic objective / performance link
Fixed Annual
Remuneration (FAR)
Salary and other benefits
(including statutory
superannuation)
Considerations
(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
Annual Short Term
Incentive (STI)
Cash
+
Deferred rights to receive
fully paid ordinary shares
Financial targets (80%) -
CEO and CFO - 80% relating
to Group NPAT
Other Executives - 60%
relating to Group NPAT and
20% relating to Divisional EBIT
Non-financial targets (20%)
Relating to personal performance
against individual objectives
Maximum:
60%-80% of FAR
(100% of FAR for CEO)
Long Term Incentive (LTI)
Rights to receive fully paid
ordinary shares
Earnings Per Share (EPS)
(50%)
and
Maximum:
CEO
100% of FAR
Total Shareholder Return (TSR)
(50%)
Other executives
40%-70% of FAR
Measured over a four year
performance period
>
>
>
>
>
Alignment to Group budget through
NPAT and Divisional budget through
Divisional EBIT performance
Non-financial targets drive leadership
performance and behaviours consistent
with achieving the Group’s short and
long term objectives and commitments
including safety, strategic plans, individual
business targets and other specific personal
or non-financial performance objectives
which align the interest of Company
executives and shareholders
Ensure strong link with the creation of
long term shareholder value to encourage
the achievement of growth of the
Company’s business
EPS was chosen as a
performance hurdle as it:
- Links executive reward to a fundamental
indicator of financial performance; and
- Links directly to the Group’s long term
objectives of maintaining and improving
earnings
TSR was chosen because it:
- Ensures alignment between comparative
shareholder return and reward for the
executive; and
- Provides a relative, external market
performance measure having regard to
a peer group of companies (Comparator
Group) with which the Group competes
for capital, customers and talent
Total remuneration
The total remuneration mix is designed to attract, retain and motivate a highly capable executive team,
encourage and drive leadership performance that reinforces the Group’s short and long term strategic
objectives and provides a common interest between executives and shareholders by linking the rewards
that accrue to executives to the creation of value for shareholders
55
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. 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 2018
Consultation with shareholders
and other stakeholders
>
>
>
Remuneration consultants and
other external advisors
Provide independent advice, information
and recommendations relevant to
remuneration decisions
In performing its duties and making
recommendations to the Board, the
Chairman of the PC 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 PC Committee process
Board
The Board approves:
>
The overall remuneration policy
>
>
Non-executive Director remuneration
and senior executive remuneration; and
The remuneration of the CEO, including
his participation in the short term and
long term incentive schemes
People and Culture (PC) Committee
The PC 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 PC Committee
Obtains remuneration information from
external advisors to assist the PC Committee
(i .e . factual information, legal advice,
accounting advice, tax advice)
The PC Committee seeks advice from external remuneration consultants on an as
required basis . The PC Committee did not obtain remuneration recommendations during
2018 . Notwithstanding this, the Board has considered information on the relativity of
KMP remuneration in the context of benchmarking reports and market data across
comparable Companies .
The Directors are pleased to present
Adelaide Brighton Limited’s financial
performance for 2018 .
Adelaide Brighton achieved record revenue
of $1,630 .6 million in 2018, an increase of
4 .6% on the prior year . The growth was
the result of realising the benefits from the
Group’s vertical integration strategy, with
contribution from acquisitions of concrete
and aggregate businesses in 2017, in
addition to growth in the heritage business
due to strong demand in east coast markets
supporting price and volumes .
Reported NPAT of $185 .3 million was up
1 .4%, although both years have been
impacted by a number of significant items
and changes in earnings from property .
Excluding property, reported NPAT of
$184 .4 million was 5 .7% higher than 2017 .
Underlying NPAT (excluding property) of
$190 .1 million was in line with the prior year
as a result of:
> Cement pricing and volumes improved
across most markets, however the average
price declined as a result of sales mix,
with margins under pressure from higher
shipping and material costs, in addition to
the cost of the temporary failure of a mill
bearing at the Birkenhead plant .
> Lime volumes were stable, although pricing
was subdued and costs increased following
the renewal of a contract for coal resulting
in higher energy costs .
> Earnings from concrete and aggregates
benefitted from higher volumes and price,
in addition to the benefit of a full year of
earnings from acquisitions made in 2017 .
> Joint venture earnings improved as a result
of the strong markets on the east coast .
Adelaide Brighton’s business model
has delivered robust earnings over a
number of years, despite challenging
market conditions at times .
Table 2
Revenue
EBITDA
EBIT
NPAT
2018
$m
Restated 1
2017
Variance
$m
%
2018
$m
Restated 1
2017
Variance
$m
%
Reported (excluding property)
Underlying (excluding property)
1,630 .6
1,559 .6
351 .5
339 .0
264 .1
256 .5
184 .4
174 .4
4 .6
3 .7
3 .0
5 .7
1,630 .6
1,559 .6
359 .6
361 .3
272 .2
278 .8
190 .1
190 .0
4 .6
(0 .5)
(2 .4)
0 .1
1 Restated numbers are due to a change in accounting policy on adoption of AASB15 Revenue from Contracts with
Customers applied from 1 January 2018 . As a result of the changes, prior year financial statements have been restated .
56
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
2.2
Long term fi nancial highlights
The table below provides an overall view of the Company’s fi nancial performance and operating
As can be seen in the graph below the
cash fl ow over the past fi ve fi nancial years to 31 December 2018 .
NPAT (underlying excluding property)
Table 3 - Financial performance and shareholders’ wealth improvement from 2014 to 2018
has increased from $159 .6 million to
$190 .1 million over the last fi ve years
representing compound annual growth rate
(CAGR) of 4 .5% .
This growth has been delivered as a
result of the Company’s long term
strategy of cost reduction and continuous
Financial year ended
31 December
Sales
NPAT
Reported
Restated 1
2014 2015 2016 2017 2018
2014
2016
2017
2015
2018
CAGR 2
%
$m
1,335 .5 1,411 .4 1,393 .8 1,559 .6 1630 .6
5 .1
Excluding
property $m 172 .0 173 .0 177 .8 174 .4 184 .4
0 .6
% change
14 .5
2 .8
(1 .9)
5 .7
1 .8
improvement; growth in the lime business
NPAT Underlying
Excluding
and vertical integration of the construction
materials business .
property $m 159 .6 174 .2 179 .1 190 .0 190 .1
4 .5
% change
3 .1
9 .1
2 .8
6 .1
0 .1
$m
200
180
160
140
120
100
Net profi t after tax (reported
excluding property) vs net profi t after tax
(underlying excluding property)
Restated numbers are due to a change in accounting
policy on adoption of AASB15 Revenue from
Contracts with Customers applied from 1 January 2018
Share price 3
$/share
3 .52
4 .75
5 .43
6 .52
4 .27
4 .9
Dividends
Franking
Cents/share 17 .0 27 .0 4 28 .04 24 .55
28 .0 4 13 .3
%
100
100
100
100
100
Operating cash fl ow $m
194 .0 229 .9 248 .4 224 .2 244 .7
Earnings per share Cents
26 .9 32 .0 28 .7 28 .0 28 .5
TSR - 1 year
Total Shareholder
Return
%
%
0 .5 42 .6 20 .2 24 .6
(30 .2)
48 .2
n
o
t
h
g
i
r
B
1 Restated numbers are due to a change in accounting policy on adoption of AASB15 Revenue from Contracts with
Customers applied from 1 January 2018 . As a result of the changes, prior year fi nancial statements have been restated .
i
e
d
a
e
d
A
l
:
e
c
r
u
o
S
2014*
2015*
2016*
2017*
2018
NPAT (reported excluding property)
NPAT (underlying excluding property)
2 Compound Annual Growth Rate .
3 At 31 December, or last trading day of the year if not 31 December .
4 Includes 8 .0 cents total special dividend .
5 Includes 4 .0 cents special dividend .
Notwithstanding the broader decline in the construction materials section from mid 2018,
as shown in the graph below, Adelaide Brighton’s TSR growth over the last fi ve years has
outperformed the S&P/ASX200 Accumulation Index .
The TSR achieved over the last fi ve
years of 48 .2% has outperformed the
S&P/ASX200 Accumulation Index, including
our Comparator Group1 . This is due to a
sustained year on year improvement in share
price and increased dividends . TSR over
the last 12 months was (30 .2%), refl ecting
a decline in share price partially offset
by increased ordinary dividends and the
payment of special dividends .
1 Comparator Group is the companies in the S&P/
ASX200 Accumulation Index, excluding all GICS
fi nancial companies and selected resources companies .
%
160
140
120
100
80
60
40
20
0
-20
ABC total shareholder returns (share price + dividends reinvested)
and S&P/ASX200 accumulation index returns
d
t
L
y
t
P
s
r
o
s
i
v
d
A
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s
r
i
F
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S
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9
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ABC TSR S&P/ASX 200 Accumulation Index
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
57
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
2018 . Company performance across key indicators is reflected in the remuneration outcomes during the year .
Mr Brydon’s remuneration arrangements were subject to his Retirement Deed and are outlined in Section 5 .1 of this Remuneration Report .
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 are NPAT
and EBIT for Divisions . Actual financial metrics are
compared to budget . 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 and creating 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 delivery against our
strategic objectives .
Fundamental to this assessment is the setting of
business initiatives to set the Company up for future
development and growth beyond the 12 month
financial assessment of the STI .
A range of metrics focused on safety, engagement,
building capability, retaining Company knowledge
and diversity with specific metrics for:
> Proactive safety behaviours
> Enhancement of 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 .
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58
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
Performance assessment
Result
Target included a financial stretch The 2018 budget was set at 5 .3% above 2017 actual .
This was a challenging target given the subdued market conditions in Western Australia and
the Northern Territory and higher import costs . For KMP to achieve the maximum outcome
under the Group financial performance measure, 2018 NPAT must have exceeded 2017
NPAT by 16%, highlighting the significant stretch component of the incentive .
Group result In its assessment of financial performance,
the Board excluded property profits and other significant
items (restructuring and transaction costs) . Group financial
performance was assessed at less than 95% of budget
resulting in the Group financial component not being met .
Strong underlying performance The Board’s view is that the underlying performance
of the Group continues to be strong with contribution from recent acquisitions in the
concrete and aggregate division highlighting the benefits of the Company’s vertical
integration strategy .
Divisional results Concrete and Aggregates Division financial
performance was greater than 95% of budget, resulting in
52 .3% achievement of the concrete and aggregates financial
component . Cement and Lime and Concrete Products Divisions
financial performance was less than 95% of budget, resulting in
the financial component for these Divisions not being achieved .
Acquisitions Position the Company to take advantage of potential “bolt-on” and
transformational acquisitions to ensure readiness when the opportunity becomes available .
The management team progressed acquisition opportunities which culminated in the
acquisition of the ResourceCo concrete business in South Australia .
Disruptive strategies and technologies A program of work was undertaken to
increase awareness of disruptive strategies and technologies initiating actions to
mitigate the potential impacts .
Community engagement Establishment of a framework to guide community
engagement initiatives across the business, including a diagnostic assessment of
current practice, risks and emerging trends and challenges .
60 -70% achievement of strategic non-financial objectives .
Enhanced safety performance Adelaide Brighton Total Recordable Injury
Frequency Rate (TRIFR) at 31 December 2018 was 26 .0, a reduction of 33% .
60- 85% achievement of People non-financial objectives .
Proactive safety behaviours Improvement in proactive safety behaviours evidenced
by the increase in reporting in 2018 - near miss and hazard reporting increased by 78%
compared to 2017 . The CEO and Managing Director and management demonstrated
their visible and active leadership through participation in site safety committee meetings
throughout the Company’s Australia wide operations .
Development of capability Mentoring program embedded across the business to
develop, inspire and support Adelaide Brighton’s future leaders . Investment in frontline
management has enabled more than 50% of frontline leaders to complete FastLead
training building confidence, capability and an openness to learning .
Deepening succession pools and identification of future executive talent The
CEO and Managing Director and management exceeded targets set in respect of internal
succession plans for Executive General managers, General managers and leadership roles .
Diverse candidate pools Initiatives to increase the number of female applicants applying
for typically male dominated roles resulted in 83 .9% of roles advertised in 2018 attracting
female applicants, more than a 17% increase compared to 2017 .
Organisation restructure Concrete Products Division restructure resulted in an improvement
in the alignment of sales, logistics and customer service workflows delivering annual savings .
40-80% achievement of Operational Excellence
non-financial objectives .
Import strategy Successful completion of a comprehensive search for the supply of
cementitious materials .
Utilisation of alternative fuel Increased utilisation of refuse derived fuel
at the Birkenhead plant to replace natural gas .
59
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. 3.1.2
Short Term Incentive - financial outcomes
Although Adelaide Brighton delivered a stable underlying financial performance in 2018, the
Group financial component did not meet target resulting in no payment for the Group financial
component of the short term incentive .
The overall result was short term incentives for all KMP (other than Mr Brydon) vesting in
the range of 13 .6% to 24 .1% of their potential maximum taking into account the Board’s
assessment of non-financial objectives and achievement of divisional financial targets .
The Concrete and Aggregates Division financial performance was greater than 95% of target,
resulting in 52 .3% 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 .
Table 4
Revenue
EBITDA
EBIT
NPAT
Underlying (excluding property)
2018
$m
Restated 1
2017
$m
1,630 .6
1,559 .6
359 .6
272 .2
190 .1
361 .3
278 .8
190 .0
Variance
%
5 .2
(0 .5)
(2 .4)
0 .1
1 Restated numbers are due to a change in accounting policy on adoption of AASB15 Revenue from Contracts with
Customers applied from 1 January 2018 . As a result of the changes, prior year financial statements have been restated .
The short term incentive payments shown in the table below reflect the performance achieved
and amounts payable to Executives for the 2018 financial year .
Table 5
For the year ended
Maximum
Actual STI
STI actual 2
Cash STI
Deferred STI
Deferred STI
Deferred STI
31 Dec 2018
potential STI
opportunity 1
as % of STI
maximum
(2 years)
(3 years)
(Total)
Current Executives
BW Brown3
AL Dell
BD Lemmon
Former Executives4
M Kelly
G Agriogiannis
$
105,000
262,230
436,080
525,378
420,707
%
24 .1
16 .4
13 .6
-
-
$
25,260
43,006
59,307
-
-
$
12,630
21,503
29,654
-
-
$
6,315
10,752
14,827
-
-
$
6,315
10,751
14,826
-
-
$
12,630
21,503
29,653
-
-
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 2018 STI was determined in conjunction with the finalisation of 2018 financial results .
