INVESTING IN
THE FUTURE
A NNU A L R E P OR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
I
CONTENTS
Our business at a glance
Chairman’s report
CEO 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
Executive team
Board of Directors
Financial statements
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05
10
12
14
16
18
20
34
36
39
42
44
46
48
ALWAYS
READY
We are a construction materials and industrial minerals
manufacturing and distribution business. We're dedicated
to delivering high performance products on time, every time.
We provide the cement, lime, aggregates, concrete and concrete
products that have been used to help build a better Australia
since 1882.
Our assets are strategically located close to raw material sources
and in locations well-positioned to support our customers.
When our customers need us, we’re always ready.
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II
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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HOME
OUR BUSINESS
AT A GLANCE
CHAIRMAN’S
REPORT
ON BEHALF OF THE BOARD, IT IS MY PLEASURE TO PRESENT YOU WITH THE 2019 ANNUAL REPORT
FOR ADELAIDE BRIGHTON, MY FIRST AS CHAIRMAN OF YOUR COMPANY.
In May 2019, I took on the role as Chairman of the Board with
Zlatko Todorcevski taking the role as Lead Independent Director
and Deputy Chair. As a long-standing Board member and
shareholder, it is with great pride that I take on this position.
The business remains robust and management remain focused
on delivering on the things we can control. Operational efficiencies
and improvements are critical to remaining cost competitive on a
global scale and these remain key areas of management focus.
Adelaide Brighton is a great Company with a great future and I
feel privileged to serve all shareholders in this role.
CAPITAL MANAGEMENT
The Board’s approach to capital management ensures that the
Group maintains an efficient balance sheet whilst also providing
flexibility for growth. In 2019, a $900 million refinancing program
was delivered to increase and diversify the Group’s available debt
funding facilities.
IN THE MINERAL
PROCESSING SECTOR
#1 LIME PRODUCER
#2 CEMENT AND CLINKER
SUPPLIER TO THE
CONSTRUCTION SECTOR
PRODUCTS
MANUFACTURER
#1 CONCRETE
#4 CONCRETE AND
AGGREGATES
PRODUCER
44 QUARRIES
95 CONCRETE PLANTS
16 CEMENT AND LIME
FACILITIES AND DEPOTS
10 CONCRETE PRODUCT
FACILITIES
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A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
In 2019, your Company reported net profit after tax of
$47.3 million and basic earnings per share of 7.3 cents.
The decline in the construction materials market presented many
challenges for the Company in 2019. The Group is responding to
these challenges and remains in a strong financial position to
deliver sustainable profits and returns to our shareholders over
the long-term.
MARKET CHALLENGES
In 2019, demand for residential construction weakened in
response to declining consumer confidence and low wages
growth, exacerbated by an oversupply in multi-residential
markets in a number of Australian states. Cuts to the official cash
interest rate by the Reserve Bank of Australia (RBA) have not
yet been effective in providing an impetus to increase consumer
confidence and demand and indeed appear to have had the
reverse effect on the Australian economy in general in the short-
term. Access to capital for home buyers has slowed and reduced,
as banks respond to the recommendations of the Haynes Banking
Royal Commission and APRA's increased prudential oversight of
residential mortgage lending.
Having said that, the medium to long-term outlook for Australian
population growth and infrastructure spend are expected to
support long-term demand for our products. This, combined with
the Group’s competitive cost position and high quality asset base,
provide a strong foundation for the business to continue to deliver
superior returns to shareholders over the longer term.
RESULT
Reflective of the external market conditions, the Group reported
Net Profit After Tax attributable to members of the Company
(NPAT) of $47.3 million and Underlying NPAT of $123.0 million –
which was in line with our profit guidance. Increased competition
and softer demand for construction materials on Australia’s
eastern seaboard also impacted revenue and earnings. Cost
pressures across sea freight, transport and raw materials also
drove down margins during the period.
In response to cost pressures, the Group is undertaking a
major cost-out initiative which is expected to reduce costs by
approximately $30 million. However, cost headwinds in 2020,
driven by sea freight, labour, energy and clinker costs, are
expected to partially offset this saving.
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RAYMOND BARRO
CHAIRMAN
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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HOME
C H A I R M A N ’S R E P O R T
The Group continues to apply a sustainable dividend policy, which is
predicated on returning surplus capital to shareholders, taking account
of the market outlook and maintenance and growth capital needs of
the business.
Consequently, your Board have recommended a fully franked
dividend of 5.0 cents per share.
During 2019, members of the Board visited almost 20 of our
operational facilities. On a personal note, I always find these visits
invigorating. Particularly with the depth of demonstrated talent on
show at each site visit. On behalf of your Directors, I would like to
acknowledge and thank our employees for their dedicated efforts
to Adelaide Brighton’s long-term success.
CEO
REVIEW
On behalf of the Board, I would like to thank our customers, joint
venture partners and suppliers for their continued support of our
business. We thank the members of the communities in which we
operate, governments and regulatory bodies for your feedback and
support which will help ensure our business remains sustainable.
We look forward to working closely with each of you and invite
you to spend more time with us to build better mutually beneficial
partnerships.
Finally, to our shareholders, we thank you for your continued
support, during what has been a challenging year. The Executive
team and all of our people are focused on driving long-term
sustainable growth and returns for all of our shareholders.
FINANCIAL SUMMARY
19 18
$ M
$ M
Revenue
1,517.0
1,630.6
Earnings before interest, tax, depreciation
and amortisation ("EBITDA")
Depreciation, amortisation and impairments
Earnings before interest and tax ("EBIT")
Net finance cost1
Profit before tax
Tax expense
Net profit after tax
Non-controlling interests
Net profit attributable to members
Underlying EBITDA
Underlying EBIT
Underlying net profit after tax
Underlying net profit after tax excluding
property
Basic earnings per share (“EPS”) (cents)
Underlying EPS (cents)
Ordinary dividends per share -
fully franked (cents)
Special dividends per share -
fully franked (cents)
Net debt2 ($ million)
Leverage ratio3 (times)
Gearing4 (%)
Return on funds employed5 - underlying (%)
271.6
(189.7)
81.9
(18.5)
63.4
(16.2)
47.2
0.1
47.3
280.0
186.4
123.0
123.0
7.3
18.9
5.0
-
423.3
1.5
35.4
11.2
352.8
(87.4)
265.4
(14.4)
251.0
(65.8)
185.2
0.1
185.3
360.9
273.5
191.0
190.1
28.5
29.4
20.0
8.0
424.8
1.2
34.1
16.6
1
2
3
4
5
Net finance cost is the net of finance costs shown gross in the income statement with
interest income included in other income
Net debt is calculated as total borrowings less cash and cash equivalents
Leverage ratio is net debt / trailing 12 month underlying EBITDA
Gearing is net debt / equity
Return on funds employed is underlying EBIT / average monthly funds employed
BOARD COMPOSITION AND RENEWAL
Your Board recognise the importance of effective independent
oversight, in line with ASX Corporate Governance Council
recommendations. Consequently, the Board maintains a majority
of independent directors and is governed by a framework which
includes protocols to handle potential conflicts of interests
between the Barro Group and Adelaide Brighton.
In May 2019, Rhonda Barro was appointed to the Board as a Non-
Independent Non-executive Director. Rhonda has over 40 years’ in
the construction materials industry and executive management
experience in line and functional areas. She is highly regarded for
her skills in maximising the effectiveness of the strategies and
structures across the Barro Group. Her breadth of experience also
extends to a true insight and appreciation of the issues that face
business leaders today.
In October 2019, Arlene Tansey retired from the Board following eight
years as an Independent Director, serving at various times as Chair of
the Audit Risk and Compliance Committee and Chair of the formerly
titled Nomination Remuneration and Governance Committee. The
Board thanks Arlene for her great service to the Company.
Emma Stein was appointed in October 2019 as an Independent
Non-executive Director. Ms Stein has over 30 years’ experience
in board and senior executive positions in the building materials,
oil and gas, energy and utilities, mining and resources, water and
waste management sectors. Prior to emigrating to Australia,
she was UK Managing Director for Gaz de France Energy, a major
energy retailer focused on industrials.
The appointments of Rhonda and Emma bring a wealth of industry-
specific experience to our Board and improve the balance between
operational and financial skills, as well as gender diversity.
SUSTAINABILIT Y
Your Board continues to respond to the increasing expectations
of stakeholders in relation to sustainability matters such
as environment and climate change, diversity and inclusion,
community and social responsibilities. We recognise that our
licence to operate is contingent on our continued good corporate
citizenship, which we never take for granted.
We continue to invest in a culture of improvement when it comes
to our environmental and social responsibilities and our interactions
and impacts on the communities in which we operate.
In 2019, we focused on key strategic priorities including: the
introduction of a Group-wide Sustainability Framework; the design
of a roadmap for the implementation of the Task Force on Climate-
related Financial Disclosures (TCFD) recommendations; and the
incorporation of additional environmental management software
capability to improve the management of the Group’s environmental
data, emissions reporting and compliance obligations.
STAKEHOLDER ENGAGEMENT
Your Board stays connected with the business and the people
who run it. Board meetings are rotated from state to state and
routinely include visits to our operations. These visits provide
great insights into the culture and operational effectiveness of the
organisation. The Board is particularly focused on demonstrating
visible leadership in safety, diversity and inclusion and also use
these visits to gauge talent for future succession.
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IT IS A GREAT PRIVILEGE TO LEAD ADELAIDE BRIGHTON – A COMPANY WITH A DEEP AND RICH HISTORY
OF DELIVERING FOR ITS STAKEHOLDERS. WE ARE PROUDLY AUSTRALIAN AND HAVE BEEN INTEGRAL
TO THE CONSTRUCTION AND GROWTH OF AUSTRALIA SINCE 1882. OUR ASSET BASE IS UNIQUE, AND
WE ARE WELL-POSITIONED FOR GROWTH. I AM PLEASED TO PRESENT THE 2019 ANNUAL REPORT AS
CHIEF EXECUTIVE OF ADELAIDE BRIGHTON.
Input costs into cement and concrete continued to rise during the
period and are forecast to increase further in 2020. In particular,
gas and electricity costs, shipping costs and raw materials
including clinker and aggregates. The Group continues to focus on
productivity gains and cost-out initiatives in areas where it can
exercise cost control, to mitigate this risk.
2019 has been a year of major change in Adelaide Brighton.
The Adelaide Brighton team is tackling the challenges of a
dynamic market head on, focusing on the things we can control
and responding quickly to the changes the market presents.
HEALTH & SAFET Y
Our people are our most important asset and I am proud to report
a significant improvement in safety. A keen focus of the Group’s
Safety ‘Step Change’ Program has seen our Total Recordable Injury
Frequency Rate (TRIFR) improve by 36%. ‘Step Change’ is a four-
part program which addresses the incidence of harm and risk of
high potential incidents, incorporates visible leadership, critical risks
and life-saving rules. The program has also introduced technology
to support live reporting of hazards and has updated and improved
training programs for frontline leadership.
YOUR EXECUTIVE TEAM
The Executive team has come together seamlessly following
a number of departures in 2018 and is working together
collaboratively to build a more sustainable business. In 2019, we
welcomed the arrival of Theresa Mlikota as Chief Financial Officer
and Tarmo Saar as Executive General Manager Strategic Projects.
In 2020, we will also welcome Rebecca Irwin, who will lead
Corporate Affairs and Sustainability. Rebecca is a seasoned
professional who will bring a renewed focus to our environmental,
climate change and sustainability agenda. Rebecca is a qualified
lawyer and has over 20 years’ experience across public and
private sectors, with a strong background in stakeholder
management.
CONSTRUCTION MATERIALS MARKET 2019
In 2019, construction materials markets weakened significantly
on the eastern seaboard of Australia – particularly in Queensland
and New South Wales – driven by an oversupply of multi-residential
dwellings, and a reduction in general consumer confidence which
was further exacerbated in regional areas by bushfires in late 2019.
We expect demand on the east coast of Australia to improve
in 2021, with the benefit of stimulus from fiscal and monetary
policy measures. The Group will continue to build out its vertically
integrated position in the interim, to ensure it takes full advantage
of this future view.
THE ADELAIDE BRIGHTON TEAM IS
TACKLING THE CHALLENGES OF A
DYNAMIC MARKET HEAD ON.
NICK MILLER
CHIEF EXECUTIVE OFFICER
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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HOME
C E O R E V I E W
C E O R E V I E W
WE EXPECT DEMAND ON THE EAST
COAST OF AUSTRALIA TO IMPROVE
IN 2021, WITH THE BENEFIT OF
STIMULUS FROM FISCAL AND
MONETARY POLICY MEASURES.
Lime sales volumes were relatively stable across Australia,
supported principally by demand from resource projects and
the Inland Rail project in NSW. Alumina sector sales remained
stable compared with 2018.
We expect demand for both lime and cement to continue to
grow in the Western Australian market in 2020.
In spite of lower volumes and the entry of a new cement
distributor into the Brisbane market, average selling prices for
cement and concrete increased marginally in both Queensland
and New South Wales. Prices for concrete products and
aggregates reduced marginally in these two markets.
Victorian and South Australian volumes were relatively stable
– supported by ongoing demand for industrial and commercial
buildings in Victoria and infrastructure projects in Adelaide.
Increased competition in the South Australian market resulted
in a reduction in average selling price for concrete and cement.
Selling prices for aggregates in the South Australian market
remained robust with the benefit of ongoing supply into the
Northern Connector project.
Northern Territory ready mix volumes were lower in 2019.
However, cement demand remained stable, supported by
increased demand from the resources sector and the benefit
of sales into the Queensland market as a result of transport
disruptions to normal supply lines.
Western Australian cement volumes increased, largely in
response to increased demand from the resources sector,
driven by the commencement of new underground gold and
nickel projects and development activities in iron ore.
FINANCIAL RESULTS
In 2019, a deterioration in residential demand across the eastern
seaboard and a loss of market share in South Australia, resulted
in Group revenues being 7.0% lower than 2018, decreasing by
$113.6 million.
Underlying net profit after tax decreased to $123.0 million which
was in line with market guidance.
Margins were impacted by lower sales volumes and net selling
price into the South Australian market following the emergence of
a new cement competitor. This forced the redistribution of some
cement volumes into the Victorian market, which in turn displaced
cement imports and resulted in significantly lower revenue and
higher costs, due to late cancellation of shipping, which severely
impacted margins.
Margins were further impacted by lower volumes in the New
South Wales and Queensland markets which were impacted by an
oversupply of multi-residential dwellings and the slower start-up
of anticipated infrastructure projects. Lower volumes resulted in
higher unit costs, particularly in relation to concrete transport and
corporate overheads. Variable costs were also higher, including
fuel, energy and raw material input costs, particularly clinker and
purchased aggregates.
Joint venture operations were similarly impacted, recording
reduced returns across all ventures, with the exception of Aalborg
which benefited from increased local demand in the Southeast
Asian region.
REVENUE*
$M
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
NET PROFIT
AFTER TAX
$M
EARNINGS
PER SHARE
CENTS
DIVIDENDS
CENTS
210
180
150
120
90
60
30
0
35
30
25
20
15
10
5
0
30
25
20
15
10
5
0
5
1
0
2
6
1
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2
7
1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
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2
7
1
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2
8
1
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2
9
1
0
2
5
1
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2
6
1
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2
7
1
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2
8
1
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2
9
1
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2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
*Prior year (2015-2017) revenue numbers
have been restated to accord with the
adoption of AASB15
Reported
Underlying
Reported
Underlying
Ordinary interim dividend
Ordinary final dividend
Special dividend
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36%
IMPROVEMENT IN TRIFR.
REFLECTING A RENEWED
FOCUS AND DEVELOPMENT
OF OUR SAFETY CULTURE.
50%
TARGET OF KILN FUEL TO
COME FROM REFUSE DERIVED
FUEL (RDF) SOURCES AT
OUR BIRKENHEAD PLANT.
350 THOUSAND TONNES OF ANNUAL
PRODUCTION EXPECTED AT OUR
SCOTCHY POCKET QUARRY,
WHICH WILL SERVICE GROWTH IN
THE SUNSHINE COAST MARKET.
Reported NPAT of $47.3 million includes one-off significant items
totalling $75.7 million after tax, which includes impairment,
former Managing Director retirement costs, retention payments,
restructuring costs and the write-off of old debt facility
establishment costs.
Key operational highlights for the period included:
Δ
A major improvement in safety with our TRIFR improving
by 36%, reflecting a renewed focus and development of our
safety culture.
Δ Operations commenced at our Scotchy Pocket quarry in July
2019, which is expected to deliver up to 350,000 tonnes of
annual production and will service growth in the Sunshine
Coast market.
Δ
Substantially completed the construction of the Pinkenba
concrete plant which is anticipated to open in 1Q20 to service
the Brisbane market.
Δ Our cement and lime team delivered three key improvement
projects which will increase productivity and reduce unit
costs, being the commissioning of the Kwinana packaging
plant, upgrades of the drymix plant and limestone stacker at
Birkenhead.
Δ
The Group reached a 1,000,000 tonne milestone for use
of Refuse Derived Fuel (RDF) at our Birkenhead plant,
having redirected waste from landfill. In this instance, our
commitment to reducing greenhouse gas emissions is entirely
complementary to our focus on reducing costs.
We are now targeting for up to 50% of our kiln fuel to come
from refuse derived energy sources.
Δ Our concrete products team commenced a rollout of their
solar initiative, with the installation of a 99Kw system at the
Townsville site, with the aim of installing 1Mw of solar capacity
in 2020.
Δ
A $900 million refinancing package was established extending
maturities to between 5-10 years, expanding our financier
pool, reducing refinancing risk and increasing our flexibility
for growth.
REVENUE BY
PRODUCT GROUP
REVENUE BY
MARKET
REVENUE BY
STATE
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Concrete and aggregates 41%
Cement
Lime
Concrete products
38%
11%
10%
Non-residential &
engineering
Residential
Mining operations
50%
32%
18%
Western Australia
South Australia
Victoria
New South Wales
Queensland
Other
19%
16%
24%
20%
16%
5%
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C E O R E V I E W
LONG-TERM OUTLOOK
Vertical integration
The outlook for Government infrastructure spend remains
very strong. Whilst projects have been a little slow in coming to
market, we anticipate an increase in activity in 2021. The Company
will target projects where it is vertically integrated and has a
positional cost advantage, particularly projects in Queensland,
New South Wales, South Australia and Victoria, which we expect
will come to market in 2020.
Looking forward, the Company will continue to pursue growth
in its downstream businesses. In early 2020, the Company will
commission our Pinkenba plant in south-east Queensland, which
will service the Brisbane market. In mid-2019, our Scotchy
Pocket Quarry was commissioned and we expect to build out
our volumes from this location to service the growing Sunshine
Coast market.
Structurally, the cement market has seen increased competition
with the emergence of a number of new distributors introducing
additional import terminal capacity, including Southern Cross
Cement in the Queensland market, SA Premium Cement in the
South Australian market and the likely development of a third
import terminal in Port Kembla NSW in the next 24 months.
We are also in the process of developing land recently secured
in the Badgerys Creek area for the establishment of another
concrete plant in the Greater Western Sydney region, which
will enable us to provide this market with a fully integrated
competitive offering given the near proximity of our Hartley Quarry
and Port Kembla cement distribution facility.
Lower interest rates, the prospect of early delivery of further tax
cuts and ongoing spending on infrastructure, are likely to deliver
stabilisation in construction materials markets in 2021. This, in
combination with expected population growth and a stronger
outlook for the resources sector, is expected to deliver a stronger
long-term outlook for Adelaide Brighton.
The Group continues to invest to ensure we maintain a
sustainable business model, which includes the need to operate
in an environmentally and socially responsible manner. To this
end, the Group is well-progressed with its corporate and social
responsibility programs and has a comprehensive plan in relation
to its environmental commitments which are detailed further in
this Annual Report.
STRATEGY
Cost reduction and operational improvement
Remaining cost competitive and customer focused in an
increasingly competitive landscape are critical to the long-term
sustainability of the Company. A geographically diverse portfolio
of assets provides Adelaide Brighton with a better cyclical balance
to earnings and an ongoing focus on building out its downstream
position will help further protect the Company’s earnings base.
Cost headwinds continue to present us with key challenges.
However, our focus on operational efficiency and scale will help
maintain the competitive cost position we enjoy in the Australian
market. Our cost-out program is expected to deliver cost savings
exceeding $30 million to counter $20 million in cost headwinds
expected in 2020.
Technology and the application of capital to make our operations
more cost efficient will help support the cost advantage we enjoy
against local competitors and imports.
Land development
We intend to exploit more fully, our land development
opportunities, to establish another earnings stream for the
business over the medium to long-term. Surplus land holdings
have been identified and are being prepared for sale, and we
are currently exploring partnerships with established property
developers to evaluate our land portfolio and its higher value use
options. We are also working with the Geelong City Council on two
excellent opportunities to develop the Batesford Quarry and the
Company’s ‘Hilltop’ land both close to the City of Geelong.
Grow lime business
We will seek to grow our lime business on the back of resource
growth opportunities. Growth in gold and nickel production
represent great prospects to increase our earnings, particularly in
Western Australia where investment in exploration is increasing.
Prospects for growth in alumina are tied to expansion options being
considered by our customers which will increase demand for lime.
Our lime production is low cost against imports, which is critical to
our product offering remaining competitive. We are also exploring
investment in beneficiation processes to increase the quality of our
lime products to enhance and maintain our competitive position
over the longer term.
Sustainability
Improving energy efficiency and reducing our carbon footprint
remain a key focus for our business. We are a large consumer of
energy and energy-intensive raw materials and continue to look
for innovative ways to neutralise our footprint. To that end, we
continue to increase our use of alternative fuels (RDF, waste oils)
and alternative cementitious materials (steel slag and fly ash).
Our Sustainability Report demonstrates that we have made great
progress in relation to limiting or offsetting our greenhouse gas
emissions and have a good roadmap for moving towards a more
carbon-neutral business model. We are working closely with all of
our stakeholders and particularly with regulatory authorities and the
communities in which we operate to ensure a sustainable future.
THE GROUP REMAINS IN A STRONG POSITION GOING FORWARD. THE LONG-
TERM OUTLOOK FOR POPULATION GROWTH, WHICH WILL DRIVE THE DEMAND
FOR RESIDENTIAL AND INFRASTRUCTURE CONSTRUCTION, REMAINS STRONG,
PARTICULARLY ON THE EASTERN SEABOARD OF AUSTRALIA.
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C E O R E V I E W
2020 OUTLOOK
In 2020, Adelaide Brighton expects competitive pressures to
persist and construction markets to remain subdued. Mining
demand is expected to grow marginally, driven by investment
in new resource projects.
We expect demand to pick up in the Queensland and Western
Australian markets, driven by demand from the resources sector
and an increase in residential and infrastructure construction
activity in the Queensland market. Pricing pressure is expected in
the Queensland market as increased capacity in both concrete and
cement distribution is established in the south-east Queensland
market. Sunstate will face increased challenges as our joint venture
partner, Boral, settles its cement supply arrangements with other
competitors in the market. Sunstate sales volumes are expected to
be lower in 2020.
The New South Wales market is expected to remain subdued until
infrastructure projects are brought to market. Early indicators of
an uplift in residential demand are present in auction clearance
rates in the Sydney market. However, this has not yet translated
to increased construction activity. We expect fiscal and monetary
policy stimulus to impact this market in 2021.
At this stage, it is difficult to project the impacts on demand
following the tragic bushfires which impacted several states.
Whilst we expect an increase in demand, it is difficult to
estimate the timing of any infrastructure or residential
construction work resulting from the bushfires.
The South Australian and Northern Territory markets are expected
to decline marginally in 2020 as key projects reach completion
in early 2020. Competition in the ready mix market is expected
to remain strong, with residential demand expected to remain
subdued, with further pricing pressure expected.
Victorian market volumes are expected to remain stable in 2020,
supported by the delivery of infrastructure projects and continued
demand from the industrial and commercial sector.
Lime and cement demand in Western Australia is expected to
increase in 2020, driven by the commencement of new gold and
nickel projects.
CONCLUSION
In summary, whilst the short-term outlook remains subdued,
the Group remains in a strong position going forward. The
long-term outlook for population growth, which will drive the
demand for residential and infrastructure construction, remains
strong, particularly on the eastern seaboard of Australia. The
Company’s Western Australian and Northern Territory operations,
which deliver key contributions to the Group’s profitability, have
remained robust through the cycle and are supported by a low
cost and competitive resources sector.
The Group’s balance sheet and undrawn debt facilities provide
it with optionality to pursue growth. The Group will continue to
focus on operational and cost improvement to ensure it remains
competitive in the global market.
I would like to thank the Adelaide Brighton team, our Board and
all of our employees, as well as our business partners for their
dedication and support of the Company. Whilst we are facing
challenging times, the Company continues to be well-positioned
competitively and will continue to deliver sustainable returns to
shareholders into the future.
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FINANCE
REPORT
FULL YEAR REPORTED NPAT DECREASED FROM $185.3 MILLION TO $47.3 MILLION IN 2019. REPORTED
PROFIT INCLUDES NON-CASH IMPAIRMENT CHARGES TOTALLING $69.8 MILLION AFTER TAX AND NON-
RECURRING SIGNIFICANT ITEMS TOTALLING $5.9 MILLION AFTER TAX RESULTING IN AN UNDERLYING
NET PROFIT AFTER TAX OF $123.0 MILLION.
SALES AND PROFIT
Revenue decreased by 7%, reflecting lower average selling
prices, primarily in the South Australian market and lower cement
and concrete volumes, predominantly on the eastern seaboard
of Australia.
In 2019, the demand for construction materials weakened
significantly, particularly in Queensland and New South Wales.
Whilst pricing remained stable in these markets, sales
volumes declined.
Lower cement volumes in South Australia resulted in the
redirection of a portion of production into the Victorian market,
at a reduced margin. It also resulted in the Group importing less
cementitious material to sell into the Victorian market. Pricing in
the South Australian market has stabilised since April 2019.
Cement and lime volumes in the Western Australian market
increased during the period, supported by demand from the
resources sector.
Underlying earnings before interest and tax decreased to $186.4
million, reducing EBIT margin from 16.8% in 2018 to 12.3% in 2019.
Whilst lower cement sales prices in the South Australian market
were the primary driver of lower earnings, margins were also
impacted by higher raw material costs, particularly clinker and
purchased aggregates, and increased sea freight, fuel, transport
and maintenance costs associated with unplanned shutdowns.
Earnings from our joint venture operations were similarly lower,
given they are also concentrated on the eastern seaboard of
Australia. Joint arrangements and associate earnings decreased
from $37.4 million in 2018 to $31.5 million in 2019.
Net finance costs increased from $14.4 million in 2018 to
$18.5 million in 2019, driven by higher average borrowings and
the introduction of the new lease accounting standard which
increased the overall cost by $3.0 million in 2019.
The effective tax rate of 25.6% reflects a higher proportion of
the Company’s profits from post-tax earnings of joint ventures.
COST-OUT PROGRAM
The Group’s cost-out program is focused on delivering in
excess of $30 million in gross cost savings to counter further
cost headwinds anticipated in 2020. The Group has long-term,
established relationships with its key suppliers for clinker, cement,
shipping and fuel. The Company typically negotiates longer term
contracts which ensure competitive pricing and security of supply.
RETURN ON FUNDS
EMPLOYED
%
CASH FLOW
FROM OPERATIONS
$M
LEVERAGE
INTEREST COVER
EBITDA BASIS
TIMES
TIMES
25
20
15
10
5
0
300
250
200
150
100
50
0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0
35
30
25
20
15
10
5
0
F I N A N CE R E P O R T
However, we operate in a global market and cost headwinds from
higher raw material and shipping costs, rising insurance costs
and an increase in gas prices in South Australia are expected to
increase the cost base by approximately $20 million in 2020.
To counter these cost increases, the Group has embarked on a
program of cost-out initiatives which includes:
Δ
A reduction in workforce and fleet numbers to reflect lower
scale of operations;
Δ
Δ
Δ
Δ
Insourcing of transportation arrangements where economic;
Cost savings through centralised procurement function and
consolidation of spending power;
Lower-cost aggregate sourcing including self-supply following
opening of Scotchy Pocket quarry; and
Pallet recovery initiatives.
CASH FLOW
Cash flow from operations is strong at $193.2 million but
decreased by $51.5 million, directly as a consequence of
lower earnings. Working capital levels, ignoring the impacts of
impairments, decreased primarily due to higher creditor balances
and improved debtor collections that offset higher inventory
levels, due to a build-up of raw material stocks at Birkenhead in
anticipation of the planned refurbishment of the Accolade vessel
in 2021 which will take three months to complete.
Capital expenditure of $91.6 million was $23.2 million lower
than 2018. Development capital for the period totalled $48.3
million and included investments in the development of the
Scotchy Pocket quarry and the Pinkenba concrete plant, both in
Queensland, and completion of the Kwinana packing plant upgrade
in Western Australia.
Proceeds from the sale of assets were largely in line with 2018 at
$4.7 million, reflecting minor asset sales.
Dividend payments of $97.8 million were made, reflecting payment
of the 2018 final dividend of 15.0 cents per share. No interim
dividend was declared or paid during 2019 to ensure gearing and
leverage were kept within targets and to maintain balance sheet
flexibility for the Group.
NET DEBT
TO EQUITY
%
50
45
40
35
30
25
20
15
10
5
0
TOTAL
ASSETS
$M
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
5
1
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2
6
1
0
2
7
1
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2
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0
2
9
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0
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Reported
Underlying
Reported
Underlying
Reported
Underlying
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BAL ANCE SHEET AND CAPITAL MANAGEMENT
The Group’s balance sheet remains strong and has been further
supported by the establishment of incremental and longer dated
debt facilities, which provide the Company optimal flexibility to
pursue opportunities for growth.
Adelaide Brighton now has debt facilities totalling $900 million,
spread across nine debt providers. The average tenure of the
facilities has increased from 2.4 to 5.7 years as a result of the
recent debt refinancing program. Undrawn debt at period end
totalled $355 million.
The Group’s leverage ratio peaked at 1.63 in September 2019,
following payment of the Group’s 2018 final dividend in the first
half of 2019. Leverage at period end improved and reported at
1.51 times trailing underlying EBITDA, which is inside the Group’s
target range of 1.0 to 2.0 times. Interest cover remains strong at
15.1 times underlying EBITDA.
The Group’s net debt to equity ratio is 35.4% at 31 December
2019, and well inside the Group's target gearing range.
SHAREHOLDER RETURNS
Adelaide Brighton's approach to capital management has the
following broad objectives:
Δ
Ensure an efficient balance sheet to optimise cost of capital
and thereby shareholder returns through utilisation of prudent
debt levels;
Δ Maintain investment grade credit metrics to optimise funding
cost;
Δ Retain balance sheet flexibility to fund capital projects and
acquisitions; and
Δ Distribute surplus capital to shareholders in an efficient
manner.
Total dividends declared with respect to the 2019 financial year
were 5.0 cents per share, fully franked, a decrease on the 28.0
cents per share declared in 2018, which included special dividends
of 8.0 cents per share.
Ordinary dividends declared of 5.0 cents per share represented
a payout ratio of 68% of 2019 basic earnings per share (EPS)
of 7.3 cents. This is consistent with Adelaide Brighton’s dividend
payout policy for ordinary dividends of 65 – 75% of basic EPS
and will also ensure the Company remains within preferred
target leverage.
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Underlying return on funds employed is lower at 11.2%, reflecting
the reduced earnings profile brought about by weaker market
conditions and increased import competition. Whilst lower than
2018, returns remain higher than the Group's cost of capital.
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The Company will continue to conserve and recycle capital where
appropriate and focus on reducing costs to improve returns to
shareholders.
The Group’s balance sheet and funding position ensure that the
Company can take a long-term view on investment decisions to
deliver a more sustainable business model for its shareholders.
We expect markets to improve in the medium term and Adelaide
Brighton is well-placed to take advantage of changing market
conditions.
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CEMENT
AND LIME
ADELAIDE BRIGHTON IS A LEADING SUPPLIER OF CEMENT AND CLINKER PRODUCTS IN AUSTRALIA.
WE HAVE MAJOR PRODUCTION FACILITIES AND MARKET-LEADING POSITIONS IN THE RESOURCE RICH
STATES OF SOUTH AUSTRALIA AND WESTERN AUSTRALIA. ADELAIDE BRIGHTON IS THE LARGEST
PRODUCER OF INDUSTRIAL LIME IN AUSTRALIA WITH PRODUCTION ASSETS IN WESTERN AUSTRALIA,
SOUTH AUSTRALIA AND THE NORTHERN TERRITORY.
OUR BUSINESS
CEMENT
LIME
The decline in residential demand on the eastern seaboard of
Australia saw overall cement sales volumes reduce by 6.1% in 2019.
Weaker demand experienced in Australia’s east coast market was
impacted by the decline in consumer confidence which was driven
by low wages growth and exacerbated by bank lending restrictions
and an oversupply in multi-residential dwellings. Whilst sales
volumes were in decline, average selling prices held firm in these
markets.
The RBA’s announced reductions in interest rates and the
federal and state government announcements for increased
infrastructure spending have not yet delivered the desired
increase in demand for construction materials. We anticipate for
this to materialise in 2021.
Underlying demand in the South Australian market was impacted
by the completion of a number of key infrastructure projects.
However, the entry of a new cement importer and distributor in
2018, was the primary driver of lower sales.
On a positive note, Western Australia cement demand stabilised
during 2019 with cement volumes slightly up on the previous
year, driven by resource sector activity and a number of new
infrastructure projects.
The Northern Territory continues to experience low demand from
construction, however demand from the resources sector saw
overall demand remain stable year on year.
THE BUSINESS HAS MADE
ONGOING INVESTMENT INTO
PROJECTS TO DRIVE EFFICIENCY
AND PRODUCTIVITY ACROSS
CEMENT AND LIME.
Lime volumes increased marginally, supported by infrastructure
projects and resource sector activity, particularly gold in Western
Australia. A number of new contracts were secured against import
competition, as a result of strong cost competitiveness versus
imported lime.
