21 October 2015
Australian Securities Exchange
BY ELECTRONIC LODGEMENT
Attention: Companies Department
BY ELECTRONIC LODGEMENT
Dear Sir/Madam,
Please find attached Brickworks Limited 2015 Annual Report, which will be distributed
to shareholders today.
Yours faithfully,
Susan Leppinus
Company Secretary
ABN 17 000 028 526
ANNUAL REPORT 2015
BRICKWORKS LIMITED AND CONTROLLED ENTITIES
A.B.N. 17 000 028 526
FIVE YEAR SUMMARY
2011
$000
2012
$000
2013
$000
2014
$000
2015
$000 Growth
%
8%
10%
25%
1%
87%
7%
23%
(8%)
Total revenue
635,615
556,911
606,509
670,268
723,611
Building Products revenue
604,915
547,590
568,654
636,895
700,871
Earnings before interest and tax
Building products
Property
Waste management
Investments
Associates
Head office and other expenses
Total EBIT
Borrowing costs
Income tax
Net profit after income tax (excluding significant
items)
Significant items
Washington H Soul Pattinson & Co.
Write down of assets to recoverable value
– Property, plant & equipment
– Building products inventory
Costs related to JV and business acquisition
Costs on closure of manufacturing facility
Costs on start up of manufacturing facilities
Impairment of goodwill and timber access rights
Costs relating to PPT / MHC proposal
Other significant items
Tax on significant items
Tax benefit arising from WHSP carrying value
42,017
26,662
2,573
1,713
66,182
(7,148)
28,538
16,438
2,571
1,081
66,619
(6,796)
32,802
49,206
413
493
59,509
(7,384)
45,081
61,013
1,414
262
44,382
(8,945)
56,364
61,735
2,649
280
54,574
(9,699)
131,999
108,451
135,039
143,207
165,903
16%
(21,155)
(10,061)
(25,215)
(4,366)
(18,800)
(16,191)
(18,073)
(23,845)
(19,482)
(26,122)
(8%)
(10%)
100,783
78,870
100,048
101,289
120,299
19%
88,686
756
(18,483)
4,973
(25,140)
(14,021)
(1,084)
(2,751)
(8,651)
–
–
–
(2,511)
(17,900)
–
(4,169)
(4,192)
(1,947)
(6,927)
(4,147)
(31,627)
(1,273)
(2,612)
7,580
12,992
(8,608)
–
729
(3,130)
(593)
–
(465)
(3,010)
5,424
13,253
(2,581)
–
–
(379)
–
–
(2,841)
(578)
1,914
958
–
–
(577)
–
(4,333)
(16,761)
(1,504)
(1,236)
2,822
4,520
Total significant items
41,768
(35,566)
(14,883)
1,466
(42,209)
Net profit after income tax
(including significant items)
142,551
43,304
85,165
102,755
78,090
(24%)
Basic earnings per share (cents)
Normalised earnings per share (cents)
96.7
68.3
29.3
53.4
57.6
67.7
69.4
68.4
52.6
81.1
(24%)
19%
Dividends
Ordinary dividends per share (cents)
40.5
40.5
40.5
42.0
45.0
7%
Ratios
Net tangible assets per share
Return on shareholders equity
Interest cover ratio
Net debt to capital employed
$9.42
8.5%
6.4
13.0%
$9.44
2.6%
5.2
14.7%
$9.82
5.0%
6.6
15.7%
$10.32
5.7%
7.3
14.5%
$10.59
4.3%
9.7
14.2%
3%
(25%)
32%
(2%)
BRICKWORKS LIMITED
A.B.N. 17 000 028 526
A N N U A L R E P O R T 2 0 1 5
REGISTERED OFFICE:
738 – 780 Wallgrove Road
Horsley Park NSW 2175
Telephone: (02) 9830 7800
Facsimile: (02) 9830 7797
DIRECTORS:
ROBERT D. MILLNER FAICD (Chairman)
Director since 1997
MICHAEL J. MILLNER MAICD (Deputy Chairman)
Director since 1998
BRENDAN P. CROTTY LS; DQIT; Dip.Bus Admin; MAPI; FAICD; FRICS
Director since 2008
DAVID N. GILHAM FCILT; FAIM; FAICD
Director since 2003
DEBORAH R. PAGE AM B.Ec, FCA, MAICD
Appointed 1 July 2014
THE HON. ROBERT J. WEBSTER MAICD; MAIM; JP
Director since 2001
MANAGING DIRECTOR:
LINDSAY R. PARTRIDGE AM BSc. Hons.Ceramic Eng; FAICD; Dip.CD
Joined the Company in 1985
Director since 2000
CHIEF FINANCIAL OFFICER:
ALEXANDER J. PAYNE B.Comm; Dip CM; FCPA; FCIS; FCSA; JP
Joined the Company in 1985
COMPANY SECRETARY:
SUSAN L. LEPPINUS B.Ec; LLB; Grad Dip App Fin
Joined the Company on 29 April 2015
AUDITORS:
ERNST & YOUNG
BANKERS:
NATIONAL AUSTRALIA BANK
SHARE REGISTER:
COMPUTERSHARE INVESTOR SERVICES PTY. LIMITED
GPO Box 2975
Melbourne Victoria 3001
Telephone: 1300 855 080 (within Australia)
(03) 9415 4000 (international)
Facsimile: (03) 9473 2500
PRINCIPAL
ADMINISTRATIVE
OFFICE:
738 – 780 Wallgrove Road
Horsley Park NSW 2175
Telephone: (02) 9830 7800
Facsimile: (02) 9830 7797
E-mail:
info@brickworks.com.au
1
BRICKWORKS LIMITED
A.B.N. 17 000 028 526
DIRECTORS’ REPORT
The Directors of Brickworks Limited present their report and the financial report of Brickworks Limited and its
controlled entities (referred to as the Brickworks Group or the Group) for the financial year ended 31 July 2015.
Directors
The names of the Directors in office at any time during or since the end of the year are:
Robert D. Millner FAICD (Chairman)
Michael J. Millner MAICD (Deputy Chairman)
Lindsay R. Partridge AM BSc. Hons. Ceramic Eng; FAICD; Dip. CD (Managing Director)
Brendan P. Crotty LS; DQIT; Dip.Bus Admin; MAPI; FAICD; FRICS
David N. Gilham FCILT; FAIM; FAICD
Deborah R. Page AM B.EC, FCA, MAICD
The Hon. Robert J. Webster MAICD; MAIM; JP
All Directors have been in office since the start of the financial year to the date of this report.
Principal activities
The Brickworks Group manufactures a diverse range of building products throughout Australia, engages in
development and investment activities to realise surplus manufacturing property and participates in diversified
investments as an equity holder.
Result of operations
The consolidated net profit for the year ended 31 July 2015 of the Brickworks Group after income tax expense,
amounted to $78,090,000 compared with $102,755,000 for the previous year.
Dividends
The Directors recommend that the following final dividend be declared:
Ordinary shareholders – 30.0 cents per share (fully franked).
The record date for the final ordinary dividend will be 5 November 2015, with payment being made on
25 November 2015.
Dividends paid during the financial year ended 31 July 2015 were:
(a) Final ordinary dividend of 28 cents per share (fully franked) paid on 27 November 2014 (2014: 27 cents)
(b) Interim ordinary dividend of 15 cents per share (fully franked) paid on 5 May 2015 (2014: 14 cents).
REVIEW OF OPERATIONS
Highlights1
• Brickworks underlying NPAT before significant items up 18.8% to $120.3 million:
Building Products EBIT up 25.0% to $56.4 million;
Land and Development EBIT up 3.1% to $64.4 million;
Investments EBIT up 22.9% to $54.8 million.
• Statutory NPAT including significant items, down 24.0% to $78.1 million;
• Net debt/capital employed of 14.2%, net debt $301.9 million;
•
•
Final dividend of 30.0 cents fully franked, up 2 cents or 7.1%;
Total full year dividend of 45.0 cents fully franked, up 3 cents or 7.1%.
Overview
Brickworks (ASX: BKW) posted a record underlying Net Profit After Tax (‘NPAT’) for the year ended 31 July 2015
of $120.3 million, up 18.8% on the prior year. A feature of the result was the diversified earnings contribution,
with Building Products, Land and Development and Investments all delivering an uplift in underlying earnings
compared to the prior year.
After including the impact of significant items, statutory NPAT was down 24.0% to $78.1 million. The significant
items primarily relate to non cash impairments in Austral Precast and Auswest Timbers, reported in the first half,
and in Washington H Soul Pattinson’s (‘WHSP’) subsidiary companies New Hope Corporation and CopperChem
in the second half.
1 All underlying profit and earnings measures exclude significant items, unless otherwise stated.
2
On record sales revenue of $700.9 million, Building Products’ underlying earnings before interest and tax
(‘EBIT’) was $56.4 million, up 25.0% on the prior year. The improved earnings were driven by a combination of
continued sales growth and solid price increases in some divisions.
Land and Development EBIT was $64.4 million for the 12 months to 31 July 2015, driven primarily by a strong
revaluation profit in the Joint Venture Industrial Property Trust2 (‘Property Trust’) and the sale of the Coles Chilled
Distribution Centre (‘Coles CDC’).
Investment EBIT, including the underlying contribution from WHSP, was up 22.9% to $54.8 million. This was due
primarily to increased underlying earnings in TPG Telecom and New Hope Corporation.
Underlying earnings per share (‘EPS’) were 81.1 cents, up 18.5% from 68.4 cents for the prior year.
Directors have declared a fully franked final dividend of 30.0 cents per share for the year ended 31 July 2015, up
7.1% from 28.0 cents. Together with the interim dividend of 15.0 cents per share, this brings the total dividends
paid for the year to 45.0 cents per share, up 3.0 cents or 7.1% on the prior year.
The record date for the final dividend will be 5 November 2015, with payment on 25 November 2015.
Financial Analysis
Gearing (debt to equity) was 17.8% at 31 July 2015, down from 18.1% at 31 July 2014. Total interest bearing
debt remained unchanged at $325.0 million and net debt was $301.9 million at 31 July 2015, down 1.0% from
$304.8 million at 31 July 2014. Net debt to capital employed was 14.1% at the end of the period, but reduced
further to 12.3% at 31 August 2015, following settlement of the Coles CDC sale within the Property Trust and
distribution of proceeds to Brickworks.
Interest costs were down 12.2% to $17.1 million for the year. Total borrowing costs were $19.5 million,
including the loss in mark to market valuation of swaps of $2.4 million. Interest cover was 9.7 times, up from 7.3
times at 31 July 2014.
Working capital, excluding land held for resale, was $167.8 million at 31 July 2015, a decrease of $4.9 million
compared to the prior year. Finished goods inventory reduced by $3.9 million during the year, however total
inventory was up by $2.2 million. This included the acquisition of a masonry plant and greater production output
that resulted in increased raw materials and work in progress.
Total cash flow from operating activities was $133.3 million, up 32.6% from $100.5 million in the prior year. This
includes $18.3 million in proceeds from the sale of the Port Kembla site in New South Wales and the Riverview
site in Queensland. Excluding these sales, operating cash flow was up 14.4%, primarily reflecting the higher level
of trading and decreased working capital.
Building Products capital expenditure on plant and equipment increased to $41.1 million, from $33.2 million in
the prior year. Stay in business capital expenditure was $25.8 million, approximately in line with depreciation.
Spend on major growth projects totalled $15.3 million and included the first phase of a plant upgrade at the
Rochedale brick plant in Queensland and a range of alternative fuels projects.
Spending on Building Products acquisitions totalled $5.5 million for the year, comprising the purchase of a
masonry plant in Rockhampton during the first half. In addition, property acquisitions totalled $15.3 million,
including the previously leased Austral Masonry sites at Yatala and Cairns in Queensland and a clay reserve at
Berrima in New South Wales.
The underlying income tax expense for the year increased to $26.1 million compared to $23.8 million for the
previous year, due to the increased earnings from the Building Products and Land and Development Groups.
The statutory tax expense of $18.8 million was down 10.5% on the previous year, with the low effective tax rate
of 19.4% reflecting the fully franked dividend and lower equity accounted earnings from WHSP.
Net tangible assets (‘NTA’) per share was $10.59 at 31 July 2015, up from $10.32 at 31 July 2014 and total
shareholder’s equity was up $27.8 million to $1.824 billion.
Return on equity of underlying earnings was 6.6%, up from 5.7% in the prior year. Over the longer term,
Brickworks diversified corporate structure has provided stability of earnings and enabled prudent investments
that have steadily built net asset value and underpinned superior long term shareholder returns.
Brickworks continues to outperform the All Ordinaries Accumulation index in terms of total shareholder returns
(‘TSR’) over most time horizons. TSR for the year to 31 July 2015 was 7.6%, 2.2% higher than the index. Over
15 years, Brickworks has delivered returns of 12.5% per annum, 4.3% above the index.
Significant items decreased NPAT by $42.2 million for the year, consisting of non cash impairments, plant
commissioning costs at Rochedale in Queensland and Horsley Park in New South Wales, costs associated
with the Perpetual litigation (discussed below) and other Building Products items such as acquisition costs and
redundancies.