3 Mr Brown was appointed a KMP on 17 September 2018 and was eligible for prorata KMP STI in 2018 from the date of his appointment .
4 The previous Chief Financial Officer Michael Kelly and Executive General Manager Concrete and Aggregates George Agriogiannis resigned effective 3 November 2018 and
11 December 2018 respectively . On resignation their entitlement to the 2018 STI was forfeited with the Board deciding not to exercise discretion in relation to payment of STI and
no amounts were payable .
Mr Brydon’s 2018 STI was treated in accordance with the terms set out in his Retirement Deed, with further detail set out in section 5 .1 of this
Remuneration Report .
60
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
3.2
Long Term Incentive
3.2.1
Long Term Incentive - outcomes
During 2018, the 2014 Award was tested for earliest exercise in May 2018 and vested at 50 .0%:
> The total shareholder return component vested at 100 .0% with the Company achieving a Total
Shareholder Return of 106 .9% being the 79th percentile of the Comparator Group .
> The compound annual EPS growth rate over the 2014 to 2017 fi nancial period was 1 .3% which
was less than the minimum EPS target of 5 .0% . Therefore, the EPS component did not vest .
The chart below illustrates Adelaide Brighton’s total shareholder return over the measurement
period for the 2014 Award . The Total Shareholder Return of 106 .9% resulted from share price
growth and payment of ordinary and special dividends totalling 109 .0 cents fully franked over
the period .
Index=100
240
220
200
180
160
140
120
100
80
ABC shareholder returns - share price growth and TSR
(October 2013 to December 2017)
Source: ASX, First Advisors Pty Ltd
Dividends
= 36 .8%
Share
price
growth
= 70 .1%
ABC TSR
= 106 .9%
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ABC share price growth ABC TSR (share price growth + dividends reinvested)
Details of the movement in Awards held by Executives during the 2018 fi nancial year are set out below .
Table 6
For the year ended
Number held
Number
Number
Number lapsed
Number held
31 Dec 2018
at 1 Jan 2018
granted during
the year 1
exercised /
vested during
the year 2
/ forfeited
during the
year 3
at 31 Dec
2018 4
Current Executives
M Brydon
BW Brown7
AL Dell
BD Lemmon
Former Executives
M Kelly 8
G Agriogiannis8
1,334,040
-
117,995
199,662
500,411
252,176
-
-
27,761
41,708
86,769
44,210
177,112
177,111
989,817
-
-
-
-
23,161
23,161
65,945
32,937
521,235
263,449
-
145,756
195,048
-
-
Value of
Awards
at grant
date 5
$
-
-
99,384
151,609
314,104
157,830
Value per
share at the
date of
exercise 6
$
6 .61
-
-
6 .42
6 .42
6 .42
1 This represents the maximum number of Awards granted in 2018 that may vest to each Executive . As the Awards granted in 2018 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 2018 were exercised, being the 2014 Award . The number of Awards that vested during the period and exercisable at 31 December
2018 is NIL . The number of Awards that vested but not yet exercisable at 31 December 2018 is NIL .
3 This includes the portion of 2014 Award that reached the end of its performance period on 31 December 2017 that did not meet the performance conditions and was forfeited .
4 Awards subject to performance conditions which remain unvested (2015, 2016, 2017 and 2018 Awards), and which will be tested for vesting during the period 2019 to 2022 .
5 Fair value of Awards granted during 2018 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 $1,955,285 based on the Volume Weighted Closing Price .
7 Mr Brown was appointed a KMP on 17 September 2018 and did not receive shares under the 2018 Award .
8 Mr Kelly and Mr Agriogiannis resigned effective 3 November 2018 and 11 December 2018 respectively . On resignation, all outstanding Awards previously held by Messrs Kelly
and Agriogiannis were forfeited .
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
61
4 Executive remuneration
Fixed remuneration is reviewed annually
The 2018 remuneration increases across the
4.1
Fixed annual remuneration
having regard to relevant factors including
Executive KMP team averaged 2 .8 percent .
performance, market conditions (both
This is in line with the Company’s policy
The amount of fixed remuneration for
generally and in the markets in which the
of setting remuneration levels based on
an individual executive (expressed as a
Group operates), growth and comparable
the size and nature of an executive’s role
total amount of salary and other benefits,
roles within peer companies and similar
(and impact of the role on the business)
including superannuation contributions) is
roles across a comparator group comprising
and individual performance in roles . Fixed
set with regard to the size and nature of an
those companies in the ASX 51-150 . For
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, their future potential
in their role for a number of years, FAR set
similar market capitalisation .
within the Group and market practice .
between the median and 75th percentile of
The Company’s stated approach is also to
the comparator would be expected .
set fixed remuneration levels at relatively
modest levels compared to peers for
Executives who are new to their roles and
to then progressively increase remuneration
based on individual performance in
that role .
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 2018
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 .
Performance conditions
When and how are the STI performance
All performance conditions are set by the Board and agreed with the executive .
50% of STI awards will be deferred (unless otherwise determined by the Board) .
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 consistently generated positive return for longer term shareholders even under difficult
market conditions .
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 .
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 2018. Governance
How is performance against the
All performance conditions under the STI are clearly defined and measurable .
performance 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 PC 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
Assessment of performance against the performance hurdles for the relevant year is determined
performance conditions determined and the
at the February meeting of the PC Committee and the Board, in conjunction with finalisation of
award made available?
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 2018 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 2020 (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 2021 (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
The Board has absolute discretion in relation to assessing performance and determining the
discretion?
amount, if any, of STI awards .
Is there an ability to ‘claw back’ in
Yes . The STI Plan Rules provide the Board with a broad ability to claw back awards if
appropriate 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
Generally, if an Executive resigns or is terminated for cause, all STI entitlements will be forfeited .
of 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
In the event of a takeover bid (or other transaction likely to result in a change in control of
Group 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 2018. 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 2018 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 2018 Awards will be tested and become exercisable to the extent of any vesting from
1 May 2022 .
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
The Company’s TSR performance must equal or exceed the growth in the returns of the median
measured and what amount can be earned?
companies of the S&P/ASX 200 Accumulation Index (XJO Al), excluding all GICS Financial
Any unexercised 2018 Awards will expire on 30 September 2022 .
companies and selected resources companies over the period from 31 December 2017 to
31 December 2021 .
The 2018 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
The EPS performance hurdle requires the compound annual growth in EPS of the Company over
calculated and what amount can be earned?
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 2018 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 2018. Governance
Is there ability to ‘claw back’ in
Yes . The rules of the Plan have, for some time, provided the Board with a broad ability to claw
appropriate circumstances?
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 2018 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
exercisable on cessation of employment?
If an Executive resigns or is terminated for cause, the Awards in respect of any tranche that is
not exercisable will generally be forfeited .
The rules of the Plan provide that in other circumstances, and at the discretion of the Board, a
pro rata number of Awards, reflecting the part of the LTI earned or accrued up to termination,
may become exercisable either at the time of termination of employment or at the end of the
original performance period applicable to a tranche .
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 CEO succession arrangements
Following the departure of long serving
As part of these arrangements and noting
5.1
Outgoing CEO
Chief Financial Officer, Michael Kelly, the
that, as Mr Brydon had announced his
Board asked Martin to extend his time with
intention to retire in May 2018 no long
On 17 May 2018, Adelaide Brighton’s CEO
the Company until after the 2018 results
term incentive award was made to him
and Managing Director, Martin Brydon,
had been delivered to the market . This also
for 2018, the Board adjusted Mr Brydon’s
announced his intention to retire after 30
provided time for the Board to complete the
short term incentive targets to focus on a
years of service to the Company . Mr Brydon
new CEO search, allow for smooth transition
smooth transition to a new Chief Executive .
has delivered exceptional results over his
between the outgoing and incoming CEO,
This included assisting with investor and
tenure with the Company, both as CEO and
and provide important continuity to the
employee engagement around the change
Managing Director and as a member of the
Company and investors and shareholders
of leadership .
senior executive team . Notably, over the
during the 2018 results release . The Board is
period of his tenure as CEO, there has been
grateful to Martin for his willingness to delay
revenue growth of 32 .8% and net profit
his retirement and to continue to provide
after tax increased 22 .6% . In addition total
leadership to the Company . In return for
shareholder returns over the period January
his commitment and continued support
2014 to December 2018, which largely
of the Company, the Board responded by
aligns with Mr Brydon’s tenure as CEO,
exercising discretion on his transitional
were 48 .2% and the Company’s share price
remuneration arrangements for 2018 .
increased by 17 .1% .
As disclosed in section 3 .1 .2 above, while
the Company did not satisfy its profit after
tax targets for the purposes of the 2018
short term incentive plan, the Board has
determined that Mr Brydon successfully
delivered against the expectations set by the
Board during the CEO transition period, and
was awarded his full (100%) 2018 STI . As
Having regard to these factors, and
Mr Brydon ceased as Managing Director on
In addition, Mr Brydon has been very flexible
particularly the Board’s request of Martin
30 January 2019 and is not continuing as an
and accommodating to the Board’s request
to delay his retirement (thereby precluding
executive beyond 31 March 2019, the Board
for him to continue in his role while the
Martin the opportunity to give proper notice
agreed that his 2018 STI would be paid
Board undertook a rigorous executive search
under his contract) the Board has resolved to
in cash following finalisation of the 2018
for a new CEO .
provide payment in lieu of notice at the end
financial results .
of his employment in addition to his other
contractual entitlements .
65
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Mr Brydon’s 2015 long term incentive, granted under the Company’s Executive Performance Share Plan were tested in line with the Plan rules .
In addition, and in recognition of his outstanding service, leadership of the Company during this period of transition, performance outcomes
and his willingness to delay his retirement, the Board has resolved it will vest Mr Brydon’s 2016 and 2017 LTI Awards in full on his retirement .
Further details of these arrangements and his remuneration for the period from 1 January to 31 March 2019 will be set out in the 2019
Remuneration Report .
The Board is grateful to Martin for his service and dedication for the majority of his professional life to the Company and believes this discretion
reflects the contribution and performance outcomes he has delivered to Adelaide Brighton and its shareholders .
5.2
Incoming CEO
The ASX announcement disclosed on 18 October 2018 sets out the material terms of Mr Nick Miller’s service agreement and remuneration
arrangements for 2019 .
A summary of these, in respect of remuneration, are set out below .
Total Base Remuneration Package
$1,500,000 per annum, reviewed annually .
(including superannuation)
STI
LTI
The maximum opportunity will be 100% of Total Base Remuneration Package .
Any short term incentive awarded to the CEO for 2019 will comprise 50% cash and 50%
deferred equity . Deferred equity will be deferred in two equal tranches for a period of 2 and
3 years respectively .
The maximum opportunity will be 100% of Total Base Remuneration Package .
Compensation for incentives foregone
In recognition of Mr Miller foregoing entitlements from his previous employer in order to
accept this position at Adelaide Brighton, as part of his contractual arrangements, he will be
eligible to receive a cash payment of $450,000, with 50% payable on commencement and
50% payable after completing 6 months’ service .
Mr Miller is a high calibre and experienced
5.3
Other Executive arrangements
The retention payments (future incentives
CEO and Managing Director with extensive
industry experience having held leadership
positions at major regional infrastructure
and construction services providers with a
track record of delivering strong business
performance over a 25 year career . He has
strong leadership qualities, commercial
expertise and strategic insight .
Due to the executive changes that occurred
during the year, to ensure business
continuity and to guard-against loss of
corporate knowledge, the Board wanted
brought forward) are in cash and are due for
payment in 2019 are:
> B Lemmon - $900,000
> A Dell - $500,000
to retain other key Executives with the
The Board sought independent advice
Company during this period of change .
in constructing the retention payments,
As a result, the Board offered retention
and subsequently considered in detail the
arrangements by way of bringing forward
purpose of the retention payments, the
Mr Miller’s total base remuneration package
vesting of future incentives for Andrew
importance of maintaining stability during a
of $1 .5 million is commensurate with
Dell and Brad Lemmon . These retention
year of change, and above all, the interests
industry benchmarks and is 7 .1% under that
payments fall due for payment in mid-2019 .
of shareholders to have experienced
of the fixed annual remuneration package
(including living away from home allowance)
paid to Mr Brydon in 2018 . Mr Miller’s
base remuneration package recognises his
extensive experience and tenure of eight
years as a CEO in construction related
industries and the Board believes the above
remuneration arrangements are appropriate
in this context .
Importantly, these payments are not
‘additional’ lump sum payments, but
Executives continuing to lead the key
business units of the Company .
have been structured such that they
A proportion of the retention payments has
bring forward the vesting of part of each
been recognised as the pro-rata incremental
executive’s future STI and LTI . Accordingly,
expense in the current year as a “bring
following payment of these amounts,
forward” of incentives as detailed in table 9 .
existing or future STI or LTI Awards will
The unrecognised balance and interactions
be adjusted downwards to reflect the
with existing incentive arrangements, will be
prepayment of these incentives in the
included in the 2019 Remuneration Report .
interests of retaining these Executives .
66
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. 6 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 .
During 2018, all Executive Service Agreements were reviewed to ensure consistency in employment arrangements for existing KMP . Independent
advice was sought in preparing revised Service Agreements, and the key terms are outlined below .
Table 7
Notice periods
Separation payments 1
6 months’ notice by either party (or payment in lieu)
6 months fixed annual remuneration where the Company terminates on notice
1 In the case of resignation, no separate payment is made to the Executive (only amounts due and payable up to the date of ceasing employment).
As described in section 5 .1 above, Mr Brydon did not provide formal notice under his agreement in order to accommodate the Board’s
request for flexibility . The Board has resolved to provide payment in lieu of notice at the end of his employment in addition to his other
contractual entitlements .
On termination of employment for any reason, 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 . Mr Kelly resigned as Chief Financial Officer during the year and ceased
employment on 3 November 2018 . The Board exercised its right under his executive service agreement, to enforce a post paid employment
non-compete undertaking . The non-compete period is a maximum of 6 months following the end of employment .
7 Non-executive Directors’ fees
7.1
Non-Executive Directors’ minimum shareholding requirement
In 2018, to enhance Board alignment with shareholder interests, the Board introduced a non-executive Director Minimum Shareholding Policy .
The Minimum Shareholding Policy was adopted in order to encourage non-executive Directors to accumulate and maintain a meaningful level of
ownership in Adelaide Brighton .