MARGINS
Cement margins were impacted by increased competition from
imports in South Australia which saw domestic volumes and
average selling prices decline in this market. This combined with
lower sales volumes into eastern seaboard markets and increased
transport and raw materials costs (cementitious materials and
shipping costs) translated to lower margins.
Birkenhead production was also impacted by operational issues
caused by a lightning strike and a separate kiln bearing failure,
which both led to higher clinker unit production costs.
Lime margins remained stable during the period, with rising costs
being offset by a small increase in prices.
COST AND EFFICIENCY PROGRAM
In an effort to maintain a cost competitive advantage over import
options, the business has made ongoing investment into projects
to drive efficiency and productivity across cement and lime
operations, including:
Δ
Continued use of alternate fuels across most kiln operations,
with over 1 million tonnes of refuse derived material being
redirected from landfill in South Australia since our use
of the material started. Birkenhead is currently operating
at approximately 26% alternate fuel substitution and are
targeting 50% within five years.
Δ New packing plant at Kwinana completed in late 2018, which
has increased productivity and improved safety with higher
levels of automation.
Δ
Δ
Δ
The upgrade of materials handling equipment at Klein Point
and Birkenhead to increase output and reduce cost of
limestone for clinker production.
A strong focus on waste disposal with significant reductions
in cement and lime kiln dust disposal being achieved through
reuse and commercialisation.
Cement mill optimisation across all milling operations
providing throughput and energy efficiency improvements.
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CE M E N T A N D L I M E
OUR BRANDS
IN 2020, THE GROUP WILL INVEST
IN A KEY INFRASTRUCTURE
ASSET, ‘THE ACCOLADE’, WHICH
WILL UNDERGO A MAJOR
REFURBISHMENT.
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CEMENT
PRODUCTION
000 TONNES
LIME
PRODUCTION
000 TONNES
CONCRETE PRODUCTION,
IMPORT AND DISTRIBUTION
ADELAIDE BRIGHTON IMPORTS 2.6MT PA CEMENTITIOUS MATERIALS
AND SELLS MORE THAN 4.3MT PA OF CEMENTITIOUS MATERIALS
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1,200
1,000
800
600
400
200
0
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→
→
→
→
→ International imports
→ Domestic imports
Clinker production
Cement terminals
→
Cement milling
→
→
→
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CONCRETE AND
AGGREGATES
WE HAVE PRIVILEGED ASSETS WITHIN OUR BUSINESS, AND GIVEN THE BENEFIT OF THEIR STRATEGIC
LOCATIONS AND DEVELOPMENT APPROVALS, OUR ASSETS WILL CONTINUE TO GENERATE SIGNIFICANT
PROFITS FOR ADELAIDE BRIGHTON FOR MANY YEARS TO COME.
OUR BUSINESS
In 2019, construction materials markets were challenging, driven
by declining building approvals, challenges with consumers gaining
access to capital and low investor confidence predominantly in
the Sydney and Brisbane markets. However, the fundamentals of
our concrete and aggregates business are still very strong.
In 2019, concrete and aggregate selling prices were modestly up on
the previous year. This is due to strong pricing disciplines and our
ability to demonstrate the value that we bring to our partnerships
with our valued customers. However, operating costs, although well
controlled, increased on a unit cost basis as the market slowed. In
particular, aggregate costs in the south-east Queensland market,
and transport costs were higher during the reporting period.
To address the deteriorating market conditions, a significant cost
reduction program was undertaken to ensure that we remain
lean and have the lowest possible cost base. This program
has generated significant ongoing annualised savings within
the Concrete and Aggregates business which will give us a
competitive cost base to work from in 2020.
In 2019, we successfully completed major infrastructure projects
in South Australia and the Northern Territory, the Northern
Connector Project and the Tindal RAAF Base Upgrade. We will
continue to enhance our major project capabilities in 2020 as
we focus on other large infrastructure projects where we have a
vertically integrated offering.
Major investments during 2019 included construction of our new
Pinkenba concrete plant. This will service the inner Brisbane market
delivering on our concrete infill strategy in south-east Queensland.
We were also pleased to commission our new quarry at Scotchy
Pocket. In line with our strategy to maximise aggregate
pull-through, this quarry is now supplying aggregates and
manufactured sand to our Sunshine Coast concrete plants.
It is well-positioned to supply the local market and major
infrastructure projects with concrete and asphalt aggregates,
as well as other road building materials.
OUR BRANDS
We will continue to seek new acquisitions, joint ventures or
develop greenfield sites in attractive markets where we can build
an integrated position to provide synergies, scale or pull-through
benefits, which improve our product offering to customers.
CONCRETE AND AGGREGATES FOOTPRINT
95 CONCRETE
PLANTS
44 QUARRIES
Data
Hy-Tec
Central
Davalan Concrete
Direct Mix Concrete
ResourceCo Concrete
Mawsons Joint Venture
CONCRETE
WE WILL CONTINUE TO SEEK NEW
ACQUISITIONS IN ATTRACTIVE
MARKETS WHERE WE CAN BUILD
AN INTEGRATED POSITION.
MAJOR INVESTMENTS DURING 2019
INCLUDED CONSTRUCTION OF OUR
NEW PINKENBA CONCRETE PLANT.
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CONCRETE
PRODUCTS
ADELAIDE BRIGHTON IS AUSTRALIA’S LARGEST MANUFACTURER OF CONCRETE MASONRY PRODUCTS
SERVICING CUSTOMERS IN ALL AUSTRALIAN STATES AND TERRITORIES.
OUR BUSINESS
Earnings, excluding property and impairments, reduced from
$9.7 million in 2018 to $6.0 million on the back of softer activity
in the broader residential and commercial construction markets,
with lower volumes particularly in Queensland and New South
Wales. Modest selling price increases were able to be achieved,
in spite of a challenging and competitive market.
At an operational level, the softer market conditions and lower
production volumes negatively impacted plant efficiencies and unit
costs in most regions, further impacting margins. The business
implemented a number of cost reduction initiatives to assist in
offsetting cost impacts associated with the lower volumes and we
continue to focus our capital investment to improve manufacturing
efficiencies and safety within our operations.
Sustainability has been an ongoing priority within the organisation
and in 2019 the Concrete Products division invested in several
energy reduction initiatives including low energy gas curing and
solar power. These initiatives combined with our utilisation of
recycled materials such as bottom ash, fly ash, smelting slag and
recycled glass supports our desire to manufacture sustainable
concrete masonry building materials now and into the future.
In 2020, we will also be launching initiatives to improve
the recovery and reuse of our pallets further adding to our
sustainability efforts whilst also improving our bottom line
performance.
The business continues to invest in product innovation and new
market opportunities that will add value to the Concrete Products
division, and to the broader Adelaide Brighton Group with vertical
integration benefits flowing back to the other divisions and joint
venture partners.
This includes our award-winning architectural bricks which are
manufactured using environmentally-friendly materials and
production processes.
OUR BRANDS
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A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
OUR AWARD-WINNING
ARCHITECTURAL BRICKS
ARE MANUFACTURED USING
ENVIRONMENTALLY-FRIENDLY
MATERIAL AND PRODUCTION
PROCESSES.
THE BUSINESS CONTINUES TO
INVEST IN PRODUCT INNOVATION.
OUR UTILISATION OF RECYCLED
MATERIALS SUPPORTS OUR DESIRE
TO MANUFACTURE SUSTAINABLE
CONCRETE MASONRY BUILDING
MATERIALS NOW AND IN
THE FUTURE.
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JOINT VENTURES
OUR JOINT VENTURE BUSINESSES OFFER VERTICAL INTEGRATION WITH OUR FULLY OWNED
OPERATIONS AND PROVIDE US WITH ACCESS TO IMPORTANT MARKETS AND PRODUCTS.
The earnings contribution from the Mawsons joint venture
decreased from its peak in 2018 of $7.2 million to $5.6 million in
2019. Underlying volumes for Mawsons in 2018 were elevated in
historical terms by significant infrastructure projects in regional
Australia. However, project volumes reduced to more normal
operating levels, while non-infrastructure volumes remained
stable during the period.
A ALBORG PORTL AND MAL AYSIA SDN. BHD.
(A ALBORG) (30%)
Aalborg manufactures and sells white cement and clinker for the
domestic Malaysian market and exports to Australia and markets
throughout Southeast Asia.
Earnings improved by approximately 130% to $1.6 million in 2019
due to strong Southeast Asian market volumes coupled with
reduced material costs and improved manufacturing efficiencies.
BURRELL MINING SERVICES (50%)
Burrell Mining Services is an unincorporated joint venture
between Adelaide Brighton and Burrell Mining Products. With
operations in New South Wales and Queensland, Burrell Mining
Services manufactures a range of concrete products exclusively
for the coal mining industry.
Burrell Mining Services reported stable earnings at $0.6 million,
supported by demand from the coal industry, particularly in
Queensland.
BATESFORD QUARRY (50%)
Batesford Quarry is an unincorporated joint venture between
Adelaide Brighton, E&P Partners and Geelong Lime Pty Ltd.
Batesford Quarry, situated at Fyansford Quarry near Geelong in
Victoria, undertakes quarrying and manufacturing, marketing and
distribution of limestone and quarry products.
Batesford Quarry earnings were marginally lower than 2018 at
$1.5 million, driven by lower demand from the agricultural lime
market due to drought conditions in parts of Victoria.
OUR JOINT VENTURE BUSINESSES
Earnings from joint arrangements and associate decreased
from $37.4 million in 2018 to $31.5 million in 2019. Pressures
on volume in the Australian east coast markets impacted on
contributions from several of the Company’s joint ventures
during 2019, whilst others strengthened their performance.
INDEPENDENT CEMENT AND LIME PT Y LTD (ICL) (50%)
ICL, a joint venture between Adelaide Brighton and Barro Group
Pty Ltd, is a specialist supplier of cement and cement-blended
products throughout Victoria and New South Wales and is the
exclusive distributor for Adelaide Brighton and any related body
corporate in these states.
The reduction in east coast residential construction activity
during 2019 impacted on ICL demand, particularly in New South
Wales. This, combined with an increased cost of materials, driven
by shipping costs and a lower exchange rate, saw ICL earnings
reduce by 20.2%.
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 of Brisbane.
In an increasingly competitive market, Sunstate earnings reduced
by 12.1%. Continued manufacturing efficiency efforts assisted in
mitigating some of the impact of lower volumes, which were driven
by softer markets. We anticipate earnings to deteriorate further in
2020, as sales volumes to our joint venture partner decrease.
MAWSON GROUP (MAWSONS) (50%)
Mawsons is a joint venture between Adelaide Brighton and BA
Mawson Pty Ltd. Mawsons is the largest premixed concrete and
quarry operator in northern regional Victoria and also operates in
southern New South Wales. Mawsons is a significant aggregates
producer in the region, holding leading positions in many of the
markets it serves.
OUR JOINT VENTURE BRANDS
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LAND
THE COMPANY’S LAND PORTFOLIO
PROVIDES A SIGNIFICANT EARNINGS
AND VALUE CREATION OPPORTUNITY
OVER THE MEDIUM TO LONG-TERM.
Smaller, surplus land holdings have been identified and are
being prepared for sale as an efficient recycling of capital
in the near term. Larger land holdings are being considered
for higher value use and further development, potentially
with experienced partners.
In 2019, Geelong City Council approved the Greater
Geelong Growth Strategy which includes the land
associated with the Company's joint venture of the
Batesford Quarry. We have approximately 530 hectares
of land included in this precinct where the quarry will form
the centrepiece lake for over 60,000 future residents.
We have also progressed options for the development
of the Company’s “Hilltop” land in Geelong, including a
structural assessment of a future use of the silos.
Due to the inadequacy of the silos we have awarded a
contract for the demolition of the redundant assets to allow
for a development of approximately 4 Hectares of land for
potential multi–residential use, incorporating the Heritage
of the old Cement Head Office building.
We will continue to optimise returns for shareholders
from the sale of surplus land and will explore broader
opportunities for land development through partnerships
with experienced land development capabilities, which
may lead to an alternate earnings annuity stream for the
Company into the future.
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SUSTAINABILITY
REPORT
AT ADELAIDE BRIGHTON, SUSTAINABILITY IS ABOUT MANAGING OUR BUSINESS TO ENSURE SUCCESS
FOR THE LONG-TERM. MANAGEMENT AND THE BOARD ARE ACTIVELY INVOLVED IN GOVERNING OUR
ENVIRONMENTAL AND SOCIAL IMPACTS AND OPPORTUNITIES. OUR COMMITMENT TO SUSTAINABILITY IS
BUILT ON A SOUND BUSINESS STRATEGY THAT SUPPORTS CONTINUOUS IMPROVEMENT IN THE SOCIAL,
ENVIRONMENTAL AND ECONOMIC PERFORMANCE OF THE GROUP.
Seventeen Sustainable Development Goals (SDGs) were defined
by the United Nations (UN) 2030 Agenda for Sustainable
Development. These goals, their related targets and indicators,
address the most important sustainability challenges and can
stimulate worldwide transformational change. We are future
focused and consider global megatrends, such as climate change,
globalisation, digitalisation and automation, and how these will
impact our operations.
The Adelaide Brighton Group includes Adelaide Brighton Limited
and the entities it controls (the Group). This report excludes
information about the joint ventures to which the Group is
party to, as their operations are not material to the Group’s
sustainability reporting. Adelaide Brighton management are
Directors on boards of the joint ventures and therefore have an
active oversight role over the sustainability performance of the
joint ventures.
The environmental data in this Sustainability Report relates to the
year ended 30 June 2019, as reported to regulatory authorities,
while the Health, Safety and Community data relates to the
Group’s financial year ending 31 December 2019.
The Group supports the UN SDGs. We acknowledge our role in
managing and governing impacts on the environment, our people,
the communities in which we operate and society more broadly.
Further, we acknowledge that we have an important part to play
in contributing to a sustainable future. We have prioritised four
SDGs that most closely align with our strategic sustainability
framework. Specifically:
1. SDG #8: Decent Work and Economic Growth;
2. SDG #9: Industry, Innovation and Infrastructure;
3. SDG #12: Responsible Consumption and Production; and
4. SDG #13: Climate Action.
This Sustainability Report outlines how the Group governs
and manages social and environmental matters, our strategic
approach and key achievements in 2019.
SUSTAINABLE BUSINESS
Environment
Eco-efficiency
Impact management
Product life cycle
Emission reduction
Waste utilisation
Site rehabilitation
↓
Economic
Economic viability
Assurance of supply
Shareholders
Government
Customers
Social
Employee resources
Stakeholder relations
Community interaction
Diversity and inclusion
↓
↓
Environment + Economic
Greenhouse gas reduction
Energy efficiency
Alternative fuels
Alternative raw materials
Supplementary cementitious materials
Economic + Social
Product development
Corporate citizenship
Developing a skills base
Safety
Environment + Social
Process waste reduction
Mains water efficiency
Local environmental effects
Governance
Integrity
Compliance
Risk management
WE ACKNOWLEDGE OUR ROLE
IN MANAGING AND GOVERNING
IMPACTS ON THE ENVIRONMENT,
OUR PEOPLE AND THE COMMUNITIES
IN WHICH WE OPERATE. WE HAVE
AN IMPORTANT PART TO PLAY IN
CONTRIBUTING TO A SUSTAINABLE
FUTURE.
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S U S TA I N A B I L I T Y R E P O R T
S U S TA I N A B I L I T Y R E P O R T
GOVERNANCE
MANAGEMENT APPROACH
Our key sustainability challenges and opportunities include the following:
The Board and Management of Adelaide Brighton are committed
to the highest standards of corporate governance, essential for
sustainable long-term performance and value creation. The Board
has an established Safety, Health, Environment and Community
(SHEC) Committee. The charter that sets out our SHEC
Committee’s roles and responsibilities is available on our website.
In summary:
Δ Our SHEC Committee consists of a minimum of three
Directors, with a majority independent, and is chaired by an
Independent Director;
Δ
SHEC Committee members meet quarterly and at other times
as required to monitor and oversee the effectiveness of the
Group’s practices related to SHEC matters;
Δ Other Non-executive Directors and members of Management
are invited to attend these meetings;
Δ
Δ
Δ
Any material matters arising are further reported to and
discussed with the Board;
The Board include SHEC matters in scheduled Director
education sessions; and
The Board will, at least annually, review the membership
and charter of the Committee to determine its adequacy for
current circumstances.
The SHEC Committee’s composition and competencies are further
described in our annual Corporate Governance Statement, also
available on our website.
More specifically, our SHEC Committee reviews the Group’s
performance and identifies our key strategic priorities which in
2019 included the following:
Δ
The further development of a Group-wide Sustainability
Framework with strategic goals including sustainable and
responsible business, and engaged people and communities;
Δ Designing a roadmap for implementation of the Task
Force on Climate-related Financial Disclosures (TCFD)
recommendations;
Δ
Incorporation of additional environmental management
software capability for improving the Group’s environmental
data management, emissions reporting and compliance
obligations. This software provides improved on-line modules
to complement our existing integrated Health, Safety and
Environment Management System; and
Δ Roll-out of a Safety ‘Step Change’ Program, a four-part
program endorsed by the Board and Executive Management
team. Implementation commenced in 2019, to address the
occurrence of harm and risk of high potential incidents,
incorporating visible leadership safety walks, critical risk
and life-saving rules, a new app supporting live reporting of
hazards and training programs for frontline leadership.
The Group’s progress against each of the above strategic
priorities is further discussed in this Sustainability Report.
We know sustainability issues are relevant to the Group and the
external environment in which we operate. Our goal is safe and
sustainable production and we continuously work to improve our
SHEC management systems and culture. Our SHEC management
tools and procedures are contained within our Health, Safety
and Environment Management System. Our Health, Safety
and Environment Policy provides the foundation, outlining our
commitments in this area and the system provides standards and
framework for achieving our SHEC objectives, including:
Δ Management and employee roles and accountabilities, and
expectations of contractors;
Δ
Δ
Δ
Δ
Δ
Δ
Provision of appropriate resources and processes to identify,
manage, report and reduce SHEC risks associated with our
operations;
Consultation and communication with employees,
contractors, suppliers and customers on SHEC matters;
Processes for complying with our legislative obligations;
Protection of the health, safety and wellbeing of employees,
contractors and visitors;
Provision of return to work opportunities for injured
employees with the best opportunity to return to work
through effective rehabilitation and equitable claims
management; and
Avoidance, reduction and control of waste and pollutants to
reduce adverse environmental impacts.
The Group recognises a number of environmental and social
stakeholder expectations. Our commitment to meeting and
exceeding these expectations is captured in various policies
and procedures, which Directors and employees are required to
comply with.
Sustainability presents both challenges and opportunities for
our industry. Responding to these challenges has already helped
us reduce our carbon footprint, decrease costs and manage our
risks better. Examples include the use of refuse derived fuels as
a fuel substitute and lowering our carbon footprint through the
use of supplemental materials, such as slag and fly ash in the
production processes.
Management’s ambition is to add to our current efforts by
continuing to drive sustainable innovation and development which
will also build brand value and improve long-term profitability.
Central to delivering on that ambition is our commitment to
developing low-carbon building materials, reducing adverse
environmental impacts of our operations, and
ensuring our people and the local communities
in which we operate continue to be engaged
with our sustainability journey. We will continue
to take advantage of opportunities that
contribute to responsible consumption and
production as aligned to the UN SDG #12.
We also include SHEC key performance indicators in executive
remuneration. The non-financial performance components of
short-term incentives include a range of metrics focused on
leadership, people, diversity, health, safety and environment with
specific metrics for:
Δ
Δ Development of capability;
Δ Deepening succession pools;
Δ
Δ
Increasing diversity of candidate pools and new hires; and
Proactive environmental and safety behaviours;
Technology as a business enabler.
MANAGEMENT’S AMBITION IS TO
ADD TO OUR CURRENT EFFORTS
BY CONTINUING TO DRIVE
SUSTAINABLE INNOVATION AND
DEVELOPMENT WHICH WILL ALSO
BUILD BRAND VALUE AND IMPROVE
LONG-TERM PROFITABILITY.
SDGS
TOPICS
CHALLENGES
OPPOR TUNITIES
#13
Climate change
Our core products are energy and emission
intensive and our assets and supply chain may
be exposed to physical impacts of climate
change.
#12
Waste
#9
#9
Natural
environment and
community
Our processes produce waste and by-products
that have potential for efficiency gains and reuse
opportunities in a circular economy. We manage
our waste and seek ways to reduce and recover
waste for recycling.
Our approach includes diverting waste materials
from landfill for recycling, using suitable
recovered materials as raw material substitutes,
as well as recovering and recycling excess
concrete and packaging waste.
Our stakeholder engagement and
environmentally beneficial activities are an
important focus area for the business. We have
programs including community tree planting
days and undertake progressive rehabilitation
of sites and buffer land under our care and when
operational activities cease.
#8
Safety, health and
wellbeing
There are inherent hazards in our operations
because of their nature and location.
#8
Diversity and
inclusion
#9
Perceived and
actual impacts on
communities
#8
Technology
We are constantly working to reduce
occupational injuries and illnesses, including
mental illness.
Regulatory changes in reporting now require
reporting on the gender pay gap in the United
Kingdom, with similar legislation developing
in Australia. The recent signing of the Uluru
statement and #InvasionDay campaign have
increased the understanding and recognition for
Indigenous rights.
We are managing interactions with our local
communities in relation to perceived and
actual impacts. Effective social performance,
including transparent reporting and community
engagement is critical to addressing this
challenge. Further, Modern Slavery legislation
in Australia and abroad will make the human
rights performance of companies a mainstream
consideration.
We understand that in the long-term,
automation and technology will transform
workforces, the equipment we use and how
we use it.
Incorporating low or carbon-neutral products into our product
mix and furthering our use of alternative fuel sources and
renewable energy, such as wind and solar. To help guide
our journey in addressing climate change risks, we have
developed a number of initiatives including a roadmap for
implementing TCFD recommendations (discussed below)
as well as materials and energy efficiency improvements
achieved through the use of raw material substitutes and
alternative fuels.
We continue to seek out and invest in processes to divert
waste materials from landfill for recovery and recycling and
reuse into products. We continue to trial and use suitable
recovered materials as raw material substitutes in our
manufacturing process and are already using slag and fly ash
as alternative materials. We also use alternative fuels in our
kilns, diverting construction waste materials from landfill.
We are using Refuse Derived Fuel (RDF) at our Birkenhead
facility.
We will continue to seek ways to better engage with our
communities and implement measures to achieve improved
environmental and social outcomes for the communities
we live and work in. We do this by providing vital materials
for construction, supporting sustainable development and
realising the value of rehabilitated sites.
We have implemented a Safety ‘Step Change’ Program and
are developing a wellbeing strategy underpinned by common
values, goals and operating principles.
Our inaugural Reflect Reconciliation Action Plan has been
endorsed by Reconciliation Australia. We have reviewed
our existing Diversity and Inclusion Policy resulting in the
development of a Diversity and Inclusion Strategy for 2020 to
2025. We have increased female representation on our Board,
Executive and within senior management. We encourage
flexible working arrangements, both in how we work and
where we work.
We are developing our inaugural Modern Slavery statement,
which will be released in 2020.
We have been publicly reporting on sustainability since 2000.
We will continue to enhance external communications to build
on our transparency efforts to date and to inform the market
about our progress.
We are developing a digital strategy to help us deliver
productivity gains from more efficient operational activities,
as well as in core Company processes in finance, and health
and safety. Technology and automation will reduce manual
handling within our operations and will remove our people
from ‘at risk’ activities.
Data-rich machines will become a more common feature of
our operations and will enable us to make better and more
agile business decisions.
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S U S TA I N A B I L I T Y R E P O R T
S U S TA I N A B I L I T Y R E P O R T
STRATEGY
Sustainability is critical to Adelaide Brighton. In 2019 we
developed a Sustainability Framework which incorporates
challenges and opportunities. The Framework is set out in the
table below and covers two key focus areas:
1. Fostering a sustainable and responsible business by reducing
adverse environmental impacts and developing low carbon
products; and
2. Enhancing engagement with people and communities by
increasing transparency, building strong relationships with
local communities and engaging our people in sustainability
initiatives.
The Sustainability Framework has been endorsed by the Board
and will help us continue to manage our business to ensure
success for the long-term, both internally and externally.
The Sustainability Framework has formed the basis of this
Sustainability Report, providing a cohesive platform for continuing
our sustainability journey. It also helps us focus and prioritise our
sustainability efforts and manage them in a cohesive way across
the Group while driving measurable performance.
Whilst we have identified a number of future priorities, this
year we have introduced 5-year targets for the opportunities
we intend to focus on in the shorter to medium term, which are
embedded within the Sustainability Framework. We will track our
performance against targets to evaluate our progress against our
strategic priorities.
S TR ATEGIC GOALS
CHALLENGES AND
OPPOR TUNITIES
CURRENT INITIATIVES
FUTURE PRIORITIES
5-YE AR TARGE TS
ALIGNMENT TO SDGS
Reduce
adverse
environmental
impacts
Δ Emission intensive
Δ Using raw material
core products
Δ Waste (excess
concrete, packaging,
use of recycled
materials)
Δ Plant design not all to
current best practice
substitutes
Δ Using alternative fuels
Δ Responsible sourcing and
screening of products
Δ Diverting waste from landfill
Δ Progressive rehabilitation
Δ Developing TCFD disclosures
Δ Implementing roadmap
to deliver on TCFD
recommendations
Δ Use of renewable energy
sources including wind and
solar
Δ Responsible use
of buffer land
(planting trees, solar
installations)
Δ Complete product
lifecycle assessments
Δ Waste minimisation and
recycling strategy
Δ Improve efficiency of
operations (energy
efficiency and plant
upgrades)
Δ Renewable energy
strategy
Δ Reduce the use of
potable water in
industrial processes
Δ Business case to
introduce hybrid/
electric vehicles and
trucks
Δ 7% carbon emission
reduction
Δ 50% kiln fuel to
be sourced from
alternative fuel in SA
Δ 25% reduction in
process waste to
landfill
SDG 9: Industry,
Innovation and
Infrastructure
SDG 12: Responsible
Consumption and
Production
SDG 13: Climate Action
Low carbon
products
Δ Regulatory
impediments to
replacing Portland
clinker cement
Δ Lack of scalable
demand for greener
products
Δ Produce cement
with 20% limestone
capability
Δ Developing geopolymer
Δ Develop carbon-
capability
Δ Recycle cement packaging
Δ Environmental product
disclosure
Δ Creating products to
customer specifications
at Birkenhead, including
production of low carbon
products
neutral/low carbon
products via R&D
investment and
strategic initiatives
Δ Grow portfolio of
sustainable products
Δ Look to acquire
businesses providing
sustainable products
and solutions
Δ 20% increase in
the tonnage of
alternative raw
materials use
SDG 9: Industry,
Innovation and
Infrastructure
SDG 12: Responsible
Consumption and
Production
SDG 13: Climate Action
People
Δ Reduce harm to our
people (physical and
mental health)
Δ Implementing Safety ‘Step
Δ Wellbeing strategy,
Change’ Program
including mental health
Δ 10% reduction in
TRIFR every year
SDG 8: Decent work
and economic growth
Δ Review of Diversity and
Δ Progress our
Δ Workforce diversity
Inclusion Policy
and inclusion
Δ Establish brand
identity
Δ Developing Reflect RAP
Δ Implementing graduate
program
Δ Access to information
Δ Inaugural Modern Slavery
statement
Δ Brand working group
established
Δ Improving environmental
compliance through
technology
reconciliation journey
through the RAP stages
Δ Common values, goals
and operating principles
Δ Company initiatives for
employees, e.g. plastic,
lighting, waste, energy
Δ Develop digital strategy
Δ Innovate RAP
approved
Δ 30% female NEDs
Δ 20% female
employees
Δ Digital platform
established
to improve
communication
Communities
Δ Reduce the negative
Δ Developing cohesive
impact and contribute
positively to the
communities in which
we operate
messaging and branding for
communities and investors
i.e. sustainability strategy
and reporting
Δ Investor engagement
Δ Strategic community
engagement initiatives
Δ Supporting local
employment
SDG 8: Decent work
and economic growth
Δ Enhance external
communications
Δ Community
engagement strategy
Δ Visible community
partnerships
Δ Local employment
focus
Δ Community
investment aligned
with the community
engagement
strategy
Δ Maintain
regular external
communications
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OUR PERFORMANCE IN 2019
Health and Safety performance is evaluated based on historical
performance, such as Total Recordable Injury Frequency Rate
(TRIFR), Lost Time Injury Frequency Rate (LTIFR), Medically
Treated Injury Frequency Rate (MTIFR), Restricted Duties Injury
Frequency Rate (RDIFR), Lost Time Severity Rate (LTSR) and
forward looking indicators, such as High Potential Incidents
(HPIs), employee engagement for mental health and safety near
misses and hazards. Employee wellbeing is also considered by
evaluating the utilisation of the Employee Assistance Program
(EAP) and proactive training being offered by the Group.
Environmental performance is evaluated based on the
reportable environmental hazards and incidents from our
operations. We report our greenhouse gas (GHG) emissions,
energy production and energy consumption in this Sustainability
Report and to the Australian Clean Energy Regulator pursuant to
the National Greenhouse and Energy Reporting (NGER) scheme, in
accordance with the National Greenhouse and Energy Reporting
Act 2007. We also report emissions of substances triggered under
the National Pollutant Inventory (NPI) underpinned in legislation
by the framework of the National Environment Protection
(National Pollutant Inventory) Measure.
Community performance is evaluated based on the quality of
our ongoing proactive engagement with the communities in which
we operate. This includes assessment of our communication
programs and community feedback and complaints mechanisms,
along with our community support programs.
KEY PERFORMANCE INDICATORS
SHEC compliance is monitored by the Executive and the SHEC
Committee of the Board to determine effectiveness of SHEC risk
management processes and to ensure controls are working as
intended. This includes any interactions with relevant regulators.
Our internal audit function is a key component of governance over
SHEC matters. SHEC audits and inspections are conducted on
a regular basis and the results of these audits and inspections
reported to our SHEC Committee, along with management plans
to rectify any findings.
Our SHEC Committee of the Board also reviews updates on state
and national regulatory developments to ensure compliance.
The most recent updates have included chain of responsibility
and industrial manslaughter laws, respirable crystalline silica
standards, and efforts to develop the hydrogen industry by the
Council of Australian Governments Energy Council.
KEY STEPS IN DELIVERING OUR 5-YEAR
SUSTAINABILIT Y TARGETS INCLUDE:
Carbon: reducing carbon emissions is focused on investments
to expand the use of low carbon fuels and carbon capture
technology, and removal of fossil fuels as a source of energy.
Landfill: increased diversion of waste to beneficial reuse.
Alternative raw materials: increase engagement with standard
setters to change quality standards that align with higher levels of
alternate raw material usage.
MATERIAL TOPICS
ME ASURE
2019
2018
PROGRESS
Reduce adverse environmental impacts and develop low carbon products
Total GHG emissions (Scope 1 and 2)1
2,387,020
(0.4% increase)
tCO2e
Set a 5-year target of 7%
GHG emission reduction
2,378,500
2,151,902
226,598
2,156,481
(0.2% increase)
230,539
(1.7% increase)
14,782,120
14,692,315
26%
25%
Set a 5-year target of 50% kiln fuel to be
sourced from alternative fuel in SA
1,284,967
(8% increase)
1,187,058
Set a 5-year target of 20% increase in
tonnage
Scope 1 GHG emissions
Scope 2 GHG emissions
Total energy consumption
Alternative fuels use in SA2
Alternative raw materials3
Reportable Environmental Incidents
Environmental Near Misses
Environmental Hazards
Mains water usage
Process waste to landfill4
People
tCO2e
tCO2e
GJ
%
Tonnes
Number
Number
Number
ML
Tonnes
1
232
388
1,317
(7% increase)
168,732
(4% decrease)
1
34
506
1,225
175,957
Total Recordable Injury Frequency Rate
MHRS5
16.2
Lost Time Injury Frequency Rate
High Potential Incidents
Safety near misses
Safety hazards
Female Non-executive Directors (NEDs)
Female employees
Communities
Community investment
MHRS5
Number
Number
Number
%
%
$
2.5
37
629
2,817
43%
15%
25.5
1.7
20
870
2,782
29%
14%
Set a 5-year target of 25% reduction in
process waste to landfill
Set a 5-year target of 10% reduction in TRIFR
every year
Maintain a 5-year target of 30% female NEDs
Set a 5-year target of 20% female employees
1
2
3
4
5
GHG emissions are measured in accordance with the NGER legislation.
Used at our clinker kiln production facilities. Alternative fuels are defined as any kiln fuel that is not a traditional fossil fuel including fuel derived from renewable or suitable recovered resources.
Alternative raw materials are defined as any waste or by-products from other industrial processes.
Waste produced through clinker and lime production that is sent to a final disposal destination.
Per million man-hours worked.
263,221
421,479
Set a target to align community investment
with strategy
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S U S TA I N A B I L I T Y R E P O R T
S U S TA I N A B I L I T Y R E P O R T
Opportunities presented by climate change include:
Δ Development of low-cost energy sources as waste streams
are diverted from landfill. Adelaide Brighton is an active
participant in the use of alternate fuels, with Refuse Derived
Fuel replacing circa 26% of energy used at the Birkenhead
cement plant; and
Δ
Participation in the transition to lower emissions intensive
construction materials that displace competing products.
A move to lower emissions products has improved the conversion
of waste streams being converted either into cost competitive
sources of inputs into the production of construction materials or
as an energy source.
We participate in industry associations (Cement Industry
Federation (CIF); Cement, Concrete & Aggregates Australia
(CCAA); and Manufacturing Australia (MA)) and a member
of the Carbon Market Institute, which provide a forum for
discussions on climate and industry changes. In addition,
key Adelaide Brighton Management are actively engaged
with Australian regulatory bodies, monitoring Australian and
international climate change developments.
The 2018 International Energy Authority (IEA) roadmap for low
carbon transition in the cement industry outlined three key
actions for all stakeholders to 2030:
IE A KE Y AC TIONS
ADEL AIDE BRIGHTON AC TIONS
Create an enabling level playing
field - development of a stable
and effective international price
on carbon.