In addition, significant items relating to WHSP were incurred, primarily related to non cash impairments in
subsidiary companies New Hope Corporation and CopperChem in the second half.
2 The Joint Venture Industrial Property Trust is a 50/50% partnership between Brickworks and Goodman Industrial Trust
3
The Building Products’ non cash asset impairments, reported in the first half, comprised $10.0 million associated
with goodwill in Austral Precast and $6.7 million in relation to Auswest Timbers log licenses, both reported in the
first half. The impairment charges recognised reflect a delay and risk in achieving planned operational efficiencies
in these businesses.
Significant Items ($m)
Gross
Tax
Impairment of goodwill in Austral Precast
Impairment of Auswest Timbers log licenses
Plant commissioning costs
Costs relating to Perpetual / Carnegie proposal
Other Building Products items
Significant items relating to WHSP
TOTAL
(10.0)
(6.7)
(4.3)
(1.6)
(1.8)
(25.1)
(49.5)
–
0.5
1.3
0.5
0.5
4.5
7.3
Net
(10.0)
(6.2)
(3.0)
(1.1)
(1.3)
(20.6)
(42.2)
Perpetual Litigation Update
On 20 February Brickworks announced that Perpetual and Carnegie had agreed to the cancellation of the
general meeting of shareholders and Carnegie had withdrawn its cross claim against Brickworks and WHSP.
On the basis the general meeting of shareholders would be cancelled Brickworks agreed with Perpetual to put
a resolution to the 2015 Annual General Meeting regarding the proposed nomination of Ms Elizabeth Crouch
as a director. Additional information will be contained in the Company’s Notice of Annual General Meeting to
shareholders.
The cross-claim brought by Perpetual against Brickworks and WHSP is continuing. The discovery process has
commenced, and will likely take some months to complete.
The Perpetual litigation has caused Brickworks to incur approximately $1.6 million in costs during the 12
months to 31 July 2015.
Brickworks Building Products Group
Summary of Housing Commencements – 12 months to June 2015
Estimated Starts3
Detached Houses
Other Residential
Total
Jun 15
Jun 14 Change
Jun 15
Jun 14 Change
Jun 15
Jun 14 Change
New South Wales4
25,454
22,541
12.9% 32,093
27,683
15.9% 57,547
50,224 14.6%
Queensland
22,306
19,355
15.2% 20,113
16,146
24.6% 42,419
35,501 19.5%
Victoria
32,302
29,440
9.7% 30,894
22,051
40.1% 63,196
51,491 22.7%
Western Australia
23,420
22,664
3.3%
7,957
6,451
23.3% 31,377
29,115
7.8%
South Australia
7,676 7,924
(3.1%)
2,723
2,754
(1.1%)
10,399
10,678
(2.6%)
Tasmania
2,083
1,603
29.9%
415
307
35.2%
2,498
1,910 30.8%
Total Australia5
114,116 104,404
9.3% 95,485
76,569
24.7% 209,601 180,973
15.8%
New Zealand6
22,969
20,451
12.3% 2,185
2,875
(24.0%)
25,154
23,326
7.8%
Total dwelling commencements for Australia were up 15.8% to 209,601 for the twelve months ended
30 June 2015. This level of residential building activity is the highest on record in Australia, with detached
housing activity now three years into a recovery and other residential commencements continuing to record
unprecedented growth.
3 Original data sourced from ABSCat. 8752.0 Number of Dwelling Unit Commencements by Sector, States & Territories
(Sep 13, Dec 13 and Mar 14 quarters). June 14 quarter estimate from BIS Shrapnel.
4 Includes ACT, to align with Brickworks divisional regions.
5 Includes Northern Territory, not shown separately on table.
6 Building Consents data sourced from Statistics New Zealand – Building Consents.
4
Detached housing commencements increased 9.3% on the prior year. The growth in detached housing was
broad-based, with all states except South Australia experiencing improved conditions. Following three years of
growth, the level of detached house building now exceeds the 25 year average by 10%, but remains 14% below
the record level.
Momentum in other residential activity continued unabated, with commencements up a further 24.7% to a new
record high of 95,485 for the twelve months to 30 June 2015. This level of other residential activity is 85%
higher than the 25 year average and more than double the levels recorded six years ago. Other residential
developments now represent 45.6% of all residential commencements in Australia, up from 20.9% six years ago.
Conditions in New South Wales (including ACT) continue to improve, with total residential commencements up
14.6% on the prior year and just shy of the record level achieved 20 years ago. Double digit growth was recorded
in both detached houses and other residential activity.
Queensland experienced a strong increase in overall activity, with commencements up 19.5% to 42,419 for the
twelve months to 30 June 2015. Despite the strong growth, the recovery in Queensland has lagged the rest of
the country, with detached housing commencements still almost 10% below the 25 year average.
Total commencements in Victoria of 63,196 for the year, are the highest on record for any state. Activity in
this state has been fuelled by unprecedented growth in other residential commencements, up a staggering
40.1% to 30,894. As a result of this sharp increase, other residential activity now makes up almost 50% of total
commencements in Victoria. Growth in detached house commencements was also strong, up 9.7% to 32,302.
After recording record levels midway through the year, and an overall increase in commencements of 7.8% at
year end, residential building activity in Western Australia now appears to have passed the peak. Activity in the
second half of the year was 15.5% below the first half, with the decline being felt in both detached houses and
other residential developments.
Tasmania delivered the greatest uplift in building activity of any state during the year, recording an overall
increase of 30.8%. Both detached housing and other residential commencements were up significantly on the
prior year.
Continued growth in New Zealand was also recorded, with building consents for the year ended 30 June 2015
increasing by 7.8%.
The value of approvals in the non residential sector in Australia decreased by 18.7% to $29.447 billion for the
twelve months to 31 July 2015. Within the non residential sector, Commercial building approvals decreased by
23.4% to $11.194 billion for the period and Industrial building approvals decreased 16.4% to $4.248 billion. The
Educational sub-sector, an important driver for bricks and masonry demand, was down 21.8% to $3.667 billion.
Building Products’ Results in Detail7
Year Ended July
Revenue
EBITDA
EBIT
Plant and Equipment Capital Expenditure8
EBITDA margin
EBIT margin
Capital Employed
Net Tangible Assets
Return on Capital Employed
Return on Net Tangible Assets
Full Time Employees
Safety (TRIFR)9
Safety (LTIFR)10
$mill
$mill
$mill
$mill
%
%
$mil
$mil
%
%
2015
700.9
81.6
56.4
41.1
11.6
8.0
842.9
590.8
6.7
9.5
1,468
22.5
2.0
2014
636.9
70.0
45.1
33.2
11.0
7.1
813.8
544.8
5.5
8.3
1,414
33.6
3.3
Change %
10.0
16.6
25.0
23.8
5.9
13.6
3.6
8.4
20.7
15.3
3.8
(32.3)
(37.8)
7 All references to earnings within Building Products represent underlying earnings, pre significant items.
8 Excludes plant rebuild costs covered by insurance.
9 Total Reportable Injury Frequency Rate (TRIFR) measures the total number of reportable injuries per million hours worked.
10 Lost Time Injury Frequency Rate (LTIFR) measures the number of lost time injuries per million hours worked.
5
Revenue for the year ended 31 July 2015 was up 10.0% to a record $700.9 million, compared to $636.9 million
for the prior year. Financial year 2015 saw a continuation of the broad-based recovery in building materials
demand, with sales revenue exceeding the prior year in all divisions except Austral Precast. Particularly strong
momentum was recorded in Austral Bricks, Bristile Roofing and Auswest Timbers.
EBIT was $56.4 million, up 25.0% on the prior year, and EBITDA was $81.6 million. Improved earnings were
achieved on the back of the strong growth in sales volume and higher prices in most divisions.
Earnings in the second half of $30.3 million were 16.0% higher than the first half. Whilst this momentum was
encouraging, extended periods of rain and cold weather from April till July, and supply constraints such as
availability of land and trades, adversely impacted sales volumes across many divisions in the second half.
Over the full year, improved volumes delivered a positive EBIT impact of $10.4 million compared to the prior year.
This was primarily due to higher volume in Austral Bricks, in particular the two largest east coast markets of New
South Wales and Victoria.
Pricing outcomes were patchy across the divisions and in total contributed an EBIT uplift of $15.5 million. Strong
price increases were achieved in Austral Bricks in all states except Western Australia. Austral Masonry, Bristile
Roofing and Auswest Timbers also recorded solid gains, however pricing in Austral Precast decreased, primarily
due to strong competition in New South Wales and Victoria.
The EBIT impact of increases in unit production and installation costs was negative $12.2 million for the year.
However after including the $7.0 million benefit from the removal of the carbon tax, the net impact was $5.2
million, representing a 1.2% uplift in unit costs. Whilst the increased volume delivered improved operating
efficiency across many plants, cost pressures still remain in some areas.
In addition, other costs increased by $8.7 million, due primarily to a significant increase in advertising and selling
support expenses. During the year, costs were incurred to ensure that service levels were maintained despite the
significant increase in demand. The Company has also made a strategic investment in a high fashion branding
campaign and the roll out of CBD design studios across all major capitals, and will continue to benefit from these
initiatives in the years ahead.
Despite the improved earnings, Building Products’ Return on Capital Employed (‘ROCE’) of 6.7% remains below
internal targets. Excluding goodwill and other intangible assets of $252.1 million, the underlying Return on Net
Tangible Assets (‘RONTA’) was 9.5%, up from 8.3% in the prior year.
Full time employees increased by 54 during the year, taking the total number to 1,468 at 31 July 2015. This
includes the addition of 11 employees as a result of the masonry plant acquisition in Rockhampton, and 23
employees due to the recommissioning of Plant 2 at Horsley Park.
During the downturn in 2012-13, employee numbers were reduced significantly in many areas of the business.
With conditions now much improved, the Company has taken the opportunity to upskill in a number of key areas
such as research and development, engineering and marketing. In addition, the senior management team has
been boosted by the recruitment of executive staff in selected areas to ensure the long term sustainability of the
business as it continues to grow.
There were 6 Lost Time Injuries (‘LTIs’) during the year. This translated into a reduction in the Lost Time Injury
Frequency Rate (‘LTIFR’) to 2.0, compared to 3.3 in the 2014 financial year. The Total Reportable Injury Frequency
Rate (‘TRIFR’) decreased to 22.5 from 33.6 in the prior financial year.
Tragically, these statistics are overshadowed by the fatal accident that occurred in February, when a roofing
contractor fell at Plant 2, Horsley Park. All management and staff at Brickworks are deeply saddened by this loss
and our thoughts and condolences are extended to the family. It is our ongoing goal to have a workplace free
from injuries and this incident has re-enforced our commitment to rolling out best practice OH&S procedures
across the organisation.
Divisional Results
Austral Bricks delivered a 40.5% increase in earnings for the twelve months ended 31 July 2015. Total sales
revenue was up 12.7% to $379.7 million, driven by a 9.7% uplift in sales volume and strong selling price increases
in most states. Excluding the impact of Western Australia where pricing was flat, the average selling price was
up 6.1% on the prior year.
Manufacturing costs were held approximately in line with the prior year, on the back of increased volume
throughput in most plants and a range of cost reduction initiatives, such as the implementation of alternative
fuels projects.
Finished goods stock levels were reduced by 11.7%, with reductions in all states except Western Australia. As a
result of the increased demand across all markets, the flow of bricks between states has increased as production
is optimised across the country.
New South Wales recorded a significant increase in earnings, primarily as a result of strong price increases and
a range of business improvement initiatives. Strong market conditions also supported growth in sales volume, up
9.7% excluding the impact of tolling arrangements.
This business is reaping the benefits of many years of investment to position Austral Bricks as the leading
style brand in the industry, resulting in supply to many multi-residential towers and urban renewal projects.
The success of this strategy is illustrated by Austral Bricks New South Wales products featuring in the winning
residential and commercial projects at the recent Horbury Hunt awards that recognise excellence in the use of
bricks in architectural design.
In response to the increasing demand for up-market products, the Punchbowl factory has been transitioned from
a floor tile and paver plant to a premium bricks manufacturer and the previously mothballed Plant 2 at Horsley
Park recommenced production in March. This plant has not been operational since 2007, indicating the strength
of the current market in New South Wales.
Production costs reduced by 1.2% compared to the previous corresponding period, with increased throughput
supported by cost reduction projects such as the use of landfill gas in Plant 1 and Plant 3 at Horsley Park.
6
In Queensland the Rochedale plant was shutdown for 18 weeks to accommodate the first phase of a plant
upgrade, comprising new clay storage, brick making and setting installation. As a result earnings declined, with
manufacturing costs significantly higher than the prior year. However, the underlying performance of the business
was positive, with local sales volume up by 7.8% and strong selling price increases achieved. Performance in the
final quarter, post the upgrades, was particularly pleasing.
The final phase of the refurbishment program, comprising upgrades to the kiln, dryers and packaging plant, is
planned for the second half of financial year 2016. This investment will deliver lower production costs, increased
capacity and improve product quality, positioning the business to deliver sustainable returns over the long term.