During their tenure on the Board, non-executive Directors are expected to acquire (within five years of their appointment) a shareholding
equivalent in value to one year’s base fees (Minimum Shareholding) and thereafter to maintain at least that level of shareholding throughout
their tenure . Non-executive Directors who are in office when this policy was adopted will have 5 years from July 2018 to achieve the
Minimum Shareholding .
Details of the current shareholdings for non-executive Directors as at 31 December 2018 are provided in section 8 .3 .
7.2
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 PC 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 PC 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 .
67
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Base fees for 2018
Fees for the Chairman and non-executive Directors are reviewed annually and considered
against peer companies . Following re-alignment of non-executive Director fees during 2017, as
foreshadowed, no further changes were made to Chairman and Non-Executive Directors fees
in 2018 .
Fees payable to non-executive Directors are inclusive of contributions to superannuation .
Base fees (Board)
Non-executive Chairman1
Non-executive Director
Committee fees
$
$
370,000
130,000
Committee chair Committee member
Audit, Risk and Compliance Committee
People and Culture Committee
Safety, Health, Environment and Community Committee
1 The Chairman of the Board receives no additional fee for Committee work .
30,000
30,000
30,000
15,000
15,000
15,000
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 .
68
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. 8 Key Management Personnel disclosure tables
8.1
Non-executive Directors’ statutory remuneration
Details of non-executive Directors’ remuneration are set out in the following table:
Table 8
Non-executive Director
Directors’ base fees
Committee fees
Year
(incl. superannuation)
(incl. superannuation)
Fees and allowances
Current Executives
Z Todorcevski 2
(Chairman)
RD Barro
KB Scott-Mackenzie
AM Tansey 3
VA Guthrie 4
GR Tarrant 5
Former Executives
LV Hosking 6
GF Pettigrew 7
Total non-executive
Directors’ remuneration
2018
2017
2018
2017
2018
2017
2018
2017
2018
2018
2018
2017
2018
2017
2018
2017
$
280,435
101,268
130,000
130,000
130,000
130,000
130,000
130,000
116,458
116,458
145,471
370,000
49,457
130,000
1,098,279
991,268
$
11,195
3,750
15,000
15,000
45,000
45,000
45,000
45,000
26,191
7,387
-
-
22,826
60,000
172,599
168,750
Post-employment
benefits
Superannuation
contributions 1
$
25,628
9,111
12,580
12,580
15,183
15,183
15,183
15,183
12,376
10,745
9,329
23,449
6,571
17,273
107,595
92,779
Total
$
291,630
105,018
145,000
145,000
175,000
175,000
175,000
175,000
142,649
123,845
145,471
370,000
72,283
190,000
1,270,878
1,160,018
1 Superannuation contributions are made on behalf of non-executive Directors which satisfy the Group’s obligations under applicable Superannuation Guarantee Charge legislation .
2 Mr Todorcevski was appointed a non-executive Director on 22 March 2017 and Chairman on 17 May 2018 . He was appointed a member of the Board’s Audit, Risk and
Compliance Committee and People and Culture Committee effective 16 November 2017 . Mr Todorcevski ceased to be a member of the People and Culture Committee on
4 July 2018, but remains a member of the Audit, Risk and Compliance Committee . As Chairman (from 16 May 2018), Mr Todorcevski does not receive Committee fees .
3 Ms Tansey was appointed Chairman of the Audit, Risk and Compliance Committee on 16 May 2018 . She ceased to be Chairman of the People and Culture Committee on
16 May 2018, but remains a member of the Committee .
4 Dr Guthrie was appointed a non-executive Director on 8 February 2018 . She was appointed Chairman of the People and Culture Committee on 26 May 2018 and a member
of the Safety, Health, Environment and Community Committee on 4 July 2018 .
5 Mr Tarrant was appointed a non-executive Director on 8 February 2018 . He was appointed a member of the Audit, Risk and Compliance Committee on 4 July 2018 .
6 Mr Hosking retired on 16 May 2018 .
7 Mr Pettigrew retired on 17 May 2018 .
69
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. 8.2
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
STI 1
Long term
incentive 3
Total
% of
remuneration
consisting of
awards 4
Current Executives
Year
$
$
$
$
M Brydon
2018
1,442,688
1,467,688
1,614,857 5
Notice payment
2017
1,408,910
-
152,9415
25,091
30,000
BW Brown
2018
125,417
12,630
100,000 6
6,271
2018
2017
2018
2017
2018
2017
2018
2017
413,050
21,503
105,464 7
404,480
16,454
-
517,600
29,654
208,728 7
485,000
27,192
-
631,183
735,290
506,995
-
-
-
475,436 8
-
167,976 9
525,900
68,503
-
24,000
24,000
27,500
30,000
25,540
30,000
18,889
20,000
AL Dell
BD Lemmon
Former Executives
M Kelly
G Agriogiannis
Total executive
remuneration
$
-
-
$
$
1,264,708
5,815,032
283,725
1,875,576
12,630
21,503
16,454
29,654
27,192
-
256,948
33,283
618,803
26,024
487,412
46,867
860,003
52,918
622,302
-
-
-
(124,464)
1,007,695
113,457
878,747
(63,457)
630,403
68,502
58,079
740,984
%
22
15
5
5
5
9
13
8
2018
3,636,933
1,531,475
2,672,461
127,291
63,787
1,156,937
9,188,884
2017
3,559,580
112,149
152,941
134,000
112,148
534,203
4,605,021
1 STI payment includes payments relating to 2018 performance accrued but not paid as at 31 December 2018 .
2 Includes Company contributions to superannuation and allocations by employees made by way of salary sacrifice of fixed remuneration .
3 In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the notional value of equity compensation granted or outstanding
during the year . The notional value of equity instruments is determined as at the grant date and is progressively allocated over the vesting period . The amount included as
remuneration is not related to or indicative of the benefit (if any) that the individual Executives may ultimately realise should the equity instruments vest . The notional value of
Awards as at the date of their grant has been determined in accordance with the accounting policy Note 26 .
4 % of remuneration for the financial year which consists of the amortised annual value of Awards issued under the Adelaide Brighton Limited Executive Performance Share Plan .
5 Pursuant to Mr Brydon’s Retirement Deed, an amount of $1,467,688 is payable in relation to payment in lieu of notice and severance payment . A payment of $147,169 being a
Living Away From Home Allowance was made pursuant to Mr Brydon’s Service Agreement to assist him in discharging his duties from the Company’s Sydney office .
6 Mr Brown was appointed Executive General Manager, Concrete and Aggregates on 17 September 2018 . Mr Brown was paid a settling allowance for relocation from
South Australia to New South Wales following his appointment to the position of Executive General Manager, Concrete and Aggregates .
7 Prorata retention payment as detailed in section 5 .3 .
8 Mr Kelly ceased employment on 3 November 2018 . On cessation of employment Mr Kelly was paid $280,287 in annual leave and long service leave entitlements .
Following Mr Kelly’s resignation, and pursuant to his service agreement in relation to a period of restraint, he has been paid a total of $195,149 .
9 Mr Agriogiannis ceased employment on 11 December 2018 . On cessation of employment Mr Agriogiannis was paid $167,976 in annual leave and long service entitlements .
70
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. 8.3
Equity holdings of Key Management Personnel
A summary of Executives’ and non-executive Directors’ current shareholdings in the Company as at 31 December 2018 is set out below .
While the Board has introduced minimum shareholding guidelines for non-executive Directors the Board continues to consider 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
Current Executives
M Brydon
BW Brown 2
AL Dell 3
BD Lemmon
Former Executives
M Kelly 4
G Agriogiannis 5
Current Non-executive Directors
Z Todorcevski
RD Barro 6
VA Guthrie 7
KB Scott-Mackenzie
AM Tansey
GR Tarrant 7
Former Non-executive Directors
LV Hosking 8
GF Pettigrew 9
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
78,906
-
5,588
8,197
16,854
13,502
20,000
246,484,345
-
5,000
10,000
-
9,851
16,739
177,112
-
-
23,161
65,945
32,937
-
-
-
-
-
-
-
-
-
-
2,430
4,015
-
10,115
-
-
-
-
-
-
-
-
(202,131)
-
-
(23,161)
(82,799)
(56,554)
53,887
-
8,018
12,212
-
-
-
20,000
32,693,984
279,178,329
-
-
-
-
(9,851)
(16,739)
-
5,000
10,000
-
-
-
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 2018 .
2 Mr Brown commenced in the position of Executive General Manager, Concrete and Aggregates effective from 17 September 2018 . He was not eligible for shares granted under
the LTI 2014 Award .
3 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 2014 Award .
4 Mr Kelly resigned effective 3 November 2018, therefore his equity holding has been reduced to nil at 31 December 2018 through ‘Net movement due to other changes” . Awards
in the 2015, 2016, 2017 and 2018 LTI Plan held by Mr Kelly were forfeited on resignation .
5 Mr Agriogiannis resigned effective 11 December 2018, therefore his equity holding has been reduced to nil at 31 December 2018 through ‘Net movement due to other changes’ .
Awards in the 2015, 2016, 2017 and 2018 LTI Plan held by Mr Agriogiannis were forfeited on resignation .
6 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 .
7 Dr Guthrie and Mr Tarrant were appointed non-executive Directors on 8 February 2018 .
8 Mr Hosking retired on 16 May 2018, therefore his equity holding has been reduced to nil at 31 December 2018 through ‘Net movement due to other changes’ .
9 Mr Pettigrew retired on 17 May 2018, therefore his equity holding has been reduced to nil at 31 December 2018 through ‘Net movement due to other changes’ .
71
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Income statement
Consolidated
For the year ended 31 December 2018
($ million)
Continuing operations
Revenue from contracts with customers
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
Notes
2018
5
5
6
21(a)
7(a)
1,630.6
(1,052.2)
(274.3)
304.1
17.2
(22.9)
(68.5)
(16.3)
37.4
251.0
(65.8)
185.2
185.3
(0.1)
185.2
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
28.5
28.4
Restated
2017
1,559 .6
(1,009 .9)
(243 .8)
305 .9
21 .1
(20 .7)
(72 .3)
(13 .6)
35 .1
255 .5
(72 .7)
182 .8
182 .7
0 .1
182 .8
Cents
28 .1
28 .0
72
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
The above income statement should be read in conjunction with the accompanying notes .
Statement of comprehensive income
For the year ended 31 December 2018
($ 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 (loss)/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
19(a)
19(a)
7(c)
25(b)
7(c)
Consolidated
2018
185.2
Restated
2017
182 .8
2.0
1.7
(0.5)
(0.6)
0.2
2.8
0 .4
-
-
1 .9
(0 .6)
1 .7
188.0
184 .5
188.1
(0.1)
188.0
184 .4
0 .1
184 .5
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
The above statement of comprehensive income should be read in conjunction with the accompany notes .
73
Balance sheet
As at 31 December 2018
($ million)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
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
Contract liabilities
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
74
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
The above balance sheet should be read in conjunction with the accompanying notes .
Notes
2018
8(i)
9
10
12
9
25(b)
21
11
13
16
15
16
7(f)
15
17
19(a)
19(b)
Consolidated
Restated
2017
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
13 .4
0 .3
9 .8
33 .8
5 .1
208 .2
428 .9
85 .0
45 .0
0 .1
559 .0
767 .2
93.9
224.8
176.4
5.5
-
500.6
39.9
2.5
173.9
1,061.7
299.5
1,577.5
2,078.1
133.0
11.7
-
-
30.4
4.2
179.3
518.7
89.2
45.2
0.1
653.2
832.5
1,245.6
1,245 .8
734.4
4.2
504.5
1,243.1
2.5
1,245.6
733 .1
1 .9
508 .2
1,243 .2
2 .6
1,245 .8
Statement of changes in equity
For the year ended 31 December 2018
Consolidated
($ million)
Notes
Balance at 1 January 2018
Change in accounting policy
Restated total equity at 1 January 2018
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Deferred hedging gains and losses and cost
of hedging transferred to the carrying value
of inventory purchased in the period
Transactions with owners in their
capacity as owners:
Dividends provided for or paid
Executive Performance Share Plan
18
17(b)/19(a)
Balance at 31 December 2018
Balance at 1 January 2017
Change in accounting policy
Restated total equity at 1 January 2017
Profit for the year (restated)
Other comprehensive income
Total comprehensive income for the year
Deferred hedging gains and losses and cost
of hedging transferred to the carrying value
of inventory purchased in the period
Transactions with owners in their
capacity as owners:
Dividends provided for or paid
Executive Performance Share Plan
18
17(b)/19(a)
Balance at 31 December 2017
Attributable to owners of Adelaide Brighton Limited
Share
capital
733.1
-
733.1
-
-
-
-
-
1 .3
1.3
734.4
731.4
-
731.4
-
-
-
-
-
1 .7
1.7
733.1
Reserves
Retained
earnings
1.9
-
1.9
-
3 .2
3.2
510.6
(2 .4)
508.2
185 .3
(0 .4)
184.9
Total
1,245.6
(2 .4)
1,243.2
185 .3
2 .8
188.1
(0 .1)
-
(0 .1)
-
(0 .8)
(0.8)
4.2
2.9
-
2.9
-
0 .4
0.4
(188 .6)
-
(188.6)
504.5
483.3
(3 .1)
480.2
182 .7
1 .3
184.0
(188 .6)
0 .5
(188.1)
1,243.1
1,217.6
(3 .1)
1,214.5
182 .7
1 .7
184.4
(0 .9)
-
(0 .9)
Non-
controlling
interests
Total equity
2.6
-
2.6
(0 .1)
-
(0.1)
-
-
-
-
2.5
2.5
-
2.5
0 .1
-
0.1
-
-
-
-
1,248.2
(2 .4)
1,245.8
185 .2
2 .8
188.0
(0 .1)
(188 .6)
0 .5
(188.1)
1,245.6
1,220.1
(3 .1)
1,217.0
182 .8
1 .7
184.5
(0 .9)
(156 .0)
1 .2
(154.8)
-
(0 .5)
(0.5)
1.9
(156 .0)
-
(156.0)
508.2
(156 .0)
1 .2
(154.8)
1,243.2
2.6
1,245.8
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
The above statement of changes in equity should be read in conjunction with the accompany notes .
75
Statement of cash flows
For the year ended 31 December 2018
($ 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
Consolidated
Notes
2018
1,812.5
(1,509.6)
25.6
0.9
(17.1)
10.5
(78.1)
Restated
2017
1,661 .3
(1,379 .4)
26 .4
1 .6
(13 .0)
8 .6
(81 .3)
Net cash inflow from operating activities
8(ii)
244.7
224 .2
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 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
(112.7)
(2.1)
5.3
(2.0)
0.6
(110.9)
2.2
89.0
(188.6)
(97.4)
36.4
57.6
(0.1)
93.9
(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
17
8(iv)
18
8(i)
76
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
The above statement of cash flows should be read in conjunction with the accompany notes .