Putting technological change
in action - implementation of
state-of-the-art technologies
and sharing operating best
practices, governments to
develop legislation that supports
use of low carbon fuels, support
risk-mitigating mechanisms for
development of new technologies
and promote flexibility in energy
systems.
Facilitating uptake of
sustainable products –
governments ensuring
regulation and standards are
in place to enable greater use
of cementitious constituents
that lower the clinker content of
cement.
Adelaide Brighton, through
its membership of industry
associations, engage with all levels
of government to promote actions
in line with the IEA roadmap.
This includes development
of climate change policy to
meet Australia’s international
commitments, participation with
relevant regulatory bodies to
change standards to facilitate
improved emissions-intensity
for construction materials, and
promotion of alternate fuels.
Key actions by the Group, either
directly or through its joint
ventures, have already improved
the carbon intensity of products
through:
Δ Utilisation of low carbon fuels
– expanding the use of Refuse
Derived Fuel at the Birkenhead
cement plant, and sourcing
electricity from a renewables
generator for circa 55% of the
Group’s requirements; and
Δ Decreasing the use of clinker-
based cementitious products
– supplementary cementitious
materials are used by Adelaide
Brighton. The Group has
equipment to process slag, a by-
product from the steel industry,
in all Australian mainland metro
markets.
REDUCE ADVERSE ENVIRONMENTAL IMPACTS AND
DEVELOP LOW CARBON PRODUCTS
Taskforce for Climate related Financial Disclosure (TCFD)
The Group acknowledges that climate change
is a shared global challenge. We are committed
to playing our role in reducing carbon emissions
and preparing for the impacts of climate
change and the actions needed to achieve net-
zero carbon emissions by 2050 contributing to
the UN SDG #13.
We acknowledge that there is a need for large reductions in global
GHG emissions to reduce the extent of future climate change and
to avoid the most severe physical climate impacts. This, coupled
with the world’s increasing requirements for secure and affordable
energy, create significant challenges which are best addressed
through collaboration between companies, governments and
communities.
The Group identifies climate change as a strategic risk that could
affect the Group’s future operating and financial performance. In
2019, we have carried out a gap analysis of the Group’s current
practices and performance against the recommendations
of the TCFD and developed a roadmap for implementing the
recommendations over a two-year period.
Governance
Our approach to governance over sustainability matters, including
climate change is articulated on page 22.
Strategy
Focus sessions with key Management and Directors were held
in 2019 as part of the development of the Group’s Sustainability
Framework, which incorporates climate change issues. Key issues
set out below have been categorised as short-term (<5 years),
medium-term (5-20 years) and long-term (>20 years):
Δ
Price for GHG emissions that are not matched internationally,
leading to deterioration of competitive cost position, resulting
in higher costs/lower margins (short-term);
Δ Material specifications for projects are changed, reducing
demand for the Company’s products, reducing volumes and
profitability (medium-term);
Δ
Δ
Transition to renewable energy - higher costs and potential
for disruption to production due to intermittent supply
(short- term);
A substitute for Portland clinker-based cement becomes
commercially viable, stranding current cement production
assets (medium-term); and
Δ Rising sea levels adversely impact operations in coastal areas.
Significant operations associated with the Cement and Lime
division are situated in coastal locations (long-term).
Climate change risks have the potential to increase costs that
are not recoverable in the markets due to competitive pressures.
For example, where these costs are not imposed evenly on all
participants, such as in a scenario where there is a lack of global
co-ordination for a price on carbon.
The Group seeks to manage climate change risk through improved
efficiency of production processes, switching fuels to low-
emissions fuels including the use of biomass, and leveraging
the use of clinker substitutes. The Group is also investing in
development of non-clinker-based substitute products.
26
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Adelaide Brighton is undertaking scenario analysis as part of its 2020
work stream, with the aim of providing further details on the potential
impact of climate change risks in its 2020 Sustainability Report.
Risk management
Adelaide Brighton operates a risk management framework, which
includes reporting of strategic risks to the Board’s Audit, Risk and
Compliance Committee. In addition, specific risks associated with
sustainability, including climate change, are included in the SHEC
Committee agenda.
The risk framework categorises risks by reviewing the likelihood,
impact, timing and mitigations in place to come to an overall
assessment that allows determination of the overall significance
of risks. In making this assessment, current and potential
changes to the regulatory requirements for climate change are
taken into consideration.
Testing for impairment for financial reporting in both 2018 and
2019 has incorporated a carbon price of AU$25, testing the Group’s
resilience to a basic scenario of a price on carbon. No impairment
was required in either year under a $25 carbon price scenario.
Metrics
In addition to the KPIs outlined on page 25, we also monitor the
following metrics:
Total CO2-e emissions by product1
Cement1
Lime1
Other1
Emission intensity by product2
Cement3
Lime
2019
2018
%
CHANGE
1,129
1,174
84
1,087
1,205
86
0.68
1.06
0.69
1.10
3.9
(2.6)
(2.3)
(1.4)
(3.6)
1
2
3
Thousand tonnes CO2-e
Tonnes CO2-e /tonne
Emissions intensity of cement from locally produced clinker
Adelaide Brighton’s progress compared to the IEA key indicators
IE A 2°C SCENARIO
LOW-VARIABILIT Y
CASE
ADEL AIDE
BRIGHTON
2014
2030
2019
Clinker to cement ratio
0.65
0.64
Thermal efficiency – Gj/t clinker
Electricity intensity – kWh/t cement
Alternate fuel usage (% of thermal energy)1
Direct CO2 intensity of cement –
tCO2-e/t cement)
1
Integrated clinker/cement facilities
Environmental performance
3.5
91
5.6
0.54
3.3
87
17.5
0.52
0.79
4.8
119
25
0.68
As a producer of heavy construction materials and lime, Adelaide
Brighton 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 both process and thermal emissions.
However, we are striving to reduce the amount of process and
thermal emission production of cement with the addition of
carbon-neutral substitutes.
To progressively reduce our emissions, we have set a 7%
carbon emission reduction target over the next five years.
We will continue to monitor and review our targets in line with
technological advancements and community expectations. The
Group’s strategy of continuous improvement has resulted in a
reduction in GHG emissions over a sustained period. While overall
GHG emissions (scope 1 and scope 2) increased 0.4% in FY19
from FY18, they have reduced 13% over the five years from FY14
and 25% in the ten years since FY09.
In addition to the incremental efficiency improvements, the
Group’s production footprint has changed over a number of years,
as a result of closing low-efficiency clinker production facilities
and concentrating production at more energy-efficient sites.
GHG EMISSIONS PROFILE OF THE AUSTRALIAN CEMENT INDUSTRY 2018 - 2019
Limestone →
CaCO3
60%
Clinker +
CaO
Carbon Dioxide
CO2
Heat (fuels)
Electricity
Process emissions
30%
10%
Thermal emissions
Indirect emissions
0%
20%
40%
60%
80%
100%
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Source: CIF Survey
ENERGY BY SOURCE
Natural gas
Coal
Refuse derived fuel
47%
23%
12%
Electricity
Liquid fuels
Recovered waste oil
9%
7%
2%
TOTAL GROUP CARBON EMISSIONS1
000 TONNES
3,000
2,800
2,600
2,400
2,200
2,000
2014
2015
2016
2017
2018
2019
Carbon emissions
Clinker and lime production
1
For year ended 30 June, scope 1 and scope 2
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S U S TA I N A B I L I T Y R E P O R T
An investment in a second firing line for the use of refuse derived
fuel (primarily wood waste) as an energy source at the Birkenhead
plant in 2015 has led to ongoing reductions in emissions due to
its lower emissions profile. The use of refuse derived fuel has
increased 42% over the last five years, with alternate fuels now
supplying 14% of ABL’s total energy consumption.
While not captured in these emission reduction figures, the
Group has also continued an electricity supply agreement with a
renewables generator for the provision of electricity to our South
Australian sites.
Our efforts in waste management have improved our emissions
and waste to landfill performance. We are focused on continuing
with our current waste management initiatives and identifying
new opportunities. We are aiming to drive circular economy
thinking and to contribute towards circular economy practices.
Some examples of this include:
Δ
An upgraded packer recycling system and debagger at
our Kwinana site, where all changeover product and off-
specification cement is recycled and blended back into the final
product, eliminating wastage and materials sent to landfill; and
Δ Recycling of damaged concrete products, crushing materials
for reuse and diverting product that would have been
disposed to landfill.
We acknowledge that it is important that we monitor and manage
our environmental impacts to minimise our environmental footprint.
We are pleased to report that we have not had any reportable
environmental incidents in 2019 and will continue to monitor
environmental incidents, environmental near misses and hazards.
In 2019, we planned and committed to upgrading our
environmental management software to include an improved on-
line module for managing environmental obligations compliance,
improving environmental monitoring, emission data and reporting.
The modules for development and implementation are:
Δ Obligations Management;
Δ
Environmental Management (including Aspects and Impacts
Register); and
Δ
Emissions Monitoring Data.
PEOPLE
Health and safety performance
Our focus is on ensuring that all our people, contractors and
site visitors go home safely at the end of every day. We regularly
monitor our safety performance.
Our TRIFR at December 2019 was 16.2, compared to 25.5 at
December 2018. Our focus across all Divisions has been the
reduction of injuries across all recordable types – lost time,
restricted duties and medically treated injuries, resulting in a
TRIFR reduction of 29% in our Cement and Lime Division, 34%
reduction in our Concrete and Aggregates Division and 47%
reduction in our Concrete Products Division.
Our LTIFR at December 2019 was 2.5 compared to 1.7 at
December 2018. The increase in LTIFR resulted from nine lost
time injuries sustained in our Concrete and Aggregates Division,
and three lost time injuries sustained in our Concrete Products
Division. Our Cement and Lime Division recorded a 68% reduction
in LTIFR in 2019.
Our sustained focus on key areas of risk shapes the design
of our injury prevention programs and is driving sustainable
improvements in reducing harm to our people.
A sustained high volume of reporting of leading safety indicators,
such as safety hazards, near misses and high potential incidents
from 4,131 in 2018 and 3,985 in 2019, is an indication that a
culture of safety is embedded across the Group.
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CASE STUDY
CASE STUDY
CASE STUDY
1 MILLION TONNES OF FUEL
FROM WASTE
Adelaide Brighton recently celebrated the use of
1,000,000 tonnes of Refuse Derived Fuel (RDF) at
its Birkenhead cement plant. RDF has helped reduce
the Group’s greenhouse gas emissions, diverting
approximately 200,000 tonnes of waste from landfill
each year, as well as reduce the use of natural gas by
25%. Adelaide Brighton was also awarded the Premier’s
Mining & Energy Award for Innovation in Environmental
Management for its alternative fuels program.
CIRCULAR ECONOMY FOR
CEMENT KILN DUST
SCHOOL TREE PLANTING DAYS,
MUNSTER
Adelaide Brighton has long sought opportunities
for reusing one of the waste products formed when
manufacturing cement – Cement Kiln Dust (CKD) – back
into the production process, or to find alternative uses
other than disposal to landfill. This has proved successful
for our Birkenhead facility this year. Since June, the
Birkenhead facility has found reuse opportunities for
100% of the CKD the site has produced.
Annual tree planting days are held with local primary
schools in the areas surrounding the Munster plant.
This year, the Munster operations team hosted 55
students from the local South Coogee Primary School
for a tree planting excursion. The students planted
hundreds of native plants and shrubs on site to
revegetate a cleared area near the boundary of the plant.
Revegetation of our quarries is one way we can
achieve the plant’s land improvement goals to provide
beautification and dust minimisation benefits to the area
surrounding our operations. Through our partnership
with wildlife rescue organisation Native Arc, the students
were also provided with the opportunity to meet some
native animals up close and gain an insight into the
importance of native planting for the habitats of our
native wildlife.
CASE STUDY
PLASTIC
RECYCLING
In 2019 we installed a bailer at our Moorebank site to
ensure all plastic pallet wrapping and shrink wrap is
recycled rather than sent to landfill. The site identified
that a significant percentage of its landfill waste was
plastic, and successfully applied for a rebate under the
NSW government “Bin Trim“ scheme. Now when plastic
waste is generated, it is bailed, collected from site, and
recycled. This project will prevent approximately 70 bins,
or 5.6 tonnes, of plastic per year going to landfill.
CASE STUDY
SOLAR ARRAY IN
TOWNSVILLE
Our concrete products site in Townsville completed
the installation of a 100kW solar array in October
2019. The system supplies 52% of the Townsville site’s
electricity consumption. We are currently working on
another 900kW of projects to bring our total to 1MW
of solar in 2020.
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S U S TA I N A B I L I T Y R E P O R T
S U S TA I N A B I L I T Y R E P O R T
CASE STUDY
CASE STUDY
VISIBLE LEADERSHIP
Visible leadership is a process implemented across the
Group’s operations in 2019, where senior leaders actively
engage in open safety conversations – across all aspects
of operations, and in the office. Outcomes of visible
leadership observations include an increased appreciation
of the nature of the hazards and risks within operations;
and how we best address them, as well as positive
recognition to staff on safe behaviours and attitudes.
SCIENCE, TECHNOLOGY,
ENGINEERING AND MATHEMATICS
(STEM) FOR GIRLS PROGRAM,
BIRKENHEAD
The Adelaide Brighton team at Birkenhead hosted 30
female year 11 students as part of the University of
Adelaide’s STEM for GIRLS Program. The visit is part of
the broader STEM Girls program and aims to showcase
some of South Australia’s STEM industries and introduce
students to women (and men) who work for these
companies. Girls visit at least three sites to view the
industry’s practices, processes and learn about career
opportunities.
The Reflect RAP forms part of Adelaide Brighton’s Diversity and
Inclusion Strategy and helps foster a culture where we embrace
difference. The Executive and RAP Working Group believe that
we can make a positive difference to Aboriginal and Torres Strait
Islander people by focusing on areas such as employment,
education, empowerment and economic development, while
enhancing the understanding of the Indigenous culture.
Adelaide Brighton’s Reflect RAP supports the three pillars
of reconciliation which includes relationships, respect and
opportunities. This is the beginning of our reconciliation process
and will be continually refined through consultation as we
continue to progress our reconciliation journey.
The Group provides employees and their families with a free and
confidential counselling service through our Employee Assistance
Program (EAP) to help employees meet life challenges and remain
healthy, engaged and productive.
Our annualised utilisation rate of the EAP for 2019 is 5.2%
which is higher than the industry benchmark of 3.2%. The EAP is
promoted at all our work sites to enable greater awareness and
support for employees’ wellbeing.
As an extension to EAP, the Group 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 the question “R U OK?”, in a meaningful way. Mental
Health Awareness Training has been rolled out across the Group
in addition to Mental Health First Aider accreditation from Mental
Health First Aid Australia.
Employee engagement
In 2018, more than 80% of our workforce completed the bi-
annual employee survey. More than 80% of the employees that
responded are proud to work for Adelaide Brighton and 76%
would recommend the Company as a great place to work.
79% are comfortable voicing their ideas and opinions, even if they
are different from others. In 2019, we have conducted listening
sessions with hundreds of employees from across the Group.
The feedback from these sessions informed the Diversity and
Inclusion Strategy 2020 to 2025.
COMMUNITIES
Community engagement
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Adelaide Brighton is committed to being a socially responsible
member of the communities in which we operate. Engagement
with, and keeping the local community informed on the operations
of our plants is an important element of our day-to-day operations.
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CASE STUDY
PROFESSIONAL DRIVER
SAFETY WORKSHOPS
Professional Driver Safety Workshops were conducted
across our Concrete and Aggregate driving operations,
and attended by more than 600 truck drivers with the
goal of engaging in a safety conversation with drivers:
Δ What it means to be a professional driver (skills,
responsible conduct and driving behaviours)
Δ Understanding the challenges drivers face on the
roads
Δ Heavy vehicle safety
Δ
The mindset that professional drivers must have
every day to be safe on the roads
The workshops generated positive engagement and
discussions, as well as personal commitments to support
safe driving.
CASE STUDY
iWOMEN PROGRAM, MUNSTER
We partnered with the Kwinana Industries Council (KIC)
in the 2019 KIC iWOMEN Program. The iWOMEN Project
is a unique program for the local region that provides an
insight into our industry for potential future employees.
In 2019, the program included a tour of the Munster and
Kwinana facilities, along with a tree planting exercise
as part of a quarry regeneration program. Thirty-five
female year 10 students representing 16 local secondary
schools completed the program.
At our Munster plant in Western Australia, we have created a
communication program which includes a dedicated community
website, a 24/7 community feedback telephone service,
newsletters, and a range of fact sheets and short videos, as well
as regular community meetings with key stakeholders.
We continue to improve our dust management, with the
installation of five new solar powered ambient air monitoring
stations in 2019 at the site to supplement the existing network,
providing early alerts to allow management of on-site activities to
prevent off-site dust impact. The site also sealed 140 metres of
road with concrete to reduce fugitive dust.
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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.
Safety is not just about processes and
procedures within a business, it is a culture.
We have continued to invest in our safety
development to deliver further improvements
in our performance. In 2019, we rolled out a
Safety ‘Step Change’ Program, contributing
to the UN SDG #8. Our new health and
safety vision of “Work Safe, Home Safe” aims to connect to the
emotional motive for staying safe at work, and resonates with
workers who responded overwhelmingly in our 2018 survey
that “going home to loved ones” was the number one reason for
staying safe at work.
Accompanying the launch of “Work Safe, Home Safe” was our
Critical Risk Program and Life Saving Rules. The Critical Risk
Program focuses on six critical risks, common across the Group.
The Life Saving Rules are a series of 10 rules that all employees
must follow. The Critical Risk Program and Life Saving Rules have
also been rolled out in 2019 across all sites.
Diversity and inclusion
Our Diversity Policy was established in 2011 with a focus on
removing barriers to enable equal opportunity employment at
Adelaide Brighton. In 2019, we have undertaken a holistic review
of the Diversity Policy, incorporating the amendments to the
ASX Corporate Governance Principles and Recommendation
(4th Edition, 2019) and further articulating our vision to 2025
to inspire our employees and the next generation of talent to
work with us at Adelaide Brighton, where our inclusive workplace
culture embraces difference and thrives. We have prioritised five
focus areas, being culture, communication, capability, connection
and community and developed detailed action plans for each of
the areas articulating target outcomes, actions to achieve the
outcomes, responsibilities and timeframes.
In recognition of the low numbers of females entering our
engineering and manufacturing vocations and to increase the
diversity of our workforce, we have implemented the following
initiatives:
Δ Uploaded online videos showcasing our female employees on
the job;
Δ
Implemented programs designed to engage graduate
engineers;
Δ Offered undergraduate scholarship opportunities and
sponsored vacation work programs to engage students who
are entering tertiary education to consider engineering as a
career option; and
Δ Offered opportunities for secondary school students to
become aware of diverse career opportunities within our
industry.
These initiatives have resulted in 20% of new hires being female,
increasing our female employment population to 15%. We have
also increased our representation of female Non-executive
Directors from 29% to 43%, further illustrating our commitment
to diversity and inclusion.
In 2019, we have developed our inaugural Reflect Reconciliation
Action Plan (RAP). Adelaide Brighton continues to invest
in Australian communities, creating strong futures for our
employees while helping cities and towns prosper. Our employees
come from many different backgrounds and cultures, embracing
difference is key to our continued growth and success.
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A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
HOME
S U S TA I N A B I L I T Y R E P O R T
Adelaide Brighton holds quarterly community liaison group
meetings for its Birkenhead cement plant in South Australia, to
engage and inform the local community. The site has a network
of air quality monitors in the local community and in the plant,
designed to provide early alerts and intervention to reduce offsite
fugitive dust. Live dust monitoring is reported on the Adelaide
Brighton Cement Community website (available online). If air
quality limits are exceeded, the site conducts an investigation and
publishes a report within 48 hours on the website.
In addition, the site consulted with the local community to develop
a three-year environmental improvement program to manage
noise and dust impacts, coming up with 16 improvement projects
in total. The site has also planted 600 native tree seedlings for
“Trees for Life” and 150 native shrubs to improve the visual
amenity of the site.
To better understand our local communities, we also encourage
and monitor community enquiries and grievances, recording and
responding to the communications we receive.
Community investment
Through our community support program, we aim to make a
valued and sustainable contribution to the communities in which
we operate by investing in programs at local schools, sporting
clubs, care agencies and community services, as well as higher
education support. We continue to invest in community initiatives,
including being a key sponsor of the Variety South Australia Moto
Run since 2009.
In addition, Adelaide Brighton Cement was once again proud to
partner with Little Athletics South Australia as the major sponsor
of the State Personal Best Classic Carnival in November 2019.
In July 2019 at the South Australian Cement Concrete and
Aggregates Australia Awards, Adelaide Brighton Cement was
awarded the winner for both the:
Δ
Environmental Innovation Award for its Alternative Fuels
Program-Refused Derived Fuel; and
Δ Diversity and Inclusion Award for its Adelaide Brighton Cement
University of Adelaide Chemical Engineering Scholarships for
female students’ program.
In August 2019 at the Western Australian Cement Concrete and
Aggregates Australia Awards, Cockburn Cement was awarded the
community engagement award for its series of educational videos
on air quality.
COMMUNITY INVESTMENT
SPEND BY FOCUS AREA
Health and wellbeing
Education
Community and
environment
Industry
49%
31%
10%
10%
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A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
CASE STUDY
ADELAIDE BRIGHTON ASSISTED
WITH THE SUPPLY OF CONCRETE TO
SUPPORT COMMUNITY INITIATIVES
We assisted with the supply of concrete to these organisations.
Daniel Morcombe House: Has been set up and has councillors
on hand to help children who have been mistreated in
life. Bruce and Denise Morcombe visit schools throughout
Queensland teaching children about stranger danger.
Men’s Sheds: These centres are set up around the Sunshine
Coast for men to go to for different activities such as wood
working and companionship.
Kawana Dolphins Rugby League Club: We've supported this
club for many years as it is a local club on the Sunshine Coast
and is also supported by many of our customers.
CASE STUDY
BUTTERFLY PROGRAM
SPONSORSHIP
The Butterfly project was established with funding by
the City of Cockburn’s Environmental Education Grant
and Adelaide Brighton’s donation of native butterfly-
host plants and financial sponsorship. Primary schools
in the Cities of Cockburn and Fremantle have come
together to deliver a local Butterfly Garden Project. Each
participating school will plant a butterfly-host garden to
create a habitat corridor for native butterfly species. The
aim of the Butterfly Garden Project is two-fold: to make
available practical STEM-based learning opportunities for
students; while boosting native butterfly numbers within
the Cities of Cockburn and Fremantle. The project now
boasts 13 participating local schools.
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CASE STUDY
GREEN AND GOLDEN
BELL FROGS
Our Port Kembla clinker grinding facility has an
endangered frog species on-site. The Green and Golden
Bell Frog (Litorea aurea) is native to eastern NSW and
due to the dwindling numbers is listed as endangered.
Since 2011, with the help of environmental consultant
Chris Wade, we have maintained two ponds and a habitat
area on-site, as per the Green and Golden Bell Frogs
Management Plan (2013). This habitat consists of two
clay-lined frog ponds with natural vegetation provided
and maintained by a horticulturalist that is ideal for these
frogs. Chris holds a scientific licence, which allows him
to regularly monitor the population, and provide advice
in relation to management practices for the frogs. On
behalf of Adelaide Brighton, Chris submits annual reports
on the colony to National Parks and Wildlife and the
Office of Environment and Heritage.
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S U S TA I N A B I L I T Y R E P O R T - H E A LT H A N D S A F E T Y
S U S TA I N A B I L I T Y R E P O R T - H E A LT H A N D S A F E T Y
HEALTH AND
SAFETY
AT ADELAIDE BRIGHTON WE ARE PASSIONATE ABOUT PROVIDING THE SAFEST WORKING ENVIRONMENT.
“WORK SAFE, HOME SAFE” IS WHAT EVERYBODY EXPECTS. WE ALL COME TO WORK WANTING TO DO
OUR JOBS SAFELY AND GO HOME EACH DAY TO OUR FAMILY AND FRIENDS.
TOTAL RECORDABLE INJURY FREQUENCY RATE
SAFET Y STEP CHANGE
Adelaide Brighton’s Total Recordable Injury Frequency Rate (TRIFR)
at December 2019 was 16.2, compared to 25.5 at December 2018.
Our focus across the Group has been the reduction of injuries across
all recordable types – lost time, restricted duties and medically
treated injuries, resulting in a TRIFR reduction of 29% in our Cement
and Lime Division, 34% reduction in our Concrete and Aggregates
Division and 47% reduction in our Concrete Products Division.
These results demonstrate that our sustained focus on key areas
of risk, that shapes the design of our injury prevention programs, is
driving sustainable improvements in reducing harm to our people.
LOST TIME INJURY FREQUENCY RATE
Adelaide Brighton’s Lost Time Injury Frequency Rate (LTIFR) at
December 2019 was 2.5 compared to 1.7 at December 2018.
The increase in LTIFR resulted from nine lost time injuries sustained
in our Concrete and Aggregates Division, and three lost time injuries
sustained in our Concrete Products Division. Our Cement and Lime
Division recorded a 68% reduction in LTIFR in 2019.
SAFET Y NEAR MISS AND HAZ ARDS
The proactive reporting of safety near misses and hazards
have been, and will continue to be, a key driver to our safety
culture where risks are managed, and injuries and incidents are
prevented. Proactive reporting and shared learnings, showcasing
safety innovation ‘what good looks like’, is communicated across
the Group, to strengthen the effectiveness of safety and health
activities and management of our critical risks.
In 2019, we continued to invest in safety to deliver further
improvements in our performance through the roll out of our
Safety ‘Step Change’ Program. This program saw the introduction
of our new health and safety vision of “Work Safe, Home Safe”,
which aims to connect to the emotional motive for staying safe at
work, and resonates with workers who responded overwhelmingly
in our 2018 employee survey that “going home to loved ones” was
the number one reason for staying safe at work.
transport; and
visible leadership.
Endorsed and delivered by the Executive Management team, the
Safety ‘Step Change’ Program focuses on four key areas including:
Δ
critical risk management;
Δ musculoskeletal stress;
Δ
Δ
Critical risk management involves increasing our learnings from
our strong reporting culture to understand how to investigate
incidents to find the cause, share the lessons learnt and to
know what is expected when undertaking critical risk activities.
Accompanying the launch of “Work Safe, Home Safe” was our
Critical Risk Program highlighting six critical risks, common
across the Group. For each of these critical risks, we identified
critical controls that must be in place before work commences.
In addition, we introduced Life Saving Rules that are designed to
keep people safe. They eliminate some of the most significant
risks, and help achieve our safety objective of “Work Safe, Home
Safe”. These are not optional rules, they are rules expected to be
followed by all our employees, contractors and visitors at all times
on our sites.
LOST TIME INJURY FREQUENCY RATE
(LTIFR)
TOTAL REPORTABLE INJURY FREQUENCY RATE
(TRIFR)
Total lost time injuries per million hours worked
Total recorded injuries per million hours worked
6
5
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3
2
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Concrete and aggregates
Concrete products
Cement and lime
Total
Concrete and aggregates
Concrete products
Cement and lime
Total
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A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
WE CONTINUED TO INVEST IN
SAFETY TO DELIVER FURTHER
IMPROVEMENTS IN OUR
PERFORMANCE THROUGH THE
ROLL OUT OF OUR SAFETY
'STEP CHANGE' PROGRAM.
600+ TRUCK DRIVERS ATTENDED
PROFESSIONAL DRIVER
SAFETY WORKSHOPS
CONDUCTED ACROSS OUR
CONCRETE AND AGGREGATES
OPERATIONS.
Another key area is musculoskeletal stress, the most common
cause of injuries to our people. In 2019, a review was undertaken
of job tasks and job dictionaries were developed for high-risk
tasks. This was supported by a review of internal processes
to improve case management and strategic oversight of the
provision of health and wellbeing services.
The key focus area of transport included a review of our transport
operations to further encourage safe driving behaviours. In 2019,
Professional Driver Safety Workshops were conducted across
our Concrete and Aggregates operations and attended by more
than 600 truck drivers. The goal of the workshops is to engage
in a conversation with our drivers about what it means to be
a professional driver, including the skills required, responsible
conduct and demonstrating driving behaviours.
The purpose of visible leadership is to reinforce positive
safety behaviours through open, unthreatening and respectful
conversations so we all go home safe every day. In 2019, the visible
leadership process was implemented across the Group, where
senior leaders actively engage in open safety conversations across
all operations. Outcomes of visible leadership conversations include
an increased appreciation of the nature of the hazards and risks
within operations, how we best address them, as well as positive
recognition to staff on safe behaviours and attitudes.
WELLBEING
Adelaide Brighton provides employees and their families with a
free and confidential counselling service through our Employee
Assistance Program (EAP) to assist employees to meet life
challenges and remain healthy, engaged and productive.
Our annualised utilisation rate of these services as
at December 2019 is 5.2% which is higher than the
industry benchmark of 3.2%. The EAP is promoted
at all our work sites, reinforced through 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 the question
“R U OK?”.
To support our employees to develop the skills to
identify and assist a friend, family member or co-
worker who may be experiencing issues with their
mental health, Mental Health First Aid Accreditation
(two day) and Mental Health Awareness (one day)
training has been offered to all frontline leaders,
Human Resources and Health, Safety and Environment
staff. 10 employees are now accredited in Mental
Health First Aid and over 100 employees have attended
Mental Health Awareness training.
To further support the Safety ‘Step Change’ Program,
Adelaide Brighton has piloted an early intervention
injury management service for employees, ensuring
workers have access to the most appropriate and
timely medical advice, information and treatment in
the workplace. The program provides a nurse triage
service 24 hours a day seven days a week, visits to
a general practitioner, physiotherapist, x-rays and
basic ultrasounds for diagnostic purposes. This pilot
program aims at delivering quality workplace medical
services to reduce the impact of injury and illness in
our workplaces.
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S U S TA I N A B I L I T Y R E P O R T - P E O P L E A N D D I V E R S I T Y
S U S TA I N A B I L I T Y R E P O R T - P E O P L E A N D D I V E R S I T Y
PEOPLE AND
DIVERSITY
OUR EMPLOYEES COME FROM MANY DIFFERENT BACKGROUNDS AND CULTURES, EMBRACING
DIFFERENCE IS KEY TO OUR CONTINUED GROWTH AND SUCCESS. IT IS CRITICAL THAT WE HAVE AN
INCLUSIVE WORKPLACE AT ALL LEVELS OF THE ORGANISATION REGARDLESS OF GENDER, MARITAL
OR FAMILY STATUS, SEXUAL ORIENTATION, GENDER IDENTITY, AGE, DISABILITY, ETHNICITY, RELIGIOUS
BELIEFS, CULTURAL BACKGROUND, SOCIO-ECONOMIC BACKGROUND, PERSPECTIVE AND EXPERIENCE.
CREATING A CULTURE THAT EMBRACES DIFFERENCE AND IS INCLUSIVE OF EVERYONE WILL ENSURE
ADELAIDE BRIGHTON CONTINUES TO BE A GREAT PLACE FOR EVERYONE TO WORK.
INVESTING IN OUR FUTURE
FRONTLINE LEADERSHIP
In 2019, we continued to invest in our people and our future by
providing learning and development opportunities, maintaining
and renewing technical knowledge and increasing the overall
capability and enterprise skills of the Group. The opportunities
included enabling innovation, cross-divisional networking and
collaboration, strengthening inclusiveness and diversity and
visible leadership.
GRADUATE PROGRAM
The 2020 Adelaide Brighton Graduate Program will commence
with an induction program that includes a facilitated mentoring
workshop with graduates and their appointed Adelaide Brighton
mentors. This investment in future talent, to support a sustainable
growth strategy, includes sourcing expertise in multiple technical
fields including process engineering, chemical engineering, health,
safety and environment, and control systems engineering. Graduate
positions include process engineer, chemical engineer, HSE and
control systems. First rotation locations are across Australia and
include; Stapylton in Queensland, Birkenhead in South Australia and
Munster in Western Australia.
Our frontline leaders participate in management training, developing
essential skills and knowledge to enable them to lead their teams to
sustained, improved business performance. The blended coaching
model is an effective way for our managers to learn and practice
new skills. Participation in this program has resulted in frontline
managers willing to have difficult conversations, coach and develop
others, create inclusive and collaborative work environments and
build engagement with their teams.
READY TO EXCEL
In 2019, we launched the Ready to Excel Program to create a
national network of highly skilled leaders who are connected and
‘Ready to Excel’. The 12-month program is highly experiential,
with participants being asked to solve complex problems,
business and operational challenges. Participants are given
opportunities to expand their Adelaide Brighton knowledge and
network by developing relationships with participants from around
the Group, including exposure to senior leaders and involvement in
workshops across different states and sites.
EMPLOYMENT BY
EMPLOYMENT STATUS
EMPLOYMENT BY
GEOGRAPHY
% EMPLOYEES ON
EBA VS STAFF
A key component of the program is the action learning project,
where participants are placed in project teams sponsored by a
member of the Executive team. The projects are derived from
Adelaide Brighton’s Sustainability Framework and will focus
on delivering the strategic goals; sustainable and responsible
business practices and engaged people and communities.
HIRING MANAGERS
Recruitment is a key activity in the support of our inclusive and
diverse workforce. Creating awareness and building the capability
of our hiring managers has been the objective of the launch of
an on-line training module ‘Licence to Recruit’ and the delivery
of workshops to build awareness of unconscious bias in the
recruitment process.
LEADERSHIP
To deliver Adelaide Brighton’s business priorities, key leadership
talent priorities have been identified and form the foundation of
development programs, succession planning, talent reviews and
career opportunities. The priorities include:
Δ
Inclusive leadership – we build understanding and
accountability for leaders to demonstrate inclusiveness,
adapting their leadership style to obtain maximum
contribution from all employees;
Δ Building capability and retaining company knowledge – we
continue to monitor and invest in development plans for
successors and future leaders, and we provide opportunities
for mentoring, secondments and cross-divisional networking
and collaboration;
Δ
Δ
Engagement – we ensure appropriate strategies are in place
to enable an engaged workforce to encourage discretionary
effort, and to continue to improve employee engagement; and
Visible leadership – we ensure our leaders understand the
value of safety to our business and model behaviours that
communicate their understanding of ‘safety as a value’ to our
people, and that day-to-day communications and decisions
reinforce ‘Work Safe, Home Safe’.