Earnings from Victoria were significantly higher than the prior year on the back of very strong sales volume, up
17.6%. Production volumes were up a comparatively low 7.1%, resulting in a 31.7% reduction in finished goods
inventory levels.
The increased production volume, together with a range of operational improvement projects delivered significant
efficiency benefits, with unit manufacturing costs down by 3.1%. The recently built Wollert factory is now delivering
on its full potential, following the transition to the new facility.
Earnings in Western Australia were considerably improved, recovering to the highest level since 2010. This
result was achieved primarily as a result of lower unit manufacturing costs due to prior year upgrades at Bellevue.
Despite the increased earnings and strong market activity, conditions in Western Australia remain difficult, with
competition for sales volume remaining intense. This is reflected by a slight loss in market share, despite average
selling prices remaining flat compared to the prior year.
During the year, contracts were signed that will deliver significantly lower energy costs, with the new rates for
electricity and gas effective from 1st July 2015 and 1st January 2016 respectively.
Earnings in South Australia were up significantly on the prior period, due largely to an increase in local sales
volume of 10.1%. The gross margin was relatively steady, with improved average selling prices being offset by
manufacturing costs increases.
Tasmania delivered an outstanding result with earnings more than double the prior corresponding period. This
result was achieved primarily due to a strong increase in local sales volume and solid price increases. An intensive
marketing campaign aimed at increasing the share of brick in housing construction proved very successful, and
delivered good returns in a state where Austral Bricks is now the sole local manufacturer.
New Zealand Brick Distributors delivered a decrease in earnings for the year. Although overall market activity
in New Zealand remains robust, sales of bricks to support the Christchurch rebuild program has slowed due to
the limited release of land suited to brick construction. Together with an increase in competition in other areas of
the country and increased use of other cladding systems this has resulted in a decline in sales volume from the
previous record levels.
Austral Masonry delivered another increase in earnings, up 9.6% compared to the prior year, on record sales
revenue of $87.1 million. Sales volume increased by 4.0%, with strong growth being recorded in north and south-
east Queensland.
The improved earnings were supported by a sustained focus on premium products in both the commercial and
residential sectors that delivered improved pricing outcomes, particularly in New South Wales. Increased sales
of higher margin engineered retaining wall systems such as “Keystone” and “Magnumstone” also had a positive
impact on the results.
In December, Austral Masonry completed the acquisition of the independent manufacturer Capricornia
Rockblock, located in Rockhampton in Central Queensland. This plant is a modern facility, commissioned in
2011, and delivers Austral Masonry the leading position in a region where it did not previously have a significant
market presence.
The previously leased operational sites at Yatala and Cairns, both in Queensland, were also purchased during
the year. Due to rental savings, both of these land acquisitions are immediately earnings and cash flow positive.
Bristile Roofing earnings increased by 19.8% on the prior year, with sales revenue up 11.0% to $111.4 million.
Higher earnings were driven by strong gains in Queensland and Western Australia, with growth also returning
in Victoria following a period of declining earnings in that state. The strong growth of imported La Escandella
terracotta tiles continues, and is now a key driver of earnings growth for Bristile.
Price increases of 6.3% were achieved, supported by an increased proportion of higher priced commercial
volume in Western Australia. Production costs were well controlled, with only a marginal increase in unit costs
over the prior year.
Austral Precast revenue was down 5.0% to $66.4 million on flat sales volumes. Conditions varied across the
country with increased sales volume in Victoria and Queensland being offset by declines in New South Wales
and Western Australia. Earnings for the year were lower, with an exceptionally strong performance in Queensland
offset by weakness in New South Wales and Victoria, both impacted by an unfavourable product mix.
A re-structure is well underway and a range of cost reduction projects are being implemented across the
business, including a focus on streamlining the pre-production process and enhancing operating systems. During
the second half of the year, significant progress was made on improving productivity across all operations. In
addition, the business is being repositioned to focus on the fast growing high rise residential market.
Auswest Timbers sales revenue increased by 17.2% to $55.7 million on record sales volume of around
63,200m3. The improved volume resulted from an increased focus on value added product sales into both
domestic and export markets. Domestic demand in the decking market has improved significantly, due in part to
the higher prices of imported alternatives as a result of the lower Australian dollar. Export demand increased from
the US and UK markets, helping to offset weaker demand from China.
Whilst earnings were down on the prior year, direct comparison is impacted by prior year insurance claims and
one-off issues in the first half of 2015 such as poor quality Jarrah log feedstock. Despite the decrease in earnings,
underlying performance is much improved, with the new management team continuing to make good progress to
7
enhance operational efficiency, with productivity improvements being wide spread across all sites.
Industry rationalisation continued during the year in both Western Australia and Victoria, with several years of
difficult conditions resulting in a number of competitors exiting these markets.
After many years of negotiations, the log supply agreement in Victoria is expected to be finalised soon. Once
in place, this agreement will provide certainty of supply and underpin planned investments to reduce costs and
improve productivity at the Orbost and Bairnsdale facilities in the East Gippsland region. These investments will
ensure that Auswest is able to meet the strong demand for products produced at these facilities.
Land and Development
Land and Development produced an EBIT before significant items of $64.4 million for the year ended 31 July
2015, up 3.1% from $62.4 million for the prior year.
The improved result was primarily due to growth in the Property Trust, generating an EBIT of $61.1million, up
40.8% from $43.4 million in the prior year.
Net property income distributed from the Trust was $15.3 million for the year, up from $13.0 million in the year
ended 31 July 2014.
The revaluation profit of stabilised Property Trust assets totalled $29.0 million, up from $23.5 million due to
compression in capitalisation rates of between 0.50% and 0.75%.
An EBIT of $1.9 million was generated through a revaluation of land that is now ready for development at
Oakdale Central. In addition, a development profit of $2.7 million resulted from the completion of the Coles CDC
expansion in the first half.
Following this expansion, the Coles CDC facility was sold for $253 million to Mapletree Logistics Trust in July
2015. This price was considerably higher than book value, reflecting a capitalisation rate of 5.7%, and generating
an additional EBIT of $12.1 million.
The sale of the Coles CDC facility at this time reflects Brickworks strategy of realising the maximum value
possible from its portfolio of property assets. The current low capitalisation rates for industrial properties in the
area, together with the long lease period and high quality tenant for this asset, created an ideal sale opportunity.
This property was sold into the Property Trust in 2006, with further expansion works completed recently. Over the
life of the development, it has delivered profits of $44.9 million on an original book value of $3.6 million, in addition
to rental distributions totalling $18.7 million.
The total value of the Property Trust at 31 July 2015 was $1.087 billion with borrowings of $413.0 million, giving
a total net value of $674.0 million. This includes the Coles CDC sale value of $253 million, still held as an asset
within the Trust at the end of the reporting period. Therefore Brickworks’ 50% share of the Trust’s net asset value
was $337.0 million at 31 July 2015. Following the subsequent settlement of the Coles CDC sale and distribution
of proceeds, Brickworks share of the Trust’s net asset value decreased to $278.0 million.
Land Sales contributed an EBIT of $4.6 million for the year, down significantly from $21.0 million in the prior year.
The largest transaction for the year was the sale of 12.4 hectares at Riverview in Queensland for a profit of $2.4
million. The remaining profit was realised from the compulsory acquisition of 1.5 hectares of land at Bellevue in
Western Australia.
Waste Management contributed a profit of $2.6 million for the year, up from $1.4 million in the prior year.
Property administration expenses totalled $3.8 million, up slightly from $3.4 million in the prior year. These
expenses include holding costs such as rates and taxes on properties awaiting development.
Investments
The underlying EBIT from total investments was up 22.9% to $54.8 million in the year ended 31 July 2015.
Washington H. Soul Pattinson Limited (‘WHSP’) ASX Code: SOL
WHSP holds a significant investment portfolio in a number of listed companies including Brickworks, New Hope
Corporation, TPG Telecom, API, Clover, Ruralco Holdings and CopperChem.
Brickworks’ investment in WHSP returned an underlying contribution of $54.6 million for the year ended 31 July
2015, up 23.0% from $44.4 million in the previous corresponding period. This was due primarily to increased
underlying earnings in TPG Telecom and New Hope Corporation. The statutory contribution from WHSP was
$29.4 million, after including the impact of significant items primarily associated with non cash impairments in
subsidiary companies New Hope Corporation and CopperChem.
The market value of Brickworks’ 42.72% share holding in WHSP was $1.401 billion at 31 July 2015, 22.3%
higher than the equity accounted carrying value of $1.146 billion. WHSP has delivered outstanding returns over
the long term, outperforming the ASX All Ordinaries Accumulation Index by 5.2% per annum over fifteen years,
to 31 July 2015.
The investment in WHSP has been an important contributor to Brickworks’ success for more than four decades.
Over this period it has delivered an uninterrupted dividend stream that reflects the earnings from WHSP’s
diversified investments. For the 12 months to 31 July 2015, cash dividends totalling $50.1 million were received,
up 4.2% on the prior year. This dividend helps to balance the cyclical earnings from Brickworks’ Building Products
and Land divisions.
Significant Items Post Balance Date
Settlement of the Coles CDC sale occurred on 28 August 2015, resulting in sale proceeds of $253.0 million to the
Property Trust. These funds were used to:
• Reduce debt within the Property Trust, resulting in the Trust gearing level reducing to 39.8% at 31 August
2015, from 44.8% at 31 July 2015;
8
• Pay a $60.0 million distribution to Brickworks Limited, resulting in Brickworks net debt decreasing to $256.3
million as at 31 August 2015; and
• Payout interest rate swap within the Property Trust.
Brickworks Included in S&P/ASX 300
Brickworks was included in the S&P ASX 300 Index as at close of trading on 18 September 2015. The improved
liquidity and profile that will arise from being included in the index will be beneficial to all shareholders and reflects
the significant level of investor support for the Group.
Outlook
Building Products
Current residential building activity is at the highest level on record and continued strong momentum in new
building approvals suggests that activity could rise further in the next six months, driven primarily by the major
east coast capital cities. In the major markets of Sydney and Melbourne, home builders are reporting strong
demand, with work in hand extending by up to one year.
With interest rates expected to stay at historically low levels for the foreseeable future, it is possible that the pent-
up underlying demand for housing will be built out in all states except New South Wales over the coming years.
However governments across Australia need to do more to overcome land title bottlenecks, delays in building
approvals and trade shortages.
These conditions are reflected in an extremely strong order book in most divisions. Austral Bricks and Bristile
Roofing orders along the east coast are particularly strong, whilst in Austral Precast, capacity in Queensland is
sold out for almost the entire year and demand in New South Wales is increasing rapidly.
In addition to market driven sales growth, significant success has been achieved in increasing the penetration
of Brickworks products in a number of key markets, despite the ongoing competition from alternatives. For
example, the use of face brick in high rise residential and commercial developments continues to increase,
underpinned by the Company’s investment in design studios across the country and strong promotional activity
to the architectural community. Similarly, La Escandella terracotta roof tiles have established a reputation as the
premium roofing product in the market, and have re-invigorated sales across the Bristile Roofing range.
Price increases of 5-10% in Austral Bricks were successfully implemented, effective from 1 July 2015, and will
add further impetus to earnings in 2016. Price increases in other divisions will also be implemented throughout
the year.
Overall, the short term outlook for Building Products is very positive, with a long pipeline of work in our major
markets and the successful implementation of price rises in July, set to drive increased earnings in 2016.
Following the Coles CDC sale Brickworks has an extremely strong balance sheet and is able to invest in strategic
capital projects in its core business, and is exploring other opportunities to provide further earnings growth over
the medium term.
Land and Development
Development activity in the Property Trust has increased significantly in the past six months and is set for a strong
year ahead. Agreements for lease have been secured for two new DHL facilities on the Oakdale Central site, with
areas of 27,000m2 and 31,000m2. Construction has already commenced on these facilities with completion due
by July 2016. Once completed, the rent received from these facilities will partially offset the reduction caused by
the Coles CDC sale.
Work has also commenced on a section of Old Wallgrove Road leading to the Oakdale Estate. These works will
improve site access and enhance the areas status as a prime location for warehousing and logistics premises.
Available industrial space for lease in Western Sydney is now severely limited due to hail damage at nearby
industrial areas. As a result, there is significant potential to secure a number of additional pre-commitments over
the next 6-12 months.
In response to the continued demand in the area, it is anticipated that the first section of Oakdale West will be
sold into the Property Trust during financial year 2016. In total the Oakdale West estate comprises 100 hectares
of developable land and this will progressively be sold into the Property Trust over a number of years. The land
is currently zoned for industrial uses and a development application is now being prepared to enable this land to
be developed.
Development of the Rochedale North estate in Queensland is also well underway, with infrastructure works to the
entire estate due for completion in October 2015. The Beaumont Tiles facility, totalling 12,912m2, is scheduled
for completion in early calendar 2016. A Heads of Agreement has been signed for an additional 8,000m2 facility
at this site.
In Victoria significant progress has been made on rezoning surplus land at Craigieburn, with the Metropolitan
Planning Commission having identified the land as suitable for residential development in their draft Quarry
Investigating Area Plan. Support for this proposal has been received from other parties and a final report is
expected to be handed down by the end of calendar 2015.