Notes to the financial report
1 Summary of significant
New and amended standards adopted by
The Group has elected to apply certain
accounting policies
the Group
practical expedients in the application of
Adelaide Brighton Limited (the Company) is
a company limited by shares, incorporated
and domiciled in Australia whose shares are
The Group has applied the following standard
AASB15 by not restating contracts that
for the first time for the financial reporting
begin and end within the same annual
period commencing 1 January 2018 .
reporting period and/or were completed
publicly traded on the Australian Securities
AASB 15 Revenue From Contracts With
Exchange (ASX) .
Customers (AASB 15)
at the beginning of the earliest period
presented and for completed contracts that
have variable consideration, the Group has
The financial report was authorised for issue
In accordance with the transitional
used hindsight and used the transition price
by the Directors on 19 March 2019 . The
provisions in AASB 15, the Group has
at the date the contract was completed .
Directors have the power to amend and
adopted the new rules retrospectively and
reissue the financial statements .
has restated comparatives for the 2017
The principal accounting policies adopted
financial year .
A receivable is recognised when the goods
and services are delivered as this is the
point in time that the consideration is
in the preparation of these consolidated
The change in accounting policy primarily
unconditional because only the passage of
financial statements are either set out below
relates to contracts with stepped pricing
time is required before the payment is due .
or included in the accompanying notes .
applying to a contract year, where the
Unless otherwise stated these policies have
contract year is different to Adelaide
been consistently applied to all the years
Brighton’s financial reporting period .
presented . Unless otherwise stated the
Where step pricing is applicable, revenue is
Trade receivables are typically due for
settlement no more than 30 to 45 days from
the end of the month of invoice .
financial statements are for the consolidated
recognised based on pricing on estimated
AASB 15 Revenue From Contracts With
entity consisting of Adelaide Brighton
purchases during the contract period .
Customers replaces AASB 118 Revenue
Limited and its subsidiaries .
(a) Basis of preparation
These general purpose financial statements
have been prepared in accordance with
Australian Accounting Standards and
Interpretations issued by the Australian
Accounting Standards Board and the
Revenue from the sale of goods is
recognised when control of the product
has transferred, being where goods are
shipped to the customer, risks of loss have
been transferred to the customer and there
is objective evidence that all criteria for
acceptance has been satisfied .
Corporations Act 2001 . The Company is a
A contract liability is recognised for expected
for-profit entity for the purpose of preparing
discount based on the stepped pricing
the financial statements .
on future purchases until the end of the
which covers contracts for goods and
services and AASB 111 Construction
Contracts which covers construction
contracts . The new standard replaces the
existing notion of risk and rewards with the
notion of control to recognise when a good
or service transfers to a customer .
Further information on revenue from
contracts with customers and other income
is detailed in Note 5 .
Comparative information has been re-stated
where appropriate to enhance comparability .
Historical cost convention
These financial statements have been
prepared under the historical cost
convention, except for the circumstances
where the fair value method has been
applied as detailed in the accounting policies .
remaining contract period .
The impact of the adoption of AASB 15 is
set out below:
Balance Sheet
($ million)
31 December 2017
Re-measurement
1 January 2018
Carrying amount
Carrying amount
Other liabilities
Deferred tax liability
15 .1
86 .0
3 .4
(1 .0)
Compliance with IFRS
Income Statement - For the year ended 31 December 2017
The consolidated financial statements
of the Adelaide Brighton Limited Group
also comply with International Financial
Reporting Standards (IFRS) as issued by
the International Accounting Standards
Board (IASB) .
($ million)
As originally presented AASB15 Restatement
Revenue
Income tax expense
Net profit after tax
1,560 .0
(72 .3)
182 .1
(0 .4)
(0 .3)
0 .7
18 .5
85 .0
Restated
1,559 .6
(72 .7)
182 .8
New standards and interpretations not yet adopted by the Group
Certain new accounting standards and interpretations have been published that are not
mandatory for 31 December 2018 reporting periods . The Group’s assessment of the impact of
these new standards and interpretations is set out below .
Adelaide Brighton Ltd and its controlled entities . Notes to and forming part of
the consolidated financial statements for the year ended 31 December 2018 .
77
1 Summary of significant
Subsidiaries are entities over which the
(c) Foreign currency translation
accounting policies (continued)
Group has control . The Group controls
(a) Basis of preparation (continued)
AASB 16 Leases (AASB 16)
AASB 16 Leases will replace the current
standard on lease accounting, AASB 117
an entity when the Group is exposed to,
or has rights to, variable returns from its
involvement with the entity and has the
ability to affect those returns through its
power to direct the activities of the entity .
(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
Leases . AASB 16 introduces a single lessee
Subsidiaries are fully consolidated from the
consolidated financial statements are
accounting model and requires the lessee to
date on which control is transferred to the
presented in Australian Dollars, which is
recognise assets and liabilities for all leases
Group . They are deconsolidated from the
Adelaide Brighton Limited’s functional and
with a term of more than 12 months, unless
date that control ceases . The acquisition
presentation currency .
the underlying asset is of low value . A lessee
method of accounting is used to account for
is required to recognise a right-of-use asset
business combinations by the Group (refer
representing its right to use the underlying
to Note 1(d)) .
(ii) Transactions and balances
Foreign currency transactions are translated
into the functional currency using the
leased asset and a lease liability representing
its obligations to make lease payments .
Intercompany transactions, balances
exchange rates prevailing at the dates of the
and unrealised gains on transactions
transactions . Foreign exchange gains and
The Group has assessed all of the existing
between Group companies are eliminated .
losses resulting from the settlement of such
leasing arrangements and service
Unrealised losses are also eliminated
transactions and from the translation at year
agreements in light of the new standard .
unless the transaction provides evidence
end exchange rates of monetary assets and
The standard will primarily affect the
of the impairment of the asset transferred .
liabilities denominated in foreign currencies
accounting for operating leases, together
Accounting policies of subsidiaries have
are recognised in the income statement or
with a limited number of contracts that are
been changed where necessary to ensure
deferred in equity if the gain or loss relate to
classified as containing embedded leases
consistency with the policies adopted by
a qualifying cash flow hedge .
under the new definition .
the Group .
(iii) Foreign operations
The Group will apply AASB 16 from its
(ii) Employee Share Trust
The results and financial position of all the
mandatory adoption date of 1 January
The Group has formed a trust to administer
foreign operations that have a functional
2019 and intends to apply the standard
the Group’s employee share scheme .
currency different from the presentation
using the modified retrospective approach,
The company that acts as the Trustee is
currency are translated into the presentation
under which the cumulative effect of
consolidated as the company is controlled by
currency as follows:
initial application is recognised in retained
the Group . The Adelaide Brighton employee
> Assets and liabilities for each balance sheet
earnings as at 1 January 2019 . The
share plan trust is not consolidated as it is
presented are translated at the closing rate
estimated impact of AASB 16 at 1 January
not controlled by the Group .
at the date of that balance sheet;
2019 is to recognise a right-of-use asset
of approximately $104 million, and a
corresponding increase to lease liabilities
of approximately $104 million . The group
expects that net profit after tax will decrease
by approximately $2 million in 2019 . The
Group does not anticipate there will be a
significant impact on the classification of
cashflows as a result of adopting AASB 16
and there will be no impact on the group
cash position .
(iii) Non-controlling interests
Non-controlling interests in the results and
equity of subsidiaries are shown separately
in the consolidated income statement and
balance sheet respectively . The Group treats
transactions with non-controlling interests
that do not result in a loss of control as
transactions with equity owners of the
Group . For changes in ownership interests,
the difference between any consideration
paid and the relevant share acquired of the
> Income and expenses for each income
statement and statement of comprehensive
income are translated at average exchange
rates (unless this is not a reasonable
approximation of the cumulative effect of
the rates prevailing on the transaction dates,
in which case income and expenses are
translated at the dates of the transactions);
and
> All resulting exchange differences are
recognised in other comprehensive income .
(b) Principles of consolidation
carrying value of net assets of the subsidiary
On consolidation, exchange differences
(i) Subsidiaries
is deducted from equity .
The consolidated financial statements
incorporate the assets and liabilities of all
subsidiaries controlled by Adelaide Brighton
Limited as at 31 December 2018 and the
results of all subsidiaries for the year then
ended . The Company and its subsidiaries
together are referred to in this financial
report as “the Group” .
arising from the translation of any net
investment in foreign entities, and
of borrowings and other financial
instruments designated as hedges of
such investments, are recognised in other
comprehensive income .
78
Adelaide Brighton Ltd and its controlled entities . Notes to and forming part of
the consolidated financial statements for the year ended 31 December 2018 .
1 Summary of significant
Where settlement of any part of cash
accounting policies (continued)
consideration is deferred, the amounts
(c) Foreign currency translation (continued)
payable in the future are discounted
to their present value as at the date of
When a foreign operation is sold or any
exchange . The discount rate used is the
borrowings forming part of the net
entity’s incremental borrowing rate, being
investment are repaid, a proportionate share
the rate at which a similar borrowing could
of such exchange differences is reclassified
be obtained from an independent financier
to profit or loss, as part of the gain or loss
under comparable terms and conditions .
on sale where applicable .
(d) Business combinations
The acquisition method of accounting
is used to account for all business
combinations, including business
combinations involving equities or
Contingent consideration is classified
either as equity or a financial liability .
Amounts classified as a financial liability
are subsequently remeasured to fair value
with changes in fair value recognised in the
income statement .
businesses under common control,
(e) Rounding of amounts
regardless of whether equity instruments or
other assets are acquired . The consideration
transferred for the acquisition of a subsidiary
comprises the fair values of the assets
transferred, the liabilities incurred and the
equity interests issued by the Group . The
consideration transferred also includes the
fair value of any contingent consideration
arrangement and the fair value of any
pre-existing equity interest in the subsidiary .
The Company is of a kind referred to in
the Australian Securities and Investments
Commission Corporations (Rounding in
Financial / Directors’ Reports) Instrument
2016/191, relating to the ‘’rounding off’’ of
amounts in the financial report . Amounts
in the financial report have been rounded
off in accordance with that instrument to
the nearest one hundred thousand dollars,
unless otherwise stated .
Acquisition-related costs are expensed as
incurred . Identifiable assets acquired and
(f) Goods and Services Tax (GST)
liabilities and contingent liabilities assumed
Revenues, expenses and assets are
in a business combination are, with limited
recognised net of the amount of associated
exceptions, measured initially at their
GST, unless the GST incurred is not
fair values at the acquisition date . On an
recoverable from the taxation authority . In
acquisition-by-acquisition basis, the Group
this case it is recognised as part of the cost
recognises any non-controlling interest in
of acquisition of the asset or as part of
the acquiree either at fair value or at the
the expense .
non-controlling interest’s proportionate
share of the acquiree’s net identifiable assets .
Receivables and payables are stated inclusive
of the amount of GST receivable or payable .
The excess of the consideration transferred,
The net amount of GST recoverable from, or
the amount of any non-controlling interest
payable to, the taxation authority is included
in the acquiree and the acquisition date
with other receivables or payables in the
fair value of any previous equity interest
balance sheet .
in the acquiree over the fair value of the
Group’s share of the net identifiable assets
acquired is recorded as goodwill . If those
amounts are less than the fair value of the
net identifiable assets of the subsidiary
acquired and the measurement of all
amounts has been reviewed, the difference
is recognised directly in profit or loss as a
bargain purchase .
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 .
Adelaide Brighton Ltd and its controlled entities . Notes to and forming part of
the consolidated financial statements for the year ended 31 December 2018 .
79
Financial performance overview
2 Segment reporting
(a) Description of segments
Management has determined the operating segments based on the reports reviewed by the former 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 .
A disaggregation of revenue using existing segments and the timing of the transfer of goods and services (at a point in time versus over time) is
considered by management to be adequate for the Groups circumstances .
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 Operating
Segments as well as meeting the aggregation criteria allowing them to be reported as one segment . The Group considered aggregation of these
segments appropriate due to the similarity of the markets that the products are sold, the consistent regulatory environment for the production,
handling and use of the products, distribution method and underlying demand drivers . Concrete Products meets the quantitative threshold
therefore is reported as a separate segment . Joint arrangements and associates related to the reportable segments form part of the above two
reportable segments .
The major end-use markets of the Group’s products include residential and non-residential construction, engineering construction, alumina
production and mining .
(b) Segment information provided to the CEO and Managing Director
The segment information provided to the former CEO and Managing Director for the reportable segments is as follows:
31 December 2018
($ million)
Total segment operating revenue
Inter-Company revenue
Revenue from external customers
Timing of revenue recognition
At a point in time
Over time
Depreciation and amortisation
EBIT
Share of net profits of joint venture and associate entities
accounted for using the equity method
31 December 2017 (Restated)
($ million)
Total segment operating revenue
Inter-Company revenue
Revenue from external customers
Timing of revenue recognition
At a point in time
Over time
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
1,462.9
(98.8)
1,364.1
1,367.6
(3.5)
1,364.1
(76.5)
290.2
147.5
-
147.5
147.5
-
147.5
(6.9)
10.7
-
-
-
-
-
-
(4.0)
(35.5)
1,610.4
(98.8)
1,511.6
1,515.1
(3.5)
1,511.6
(87.4)
265.4
37.4
-
-
37.4
Cement, Lime, Concrete
Concrete
Unallocated
Total
and Aggregates
Products
1,402 .5
(95 .5)
1,307 .0
1,310 .4
(3 .4)
1,307 .0
(69 .4)
287 .7
147 .6
-
147 .6
147 .6
-
147 .6
(7 .8)
10 .2
-
-
-
-
-
-
(5 .3)
(30 .3)
1,550 .1
(95 .5)
1,454 .6
1,458 .0
(3 .4)
1,454 .6
(82 .5)
267 .6
35 .1
-
-
35 .1
80
Adelaide Brighton Ltd and its controlled entities . Notes to and forming part of
the consolidated financial statements for the year ended 31 December 2018 .
2 Segment reporting (continued)
(b) Segment information provided to the CEO and Managing Director (continued)
Sales between segments are carried out at arms length and are eliminated on consolidation .