DIVERSIT Y AND INCLUSION
In 2019, a holistic review of Adelaide Brighton’s Diversity and
Inclusion Policy was undertaken. This included a thorough
consultation process to understand first-hand from our
employees their experience of working at Adelaide Brighton and
how inclusive we are.
Δ
The EGM Human Resources & Health, Safety and Environment
is a member of the Cement Concrete & Aggregates
Australia (CCAA) Diversity Committee and participated in
the development of the CCAA Diversity and Inclusion Plan
to ensure we align with the industry approach to Diversity
and Inclusion, and that we are involved in the solution at an
industry level.
Δ
Δ
Listening Sessions were conducted across the Group to hear
from employees about their experience of working at Adelaide
Brighton and how well we are doing at being inclusive and
what we could do better.
An Executive Diversity and Inclusion Steering Committee has
been established and a number of workshops were conducted
with the Committee.
Full-time
Casual
Part-time
93%
South Australia
4%
3%
New South Wales
Queensland
Western Australia
Victoria
Northern Territory
Tasmania
33%
20%
16%
14%
13%
3%
1%
EBA
Staff
60%
40%
36
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
OUR CEO, NICK MILLER
INSPIRING FUTURE LEADERS
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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S U S TA I N A B I L I T Y R E P O R T - D I V E R S I T Y R E P O R T
1N 2019, WE CONTINUED TO
INVEST IN OUR PEOPLE BY
PROVIDING LEARNING AND
DEVELOPMENT OPPORTUNITIES,
RENEWING TECHNICAL KNOWLEDGE
AND INCREASING THE OVERALL
CAPABILITY AND ENTERPRISE
SKILLS OF THE GROUP.
Δ
Δ
A Diversity and Inclusion session was facilitated at the
Adelaide Brighton Management Conference with our top 90
leaders, including leaders from our joint ventures.
Secondary Listening Sessions were conducted across the Group
followed by workshops with our Committee to feed back our
renewed strategy and engage in further consultation to ensure
our strategy was in line with our employees’ expectations.
A Strategy built by the people of Adelaide Brighton for the people
of Adelaide Brighton. The Diversity and Inclusion Strategy 2020 –
2025 is the result of what we heard, combined with best practice
research. It sets out how we invest in our future.
Our vision is that the next generation of talent will aspire to work
with us at Adelaide Brighton, where our inclusive workplace culture
embraces difference and thrives.
Key focus areas were established to enable the vision including
culture, communication, capability, connection and community.
Each focus area has a detailed action plan consisting of the
target outcomes, the actions to achieve the outcomes, who is
responsible, and a timeframe for delivery.
RECONCILIATION ACTION PL AN (RAP)
In 2019, Adelaide Brighton developed its first Reconciliation
Action Plan (RAP).
The development of this RAP will help us further develop
Adelaide Brighton’s relationships with Aboriginal and Torres
Strait Islander people and create other meaningful opportunities
for their contribution. A RAP Working Group has been established
and our Reflect RAP has been endorsed by Reconciliation Australia.
For many years we have been building relationships with
Aboriginal and Torres Strait Islander people through various
programs such as helping Indigenous law students transition
from graduates to legal practitioners, St Peter’s College
secondary school Indigenous student sponsorship and
support of the Aurora Education Foundation.
WELLBEING
As part of being an inclusive workplace, we want to support
the mental health of our employees to create a more engaged
and productive workforce. Aligned with this, and building on our
company-wide “R U Ok?” initiatives, a key wellbeing focus has
been upskilling our employees in mental health and ensuring
they have an understanding of where they are able to access
support should they require it. This training in mental health
awareness also provides employees with improved skills to start
conversations with other workers who may require support. In
addition to the employees who have participated in this training,
ten employees have been accredited as Mental Health First Aiders
with Mental Health First Aid Australia.
Adelaide Brighton invited Ross Jones - Ambassador, Mentally
Healthy Workplaces, for SafeWork NSW - to the 2019
Management Conference, to deliver a session reinforcing the
importance of this mental health awareness training and the
multitude of organisational benefits that are associated with
having a mentally healthy workplace.
Our Employee Assistance Program (EAP) provides employees
with practical support in dealing with mental health issues when
required. The intensified promotion of this program during 2019,
has seen an increase in employees accessing this service for
mental health related matters.
38
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
DIVERSITY
REPORT
ADELAIDE BRIGHTON IS COMMITTED TO PROVIDING AN INCLUSIVE WORKPLACE THAT VALUES AND
PROMOTES DIVERSITY OF SKILLS, EXPERIENCE AND CULTURAL BACKGROUND.
We recognise that an inclusive culture 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. An overview of these
objectives, and our progress towards achieving these objectives
during the 2019 financial year are set out below.
In addition to progress against these specific objectives, the
People and Culture Committee updated the Committee’s charter
and approved the launch of our Diversity and Inclusion Strategy
2020 to 2025. By 2025, our vision is that the next generation of
talent will aspire to work with us at Adelaide Brighton, where our
inclusive workplace culture thrives on diversity. To achieve this, we
have listened to our people to understand what is working well and
where we can improve. Our Diversity and Inclusion Strategy takes
into consideration this feedback and is our roadmap to creating a
culture that embraces difference and is inclusive of everyone.
OB JEC TIVES
DIVERSIT Y ME ASURES TO FACILITATE
ACHIE VEMENT OF OB JEC TIVES
PROGRESS
To promote
a culture of
diversity and
inclusion.
Δ Review our diversity policy, deployment of the plan
and progress towards achieving the objectives.
Conduct listening sessions across the Group to
obtain employee feedback. Develop a vision and
five-year strategy to progress a culture that
embraces difference and is inclusive of everyone to
be approved by the People and Culture Committee.
Δ The People and Culture Committee discussed the Company’s
diversity measures and reviewed progress towards achieving
the objectives. The Committee approved the Diversity and
Inclusion vision and strategy 2020 to 2025 to continue to create
an inclusive culture that embraces difference. In addition, our
inaugural Reflection Reconciliation Action Plan was endorsed by
Reconciliation Australia.
Δ Proactively engage with industry to enhance
Δ As a member of Cement Concrete & Aggregates Australia
inclusion and increase diversity.
(CCAA) and their Diversity Working Group, contributed to the
development of the CCAA Diversity and Inclusion Plan to foster
an environment that builds a stronger level of diversity and
inclusion in our industry.
Δ Company-wide training in workplace policies
Δ On-line learning platform established to provide an effective
(including diversity, anti-bullying and harassment,
Equal Employment Opportunity).
Δ Recruitment sourcing strategies and practices
deliver diverse candidate pools, employment
decisions are made without regard to factors that
are not applicable to the inherent requirements of
a position and unconscious gender bias does not
influence outcomes.
Δ Promote Adelaide Brighton as a diverse employer
with an inclusive culture.
Δ Group mentoring program for high potential
employees facilitated across the divisions to
continue to develop inclusive leadership.
and accessible way for employees and contractors to complete
inductions and training, complementing workshop sessions.
In addition, specific offerings launched also to support Company
policies such as bullying and harassment.
Δ Continued to invest in hiring manager capability with the launch
of an on-line recruitment training module “Licence to Recruit”
and the delivery of unconscious bias workshops for hiring
managers. 20% of all new hires in 2019 were female with 45% of
staff roles filled by female new hires.
Δ Initiatives to increase the number of female applicants applying
for typically male dominated roles include: gender-neutral
language in advertising, providing flexibility options, training
for candidates without prior experience, and establishing a
relationship with “Soldier On”.
Δ Mentoring program embedded across the business to develop,
inspire and support the next generation.
Δ Leadership talent priorities include building understanding
and accountability to demonstrate inclusiveness and adapting
leadership style to obtain maximum contribution from all
employees.
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.
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S U S TA I N A B I L I T Y R E P O R T - D I V E R S I T Y R E P O R T
OB JEC TIVES
DIVERSIT Y ME ASURES TO FACILITATE
ACHIE VEMENT OF OB JEC TIVES
PROGRESS
Build talent
pipelines through
investment
in skills and
capabilities.
Δ Ensure performance, development and succession
Δ Development programs are provided for individuals as part of
management processes support the career
progression of individuals regardless of gender or
cultural background.
Our Business My Potential Program.
Δ Talent and Succession Management process proactively
challenges and promotes gender representation.
Δ Investment in frontline management has enabled our frontline
leaders to complete FastLead training building confidence,
capability and an openness to learning.
Δ Sponsor or encourage professional networking,
Δ When needs are identified, coaching programs are supported
coaching programs and cross-divisional projects
to give employees the opportunity to connect with
other professionals.
across the business.
Δ Ready to Excel is a CEO sponsored program for identified high
performers to inspire curiosity, innovation and networking
across the Group. The inaugural program was launched in 2019
with 33.3% female participants.
Δ Sponsor MBA or post-graduate studies for high
Δ Adelaide Brighton supports external study and development for
potential employees.
high potential employees.
Δ In recognition of the low female participation in
Δ Electrical Engineering scholarship, University of Wollongong
engineering (11.2%)1 and manufacturing vocations
and to increase the diversity of our workforce:
- Implement programs designed to engage
graduate engineers;
providing a female student both a financial benefit and a work
placement opportunity.
Δ Engineering scholarships across multiple year groups are in
place at University of Adelaide for female students.
- Offer undergraduate scholarship opportunities
and sponsor vacation work programs to engage
students who are entering tertiary education to
consider engineering as a career option; and
- Offer opportunities for secondary school students
to become aware of diverse career opportunities
within our industry.
Δ Sponsorship of STEM Program (Science, Technology, Engineering
and Math) for Year 10 and 11 secondary school students.
Δ Vacation programs in place in Adelaide, Perth and Sydney.
Participation in Kwinana Industries Council iWomen and iScience
projects.
Δ Sponsorship of the SA Law Society Indigenous Law Student
Mentoring Program, ongoing Scholarship for an indigenous
secondary school student at St Peter’s College in Adelaide.
Δ Support of the Aurora Foundation Aspiration Initiative designed
to enhance academic achievement for Aboriginal and Torres
Strait Islander secondary school students.
To reward and
remunerate fairly.
Δ Adelaide Brighton has a policy to provide equal pay
Δ The gender pay parity review was completed in 2019 as part of
for equal work.
Δ As part of the annual salary review process,
Adelaide Brighton undertakes a review of pay parity.
Δ Pay parity is also considered at the time of hiring
new employees, to eliminate potential gaps in pay
arising from hiring decisions.
Adelaide Brighton’s annual remuneration review processes.
Δ Methodology and training supporting the staff remuneration
framework, the Mercer International Position Evaluation (IPE), is
embedded in the hiring process.
To provide flexible
work practices.
Δ Adelaide Brighton seeks to provide suitable working
arrangements for employees returning from
maternity leave.
Δ 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.
Δ We also offer 12 weeks’ paid parental leave for the
primary carer.
Δ Formal review of all part-time work arrangements
to ensure roles are appropriate to maintain career
development.
Understand the
diversity of our
workforce.
Δ Measure age, gender, and cultural identity of our
workforce.
Δ 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.
Δ 7% of the workforce have a part-time or casual work
arrangement.
Δ 7 employees have taken Maternity Leave and 13 employees
have taken Paternity Leave in 2019.
Δ Analysis of results from bi-annual employee survey of cultural
identity plus diversity data is collected from candidates during
the recruitment process.
Δ Reconciliation Action Plan Working Group established.
Δ Member of Cement Concrete & Aggregates Australia (CCAA)
Diversity Working Group.
1.
Engineers Australia. The Engineering Profession. A Statistical Overview, Fourteenth
Edition June 2019
40
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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INVESTING IN FUTURE TALENT,
WHERE OUR INCLUSIVE WORKPLACE
CULTURE THRIVES ON DIVERSITY.
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Adelaide Brighton is committed to the regular review of its
objectives to ensure that these continue to be appropriate
and relevant. This commitment includes the completion of the
workplace profile report as required by the Workplace Gender
Equality Act 2012. A copy of the workplace profile report is
available in the investor relations section of our website.
The Board is committed to build upon the achievements to date
and reinforce the continued efforts in promoting and cultivating
a culture of diversity and inclusiveness.
The following table shows the proportional representation of
women employees at various levels within the Adelaide Brighton
Group (as at 31 December 2019):
Board
Senior Executives
Senior managers
(direct reports to senior Executives)
Total workforce
MALE
FEMALE
43%
22%
4
7
40%
26
15% 1,280
3
2
17
220
A copy of our Diversity and Inclusion Policy is available in the
corporate governance section of our website.
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TA X T R A N S PA R E N C Y R E P O R T
TAX TRANSPARENCY
REPORT
THIS REPORT IS PREPARED IN ACCORDANCE WITH ADELAIDE BRIGHTON’S VOLUNTARY ADOPTION OF
THE TAX TRANSPARENCY CODE AND PROVIDES INFORMATION REGARDING ADELAIDE BRIGHTON’S TAX
CONTRIBUTION, ITS APPROACH TO TAX STRATEGY AND GOVERNANCE, AND ITS INTERNATIONAL RELATED
PARTY DEALINGS DURING THE YEAR ENDED 31 DECEMBER 2019. ADELAIDE BRIGHTON PUBLISHES THIS
REPORT ON A VOLUNTARY BASIS AS PART OF ITS COMMITMENT TO TAX TRANSPARENCY.
DISCLOSURES – PART A
EFFECTIVE COMPANY TA X RATE
The Australian full company tax rate is currently 30% of taxable
income. Taxable income represents gross income minus amounts
that are treated as deductible or exempt under the tax law.
The Effective Tax Rate (“ETR”), being tax expense divided by profit
before tax, for Adelaide Brighton’s Australian operations is 25.6%
for the year ended 31 December 2019.
The ETR differs to the company tax rate due to non-temporary
differences, which represent amounts that are recognised as
assessable or deductible for accounting purposes or tax purposes,
but not both.
Income tax expense is an accounting concept that is different
to income tax payable. Income tax expense reflects the amount
of income that is assessable for tax purposes regardless of the
timing. In contrast, income tax payable reflects the amount of
income that is assessable in the current year.
The ETR is presented under three scenarios below: accounting
profit; accounting profit excluding equity accounted earnings;
and accounting profit excluding equity accounted earnings and
income tax expense excluding capital losses recognised. The
reason for this, is to provide maximum transparency.
In accordance with accounting standards, the share of after
tax profits generated by Adelaide Brighton’s joint ventures and
associates is recognised by the Group in the income statement.
Adelaide Brighton also maintains a balance of capital losses that
may be recouped to offset capital gains incurred for tax purposes.
However, during the year ended 31 December 2019 no capital
losses were recognised to offset capital gains. The inclusion of
equity accounted earnings in accounting profit, and the inclusion
of capital losses recognised in income tax expense, may distort
the ETR and removing these items from the ETR provides a more
transparent representation.
The global ETR recognises the accounting profit/loss attributable
to Adelaide Brighton’s minority interest in our Malaysian based
associate. Additional information in relation to Adelaide Brighton’s
international related party dealings is provided under Part B of
this Report.
42
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
Australian operations
Australian operations –
Excluding equity accounted earnings
Australian operations – Excluding equity
accounted earnings and capital losses recognised
Global operations
Global operations –
Excluding equity accounted earnings
Global operations –
Excluding equity accounted earnings and capital
losses recognised
2019
2018
25.6%
26.7%
35.4%
29.7%
35.4%
29.8%
2019
2018
25.0%
26.7%
35.4%
29.7%
35.4%
29.8%
Adjusting for equity accounted earnings and capital losses not
previously recognised, Adelaide Brighton has an effective tax rate
of 35.4% percent for the year ended 31 December 2019.
2019 EFFECTIVE TAX RATE
%
40
35
30
25
20
15
10
5
0
ETR accounting profit
ETR excluding equity
accounted earnings
ETR excluding equity accounted
earnings & losses recognised
Australian operations
Global operations
Australian corporate tax rate
RECONCILIATION OF ACCOUNTING PROFIT TO INCOME
TA X EXPENSE AND INCOME TA X 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 2019 Financial Statements.
Accounting profit before tax
Prima facie tax payable (at 30%)
Tax effect of non-temporary differences (at 30%):
Non-allowable expenses
Non-assessable income
Rebatable dividends
Non-assessable non-exempt dividends
Goodwill impairment
Other additions/ (deductions)
Previously unrecognised capital losses
2019
$M
63.4
19.0
0.5
(2.1)
(4.0)
-
2.6
(0.1)
-
2018
$M
251.0
75.3
0.5
(2.2)
(5.3)
(0.4)
-
(0.8)
(0.1)
Income tax expense
15.9
67.0
Tax effect of temporary differences (at 30%):
Higher accounting depreciation compared to tax
depreciation
Accounting impairment of fixed assets
Timing of deduction for consumables
Timing of deduction for provisions
Deduction for accruals on payment
Timing of deduction of prepayments
Foreign currency income not yet realised for tax
Other timing differences
Income tax payable
Income tax expense - current year
Under/(over) provision in prior years
Total income tax expense recognised
(1.6)
15.0
0.2
2.5
(0.9)
0.4
-
-
31.5
15.9
0.3
16.2
1.5
-
(2.6)
(0.8)
(0.2)
(0.1)
0.1
(0.4)
64.5
67.0
(1.2)
65.8
IDENTIFICATION OF MATERIAL TEMPORARY AND
NON-TEMPORARY DIFFERENCES
Material adjustments for non-temporary items that reduce income
tax expense relate primarily to differences in the accounting and
tax treatment of income derived from joint ventures and associated
entities as outlined above. During the year ended 31 December
2019, a significant impairment to goodwill was recognised,
resulting in an increase to income tax expense.
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 related primarily
to differences in the timing of deductions for expenses such as
depreciation, provisions, accruals, prepayments and consumables.
During the year ended 31 December 2019, significant timing
differences were also recognised in relation to the accounting
impairment of fixed assets.
DISCLOSURES – PART B
TA X STRATEGY AND GOVERNANCE
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. Adelaide Brighton is committed to being a responsible
corporate citizen and actively seeks to contribute to the wellbeing
of shareholders, customers, the economy and the community.
Adelaide Brighton reflects these commitments in its approach to
taxation, with a high focus on meeting its various tax obligations.
Strong internal expertise 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.
Adelaide Brighton was recently reviewed by the Australian Taxation
Office as part of the Top 1,000 Streamlined Assurance Review. In
their final Report, dated May 2019, the Australian Taxation Office
awarded Adelaide Brighton a ‘High’ level of assurance (being the
highest assurance rating achievable) overall and for each of the key
areas reviewed (namely Significant and new transactions, Specific
tax risks, and Alignment between accounting and tax results).
INTERNATIONAL REL ATED PART Y DEALINGS
Adelaide Brighton has limited international related party dealings.
The Group holds a 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.
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
agreements, arrangements or dealings must be on arm’s length
terms as if conducted by two independent parties. As a result of
these measures, Adelaide Brighton’s dealings with APM, which are
limited to the purchase of clinker, are conducted on a commercial
arm’s length basis.
TA X CONTRIBUTION SUMMARY
Adelaide Brighton paid/will pay in excess of $45.0 million in
Commonwealth, state and territory taxes in respect of the 2019 year.
TA XES BORNE BY ADEL AIDE BRIGHTON
Corporate income tax1,4
Fringe benefits tax2
Payroll tax3
Property tax
Total
TA XES COLLEC TED BY ADEL AIDE BRIGHTON
Goods and services tax5
PAYG withholding (employees)
Total
2019
$M
31.4
1.3
9.9
2.5
45.0
2019
$M
2018
$M
63.7
1.2
9.0
3.6
77.5
2018
$M
151.0
48.6
160.2
45.1
199.6
205.3
Note: figures may not add down due to rounding.
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 2019 is due for
lodgement in mid-2020.
Fringe benefits tax paid in respect of the year ended 31 March 2019.
Payroll tax paid in respect of the year ended 30 June 2019.
Prior year income tax paid has been updated from the amount shown in the 2018
Annual Report to reflect the final income tax liability per the income tax return which
was due and lodged in mid-2019 (after the 2018 Annual Report was published).
Net GST collected $52.1 million (2018: $55.3 million) after input tax credits on behalf
of taxation authorities.
2
3
4
5
In this Tax Transparency Report references to ‘Adelaide Brighton’,
‘the Group’ and ‘our’ refer to Adelaide Brighton Limited and its
wholly owned subsidiaries.
This Tax Transparency Report has not been independently audited;
however, disclosures made in Part A of this Tax Transparency
Report are consistent with disclosures made in the audited
financial statements.
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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HOME
EXECUTIVE
TEAM
THE EXECUTIVE TEAM HAS
COME TOGETHER SEAMLESSLY
AND IS WORKING TOGETHER
COLLABORATIVELY TO BUILD A
MORE SUSTAINABLE BUSINESS.
NICK MILLER
THERESA MLIKOTA
MICHAEL MILLER
TARMO SAAR
BRAD LEMMON
MARCUS CLAYTON
DIMITY SMITH
BRETT BROWN
ANDREW DELL
CHIEF EXECUTIVE OFFICER
CHIEF FINANCIAL OFFICER
EXECUTIVE GENERAL
MANAGER, MARKE TING AND
INTERNATIONAL TRADE
EXECUTIVE GENERAL MANAGER,
STRATEGIC PROJEC TS
EXECUTIVE GENERAL
MANAGER, CEMENT
AND LIME
GENERAL COUNSEL AND
COMPANY SECRE TARY
EXECUTIVE GENERAL
MANAGER, HUMAN
RESOURCES AND
HE ALTH SAFE T Y AND
ENVIRONMENT
EXECUTIVE GENERAL
MANAGER, CONCRE TE
AND AGGREGATES
EXECUTIVE GENERAL
MANAGER, CONCRE TE
PRODUC TS
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RAYMOND BARRO
BBus, CPA, FGIA, FCIS
CHAIRMAN
Age 58
Experience
Over 24 years’ experience in the
premixed concrete and construction
materials industry.
Committee memberships
Member, Safety, Health, Environment
and Community Committee.
Current directorships
Managing Director of
Barro Group Pty Ltd.
GEOFF TARRANT
BBus
DIREC TOR
Age 51
Experience
Extensive experience in the finance
industry with experience gained in
Australia, the United Kingdom and Asia.
Committee memberships
Member, Audit, Risk and Compliance
Committee.
Current directorships
Chairman of Zuuse Limited.
HOME
BOARD OF
DIRECTORS
VANESSA GUTHRIE
Hon DSc, PhD, BSc (Hons)
DIREC TOR
Age 59
Experience
Extensive experience in the mining
and resources industry across a
variety of roles including operations,
environment, community, Indigenous
affairs, corporate development and
sustainability.
Committee memberships
Chairman, People and Culture
Committee and Member of the
Safety, Health, Environment
and Community Committee.
Current directorships
Director of Santos Limited,
Tronox Holdings PLC and
the Australian Broadcasting
Corporation.
46
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ZLATKO TODORCEVSKI
MBA, BCom, FCPA, FGIA
DEPUT Y CHAIRMAN AND
LE AD INDEPENDENT DIREC TOR
Age 51
Experience
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.
Committee memberships
Chairman, Audit, Risk and
Compliance Committee and
Member of the People and
Culture Committee.
Current directorships
Director The Star
Entertainment Group
Limited and Coles Limited.
RHONDA BARRO
DIREC TOR
Age 65
Experience
Over 43 years’ experience in the
construction materials industry and
executive management experience in
line and functional areas.
Committee memberships
Member, People and
Culture Committee.
Current directorships
Executive Director of
Barro Group Pty Ltd.
EMMA STEIN
BSc (Physics Hons), MBA, FUWS, FAICD
KEN SCOTT-MACKENZIE
BE(Mining), Dip Law
DIREC TOR
Age 59
Experience
Over 30 years’ experience in Board
and senior executive positions in the
building materials, oil and gas, energy
and utilities, mining and resources,
water and waste management
sectors.
Committee memberships
Member, Audit, Risk and
Compliance Committee and
People and Culture
Committee.
Current directorships
Director, Alumina
Limited, Cleanaway
Waste Management
Limited and Infigen
Energy Limited.
DIREC TOR
Age 69
Experience
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.
Committee memberships
Chairman, Safety, Health,
Environment and
Community Committee
and Member, People and
Culture Committee.
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FINANCIAL
STATEMENTS
2019
CONTENTS
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
1
Summary of significant accounting policies
Financial performance overview
2
3
4
5
6
7
8
Segment reporting
Critical accounting estimates and assumptions
Earnings per share
Revenue from contracts with customers and
other income
Expenses
Income tax
Note to statement of cash flows
Balance sheet items
9
10
11
12
13
14
15
Trade and other receivables
Inventories
Property, plant and equipment
Leases
Intangible assets
Impairment tests
Provisions
49
58
72
73
74
75
76
77
77
81
81
82
83
83
84
85
88
90
90
91
91
93
95
96
98
Capital structure and risk management
16
17
18
19
20
Borrowings
Share capital
Dividends
Reserves and retained earnings
Financial risk management
Group structure
21
22
23
24
25
26
Joint arrangements and associate
Subsidiaries and transactions with
non-controlling interests
Deed of cross guarantee
Parent entity financial information
Retirement benefit obligations
Share-based payment plans
100
100
100
101
102
103
109
109
110
111
112
113
116
Other
27
28
29
30
31
118
Related parties
118
Events occurring after the balance sheet date 119
120
Commitments for capital expenditure
120
Remuneration of auditors
120
Contingencies
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report to the members
of Adelaide Brighton Ltd
Financial history
Information for shareholders
121
122
123
126
127
DIRECTORS’
REPORT
The Directors present their report on the consolidated entity (the Group) consisting of Adelaide Brighton Limited (the Company) and the
entities it controlled at the end of, or during, the year ended 31 December 2019.
DIRECTORS
The Directors of the Company, at any time during or since the end of the fi nancial year and up to the date of this report, are:
D
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RD Barro (Chairman)
Z Todorcevski (Deputy Chairman and Lead Independent Director)
RR Barro (appointed 10 May 2019)
VA Guthrie
KB Scott-Mackenzie
ER Stein (appointed 4 October 2019)
GR Tarrant
M Brydon (ceased 30 January 2019)
AM Tansey (ceased 4 October 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.
REVIEW OF OPERATIONS
Information on the principal activities, operations and fi nancial position of the Group and its business strategies and prospects is set out
in the Chairman’s report, Chief Executive Offi cer’s review, operating and fi nancial review on pages 3 to 19 of this Annual Report.
A summary of the fi nancial results for the year ended 31 December 2019 is set out below:
S TATUTORY RESULTS
Revenue from contracts with customers
Earnings before interest, tax, depreciation, amortisation and impairments
Depreciation, amortisation and impairments
Earnings before interest and tax ("EBIT")
Net fi nance cost1
Profi t before tax
Income tax expense
Net profi t 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 debt2 ($ million)
Net debt/equity (%)
19
$ M
1,517.0
271.6
(189.7)
81.9
(18.5)
63.4
(16.2)
47.2
47.3
(0.1)
7.3
5.0
–
100.0
423.3
CONSOLIDATED
18
$ M
1,630.6
352.8
(87.4)
265.4
(14.4)
251.0
(65.8)
185.2
185.3
(0.1)
28.5
20.0
8.0
100.0
424.8
35.4%
34.1%
The results were impacted by a number of signifi cant items. The table on page 50 sets out the underlying fi nancial results for the year
ended 31 December 2019 which have been adjusted for the signifi cant items. An explanation of the signifi cant items and reconciliation
to statutory results is provided on page 50.
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REVIEW OF OPERATIONS (continued)
UNDERLYING RESULTS
Revenue from contracts with customers
Earnings before interest, tax, depreciation, amortisation and impairments
Depreciation and amortisation
Earnings before interest and tax ("EBIT")
Net finance cost1
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)
Leverage ratio3 (times)
Net Profit after Tax
19
$ M
CONSOLIDATED
18
$ M
1,517.0
1,630.6
280.0
(93.6)
186.4
(18.5)
167.9
(45.0)
122.9
123.0
(0.1)
18.9
1.5
360.9
(87.4)
273.5
(14.4)
259.1
(68.2)
190.9
191.0
(0.1)
29.4
1.2
Full year reported NPAT decreased 74.5% on 2018, to $47.3 million.
Underlying NPAT declined 35.6% from $191.0 million in 2018 to $123.0 million.
Property profits contributed nil to NPAT in the year, compared to $0.9 million in 2018.
1 Net finance cost is the net of finance costs shown gross in the income statement with interest income included in other income.
2 Net debt is calculated as total borrowings less cash and cash equivalents.
3 Leverage ratio of net debt/trailing 12 months underlying EBITDA.
Reconciliation of underlying profit
Underlying measures of profit exclude significant items of revenue and expenses, such as the costs related to restructuring,
rationalisation and acquisitions, to highlight the underlying financial performance across reporting periods. Profits from the Group's
long-term land sales program are included in underlying profit despite the timing being difficult to predict.
The following table reconciles underlying earnings measures to statutory results.
19
INCOME
TA X
$ M
(16.2)
(26.3)
(0.3)
(2.1)
(0.1)
(45.0)
PROFIT
BEFORE TA X
$ M
63.4
96.1
0.9
7.1
0.4
167.9
PROFIT
AF TER TA X
PROFIT
BEFORE TA X
$ M
47.2
69.8
0.6
5.0
0.3
122.9
$ M
251.0
-
2.6
6.9
(1.4)
259.1
18
INCOME
TA X
$ M
(65.8)
-
(0.8)
(2.0)
0.4
(68.2)
PROFIT
AF TER TA X
$ M
185.2
-
1.8
4.9
(1.0)
190.9
FULL YE AR ENDED 31 DECEMBER
Statutory profit
Impairment
Doubtful debts
Corporate restructuring costs
Acquisition expenses
Underlying profit
Note: Figures may not add due to rounding
Impairment
The Group has recognised a pre-tax non-cash impairment charge of $96.1 million in the period (nil pcp). The charge reflects impairment
testing incorporating the updated outlook for the Group and the reassessment of carrying values following the initial review of business
plans and strategies by the Group’s Chief Executive Officer.
Doubtful debts
In late 2017, Adelaide Brighton became aware of certain financial discrepancies which related to transactions whereby it had been
underpaid for products supplied. The Group 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 amounts have been incurred
in the period of $0.9 million ($2.6 million pcp). The Group expects, in time, that amounts recovered will exceed the costs incurred in the
recovery process.
Corporate restructuring costs
Redundancies and one-off employment costs of $7.1 million were recognised in the period ($6.9 million pcp). These costs result from
staff restructuring within the Group.
D I R E C T O R S' R E P O R T
Acquisition expenses
Costs of $0.4 million associated with prior period acquisitions, including stamp duty, legal and other consulting costs, were incurred
during the period (income of $1.4 million pcp).
DIVIDENDS PAID OR DECL ARED BY THE COMPANY
During the 2019 financial year, the following dividends were paid:
Δ
A final dividend in respect of the year ended 31 December 2018 of 15.0 cents per share (fully franked), comprising an ordinary dividend
of 11.0 cents per share and a special dividend of 4.0 cents per share, was paid on 15 April 2019. This dividend totalled $97,758,469; and
Δ No interim dividend was paid in respect of the year ended 31 December 2019.
Since the end of the financial year, the Directors have approved the payment of a final ordinary dividend of 5.0 cents per share (fully
franked). The final dividend is to be paid on 28 April 2020. The record date for the final ordinary dividend is 14 April 2020.
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.
RISK
DE TAILS
MITIGATION
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.
Adelaide Brighton maintains long-term contracts with major
resource customers and raw material suppliers to minimise loss of
business and earnings through market cycles.
Macro-
economic
conditions
Adelaide Brighton operates mainly in residential, non-
residential and infrastructure construction markets, as
well as supplying product to the resources sector. Its
financial performance is closely tied to the performance
of those markets. The resources, residential, industrial,
commercial and infrastructure construction markets are
cyclical and affected by various factors beyond the Group’s
control including: commodity price performance and
investment into mining projects, the performance of the
Australian federal and state economies, the application of
fiscal and monetary policies and regulatory compliance,
the allocation and timing of government funding for public
infrastructure and other building programs, the level of
demand for building products and construction materials
and services generally, the availability and cost of labour,
raw materials and transport services, as well as the price
and availability of fuel and energy. Adelaide Brighton
supplements its local Australian production with imported
materials. The supply of imported materials is therefore
dependent upon economic conditions in countries outside
of Australia, particularly in Japan, Indonesia and other
Southeast Asian countries.
Regulatory
compliance
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.
The Group employs a range of initiatives to meet or exceed
regulatory compliance including:
Δ Employment of specialists to support operational staff in areas
such as human resources, health and safety, environment and
sustainability;
Non-compliance with regulatory requirements could lead
to substantial penalties and impositions on operations.
Δ Regular training and competency testing of employees;
Δ Inclusion of regulatory compliance within the internal audit scope;
and
Δ Policies and procedures designed to instil and foster a culture
going beyond mere compliance.
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D I R E C T O R S' R E P O R T
D I R E C T O R S' R E P O R T
BUSINESS RISKS AND MITIGATION (continued)
BUSINESS RISKS AND MITIGATION (continued)
RISK
DE TAILS
MITIGATION
RISK
DE TAILS
MITIGATION
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 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 29.5% 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.
Energy
pricing
Foreign
currency
Interest
rates
Competitive
landscape
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 imports a range of materials to supplement
capacity of local production facilities, with approximately
2.6 million tonnes of product imported in 2019. 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’s debt portfolio is exposed to changes in
interest rates, which may result in increased interest
costs.
Australia, with its relatively open access to global
participants, is a competitive market. Heightened
competition combined with fluctuations in the macro
economic environment can lead to product price volatility
and impact upon the financial performance of the Group.