Investments
The diversified nature of our holding in WHSP’s investments is expected to deliver steadily increasing earnings and
dividends to Brickworks over the long term.
Brickworks Group
Building Products earnings for the 2016 financial year are expected to exceed 2015. Land and Development
earnings are expected to be approximately in line with the prior year, subject to the timing and value of property
transactions. Investment earnings are expected to remain stable over the long term.
9
Significant changes in state of affairs
There were no significant changes in the state of affairs of the Brickworks Group during the year, other than those
events referred to in the Review of Operations and Financial Performance and the Financial Statements.
After balance date events
The Group’s share of net profits in joint ventures includes $12.1 million of equity accounted share of profit on
disposal of Coles CDC held by BGAI CDC Trust. The settlement of the transaction occurred on 28 August 2015,
resulting in sale proceeds of $253.0 million to the Trust. These funds were used to settle interest rate swaps and
reduce debt within the Trust. In addition a $60.0 million distribution was paid to the Group, resulting in the Group’s
net debt decreasing to $256.3 million as at 31 August 2015.
On 31 August 2015 the Group acquired the assets and the business of CJM Roof & Building Services Pty Limited
for total consideration of $388,000.
No other matters or circumstances have arisen since the end of the financial year that have significantly affected
the current financial year, or may significantly affect in subsequent financial years:
• the operations of the Brickworks Group;
• the results of those operations; or
• the state of affairs of the Brickworks Group.
Likely developments and expected results of operations
The Review of Operations gives an indication of likely developments and the expected results of operations in
subsequent financial years.
Workplace Health and Safety
“There is no task that we undertake that is so important that we can’t take the time to find a safe way to do it”.
Brickworks is committed to minimising the risks to health and safety of its employees, contractors and the general
public. A strong safety culture is fundamental to our Company’s ongoing WHS performance.
Safety performance is reviewed at all levels of the business, with an expectation of continuous improvement,
holding management to account for their leadership in preventing workplace injuries and illness.
Overall the safety performance continued to improve. The incidence of lost time injuries reduced with a 37.8
percent reduction in the Lost Time Injury Frequency Rate. The Lost Time Injury Frequency Rate (LTIFR) was
2.02. The Total Recordable Injury Frequency Rate (TRIFR) also improved with a 32.3 percent reduction in
the TRIFR. The TRIFR was 22.5. Overall workplace injuries declined by 25.2 percent recording a Total Work
Injury Frequency Rate of 120.6 per million hours worked. Despite this marked improvement in its overall safety
performance, Brickworks regrets that it sustained a serious incident during the year which resulted in a contractor
fatality at one of its NSW operational sites.
The standardisation of the WHS management system in all divisions of the Company has provided a consistent
approach to managing safety and provided an effective system to reduce risk. Workplace audits are diligently
undertaken to verify WHS compliance. Consultation with employees and contractors to identify physical hazards
and implement effective controls has been a key activity in reducing workplace injury rates.
Brickworks have a strong WHS performance measurement culture with clear WHS goals communicated
throughout all levels of the business. Safety performance is monitored utilising lead and lag indicators that are
benchmarked both internally and externally to guide Company performance.
The implementation of an employee Wellbeing program to improve employee health and welfare and an
online learning management system for training Brickworks employees in safe work practices and regulatory
requirements are also key initiatives that have improved safety performance.
This result reflects the sustained commitment of all Brickworks personnel to safety.
The Environment
The Brickworks Group understands and accepts its responsibility for environmental protection which is integral to
the conduct of its commercial operations. Brickworks’ objective is to comply with all applicable environmental laws
and regulations and community standards in a commercially effective way. We are committed to encouraging
concern and respect for the environment and emphasising every employee’s responsibility for environmental
performance.
This year saw the retrospective repeal of the Clean Energy Legislation (Carbon Tax) as of 30 June 2015 and
Brickworks finalising its obligations under that scheme. The Company maintains its commitment to reducing its
energy consumption and carbon footprint through the use of clean, renewable fuels as substitutes for natural
gas. The Energy Efficiency Opportunities Act was also repealed during this period as recommended under the
Federal Governments “green tape reduction program”.
Brickworks is continuing its initiatives to reduce energy usage and cost across all divisions. These include
fuel–switching projects from natural gas to cheaper and lower emissions intensity sources such as landfill gas,
sawdust and other organic materials. A power factor correction program and network tariff reassignment project
was undertaken resulting in substantial reductions in electricity network charges. At the same time the Group is
continuing to introduce ways to reduce energy consumption and emissions through product re-engineering such
as redesigning the bricks to reduce their mass and incorporating other waste streams and fluxes to reduce peak
firing temperatures.
The successful launch of the Carbon Neutral brick has created much interest from the design and architectural
community and we are currently undertaking Environmental Product Disclosures on similar products utilising
clean renewable fuel sources with lower embodied carbon.
10
To date the company has successfully implemented projects under the Clean Technology Investment Program
resulting in $3.83 million in grant funding. This grant funding has helped justify projects which reduce energy
consumption and greenhouse gas emissions and mitigate risks associated with increased gas pricing and
potential supply constraints. These projects include substituting natural gas with landfill gas, commissioning a
reduction by-pass unit in a brick kiln, incorporating biomass as a substitute fuel and generating electricity utilising
waste heat via an Organic Rankin Cycle Generator.
The Group actively participates in energy efficiency and greenhouse gas reporting schemes which have
assisted in reducing costs, energy consumption, and greenhouse gas emissions. The programs have also led to
measurable improvements of systems and processes for data capture and storage, measuring and calculating
emissions and implementing energy saving initiatives. These programs include:
• National Greenhouse and Energy Reporting (NGER) Act 2007 – this program requires organisations to
measure and report their energy consumption, production and greenhouse gas emissions under strict
protocols. Brickworks has been measuring its energy consumption and emissions for some 15 years and
this program has assisted Brickworks to streamline its processes for data capture, measuring, calculating
and reporting energy and emissions. The data is subsequently collated and reported monthly to Senior
Management and the Board; and
• National Pollution Inventory (NPI) – the NPI provides the government, community and industry with
information on substances and emissions estimates for 93 toxic substances. Brickworks continues to fulfil its
mandatory reporting requirements under this scheme.
There is significant environmental regulation requiring compliance for Brickworks’ building products manufacturing
and associated activities in each state of Australia, as set out below. Each site holds a current licence and/or
consent in consultation with the local environment protection authorities. Annual returns were completed where
required for each licence stating the level of compliance with site operating conditions.
Queensland production facilities and mining leases operate and are licensed under the Environmental
Protection Act 1994 and Regulations. Each site is regulated by Environmental Management Overview Strategy
documentation or plans of operations. Various approvals have also been obtained from Brisbane City Council
relating to the operation of the concrete roof tile facility at Wacol.
New South Wales production facilities and mine areas are administered under the Protection of the Environment
Amendment Legislation Act 2015, which licences organisations and regulates the level of all discharges into the
environment. Load based licensing fees are determined by the Environmental Protection Authority based on the
level of discharges. The Environmental Planning and Assessment Act 1979 apply to the approval conditions of
the Group’s activities. Some sites also operate within additional requirements imposed by local government and
NSW Department of Primary Industries.
Victorian production sites are licensed under the EPA Act 1970, including various state environmental protection
policies and regulations. Mining leases operate under the Extractive Industries Development Act 1995.
South Australian production facilities are licensed under the EPA Act 1993, while mining and rehabilitation plans
are approved in accordance with Regulations under the Mines and Works Inspection Act 1920.
Western Australian operations operate under the Environmental Protection Act 1986. They have licences issued
from a number of government agencies, including the Department of Environment and the Department of Mines
and Petroleum. A number of our sites also operate under additional requirements issued by local shires and
councils. Tasmanian operations and mining leases operate under the Environmental Protection Act of 1973.
Audit and assurance programs are an integral aspect of Brickworks’ environment management systems assisting
in measuring performance and mitigating environmental risks. A total of six independent annual audits were
completed this year, which were supplemented by internal audits carried out by Brickworks’ environmental
personnel. The independent environmental auditors complete an environmental compliance audit of all factory
and quarry sites every one to three years, with the audit frequency determined by risk analysis and the results of
previous audits. The purpose of this is to ensure compliance with all current licences and regulations and identify
risks of an adverse environmental event under any other relevant legislation.
During the year, results of our environmental management process indicated that some emissions were in
excess of licence limits. The Group has investigated all these non-compliances, working closely with the relevant
authorities to resolve these issues. The Queensland Department of Environment and Heritage Protection is
currently investigating a potential unlicensed quarry activity. The Company is co-operating with the department.
There have been no prosecutions arising as a result of any of these issues.
Risk Management
The Board of Brickworks has adopted a Risk Management framework that identifies Risk Tolerance and Risk
Appetite for the Group and then considers how each identified risk is placed within that framework.
That framework involves assessment of the likelihood of an event occurring, the potential impact of each event
and the controls and processes in place to continually mitigate each risk.
The significant risks that may impact the achievement of the Group’s business strategies and financial prospects
are:
11
Building Products
The achievement of business objectives in the Building Products Group may be impacted by the following
significant risks:
Risk
Serious Safety Incidents The Group has a strong safety culture and a well developed WHS system (refer
Mitigation
Environmental incident
Alternate products
Shift in housing trend
New competitor
Plant performance
Production capacity
Business Interruption
Asbestos Risk
further “Safety”).
The Group has a comprehensive environmental compliance system and strong
commitment to environmental protection (refer further “Environment”).
The Group has a strong focus on research and development, monitors market
trends and has strategies to diversify its range of building products and its
marketing approach.
The movement away from detached housing threatens the Group’s traditional
market. The Group has strategies to diversify its range of building products and its
marketing approach.
Whilst barriers to entry are significant, the Group monitors both domestic
manufacturing and import competitors and has adopted a customer relationship
and quality model, supported by investment in research and development.
All plants are subject to regular preventative maintenance programs and
appropriately qualified staff are employed to monitor and oversee production
activities. Plant performance is measured and monitored daily, weekly and
monthly.
The Group manages production capacity by restarting, building and mothballing
plant to adapt to cyclical market conditions. In the 2015 financial year the Group
restarted Plant 2 at Horsley Park, NSW.
There are multiple facilities throughout Australia that can transport products
between locations as and when required. The major facilities have rolling risk
reviews and reporting by outside parties. The business also maintains significant
insurance policies to manage the physical loss of assets and any loss of income
due in an insurable interruption.
There has been a comprehensive review of all locations for the presence of
asbestos. Building cladding is regularly removed and replaced with non-asbestos
based materials. Where any asbestos is found, either within a plant or during
rehabilitation, it is immediately quarantined and removed by qualified, reputable
contractors, using the most diligent safety standards.
Land and Development
The achievement of business objectives in Land and Development may be impacted by the following significant
risks:
Risk
Market Risk
Mitigation
The industrial property cycle may deteriorate, resulting in softening capitalisation
rates and lack of growth. The Group manages the risk by monitoring the key
economic drivers, employing property professionals who understand the property
cycle and undertaking development in joint venture with Goodman Group. The
Group regularly conducts hold/sell assessments.
Serious Safety Incidents The Group has a strong safety culture and a well developed WHS system (refer
further “Safety”).
Property Trust Financing The joint property trusts maintain facilities with multiple lenders with various
tenors up to 7 years. In addition, gearing is maintained at prudent levels through
the property cycles.
The Group takes a long term, patient approach to achieving the highest and best
use for each property. The rezoning process for a property usually commences
prior to finalisation of its existing use.
Rezoning Risk
Investment
The achievement of business objectives in the Investment activities may be impacted by the following significant risks:
Risk
Market Risk
Group
Mitigation
The Group’s investment in WHSP is subject to market movements and the
underlying performance of WHSP. The WHSP investment is diversified across
industries other than those in which the balance of Brickworks specialises, which
provides a stable stream of dividends over the long term. The WHSP group may
have significant exposure to the Coal and Telecommunications Markets.
The achievement of business objectives in the Group activities may be impacted by the following significant risks:
Risk
Financing Risk
Mitigation
The Group maintains conservative gearing levels below 20% in recognition of its
cyclical nature. Senior debt facilities are maintained with five lenders with whom
an open and transparent relationship is maintained. Facilities are maintained over
various tenors at 3, 4 and 5 years, ensuring that a maximum of $150 million will
expire at any one point in time.
12
Information on Directors
Robert D. Millner FAICD
Chairman
Mr R. Millner is the non-executive chairman of the Board. He first joined the Board in 1997 and was appointed
chairman in 1999. Mr Millner has extensive corporate and investment experience. He is a member of the
Remuneration Committee and the Nomination Committee.
Other directorships:
Washington H. Soul Pattinson and Co. Ltd
New Hope Corporation Ltd
TPG Telecom Ltd
BKI Investment Company Ltd
Milton Group
Australian Pharmaceutical Industries Ltd
Souls Private Equity Ltd
Director since 1984
Director since 1995
Director since 2000
Director since 2003
Director since 1998
Director since 2000
Appointed 2004, Resigned 2012
Michael J. Millner MAICD
Deputy Chairman
Mr M. Millner is a non-executive Director who was appointed to the Board in 1998. He is on the board and a
councillor of the Royal Agricultural Society of NSW, including Chair of the RAS Foundation, and has extensive
experience in the investment industry. Mr Millner is the deputy chairman of the Board, and a member of the Audit
and Risk Committee and the Remuneration Committee and the Nomination Committee.