The operating revenue assessed by the former 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
Royalties
Revenue from continuing operations
Consolidated
2018
1,610.4
(98.8)
102.3
16.3
0.4
1,630.6
Restated
2017
1,550 .1
(95 .5)
89 .5
15 .1
0 .4
1,559 .6
The former CEO and Managing Director assessed 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
2018
265.4
(14.4)
251.0
Restated
2017
267 .6
(12 .1)
255 .5
Revenues of $292 .0 million (2017: $268 .5 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 14
> Provisions for close down and restoration costs - Note 15(iv)
> Defined benefit superannuation plan - Note 25
Detailed information about each of these estimates and assumptions is included in Notes 14, 15(iv) and 25 together with information about the
basis of calculation for each affected line item in the financial statements .
81
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
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 .
(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
2018
28.5
28.4
Restated
2017
28 .1
28 .0
Consolidated
2018
2017
650,498,520
650,067,492
1,678,766
2,767,452
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
652,177,286
652,834,944
($ 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 from contracts with customers and other income
Accounting policy - revenue recognition
Revenue is recognised for the major business activities as follows:
(i) Revenue from contracts with customers
Consolidated
2018
Restated
2017
185.2
0.1
182 .8
(0 .1)
185.3
182 .7
Revenue from the sale of goods is recognised when control of the product has transferred, being where goods are shipped to the customer, risks
of loss have been transferred to the customer and there is objective evidence that all criteria for acceptance has been satisfied .
(ii) Interest income
Finance income comprises interest income recognised on financial assets . Interest income is recognised as it accrues in profit or loss, using the
effective interest rate method .
82
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
5 Revenue from contracts with customers and other income (continued)
Consolidated
($ million)
Revenue from contracts with customers
Revenue from contracts with customers
Royalties
Other income
Interest from joint ventures
Interest from other parties
Net gain on disposal of property, plant and equipment
Fair value accounting gain on business acquisition
Rental income
Other income
Notes
2018
1,630.2
0.4
1,630.6
0.7
1.2
0.4
-
1.5
13.4
17.2
Restated
2017
1,559 .2
0 .4
1,559 .6
0 .7
0 .8
10 .4
4 .5
1 .2
3 .5
21 .1
Total revenue from contracts with customers and other income
1,647.8
1,580 .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 $1 .3 million (2017: $11 .1 million) which is recognised in
other income .
6 Expenses
Profit before income tax includes the following specific expenses:
($ million)
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
Accounting policy - borrowing costs
Notes
2018
2017
Consolidated
4.5
76.0
4.7
85.2
2.2
185.0
13.4
10.0
1.0
-
4 .3
71 .4
4 .9
80 .6
1 .9
169 .0
11 .7
9 .2
18 .3
-
20(b)
Borrowing costs incurred for the construction of any qualifying asset are capitalised into the cost base of the asset 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)
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
16.3
1.1
-
17.4
(1.1)
16.3
Notes
2018
2017
Consolidated
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,
being 3 .1% p .a . (2017: 2 .8% p .a .) .
13 .5
1 .1
-
14 .6
(1 .0)
13 .6
83
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
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 .
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 .
84
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018. 7 Income tax (continued)
($ 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% (2017: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non allowable expenses
Non assessable income
Rebateable dividends
Non assessable non exempt dividends
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 expense/(benefit)
(Over)/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 expense/(benefit)
(c) Tax expense relating to items of other comprehensive income
Actuarial (loss)/gain on retirement benefit obligation
Changes in the fair value of cash flow hedges
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised:
Revenue losses
Capital losses
Consolidated
2018
251.0
75.3
0.5
(2.2)
(5.3)
(0.4)
(0.8)
(0.1)
1.2
65.8
64.5
4.0
(2.7)
65.8
(0.9)
0.1
(0.8)
(0.2)
0.5
0.3
Restated
2017
255 .5
76 .7
2 .6
(3 .4)
(4 .6)
-
(0 .7)
(0 .3)
2 .4
72 .7
71 .8
(3 .1)
4 .0
72 .7
(0 .8)
(0 .3)
(1 .1)
0 .6
-
0 .6
0.6
11.2
0 .5
11 .3
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 .
85
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
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
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
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
Consolidated
2018
Restated
2017
1.1
30.8
1.8
33.7
(33.7)
-
37.8
(3.9)
0.5
(0.7)
-
33.7
97.4
12.9
12.6
122.9
(33.7)
89.2
122.5
0.4
0.1
(0.1)
-
122.9
1 .4
33 .1
3 .0
37 .5
(37 .5)
-
28 .9
7 .4
(1 .1)
-
2 .3
37 .5
100 .5
10 .4
11 .6
122 .5
(37 .5)
85 .0
118 .8
3 .4
(0 .3)
(1 .6)
2 .2
122 .5
86
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
8 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
2018
2017
91.0
2.9
93.9
56 .0
1 .6
57 .6
The Group has an offsetting agreement with its bank for cash facilities . This agreement allows the Group to manage cash balances on a total
basis, offsetting individual cash balances against overdrafts . The value of overdraft at 31 December 2018 was $nil (2017:$nil) .
(b) Risk exposure
The Group’s exposure to interest rate risk is discussed in Note 20 . 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
($ million)
Profit for the year
Doubtful debts
Depreciation, amortisation and impairment
Share based payments
Finance charges on remediation provision
(Gain) / loss on sale of non-current assets
Share of profits of joint ventures, net of dividends received
Non-cash retirement benefits expense
Non-cash remediation obligation
Fair value accounting gain on acquisition of business
Capitalised interest
Other
Net cash provided by operating activities before changes in assets and liabilities
Changes in operating assets and liabilities, net of effects from purchase of
business combinations:
(Increase) / 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
Consolidated
2018
185.2
1.0
87.4
(1.1)
1.1
0.2
(11.7)
0.5
1.2
-
(1.1)
(0.9)
Restated
2017
182 .8
18 .3
82 .5
(2 .9)
1 .1
(6 .4)
(8 .6)
0 .7
(4 .3)
(4 .5)
(1 .0)
(0 .8)
261.8
256 .9
(2.1)
(0.8)
16.9
(12.7)
(3.3)
(15.4)
3.8
(3.5)
(9 .0)
(1 .8)
(53 .0)
27 .6
2 .3
(5 .5)
(3 .9)
10 .6
244.7
224 .2
87
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
8 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
(iv) Reconciliation of movements of liabilities to cash flows arising from financing activities
Consolidated
2018
93.9
-
(518.7)
(424.8)
2017
57 .6
(0 .3)
(428 .9)
(371 .6)
Total
(288 .5)
(82 .4)
(0 .7)
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
21 .5
36 .1
-
57.6
36 .3
-
93.9
-
-
-
-
-
-
-
(0 .4)
0 .1
-
(0.3)
0 .3
-
-
(0 .3)
0 .3
-
-
-
-
-
-
-
-
-
-
-
-
(309 .3)
(118 .9)
(0 .7)
(428.9)
(371.6)
(91 .1)
1 .3
(54 .5)
1 .3
(518.7)
(424.8)
($ million)
Net debt as at 1 January 2017
Cash flows
Other non-cash movements
Net debt as at 31 December 2017
Cash flows
Other non-cash movements
Net debt as at 31 December 2018
88
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
Balance sheet items
9 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 20(b) .
The amount of the provision is recognised in the income statement . When a trade receivable for which a loss allowance provision has been
recognised becomes uncollectible in a subsequent period, it is written off against the provision account . Subsequent recoveries of amounts
previously written off are credited against expenses in the income statement .
($ million)
Current
Trade receivables
Loss allowance provision
Amounts receivable from joint ventures
Prepayments
Other receivables
Total current
Non-current
Loans to joint ventures
Other non-current receivables
Total non-current
Movement in loss allowance provision
Opening balance at 1 January
Amounts written off during the year
Loss allowance provision recognised during the year
Closing balance at 31 December
Fair value and credit, interest and foreign exchange risk
Notes
2018
2017
Consolidated
189.0
(19.1)
169.9
34.8
7.3
12.8
200 .1
(19 .5)
180 .6
50 .3
6 .5
3 .6
224.8
241 .0
38.4
1.5
39.9
19.5
(1.4)
1.0
19.1
35 .4
1 .9
37 .3
1 .2
-
18 .3
19 .5
20(b)
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 20 .
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above .
Adelaide Brighton Ltd and its controlled entities . Notes to and forming part of
the consolidated financial statements for the year ended 31 December 2018 .
89
10 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
2018
2017
69.7
63.4
43.3
176.4
73 .6
56 .9
43 .8
174 .3
Inventory expense
Inventories recognised as expense during the year ended 31 December 2018 and included in cost of sales amounted to $981 .7 million
(2017: $948 .5 million)
11 Property, plant and equipment
Accounting policy - property plant and equipment
Property, plant and equipment are shown at historical cost less accumulated depreciation and accumulated impairment losses . Cost includes
expenditure that is directly attributable to the acquisition of the assets .
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably . The carrying amount
of any component accounted for as a separate asset is derecognised when replaced . All other repairs and maintenance are charged to profit or
loss during the reporting period in which they are incurred .
(i) Mineral reserves
Mineral reserves are amortised based on annual extraction rates over the estimated life of the reserves 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 .
90
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
11 Property, plant and equipment (continued)
Consolidated at 31 December 2018
($ million)
At cost
Accumulated depreciation
Net book amount
Reconciliations
Carrying amount at
1 January 2018
Additions
Disposals
Business combinations
Reclassification
Depreciation/amortisation
Carrying amount at
31 December 2018
Freehold
land
Buildings
Leasehold
property
Plant &
equipment
Mineral
reserves
Asset
retirement
cost
In course of
construction
Total
193 .0
-
152 .8
(69 .1)
193.0
83.7
178 .5
17 .0
(0 .2)
-
(2 .3)
-
89 .0
1 .3
(0 .8)
-
(1 .3)
(4 .5)
9 .6
(4 .4)
5.2
5 .8
-
-
-
(0 .1)
(0 .5)
1,453 .1
(921 .4)
226 .1
(47 .7)
531.7
178.4
517 .9
54 .6
(2 .2)
1 .1
34 .5
(74 .2)
174 .3
5 .9
-
-
2 .9
(4 .7)
34 .3
(10 .3)
24.0
25 .2
0 .1
-
-
-
(1 .3)
45 .7
2,114 .6
-
(1,052 .9)
45.7
1,061.7
46 .5
34 .4
-
-
(35 .2)
-
1,037 .2
113 .3
(3 .2)
1 .1
(1 .5)
(85 .2)
193.0
83.7
5.2
531.7
178.4
24.0
45.7
1,061.7
Consolidated at 31 December 2017
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
Leased assets
178 .5
-
154 .4
(65 .4)
178.5
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)
218 .0
(43 .7)
517.9
174.3
495 .8
42 .6
(3 .2)
21 .7
29 .6
(68 .6)
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
Plant and equipment includes the following amounts where the Group is a lessee under a finance lease:
($ million)
Cost
Accumulated depreciation
Net book amount
Consolidated
2018
-
-
-
2017
1 .2
(0 .5)
0 .7
91
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
12 Assets classified as held for sale
Accounting policy - assets held for sale
Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of their carrying amount and fair value less costs to
sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered
highly probable .
An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal group) to fair value less costs to sell . A gain is
recognised for any subsequent increases in fair value less costs to sell an asset (or disposal group), but not in excess of any cumulative impairment loss
previously recognised . A gain or loss not previously recognised by the date of the sale of the non current asset (or disposal group) is recognised at the
date of de-recognition .
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale .
Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised .
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the
other assets in the balance sheet . The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the
balance sheet .
Signed contracts are in existence for the sale of these assets held for sale and the assets are held at their carrying value . The timing is normal for
the nature of the of the contract for sale in the Concrete Products segment .
($ million)
Current
Land and buildings
Plant and equipment
13 Intangible assets
Accounting policy - intangible assets
(i) Goodwill
Consolidated
2018
2017
-
-
-
1 .6
0 .3
1 .9
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 2018
Cost
Accumulated amortisation
Carrying amount at 31 December 2018
Opening balance at 1 January 2018
Reclassification
Additions in current year
Amortisation charge
Closing balance at 31 December 2018
92
Consolidated
Other
Goodwill
Software
intangibles
Total
281.3
-
281.3
280.1
-
1.2
-
281.3
20.1
(12.4)
7.7
8.5
1.2
-
(2.0)
7.7
12.1
(1.6)
10.5
11.3
(0.6)
-
(0.2)
10.5
313.5
(14.0)
299.5
299.9
0.6
1.2
(2.2)
299.5
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
13 Intangible assets (continued)
($ 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
14 Impairment tests
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
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
2018
134.0
138.5
272.5
8.8
281.3
2017
134 .0
137 .3
271 .3
8 .8
280 .1
The recoverable amount of a CGU is determined based on value-in-use calculations . These calculations use cash flow projections based on 2019
financial budgets approved by the Board, external forecasts of market growth rates and expected operating margins and capital expenditure .
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
Growth rate 1
Discount rate 2
2018
%
1.4
1.2
2017
%
1 .3
1 .2
2018
%
10.8
11.6
2017
%
11 .3
12 .1
1 Weighted average growth rate used to extrapolate cash flows beyond the specific market forecast period of up to 11 years .
2 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
and other operating costs 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 .
93
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
15 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 $40 .0 million (2017: $43 .1 million) .
94
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018. 15 Provisions (continued)
($ million)
Current
Employee benefits
Restoration provisions
Workers’ compensation
Other provisions
Non-current
Employee benefits
Restoration provisions
Consolidated
2018
2017
26.8
1.5
1.1
1.0
30.4
6.7
38.5
45.2
27 .3
5 .1
0 .8
0 .6
33 .8
7 .0
38 .0
45 .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
2018
4.2
2017
4 .0
Movements in each class of provision during the financial year, other than employee benefits, are set out below .
($ million)
Opening balance at 1 January 2018
Additional provision recognised - charged to income statement
Additional provision recognised - charged to asset retirement cost
Charged to income statement - unwind of discount
Payments
Closing balance at 31 December 2018
Workers’
Restoration
Other
compensation
provisions
provisions
0.8
0 .8
-
-
(0 .5)
1.1
43.1
-
0 .1
1 .1
(4 .3)
40.0
0.6
1 .0
-
-
(0 .6)
1.0
95
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
Capital structure and risk management
16 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
Consolidated
2018
2017
-
518.7
518.7
0 .3
428 .9
428 .9
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 20 . 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
Minimum lease payments
Future finance charges
Total lease liabilities
The present value of finance lease liabilities is as follows:
Within one year
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
4.4
12.5
124.4
141.3
4 .9
14 .9
128 .9
148 .7
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 .