Key
equipment
failure
The production of cement and lime involves large scale
manufacturing sites in order to obtain economies of scale.
The failure of key equipment in the process can disrupt
production.
Production
quality
The Group's key products of cement, lime, concrete,
aggregates and concrete products are sold in
accordance with relevant quality standards. Materials
used in production are natural products and therefore
normal variability of the characteristics could result in
fluctuations in quality of the end product.
Products that do not meet the relevant quality standard
could result in end-use customers being financially
disadvantaged.
The Group is able to leverage its access to products from emissions
efficient suppliers as a result of the Company’s import strategy.
The use of alternate products with cementitious properties, such as
fly ash and ground granulated slag, has increased.
In addition, the use of renewable energy sources such as wind and
solar has increased.
Adelaide Brighton is also working with partners in the development
of alternate products to replace Portland cement.
The Group has adopted a two-year roadmap to implement the
recommendations released by the Task Force on Climate-related
Financial Disclosures, which are detailed in Adelaide Brighton’s 2019
Sustainability Report.
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 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.
The Group manages exposure to interest rate risk through a
formalised hedging program. A portion of the Group’s drawn debt
is hedged at fixed rates for a period of 5 years to limit the risk of
increases in interest rates to Adelaide Brighton.
Through a focus on cost control and productivity 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. The Group utilises technology to provide
more meaningful data to improve margin and cost and engages
proactively with its customer base to ensure their operational needs
are fully met. We continue to develop our product range to address
the changing needs of our customers and the increased focus on
delivering products with a greener environmental footprint.
Business continuity planning identifies risks with key equipment and
alternate strategies are developed to mitigate risks including holding
“insurance spares” of key equipment and contractual arrangements
to supplement production where required. To the extent that
production is disrupted, the Group maintains business interruption
insurance which responds, after periods exceeding 20 days.
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. The Group has product liability insurance which covers the
Group’s legal liability to pay compensation and costs for personal
injury or property damage arising from the supply of non-compliant
products.
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.
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.
Fraud,
bribery and
corruption
Changes in macroeconomic conditions and customer
specific issues impacting cash flows available to settle
purchases affect the level of risk associated with trade
credit outstanding.
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.
The Group’s Code of Conduct outlines the key principles that govern
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.
STATE OF AFFAIRS
Other than set out in the Chairman’s report, Chief Executive Officer’s review, operating and financial review on pages 3 to 19 of this
Annual Report, 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 2019 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.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
The Chairman’s report, Chief Executive Officer’s review, operating and financial review on pages 3 to 19 of this Annual Report refer to
likely developments in Adelaide Brighton’s operations in future financial years and the expected results of those operations.
ENVIRONMENTAL PERFORMANCE
The Group’s operations are subject to various Commonwealth, state and territory environmental regulations.
Environmental performance is monitored by site and business division, and information about the Group’s performance is reported to
and reviewed by the Group’s senior management, the Board’s Safety, Health, Environment 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.
Group entities respond as required to requests made by regulatory authorities, including requests for information and site inspections.
During 2019, Group entities were issued with regulatory notices issued by government authorities responsible for planning and
environment matters. Group companies responded to regulatory notices as required and addressed issues raised by regulatory
authorities.
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 ABCL understood was certified Virgin Excavated Natural Material delivered to the
Morgan Ash Vales Point site. ABCL preserved the material as required by the NSW EPA and on 23 January 2020, the NSW EPA issued to
Hogan Haulage, the third party that delivered the material to the site, a notice requiring Hogan Haulage to clean up the material by 21
February 2020.
On 28 November 2018, Hy-Tec Industries (Queensland) Pty Ltd (“Hy-Tec”) self-reported to the Queensland Department of Natural
Resources, Mines and Energy (“DNRM&E”) that Hy-Tec’s concrete business in Mundubbera had been extracting sand from the Burnett
River without a Quarry Material Allocation Notice. After investigating the circumstances, on 26 June 2019, the DNRM&E confirmed that it
did not propose to take any regulatory action.
On 3 May 2019, Hy-Tec self-reported to the NSW EPA, a discharge of water from its Tumbulgum quarry in northern NSW. On 29 January
2020, the NSW EPA issued a Penalty Infringement Notice for $15,000 for alleged offences associated with the discharge. Hy-Tec has
paid the penalty.
Following the acquisition of its Alice Springs and Katherine quarries in 2017, Hy-Tec Industries (Northern Territory) Pty Ltd lodged its
2017/18 and 2018/19 National Pollution Inventory reports for the quarries late in November 2019.
On 5 November 2019, Cockburn Cement Limited was informed that the WA Department of Water and Environmental Regulation (DWER)
was conducting an investigation into alleged offences against the WA Environmental Protection Act (EP Act). The DWER informed
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Cockburn Cement Limited that it was investigating alleged unreasonable odour emissions from Cockburn Cement’s Munster plant
between January and April 2019. Cockburn Cement Limited denies the allegations and denies that it has committed any offence.
Further details of the Group’s environmental performance are contained in the 2019 Sustainability Report.
DIRECTOR PROFILES
The following information is current as at the date of this report.
DIREC TOR
E XPERIENCE
Raymond Barro
BBus, CPA, FGIA, FCIS
Age 58
Non-executive Director since August 2008.
Over 29 years’ experience in the premixed concrete and construction materials
industry.
Managing Director of Barro Group Pty Ltd.
Zlatko Todorcevski
MBA, BCom, FCPA, FGIA
Age 51
Rhonda Barro
Age 65
Vanessa Guthrie
Hon DSc, PhD, BSc (Hons)
Age 59
Ken Scott-Mackenzie
BE(Mining), Dip Law
Age 69
Emma Stein
BSc (Physics Hons),
MBA, FUWS, FAICD
Age 59
Geoff Tarrant
BBus
Age 51
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’s Energy business.
Director, The Star Entertainment Group Limited and Coles Group Limited.
Non-executive Director since May 2019.
Experienced executive with over 40 years’ experience in the construction
materials industry with a background in concrete and quarry operations and
strategy.
Executive Director of the Barro Group. Director Co.As.It. Italian Assistance
Association, Chairman Italian Historical Society Strategy Committee and Director
St Vincent’s Institute of Medical Research Foundation.
Independent Non-executive Director since February 2018.
Extensive experience in the mining and resources industry. Former CEO and
Managing Director of Toro Energy Limited and Vice President Sustainable
Development at Woodside Energy.
Director of Santos Limited. Former Director Vimy Resources Limited.
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.
Non-executive Director since October 2019.
Experienced global executive with over 30 years’ experience in Board and senior
executive positions in the building materials, oil and gas, energy and utilities,
mining and resources, water and waste management sectors.
Former UK Managing Director for Gaz de France Energy, a major energy retailer
focused on industrials.
Director Alumina Limited, Cleanaway Waste Management Limited and Infigen
Energy Limited.
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
Appointed Chair
(10 May 2019)
Member, Safety, Health,
Environment and Community
Committee
Appointed Deputy Chairman
and Lead Independent
Director (10 May 2019)
Chairman, Audit, Risk and
Compliance Committee
Member, People and Culture
Committee (appointed
10 May 2019)
Chairman, People and Culture
Committee
Member, Safety, Health,
Environment and Community
Committee
Chairman, Safety, Health,
Environment and Community
Committee
Member, People and Culture
Committee
Member, Audit, Risk and
Compliance Committee
(appointed 4 October 2019)
Member, People and Culture
Committee (appointed
4 October 2019)
D I R E C T O R S' R E P O R T
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:
DIREC TOR
BOARD MEE TINGS
AUDIT, RISK & COMPLIANCE
COMMIT TEE
PEOPLE AND CULTURE
COMMIT TEE
SAFE T Y, HE ALTH, ENVIRONMENT
AND COMMUNIT Y COMMIT TEE 1
RD Barro2
Z Todorcevski3
RR Barro4
VA Guthrie
KB Scott-Mackenzie
ER Stein5
AM Tansey6
GR Tarrant
M Brydon7
A
14
14
9
14
14
2
11
14
1
H
14
14
9
14
14
3
11
14
1
A
–
6
–
–
–
1
5
6
–
H
–
6
–
–
–
1
5
6
–
A
–
–
2
5
5
1
4
–
–
H
–
–
2
5
5
1
4
–
–
A
3
–
–
3
3
–
–
–
–
H
3
–
–
3
3
–
–
–
–
A Number of meetings attended.
H Number of meetings held during period of office.
1 Safety, Health, Environment and Community Committee formerly named Safety, Health and Environment Committee. Change of name effective 26 February 2019.
2 Mr Barro was appointed Chairman of the Board effective 10 May 2019.
3 Mr Todorcevski was Chairman of the Board until 10 May 2019 when he was appointed Deputy Chairman and Lead Independent Director. From 4 October 2019 Mr Todorcevski was
appointed Chairman of the Audit, Risk and Compliance Committee.
4 Ms Barro was appointed as a Director and member of the People and Culture Committee effective 10 May 2019.
5 Ms Stein was appointed as a Director, a member of the Audit, Risk and Compliance Committee and a member of the People and Culture Committee effective 4 October 2019. Due to a pre-
appointment commitment, Ms Stein was not able to attend one ad hoc Board meeting.
6 Ms Tansey retired as a Director on 4 October 2019.
7 Mr Brydon retired as a Director on 30 January 2019.
DIRECTORS’ INTERESTS
RD Barro
Z Todorcevski
RR Barro
VA Guthrie
KB Scott-Mackenzie
ER Stein
GR Tarrant
ORDINARY SHARES
279,178,329
50,000
278,787,781
5,000
20,000
–
–
Full details of the interests in share capital of Directors of the Company are set out in the Remuneration Report on pages 58 to 71 of
this report.
DIRECTOR AND EXECUTIVE REMUNERATION
Details of the Company’s remuneration policies and the nature and amount of the remuneration of the Directors and certain senior
executives are set out in the Remuneration Report on pages 58 to 71 of this report.
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Member, Audit, Risk and
Compliance Committee
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.
COMPANY SECRETARIES
Two other employees of the Company also held the office of Company Secretary for periods during the year to assist with secretarial
duties should the principal Company Secretary be absent: the Company’s former Group Corporate Affairs Adviser, Luba Alexander who
had been Company Secretary since 22 March 2001 (resigned 15 November 2019) and the Group’s General Manager Corporate Finance
and Investor Relations, Darryl Hughes, who was appointed on 11 December 2019.
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D I R E C T O R S' R E P O R T
INDEMNIFICATION AND INSURANCE OF OFFICERS
Rule 9 of the Company’s constitution provides that the Company indemnifies each person who is or who has been an “officer” of the
Company on a full indemnity basis and to the full extent permitted by law, against liabilities incurred by that person in their capacity as
an officer of the Company or of a related body corporate.
Rule 9.1 of the constitution defines “officers” to mean:
Δ
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.
Δ
Additionally, the Company has entered into Deeds of Access, Indemnity and Insurance with all Directors of the Company and its wholly-
owned subsidiaries. These deeds provide for indemnification on a full indemnity basis and to the full extent permitted by law against
all losses or liabilities incurred by the person as an officer of the relevant Company. The indemnity is a continuing obligation and is
enforceable by an officer even if he or she has ceased to be an officer of the relevant Company or its related bodies corporate.
The Company was not liable during 2019 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, the Executive General Managers and any other Officers of each of the divisions of the
Group, for the period 1 May 2019 to 30 April 2020. Due to confidentiality obligations under that policy, the premium payable and further
details in respect of the nature of the liabilities insured against cannot be disclosed.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of the Court to bring proceedings on behalf of the Company or to intervene in any proceedings to which
the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The
Company was not a party to any such proceedings during the year.
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s experience
and expertise with the Company and the Group are important.
Details of the amounts paid or payable to PricewaterhouseCoopers for audit and non-audit services provided during the year are set out
in Note 30 to the Financial Statements on page 120 of this report.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit, Risk and Compliance
Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out in
Note 30, did not compromise the auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
Δ
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
Δ None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
AUDITOR’S INDEPENDENCE DECL ARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 122.
ROUNDING OFF
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 relating to
the “rounding off” of amounts in the Directors’ report. In accordance with that instrument, amounts in the financial report and Directors’
report have been rounded off to the nearest one hundred thousand dollars, unless otherwise stated.
D I R E C T O R S' R E P O R T
SHARES UNDER OPTION
Unissued ordinary shares under option relate to Awards associated with the Company’s Executive Performance Share Plan. Outstanding
Awards at the date of this report are as follows:
DATE AWARDS GR ANTED
E XPIRY DATE
NUMBER OF AWARDS
1 January 2016
1 January 2017
1 January 2018
1 January 2019
Total
30 September 2020
30 September 2021
30 September 2022
30 September 2023
193,490
166,866
142,357
560,887
1,063,600
The exercise price for these Awards is nil. Further details of Awards are set out in Note 26 and the Remuneration Report.
REGISTERED OFFICE
The registered office of the Company is Level 1, 157 Grenfell Street, Adelaide, South Australia 5000.
CORPORATE GOVERNANCE STATEMENT
The corporate governance statement is available on the Adelaide Brighton Limited website and may be accessed via the following URL:
http://adbri.com.au/ourresponsibilities#governance-exp
Signed in accordance with a resolution of the Directors.
Raymond Barro
Chairman
Dated 26 February 2020
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R E M U N E R AT I O N R E P O R T
REMUNERATION
REPORT
CHAIRMAN’S LET TER
Dear Shareholders
On behalf of the Board and as Chair of the People and Culture Committee, I am pleased to present the Adelaide Brighton 2019
Remuneration Report.
COMPANY PERFORMANCE
The 2019 financial year saw a reduction in overall profitability of the Company driven by subdued demand across the eastern seaboard
and competitive pressure in Queensland and South Australia. Underlying net profit after tax decreased from $191 million to $123 million.
Adelaide Brighton responded to these changes in the market by focusing our efforts on a major cost reduction program and expanding
our exposure to the infrastructure sector. Benefits from these initiatives are already being realised, although the full impact will not be
achieved until 2020 and onwards.
The Group 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.
RESPONSE TO 2019 AGM VOTE
At the 2019 AGM, Adelaide Brighton received a ‘first strike’, with 30.6% of shareholders voting against the Remuneration Report.
We acknowledge the concerns that shareholders raised which led to the ‘first strike’.
Following conversations with shareholders who voted against the report, we understand that it was predominantly in response to the
exercise of the Board’s discretion to the treatment of incentives awarded to the outgoing Managing Director and CEO, Martin Brydon.
The structure of Mr Brydon’s arrangements was disclosed in the 2018 Remuneration Report and were one-off in nature, reflecting the
exceptional returns generated during his tenure with the Company and flexibility regarding his retirement arrangements. Some amounts
included in this report reflect the final period of his service in 2019.
On the basis of this feedback the Board has reflected upon our remuneration framework. While Board discretion can be exercised
within Plan rules, our preference in future is to consider alternative remuneration structures including the issue of shares with holdback
provisions for any future Board discretion to ensure linkage to shareholder value.
In addition, the LTI plan will be reviewed in 2020. The objectives of the review are to ensure ongoing alignment with shareholder objectives, in
addition to incentivising the executive in the long term. Changes being considered include; a minimum hold requirement for vested shares,
the inclusion of non-financial measures and the introduction of additional performance measures.
REMUNERATION IN FY19
Non-executive Director fees
For those Executives that are subject to retention arrangements, the value of the assessed performance for non-financial objectives will be
offset against their retention balance. This decision has been made to accelerate the alignment of the remuneration of key Executives.
The STI awards reflect the improvement in the Group’s performance in community engagement and safety outcomes, which are essential
to long-term profitability and maintaining a strong social licence to operate. The Board believes that these outcomes balance the important
achievements of management despite the softening of demand in the construction industry and the lower profit achieved this year.
LTI outcomes
The LTI plan plays an important role in aligning Executives and the interests of shareholders by ensuring Executive reward is linked to
increasing shareholder value over the long term.
Across the performance period of the 2015 LTI, Adelaide Brighton’s TSR was 89.5%, placing the Company at the 80th percentile of the
comparator group, reflecting the strong share price and dividend payments over the period. Accordingly, the TSR component of the
award vested in full. Conversely, the compound annual earnings per share (EPS) performance condition did not meet the threshold and
did not vest. Overall, 50% of the 2015 LTI awards vested due to the condition attaching to the TSR component over the period.
The design of the LTI Plan in 2020 will reflect the outcomes of the planned review.
BOARD RENEWAL AND EXECUTIVE SUCCESSION
During the year there has been renewal in the Board of Adelaide Brighton:
Δ Mr Raymond Barro was appointed Chairman of the Company following the 2019 Annual General Meeting (AGM) on 10 May 2019.
Δ Mr Zlatko Todorcevski, the previous Chairman, was appointed Deputy Chairman and Lead Independent Director.
Δ On 10 May 2019, Ms Rhonda Barro, an Executive Director of the Barro Group, the Company’s largest shareholder, was elected to the
Board. Ms Barro has over 43 years’ experience in the construction materials industry.
Δ On 4 October 2019, Ms Emma Stein was appointed to the Board. Ms Stein brings over 30 years’ experience in Board and senior
executive positions in the building materials, oil and gas, energy and utilities, mining and resources, water and waste management
sectors. Ms Stein will stand for election as a Director at the 2020 AGM.
Δ Ms Arlene Tansey retired from the Board on 4 October 2019, having been a Director since April 2011. The Board thanks Ms Tansey for
her commitment and contribution over her years’ of service to the Company.
The Board continues to comprise a majority of independent directors in line with the Board Governance Framework announced in early
2019 and the recommendations of the ASX Corporate Governance Council.
In light of the Board’s succession, the Board has determined to establish a Committee for Nomination and Governance, including conflict
of interest protocols. The Committee will be chaired by the Lead Independent Director and no additional fees will be paid to the members
of this Committee.
At an executive level, 2019 saw the successful transition of Nick Miller into the Chief Executive Officer role and Theresa Mlikota as
Chief Financial Officer.
Nick brings 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.
Theresa is a highly regarded finance executive with 30 years’ experience in the resources and construction sectors. Theresa previously
held the role of CFO with Ausdrill Limited, Fulton Hogan, Thiess, Macmahon Holdings and Barminco Ltd.
These changes have strengthened our leadership group and have put Adelaide Brighton in a position for continued success.
Non-executive Director fees increased by 2% during 2019, following a freeze on fees which had been in place since 2017. There are no
proposed increases for 2020.
CONCLUSION
Executive Fixed Remuneration
Fixed remuneration has been set in line with the overall aim of paying an appropriate amount to hire and retain executive talent. For new
executives in 2019, rates of remuneration were benchmarked to attract appropriately qualified candidates to the roles of CEO and CFO.
For existing Executives, following benchmarking against the market, changes to remuneration in 2018 were regarded as sufficient to
hold fixed remuneration flat in 2019.
Executive Retention Payment
In response to the unique circumstances in 2018, which included the departure of the MD & CEO, plus two other Executives, the Board
offered retention payments to the remaining key Executives in August 2018. This was in response to the recognition that with change
can come a period of perceived instability.
The cash payment was conditional upon continued service until July 2019 and was a ‘bring forward’ of vesting of future STI and LTI.
Any entitlements to future STI and LTI will be reduced by the amount of the retention payment. The retention payment has been
effective in achieving the objective of retaining key Executives both in the initial period and to today.
STI outcomes
Short-term incentive awards take into account the Board’s assessment of performance against non-financial objectives. While the
Company demonstrated strong performance in safety and community engagement, the Company’s financial performance fell short of
targets. As a result, the Board and CEO agreed no STI would be paid for the 2019 year.
The Board has ensured that remuneration outcomes reflect the level of performance achieved against the applicable targets.
We have prepared the 2019 Remuneration Report consistent with our objective of being transparent about our remuneration framework
and practices, and the link between Company and individual performance with 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 reporting and practices. We look forward to welcoming you to the 2020 Annual General Meeting.
Vanessa Guthrie
Chairman of People and Culture Committee
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R E M U N E R AT I O N R E P O R T
R E M U N E R AT I O N R E P O R T
REMUNERATION REPORT CONTENTS
1. Key management personnel
2. Executive remuneration policy and framework
2.1 Remuneration policy
2.2 Remuneration framework
2.3 Remuneration mix
2.4 Remuneration governance
3. Non-executive Directors’ fees
3.1 Non-executive Directors’ minimum
shareholding requirement
3.2 Policy and approach to setting Director fees
4. Summary of financial performance in 2019
5. Linking remuneration to company performance
5.1 Short-term incentive – outcomes
5.2 Long-term incentive – outcomes
6. Executive remuneration in 2019
6.1 Fixed annual remuneration
6.2 Short-term incentive
6.3 LTI
6.4 Executive service agreements
7. Key management personnel disclosure tables
7.1 Non-executive Directors’ statutory remuneration
7.2 Executive statutory remuneration
7.3 Equity holdings of key management personnel
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The Directors of Adelaide Brighton Limited (the Company) present the Remuneration Report (Report) for the Company and the Group
for the financial year ended 31 December 2019. The Report outlines the remuneration arrangements in place for the Key Management
Personnel (KMP) of the Company and is prepared in accordance with section 300A of the Corporations Act 2001 (Cth). This Report, which
forms part of the Directors’ Report, has been audited by PricewaterhouseCoopers.
1. KEY MANAGEMENT PERSONNEL
The KMP of Adelaide Brighton comprise all Directors and those Executives who have authority and responsibility for the planning,
directing and controlling of the activities of the Group. In this Report, ‘Executives’ refers to members of the Group Executive team
identified as KMP.
The KMP detailed in this Report for the 2019 financial year are:
NAME
E XECUTIVES
Current
Nick Miller
Theresa Mlikota
Brett Brown
Andrew Dell
Brad Lemmon
Former
Martin Brydon
NON-E XECUTIVE DIREC TORS
Current
Raymond Barro
Zlatko Todorcevski
Ken Scott-Mackenzie
Vanessa Guthrie
Geoff Tarrant
Rhonda Barro
Emma Stein
Former
Arlene Tansey
POSITION
TERM
Chief Executive Officer
Chief Financial Officer
From 30 January 2019
From 15 April 2019
Executive General Manager, Concrete and Aggregates
Executive General Manager, Concrete Products
Executive General Manager, Cement and Lime
Full year
Full year
Full year
CEO and Managing Director
Until 31 March 2019
Chairman
Deputy Chairman and Lead Independent Director
Independent Non-executive Director
Independent Non-executive Director
Non-executive Director
Non-executive Director
Independent Non-executive Director
From 10 May 20191
From 10 May 20192
Full year
Full year
Full year
From 10 May 2019
From 4 October 2019
Non-executive Director
Until 4 October 2019
1 Mr Barro was a Non-executive Director prior to being appointed.
2 Mr Todorcevski was Chairman prior to being appointed Deputy Chairman and Lead Independent Director.
2. EXECUTIVE REMUNERATION POLICY AND FRAMEWORK
2.1 Remuneration policy
REMUNER ATION PRINCIPLES
The Board ensures remuneration policies are clearly aligned with the Group strategy, which is focused on maintaining and growing long-
term shareholder value. In determining Executive remuneration, the Board has adopted a policy that is guided by the following principles.
AT TR AC T
AND RE TAIN
PAY-FOR-
PERFORMANCE
Reward individual
performance,
responsibility and
potential.
Provide
remuneration that
attracts, rewards,
motivates and
retains a highly
capable Executive
team.
BEHAVIOURS
Drive leadership,
performance and
behaviours that
reinforce the
Group’s short and
long-term strategic
and operational
objectives.
SHAREHOLDER
ALIGNMENT
MARKE T
COMPE TITIVE
Have regard to
market practice and
market conditions.
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.
TR ANSPARENT
Provide transparency
and clarity on what,
to whom and on what
basis remuneration
has been paid.
The governance of remuneration outcomes is a key focus of the Board and the People and Culture (PC) Committee.
Remuneration policies are regularly reviewed to ensure that remuneration for Executives continue to remain aligned with
Company performance. Further detail on remuneration governance is set out at section 2.4.
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R E M U N E R AT I O N R E P O R T
2. EXECUTIVE REMUNERATION POLICY AND FRAMEWORK (continued)
3. NON-EXECUTIVE DIRECTORS’ FEES
2.2 Remuneration framework
3.1 Non-executive Directors’ minimum shareholding requirement
REMUNER ATION
COMPONENT
Purpose
Delivery
Opportunity
FIXED
‘AT RISK’ REMUNER ATION
FIXED ANNUAL REMUNER ATION (FAR)
SHOR T-TERM INCENTIVE (S TI)
LONG-TERM INCENTIVE (LTI)
Provide competitive base pay to
attract and retain the skills needed
to manage the business.
To be delivered on the achievement
of performance targets linked to the
Group’s annual business objectives.
Salary and other benefits
(including statutory
superannuation).
Cash (50%)
Deferred rights to
receive fully paid
ordinary shares (50%)
To focus Executives on the Group’s
long-term business strategy to create
and protect shareholder value over a
four-year performance period.
Rights to receive fully paid ordinary
shares (100%)
Set at between the median and
75th percentile of the ASX51-150
for successful performers, and at
relatively modest levels compared
to peers for new Executives.
CEO
100% of FAR
Other executives
60% – 80% of FAR
CEO
100% of FAR
Other executives
40% – 70% of FAR
FY19 Approach FAR is set with regard to the size
and nature of an executive’s role,
the long-term performance of an
individual, their future potential within
the Group and market practice.
Δ Financial (80%)
Δ Non-financial (20%)
Δ Strategic
Δ People
Δ Operational excellence
Δ Four-year performance against:
– Compound annual Earnings
Per Share (EPS) (50%)
– Relative Total Shareholder
Return (TSR) (50%)
2.3 Remuneration mix
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%
KE Y MANAGEMENT PERSONNEL (AVER AGE)
Fixed annual remuneration
Short-term incentive
Long-term incentive
46%
Cash 62%
16%
16%
22%
Equity 38%
2.4 Remuneration governance
Our governance framework for determining executive remuneration is outlined below:
BOARD
PC COMMIT TEE
MANAGEMENT
The Board approves:
Δ The overall remuneration policy;
Δ Non-executive Director
remuneration and senior executive
remuneration; and
Δ The remuneration of the CEO,
including his participation in the
short-term and long-term incentive
schemes.
The PC Committee is delegated
responsibility by the Board to review
and make recommendations on:
Δ The remuneration policies and
framework for the Group;
Δ Non-executive Director
remuneration;
Δ Remuneration for senior executives;
and
Δ Executive incentive arrangements.
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).
⟷
CONSULTATION
WITH
SHAREHOLDERS
AND OTHER
S TAKEHOLDERS
→
−
→
−
→
−
REMUNER ATION CONSULTANTS AND OTHER E X TERNAL ADVISORS
Provide independent advice, information and recommendations relevant to remuneration decisions.
In performing their duties and making recommendations to the Board, the Chairman of the PC Committee
seeks independent advice from external advisors on various remuneration related matters.
Any advice or recommendations provided by external advisers are used to assist the Board – they do not
substitute for the Board and PC Committee process.
Adelaide Brighton’s Non-executive Director Minimum Shareholding Policy enhances Board alignment with shareholder interests
and encourages 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 requirement.
Details of the current shareholdings for Non-executive Directors as at 31 December 2019 are provided in section 7.3.
3.2 Policy and approach to setting Director fees
FE ATURE
DESCRIP TION
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.
Aggregate fees
approved by
shareholders
Base fees for 2019
The new Chairman commenced in May 2019 and his fee has not been increased from his time as a Non-
executive Director, consisting of the base fee and a committee member fee. The Deputy Chairman and
Lead Independent Director’s fee has not been changed from his time as Chairman, taking into account the
continued time commitment of the role. He therefore receives a higher fee but does not receive any additional
payment for service on the respective committees he is a member of.
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:
Δ Independent professional advice;
Δ Fees paid by comparable companies;
Δ The general time commitment and responsibilities involved; and
Δ The level of remuneration necessary to attract and retain Directors of a suitable calibre.
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.
Fees for the Chairman and Non-executive Directors are reviewed annually and considered against peer
companies.
Fees payable to Non-executive Directors are inclusive of contributions to superannuation.
BASE FEES (BOARD)
Chairman
Deputy Chairman and Lead Independent Director1
Non-executive Director
COMMIT TEE FEES
Audit, Risk and Compliance Committee
People and Culture Committee
Safety, Health, Environment and Community Committee
$
147,900
377,400
132,600
COMMIT TEE CHAIR ($)
COMMIT TEE MEMBER ($)
30,600
30,600
30,600
15,300
15,300
15,300
1 The Deputy Chairman and Lead Independent Director of the Board receives no additional fee for committee work.
In accordance with the Company’s constitution, Directors are also permitted to be paid additional fees for
special duties or exertions. Such fees may or may not be included in the aggregate amount approved by
shareholders, as determined by the Directors. No such fees were paid during the year.
Directors are also entitled to be reimbursed for all business-related expenses, including travel, as may be
incurred in the discharge of their duties.
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R E M U N E R AT I O N R E P O R T
4. SUMMARY OF FINANCIAL PERFORMANCE IN 2019
5. LINKING REMUNERATION TO COMPANY PERFORMANCE (continued)
2015
2016
2017
2018
2019
CAGR %
5.1 Short-term incentive – outcomes
Sales
NPAT reported
Share price
Dividends
Franking
Operating cash flow
Basic earnings per share
TSR – 1 year
$m
1,411.4
1,393.8
1,559.6
1,630.6
1,517.0
excluding property $m
173.0
177.8
174.4
184.4
$/share
cents/share
%
$m
cents
%
4.75
27.0
100
5.43
28.0
100
6.52
24.5
100
229.9
248.4
224.2
32.0
42.6
28.7
20.2
28.0
24.6
4.27
28.0
100
244.7
28.5
47.3
3.46
5.0
100
193.2
7.3
(30.2)
(18.9)
1.8
(27.7)
(7.6)
(34.4)
–
(4.3)
(30.9)
5. 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 2019. Company performance across key indicators is reflected in the remuneration outcomes during the year.
PERFORMANCE ME ASURE
RE ASON CHOSEN
PERFORMANCE ASSESSMENT
RESULT
FINANCIAL PERFORMANCE
Financial
The financial metrics are
NPAT for the Group and EBIT
for Divisions. Actual financial
metrics are compared to
budget. The Board has
discretion to adjust actual
results for target assessment.
The Board believes these financial
measures align the interests of
Executives with shareholders,
ensuring the KMP are rewarded on the
Group’s annual business objectives
and creating sustainable value for
shareholders. Stretch targets provide
incentives beyond budget to enhance
shareholder returns.
0%
Group reported NPAT and Divisional EBIT
were impacted by lower market demand
and the entry of new competitors into the
South Australian and Queensland markets.
Financial performance of the Group and all
divisions did not meet the threshold for the
performance measure of 95% of budget.
NON-FINANCIAL PERFORMANCE
Strategic
People
The strategic initiatives
focus on technology, market
profitability diversity and
inclusion.
Fundamental to this
assessment is the setting of
business initiatives to deliver
long-term development and
growth.
Implementing strategies to drive
sustainable growth, proactively
responding to market development
and future ways of working are critical
to delivering the strategy and building
shareholder value.
A range of metrics focused on
people, culture and capability
with specific metrics for:
Δ Proactive safety;
Δ Environmental
performance;
Δ Development of capability;
Δ Deepening succession
pools; and
Δ Increasing diversity.
Increasing the diversity of candidate
pools will result in a more robust
talent pipeline and more diverse
workforce to reflect the communities
we operate in. This enables the CEO to
deepen leadership succession, for our
long-term success. Leading safety
indicators are designed to drive
cultural change and through visible
leadership, deliver on the Safety
“Step-Change” and reduce harm.
80-
100%
80-
120%
Technology - A comprehensive technology
strategy and implementation roadmap was
developed.
Market profitability - A model was
developed to monitor market share and
pricing strategies
Diversity and inclusion – An employee
consultation process was undertaken
to gauge Company working experiences,
for incorporation into the Diversity and
Inclusion Strategy.
Diverse candidate pools - Initiatives
increased the number of female applicants
and new hires in typically male dominated
roles, resulting in an increase in new
female hires from 19% to 20%.
Deepen leadership succession pools -
Internal succession and development
plans are in place for Executives, General
Managers and leadership roles.
Cultural change through visible leadership –
Demonstrated through visible leadership
walks and reporting safety behaviours,
across our operations.
Development of capabilities – Executive-
led investigations into high potential
incidents to determine root cause and
prevent reoccurrence.
Operational
excellence
Specific operational
targets focused on business
processes, energy supply,
import strategy, operational
improvement, investment
returns and reducing
safety risk.
Specific measures and initiatives
were identified to ensure the delivery
of sustainable operations and
shareholder returns.
Energy supply - Comprehensive energy
supply program developed, including
increased use of refuse derived fuel.
Business process - A key business process
review and improvement program was
developed.
80-
100%
Considering the financial performance, and despite the positive outcomes for non-financial objectives, the board exercised its
discretion to pay no STI for 2019.
FOR THE YE AR ENDED
31 DECEMBER 2019
MA XIMUM
POTENTIAL S TI
OPPOR TUNIT Y 1
AC TUAL S TI
AS % OF S TI
MA XIMUM
S TI
AC TUAL 2
CASH
S TI
DEFERRED
S TI
(2 YE ARS)
DEFERRED
S TI
(3 YE ARS)
CURRENT E XECUTIVES
Nick Miller
Theresa Mlikota
Brett Brown
Andrew Dell3
Brad Lemmon3
FORMER E XECUTIVE
Martin Brydon4
$
1,329,333
540,000
360,000
262,230
444,000
%
–
–
–
–
–
$
–
–
–
–
–
$
–
–
–
–
–
366,962
100%
366,962
366,962
$
–
–
–
–
–
–
$
–
–
–
–
–
–
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 2019 STI was determined in conjunction with the finalisation of 2019 financial results in relation to all Executives, excluding former Executives.
3 In line with the retention arrangements disclosed in last year’s remuneration report, these amounts represent the prepayments of future incentives. Further detail on these
payments is included in section 7.2 of this report.