Other directorships:
Ruralco Holdings Ltd
Washington H. Soul Pattinson & Co Ltd
Director since 2007
Appointed 1997, Resigned 2012
Brendan P. Crotty LS; DQIT; Dip.Bus Admin; MAPI; FAICD; FRICS
Director
Mr Crotty was appointed to the Board in June 2008 and is a non-executive Director. He brings extensive property
industry expertise to the Board, including 17 years as Managing Director of Australand until his retirement in
2007. He is a director of a number of other entities that are involved in the property sector, including Chairman
of Western Sydney Parklands Trust, as well as being on the Macquarie University Council. He is the Chair of
the Remuneration Committee, and a Member of the Audit and Risk Committee and the Nomination Committee.
Other directorships:
GPT Group
Australand Funds Management Ltd
Director since 2009
Appointed 2007, Resigned 2012
David N. Gilham FCILT; FAIM; FAICD
Director
Mr Gilham was appointed to the Board of Brickworks in 2003. He has extensive experience in the building
products and timber industries. He was previously General Manager of the Building Products Division of Futuris
Corporation and Managing Director of Bristile Ltd from 1997 until its acquisition by Brickworks in 2003, and
has been involved with various timber companies. He is a member of the Nomination Committee and the
Remuneration Committee.
Deborah R. Page AM B.Ec, FCA, MAICD
Director
Mrs Page was appointed to the Board in July 2014 and is a non-executive Director. Mrs Page has extensive
financial expertise, arising initially from her time at Touche Ross/KPMG Peat Marwick including as a partner,
and subsequently from senior executive roles with the Lend Lease Group, Allen Allen and Hemsley and the
Commonwealth Bank. She also has experience as a Director in a number of sectors, including Property, Energy
& Renewables, Insurance, Funds Management, and Public Sector bodies. Mrs Page is the Chair of the Audit and
Risk Committee, and a member of the Nomination Committee and the Remuneration Committee.
Other directorships:
Investa Listed Funds Management Ltd
(responsible entity of ASX listed Investa Office Fund)
Service Stream Ltd
Australian Renewable Fuels Ltd
BT Investment Management Ltd
Appointed 2011
Appointed 2010
Appointed 2012
Appointed 2014
The Hon. Robert J. Webster MAICD; MAIM; JP
Director
Mr Webster was appointed to the Board in 2001 and is a non-executive Director. He is Senior Client Partner
in Korn Ferry International’s Sydney office. He is the Chair of the Nomination Committee, a member of the
Remuneration Committee and a member of the Audit and Risk Committee (Chair until 29 July 2015).
Other directorships:
Greater Sydney Land Services Board
Appointed 2013
13
Lindsay R. Partridge AM BSc. Hons. Ceramic Eng; FAICD; Dip CD
Managing Director
Mr Partridge graduated as a ceramic engineer from the University of New South Wales, and worked extensively
in all facets of the clay products industry in Australia and the United States before joining the Austral Brick
Company in 1985. In 2008, Mr Partridge completed the Stanford University Executive Development Program. He
held various senior management positions at Austral before being appointed Managing Director of Brickworks
in 2000. Since then, Brickworks has grown significantly in terms of size and profitability as its operations have
become Australia-wide, with its product range extending beyond bricks to tiles, pavers and masonry and activities
expanding into property development.
Mr Partridge has also had extensive industry involvement, and is currently a director of various industry bodies,
including the Australian Brick and Blocklaying Training Foundation, and the Clay Brick and Paver Institute.
In 2012 he was awarded the Member of the Order of Australia for services to the Building and Construction
Industry, particularly in the areas of industry training and career development, and to the community. He is a
director of Children’s Cancer Institute Australia.
Information on Chief Financial Officer and Company Secretary
Alexander J. Payne B.Comm; Dip CM; FCPA; FCIS; FCSA; JP
Chief Financial Officer
Mr Payne is an accountant with significant financial experience, who joined The Austral Brick Company in 1985.
In 1987 he was appointed Group Company Secretary, and was appointed Chief Financial Officer in 2003. He
is a Director of BKI Investment Company Ltd. In 2011, Mr Payne completed the Stanford University Executive
Development Program.
Susan Leppinus B.Ec; Llb; Grad Dip App Fin
Company Secretary and General Counsel
Susan Leppinus was appointed as Company Secretary and General Counsel in April 2015. Ms Leppinus has
ten years experience as a company secretary and general counsel, working with boards of directors and senior
management in publicly listed companies most recently with David Jones Limited and Crane Group Limited.
Meetings of Directors
The number of meetings of directors (including meetings of committees of directors) held during the year and the
number of meetings attended by each director are set out below. All directors were eligible to attend all director
and committee meetings held.
Directors’
meetings
Audit & Risk Remuneration Nomination
Committee1
Committee
Committee
Independent
Board
Committee
Number of meetings held:
Number attended:
R.D. Millner
M.J. Millner
L.R. Partridge
B.P. Crotty
D.N. Gilham
D.R. Page
R.J. Webster
Directors interests
10
10
10
10
9
10
9
10
2
N/A
N/A
N/A
2
N/A
2
2
2
2
1
N/A
2
2
2
2
NIL
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2
N/A
N/A
2
2
2
2
2
As at 24 September 2015, Directors had the following relevant interests in Brickworks shares:
R.D. Millner
M.J. Millner
L.R. Partridge
B.P. Crotty
D.N. Gilham
D.R. Page
R.J. Webster
ORDINARY SHARES
5,653,740
5,628,142
158,434
15,209
102,268
2,400
15,922
As at 24 September 2015, no Director had relevant interests in debentures of, or interests in a registered scheme
made available by Brickworks or a related body corporate.
As at 24 September 2015, no Director had any rights or options over shares in debentures of, or interests in a
registered scheme made available by Brickworks or a related body corporate.
As at 24 September 2015, there were no contracts entered into by Brickworks or a related body corporate to
which any Director is party, or under which any Director is entitled to benefit nor were there any contracts which
confer any right for any Director to call for or deliver shares in, debentures of, or interests in a registered scheme
made available by Brickworks or a related body corporate.
1 A Nomination Committee meeting is usually held in July each year. This year no Board or Committee meetings were held
in July 2015 due to other commitments of Directors. The Nomination Committee Meeting was held in the first week of
August 2015.
14
DIRECTORS’ REPORT – REMUNERATION REPORT
The Remuneration Report has been audited in accordance with s300A of the Corporations Act 2001.
1. Overview
1.1 Executive Summary
The Brickworks Board of Directors is committed to ensuring that the remuneration framework is focused on
driving a performance culture and is closely aligned to the achievement of the Company’s strategy and business
objectives. During 2014, the Board made a number of changes to its remuneration structure as disclosed in last
year’s Remuneration Report as follows:
• Appointed an independent non-executive director as Remuneration Committee Chair (Mr B Crotty);
• Appointed an additional independent non-executive director to the Remuneration Committee (Mrs D Page);
• Undertook a thorough review of the executive remuneration policy framework to place greater emphasis on
performance whilst maintaining retention;
• Placed limits on the Short Term Incentive scheme (STI);
• Changed the structure of the Long Term Incentive scheme (LTI) to place greater emphasis on retaining
executive Key Management Personnel (KMP) and other senior managers of business units (senior
executives) by rewarding individual out performance via the allocation of additional Brickworks shares;
• Reduced entitlements to termination payments;
•
•
Tightened eligibility for restraint payments which will be paid progressively over the restraint period to ensure
compliance with restraint obligations;
LTI shares will no longer vest immediately on retirement or redundancy. Rather they will continue to vest
progressively over the original 5 year grant period, subject to compliance with employment contract conditions.
Following the vote on the Remuneration Report at the Company’s 2014 Annual General Meeting, and a review of
the relevant proxy advisor reports, the Board has introduced a number of additional changes in 2015 as follows:
• Enhanced disclosure in this report particularly around the payment of short term incentives to KMP;
• Placed greater emphasis on and enhanced the level of disclosure of the performance criteria used to
determine shares allocated under the LTI;
•
Introduced a new TSR performance measure for the LTI which applies to the Managing Director (MD) and
the Chief Financial Officer (CFO).
This year’s report reflects the initiatives taken by the Board to achieve the twin objectives of driving higher
performance and retaining key staff. The importance of retaining key staff has been reflected in a greater
emphasis on long term incentives.
1.2. Details of Key Management Personnel
The following persons had authority and responsibility for planning, directing and controlling the activities of the
Group, directly or indirectly, including any director (whether executive or otherwise) of that entity during the full
financial year.
Directors
The following persons were directors of Brickworks Ltd during the full financial year:
Mr R. Millner
Mr M. Millner
Non-executive Chair
Non-executive Deputy Chair
Mr L. Partridge
Executive Director (Managing Director)
Mr B. Crotty
Mr D. Gilham
Mrs D. Page
Non-executive Director
Non-executive Director
Non-executive Director
The Hon. R. Webster
Non-executive Director
Executives
Mr A. Payne
Chief Financial Officer
Ms M. Kublins
Executive General Manager – Property & Development
Mr D. Fitzharris
Group General Manager Sales – Brickworks Building Products
Mr M. Finney
Mr P. Scott
Mr D. Millington
Group General Manager – National Operations and Austral Bricks East Coast
Group General Manager WA – Brickworks Building Products
General Manager- Bristile Roofing East Coast until 31 January 2015 and thereafter
General Manager Austral Masonry. He is no longer a KMP from 1 February 2015.
15
1.3. Remuneration Committee
The Board has an established Remuneration Committee which operates under the delegated authority of the
Board of Directors. A summary of the Remuneration Committee charter is included on the Brickworks website
(www.brickworks.com.au). All non-executive Directors of Brickworks are members of the Remuneration
Committee and the membership of the Remuneration Committee is as follows:
Mr B Crotty
Mr D Gilham
Mr M Millner
Mr R Millner
Mrs D Page
Non-executive Chair (Committee Chair)
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
The Hon. R Webster
Non-executive Director
The main functions of the Remuneration Committee are to assist the Board in fulfilling its responsibilities to:
• Ensure that remuneration policies and practices are consistent with Brickworks’ strategic goals and human
resources objectives;
• Enable Brickworks to attract and retain executives and Directors who will create value for shareholders;
• Equitably, consistently and responsibly reward executives having regard to the performance of Brickworks,
the performance of the executives and the general pay environment;
• Ensure executive succession planning is adequate and appropriate; and
• Retain key executives in the event that competitors attempt to recruit them.
The Committee is authorised by the Board to obtain external professional advice, and to secure the attendance
of advisers with relevant experience and expertise if it considers this necessary.
1.4. Use of remuneration consultants
Where the Remuneration Committee will benefit from external advice, it will engage directly with a remuneration
consultant, who reports directly to the Committee. In selecting a suitable consultant, the Committee considers
potential conflicts of interest and requires independence from the Group’s Key Management Personnel as part
of their terms of engagement.
• During the financial year, the Remuneration Committee appointed Guerdon & Associates (Guerdons) as
the remuneration adviser to provide remuneration information regarding remuneration benchmarking for
executive KMP.
• Remuneration recommendations were provided to the Remuneration Committee as an input into decision
making only. The Remuneration Committee considered the recommendations in conjunction with other
factors in making its remuneration determinations.
The Committee is satisfied the advice received from Guerdons is free from undue influence from the executive
KMP to whom the remuneration recommendations apply, as Guerdons were engaged by, and reported to,
the Chairman of the Remuneration Committee.
•
• During the year no remuneration recommendations, as defined by the Corporations Act, were provided.
1.5. Board Policies for determining remuneration
Policies for determining the nature and amount of remuneration for the executive KMP are developed by the
Remuneration Committee for approval by the Board. Once approved by the Board, these policies are applied
consistently across all divisions within the Group. Brickworks’ remuneration policy is designed to ensure that
every executive KMP’s remuneration reflects their duties and responsibilities, as well as ensuring that the Group
is able to attract and retain key talent cost effectively.
The Board of Brickworks recognises that the Group’s performance is very dependent on its capacity to attract,
retain and develop highly skilled and motivated employees. Whilst remuneration is a key factor in achieving
these objectives, the Board recognises there are other factors which influence this capacity, including the culture,
reputation, work environment, human resource and professional development policies of the Group. As noted
above, the Remuneration Committee undertook a thorough review of the executive KMP remuneration policy
framework during the 2014 financial year. The updated executive KMP remuneration policies reflect the unique
business environment and circumstances in which Brickworks operates as well as its strategic and operational
responses to competitor activity and market volatility.
As a consequence of this review, the Board of Brickworks has over 2014 and 2015:
•
Limited future short term incentive payments to 50% of total fixed remuneration;
• Placed greater emphasis on retaining executive KMP by rewarding individual out-performance via the
allocation of additional Brickworks Limited shares, with a value that may in some circumstances involve
annual allocations in excess of the previous limit of 50% of fixed remuneration. All shares allocated to
Brickworks executives will continue to have vesting periods of 5 years;
• Placed greater emphasis on assessing performance to determine shares allocated under the LTI; and
•
Introduced an absolute TSR component to the LTI for the Managing Director and the Chief Financial Officer
for 50% of share allocations made or approved after 31 July 2015.