96
Adelaide Brighton Ltd and its controlled entities . Notes to and forming part of
the consolidated financial statements for the year ended 31 December 2018 .
17 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
Consolidated
2018
2017
650,610,606 (2017: 650,272,495) ordinary shares, fully paid
734.4
733 .1
(b) Movements in ordinary share capital
Opening balance at 1 January
338,111 shares issued under Executive Performance Share Plan (2017: 618,396)1
Closing balance at 31 December
733.1
1.3
734.4
731 .4
1 .7
733 .1
1 Ordinary shares issued under the Adelaide Brighton Limited Executive Performance Share Plan (refer Note 26) .
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up the Company in proportion to the number of and
amounts paid on the shares held . On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to
one vote and, on a poll, each share is entitled to one vote .
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital .
(d) Dividend Reinvestment Plan
Under the Dividend Reinvestment Plan (DRP), holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the
issue of new ordinary shares rather than by being paid in cash . Shares are issued under the DRP at a price determined by the Board . The operation
of the DRP for any dividend is at the discretion of the Board, which suspended the DRP in February 2015 with immediate effect, and has not been
reactivated since that time .
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern, continuing to provide returns for
shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital .
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue shares as well as
issue new debt or redeem existing debt . The Group monitors capital on the basis of the gearing ratio . Adelaide Brighton’s target gearing ratio is
25% to 45% .
The gearing ratio at 31 December 2018 and 31 December 2017 was as follows:
($ million)
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Gearing ratio
(f) Employee share scheme and options
Consolidated
2018
518.7
(93.9)
424.8
1,245.6
34.1%
Restated
2017
429 .2
(57 .6)
371 .6
1,245 .8
29 .8%
Information relating to the employee share schemes, including details of shares issued under the schemes is set out in Note 26 .
97
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
18 Dividends
($ million)
Dividends paid during the year
2017 final dividend of 16 cents (2016 - 15 .5 cents) per fully paid ordinary share, franked at
100% (2016 - 100%) paid on 13 April 2018
2018 interim dividend of 13 cents (2017 - 8 .5 cents) per fully paid ordinary share, franked at
100% (2017 - 100%) paid on 11 October 2018
Total dividends - paid in cash
Dividend not recognised at year end
The Company
2018
2017
104.0
100 .7
84.6
188.6
55 .3
156 .0
Since the end of the year the Directors have recommended the payment of a final
dividend of 15 cents (2017 16 cents) per fully paid share, franked at 100% (2017: 100%) .
The aggregate amount of the proposed final dividend to be paid on 15 April 2019, not
recognised as a liability at the end of the reporting period, is
97.6
104 .0
Franked dividend
The franked portion of the dividend proposed as at 31 December 2018 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 2019 .
($ million)
Franking credits available for subsequent financial years based on a tax rate of 30% (2017: 30%)
Consolidated
2018
123.4
2017
136 .4
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 .
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 $41 .8 million (2017: $46 .0 million) .
19 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
Reallocation to liabilities1
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
1 Certain long term equity incentives have changed and will result in a cash settled entitlement .
98
1.7
1.4
1.1
4.2
(0.3)
2.0
1.7
2.2
1.2
(1.4)
(0.2)
(0.4)
1.4
-
1.7
(0.1)
(0.5)
1.1
(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
-
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
19 Reserves and retained earnings (continued)
(b) Reserves (continued)
Nature and purpose of reserves
Foreign currency translation
Exchange differences arising on translation of foreign controlled entities and the foreign associate are recognised in other comprehensive income
as described in Note 1(c) and accumulated in a separate reserve within equity . The cumulative amount is reclassified to the income statement
when the net investment is disposed of .
Share-based payment
The share-based payment reserve is used to recognise the fair value of awards issued but not exercised . Refer Note 26 .
Cash flow hedge reserve
The cash flow hedge reserve is used to recognise the accumulated movement in fair value of instruments that qualify for hedge accounting . The
accumulated amount of a hedging instrument is transferred to the carrying value of inventory on recognition or, for hedges of items that are not
non-financial assets or non-financial liabilities, to the income statement at the time of recognising the item in the income statement .
(b) Retained earnings
($ million)
Opening balance at 1 January
Net profit for the year
Actuarial (loss) / gain on defined benefit obligation net of tax
Dividends
Closing balance at 31 December
20 Financial risk management
Financial risk management
Consolidated
2018
508.2
185.3
(0.4)
(188.6)
504.5
Restated
2017
480 .2
182 .7
1 .3
(156 .0)
508 .2
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
Consolidated
2018
2017
55.0
(56.7)
(1.7)
24 .2
(24 .2)
-
99
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
20 Financial risk management (continued)
(a) Market risk (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 2018 and 2017, 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
2018
2017
Weighted
Weighted
average
Balance
average
Balance
interest rate
$ million
interest rate
$ million
2.0%
3.1%
93.9
518.7
2 .0%
2 .83%
57 .6
428 .9
-
-
5 .51%
0 .3
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
2018
2017
Impact on
Impact on
post-tax
Impact on
post-tax
Impact on
profit
(3.6)
3.6
equity
(3.6)
3.6
profit
(3 .0)
3 .0
equity
(3 .0)
3 .0
Credit risk is managed on a Group basis using delegated authority limits . Credit risk arises from cash and cash equivalents, derivative financial
instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and
committed transactions, and financial guarantees . Financial guarantees are only provided in exceptional circumstances and are subject to approval
in accordance with the Board approved delegated authorities .
For banks and financial institutions, only independently rated parties with investment grade rating are accepted . Derivative counterparties and
cash transactions are limited to high credit quality institutions .
100
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
20 Financial risk management (continued)
(b) Credit risk (continued)
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 . The Group uses
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, which permits the use of the lifetime expected loss provision
for all trade receivables . The loss allowance provision as at 31 December 2018 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
2018
Gross
2017
Gross
Expected
Carrying
Expected
Carrying
loss rate
%
0.11
0.21
2.03
75.92
Amount
$million
Provision
$million
115.6
73.6
10.1
24.5
223.8
0.1
0.2
0.2
18.6
19.1
loss rate
%
0 .11
0 .22
2 .09
73 .26
Amount
$million
Provision
$million
125 .7
85 .8
13 .1
25 .8
250 .4
0 .1
0 .2
0 .3
18 .9
19 .5
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 $189 .0 million (2017: $200 .1 million) and joint venture receivables of $34 .8 million
(2017: $50 .3 million) .
In late 2017 the Group became aware of certain financial discrepancies which related to transactions whereby it was underpaid for products
supplied to customers . The Group has as a result recognised an additional provision of $17 .1 million in 2017 for the impairment of trade
receivables in the balance sheet in the prior period .
While the financial impact of the discrepancies has been quantified, investigations are continuing . The Company is also continuing its efforts to
recover amounts due .
(c) Liquidity risk
The ultimate responsibility for liquidity risk management rests with the Board which has established an appropriate risk management framework
for the management of the Group’s short, medium and long term funding and liquidity management requirements . The Group’s Corporate
Treasury Function manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities . Included below is a statement of
credit standby facilities that the Group has at its disposal to further reduce liquidity risk .
Financing arrangements
($ 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:
4 January 2019
6 January 2021
7 January 2022
Consolidated
2018
2017
4.0
590.0
594.0
-
520.0
520.0
4.0
70.0
74.0
-
330.0
260.0
590.0
4 .0
540 .0
544 .0
-
430 .0
430 .0
4 .0
110 .0
114 .0
210 .0
330 .0
-
540 .0
101
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
20 Financial risk management (continued)
(c) Liquidity risk (continued)
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 2018
Non-derivatives
Trade payables
Bank facilities
Finance leases
Bank guarantees
Derivatives
Gross settled forward foreign exchange
contracts (cash flow hedges):
- (inflow)
- outflow
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
< 6 months 6-12 months
1-2 years
> 2 years
Total
(Assets)/Liabilities
Carrying Amount
133.0
8.5
-
6.2
147.7
(47.5)
48.9
1.4
145 .9
6 .4
0 .3
6 .0
158 .6
(23 .8)
23 .8
-
-
8.5
-
6.5
15.0
(7.5)
7.8
0.3
-
6 .4
-
6 .3
12 .7
(0 .4)
0 .4
-
-
316.6
-
4.2
320.8
-
220.1
-
23.7
243.8
-
-
-
-
-
-
-
195 .1
-
-
195 .1
-
250 .1
-
23 .2
273 .3
-
-
-
-
-
-
133.0
553.7
-
40.6
727.3
(55.0)
56.7
1.7
145 .9
458 .0
0 .3
35 .5
639 .7
(24 .2)
24 .2
-
133.0
518.7
-
-
651.7
-
-
-
145 .8
428 .9
0 .3
-
575 .0
-
-
-
(d) Financial instruments, derivatives and hedging activity
The Company early adopted AASB 9 Financial Instruments and implemented hedge accounting during the prior period ended December 2015 .
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 9 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 .
102
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
20 Financial risk management (continued)
(d) Financial instruments, derivatives and hedging activity (continued)
(iii) Hedging instruments
Financial instruments entered into by the Group for the purpose of managing foreign currency risk associated with its highly probable inventory
purchases and electricity price risk with its highly probable electricity purchases after late August 2015 qualify for hedge accounting . Instruments
are initially recognised at fair value on the date a contract is entered into .
Changes in fair value of instruments that qualify for hedge accounting are recognised in other comprehensive income in the cash flow hedge
reserve . Amounts accumulated in the hedge reserve are recognised as part of the initial carrying amount of an asset or liability or reclassified to
the income statement, depending upon the purpose of the hedging instrument .
Refer to Note 20(a) for details of the movements in the Group’s reserves relating to hedging activities .
The effects of applying hedge accounting on the Group’s financial position and performance are as follows:
Hedging instrument - forward foreign exchange contracts
Carrying amount - $ million
Notional amount US Dollars - $ million
Notional amount Yen - $ million
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
2018
2017
1.7
53.4
1.2
0.4
Jan - Jul 2019
1:1
-
-
-
20 .6
1 .7
1 .9
Jan - Aug 2018
1:1
-
-
A$1 : US$0.7281
A$1 : Yen 82.5
A$1 : EURO$0.6438
A$1 : US$0 .7769
A$1 : Yen 87 .9
A$1 : EURO$0 .6581
The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure purposes . The carrying
amounts of financial instruments disclosed in the balance sheet approximate to their fair values . AASB 13 Fair Value Measurement requires
disclosure of fair value measurements by level of the following fair value measurement hierarchy:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities .
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly
(derived from prices) .
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) .
(i) Recognised fair value measurements
The Group measures and recognises derivatives used for hedging foreign currency risk and electricity price risk at fair value on a recurring basis .
The Group held assets in relation to forward exchange contracts of $1 .7 million (2017: assets of $0 .2 million and liabilities of $0 .2 million) at
the end of the reporting period . There were no electricity price caps in place at 31 December 2018 or 31 December 2017 . 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 receiveables, 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) .
103
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
Group structure
21 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
2018
133.9
36.6
-
36.6
2017
121 .3
33 .6
-
33 .6
2018
40.0
0.8
-
0.8
2017
39 .0
1 .5
-
1 .5
2018
173.9
37.4
-
37.4
2017
160 .3
35 .1
-
35 .1
104
Adelaide Brighton Ltd and its controlled entities . Notes to and forming part of
the consolidated financial statements for the year ended 31 December 2018 .
21 Joint arrangements and associate (continued)
(b) Interests in joint arrangements and associate
Ownership interest
2018
2017
Name
Principal place of business
Aalborg Portland Malaysia Sdn . Bhd .1
Malaysia
Batesford Quarry 2
Victoria
Burrell Mining Services JV 2
New South Wales and Queensland
E .B . Mawson & Sons Pty Ltd and
Lake Boga Quarries Pty Ltd 3
New South Wales and Victoria
Independent Cement and Lime Pty Ltd3 New South Wales and Victoria
Peninsula Concrete Pty Ltd 3
South Australia
Sunstate Cement Ltd3
Queensland
%
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 $32 .1 million (2017: $31 .3 million) .
22 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
2018
2017
%
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
105
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018. 23 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, Central Pre-Mix Concrete Pty Ltd and Hy-Tec Industries (Northern Territory) 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 Instrument and is classified as a member of the “Extended Closed Group” for the
purposes of the Instrument .
Hy-Tec Industries (Northern Territory) Pty Ltd was added to the “Closed Group” during 2018 .
Set out below is a consolidated balance sheet as at 31 December 2018 of the Closed Group .
($ million)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
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
106
2018
86.6
226.7
175.8
5.6
-
494.7
39.9
2.5
98.6
21.4
1,024.6
293.2
1,480.2
1,974.9
131.7
-
-
29.9
15.8
177.4
518.7
90.1
45.1
0.1
654.0
831.4
Restated
2017
50 .4
242 .6
166 .4
-
1 .9
461 .3
37 .3
3 .5
91 .7
21 .4
997 .4
293 .6
1,444 .9
1,906 .2
140 .9
0 .1
9 .9
33 .0
18 .3
202 .2
428 .9
84 .0
42 .4
0 .1
555 .4
757 .6
1,143.5
1,148 .6
734.4
2.2
406.9
733 .1
1 .4
414 .1
1,143.5
1,148 .6
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
23 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 2018 of the Closed Group .
($ million)
Profit before income tax
Income tax expense
Profit for the year
Retained earnings 1 January
Retained earnings - newly added entities
Profit for the year
Other comprehensive income
Dividends paid
Retained earnings 31 December
24 Parent entity financial information
2018
242.6
(65.9)
176.7
414.1
5.1
176.7
(0.4)
(188.6)
406.9
Restated
2017
237 .5
(70 .0)
167 .5
401 .3
-
167 .5
1 .3
(156 .0)
414 .1
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 .
107
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
24 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
2018
2017
2,534.8
2,932.3
1,445.9
1,999.5
932.8
2,277 .1
2,674 .6
1,298 .8
1,762 .7
911 .9
727.3
725 .9
1.4
204.1
932.8
208.9
208.9
2 .2
183 .8
911 .9
169 .1
169 .1
(b) Guarantees entered into by the parent entity
Bank guarantees
5.4
7 .4
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 31 December 2018 or 31 December 2017 other than the bank guarantees
detailed above .
25 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 .
108
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
25 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 .
(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 2018, 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 .