4 STI paid in accordance with retirement arrangements disclosed in the 2018 remuneration report.
5.2 Long-term incentive – outcomes
Across the performance period of the 2015 LTI, Adelaide Brighton’s TSR was 89.5%, placing the return at the 80th percentile.
Accordingly, the TSR component of the award vested in full. The LTI award did not meet the compound annual earnings per share
(EPS) performance condition. Accordingly, only 50% of the 2015 LTI awards vested.
FOR THE YE AR
ENDED 31 DEC 2019
NUMBER HELD
AT 1 JAN 2019
NUMBER
GR ANTED
DURING THE
YE AR 1
NUMBER
E XERCISED /
VES TED DURING
THE YE AR 2
NUMBER L APSED
/ FORFEITED
DURING THE
YE AR 3
NUMBER HELD
AT 31 DEC
2019 4
VALUE OF
AWARDS AT
GR ANT DATE 5
FAIR
VALUE AT
GR ANT
DATE
VALUE PER
SHARE AT
THE DATE OF
E XERCISE 6
$
$/AWARD
$
CURRENT E XECUTIVES
Nick Miller
Theresa Mlikota
Brett Brown
Andrew Dell
Brad Lemmon
FORMER E XECUTIVE
–
–
–
145,756
195,048
271,915
66,019
44,146
34,301
54,447
–
–
–
–
–
–
(23,530)
(25,575)
(23,529)
(25,575)
271,915
519,357
66,019
44,146
132,998
198,345
117,843
76,152
59,169
93,921
1.91
1.78
1.73
1.72
1.72
Martin Brydon7
989,817
–
(794,244)
(195,573)
–
–
–
–
–
3.60
3.60
4.45
1 This represents the maximum number of Awards granted in 2019 that may vest to each Executive. As the Awards granted in 2019 only vest on satisfaction of performance
conditions which are to be tested in future financial periods, none of the Awards as set out above vested or were forfeited during the year. At the end of the applicable
performance period, any Awards that have not vested will expire.
2 These Awards which were exercisable during 2019 were exercised. For current Executives, these relate to the 2015 Awards. For the former Executive, this relates to the 2015,
2016 and 2017 Awards. The number of Awards that vested during the period and exercisable at 31 December 2019 is nil. The number of Awards that vested but were not yet
exercisable at 31 December 2019 is nil.
3 This includes the portion of 2015 Award that reached the end of its performance period on 31 December 2018 that did not meet the performance conditions and were
forfeited.
4 Awards subject to performance conditions which remain unvested (2016, 2017, 2018 and 2019 Awards), and which will be tested for vesting during the period 2020 to 2023.
5 Fair value of Awards granted during 2019 as at grant date.
6 The value per share at the date of exercise is the Volume Weighted Closing Price which is the average of the closing price and number of Adelaide Brighton Limited shares
traded on the Australian Securities Exchange for the five trading days before the exercise date, but not including the day of exercise. The aggregate value of Awards that
vested during the year is $3,711,164 based on the Volume Weighted Closing Price.
7 As previously disclosed, no LTI grant was made to Mr Brydon in 2019.
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R E M U N E R AT I O N R E P O R T
6. EXECUTIVE REMUNERATION IN 2019
6.1 Fixed annual remuneration
6. EXECUTIVE REMUNERATION IN 2019 (continued)
FE ATURE
DESCRIP TION
The amount of fixed remuneration for an individual Executive (expressed as a total amount of salary and other benefits,
including superannuation contributions) is set with regard to the size and nature of an Executive’s role, the long-term
performance of an individual, their future potential within the Group and market practice. The Company’s stated approach is also
to set fixed remuneration 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.
Fixed remuneration is reviewed annually having regard to relevant factors including performance, market conditions (both
generally and in the markets in which the Group operates), growth and comparable roles within peer companies and similar roles
across a comparator group comprising those companies in the ASX 51-150. For someone who has performed successfully in
their role for a number of years, FAR set between the median and 75th percentile of the comparator would be expected.
The CEO and CFO were appointed during the year. Due to remuneration changes in 2018 including retention agreements, FAR for
other Executives was assessed as being appropriate and no changes were made in 2019.
6.2 Short-term incentive
Adelaide Brighton’s STI is the Company’s ‘at risk’ short-term incentive component of the remuneration mix for senior Executives.
A summary of the key features of the 2019 STI is as follows:
FE ATURE
DESCRIP TION
Participants
Purpose
The CEO and senior Executives who are able to have a direct impact on the Group’s performance against the
relevant performance hurdles.
The STI is designed to put a meaningful proportion of senior Executives’ remuneration ‘at risk’, to be delivered
on the achievement of performance targets linked to the Group’s annual business objectives, ensuring senior
Executives create sustainable value for shareholders.
Deferral
50% of STI awards will be deferred into rights (unless otherwise determined by the Board).
PERFORMANCE CONDITIONS
Performance
conditions
All performance conditions are set by the Board and agreed with the Executive.
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 cost considerations.
Our management team has responded well to external pressures over recent years, and has consistently
generated positive returns 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.
RE WARD OPPOR TUNIT Y
STI vesting schedule
STI outcomes of financial targets vest progressively in accordance with the following scale:
FINANCIAL TARGE T ACHIE VED
S TI % FOR FINANCIAL TARGE T
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
GOVERNANCE
Assessment against
measures
All performance conditions under the STI are clearly defined and measurable.
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 continues to be based on EBIT
performance.
In respect of the financial targets, the Board compares the actual earnings against the budget 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’s performance against the agreed non-
financial targets, and that of the senior Executives (based on the recommendation of the CEO).
Timing of the award
Assessment of performance against the performance hurdles for the relevant year is determined at the
February meeting of the PC Committee and the Board, in conjunction with finalisation of the Group’s full year
results.
Disposal restrictions
and dividends
The cash component 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 practicable after the announcement of the
Company’s full year result.
The 2019 Deferred Rights are divided into two equal tranches:
Δ The Deferred Rights in Tranche 1 and the shares acquired on their exercise may not be sold or otherwise
disposed of until after 31 December 2021 (2-year disposal restriction); and
Δ 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 2022 (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 attract voting rights.
Board discretion
The Board has absolute discretion in relation to assessing performance and determining the amount, if any, of
STI awards.
Clawback
The STI Plan Rules provide the Board with a broad ability to clawback awards if considered appropriate.
In addition to the STI Plan Rules, the Board also has a formal Clawback Policy which provides the Board with
the ability to reduce, forfeit or require repayment of incentives which vest (or may vest) in the case of a
material misstatement in Company financial results, serious misconduct by a participant or in circumstances
where incentive awards or vesting is based on incorrect information not of a financial nature.
CESSATION OF EMPLOYMENT OR A CHANGE OF CONTROL
Cessation
The Board has ultimate discretion to determine the treatment of awards on cessation.
If an Executive resigns or is terminated for cause, all STI entitlements will be forfeited.
The STI Plan Rules provide that in other circumstances, and at the discretion of the Board, award
opportunities will be pro rata reduced to reflect the proportion of the measurement period not worked.
Any disposal restrictions applicable to shares acquired upon the exercise of Deferred Rights will be lifted on
cessation of employment.
Change of control
In the event of a takeover bid (or other transaction likely to result in a change in control of the Company),
the Board has absolute discretion to take any action as provided under the STI Plan Rules.
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R E M U N E R AT I O N R E P O R T
6. EXECUTIVE REMUNERATION IN 2019 (continued)
6.3 LTI
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 2019 LTI Award are as follows:
FE ATURE
DESCRIP TION
DRIVING PERFORMANCE
Participants
Purpose
The LTI is offered to senior Executives whose behaviour and performance have a direct impact on the Group’s
long-term performance.
To focus Executives on the Group’s long-term business strategy to create and protect shareholder value over a
four-year performance period, thus aligning Executives’ interests more closely with shareholders.
VES TING, PERFORMANCE CONDITIONS AND RE WARD OPPOR TUNIT Y
Performance
period
Exercise of
Awards
TSR vesting
schedule
The 2019 Awards will be tested on results up to 31 December 2022 and become exercisable to the extent of any
vesting from 1 May 2023.
Shares are delivered to the Executive on the exercise of the Awards. Awards are granted at no cost to the
Executive and no amount is payable by the Executive on the exercise of the Awards.
Any unexercised 2019 Awards will expire on 30 September 2023.
The Company’s TSR performance must equal or exceed the growth in the returns of the median companies of
the S&P/ASX 200 Accumulation Index (XJO Al), excluding all GICS Financial companies and selected resources
companies over the period from 31 December 2018 to 31 December 2022.
The 2019 Awards vest progressively in accordance with the following scale:
6. EXECUTIVE REMUNERATION IN 2019 (continued)
FE ATURE
DESCRIP TION
CESSATION OF EMPLOYMENT OR A CHANGE OF CONTROL
Cessation
The Board has ultimate discretion to determine the treatment of Awards on cessation.
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 Board may at any time waive in whole or in part any performance condition and additional terms in relation to
any Awards granted.
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.
Change of control
In the event of a takeover bid (or other transaction likely to result in a change in control of the Company), an
Executive will only be allowed to exercise his or her Awards to the extent determined by the Board as provided
under the rules of the Plan.
6.4 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.
The key terms of the Executive Service Agreements are outlined below:
TSR GROW TH REL ATIVE PERCENTILE R ANKING
% OF AWARDS SUB JEC T TO TSR HURDLE TO VES T
NOTICE PERIODS
SEPAR ATION PAYMENTS 1
Below 50th percentile
50th percentile
Between 50th and 75th percentile
75th percentile or above
Nil
50%
Pro rata
100%
E XECUTIVE
CEO
Other KMP
12 months’ notice by either party
(or payment in lieu)
12 months’ fixed annual remuneration
where the Company terminates on notice
6 months’ notice by either party
(or payment in lieu)
6 months’ fixed annual remuneration
where the Company terminates on notice
EPS vesting
schedule
The EPS performance hurdle requires the compound annual growth in EPS of the Company over the relevant
performance period to equal or exceed 5% per annum before any Awards will vest.
1
In the case of resignation, the Board has discretion as to whether a separation payment is made to the Executive (in addition to other amounts due and payable up to the date
of ceasing employment)
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 2019 Award are to vest progressively in accordance with the following scale:
COMPOUND ANNUAL GROW TH IN EPS
% OF AWARDS SUB JEC T TO TSR HURDLE TO VES T
Below 5% per annum
5% per annum
Between 5% and 10% per annum
10% per annum or above
Nil
50%
Pro rata
100%
Re-testing
Re-testing of either of the performance conditions applicable to a tranche of Awards is not permitted.
GOVERNANCE
Clawback
The rules of the Plan have, for some time, provided the Board with a broad ability to clawback 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.
Other conditions
An Executive’s entitlement to shares under an Award may also be adjusted to take account of capital
reconstructions and bonus issues.
The rules of the Plan contain a restriction on removing the ‘at risk’ aspect of the instruments granted to
Executives. Plan participants may not enter into any transaction designed to remove the ‘at risk’ aspect of an
instrument before it becomes exercisable (e.g. 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 2019 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.
7. KEY MANAGEMENT PERSONNEL DISCLOSURE TABLES
7.1 Non-executive Directors’ statutory remuneration
NON-E XECUTIVE DIREC TOR
YE AR
DIREC TORS ’ BASE FEES
(INCL. SUPER ANNUATION)
COMMIT TEE FEES
(INCL. SUPER ANNUATION)
FEES AND ALLOWANCES
Raymond Barro
Zlatko Todorcevski
Ken Scott-Mackenzie
Vanessa Guthrie
Geoff Tarrant
Rhonda Barro
Emma Stein
FORMER
Arlene Tansey
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
132,600
130,000
377,400
280,435
132,600
130,000
132,600
116,458
132,600
116,458
85,037
–
31,708
–
101,371
130,000
15,300
15,000
–
11,195
45,900
45,000
45,900
26,191
15,300
7,387
9,812
–
7,318
–
35,091
45,000
TOTAL
147,900
145,000
377,400
291,630
178,500
175,000
178,500
142,649
147,900
123,845
94,849
–
39,026
–
136,462
175,000
POS T-EMPLOYMENT
BENEFITS
SUPER ANNUATION
CONTRIBUTIONS 1
12,831
12,580
32,742
25,628
15,486
15,183
15,486
12,376
12,831
10,745
8,228
–
3,385
–
11,839
15,183
1 Superannuation contributions are made on behalf of Non-executive Directors which satisfy the Group’s obligations under applicable Superannuation Guarantee Charge legislation.
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R E M U N E R AT I O N R E P O R T
R E M U N E R AT I O N R E P O R T
7. KEY MANAGEMENT PERSONNEL DISCLOSURE TABLES (continued)
7. KEY MANAGEMENT PERSONNEL DISCLOSURE TABLES (continued)
7.2 Executive statutory remuneration
7.3 Equity holdings of key management personnel
SHOR T-TERM BENEFITS
2019
CASH SAL ARY
(FAR)
CASH
S TI 1
Nick Miller
1,307,363
Theresa Mlikota
465,781
Brett Brown
Andrew Dell
Brad Lemmon
436,077
413,051
530,000
FORMER E XECUTIVE
–
–
–
–
–
OTHER
BENEFITS 2
450,0006
250,0007
–
394,5368
691,2729
POS T-
EMPLOYMENT
BENEFIT
SUPER-
ANNUATION 3
21,969
14,901
13,923
24,000
25,000
Martin Brydon10
360,671
366,962
560,627
6,250
EQUIT Y-BASED
BENEFITS
DEFERRED
S TI 1
LONG-TERM
INCENTIVE 4
TOTAL
% OF
REMUNER ATION
CONSIS TING OF
AWARDS 5
–
–
–
–
–
–
3,066
1,782,398
1,310
866
–
–
731,992
450,866
831,587
1,246,272
466,061
1,760,571
0.2
0.2
0.2
–
–
26
1 STI includes amounts relating to 2019 performance accrued but not paid as at 31 December 2019.
2 Other benefits relate to a sign-on bonus for Nick Miller and Theresa Mlikota, pro-rata portion of retention for Andrew Dell and Brad Lemmon, and accrued leave entitlements
3
4
for Martin Brydon.
Includes Company contributions to superannuation and allocations by employees made by way of salary sacrifice of fixed remuneration.
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.
5 % 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.
6 Nick Miller’s sign-on bonus was paid on 30 January 2019 and 12 July 2019 in equal instalments.
7 Theresa Mlikota’s sign-on bonus was paid on 12 April 2019.
8 This amount relates to the retention payment granted to Mr Dell in FY18, the full details of which were disclosed in last year’s Remuneration Report. The payments are not
‘additional’ lump sum payments, but have been structured such that they bring forward the vesting of part of each of Mr Dell’s future STI and LTI. Accordingly, following
payment of these amounts, existing or future STI or LTI Awards will be adjusted downwards to reflect the prepayment of these incentives. In consideration of the financial
performance of the business, the Board exercised discretion in determining no STI will be paid. For the purposes of retention, the notional STI due to Mr Dell has been offset
against the balance of retention outstanding.
9 This amount includes the retention payment granted to Mr Lemmon in FY18, the full details of which were disclosed in last year’s Remuneration Report. The payments are not
‘additional’ lump sum payments, but have been structured such that they bring forward the vesting of part of each of Mr Lemmon’s future STI and LTI. Accordingly, following
payment of these amounts, existing or future STI or LTI Awards will be adjusted downwards to reflect the prepayment of these incentives. In consideration of the financial
performance of the business, the Board exercised discretion in determining no STI will be paid. For the purposes of retention, the notional STI due to Mr Lemmon has been
offset against the balance of retention outstanding.
10 Mr Brydon stepped down as CEO and Managing Director on 30 January 2019 and was employed through to 31 March 2019. Mr Brydon was deemed by the People and Culture
Committee and the Board to have satisfied the performance conditions relating to the 2019 financial year STI by providing assistance with the transition to the new Chief
Executive Officer and overseeing the finalisation of the 2018 financial statements. Accordingly, he received a pro rata short-term incentive award for the 2019 financial year.
SHOR T-T ERM BENEFI T S
2018
C A SH S A L A RY
(FA R)
C A SH
S T I 1
O T HER
BENEFI T S
Martin Brydon
1,442,688
1,467,688
1,614,857
Brett Brown
Andrew Dell
125,417
413,050
Brad Lemmon
517,600
12,630
21,503
29,654
100,000
105,464
208,728
P OS T-
EMPL OY MEN T
BENEFI T
SUPER-
A NNUAT ION 2
25,091
6,271
24,000
27,500
EQUI T Y-B A SED
BENEFI T S
T O TA L
DEFERRED
S T I 1
L ONG-T ERM
INCEN T I V E 3
% OF
REMUNER AT ION
CONSIS T ING OF
AWA RDS 4
–
1,264,708
5,815,032
12,630
21,503
29,654
–
33,283
46,867
256,948
618,803
860,003
22
–
5
5
1 STI includes amounts relating to 2018 performance accrued but not paid as at 31 December 2018.
2
3
Includes Company contributions to superannuation and allocations by employees made by way of salary sacrifice of fixed remuneration.
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.
A summary of Executives’ and Non-executive Directors’ current shareholdings in the Company as at 31 December 2019 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 fluctuations).
BAL ANCE AT
BEGINNING
OF YE AR
GR ANTED AS REMUNER ATION DURING THE YE AR
LTI
DEFERRED S TI
NE T MOVEMENT
DUE TO
OTHER CHANGES
BAL ANCE
AT END
OF YE AR 1
CURRENT E XECUTIVES
Nick Miller2
Theresa Mlikota3
Brett Brown
Andrew Dell
Brad Lemmon
FORMER E XECUTIVES
–
–
–
8,018
12,212
–
–
–
23,530
25,575
Martin Brydon4
53,877
794,244
CURRENT NON-E XECUTIVE DIREC TORS
Raymond Barro5
279,178,329
Zlatko Todorcevski
20,000
Rhonda Barro6
Vanessa Guthrie
–
–
Ken Scott-Mackenzie
5,000
Emma Stein6
Geoff Tarrant
–
–
FORMER NON-E XECUTIVE DIREC TORS
Arlene Tansey 7
10,000
–
–
–
–
–
–
–
–
–
–
2,699
4,595
6,336
–
–
–
–
–
–
–
–
–
8,000
–
15,000
(26,324)
(29,674)
8,000
–
17,699
9,819
14,449
(848,121)
–
–
279,178,329
30,000
50,000
278,787,781
278,787,781
5,000
15,000
–
–
(10,000)
5,000
20,000
–
–
–
1 The balances reported in this table 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 2019.
2 Mr Miller commenced in the position of Chief Executive Officer effective from 30 January 2019. He was not eligible for shares granted under the LTI 2015 Award.
3 Ms Mlikota commenced in the position of Chief Financial Officer effective from 15 April 2019. She was not eligible for shares granted under the LTI 2015 Award.
4 Mr Brydon ceased in the position of Managing Director and Chief Executive Officer effective from 30 January 2019.
5 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.
6 Ms Barro and Ms Stein were appointed Non-executive Directors on 10 May 2019 and 4 October 2019 respectively. Net movement due to other changes for Ms Barro relate
to shareholdings held at the time of her appointment to the Board. The balances relating to Ms Barro include shares owned by entities over which Ms Barro has a significant
influence, or which she jointly controls, but she does not control these entities herself.
7 Ms Tansey resigned as a Non-executive Director effective 4 October 2019.
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INCOME
STATEMENT
FOR THE YE AR ENDED 31 DECEMBER 2019
NOTES
Continuing operations
Revenue from contracts with customers
Cost of sales
Freight and distribution costs
Gross profit
Other income
Marketing costs
Administration costs
Finance costs
Impairment losses
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
5
5
6
2,14
21(a)
7(a)
19
$ M
1,517.0
(983.7)
(282.8)
250.5
5.1
(24.4)
(83.1)
(20.1)
(96.1)
31.5
63.4
(16.2)
47.2
47.3
(0.1)
47.2
CONSOLIDATED
18
$ M
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
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
The above income statement should be read in conjunction with the accompanying notes.
CENTS
CENTS
4
4
7.3
7.2
28.5
28.4
STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YE AR ENDED 31 DECEMBER 2019
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Changes in the fair value of cash flow hedges
Income tax relating to these items
Items that will not be reclassified to profit or loss
Actuarial gain/(loss) on retirement benefit obligation
Income tax (credit)/expense 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)
19
$ M
47.2
CONSOLIDATED
18
$ M
185.2
0.4
(0.7)
0.2
2.3
(0.6)
1.6
48.8
48.9
(0.1)
48.8
2.0
1.7
(0.5)
(0.6)
0.2
2.8
188.0
188.1
(0.1)
188.0
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
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BALANCE
SHEET
AS AT 31 DECEMBER 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Total current assets
Non-current assets
Receivables
Retirement benefit asset
Joint arrangements and associate
Property, plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
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
The above balance sheet should be read in conjunction with the accompanying notes.
NOTES
8(i)
9
10
9
25(b)
21
11
12
13
12
15
16
12
7(f)
15
17
19(a)
19(b)
19
$ M
116.8
218.7
155.2
28.5
519.2
43.6
4.5
184.8
1,033.7
84.6
283.3
1,634.5
2,153.7
144.9
5.7
33.8
8.6
193.0
540.1
81.9
74.6
66.7
0.1
763.4
18
$ M
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
–
30.4
15.9
179.3
518.7
–
89.2
45.2
0.1
653.2
956.4
832.5
1,197.3
1,245.6
739.0
0.2
455.7
1,194.9
2.4
1,197.3
734.4
4.2
504.5
1,243.1
2.5
1,245.6
STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED
CONSOLIDATED
AT TRIBUTABLE TO OWNERS OF ADEL AIDE BRIGHTON LIMITED
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INTERES TS
$ M
TOTAL
EQUIT Y
$ M
FOR THE YE AR ENDED 31 DECEMBER 2019
NOTES
SHARE
CAPITAL
$ M
RESERVES
RE TAINED
E ARNINGS
$ M
$ M
TOTAL
$ M
Balance at 1 January 2019
734.4
4.2
504.5
1,243.1
2.5
1,245.6
Profit/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) 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
18
Executive Performance Share Plan
17(b)/19(a)
Employee Equity Participation Share Plan
17(b)
–
–
–
–
–
3.5
1.1
4.6
–
(0.1)
(0.1)
47.3
1.7
49.0
47.3
1.6
48.9
(0.1)
–
(0.1)
(1.1)
–
(1.1)
–
(2.8)
–
(2.8)
(97.8)
(97.8)
–
–
0.7
1.1
(97.8)
(96.0)
–
–
–
–
–
47.2
1.6
48.8
(1.1)
(97.8)
0.7
1.1
(96.0)
Balance at 31 December 2019
739.0
0.2
455.7
1,194.9
2.4
1,197.3
Balance at 1 January 2018
Change in accounting policy
Restated total equity at 1 January 2018
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
18
Executive Performance Share Plan
17(b)/19(a)
733.1
–
733.1
–
–
–
–
–
1.3
1.3
1.9
–
1.9
–
3.2
3.2
510.6
(2.4)
508.2
185.3
(0.4)
184.9
1,245.6
(2.4)
1,243.2
185.3
2.8
188.1
(0.1)
–
(0.1)
–
(0.8)
(0.8)
(188.6)
(188.6)
–
0.5
(188.6)
(188.1)
2.6
–
2.6
(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)
Balance at 31 December 2018
734.4
4.2
504.5
1,243.1
2.5
1,245.6
The above statement of changes in equity should be read in conjunction with the accompanying notes.
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STATEMENT OF
CASH FLOWS
FOR THE YE AR ENDED 31 DECEMBER 2019
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
NOTES
Interest received
Interest paid
Other income
Income taxes paid
Income tax refunds
Net cash inflow from operating activities
8(ii)
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
Drawdown of borrowings
Principal elements of lease payments
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
The above statement of cash flows should be read in conjunction with the accompanying notes.
8(iv)
8(iv)
18
8(i)
19
$ M
CONSOLIDATED
18
$ M
1,671.7
(1,434.2)
1,812.5
(1,509.6)
21.0
0.6
(15.6)
3.1
(64.9)
11.5
193.2
25.6
0.9
(17.1)
10.5
(78.1)
–
244.7
(91.6)
(112.7)
–
4.7
(2.7)
0.6
(89.0)
4.3
19.7
(7.5)
(97.8)
(81.3)
22.9
93.9
–
116.8
(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
NOTES TO THE
FINANCIAL REPORT
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Adelaide Brighton Limited (the Company) is a company limited by shares, incorporated and domiciled in Australia whose shares are
publicly traded on the Australian Securities Exchange (ASX).
The financial report was authorised for issue by the Directors on 26 February 2020. The Directors have the power to amend and
reissue the financial statements.
The principal accounting policies adopted in the preparation of these consolidated financial statements are either set out below
or included in the accompanying notes. Unless otherwise stated, these policies have been consistently applied to all the years
presented. Unless otherwise stated, the financial statements are for the consolidated entity consisting of Adelaide Brighton Limited
and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. The Company is a for-profit
entity for the purpose of preparing the financial statements.
Comparative information has been restated where appropriate to enhance comparability.
Historical cost convention
These financial statements have been prepared under the historical cost convention, except for the circumstances where the
fair value method has been applied as detailed in the accounting policies.
Compliance with IFRS
The consolidated financial statements of the Adelaide Brighton Limited Group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
New and amended standards adopted by the Group
Aside from AASB 16 Leases, other new standards and amendments applied for the first time for the annual reporting period
commencing 1 January 2019 did not have any impact on the amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
The Group has applied AASB 16 Leases for the first time for the financial reporting period commencing 1 January 2019.
AASB 16 Leases (AASB 16)
The Group has adopted the new leasing standard AASB 16 Leases retrospectively from 1 January 2019 and has not restated
comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The
reclassifications and adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on
1 January 2019. The new accounting policies are disclosed in Note 12.
Under AASB 16, a lease exists when a contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration. When a lease exists, a right-of-use asset and lease liability are recognised in the balance sheet.
As a result, most traditional operating leases are now capitalised on the balance sheet. In addition, there are other service
agreements that are deemed to contain an embedded lease and therefore the lease component of the agreement is also
capitalised.
At the date of application of the standard, the Group recognised lease liabilities in relation to leases which had previously been
classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured at the present value of
the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted
average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 3.51%. The Group had no
leases previously classified as finance leases immediately before transition.
At the date of application of the standard, the right-of-use asset was valued as the initial value of the lease liability, plus the
amount of any prepaid lease amounts paid prior to 1 January 2019.
From 1 January 2019, each lease payment is allocated between the liability and finance cost. The right-of-use asset is
depreciated over the shorter period of its useful life, or the lease term.
Until the 2018 financial year, leases were classified as operating leases or finance leases based on the terms and conditions of
the agreements. Payments made under operating leases were charged to the income statement on a straight-line basis over the
period of the lease.
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N O T E S T O T H E F I N A N C I A L R E P O R T
N O T E S T O T H E F I N A N C I A L R E P O R T
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Practical expedients applied
(vi) New standards and interpretations not yet adopted
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard:
Δ
The use of a single discount rate across a portfolio of leases with reasonably similar characteristics in relation to lease
term;
Δ
Δ
The accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-
term leases, which are recognised on a straight-line basis as expense; and
The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
(ii) Measurement of lease liabilities
The difference between operating lease commitments disclosed in 31 December 2018 accounts and lease liabilities
disclosed at the date of application of the standard are explained below:
Operating lease commitments disclosed as at 31 December 2018
Discounted using the lessee’s incremental borrowing rate at the date of initial application
Less short-term leases recognised on a straight-line basis as expense
Less non-regenerative resource leases
Add Embedded leases previously expensed on a straight-line basis
Lease liability recognised as at 1 January 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
$ MILLION
141.3
62.8
(0.2)
(7.1)
35.7
91.2
9.0
82.2
91.2
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019
reporting periods and have not been early adopted by the Group. These standards are not expected to have a material
impact on the entity in the current or future reporting periods and on foreseeable future transactions.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries controlled by Adelaide Brighton
Limited as at 31 December 2019 and the results of all subsidiaries for the year then ended. The Company and its subsidiaries
together are referred to in this financial report as “the Group”.
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from
the date that control ceases. The acquisition method of accounting is used to account for business combinations by the
Group (refer to Note 1(d)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
(ii) Employee Share Trust
The Group has formed a trust to administer the Group’s employee share scheme. The company that acts as the Trustee
is consolidated as the company is controlled by the Group. The Adelaide Brighton Employee Share Plan Trust is not
consolidated as it is not controlled by the Group.
(iii) Measurement of right-of-use assets
(iii) Non-controlling interests
The associated right-of-use assets for leases were measured on a retrospective basis as if the new rules had always been
applied.
(iv) Adjustments recognised in the balance sheet on 1 January 2019
The impact on the balance sheet of the adoption of AASB 16 Leases is set out below:
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement and balance sheet respectively. The Group treats transactions with non-controlling interests that do not result
in a loss of control, as transactions with equity owners of the Group. For changes in ownership interests, the difference
between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is
deducted from equity.
CARRYING AMOUNT
31 DECEMBER 2018
RE-ME ASUREMENT
CARRYING AMOUNT
1 JANUARY 2019
(c) Foreign currency translation
(i) Functional and presentation currency
$ MILLION
Right-of-use assets
Prepayments
Lease liabilities
Retained earnings
–
7.3
–
504.5
91.4
(0.2)
91.2
–
(v) Impact of adopting AASB 16 on the income statement for the year ended 31 December 2019
The impact of applying AASB 16 on the income statement for the year ended 31 December is set out below:
Profit before income tax – as reported year ended 31 December 2019
Impact of AASB 16 included in comprehensive income for the year ended 31 December 2019 as reported:
Interest charge
Depreciation charge
Net profit/(loss) before tax
Prior period policy not applied to current year:
Lease costs
Net incremental expense recognised in the current period through application of AASB16 on profit/(loss)
before tax
Profit before income tax – before adoption of new standard
91.4
7.1
91.2
504.5
$ MILLION
63.4
3.0
7.6
10.6
(7.5)
3.1
66.5
Notwithstanding the impact of amounts recognised in the income statement and balance sheet, the application of AASB 16
has not impacted cash flows.
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian Dollars, which is Adelaide Brighton Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised
in the income statement or deferred in equity if the gain or loss relates to a qualifying cash flow hedge.
(iii) Foreign operations
The results and financial position of all the foreign operations that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
Δ
Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
Δ
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.
Δ
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated as hedges of such investments, are recognised in other
comprehensive income.
When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of
such exchange differences is reclassified to profit or loss, as part of the gain or loss on sale where applicable.
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N O T E S T O T H E F I N A N C I A L R E P O R T
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving equities or businesses under common control, regardless of whether equity instruments or other assets are acquired.
The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the
liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any
contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-
acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling
interest’s proportionate share of the acquiree’s net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date
fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets
acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary
acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a
bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
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.
(e) Rounding of amounts
The Company is of a kind referred to in the Australian Securities and Investments Commission Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191, relating to the ‘’rounding off’’ of amounts in the financial report. Amounts
in the financial report have been rounded off in accordance with that instrument to the nearest one hundred thousand dollars,
unless otherwise stated.
(f) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
FINANCIAL PERFORMANCE
OVERVIEW
2 SEGMENT REPORTING
(a) Description of segments
Management has determined the operating segments based on the reports reviewed by the CEO. 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 Group’s circumstances.
Concrete Products.
Cement, Lime, Concrete and Aggregates; and
The two reportable segments have been identified as follows:
Δ
Δ
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
The segment information provided to the CEO for the reportable segments is as follows:
31 DECEMBER 2019
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
Impairment:
Receivables and other debtors
Inventory
Property, plant and equipment
Asset retirement provision
Intangible assets
Goodwill
Total impairment
EBIT
Underlying EBIT
Share of net profits of joint venture and associate
entities accounted for using the equity method
CEMENT, LIME ,
CONCRE TE AND
AGGREGATES
$ M
1,354.8
(97.2)
1,257.6
1,262.1
(4.5)
1,257.6
(82.7)
(0.4)
(10.8)
(44.9)
(3.0)
(2.6)
–
(61.7)
152.9
215.8
31.5
CONCRE TE
PRODUC TS
$ M
142.3
–
142.3
142.3
–
142.3
(6.5)
–
(13.7)
(8.1)
-
–
(8.8)
(30.6)
(24.6)
6.0
–
UNALLOCATED
$ M
–
–
–
–
–
–
(4.4)
–
–
(2.0)
-
(1.8)
–
(3.8)
(46.4)
(35.4)
–
TOTAL
$ M
1,497.1
(97.2)
1,399.9
1,404.4
(4.5)
1,399.9
(93.6)
(0.4)
(24.5)
(55.0)
(3.0)
(4.4)
(8.8)
(96.1)
81.9
186.4
31.5
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F I N A N C I A L P E R F O R M A N C E O V E R V I E W
F I N A N C I A L P E R F O R M A N CE O V E R V I E W
2 SEGMENT REPORTING (continued)
31 DECEMBER 2018
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
Underlying EBIT (excluding property)
Share of net profits of joint venture and associate
entities accounted for using the equity method
CEMENT, LIME ,
CONCRE TE AND
AGGREGATES
$ M
CONCRE TE
PRODUC TS
$ M
UNALLOCATED
$ M
1,462.9
(98.8)
1,364.1
1,367.6
(3.5)
1,364.1
(76.5)
290.2
292.6
37.4
147.5
–
147.5
147.5
–
147.5
(6.9)
10.7
9.7
–
–
–
–
–
–
–
(4.0)
(35.5)
(29.8)
–
TOTAL
$ M
1,610.4
(98.8)
1,511.6
1,515.1
(3.5)
1,511.6
(87.4)
265.4
272.5
37.4
Sales between segments are carried out at arm’s length and are eliminated on consolidation.