2. Remuneration components
2.1 Group performance, shareholder wealth and remuneration
Executive KMP remuneration is comprised of both fixed and performance-based components. The structure of
the remuneration is designed to provide an appropriate balance between these components. Fixed remuneration
16
is made up of base salary, superannuation and other benefits such as the provision of Company maintained
motor vehicles (if provided). Fixed remuneration is approved by the Remuneration Committee based on data
sourced from external providers, including independent remuneration data providers.
Performance-based remuneration is tied to the performance of both the individual and the division and/or Group.
Any such remuneration earned is available as a combination of Brickworks’ shares purchased through the
Brickworks Deferred Employee Share Plan and cash.
Brickworks’ remuneration policy has been tailored to help align executive interests with those of shareholders
through the use of variable components. Brickworks STI has been designed to focus executives on the necessity
to achieve a range of agreed targets for their respective businesses.
The Board aims to improve profit and cash flows, improve production and operational efficiencies, rationalise
non – performing assets, retain key employees who have developed key skills and expertise in the industries in
which the Group operates, ensure the health and safety of employees and provide demonstrated leadership on
environmental compliance.
The remuneration strategy supports this through its short term performance incentive program and its long term
incentive program.
The short term incentive program has as key performance measures for each executive KMP the financial and non-
financial performance measures to support its strategy as outlined further in section 2.3. Short term incentives paid
reflect the increased profit generated by the Building Products and the Land and Development division in FY2015.
The primary purpose of Brickwork’s LTI is the retention of the Company’s senior executive team. It can take many
years to gain the operating and manufacturing processes for building materials and an executive who knows
the Company’s clients extremely well and has a long history of successful negotiations with them will also be
difficult to replace. The Board aims to achieve this through its retention based long term incentive plan which
operates over 5 years. In addition for share allocations to the Managing Director and the Chief Financial Officer
approved after 31 July 2015 a TSR performance measure will apply, recognising their Group roles with overall
responsibility for the long term value of the Company.
The Board considers the LTI has been effective in increasing shareholder wealth, and will continue to be effective
in creating additional shareholder value over the long term, placing Brickworks in a strong position to outperform
its competitors. In addition, the introduction of a new TSR long term incentive plan for the Managing Director and
the Chief Financial Officer will enhance the alignment of executive interests with those of shareholders.
While the Board and executive KMP accepts that a number of factors have contributed to recent share price
performance, the Board is of the opinion that the Company’s current strategies and operational initiatives will
deliver superior long term results to shareholders. While performance based remuneration is tied to the financial
results delivered by the building products and property segments, Brickworks’ share price may also be influenced
by factors outside of management’s control.
The following table shows a number of relevant measures of Group performance over the past five years. A
detailed discussion on the current year results is included in the review of operations and is not duplicated in full
here; however an analysis of the figures below demonstrates dividend growth, and consistent performance in a
difficult cyclical environment.
2011
2012
2013
2014
2015
Total revenue (millions)
$635.6
$556.9
$606.5
$670.3
$723.6
Combined Building Products & Property
EBIT before significant items (millions)
Net profit before significant items
after tax (millions)
$71.3
$47.5
$82.4
$107.5
$120.7
$100.8
$78.9
$100.0
$101.3
$120.3
Net profit after tax (millions)
$142.6
$43.3
$85.2
$102.8
$78.1
Net Tangible Assets (millions)
$1,390.1
$1,393.1
$1,450.9
$1,516.8
$1,572.1
Share price at year end
$9.90
$10.08
$12.20
$14.30
$14.90
Dividends – ordinary shares (cents)
40.5
40.5
40.5
42.0
45.0
2.2 Fixed Remuneration
There has been no material increases in total fixed remuneration for executive KMP in the 2015 financial year.
2.3 Short Term Incentives (STI)
Brickworks’ STI has been designed to focus executives on achieving a range of agreed targets for the respective
businesses. The STI is structured around the achievement of annual performance criteria based on each
executive’s capacity to influence targeted outcomes. Brickwork’s STI is based on the profitability of operating
divisions and the overall Group, as well as the level of achievement of key strategic objectives that will underpin
performance in the future. This incentive scheme covers the executive KMP. Variable remuneration available
as a proportion of total salary for an employee increases as that employee gains greater responsibility and
has greater capacity to influence the performance of the business as a whole. For the 2015 financial year,
the potential variable component targeted 12.5%, 25%, 37.5% or 50% of base salary, adjusted up or down for
performance compared against prior years and internal targets set in advance. From the 2015 financial year
17
onwards the STI cash opportunity for all executives is now capped at 50% of the total fixed remuneration. Any
excess STI earned above 50% of total fixed remuneration will not be paid as a cash bonus, but will be added to
the LTI component and paid as additional shares through the Brickworks Deferred Employee Share Scheme.
In line with historical performance, executive KMP have not received STI payments each year. The Managing
Director and Chief Financial Officer did not receive STI payments in relation to the 2009, 2011 and 2012 financial
years, with no KMP receiving an STI payment in 2012.
The Company’s KMP (excluding non-executive directors) all participate in the annual STI plan. The key
performance indicators (KPIs) for the STI plan comprise both financial and non-financial measures. The plan is
broadly the same for all participants, although there are some differences between the members of the executive
group.
The overall STI program will remain consistent for 2015 and 2016, and is as follows:
Purpose
Timing
Variable STI as a
proportion of Base Salary
Financial vs Non-financial
goals (% of STI) for all
executive KMP
Financial Measures
(75% of total STI)
Non-Financial Measures
(25% of total STI
Maximum STI payable
(% of total fixed
remuneration) for all
executive KMP
To drive individual and business performance in order to deliver annual business
plans and increase shareholder value.
Participation is on an annual basis, with performance measured for the financial
year ending 31 July. Each year, the Remuneration Committee sets the KPIs for
KMP (excluding non-executive directors) for the coming year. At the end of each
year, actual performance is measured against the pre-determined KPIs in order
to ascertain the STI payout percentage awarded.
Variable remuneration available as a proportion of base salary for an employee
increases as that employee gains greater responsibility and has greater capacity
to influence the performance of the business as a whole. For the 2015 financial
year, the potential variable component targeted either 12.5%, 25%, 37.5% or
50% of base salary, adjusted up or down for performance compared against
prior year and internal targets set in advance, subject to the maximum STI cash
payment cap of 50% of total fixed remuneration.
Financial goals – 75%
Non-Financial goals – 25%
These financial measures include 50% linked to profit generation and 50%
linked to cash generation assessed against both prior years’ results and Board
approved budgets.
Cash generation performance targets include operational working capital
reduction targets and net cash flows from operating activities.
These measures are assessed for the MD and CFO against the combined
Building Products and Land and Development segments and for divisional
executives these relate specifically to their division.
Non-financial measures include performance against specified safety targets
commonly referred to within the industry such as the long term injury frequency
rate (LTIFR) and the total recordable injury frequency rate (TRIFR) and
specific personal goals for each executive KMP. Personal goals cover various
areas including: demonstrated leadership on safety, health and environment;
development of people and effective succession planning; restructuring
and rationalisation; production efficiencies; operational and manufacturing
improvements and returns on net tangible assets.
50% with over performance rewarded as additional LTI shares with deferral over
5 years.
The Board considers the profit and cash generation measures to be appropriate as they are directly linked to
the Group’s ability to generate returns and create value for shareholders. These financial measures are also
appropriate from an executive’s perspective as the executive is assessed against areas of direct responsibility
and influence.
These hurdles take into account the aim of continual improvement in returns to shareholders, whilst at the same
time recognising that there are a number of external factors (such as the cyclical nature of the Australian building
industry) that are outside the control of individual executives. Comparisons against properly determined and
approved budgets that take into account these external factors are aimed at rewarding executives for strong
performance in a weaker environment, which is designed to offset the impact of the sometimes unavoidable
market conditions that are encountered by the business.
The Board applies the additional criteria listed above to ensure that there is sufficient focus on other areas of
business performance, including several non-financial factors which are critical to the long term success of the
Group. These areas of wider corporate responsibility such as occupational health and safety, environmental
compliance and improvements in manufacturing performance reward executive KMP for taking a sustainable
approach to operations by encouraging strategic decisions that generate shareholder value over the longer term.
18
STI performance achieved by executive KMP’s against targets set for FY 2015 is set out below:
KMP Role
STI Performance measures
MD and CFO
Profit and cash generation for Building Products and Land and
Development and non-financial measures.
EGM
Land and Development
Profit and cash generation for Land and Development and
non-financial measures.
GM Sales Brickworks
Building Products
Profit and cash generation for Bristile Roofing East Coast, Austral
Bricks East Coast, Austral Masonry, Austral Precast and Export
and non-financial measures.
GM Austral Bricks East
Coast
Profit and cash generation for Austral Bricks East Coast and
non-financial measures.
GM WA Brickworks
Building Products
Profit and cash generation for Austral Bricks WA and Bristile
Roofing WA and non-financial measures.
GM Bristile Roofing East
Coast
Profit and cash generation for Bristile Roofing East Coast and
non-financial measures.
Overall
proportion
of target
achieved
99.7%
110%
100%
100%
53%
42%
Some key performance measures reflected in the above STI payments include:
•
•
•
The significant improvement in profit generated in the Land and Development Group;
The notable improvement in profit in the Building Products Group;
The significant improvement in profit and cash generated by the Austral Bricks East Coast division;
• A reduction in cash generated in the Austral Bricks WA, Bristile Roofing WA and Bristile Roofing East Coast
divisions.
2.4 Long Term Incentives (LTI)
Brickworks Limited has had an LTI in place for many years through the Brickworks Deferred Employee Share
Plan in which employees receive Brickworks Limited shares. No consideration is payable by participants under
the terms of the Plan.
Under the Company’s Share Trading Policy Brickworks shares are not permitted to be used to secure any type of
financial product, such as margin loans or similar. Options, collars and/or other financial derivatives must not be
used in respect of any Brickworks shares.
The primary purpose of Brickwork’s LTI is the retention of the Company’s senior executive team. For example,
acquisition of the necessary knowledge to successfully manage the manufacturing processes for building
materials usually requires an immersion period of at least 5 years and in some sectors, such as brick production,
as much as 10 years. Similarly, an executive who knows the Company’s clients extremely well and has a long
history of successful negotiations with them will also be difficult to replace. Not surprisingly, Brickworks seeks to
retain as many of its experienced executives as practically possible.
2.4.1 Current LTI
The current LTI is in the form of a Deferred Employee Share Plan.
For the 2015 financial year, the value of shares granted was dependent upon the employee’s position within the
Group and their base salary. For the Managing Director and Chief Financial Officer, this entitlement was up to
50% of base salary, with other executive KMP being entitled to shares with a value up to 37.5% of base salary.
However, the value of LTI shares may exceed these percentages as a consequence of STI cash payments
being capped at 50% of base remuneration and outperformance against the STI measures being recognised by
the grant of additional LTI shares. Under the terms of the scheme, the employee receives the voting rights and
an entitlement to any future dividends immediately upon granting, however they are unable to sell or otherwise
access the shares to trade unless they satisfy vesting criteria. 20% of these shares will become available to the
employee at the end of each of the following five years, providing they continue to be employed by Brickworks.
Following changes made during the financial year, the LTI shares granted to, or already held by, executives will
no longer vest immediately on retirement or redundancy. Rather they will continue to vest progressively over
the original 5 year grant period, subject to compliance with employment contract conditions including restraints.
The vesting period for shares allocated to executives may extend for up to 5 years beyond the date at which a
particular executive ceases to be an employee.
In line with prior conditions, if an executive leaves the Company of his/her own volition all unvested shares held
in the name of that executive will be forfeited except in limited circumstances, such as medical reasons or bona
fide retirement.
Brickwork’s executive KMP are highly skilled and the greater emphasis on the Company’s LTI scheme reflects
the importance that the Board places on retaining them for as long as possible, provided of course that these
executives continue to deliver high levels of performance. Shares in the LTI vest on a change in control of
Brickworks Ltd.
19
2.4.2 New Elements of LTI
For all allocations of shares to executive KMP under the LTI from 31 July 2015 two new elements have been
introduced as explained below.
1. Performance testing prior to share allocation
Performance criteria will be considered by the Board at its discretion before plan shares are allocated. This
includes an assessment of:
• Company/business unit/plant return on net tangible assets over the previous 3 years;
• Company/business unit/plant profit performance over the previous 3 years;
• Achievement of individual strategic/operational KPI’s over the previous 3 years;
• General market conditions that have an impact on demand for Brickworks products e.g. Global Financial Crisis.
LTI allocations to KMP will reflect the level of performance achieved against the above criteria. For all executive
KMP other than the Managing Director and Chief Financial Officer, LTI rewards will continue to vest progressively
at 20% over 5 years unless forfeited. The concept of a testing element on allocation and the long term 5 year
vesting requirements support the fact that dividends are paid to the employee on unvested shares unless or until
they are forfeited.