109
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
25 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:
($ million)
At 1 January 2018
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 2018
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
Present value of
Fair value of
Net obligation/
obligation
plan assets
(asset)
44.8
1.4
1.3
0.1
2.8
-
(0.1)
(0.1)
(0.2)
-
0.8
(4.6)
43.6
51 .4
1 .7
1 .7
0 .2
3 .6
-
(0 .3)
0 .9
0 .6
-
0 .9
(48.3)
-
(1.4)
(0.1)
(1.5)
0.8
-
-
0.8
(0.9)
(0.8)
4.6
(46.1)
(53 .7)
-
(1 .8)
(0 .2)
(2 .0)
(2 .5)
-
-
(2 .5)
(0 .9)
(0 .9)
(11 .7)
44 .8
11 .7
(48 .3)
(3.5)
1.4
(0.1)
-
1.3
0.8
(0.1)
(0.1)
0.6
(0.9)
-
-
(2.5)
(2 .3)
1 .7
(0 .1)
-
1 .6
(2 .5)
(0 .3)
0 .9
(1 .9)
(0 .9)
-
-
(3 .5)
110
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
25 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 2018
Unquoted
$ million
12.9
16.1
6.5
6.5
0.9
3.2
46.1
31 December 2017
Unquoted
in %
28%
35%
14%
14%
2%
7%
100%
$ million
12 .6
15 .4
10 .1
6 .3
1 .0
2 .9
48 .3
in %
26%
32%
21%
13%
2%
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
2018
2017
%
3.0
2.5
2.5
2.5
%
3 .3
2 .0
3 .5
3 .0
The sensitivity of the defined benefit obligation to changes in the significant assumptions is:
31 December 2018
Discount rate
Future salary increases
31 December 2017
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 .5%
Increase by 1 .1%
Increase by 1 .6%
Decrease by 1 .0%
Decrease by 1 .6%
Increase by 1 .2%
Increase by 1 .7%
Decrease by 1 .1%
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 2019 are $0 .7 million (2018: $0 .7 million) .
The weighted average duration of the defined benefit obligation is 5 years (2017: 6 years) .
111
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
26 Share-based payment plans
Accounting policy - share-based payments
Share-based compensation benefits are provided to executives via the Adelaide Brighton Limited Executive Performance Share Plan (“the Plan”
or “EPSP”) .
The fair value of Awards granted under the Plan is recognised as an employee benefit expense with a corresponding increase in equity . The fair
value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the Awards .
The fair value at grant date is independently determined using a pricing model that takes into account the exercise price, the term of the Award,
the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the Award, the share price at grant date, the expected
dividend yield and the risk-free interest rate for the term of the Award .
The fair value of the Awards granted excludes the impact of any non-market vesting conditions (e .g . earnings per share) . Non-market vesting
conditions are included in assumptions about the number of Awards that are expected to become exercisable . At each balance sheet date, the
entity revises its estimate of the number of Awards that are expected to become exercisable . The employee benefit expense recognised each
period takes into account the most recent estimate . The impact of the revision to original estimates, if any, is recognised in the income statement
with a corresponding entry to equity .
The Plan is administered by the Adelaide Brighton employee share plan trust; see Note 1(b)(ii) .
(a) Employee Share Plan
The establishment of the Adelaide Brighton Limited Employee Share Plan was approved by special resolution at the Annual General Meeting of
the Company held on 19 November 1997 . Subject to the Board approval of grants, all full time employees of the Company and its controlled
entities who have been continuously employed by the Company or a controlled entity for a period of one year are eligible to participate in the
Plan . Casual employees and contractors are not eligible to participate in the Plan .
No shares were issued under the Employee Share Plan during the year (2017 - 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 49-71 .
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
2018
2017
2,767,452
142,357
(554,824)
(338,111)
(338,108)
2,919,824
593,583
-
(618,396)
(127,559)
1,678,766
2,767,452
-
-
The average value per share at the earliest exercise date during the year was $6 .42 (2017: $5 .76) . 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 .
112
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
26 Share-based payment plans (continued)
(b) Executive Performance Share Plan (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 2018 - 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
2018 Awards
$6 .84
$0 .96
2 .30
3 .00
50%
1 May 22
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
Comparative information has been updated to reflect the most recent Award valuations undertaken by the independent valuer .
The Plan does not entitle the Participants to participate in any other share issues of the Company and the unexercised Awards do not attract
dividend or voting rights . The Group recognised share based payments expense of $1,399,867 during the year (2017: $619,965) .
The weighted average remaining contractual life of Awards outstanding at the end of the period was 1 .4 years (2017: 1 .8 years) .
113
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
Other
27 Related parties
(a) Compensation of Key Management Personnel
($ million)
Short-term employee benefits
Post employment benefits
Share-based payments
Consolidated
2018
9.0
0.1
1.2
10.3
2017
5 .3
0 .1
0 .5
5 .9
(b) Other transactions with Key Management Personnel
RD 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, the former CEO and Managing Director, and M Kelly, a senior executive of Adelaide Brighton Limited for part of the year, were
Directors of Sunstate Cement Ltd during the reporting period . G Agriogiannis and B Brown, being senior executives of Adelaide Brighton Limited
were also Directors of the Mawson Group for part of the year . 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
2018
$
2017
$
84,622,252
34,204,918
80,951,994
18,967,244
Details of interests in controlled entities are set out in Note 22 . 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 .
114
Adelaide Brighton Ltd and its controlled entities . Notes to and forming part of
the consolidated financial statements for the year ended 31 December 2018 .
27 Related parties (continued)
(e) Transactions with related parties
The following transactions occurred with related parties:
($’000)
Sales of goods
Joint venture entities
Purchases of materials and goods
Joint venture entities
Associate entities
Interest revenue
Joint venture entities
Dividend and distribution income
Joint venture entities
Superannuation contributions
Consolidated
2018
2017
328,134
307,037
116,080
10,362
115,210
6,597
742
659
25,670
26,413
Contributions to superannuation funds on behalf of employees
13,337
12,628
Loans advanced to:
Joint venture entities
(f) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the reporting date in relation to transactions with related parties:
($’000)
Current receivables
Joint venture entities (interest)
Joint venture entities (trade)
Non-current receivables
Joint venture entities (loans)
Current payables
Joint venture entities (trade)
2,958
3,125
Consolidated
2018
2017
394
34,375
313
49,977
38,032
35,049
8,847
7,997
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 $742,491 (2017: $659,420) .
28 Events occurring after the balance sheet date
No matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly affect the Group’s operations,
the results of those operations, or the Group’s state of affairs in future financial years .
29 Commitments for capital expenditure
($ million)
Capital expenditure contracted for at the reporting date but not recognised as
liabilities is as follows:
Within one year
Consolidated
2018
2017
11.1
15 .0
115
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018.
30 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:
($)
(a) Audit services
PricewaterhouseCoopers Australian firm
Audit and review of financial statements
(b) Non-audit services
PricewaterhouseCoopers Australian firm
Other assurance services
31 Contingencies
Details and estimates of maximum amounts of contingent liabilities are as follows:
($ million)
(a) Guarantees
Bank guarantees
(b) Litigation
Consolidated
2018
2017
769,416
855,313
65,900
20,550
Consolidated
2018
40.6
2017
35 .4
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 .
116
Adelaide Brighton Ltd and its controlled entities. Notes to and forming part of the consolidated financial statements for the year ended 31 December 2018. Directors’ declaration
Auditor’s independence declaration
AUDITOR’S INDEPENDENCE DECLARATION
In the Directors’ opinion:
(a) the fi nancial statements and notes set out
on pages 72 to 116 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 fi nancial position as at
31 December 2018 and of its performance
As lead auditor for the audit of Adelaide
Brighton Limited for the year ended
31 December 2018, 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 .
for the fi nancial year ended on that date;
This declaration is in respect of Adelaide
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
identifi ed in Note 23 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 23 .
Brighton Limited and the entities it
controlled during the period .
MT Lojszczyk
Partner
PricewaterhouseCoopers
Adelaide 19 March 2019
Liability limited by a scheme approved
Note 1(a) confi rms that the fi nancial
under Professional Standards Legislation .
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 former CEO and
Managing Director and Acting Chief
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
Financial Offi cer required by section 295A of
www .pwc .com .au
the Corporations Act 2001 .
This declaration is made in accordance with
a resolution of the Directors .
Zlatko Todorcevski
Chairman
Dated 19 March 2019
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
117
Independent auditor’s report to the members of Adelaide Brighton Ltd
Report on the audit of the
fi nancial report
Our opinion
In our opinion:
The accompanying fi nancial report of
Adelaide Brighton Limited (the Company)
and its controlled entities (together
the Group) is in accordance with the
Corporations Act 2001, including:
Independence
We are independent of the Group in
accordance with the auditor independence
requirements of the Corporations Act
2001 and the ethical requirements of
the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that
are relevant to our audit of the fi nancial
report in Australia . We have also fulfi lled our
other ethical responsibilities in accordance
(a) giving a true and fair view of the Group’s
with the Code .
fi nancial position as at 31 December 2018
and of its fi nancial performance for the
year then ended
(b) complying with Australian Accounting
Standards and the Corporations
Regulations 2001 .
What we have audited
The Group fi nancial report comprises:
> the consolidated balance sheet as at
31 December 2018
Our audit approach
An audit is designed to provide reasonable
assurance about whether the fi nancial
report is free from material misstatement .
Misstatements may arise due to fraud
or error . They are considered material if
individually or in aggregate, they could
reasonably be expected to infl uence the
economic decisions of users taken on the
basis of the fi nancial report .
Audit scope
> Our audit focused on where the Group
made subjective judgements; for example,
signifi cant accounting estimates involving
assumptions and inherently uncertain
future events .
> We conducted an audit of the most
signifi cant 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
fi nancially signifi cant to the fi nancial report .
> Additionally, we performed specifi c risk
focused audit procedures in relation to the
Group’s Cement and Lime component in the
Northern Territory and New South Wales,
Concrete and Aggregates components in
New South Wales, Victoria and Queensland
and Concrete Products .
> Independent Cement and Lime Pty Ltd
and Sunstate Cement Ltd were the largest
contributors to the Group’s share of net
> the consolidated statement of
We tailored the scope of our audit to ensure
profi ts from joint ventures and associates .
comprehensive income for the year
that we performed enough work to be able
Other auditors audited the fi nancial reports
then ended
to give an opinion on the fi nancial report as
for Independent Cement and Lime Pty Ltd
> the consolidated statement of changes in
a whole, taking into account the geographic
and Sunstate Cement Ltd for the year ended
equity for the year then ended
and management structure of the Group, its
30 June 2018 . We determined the level of
> the consolidated statement of cash fl ows for
accounting processes and controls and the
involvement we needed to have to be able
the year then ended
industry in which it operates .
> the notes to the consolidated fi nancial
statements, which include a summary of
Materiality
to conclude whether suffi cient appropriate
audit evidence had been obtained for our
opinion on the Group fi nancial report as
signifi cant accounting policies
> For the purpose of our audit we used overall
a whole, including reviewing the work of
> the directors’ declaration .
Group materiality of $12 million, which
these other auditors . Due to the different
Basis for opinion
represents approximately 5% of the Group’s
balance dates utilised by these joint
profi t before tax .
ventures, we performed audit procedures
We conducted our audit in accordance
> We applied this threshold, together with
for the period 1 July 2018 to (and as at)
with Australian Auditing Standards . Our
qualitative considerations, to determine the
31 December 2018, including substantive
responsibilities under those standards
scope of our audit and the nature, timing
analytical procedures over the fi nancial
are further described in the Auditor’s
and extent of our audit procedures and to
results, to obtain suffi cient evidence in
responsibilities for the audit of the fi nancial
evaluate the effect of misstatements on the
respect of the results for the year ended and
report section of our report .
fi nancial report as a whole .
fi nancial position as at 31 December 2018
We believe that the audit evidence we have
obtained is suffi cient and appropriate to
provide a basis for our opinion .
> We chose Group profi t before tax because,
for our opinion .
in our view, it is the benchmark against
which the performance of the Group is
most commonly measured .
> We utilised a 5% threshold based on
our professional judgement, noting
it is within the range of commonly
acceptable thresholds .
Outside the operations identifi ed above,
the Group includes components which
individually and collectively do not
contribute materially to the overall Group
result . We have obtained an understanding
of these operations and performed
analytical procedures .
118
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the
current period . The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters . Further, any commentary on the outcomes of a particular audit procedure is
made in that context .
Key audit matter
How our audit addressed the key audit matter
Recoverability of good will and property, plant and equipment
We evaluated the Group’s cash flow forecasts and the process
(Refer to notes 11, 13 & 14)
The financial report of the Group includes goodwill of $281 .3 million
and property, plant and equipment of $1,061 .7 million as at 31
December 2018 .
by which they were developed . We compared the 2019 forecast
to 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 note that for
the assessment in the current year, management have allocated
In order to assess recoverability of these assets, the Group prepared
financial models (hereafter, “the models”) as at 31 December 2018
corporate costs against each operating segment which has increased
the costs included in the discounted cash flow model .
to determine if the carrying values of goodwill and property, plant
and equipment were supported by forecast future cash flows,
discounted to present value .
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 have performed a sensitivity analysis on
The recoverability of these assets was a key audit matter given the
the growth rate and WACC used . No material risk of impairment was
significance of the Group’s recorded goodwill and property, plant and
identified through this assessment .
equipment balances to the financial position of the Group, and the
judgments and assumptions required in assessing the assets value in
use (including budgeted cash flows, growth rates and discount rates) .
The Group engaged an expert to assist them in determining the
discount rates applied in the impairment models . We assessed them
as Group experts, and considered their methods, competency, and
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
ensured that the WACC employed in the cashflow forecasts are
consistent with those recommended by management’s expert .
119
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Key audit matter
How our audit addressed the key audit matter
Estimation of close down and restoration provision
We assessed whether a provision was included for all sites that
(Refer to note 15)
The Group recognised restoration provisions of $40 .0 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 signifi cant
judgement to estimate future costs and to assess rehabilitation
requirements .
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
signifi cant change to the nominal cost of the provision from the
previous period, or where we would have expected there to be a
material change based on our knowledge of the business . For sites
what a signifi cant change, we have corroborated with site manager
The rehabilitation provision for sites being actively remediated is
and engineering reports to validate the change .
based on future works tendered cost estimates as well as costs to
complete the current stage of rehabilitation . For other quarries not
currently being actively remediated, the provision is determined via
the nominal cost estimate process completed annually by operational
staff based on rehabilitation requirements, current costs, and forecast
cost infl ation factors . These are then discounted in order to estimate
the net present value of the provision .