The operating revenue assessed by the CEO 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:
Total segment operating revenue
Inter-company revenue elimination
Freight revenue
Other production revenue
Royalties
Revenue from continuing operations
19
$ M
CONSOLIDATED
18
$ M
1,497.1
1,610.4
(97.2)
104.9
11.6
0.6
(98.8)
102.3
16.3
0.4
1,517.0
1,630.6
The CEO 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:
EBIT
Net interest
Profit before income tax
(c) Other segment information
19
$ M
81.9
(18.5)
63.4
CONSOLIDATED
18
$ M
265.4
(14.4)
251.0
Revenues of $252.1 million (2018: $292.0 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.
Δ
Δ
Δ Retirement benefit obligations – Note 25
Provisions for close-down and restoration costs – Note 15(iv)
Impairment tests – Note 14
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.
19
CENTS
7.3
7.2
CONSOLIDATED
18
CENTS
28.5
28.4
19
SHARES
CONSOLIDATED
18
SHARES
651,542,678
650,498,520
1,063,600
1,678,766
652,606,278
652,177,286
19
$ M
CONSOLIDATED
18
$ M
47.2
0.1
47.3
185.2
0.1
185.3
Basic earnings per share
Diluted earnings per share
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share
Adjustment for calculation of diluted earnings per share:
Awards
Weighted average number of ordinary shares and potential ordinary shares
used as the denominator in calculating diluted earnings per share
Reconciliation of earnings used in calculating earnings per share
Basic and diluted earnings per share
Profit after tax
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
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.
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F I N A N C I A L P E R F O R M A N CE O V E R V I E W
5 REVENUE FROM CONTRACTS WITH CUSTOMERS AND OTHER INCOME (continued)
6 EXPENSES (continued)
CONSOLIDATED
Accounting policy – borrowing costs
Revenue
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
Rental income
Other income
19
$ M
1,516.4
0.6
1,517.0
0.7
0.9
0.3
1.5
1.7
5.1
18
$ M
1,630.2
0.4
1,630.6
0.7
1.2
0.4
1.5
13.4
17.2
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.
Finance costs
Interest and finance charges paid/payable for lease liabilities and financial liabilities not at fair
value through profit or loss
Unwinding of the discount on restoration provisions and retirement benefit obligation
Total finance costs
Amount capitalised1
Finance costs expensed
19
$ M
CONSOLIDATED
18
$ M
20.0
0.9
20.9
(0.8)
20.1
16.3
1.1
17.4
(1.1)
16.3
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
Total revenue from contracts with customers and other income
1,522.1
1,647.8
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 $nil (2018: $1.3 million) which is
recognised in other income.
2.5% p.a. (2018: 3.1% p.a.).
7
INCOME TA X
Accounting policy – income tax
6 EXPENSES
Profit before income tax includes the following specific expenses:
Depreciation
Amortisation of intangibles
Impairment of goodwill
Impairment of other assets
Receivables and other debtors
Inventory
Property, plant and equipment
Asset retirement provision
Other intangible assets
Total Impairment
Other charges
Employee benefits expense
Defined contribution superannuation expense
Operating lease rental charge
NOTES
11, 12
13
13, 14
10
11
13, 14
19
$ M
91.2
2.4
8.8
0.4
24.5
55.0
3.0
4.4
96.1
190.6
13.4
1.7
CONSOLIDATED
18
$ M
85.2
2.2
–
–
–
–
–
–
185.0
13.4
10.0
An impairment charge arose in the Concrete Products CGU following revised forecasts being considered in value-in-use cash flow
models. This was a result of further softening of conditions in the residential and civil construction markets, with weak demand
across the Queensland and New South Wales regions in particular. Following a review across the Group, specific assets were also
identified as no longer supporting strategy and were impaired.
The impairment recorded as a result of value-in-use cash flow modelling and balance sheet review in the period by segment is
disclosed in Note 2.
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.
Tax consolidation
Adelaide Brighton Limited and its wholly-owned Australian subsidiaries implemented the Australian 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 entity’s financial statements.
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F I N A N C I A L P E R F O R M A N CE O V E R V I E W
7
INCOME TA X (continued)
7
INCOME TA X (continued)
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.
(e) Non-current deferred tax assets
CONSOLIDATED
The balance comprises temporary differences attributable to:
(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% (2018: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Goodwill impairment
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/(over) provided in prior years
Aggregate income tax expense
Aggregate income tax expense comprises:
Current taxation expense
Net deferred tax expense/(benefit)
Under/(over) provided in prior year
(b) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or
loss but directly (credited)/debited to equity
Current tax
Net deferred tax 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
19
$ M
63.4
19.0
2.6
0.5
(2.1)
(4.0)
–
(0.1)
–
0.3
16.2
31.4
(15.5)
0.3
16.2
(1.0)
1.1
0.1
(0.6)
0.2
(0.4)
0.6
11.2
18
$ M
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)
0.6
11.2
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.
Share-based payment reserve
Provisions
Lease liabilities
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
Closing balance at 31 December – before offset
(f) Non-current deferred tax liabilities
The balance comprises temporary differences attributable to:
Property, plant and equipment
Right-of-use assets
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
Closing balance at 31 December – before offset
19
$ M
CONSOLIDATED
18
$ M
0.1
40.0
26.2
0.9
67.2
(67.2)
–
33.7
36.3
(1.8)
(1.0)
67.2
86.5
25.4
13.2
16.7
141.8
(67.2)
74.6
122.9
18.8
(0.7)
0.8
141.8
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
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F I N A N C I A L P E R F O R M A N CE O V E R V I E W
8 NOTE TO STATEMENT OF CASH FLOWS (continued)
(iv) Reconciliation of movements of liabilities to cash flows arising from financing activities
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
LEASES DUE
WITHIN
1 YEAR
LEASES DUE
AFTER
1 YEAR
$ MILLION
Net debt as at
1 January 2018
Cash flows
Other non-cash
movements
Net debt as at
31 December 2018
Recognised on
adoption of
AASB16
(refer note 1(ii))
Cash flows
Acquisition –
leases
Other non-cash
movements
57.6
36.3
–
93.9
22.9
–
Net debt as at
31 December 2019
116.8
Lease liabilities
Net debt excluding
lease liabilities
–
–
–
–
–
–
–
(0.3)
0.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(428.9)
(91.1)
1.3
(518.7)
–
–
–
–
–
–
–
–
TOTAL
(371.6)
(54.5)
1.3
(424.8)
(7.5)
(83.7)
(91.2)
(19.7)
7.5
–
10.7
(0.3)
(0.3)
(1.7)
(5.7)
2.1
(5.3)
(540.1)
(5.7)
(81.9)
(510.9)
87.6
(423.3)
8 NOTE TO STATEMENT OF CASH FLOWS
(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 and 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. Bank overdrafts are shown within borrowings
in current liabilities on the balance sheet.
Current
Cash at bank and on hand
Term deposits
Cash and cash equivalents
(a) Offsetting
19
$ M
113.9
2.9
116.8
CONSOLIDATED
18
$ M
91.0
2.9
93.9
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 all overdrafts at 31 December
2019 was $nil (2018: $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
CONSOLIDATED
Profit for the year
Doubtful debts
Impairment of goodwill
Depreciation, amortisation and other impairment
Share-based payments
Finance charges on remediation provision
Interest on right-of-use assets
(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 / (asset increase)
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
Decrease / (increase) in receivables
Increase / (decrease) in trade creditors
Increase / (decrease) in provisions
(Decrease) / increase in taxes payable
(Decrease) / increase in deferred taxes payable
(Decrease) / increase in other operating assets and liabilities
Net cash inflow from operating activities
(iii) Net debt reconciliation
Cash and cash equivalents
Borrowings – repayable within one year (including overdraft)
Borrowings – repayable after one year
Net debt
19
$ M
47.2
1.3
8.8
180.9
(2.7)
(0.9)
3.0
(0.4)
(10.5)
0.4
(20.2)
(0.8)
1.2
207.3
(3.2)
(0.8)
3.0
11.1
21.1
(22.9)
(14.0)
(8.4)
193.2
116.8
–
(540.1)
(423.3)
18
$ M
185.2
1.0
–
87.4
(1.1)
1.1
–
0.2
(11.7)
0.5
1.2
(1.1)
(0.9)
261.8
(2.1)
(0.8)
16.9
(12.7)
(3.3)
(15.4)
3.8
(3.5)
244.7
93.9
–
(518.7)
(424.8)
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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 holds
the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at
amortised cost using the effective interest rate.
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.
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
19
$ M
185.2
(19.1)
166.1
32.5
7.5
12.6
218.7
42.5
1.1
43.6
19.1
(0.6)
0.6
19.1
CONSOLIDATED
18
$ M
189.0
(19.1)
169.9
34.8
7.3
12.8
224.8
38.4
1.5
39.9
19.5
(1.4)
1.0
19.1
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(b).
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables
mentioned above.
B A L A N CE S H E E T I T E M S
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.
Current
Finished goods
Raw materials and work-in-progress
Engineering spare parts stores
Inventory expense
19
$ M
60.8
61.3
33.1
155.2
CONSOLIDATED
18
$ M
69.7
63.4
43.3
176.4
Inventories recognised as expense during the year ended 31 December 2019 and included in cost of sales amounted to
$909.9 million (2018: $981.7 million).
Write-downs of inventories to net realisable value amounted to $24.5 million (2018: $nil). These were recognised as an expense
during the year ended 31 December 2019 and included in cost of sales.
11 PROPERT Y, PL ANT AND EQUIPMENT
Accounting policy – property plant and equipment
Property, plant and equipment is 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.
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A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
91
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B A L A N CE S H E E T I T E M S
11 PROPERT Y, PL ANT AND EQUIPMENT (continued)
(iv) Other fixed assets
B A L A N CE S H E E T I T E M S
12 LEASES
Accounting policy – leases
20–40 years
Plant and equipment
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:
Δ Buildings
Δ
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.
3–40 years
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.
FREEHOLD
LAND
BUILDINGS
LEASEHOLD
PROPERTY
PLANT &
EQUIPMENT
MINERAL
RESERVES
ASSET
RETIREMENT
COST
IN COURSE OF
CONSTRUCTION
$ M
$ M
$ M
$ M
$ M
$ M
$ M
TOTAL
$ M
CONSOLIDATED AT
31 DECEMBER 2019
At cost
190.5
153.0
9.7
1,500.5
205.2
56.5
50.7
2,166.1
Accumulated depreciation
and impairment
Net book amount
Reconciliation
Carrying amount at
1 January 2019
Additions
Disposals
Reclassification
Impairment loss
Depreciation/amortisation
Carrying amount at
31 December 2019
CONSOLIDATED AT
31 DECEMBER 2018
At cost
Accumulated depreciation
Net book amount
Reconciliation
Carrying amount at
1 January 2018
Additions
Disposals
Business combinations
Reclassification
Depreciation/amortisation
Carrying amount at
31 December 2018
–
190.5
(73.0)
80.0
(5.0)
4.7
(988.6)
511.9
(52.0)
153.2
(13.7)
42.8
(0.1)
(1,132.4)
50.6
1,033.7
193.0
1.1
(2.2)
–
(1.4)
–
83.7
1.8
–
1.4
(2.3)
(4.6)
5.2
0.1
–
–
–
(0.6)
531.7
48.0
(2.2)
32.2
(25.0)
(72.8)
178.4
0.6
–
–
(21.6)
(4.2)
24.0
22.2
–
–
(2.0)
(1.4)
45.7
41.3
–
(33.7)
(2.7)
–
1,061.7
115.1
(4.4)
(0.1)
(55.0)
(83.6)
190.5
80.0
4.7
511.9
153.2
42.8
50.6
1,033.7
193.0
–
193.0
152.8
(69.1)
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)
531.7
226.1
(47.7)
178.4
34.3
(10.3)
24.0
45.7
2,114.6
–
(1,052.9)
45.7
1,061.7
517.9
54.6
(2.2)
1.1
34.5
(74.2)
174.3
5.9
–
–
2.9
(4.7)
25.2
0.1
–
–
–
46.5
34.4
–
–
(35.2)
1,037.2
113.3
(3.2)
1.1
(1.5)
(1.3)
–
(85.2)
193.0
83.7
5.2
531.7
178.4
24.0
45.7
1,061.7
Leased assets
From 2019, leased assets are presented as a separate line item in the balance sheet, see Note 12. Refer to Note 1 [a] for details
about changes in the accounting policies.
The Group leases various offices, warehouses and plant and equipment. Rental contracts are typically made for fixed periods with
most having a tenure of up to 10 years. There are a small number of leases that extend beyond the 10-year lease period including
one lease with a lease term of 50 years. Many leases also have extension options. Lease terms are negotiated on an individual
basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than
the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing
purposes. At the inception of a contract the Group assesses whether the contract is or contains a lease based on whether the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present
value of the following lease payments:
Δ
Δ
Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement
date;
Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
Amounts expected to be payable by the Group under residual value guarantees;
The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
Δ
Δ
Δ
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
Δ Uses recent third party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing
conditions since third party financing was received, and
Δ Makes adjustments specific to the lease term.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability
is reassessed and adjusted against the right-of-use asset.
The amount of the initial measurement of lease liability;
Any lease payments made at or before the commencement date less any lease incentives received;
Right-of-use assets are measured at cost comprising the following:
Δ
Δ
Δ
Δ Restoration costs.
Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group
is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Any initial direct costs; and
Each lease payment is allocated between the liability and finance cost. 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.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a
straight-line basis as an expense in the income statement. Short-term leases are leases with a lease term of 12 months or less.
Low-value assets comprise IT equipment and small items of office furniture.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease
and non-lease components based on their relative stand-alone prices.
The standard specifically excludes leases to explore for or use minerals and non-regenerative resources, therefore any leases of
quarry assets continue to be accounted for consistently with prior periods.
92
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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B A L A N CE S H E E T I T E M S
12 LEASES (continued)
Accounting policy – finance leases 2018
Finance lease liabilities were included in borrowings until 31 December 2018, but were reclassified to lease liabilities on 1 January
2019 in the process of adopting the new leasing standard. See note 1(a) for further information about the change in accounting
policy for leases. The value of finance leases at 31 December 2018 was nil.
From 1 January 2019, the Group has recognised right-of-use assets for operating leases, except for short-term and low-value leases.
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
(i) Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
Right-of-use assets
Property
Plant and equipment
Lease liabilities
Current
Non-current
Additions to the right-of-use assets during the 2019 financial year were $274,000.
(ii) Amounts recognised in the income statement
The income statement shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Property
Plant and equipment
Interest expense (included in finance cost)
Expense relating to short-term leases (included in cost of goods sold and administrative expenses)
Expense relating to variable lease payments not included in lease liabilities
(included in administrative expenses)
The total cash outflow for leases in 2019 was $43,283,570.
19
$ M
CONSOLIDATED
18
$ M
–
–
–
–
4.4
12.5
124.4
141.3
CONSOLIDATED
1 JANUARY
19
$ M
19
$ M
52.4
32.2
84.6
5.7
81.9
87.6
57.2
34.0
91.2
9.0
82.2
91.2
19
$ M
CONSOLIDATED
18
$ M
4.2
3.4
7.6
3.0
0.2
44.5
55.3
–
–
–
–
–
–
–
B A L A N CE S H E E T I T E M S
12 LEASES (continued)
(iii) Lorry owner-drivers
The Group has contracts with a number of lorry owner-drivers who are used for delivering concrete in an operationally flexible
manner that supplement the Company’s owned fleet. The contracts include the supply of a vehicle and driver with terms of up
to 10 years. These contracts are treated as embedded leases, as the arrangements convey the right to control the use of the
lorry in exchange for consideration. In circumstances where these contracts contain minimum or fixed payments relating to the
underlying asset, these amounts would be used to calculate the valuation of the lease liability and right-of-use asset.
As the payments made under these agreements are wholly variable, they are not reflected in the measurement of lease
liabilities or right-of-use assets and are expensed when incurred. The amounts are dependent on deliveries made and services
performed with no minimum fixed payments. The following amounts are the estimated future cash outflows the Group will pay
to contracted lorry owner-drivers based on the current fleet under existing terms.
AS AT 31 DECEMBER
Estimated cash outflows payable to lorry owner-drivers under existing contract terms, but not
recognised as liabilities:
Within one year
Later than one year but not later than five years
Later than five years
(iv) Extension and termination options
19
$M
35.6
105.8
19.1
160.5
Extension and termination options are included in a number of property and equipment leases across the Group. These are used
to maximise operational flexibility in terms of managing the assets used in the Group’s operations. In cases where these options
exist they are exercisable only by the Group and not by the respective lessor.
13 INTANGIBLE ASSETS
Accounting policy – intangible assets
(i) Goodwill
Goodwill is measured as described in Note 1(d). Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill on acquisition of joint ventures is included in the investment in joint ventures.
Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Gains and losses
on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-
generating units (CGUs) which are expected to benefit from the business combination for the purpose of impairment testing.
Each of those CGUs 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.
94
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B A L A N CE S H E E T I T E M S
B A L A N CE S H E E T I T E M S
13 INTANGIBLE ASSETS (continued)
(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.
31 DECEMBER 2019
Cost
Accumulated amortisation and impairment
Carrying amount at 31 December 2019
Opening balance at 1 January 2019
Reclassification
Impairment charge
Amortisation charge
Closing balance at 31 December 2019
31 DECEMBER 2018
Cost
Accumulated amortisation and impairment
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
GOODWILL
SOF T WARE
OTHER INTANGIBLES
CONSOLIDATED
$M
281.3
(8.8)
272.5
281.3
–
(8.8)
–
272.5
$M
20.1
(15.9)
4.2
7.7
–
(1.7)
(1.8)
4.2
$M
11.4
(4.8)
6.6
10.5
(0.6)
(2.7)
(0.6)
6.6
GOODWILL
SOF T WARE
OTHER INTANGIBLES
CONSOLIDATED
$M
281.3
–
281.3
280.1
–
1.2
–
281.3
$M
20.1
(12.4)
7.7
8.5
1.2
–
(2.0)
7.7
$M
12.1
(1.6)
10.5
11.3
(0.6)
–
(0.2)
10.5
TOTAL
$M
312.8
(29.5)
283.3
299.5
(0.6)
(13.2)
(2.4)
283.3
TOTAL
$M
313.5
(14.0)
299.5
299.9
0.6
1.2
(2.2)
299.5
14 IMPAIRMENT TESTS
Goodwill is not subject to amortisation and is tested annually for impairment or more frequently if events or changes in
circumstances indicate that it 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 (CGU’s). 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 CGUs identified according to business segments.
A segment level summary of the goodwill allocation is presented below.
Cement and Lime
Concrete and Aggregates
Cement, Lime, Concrete and Aggregates segment
Concrete Products segment
19
$ M
134.0
138.5
272.5
–
272.5
CONSOLIDATED
18
$ M
134.0
138.5
272.5
8.8
281.3
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections
based on 2020 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.
14 IMPAIRMENT TESTS (continued)
(b) Key assumptions used for value-in-use calculations
Cement, Lime, Concrete and Aggregates
Concrete Products
GROW TH R ATE 1
DISCOUNT R ATE 2
19
%
1.3
1.4
18
%
1.4
1.2
19
%
10.2
10.7
18
%
10.8
11.6
1 Weighted average growth rate used to extrapolate cash flows beyond the specific market forecast period of 7 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 CGUs 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 expectations for the future. The discount rates
used are pre-tax and reflect specific risks relating to relevant segments.
(c) Impairment charge
An impairment charge arose in the Concrete Products CGU following revised forecasts being considered in value-in-use cash
flow models. Goodwill of $8.8 million (2018: nil) was impaired in the Concrete Products CGU.
Following a review across the Group, specific assets were also identified as no longer supporting strategy and were impaired. An
impairment charge of $58.0 million was recognised against items of property, plant and equipment (2018: nil) and $4.4 million
was recognised against intangible assets (2018: nil). Total impairment charged by segment is disclosed in Note 2.
Cement, Lime, Concrete and Aggregates $2,643 million; and
As at 31 December 2019, the recoverable amount of the CGUs were:
Δ
Δ
Following the impairment recognised at the half year 2019, the carrying amount of the Concrete Products CGU has been written
down to the recoverable amount.
Concrete Products $129 million.
(d) Impact of possible changes in key assumptions
The values assigned to the key assumptions are based on management’s assessment of future performance in each of the
CGU’s with reference to historical experience, future estimates and internal and external factors. The estimated recoverable
amounts are highly sensitive to changes in key assumptions.
While the estimated recoverable amount of each of the CGU’s is greater than the carrying values at 31 December 2019, adverse
changes in certain key assumptions would result in an impairment of goodwill as set out below:
IMPAIRMENT CHARGE (PRE-TA X)
CHANGES TO ASSUMP TIONS
31 DECEMBER 2019
Cement, Lime, Concrete and Aggregates
Concrete Products
MARKE T GROW TH
R ATE 1
–1%
$ M
23.3
9.0
LOWER
PRICING 2
–1%
$ M
17.8
–
DISCOUNT
R ATE 3
+1%
$ M
42.8
7.7
LOWER
VOLUME 4
$ M
16.1
–
1 Market growth rate adjustments apply as a reduction from the assumed CGU growth rates for the internal forecast period, being the initial seven years of cash flow modelling.
2 Lower pricing adjustments assume pricing of goods and services bought and sold are less than estimated over the internal forecast period.
3 Discount rate adjustments assume the rate is higher than those used in cash flow model.
4 A further 10 percentage point reduction in forecast growth rates for 2021 and 2022.
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B A L A N CE S H E E T I T E M S
B A L A N CE S H E E T I T E M S
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-term employee benefit obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be
settled within 12 months after the end of the period in which the employees render the related service are recognised in respect
of employees’ services up to the end of the reporting period. These 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.
Estimated 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.
15 PROVISIONS (continued)
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 land as part of the quarrying
process. Cost estimates are evaluated at least annually, based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
Provision for close-down and restoration costs at the end of the year was $61.9 million (2018: $40.0 million).
Current
Employee benefits
Restoration provisions
Other provisions
Non-current
Employee benefits
Restoration provisions
19
$ M
CONSOLIDATED
18
$ M
26.2
2.0
5.6
33.8
6.8
59.9
66.7
26.8
1.5
2.1
30.4
6.7
38.5
45.2
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.
Current leave obligations expected to be settled after 12 months
19
$ M
3.1
CONSOLIDATED
18
$ M
4.2
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Opening balance at 1 January 2019
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 2019
RES TOR ATION
PROVISIONS
OTHER
PROVISIONS
$ M
40.0
–
22.1
0.9
(1.1)
61.9
$ M
2.1
5.1
–
–
(1.6)
5.6
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C A P I TA L S T R U C T U R E A N D R I S K M A N A G E M E N T
CAPITAL STRUCTURE
AND RISK MANAGEMENT
16 BORROWINGS
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.
Current
Bank loans – unsecured
Non-current
Bank loans – unsecured
19
$ M
CONSOLIDATED
18
$ M
–
–
540.1
518.7
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(iii). Due to the short-term fixed interest rates of the
borrowings, the carrying value is the fair value.
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.
19
$ M
CONSOLIDATED
18
$ M
(a) Share capital
Issued and paid up capital
651,723,127 (2018: 650,610,606) ordinary shares, fully paid
739.0
734.4
(b) Movements in ordinary share capital
Opening balance at 1 January
887,363 shares issued under Executive Performance Share Plan (2018: 338,111) 1
225,158 shares issued under employee share plan (2018: nil)
Closing balance at 31 December
1 Ordinary shares issued under the Adelaide Brighton Limited Executive Performance Share Plan (refer Note 26(b)).
(c) Ordinary shares
734.4
3.5
1.1
739.0
733.1
1.3
–
734.4
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.
17 SHARE CAPITAL (continued)
(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 while maintaining the flexibility to grow.
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 leverage ratio. Adelaide
Brighton’s target leverage ratio is 1.0 to 2.0 times underlying EBITDA.
The leverage ratio at 31 December 2019 and 31 December 2018 was as follows:
Total borrowings (excluding lease liabilities)
Less: cash and cash equivalents
Net debt
Underlying EBITDA
Leverage ratio
(f) Employee share scheme and options
19
$ M
540.1
(116.8)
423.3
280.0
1.5
CONSOLIDATED
18
$ M
518.7
(93.9)
424.8
360.9
1.2
Information relating to the employee share schemes, including details of shares issued under the schemes is set out in Note 26.
18 DIVIDENDS
Dividends paid during the year
2018 final dividend of 15 cents (2017: 16 cents) per fully paid ordinary share,
franked at 100% (2018: 100%) paid on 15 April 2019
2019 interim dividend of nil cents (2018: 13 cents) per fully paid ordinary share,
franked at 100% (2018: 100%)
Total dividends – paid in cash
Dividend not recognised at year end
19
$ M
CONSOLIDATED
18
$ M
97.8
–
97.8
104.0
84.6
188.6
Since the end of the year the Directors have recommended the payment of a final dividend of 5.0 cents
(2018: 15 cents) per fully paid share, franked at 100% (2018: 100%). The aggregate amount of the
proposed final dividend to be paid on 28 April 2020, not recognised as a liability at the end of the reporting
period, is:
32.6
97.6
Franked dividend
The franked portion of the dividend proposed as at 31 December 2019 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 2020.
Franking credits available for subsequent financial years based on a tax rate of 30% (2018: 30%)
115.1
123.4
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 $14.0 million (2018: $41.8 million).
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C A P I TA L S T R U C T U R E A N D R I S K M A N A G E M E N T
C A P I TA L S T R U C T U R E A N D R I S K M A N A G E M E N T
19 RESERVES AND RETAINED EARNINGS
(a) Reserves
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.
Nature and purpose of reserves
Foreign currency translation
19
$ M
CONSOLIDATED
18
$ M
2.1
(1.4)
(0.5)
0.2
1.7
0.4
2.1
1.4
0.5
(1.1)
–
(2.2)
(1.4)
1.1
(0.7)
(1.1)
0.2
(0.5)
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
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 effective portion of gains or losses on derivatives that are designated and
qualify as cash flow hedges as described in Note 20. 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.
20 FINANCIAL RISK MANAGEMENT
Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange, interest rate risk, and
commodity price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the financial performance where the Group’s exposure is
material.
The Board approves written principles for overall risk management, as well as policies covering specific areas, such as foreign
exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investment of excess
liquidity. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes.
The Group uses different methods to measure different types of risk to which it is exposed, which are reviewed at 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, price caps to hedge the price risk related to certain electricity purchases and swaps to hedge the interest rate risk
related to the long-term borrowings at variable rates.
Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging
instrument and the hedged item. This will result in the recognition of interest expense at a fixed interest rate for the hedged floating
rate loans and inventory at the fixed foreign currency rate for the hedged 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:
Forward foreign exchange contracts:
Buy foreign currency
Sell Australian Dollar (cash flow hedges)
Net exposure – liability / (asset)
19
$ M
77.5
(76.6)
0.9
CONSOLIDATED
18
$ M
55.0
(56.7)
(1.7)
(b) Retained earnings
CONSOLIDATED
(ii) Electricity price risk
Opening balance at 1 January
Net profit for the year
Actuarial gain/(loss) on defined benefit obligation net of tax
Dividends
Closing balance at 31 December
19
$ M
504.5
47.3
1.7
(97.8)
455.7
18
$ M
508.2
185.3
(0.4)
(188.6)
504.5
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.
102
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
103
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C A P I TA L S T R U C T U R E A N D R I S K M A N A G E M E N T
C A P I TA L S T R U C T U R E A N D R I S K M A N A G E M E N T
20 FINANCIAL RISK MANAGEMENT (continued)
(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, debt facilities have been on terms of one to three years, with fixed bank
lending margins associated with each term. During 2019, debt facilities were renegotiated with terms of five to ten years.
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. In addition, cash advances on long-term ten-year facilities are drawn at fixed
rates for the term of the facility.
During both 2019 and 2018, the Group’s borrowings 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:
CONSOLIDATED
19
18
WEIGHTED
AVER AGE
INTERES T R ATE
BAL ANCE
$ MILLION
WEIGHTED
AVER AGE
INTERES T R ATE
BAL ANCE
$ MILLION
1.2%
2.1%
116.8
440.1
3.7%
100.0
2.0%
3.1%
–
93.9
518.7
–
Variable rate instruments:
Cash at bank, on hand and at call
Bank facilities
Fixed rate instruments:
Bank facilities
(iv) Summarised sensitivity analysis
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.
Recognised liabilities for electricity purchases are not impacted by price movements due to the prices being fixed at the
time of consumption of the electricity.
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.
CONSOLIDATED
19
18
IMPAC T ON POS T
TA X PROFIT
$ M
IMPAC T ON
EQUIT Y
$ M
IMPAC T ON POS T
TA X PROFIT
$ M
IMPAC T ON
EQUIT Y
$ M
(2.3)
2.3
(2.3)
2.3
(3.6)
3.6
(3.6)
3.6
Interest rates – increase by 1%
Interest rates – decrease by 1%
(b) Credit risk
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 an investment grade rating are accepted. Derivative
counterparties and cash transactions are limited to high credit quality institutions.
For trading credit risk, the Group assesses the credit quality of the customer, taking into account its financial position, past
experience, external credit agency reports and credit references. Individual customer risk limits are set based on internal
approvals in accordance with delegated authority limits set by the Board. The compliance with credit limits by credit approved
customers is regularly monitored by line credit management. Sales to non-account customers are settled either in cash, major
credit cards or electronic funds transfer, mitigating credit risk. In relation to a small number of customers with uncertain credit
history, the Group has taken out personal guarantees in order to cover credit exposures.
20 FINANCIAL RISK MANAGEMENT (continued)
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 2019 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
19
18
E XPEC TED
LOSS R ATE
GROSS CARRYING
AMOUNT
PROVISION
E XPEC TED
LOSS R ATE
GROSS CARRYING
AMOUNT
PROVISION
%
0.11
0.21
2.03
74.90
$ M
129.9
55.7
7.0
25.1
217.7
$ M
0.1
0.1
0.1
18.8
19.1
%
0.11
0.21
2.03
75.92
$ M
115.6
73.6
10.1
24.5
223.8
$ M
0.1
0.2
0.2
18.6
19.1
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 $185.2 million (2018: $189.0 million) and joint venture receivables of
$32.5 million (2018: $34.8 million).
(c) Liquidity risk
The ultimate responsibility for liquidity risk management rests with the Board which has established an appropriate risk
management framework for the management of the Group’s short, medium and long-term funding and liquidity management
requirements. The Group’s Corporate Treasury function manages liquidity risk by maintaining adequate reserves, banking
facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities. Included below is a statement of credit standby facilities that the Group has at its
disposal to further reduce liquidity risk.
During the year the Group extended the maturity of its debt and increased its committed borrowing limits.
FINANCING ARR ANGEMENTS
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:
6 January 2021
7 January 2022
21 November 2024
21 November 2026
21 November 2029
19
$ M
CONSOLIDATED
18
$ M
4.0
900.0
904.0
–
545.0
545.0
4.0
355.0
359.0
–
–
750.0
50.0
100.0
900.0
4.0
590.0
594.0
–
520.0
520.0
4.0
70.0
74.0
330.0
260.0
–
–
590.0
104
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
105
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C A P I TA L S T R U C T U R E A N D R I S K M A N A G E M E N T
C A P I TA L S T R U C T U R E A N D R I S K M A N A G E M E N T
20 FINANCIAL RISK MANAGEMENT (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.
CONSOLIDATED
CONTR AC TUAL MATURITIES OF FINANCIAL LIABILITIES
$M
$M
$M
$M
< 6 MONTHS
6-12 MONTHS
1-2 YE ARS
> 2 YE ARS
31 December 2019
Non-derivatives
Trade payables
Bank facilities
Lease liabilities
Bank guarantees
Derivatives
Gross-settled forward foreign exchange
contracts (cash flow hedges):
– (inflow)
– outflow
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
144.9
7.9
3.5
4.0
–
7.9
3.2
0.2
160.3
11.3
(58.2)
57.4
(0.8)
(19.3)
19.2
(0.1)
133.0
8.5
–
6.2
–
8.5
–
6.5
–
31.8
5.6
2.5
39.9
–
–
–
–
316.6
–
4.2
147.7
15.0
320.8
(47.5)
48.9
1.4
(7.5)
7.8
0.3
–
–
–
–
595.9
154.0
26.4
776.3
–
–
–
–
220.1
–
23.7
243.8
–
–
–
CARRYING
AMOUNT
(ASSE TS) /
LIABILITIES
$M
144.9
540.1
87.6
–
772.6
–
–
0.9
133.0
518.7
–
–
651.7
–
–
(1.7)
TOTAL
$M
144.9
643.5
166.3
33.1
987.8
(77.5)
76.6
(0.9)
133.0
553.7
–
40.6
727.3
(55.0)
56.7
1.7
(d) Financial instruments, derivatives and hedging activity
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
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.
20 FINANCIAL RISK MANAGEMENT (continued)
Accounting policy – derivatives and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into, and they are subsequently
remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates
certain derivatives as either:
Δ Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
Δ Hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probably forecast
transaction (cash flow hedges).
At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and hedged
items including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of
hedged items. The Group documents its risk management objective and strategy for undertaking its hedge transactions.
The fair values of derivative financial instruments designated in hedge relationships are disclosed below. Movements in the hedging
reserves in shareholders’ equity are shown in Note 19(a). The fair value of a hedging derivative is classified as a non-current asset or
liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when
the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not
meet the hedge accounting criteria, they are classified as ‘held for trading’ for accounting purposes and are accounted for at fair
value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within
12 months after the end of the reporting period.
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
the cash flow hedge reserve within equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or
loss.
Where option contracts are used to hedge forecast transactions, the Group designates only the intrinsic value of the options as the
hedging instrument.
Gains or losses relating to the effective portion of the change in intrinsic value of the options are recognised in the cash flow
hedge reserve within equity. The changes in the time value of the options that relate to the hedged item (‘aligned time value’) are
recognised within other comprehensive income (OCI).
When forward contracts are used to hedge forecast transactions, the Group generally designates only the change in fair value of the
forward contract related to the spot component as the hedging instrument. Gains or losses relating to the effective portion of the
change in the spot component of the forward contracts are recognised in the cash flow hedge reserve within equity. The change in
the forward element of the contract that relates to the hedged item (‘aligned forward element’) is recognised within OCI.