2. TSR Performance Target for the Managing Director and the Chief Financial Officer
A new TSR target for vesting has been introduced for share allocations made to the Managing Director and Chief
Financial Officer to recognise the Board’s preference for the Managing Director and Chief Financial Officer to
achieve increasing profits over the longer term. There will be no change to the LTI conditions for participants
other than the Managing Director and the Chief Financial Officer.
For allocations made after 31 July 2015, 50% of shares allocated will be assessed for vesting against an annual
TSR target of 7.0% (TSR Shares).
An absolute TSR target was chosen over a relative TSR measure. A primary concern about using relative TSR
was the volatility in companies’ performance ranking which can be perceived by plan participants as of more
limited value than an absolute performance measure due to an executives’ lack of direct control over relative
TSR. The Board is also wary of the potential for TSR to reward share price volatility, as companies with more
volatile TSR are more likely to achieve maximum vesting. Furthermore, relative TSR ranking is highly dependent
on the peer group selection and the choice of performance period, as the selection of the date or averaging
period over which relative TSR is measured can have a significant impact on the outcome.
A TSR target has also been chosen due to the difficulty of choosing a meaningful benchmark of companies to
use for a relative TSR assessment. This is particularly so given the diverse nature of the Company’s operations
which include Building Products, Land and Development and Investments.
The assessment of TSR Shares against the TSR target is undertaken progressively for 20% of the TSR Shares
on 31 July for each of the 5 years following the allocation date.
50% of the shares allocated to the Managing Director and the Chief Financial Officer will continue to vest
progressively at 20% per year based on tenure.
TSR testing is undertaken for 20% of the TSR Shares on 31 July each year for 5 years following the allocation
date.
•
•
•
•
•
20% of TSR Shares are tested in year 1 against a 1 year TSR target of 7.0% per annum;
20% of TSR Shares are tested in year 2 against a 2 year TSR target of 7.0% per annum;
20% of TSR Shares are tested in year 3 against a 3 year TSR target of 7.0% per annum;
20% of TSR Shares are tested in year 4 against a 4 year TSR target of 7.0% per annum; and
20% of TSR Shares are tested in year 5 against a 5 year TSR target of 7.0% per annum.
The share price used at commencement of each tranche for assessing TSR performance of Brickworks shares
is the Volume Weighted Average Price (VWAP) for the month of July prior to the allocation of TSR Shares. The
actual share price used to compare to the TSR target share price is the July VWAP in the year of testing.
In any one year up to five TSR Share tranches allocated will be tested. The TSR performance target for each
allocation in that year is the average of 5 Brickworks share prices calculated from 5 different commencement
VWAPs on 5 different years (i.e. it will include the average of a Brickworks one year TSR, a two year TSR, a three
year TSR, a four year TSR and a five year TSR).
The level of vesting applicable to each tranche will be as follows:
•
•
•
•
If the 7.0% TSR target (averaged as explained above) is met, 100% of TSR Shares will vest;
If a 6.0% TSR target (averaged as explained above) is met, then 50% of the TSR Shares will vest;
If the TSR target (averaged as explained above) of 6.0% is not met, then no shares will vest in that initial
year of testing. To the extent that any tranche does not vest in one year it will be deferred and form part of
the shares that are eligible for vesting in the following years. In other words, underperformance in one year
can be made up by over performance in the following years, provided that underperformance in the 5th year
may only be made up by outperformance in the 6th year;
If the TSR Target (averaged as explained above) of 8.0% is met, there will be an incremental vesting of up
to 150%,of the TSR Shares to enable underperformance in one year to be made up by over performance in
20
the following years. The cumulative vesting can therefore reach a level that will be equivalent to but not more
than the total number of shares that would have been allocated and vested as at that date, if all TSR hurdles
had been satisfied;
TSR performance between 6.0% and 8.0% and above will generate pro-rata vesting entitlements on a
straight-line basis.
•
Therefore, aligned with shareholders’ interests, for tranches of shares that are being tested for vesting in any
particular year, a TSR of at least 6.0% must be achieved for 50% of TSR Shares to vest. A TSR based vesting
test will not apply to any allocations made or agreed to be made before 31 July 2015 and not yet vested.
There has been actuarial input in relation to the new TSR performance measure which, inter alia, confirms that
the vesting tests provide an appropriate balance between the key objectives of performance and retention.
2.4.3 Other Company wide share plan
In addition to the Deferred Employee Share Plan referred to above, Brickworks operates the Brickworks Exempt
Employee Share Plan as part of the remuneration structure of the Group. All employees of Brickworks with
a minimum 3 months service are eligible to join the Brickworks Exempt Employee Share Plan, whereby the
employee may salary sacrifice an amount toward the purchase of Brickworks ordinary shares and the Company
contributes a maximum of $3 per employee per week. The plans are aimed at encouraging employees to share
in ownership of their Company, and help to align the interests of all employees with that of the shareholders.
2.4.4 Market Purchases
In accordance with ASX Listing Rule 10.14, the Company contribution to the Brickworks Employee Share Plan is
unavailable to Directors of Brickworks.
An employee’s right to transact shares in either share plan is governed by the trust deeds for those Plans and the
Company’s policy regarding trading windows.
At 31 July 2015, there were 739 employees participating in the share plans, holding 1,413,008 shares (0.95% of
issued capital).
During the year, all monthly share purchases through the Brickworks Employee Share Plans were performed
on market, as were bonus shares granted to the Managing Director through the Deferred Employee Share
Plan. Bonus shares granted through the Deferred Employee Share Plan to employees other than the Managing
Director were issued as new shares.
3. Employment Contracts
3.1 Termination payments
Under the legacy contracts in place during the 2014 financial year, if executives resigned from their employment,
they were entitled to their salary up to termination date plus any accrued leave provisions. They were also entitled
to a pro-rata portion of the average of the previous three years annual bonus. Under the new arrangements, there
is no longer an automatic entitlement to an average bonus.
Under the legacy contracts in place during the 2014 financial year, if the Company terminated an executive other
than for cause, the executive was entitled to receive notice of up to six months or an equivalent payment in lieu
of this notice, plus a termination benefit of up to twelve months base salary and the average of the previous three
years annual bonus. In addition the executive was entitled to immediately be given all unvested shares held on
their behalf by the Brickworks Deferred Employee Share Plan.
Under the new arrangements, a payment will be made by the Company upon termination or bona-fide retirement,
equivalent to a proportion (ranging from 50% to 100%) of each executive’s average base pay for the previous
3 years, and any unvested shares held on behalf of the executive will remain within the Brickworks Deferred
Employee Share Plan and retain their vesting criteria. Under these new arrangements, Brickworks can terminate
an executive’s employment on 2 month’s notice (or payment in lieu of notice) and executives can terminate on 2
month’s notice (apart from the Chief Financial Officer who must be given 3 months notice, the Managing Director
and Group General Manager – National Operations and Austral Bricks East Coast who must be given 6 months
notice).
In October 2011, the Group General Manager Austral Bricks East Coast was allocated $250,000 in Brickworks
shares under his sign on agreement. These shares are subject to a progressive clawback condition if he was to
terminate within five years from his commencement date (9 May 2011).
If the Managing Director or any other executive KMP is subject to immediate termination (for cause as defined in
their employment contract), Brickworks is not liable for any termination payments to the employee other than any
outstanding base pay and accrued leave amounts. All unvested shares held on their behalf by the Brickworks
Deferred Employee Share Plan will be forfeited.
The provisions contained in the new contracts reduce the termination benefits available to senior executives and
may slightly increase the LTI and Retirement Benefits to achieve higher rates of retention.
3.2 Executive Restraint
All executive KMP gain strategic business knowledge during the course of their employment. Brickworks will
use any means available to it by law to ensure that this information is not used to the detriment of the Company
by any employee following termination. In order to protect the Group’s interests, Brickworks had an enforceable
restraint through the executive’s legacy employment contract to prevent executives from either going to work for
a competitor, or inducing other employees to leave the Company, for a specified period. In consideration of the
restraint, executives would receive a monthly payment, equivalent to their existing base salary plus one twelfth
of the average of the previous three annual bonuses, for a period of up to twelve months.
21
Under the new arrangements, the terms of the restraint have been tightened to prevent employees from going
to work for a competitor, customer or supplier for commensurate periods of between 6 and 12 months. A breach
of the restraint conditions by an employee places at risk either any unvested shares held, or a potential monthly
restraint payment at the discretion of the Company.
The termination payments referred to above, together with the fact that most executives generally will also have
unvested shares with a value in excess of the base remuneration for the restraint period at any time, are intended
to discourage executives with deep corporate knowledge and significant capacity to contribute to the profitability
of the Company from seeking employment with competitors.
4. Non-executive Directors
The remuneration of non-executive Directors is determined by the full Board after consideration of Group
performance and market rates for Directors’ remuneration. Non-executive Director fees are fixed each year, and
are not subject to performance-based incentives. Brickworks’ non-executive directors are not employed under
employment contracts.
The maximum aggregate level of fees which may be paid to non-executive directors is required to be approved
by shareholders in a general meeting. This figure is currently $1,000,000, and was approved by shareholders
at the 2014 Annual General Meeting. Brickworks’ constitution requires that Directors must own a minimum of
500 shares in the Company within two months of their appointment. All Directors complied with this requirement
during the year.
Under legacy arrangements, non-executive Directors appointed prior to 30 June 2003 were entitled to receive
benefits upon their retirement from office. These benefits were frozen with effect from 30 June 2003, and are
not indexed. The Company has obtained specific independent legal advice regarding the entitlements of the
three non-executive directors referred to below which has confirmed that the amounts listed in the table will be
payable, as they have been grandfathered under the previous legislation relating to the retirement benefits of
non-executive directors. These benefits for the three participating directors, which have been fully provided for in
the Company’s financial statements, are as follows:
Name
R. Millner
M. Millner
R. Webster
Benefit as at 30 June 2003
$300,000
$150,000
$93,750
5. Remuneration of Key Management Personnel
5.1 Table of Remuneration to KMP
The fees payable to non-executive Directors and the remuneration payable to other KMP during the financial
year ending 31 July 2015 are disclosed in the following table.
Directors
RD Millner
MJ Millner
BP Crotty
DN Gilham
DR Page1
RJ Webster
LR Partridge
Total Directors
Base fees /
salary
Non-
monetary
benefits
Post
Employment
(Super)
Total
fixed
remuneration
Short Term
Incentive
Long Term
Incentive
214,612
206,288
107,306
103,144
114,155
103,144
107,306
103,144
118,037
8,577
114,155
110,000
–
–
–
–
–
–
–
–
–
–
–
–
20,388
19,125
10,194
9,562
235,000
225,413
117,500
112,706
10,845
125,000
9,562
10,194
9,562
112,706
117,500
112,706
11,213
129,250
815
9,392
10,845
125,000
9,923
119,923
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
235,000
225,413
117,500
112,706
125,000
112,706
117,500
112,706
129,250
9,392
125,000
119,923
1,269,173
1,183,733
2,044,744
1,818,030
6,891
73,582
6,891
73,582
18,827
1,294,891
642,084
530,803
2,467,778
17,859
1,275,174
590,000
386,500
2,251,674
92,506
2,144,141
642,084
530,803
3,317,028
76,408
1,968,020
590,000
386,500
2,944,520
Year
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
1 Deborah Page commenced with the Company on 1 July 2014
22
Other Key
Management
Personnel
AJ Payne
M Kublins
DT Fitzharris
M Finney2
P Scott
D Millington3
Total Other KMP
Year
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Base fees /
salary
Non-
monetary
benefits
Post
Employment
(Super)
Total
fixed
remuneration
Short Term
Incentive
Long Term
Incentive
Total
609,673
588,725
465,673
446,533
521,173
507,225
605,259
547,225
455,173
443,225
159,188
291,225
2,816,139
7,532
4,856
5,358
16,597
41,916
42,875
6,332
24,239
4,457
4,421
13,744
24,391
79,339
18,827
17,859
18,827
17,859
18,827
17,859
18,827
17,859
18,827
17,859
10,957
17,859
636,032
304,007
244,899
1,184,938
611,440
279,000
188,950
1,079,390
489,858
242,500
182,490
480,989
258,847
127,874
581,916
270,000
140,805
567,959
185,087
110,749
914,848
867,710
992,721
863,795
630,418
290,000
137,505
1,057,923
589,323
212,625
84,000
31,767
-
95,000
98,890
97,874
-
79,044
70,687
896,948
661,347
595,146
183,889
483,206
478,457
465,505
183,889
333,475
105,092
3,000,570
1,190,507
804,589
4,995,666
2,824,158
117,379
107,154
3,048,691
1,046,370
691,134
4,786,195
Note: In addition to the total benefits above, these KMPs accrued leave entitlements during the year as follows:
- L R Partridge: net decrease of $35,593 in accrued leave entitlements (2014: $15,219 increase)
- A J Payne: net decrease of $889 (2014: $3,457 increase)
- M Kublins: net increase of $15,532 (2014: $8,031 increase)
- D T Fitzharris: net increase of $9,631 (2014: $29,820 increase)
- M Finney: net increase of $28,747 (2014: $17,093 increase)
- P Scott: net decrease of $12,286 (2014: $11,862 increase)
- D Millington: net increase of $23,231 (2014: $6,837 increase).