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 refl ect any new knowledge gained
from rehabilitation planned in other areas or changes in rehabilitation
requirements . The provisions for these sites were tested on initial
recognition, or since the last signifi cant change to nominal cost .
For sites being actively remediated, we compared the movement
in the provision recognised, with the actual costs of the work
performed during the period . To assess the Group’s ability to estimate
accurately for provision of areas still to be remediated, we also
compared previous period’s estimates of costs to the actual costs,
based on the area of required remediation .
Key audit matter
How our audit addressed the key audit matter
Measurement of stockpiled inventory
(Refer to note 10)
Of the Group’s $176 .4 million of recorded inventory on hand at
31 December 2018, $63 .4 million comprised raw materials and work
in progress .
Raw materials and work in progress inventory is typically stockpiled
prior to consumption or sale . The measurement of these inventories
is a key audit matter as the measurement of inventory quantities for
We assessed the independent surveyors as Group experts, and for
each expert considered the surveyor’s method, competency and
objectivity . We were satisfi ed that we could use their work for the
purpose of our audit .
We obtained and inspected the survey results for material stockpiled
inventory locations . We reperformed the Group’s conversion of the
quantities identifi ed from the surveyors’ reports to tonnages using
the Group’s density factors .
stockpiled inventory is complex . The Group relies on independent
We compared the density factors used to results of the Group’s
surveyors to perform volumetric surveys to estimate the quantity
internal laboratory testing that occurred during the year and to prior
stockpiled for these inventory types . Survey quantity results, which
year density factors for the same raw material, where available . Given
are reported in cubic metres, are converted to tonnages using
the nature of the inventory, the density factors do not usually vary
density factors .
signifi cantly year on year . We identifi ed no signifi cant changes in
these factors in the current year or other factors which would require
a change .
120
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018 .
Other information
Responsibilities of the directors
Report on the remuneration report
The directors are responsible for the
for the financial report
other information . The other information
The directors of the Company are
Our opinion on the remuneration report
We have audited the remuneration report
comprises the information included in
responsible for the preparation of the
included in pages 49 to 71 of the directors’
the annual report for the year ended 31
financial report that gives a true and
report for the year ended 31 December 2018 .
December 2018, but does not include the
fair view in accordance with Australian
financial report and our auditor’s report
Accounting Standards and the Corporations
thereon . Prior to the date of this auditor’s
Act 2001 and for such internal control as
report, the other information we obtained
the directors determine is necessary to
included the Company Profile and Map
enable the preparation of the financial
of Operations, Chairman’s Report, Chief
report that gives a true and fair view and is
Executive Officer and Managing Director
free from material misstatement, whether
Review, Finance Report, Cement and Lime
due to fraud or error .
Report, Concrete and Aggregates Report,
Concrete Products Report, Joint Ventures
Report, Sustainability Report, Health and
Safety Report, People and Diversity Report,
Tax Transparency Report, Diversity Report,
Corporate Governance Overview, Directors
Summary and Information for Shareholders .
We expect the remaining other information
to be made available to us after the date of
this auditor’s report .
Our opinion on the financial report does not
cover the other information and we do not
In preparing the financial report, the
directors are responsible for assessing the
ability of the Group to continue as a going
concern, disclosing, as applicable, matters
related to going concern and using the
going concern basis of accounting unless
the directors either intend to liquidate the
Group or to cease operations, or have no
realistic alternative but to do so .
Auditor’s responsibilities for the
audit of the financial report
and will not express an opinion or any form
Our objectives are to obtain reasonable
of assurance conclusion thereon .
In connection with our audit of the financial
report, our responsibility is to read the other
information and, in doing so, consider
whether the other information is materially
inconsistent with the financial report or
our knowledge obtained in the audit, or
otherwise appears to be materially misstated .
assurance about whether the financial
report as a whole is free from material
misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes
our opinion . Reasonable assurance is a high
level of assurance, but is not a guarantee
that an audit conducted in accordance
with the Australian Auditing Standards
will always detect a material misstatement
If, based on the work we have performed
when it exists . Misstatements can arise from
on the other information that we obtained
fraud or error and are considered material if,
prior to the date of this auditor’s report,
individually or in the aggregate, they could
we conclude that there is a material
reasonably be expected to influence the
misstatement of this other information, we
economic decisions of users taken on the
are required to report that fact . We have
basis of the financial report .
nothing to report in this regard .
A further description of our responsibilities
When we read the other information not
for the audit of the financial report is
yet received, if we conclude that there is
located at the Auditing and Assurance
a material misstatement therein, we are
required to communicate the matter to
Standards Board website at:
http://www .auasb .gov .au/auditors_
the directors and use our professional
responsibilities/ar1 .pdf . This description
judgement to determine the appropriate
forms part of our auditor’s report .
action to take .
In our opinion, the remuneration report
of Adelaide Brighton Limited for the year
ended 31 December 2018 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 19 March 2019
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
121
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Financial history
Year Ended
Dec
Dec 1
Dec
Dec
Dec 2
Dec
Dec 3
Dec
Dec
Dec
Dec
Dec
Dec
(A$ million unless stated)
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
Statements of financial
performance
Sales revenue
Depreciation, amortisation
1,630 .6 1,559 .6 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
and impairments
(87 .4)
(82 .5)
(78 .1)
(77 .8)
(75 .0)
(70 .6)
(65 .2)
(57 .8)
(52 .8)
(56 .8)
(56 .8)
(52 .4)
(51 .8)
Earnings before interest and tax
265 .4 267 .6 266 .1
298 .6
247 .5
222 .7
222 .1
219 .83 216 .2
185 .3 189 .1 171 .3
148 .8
Net interest earned (paid)
(14 .4)
(12 .1)
(11 .5)
(13 .0)
(15 .0)
(14 .1)
(14 .6)
(17 .0)
(14 .0)
(16 .7)
(33 .8)
(21 .7)
(15 .2)
Profit before tax, abnormal
and extraordinary items
251 .0
255 .5 254 .6
285 .6
232 .5
208 .6
207 .5
206 .4
202 .2
168 .6 155 .3
149 .6
133 .6
Tax expense
(65 .8)
(72 .7)
(68 .4)
(77 .8)
(59 .9)
(57 .5)
(54 .6)
(58 .0)
(50 .8)
(45 .4)
(34 .5)
(35 .7)
(31 .0)
Non-controlling interests
0 .1
(0 .1)
(0 .1)
0 .1
0 .1
-
0 .1
-
0 .1
(0 .1)
-
-
(0 .5)
Net profit after tax
attributable to members
185 .3 182 .7
186 .3
207 .9
172 .7
151 .1
153 .0
148 .4
151 .5
123 .1 120 .8
113 .9
102 .1
Group balance sheet
Current assets
500 .6
474 .8 390 .1
403 .1
387 .4
390 .2
363 .7
307 .8
274 .1
308 .8 290 .8
233 .1
224 .7
Property, plant and equipment
1,061 .7 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
Receivables
Investments
Intangibles
39 .9
37 .3
34 .4
32 .9
32 .7
31 .4
29 .6
173 .9
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
299 .5
299 .9 270 .3
272 .9
266 .4
183 .9
184 .8
183 .0
179 .1
169 .0 169 .4
164 .4
164 .6
Other non-current assets
2 .5
3 .5
2 .3
1 .3
0 .0
0 .0
3 .5
0 .0
0 .0
0 .0
0 .0
2 .7
22 .9
Total assets
2,078 .1 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
Current borrowings and creditors
144 .7
159 .2 117 .4
123 .9
122 .7
105 .4
115 .0
99 .2
106 .4
106 .5
Current provisions
34 .6
49 .0
50 .6
55 .4
44 .2
105 .8
78 .5
34 .5
52 .6
55 .4
98 .4
44 .5
145 .5
125 .8
49 .5
54 .1
Non-current borrowings
518 .7
428 .9 309 .6
329 .5
390 .1
259 .1
299 .3
258 .7
150 .2
200 .5 410 .5
281 .9
210 .7
Deferred income tax and other
non-current provisions
134 .5
130 .1 129 .0
122 .4
126 .9
101 .6
114 .4
116 .7
88 .4
95 .6 102 .8
94 .3
109 .1
Total liabilities
Net assets
Share capital
Reserves
Retained pofits
832 .5
767 .2 606 .6
631 .2
683 .9
571 .9
607 .2
509 .1
397 .6
458 .0 656 .2
571 .2
499 .7
1,245 .6 1,245 .8 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
734 .4
733 .1 731 .4
729 .2
727 .9
699 .1
696 .6
694 .6
692 .7
690 .4 540 .4
514 .0
513 .3
4 .2
1 .9
2 .9
1 .2
3 .3
4 .3
2 .1
2 .3
2 .6
2 .9
3 .5
14 .5
13 .3
504 .5
508 .2 483 .3
474 .3
402 .8
355 .6
304 .4
257 .3
236 .0
200 .6 155 .0
136 .4
139 .8
Shareholders’ equity attributable
to members of the Company
1,243 .1 1,243 .2 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
Non-controlling interests
2 .5
2 .6
2 .5
2 .6
2 .7
2 .8
2 .8
2 .9
3 .0
3 .1
3 .0
3 .0
8 .6
Total shareholders’ funds
1,245 .6 1,245 .8 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
Share information
Net Tangible Asset Backing
($/share)
Return on funds employed (%)
1 .45
16 .1
1 .46
16 .7
Basic earnings per share (¢/share)
28 .5
28 .1
Diluted earnings (¢/share)
Total dividend (¢/share) 4
Interim dividend (¢/share) 4
28 .4
28 .0
9 .0
28 .0
24 .5
8 .5
1 .46
17 .5
28 .7
28 .6
28 .0
8 .5
Final dividend (¢/share)4
11 .0
12 .0
11 .5
11 .0
Special dividend (¢/share)4
Gearing (%)
8 .0
34 .1
4 .0
29 .8
8 .0
8 .0
1 .44
1 .34
1 .38
1 .29
1 .22
19 .8
32 .0
31 .9
27 .0
8 .0
17 .7
26 .9
26 .8
17 .0
7 .5
9 .5
-
17 .0
23 .7
23 .4
19 .5
7 .5
9 .0
3 .0
18 .0
24 .0
23 .8
16 .5
7 .5
9 .0
-
19 .4
23 .3
23 .2
16 .5
7 .5
9 .0
-
1 .19
20 .0
23 .9
23 .7
21 .5
7 .5
9 .0
5 .0
1 .15
17 .3
20 .4
20 .3
13 .5
5 .5
8 .0
-
0 .97
18 .0
22 .2
22 .0
15 .0
6 .5
8 .5
-
0 .93
0 .94
18 .1
16 .7
21 .0
18 .8
20 .8
16 .4
18 .5
18 .5
6 .0
9 .0
3 .5
5 .0
7 .5
6 .0
23 .6
24 .6
31 .6
23 .4
30 .9
26 .0
15 .9
19 .6
55 .3
48 .4
33 .6
1 Restated for changes to accounting policies (Note 1 (b) to Financial Statements)
3 Restated for changes to accounting policies (Note 42 to the 2013 Financial Statements)
2 Restated for final acquisition accounting values for businesses purchased in 2014
4 Fully franked
122
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018. Information for shareholders
Annual general meeting
Direct credit of dividends
On market buy back
The annual general meeting of
shareholders will be held at the
InterContinental, North Terrace,
Adelaide, South Australia on
Friday 10 May 2019 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
Communications
Our internet site www .adbri .com .au
offers access to our ASX
announcements and news releases
as well as information about our
operations .
9 .06
8 .82
8 .43
7 .46
1 .53
1 .26
1 .18
1 .05
0 .61
0 .56
0 .46
0 .35
0 .25
0 .23
0 .20
0 .18
0 .17
0 .16
0 .15
At 26 March 2019 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 26 March 2019
Shareholder
Barro Properties Pty Ltd
Barro Group
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
JP Morgan Nominees Australia Limited
No. of
ordinary
shares held
% of
issued
capital
215,285,359
33 .03
59,022,619
57,489,902
54,944,172
48,609,996
Citicorp Nominees Pty Ltd
9,981,295
National Nominees Limited
Argo Investments Ltd
Australian Foundation Investment Company Limited
8,229,296
7,681,385
6,822,000
BNP Paribas Nominees Pty Ltd
3,969,720
Ageflow Pty Ltd
Milton Corporation Limited
Sandhurst Trustees Ltd
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited - A ./C2
3,630,000
2,978,554
2,312,480
1,636,132
1,500,207
IOOF Investment Management Limited
1,330,156
Djerriwarrh Investments Limited
Mirrabooka Investments Limited
1,145,000
1,120,000
HSBC Custody Nominees (Australia) Limited - GSCO ECA
1,079,705
Diversified United Investment Limited
1,000,000
Total top 20 shareholders
Total remaining shareholders balance
489,767,978
75.15
161,955,149
24.85
Voting rights
All shares at 26 March 2019 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 26 March 2019 No. of shareholders
% of issued capital
1 - 1,000
4,594
0 .34
1,001 - 5,000
10,015
4 .27
5,001 - 10,000
4,063
4 .62
10,001 - 100,000
3,197
11 .11
100,001 - over
140
79 .66
Total shareholders
22,009
100.00
Less than a marketable parcel of 112 shares
828
Substantial shareholders
Unquoted securities
Barro Properties Pty Ltd, by a notice
of change of interests of substantial
shareholder dated 12 September
2018, informed the Company that
it or an associate had a relevant
interest in 279,710,424 ordinary
shares or 43 .0% of the Company’s
issued share capital .
1,678,766 Awards issued to 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 six .
123
Adelaide Brighton Ltd and its controlled entities for the year ended 31 December 2018.
1
2
3
5
8
10
12
14
16
18
26
28
30
32
34
36
37
39
49
72
73
74
75
76
77
80
89
96
104
114
117
117
118
122
123
Performance summary
Company profile and map of operations
Chairman’s report
Chief Executive Officer review
Finance report
Cement and Lime
Concrete and Aggregates
Concrete Products
Joint Ventures
Sustainability report
> Health and safety
> People and diversity
> Diversity report
> Tax transparency report
Corporate governance overview
Directors
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
> Financial performance overview
> Balance sheet items
> Capital structure and risk management
> Group structure
> Other
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report to the Members of Adelaide Brighton Ltd
Financial history
Information for shareholders
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
This report is printed by an independently audited
carbon neutral printer on 100% post consumer
recycled carbon neutral manufactured stocks
accredited by the Forest Stewardship Council R
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.
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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