Amounts accumulated in equity are reclassified in the periods when the hedged item affects profit or loss, as follows:
Δ Where the hedged item subsequently results in the recognition of a non-financial asset (such as inventory), both the deferred
hedging gains and losses and the deferred time value of the option contracts or deferred forward points, if any, are included
within the initial cost of the asset. The deferred amounts are ultimately recognised in profit or loss as the hedged item affects
profit or loss (for example through cost of sales).
Δ
The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings, is recognised in profit
or loss within finance cost at the same time as the interest expense on the hedged borrowings.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction
occurs, resulting in the recognition of a non-financial asset such as inventory. When the forecast transaction is no longer expected
to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to profit
or loss.
Derivative instruments that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do
not qualify for hedge accounting are recognised immediately in profit or loss.
106
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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C A P I TA L S T R U C T U R E A N D R I S K M A N A G E M E N T
20 FINANCIAL RISK MANAGEMENT (continued)
Foreign currency options
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, qualify for hedge accounting.
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 (liability)/asset – $ 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
19
(0.8)
67.6
8.8
1.1
CONSOLIDATED
18
1.7
53.4
1.2
0.4
Jan – Sep 2020
Jan – Jul 2019
1:1
–
–
1:1
–
–
A$1 : US$0.694
A$1 : US$0.7281
A$1 : Yen 74.5
A$1 : Yen 82.5
A$1 : EURO 0.6146
A$1 : EURO 0.6438
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 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, interest rate risk and electricity price
risk at fair value on a recurring basis. The Group held liabilities in relation to forward exchange contracts of $0.8 million (2018:
assets of $1.7 million) at the end of the reporting period. There were no interest rate swaps or electricity price caps in place at
31 December 2019 or 31 December 2018. 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 to these financial statements.
The carrying value less impairment provision of current trade receivables and payables are assumed to approximate their fair
values due to their short-term nature. For non-current receivables, the fair values are also not significantly different to their
carrying amounts as a commercial rate of interest is charged to the counterparty (level 3).
The interest rate for current and non-current borrowings is reset on a short-term basis, generally 30 to 90 days, and therefore
the carrying value of current and non-current borrowings equal their fair values (level 2).
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 provides summarised financial information for the joint ventures and associate which are individually
immaterial and accounted for using the equity method.
Investment in joint ventures and associate
Profit from continuing operations
Other comprehensive income
Total comprehensive income
JOINT VENTURES
ASSOCIATE
CONSOLIDATED
19 18 19 18 19 18
$ M
142.5
29.9
–
29.9
$ M
133.9
36.6
–
36.6
$ M
42.3
1.6
–
1.6
$ M
40.0
0.8
–
0.8
$ M
184.8
31.5
–
31.5
$ M
173.9
37.4
–
37.4
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G R O U P S T R U C T U R E
21 JOINT ARRANGEMENTS AND ASSOCIATE (continued)
(b) Interests in joint arrangements and associate
OWNERSHIP INTERES T
19 18
NAME
PRINCIPAL PL ACE OF BUSINESS
Aalborg Portland Malaysia Sdn. Bhd.1
Malaysia
Batesford Quarry2
Victoria
Burrell Mining Services JV2
E.B. Mawson & Sons Pty Ltd and
Lake Boga Quarries Pty Ltd3
New South Wales and
Queensland
New South Wales and Victoria
Independent Cement and Lime Pty Ltd3
New South Wales and Victoria
Peninsula Concrete Pty Ltd3
Sunstate Cement Ltd3
South Australia
Queensland
%
30
50
50
50
50
50
50
%
30
50
50
50
50
50
50
AC TIVITIES
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 the Mawsons joint venture.
On exercise, the enterprise value is calculated with reference to 7 times average EBITDA (based on preceding two financial years’
performance) less debt. 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 $32.5 million (2018: $32.1 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 ENTIT Y
PL ACE OF INCORPOR ATION
CL ASS OF SHARES
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
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Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
OWNERSHIP INTERES T
HELD BY THE GROUP
19
%
18
%
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
G R O U P S T R U C T U R E
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 2019 of the Closed Group.
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other financial assets
Total current assets
Non-current assets
Receivables
Retirement benefit asset
Joint arrangements and associate
Other financial assets
Property, plant and equipment
Right-of-use asset
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Lease liability
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
19
$ M
18
$ M
112.6
218.3
154.4
28.6
0.2
514.1
42.6
4.5
102.0
21.4
997.3
84.3
277.0
1,529.1
2,043.2
143.8
5.6
32.8
8.5
190.7
540.1
75.5
81.7
66.6
0.1
764.0
954.7
1,088.5
739.0
(2.0)
351.5
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
1,143.5
734.4
2.2
406.9
1,088.5
1,143.5
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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G R O U P S T R U C T U R E
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 2019 of the Closed Group.
24 PARENT ENTIT Y FINANCIAL INFORMATION (continued)
(iv) Share-based payments
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
19
$ M
57.2
(16.5)
40.7
406.9
–
40.7
1.7
(97.8)
351.5
18
$ M
242.6
(65.9)
176.7
414.1
5.1
176.7
(0.4)
(188.6)
406.9
24 PARENT ENTIT Y FINANCIAL INFORMATION
The financial information for the parent entity, Adelaide Brighton Limited (“the Company”), has been prepared on the same basis as
the consolidated financial statements, except as set out below.
(i)
Investments in subsidiaries, associate and joint arrangements
Investments in subsidiaries, associate and joint arrangements are accounted for at cost in the financial statements of the
Company. Such investments include both investments in shares issued by the subsidiary and other parent entity interests that
in substance form part of the parent entity’s investment in the subsidiary. These include investments in the form of interest-
free loans which have no fixed repayment terms and which have been provided to subsidiaries as an additional source of
long-term capital. Trade amounts receivable from subsidiaries in the normal course of business and other amounts advanced on
commercial terms and conditions are included in receivables. Dividends received from associates are recognised in the parent
entity’s profit or loss, rather than being deducted from the carrying amount of these investments.
(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.
The grant by the Company of options over its equity instruments to employees of subsidiary undertakings in the Group is treated
as a receivable from that subsidiary undertaking.
(a) Summary financial information
The individual financial statements for the Company show the following aggregate amounts:
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
(Loss) / profit for the year
Total comprehensive (loss)/income
(b) Guarantees entered into by the parent entity
Bank guarantees
(c) Contingent liabilities of the parent entity
19
$ M
2,586.2
2,949.8
1,584.9
2,126.3
823.5
18
$ M
2,534.8
2,932.3
1,445.9
1,999.5
932.8
731.9
727.3
(1.5)
93.1
823.5
(13.2)
(13.2)
1.4
204.1
932.8
208.9
208.9
4.4
5.4
The parent entity did not have any contingent liabilities as at 31 December 2019 or 31 December 2018 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.
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.
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G R O U P S T R U C T U R E
G R O U P S T R U C T U R E
25 RETIREMENT BENEFIT OBLIGATIONS (continued)
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 balances of these obligations are sensitive to changes in these assumptions.
(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:
Δ
Administration of the Plan and payment to the beneficiaries from Plan assets when required in accordance with the Plan
rules;
Compliance with superannuation law and other applicable regulations.
Δ Management and investment of the Plan assets; and
Δ
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 2019, 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:
Δ
Investment risk – the risk that investment returns will be lower than assumed and the Company will need to increase
contributions to offset this shortfall;
Δ
Δ
Δ
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;
and
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.
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:
At 1 January 2019
Current service cost
Interest expense/(income)
Remeasurements
Return on plan assets, excluding amounts included in interest expense/(income)
Loss from change in financial assumptions
Experience loss
Contributions:
Employers
Plan participants
Payments from Plan:
Benefit payments
At 31 December 2019
At 1 January 2018
Current service cost
Interest expense/(income)
Transfers in/(out)
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
(c) Categories of plan assets
The major categories of plan assets are as follows:
PRESENT VALUE
OF OBLIGATION
FAIR VALUE OF
PL AN ASSE TS
$ M
43.6
1.2
1.1
2.3
–
1.5
1.9
3.4
–
0.8
(5.7)
44.4
44.8
1.4
1.3
0.1
2.8
–
(0.1)
(0.1)
(0.2)
–
0.8
(4.6)
43.6
$ M
(46.1)
–
(1.2)
(1.2)
(5.7)
–
–
(5.7)
(0.8)
(0.8)
5.7
(48.9)
(48.3)
–
(1.4)
(0.1)
(1.5)
0.8
–
–
0.8
(0.9)
(0.8)
4.6
(46.1)
NE T
OBLIGATION/
(ASSE T )
$ M
(2.5)
1.2
(0.1)
1.1
(5.7)
1.5
1.9
(2.3)
(0.8)
–
–
(4.5)
(3.5)
1.4
(0.1)
–
1.3
0.8
(0.1)
(0.1)
0.6
(0.9)
–
–
(2.5)
Australian equity
International equity
Fixed income
Property
Cash
Other
Total
31 DECEMBER 2019
UNQUOTED
31 DECEMBER 2018
UNQUOTED
$ M
13.7
16.6
6.4
6.8
2.0
3.4
48.9
%
28%
34%
13%
14%
4%
7%
100%
$ M
12.9
16.1
6.5
6.5
0.9
3.2
46.1
%
28%
35%
14%
14%
2%
7%
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.
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G R O U P S T R U C T U R E
25 RETIREMENT BENEFIT OBLIGATIONS (continued)
(d) Actuarial assumptions and sensitivity
The significant actuarial assumptions used were as follows:
Discount rate – % p.a.
Future salary increases – % p.a. – first year
Future salary increases – % p.a. – second year
Future salary increases – % p.a. – thereafter
19
1.9
1.6
1.6
3.0
18
3.0
2.5
2.5
2.5
The sensitivity of the defined benefit obligation to changes in the significant assumptions is:
31 December 2019
Discount rate
Future salary increases
31 December 2018
Discount rate
Future salary increases
CHANGE IN ASSUMP TION
INCRE ASE IN ASSUMP TION
DECRE ASE IN ASSUMP TION
IMPAC T ON DEFINED BENEFIT OBLIGATION
0.50 ppts
0.50 ppts
0.50 ppts
0.50 ppts
Decrease by 1.5%
Increase by 1.6%
Increase by 1.0%
Decrease by 1.0%
Decrease by 1.5%
Increase by 1.1%
Increase by 1.6%
Decrease by 1.0%
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 $nil (2018: $0.7 million).
The weighted average duration of the defined benefit obligation is 5 years (2018: 5 years).
26 SHARE-BASED PAYMENT PL ANS
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
benefits 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 Adelaide Brighton Employee Share Plan (ES Plan) established in 1997; and
The Group operate two general employee share plans:
Δ
Δ
Subject to the Board approval of grants, employees that meet the eligibility criteria can participate in the Plan.
The Adelaide Brighton Limited Tax Exempt Employee Share Plan (TEES Plan) established in 2018.
In 2019 the Board approved the issue of 225,158 shares under the TEES Plan (2018: Nil), while no shares were issued under
the ES Plan (2018: Nil). In subsequent years, the Board will decide whether, considering the profitability of the Company, and
demands of the business, further invitations to take up grants of shares should be made.
26 SHARE-BASED PAYMENT PL ANS (continued)
(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 58-71.
The exercise price for each Award is $nil.
MOVEMENT IN NUMBER OF AWARDS OUTS TANDING
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
19
1,678,766
560,887
–
(887,363)
(288,690)
18
2,767,452
142,357
(554,824)
(338,111)
(338,108)
1,063,600
1,678,766
–
–
The average value per share at the earliest exercise date during the year was $4.33 (2018: $6.42). The value per share is
calculated using the Volume Weighted Closing Price which is the average of the closing price and number of Adelaide Brighton
Limited shares traded on the Australian Securities Exchange for the five trading days before the exercise date, but not including
the day of exercise.
The fair value of Awards at the grant date is 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 has 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 2019 – 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
2019 AWARDS
$3.27
$0.44
0.83
4.30
50%
1 May 23
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
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 $340,331 during the year
(2018: $1,399,867).
The weighted average remaining contractual life of Awards outstanding at the end of the period was 2.3 years (2018: 1.4 years).
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OTHER
27 REL ATED PARTIES
(a) Compensation of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
19
$ M
7.4
0.2
0.5
8.1
CONSOLIDATED
18
$ M
9.0
0.1
1.2
10.3
(b) Other transactions with Key Management Personnel
RD Barro, a Director of Adelaide Brighton Limited, is Managing Director of Barro Group Pty Ltd. RR Barro, a director of Adelaide
Brighton Limited, is a Director of the 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.
Martin Brydon, the former CEO and Managing Director, Nick Miller, the CEO, and Brad Lemmon, a senior Executive of Adelaide
Brighton Limited, were Directors of Sunstate Cement Ltd for at least a portion of the reporting period. Nick Miller, the CEO of the
Company, and Brad Lemmon, a senior Executive, were directors of Independent Cement and Lime Pty Ltd for at least a portion
of the reporting period. Brett Brown and Michael Miller, both senior Executives of Adelaide Brighton Limited were Directors of the
Mawson Group.
During the year, the Group traded significantly with Independent Cement and Lime Pty Ltd, Sunstate Cement Ltd, the Mawson
Group and Aalborg Portland Malaysia Sdn. Bhd., which are all joint ventures or associates of the Group.
(c) Controlled entities
All transactions involving the Barro Group Pty Ltd and Adelaide Brighton Limited and its subsidiaries, Independent Cement
and Lime Pty Ltd and its subsidiaries, Sunstate Cement Ltd, the Mawson Group and Aalborg Portland Malaysia Sdn. Bhd. were
conducted on standard commercial terms.
Transactions entered into during the year with Directors of the Company and the Group, or their related parties, are on standard
commercial terms and conditions, and include the purchase of goods from the Group and the receipt of dividends from the
Company.
Aggregate amounts of the above transactions by subsidiaries and joint ventures
with the Directors and their related parties:
Sales to Director-related parties
Purchases from Director-related parties
19
$
CONSOLIDATED
18
$
81,626,641
84,622,252
25,962,003
34,204,918
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.
O T H E R
27 REL ATED PARTIES (continued)
(e) Transactions with related parties
The following transactions occurred with related parties:
Sales of goods
Joint venture entities
Purchases of materials and goods
Joint venture entities
Associate entities
Interest revenue
Joint venture entities
Dividend and distribution income
Joint venture entities
Superannuation contributions
19
$ 000
CONSOLIDATED
18
$ 000
285,058
328,134
118,459
6,837
116,080
10,362
664
742
20,984
25,670
Contributions to superannuation funds on behalf of employees
12,541
13,337
Loans advanced to:
Joint venture entities
3,459
2,958
(f) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables
Joint venture entities (interest)
Joint venture entities (trade)
Non-current receivables
Joint venture entities (loans)
Current payables
Joint venture entities (trade)
19
$ 000
CONSOLIDATED
18
$ 000
664
31,838
394
34,375
41,803
38,032
5,813
8,847
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 $664,833
(2018: $742,491).
28 EVENTS OCCURRING AFTER THE BAL ANCE SHEET DATE
No matter or circumstance has arisen since 31 December 2019 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.
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29 COMMITMENTS FOR CAPITAL EXPENDITURE
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Within one year
19
$ M
CONSOLIDATED
18
$ M
18.1
11.1
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:
19
$
CONSOLIDATED
18
$
(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:
(a) Guarantees
Bank guarantees
(b) Litigation
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.
DIRECTORS’
DECLARATION
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 72 to 120 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2019 and of its performance for the
financial year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified
in Note 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.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
751,356
769,416
The Directors have been given the declarations by the CEO and Chief Financial Officer required by section 295A of the Corporations Act
2001.
This declaration is made in accordance with a resolution of the Directors.
154,694
65,900
19
$ M
33.2
CONSOLIDATED
18
$ M
40.6
Raymond Barro
Chairman
Dated 26 February 2020
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AUDITOR’S INDEPENDENCE
DECLARATION
As lead auditor for the audit of Adelaide Brighton Limited for the
year ended 31 December 2019, I declare that to the best of my
knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements
of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional
conduct in relation to the audit.
This declaration is in respect of Adelaide Brighton Limited and the
entities it controlled during the period.
M. T. Lojszczyk
Partner
Adelaide 26 February 2020
PricewaterhouseCoopers
PricewaterhouseCoopers, ABN 52 780 433 757
Level 11, 70 Franklin Street, Adelaide SA 5000, GPO Box 418, Adelaide SA 5001
T: +61 8 8218 7000, F: +61 8 8218 7999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ADELAIDE BRIGHTON LTD
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REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Our opinion
In our opinion:
The accompanying financial report of Adelaide Brighton Limited
(the Company) and its controlled entities (together the Group) is
in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group’s financial position as
at 31 December 2019 and of its financial performance for the
year then ended
(b) complying with Australian Accounting Standards and the
Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
Δ
Δ
Δ
the consolidated balance sheet as at 31 December 2019
the consolidated income statement for the year then ended
the consolidated statement of comprehensive income for the
year then ended
Δ
Δ
Δ
the consolidated statement of changes in equity for the year
then ended
the consolidated statement of cash flows for the year then
ended
the notes to the financial report, which include a summary of
significant accounting policies
the directors’ declaration.
Δ
Basis for opinion
We conducted our audit in accordance with Australian Auditing
Standards. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the
financial report section of our report.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the
ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that
are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance
with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about
whether the financial report is free from material misstatement.
Misstatements may arise due to fraud or error. They are
considered material if individually or in aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial report
as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and
the industry in which it operates.
Materiality
Δ
For the purpose of our audit we used overall Group materiality
of $6.3 million, which represents approximately 4% of the
Group’s profit before tax and impairments. We utilised a 4%
threshold based on our professional judgement.
Δ We applied this threshold, together with qualitative
considerations, to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate
the effect of misstatements on the financial report as a whole.
Δ We chose Group profit before tax because, in our view, it is
the benchmark against which the performance of the Group is
most commonly measured. We also adjusted for impairments
as they are unusual or infrequently occurring items impacting
profit and loss.
Audit Scope
Δ Our audit focused on where the Group made subjective
judgements; for example, significant accounting estimates
involving assumptions and inherently uncertain future events.
Δ We conducted an audit of the most significant components
being Cement and Lime (primarily focusing on the South
Australian and Western Australian businesses which comprise
the bulk of these operations) which, in our view, were
financially significant to the financial report.
Δ
Δ
Additionally, we performed specific 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
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 profits
from joint ventures and associates. Other auditors audited the
financial reports for Independent Cement and Lime Pty Ltd and
Sunstate Cement Ltd for the year ended 30 June 2019. We
determined the level of involvement we needed to have to be able
to conclude whether sufficient appropriate audit evidence had
been obtained for our opinion on the Group financial report as
a whole, including review the work of these other auditors. Due
to the different balance dates utilised by these joint ventures,
we performed audit procedures for the period 1 July 2019 to
(and as at) 31 December 2019, including substantive analytical
procedures over the financial results, to obtain sufficient
evidence in respect of the results for the year ended and financial
position as at 31 December 2019 for our opinion.
Δ Outside the operations identified above, the Group includes
components which individually and collectively do not
contribute materially to the overall Group result. We have
obtained an understanding of these operations and performed
analytical procedures.
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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I N D E P E N D E N T A U D I T O R ’S R E P O R T T O T H E M E M B E R S O F A D E L A I D E B R I G H T O N LT D
I N D E P E N D E N T A U D I T O R ’S R E P O R T T O T H E M E M B E R S O F A D E L A I D E B R I G H T O N LT D
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. We communicated the key audit matters to the Audit,
Risk and Compliance Committee.
KE Y AUDIT MAT TER
HOW OUR AUDIT ADDRESSED THE KE Y AUDIT MAT TER
Recoverability of goodwill and property, plant and equipment
(Refer to Notes 2, 11, 13 & 14)
The financial report of the Group includes goodwill of $272.5 million
and property, plant and equipment of $1,033.7 million as at 31
December 2019.
In order to assess the recoverable amount of these assets, the Group
prepared financial models (hereafter, “the models”) at 30 June 2019
and again at 31 December 2019 to determine if the carrying values
of goodwill and property, plant and equipment were supported by
forecast future cash flows, discounted to present value.
The Group recognised a pre-tax impairment charge of $96.1 million
for the year ended 31 December 2019.
The recoverability of these assets was a Key Audit Matter given the
financial significance of the impairment charge recognised during the
year ended 31 December 2019, significance of the Group’s recorded
goodwill and property, plant and equipment balances to the financial
position of the Group, and the judgements and assumptions required
in assessing the assets’ value-in-use (including budgeted cash flows,
growth rates and discount rates).
Estimation of close down and restoration provision
(Refer to Note 15)
The Group recognised restoration provisions of $61.9 million in
relation to the rehabilitation of currently disturbed areas, such as
quarries and concrete plants.
The estimation of rehabilitation provisions was a key audit matter
because rehabilitation provisions are a critical accounting estimate
and involve significant judgement to estimate future costs and to
assess rehabilitation requirements.
The rehabilitation provision for sites being actively remediated is
based on tendered cost estimates for future works 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 inflation factors. These are then discounted in order to
estimate the net present value of the provision.
Our procedures to address the identified Key Audit Matter included,
but were not limited to:
Δ Assessed the appropriateness of the Cash Generating Units
(CGUs) identified by the Group and the assets and liabilities
allocated to them.
Δ Obtained the models prepared by the Group and considered
the appropriateness and reasonableness of future earnings
estimates, including assessment against external rates and
factors for the industry.
Δ Compared actual results achieved to previous years’ forecasts to
assess the ability of the Group to accurately budget and forecast
future results.
Δ Compared the 2020 cash flow forecast with Board approved
budgets.
Δ 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.
Δ We engaged an expert to assess the discount rates applied within
the models. Performed sensitivity analysis over key assumptions
included in the models including specific growth and discount
rates applied.
We have also evaluated the disclosures included in the Financial
Statements against the requirements of Australian Accounting
Standards.
Our procedures to address the Key Audit Matter included, but were
not limited to:
Δ Obtaining the models prepared by the Group and assessing the
reasonableness of inflation and discount rates used to determine
the present value of the provision. We also assessed whether all
sites that have been disturbed and required rehabilitation were
included in the models.
Δ Assessed the nature, timing and extent of rehabilitation work to
be performed by inspecting rehabilitation plans.
Δ Agreeing the nominal cost to rehabilitate for each respective
provision within the model to surveys completed by Managers and
Engineers at each site. We also considered the appropriateness
of the information included in the surveys against significant
contracts and agreements in the current year and other
information.
Δ Enquiries with Site Managers and Site Engineers to obtain
an understanding of how nominal costs to rehabilitate are
determined for a sample of rehabilitation sites. Additional
enquiries were also performed as to any significant changes
during the period that would impact the estimates made.
Δ Considered the appropriateness and consistency of methods used
to estimate each site’s specific provision.
Δ Compared actual costs incurred to rehabilitate, to what was
previously provided to assess the ability of the Group to accurately
determine future costs to rehabilitate similar sites.
Δ We also checked the mathematical accuracy of the calculations of
the individual site provisions within the models.
124
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
KE Y AUDIT MAT TER
HOW OUR AUDIT ADDRESSED THE KE Y AUDIT MAT TER
Measurement of stockpiled inventory
(Refer to Note 10)
The Group has $61.3 million of raw material and work-in-progress
inventory on hand as at 31 December 2019.
Raw materials and work-in-progress inventory is typically stockpiled
prior to consumption or sale. The Group relies on surveyors to
perform volumetric surveys to estimate the quantity stockpiled for
these inventory types. Survey quantity results, which are reported
in cubic metres, are converted to tonnages using density factors.
The measurement of these inventories is a key audit matter as the
measurement of inventory quantities for stockpiled inventory
is complex.
Our procedures to address the identified Key Audit Matter included,
but were not limited to:
Δ Assessing the surveyors as Group experts, and for each expert
considering the surveyor’s method, competency and objectivity.
Δ Obtaining and inspecting the survey results for material stockpiled
inventory locations.
Δ Reperforming the Group’s conversion of the quantities identified
from the surveyors’ reports, to tonnes using the Group’s density
factors.
Comparing the density factors used to prior year density factors for
the same raw material. Given the nature of the inventory, the density
factors do not usually vary significantly year on year.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual
report for the year ended 31 December 2019, but does not include
the financial report and our auditor’s report thereon.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken
on the basis of the financial report.
Our opinion on the financial report does not cover the other
information and accordingly we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information
that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
A further description of our responsibilities for the audit of
the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_
responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
REPORT ON THE REMUNERATION REPORT
Our opinion on the remuneration report
We have audited the remuneration report included in pages 58 to
71 of the Directors’ report for the year ended 31 December 2019.
In our opinion, the remuneration report of Adelaide Brighton
Limited for the year ended 31 December 2019 complies with
section 300A of the Corporations Act 2001.
Responsibilities of the Directors for the financial report
Responsibilities
The Directors of the Company are responsible for the preparation
of the financial report that gives a true and fair view in accordance
with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the Directors determine is
necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement,
whether due to fraud or error.
In preparing the financial report, the Directors are responsible for
assessing the ability of the Group to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about
whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards
will always detect a material misstatement when it exists.
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
M. T. Lojszczyk
Partner
Adelaide 26 February 2020
PricewaterhouseCoopers, ABN 52 780 433 757
Level 11, 70 Franklin Street, Adelaide SA 5000, GPO Box 418, Adelaide SA 5001
T: +61 8 8218 7000, F: +61 8 8218 7999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
125
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HOME
FINANCIAL
HISTORY
INFORMATION FOR
SHAREHOLDERS
YE AR ENDED
(A$ MILLION UNLESS S TATED)
DEC
2019
DEC
2018
DEC 1
2017
DEC
2016
DEC
2015
DEC 2
2014
DEC
2013
DEC 3
2012
DEC
2011
DEC
2010
ANNUAL GENERAL MEETING
Statements of financial performance
Sales revenue
1,517.0
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
Depreciation, amortisation and impairments
(189.7)
(87.4)
(82.5)
(78.1)
(77.8)
(75.0)
(70.6)
(65.2)
(57.8)
(52.8)
Earnings before interest and tax
81.9
265.4
267.6
266.1
298.6
247.5
222.7
222.1
219.83
216.2
Net interest earned (paid)
(18.5)
(14.4)
(12.1)
(11.5)
(13.0)
(15.0)
(14.1)
(14.6)
(17.0)
(14.0)
The annual general meeting of shareholders will be held at the Pullman Hotel, 16 Hindmarsh Square, Adelaide, South Australia on
Tuesday 19 May 2020 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.
540.1
518.7
428.9
309.6
329.5
390.1
259.1
299.3
258.7
150.2
ONLINE SERVICES
Property, plant and equipment
1,033.7
1,061.7 1,037.2
Current borrowings and creditors
149.4
144.7
159.2
117.4
123.9
122.7
Profit before tax
Tax expense
Non-controlling interests
Net profit after tax attributable to members
Group balance sheet
Current assets
Receivables
Investments
Intangibles
Right-of-use assets
Other non-current assets
Total assets
Current provisions
Current lease liabilities
Non-current borrowings
Deferred income tax and other non-current
provisions
Total liabilities
Net assets
Share capital
Reserves
Retained profits
Shareholders' equity attributable
to members of the Company
Non-controlling interests
Total shareholders' funds
Share information
63.4
251.0
255.5
254.6
285.6
232.5
208.6
207.5
206.4
202.2
(16.2)
(65.8)
(72.7)
(68.4)
(77.8)
(59.9)
(57.5)
(54.6)
(58.0)
(50.8)
0.1
47.3
0.1
(0.1)
0.1
0.1
0.1
-
0.1
-
0.1
185.3
182.7
186.3
207.9
172.7
151.1
153.0
148.4
151.5
519.2
500.6
474.8
43.6
184.8
283.3
84.6
4.5
39.9
173.9
299.5
-
2.5
37.3
160.3
299.9
-
3.5
390.1
978.4
34.4
151.2
270.3
-
2.3
403.1
986.1
32.9
142.2
272.9
-
1.3
387.4
994.2
32.7
139.9
266.4
-
0.0
390.2
889.7
31.4
138.5
183.9
-
0.0
363.7
902.5
29.6
129.0
184.8
-
3.5
307.8
851.0
27.2
97.2
274.1
760.6
30.4
87.7
183.0
179.1
-
0.0
-
0.0
2,153.7
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
37.9
5.7
34.6
49.0
50.6
55.4
44.2
-
-
-
-
-
105.4
105.8
-
115.0
78.5
-
99.2
34.5
-
106.4
52.6
-
141.4
134.5
130.1
129
122.4
126.9
101.6
114.4
116.7
88.4
956.4
832.5
767.2
606.6
631.2
683.9
571.9
607.2
1,197.3
1,245.6 1,245.8 1,220.1 1,207.3 1,136.7 1,061.8 1,005.9
739.0
734.4
733.1
731.4
729.2
727.9
699.1
696.6
0.2
4.2
1.9
2.9
1.2
3.3
4.3
2.1
-
509.1
957.1
694.6
2.3
-
397.6
934.3
692.7
2.6
455.7
504.5
508.2
483.3
474.3
402.8
355.6
304.4
257.3
236.0
1,194.9
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
2.4
2.5
2.6
2.5
2.6
2.7
2.8
2.8
2.9
3.0
1,197.3
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
Non-current lease liabilities
81.9
-
-
-
-
-
-
-
Net tangible asset backing ($/share)4
1.40
1.45
1.46
1.46
1.44
1.34
1.38
1.29
1.22
1.19
Return on funds employed %
Basic earnings per share (¢/share)
Diluted earnings (¢/share)
Total dividend (¢/share)5
Interim dividend (¢/share)5
Final dividend (¢/share)5
Special dividend (¢/share)5
Gearing %
4.9
7.3
7.2
5.0
-
5.0
-
35.4
16.1
28.5
28.4
28.0
9.0
11.0
8.0
34.1
16.7
28.1
28.0
24.5
8.5
12.0
4.0
29.8
17.5
28.7
28.6
28.0
8.5
11.5
8.0
23.6
19.8
32.0
31.9
27.0
8.0
11.0
8.0
24.6
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
-
20.0
23.9
23.7
21.5
7.5
9.0
5.0
31.6
23.4
30.9
26.0
15.9
1 Restated for changes to accounting policies (Note 1 (b) to the 2018 Financial Statements)
2 Restated for final acquisition accounting values for businesses purchased in 2014
3 Restated for changes to accounting policies (Note 42 to the 2013 Financial Statements)
4 Assets for the purposes of net tangible assets, includes right-of-use assets associated with leases recognised in accordance with AASB 16
5 Fully franked
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
Facsimile: 1300 534 987
International: +613 9415 4031
International: +613 9473 2408
When communicating with the share registry, shareholders should quote their current address together with their Security Reference
Number (SRN) or Holder Identification Number (HIN) as it appears on their Issuer Sponsored/CHESS statement.
Shareholders 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.
DIRECT CREDIT OF DIVIDENDS
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 PL AN (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 SRN, 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:
General Manager Corporate Finance and Investor Relations
Adelaide Brighton Ltd
Level 9 Aurora Place
88 Phillip Street
Sydney NSW 2000
Telephone: 02 8248 9903
Email: adelaidebrighton@adbri.com.au
126
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
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I N F O R M AT I O N F O R S H A R E H O L D E R S
COMMUNICATIONS
Our internet site www.adbri.com.au off ers access to our ASX announcements and news releases as well as information about our
operations.
SUBSTANTIAL SHAREHOLDERS
Barro Properties Pty Ltd, by a notice of change of interests of substantial shareholder dated 30 May 2019, 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.
ON-MARKET BUY BACK
At 26 February 2020 there is no on-market buy back of the Company’s shares being undertaken.
T WENT Y L ARGEST SHAREHOLDERS SHOWN IN THE COMPANY’S REGISTER OF MEMBERS AS AT 3 FEBRUARY 2020
SHAREHOLDER
Barro Properties Pty Ltd
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Barro Group Pty Ltd
Citicorp Nominees Pty Limited
Carltonbridge Pty Ltd
National Nominees Limited
Argo Investments Ltd
Cloverdew Pty Ltd
Australian Foundation Investment Company Limited
Churchbridge Pty Ltd
Agefl ow Pty Ltd
Rayonbridge Pty Ltd
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
Sunstone Finance Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
Citicorp Nominees Pty Limited
Total top 20 shareholders
Total remaining shareholders balance
VOTING RIGHTS
NUMBER OF ORDINARY SHARES HELD
% OF ISSUED CAPITAL
215,285,359
86,474,849
51,923,503
32,412,619
25,642,607
11,416,000
11,337,163
7,681,385
6,580,000
6,300,000
5,040,000
3,630,000
3,574,000
3,230,585
2,988,018
2,521,787
2,378,456
2,000,000
1,828,880
1,621,128
483,866,339
167,856,788
33.03
13.27
7.97
4.97
3.93
1.75
1.74
1.18
1.01
0.97
0.77
0.56
0.55
0.50
0.46
0.39
0.36
0.31
0.28
0.25
74.25
25.75
All shares at 3 February 2020 were of one class with equal voting rights being one vote for each shareholder and, on a poll, one vote for
each fully paid ordinary share.
SHARES HELD AS AT 3 FEBRUARY 2020
1 –
1,000
1,001 –
5,000
5,001 – 10,000
10,001 – 100,000
100,001 –
over
Total shareholders
Less than a marketable parcel of 143 shares
UNQUOTED SECURITIES
NUMBER OF SHAREHOLDERS
% OF ISSUED CAPITAL
4,749
9,510
4,022
3,344
137
21,762
962
0.35
4.08
4.60
11.93
79.04
100.00
Unquoted securities consist of 1,063,600 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 eight.
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 N.V. used with permission.
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128
128
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019
129
THE GROUP CONTINUES TO INVEST
TO ENSURE WE MAINTAIN A
SUSTAINABLE BUSINESS MODEL.
adbri.com.au
Head Office
Level 1, 157 Grenfell Street
Adelaide SA 5000
+61 8 8223 8000
adelaidebrighton@adbri.com.au
130
A DEL A IDE BRIGH T ON LT D A NNUA L REPOR T 2019