The profit (before tax and excluding significant items) generated by the Building Products and Land and
Development division increased by 12.3% whereas the total remuneration paid to Lindsay Partridge and Alex
Payne increased as follows:
–
–
Lindsay Partridge – 9.6%
Alex Payne – 9.8%
The profit (before tax and excluding significant items) generated by the Land and Development division increased
by 3.1% whereas the total remuneration paid to the Executive General Manager – Land and Development
increased by 5.4%.
The profit (before tax and excluding significant items) generated by the Building Products division increased by
25.0% whereas:
(i)
(ii)
The total remuneration received by the Group General Manager Sales – Brickworks Building Products
increased by 14.9% and
The total remuneration received by the Group General Manager National Operations and Austral Bricks
East Coast increased by 17.9%.
2 Non-monetary benefits provided to M. Finney in prior years included the use of a Company supplied vehicle. In the 2015
financial year this benefit was replaced with a car allowance which forms part of his base salary. M. Finney is now responsible
for all expenses associated with the use of his new vehicle
3 David Millington is no longer a KMP from 1 February 2015.
23
5.2 Director and Key Management Personnel shareholdings
Held 31 July
2014
Granted as
Remuneration
Date Granted as
Remuneration
Purchases
Shares
Disposed of
Held 31
July 2015
Directors
RD Millner
MJ Millner
B Crotty
DN Gilham
DR Page
5,584,100
5,558,142
10,209
102,268
1,500
RJ Webster
15,922
–
–
–
–
–
–
LR Partridge
203,915
76,829
2 October 2014
Other Key Management Personnel
AJ Payne
213,930
M Kublins
56,342
DT Fitzharris
100,978
P Scott
59,116
20,681
11,838
19,188
10,786
13,720
7,147
5,726
4,387
2 October 2014
23 October 2014
2 October 2014
23 October 2014
2 October 2014
23 October 2014
2 October 2014
23 October 2014
M Finney
18,985
15,761
2 October 2014
D Millington
16,659
5,859
3,474
2 October 2014
23 October 2014
69,640
70,000
5,000
–
900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,653,740
5,628,142
15,209
102,268
2,400
15,922
122,310
158,434
–
246,449
1,800
84,516
34,253
87,592
9,388
59,841
–
34,746
6,066
19,926
Shareholdings shown above reflect all direct, indirect and beneficial holdings by Key Management Personnel,
and include unvested shares held through the Brickworks Deferred Employee Share Plan which may not vest to
the employee if they do not satisfy vesting criteria.
All share transactions by Key Management Personnel were on normal terms and conditions on the Australian
Securities Exchange.
No options over unissued shares or interests in Brickworks Limited or a controlled entity were granted during or
since the end of the financial year and there were no options outstanding at the date of this report. No shares
or interests have been issued during or since the end of the year as a result of the exercise of any option over
unissued shares or interests in Brickworks or any controlled entity.
24
Auditor’s independence declaration
The Directors received an independence declaration from the auditor, Ernst & Young. A copy has been included
on page 26 of the report.
Provision of non-audit services by external auditor
During the year the external auditors, Ernst & Young, did not provide any non-audit services to the Group.
The details of total amounts paid to the external auditors are included in note 6 to the financial statements.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify Ernst & Young during or since the financial year.
Auditor rotation
In accordance with section 324DAA Corporations Act 2001 and the recommendation of the Audit Committee,
the lead audit partner will undertake the audit for the financial year end 31 July 2015. A new lead audit partner
has been appointed for the financial year ended 31 July 2016, subject to annual assessment by the Chair of the
Audit Committee.
Proceedings on behalf of the Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or 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.
Indemnification of Directors and officers
The Company’s Rules provide for an indemnity of Directors, executive officers and secretaries where liability is
incurred in connection with the performance of their duties in those roles other than as a result of their negligence,
default, breach of duty or breach of trust in relation to the Company. The Rules further provide for an indemnity
in respect of legal costs incurred by those persons in defending proceedings in which judgment is given in their
favour, they are acquitted or the Court grants them relief.
Since the end of the previous financial year, the Company has paid insurance premiums in respect of Directors’
and officers’ liability. The insured persons under those policies are defined as all Directors (being the Directors
named in this Report), executive officers and any employees who may be deemed to be officers for the purposes
of the Corporations Act 2001.
Rounding of Amounts
The Company has applied the relief available to it under ASIC Class Order 98/100 and accordingly, amounts in
the financial report and Directors’ report have been rounded off to the nearest $1,000 where allowed under that
class order.
Made in accordance with a resolution of the Directors at Sydney.
Dated 24 September 2015.
R.D. MILLNER
Director
L.R. PARTRIDGE AM
Director
25
26
680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Auditor’s Independence Declaration to the Directors of Brickworks Limited In relation to our audit of the financial report of Brickworks Limited for the financial year ended 31 July 2015, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Renay Robinson Partner 24 September 2015 BRICKWORKS LIMITED
AND CONTROLLED ENTITIES A.B.N. 17 000 028 526
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED
31 JULY 2015
Revenue
Cost of sales
Gross profit
Other income
Distribution expenses
Administration expenses
Selling expenses
NOTE
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
3
723,611
670,268
(513,908)
(464,793)
209,703
205,475
3
3,483
3,981
(61,419)
(57,387)
(24,118)
(22,258)
(64,107)
(60,713)
Borrowing costs expense
4
(19,482)
(18,073)
Other expenses
(36,625)
(18,493)
Share of net profits of associates and joint ventures
accounted for using the equity method
24, 25
89,435
91,196
Profit before income tax expense
96,870
123,728
Income tax expense attributable to profit
5
(18,780)
(20,973)
Profit after income tax expense
78,090
102,755
Other comprehensive income
Items that may subsequently be reclassified to net profit
Foreign currency translation
(2)
254
Share of (decrements) / increments in reserves attributable to
associates and joint ventures
(2,472)
29,406
Income tax on items of other comprehensive income
742
(8,794)
Other comprehensive income for the period, net of tax
(1,732)
20,866
Total comprehensive income for the period
76,358
123,621
Net profit attributable to members of the parent entity
78,090
102,755
Total comprehensive income for the period attributable
to members of the parent entity
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
8
8
76,358
123,621
52.6
52.6
69.4
69.4
These statements should be read in conjunction with the accompanying notes.
27
BRICKWORKS LIMITED
AND CONTROLLED ENTITIES A.B.N. 17 000 028 526
STATEMENT OF FINANCIAL POSITION AS AT 31 JULY 2015
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Land held for resale
Prepayments
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Inventories
Land held for resale
Investments accounted for using
the equity method
Property, plant and equipment
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Interest-bearing liabilities
Derivative financial instruments
Income tax provision
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Interest-bearing liabilities
Derivative financial instruments
Provisions
Deferred taxes
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained profits
TOTAL EQUITY
NOTE
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
9
10(a)
11(a)
12(a)
11(b)
12(b)
13
14
15
16
17(a)
18(a)
19(a)
17(b)
18(b)
19(b)
20
21
22
23,051
103,104
178,706
5,455
6,536
21,208
98,273
176,484
13,079
8,320
316,852
317,364
8,129
8,182
8,134
18,991
1,455,673
477,570
252,111
1,423,299
431,842
268,970
2,201,665
2,151,236
2,518,517
2,468,600
88,335
24,445
234
16,488
53,978
82,011
25,541
428
97
49,468
183,480
157,545
299,239
5,152
5,410
200,986
299,999
2,588
12,093
199,879
510,787
514,559
694,267
672,104
1,824,250
1,796,496
334,165
322,444
1,167,641
331,420
323,558
1,141,518
1,824,250
1,796,496
These statements should be read in conjunction with the accompanying notes.
28
BRICKWORKS LIMITED
AND CONTROLLED ENTITIES A.B.N. 17 000 028 526
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2015
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T
BRICKWORKS LIMITED
AND CONTROLLED ENTITIES A.B.N. 17 000 028 526
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2015
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Proceeds from land held for resale
Interest received
Borrowing costs
Dividends and distributions received
Income tax paid
NOTE
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
769,483
(702,444)
18,256
280
(18,360)
66,425
(388)
687,941
(631,148)
–
252
(19,427)
63,804
(940)
Net cash flows from operating activities
23(a)
133,252
100,482
Cash flows from investing activities
Purchases of investments
Proceeds from the sale or return of investments
Purchases of intangible assets
Payment for business net of cash acquired
Proceeds from sale of property, plant and equipment
Purchases of property, plant and equipment
28(b)
(892)
–
–
(5,495)
477
(60,685)
(204)
11,321
(114)
–
6,904
(43,042)
Net cash flows used in investing activities
(66,595)
(25,135)
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Loan (to) / from other entity
Dividends paid
Net cash flows used in financing activities
Net increase in cash held
Cash at beginning of year
Cash at end of year
441,000
(442,000)
–
(63,814)
125,000
(138,000)
440
(60,696)
(64,814)
(73,256)
1,843
21,208
23,051
2,091
19,117
21,208
9
These statements should be read in conjunction with the accompanying notes.
30
Net cash flows from operating activities
23(a)
133,252
100,482
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Proceeds from land held for resale
Interest received
Borrowing costs
Income tax paid
Dividends and distributions received
Cash flows from investing activities
Purchases of investments
Proceeds from the sale or return of investments
Purchases of intangible assets
Payment for business net of cash acquired
Proceeds from sale of property, plant and equipment
Purchases of property, plant and equipment
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Loan (to) / from other entity
Dividends paid
Net cash flows used in financing activities
Net increase in cash held
Cash at beginning of year
Cash at end of year
NOTE
31 JULY 15
31 JULY 14
$000
$000
769,483
(702,444)
18,256
280
(18,360)
66,425
(388)
(892)
–
–
(5,495)
477
(60,685)
687,941
(631,148)
–
252
(19,427)
63,804
(940)
(204)
11,321
(114)
–
6,904
(43,042)
441,000
(442,000)
–
(63,814)
125,000
(138,000)
440
(60,696)
(64,814)
(73,256)
1,843
21,208
23,051
2,091
19,117
21,208
28(b)
9
Net cash flows used in investing activities
(66,595)
(25,135)
BRICKWORKS LIMITED
AND CONTROLLED ENTITIES A.B.N. 17 000 028 526
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
CONSOLIDATED
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Brickworks Limited is a listed public company, incorporated and domiciled in Australia, and is a for-profit entity. These accounts were
authorised for issue in accordance with a resolution of the directors on 24 September 2015.
The financial report includes financial statements for the consolidated entity consisting of Brickworks Limited and its subsidiaries
(“the Group”).
(a)
Basis of preparation and Statement of compliance
The financial statement is a general purpose financial statement that has been prepared in accordance with the requirements of the
Corporations Act 2001 and Australian Accounting Standards.
The financial statement complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board.
These financial statements have been prepared under the historical cost convention, except for available-for-sale financial assets,
held for trading financial assets, derivatives and investment property, which have been measured at fair value.
(b)
New accounting standards and interpretations
The principal accounting policies adopted in the preparation of the financial statement are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
The following accounting standards became effective for the Group during the year:
• AASB 9: AASB 2014-1 ‘Amendments to Australian Accounting Standards’ (Part A: Annual Improvements 2010–2012 and 2011-
2013 Cycles);
• AASB 2012-3 ‘Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities’;
• AASB 1031 ‘Materiality’, AASB 2013-9 ‘Amendments to Australian Accounting Standards’ – Conceptual Framework, Materiality
and Financial Instruments’ (Part B: Materiality), AASB 2014-1 ‘Amendments to Australian Accounting Standards’ (Part C:
Materiality).
The application of these standards did not result in any changes to profit or carrying value of balance sheet items in either the current
or comparative financial year.
(c)
Principles of consolidation
The consolidated financial statements are those of the consolidated entity, comprising Brickworks Limited (the parent entity) and all
entities that Brickworks controlled from time to time during the period and at reporting date. Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its
power over the investee.
There are no non-wholly owned entities in the group which are solely controlled by Brickworks. All non-wholly owned entities are
either jointly controlled or subject to significant influence (in which case these entities are equity accounted), or treated as a held for
trading financial asset.
There are no dissimilarities in reporting periods or accounting policies between Brickworks or any of its controlled entities.
Investments in subsidiaries in the parent entity financial statements are shown at cost.
All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have
been eliminated on consolidation.
Where controlled entities have entered or left the economic entity during the period, their operating results have been included from
the date control was obtained or excluded from the date control ceased.
(d)
Revenue
Sales revenue is recognised when the significant risks and rewards of ownership of the items sold have passed to the buyer, and the
revenue is also able to be measured reliably.
For revenue from the sale of goods, this occurs upon the delivery of goods to customers.
For revenue from the sale of land held for resale, this is recognised at the point at which any contract of sale in relation to industrial
land has become unconditional, and at which settlement has occurred for residential land.
Revenue from construction contracts is recognised by reference to the stage of completion of a contract or contracts in progress at
reporting date or at the time of completion of the contract and billing to the customer. Stage of completion is measured by reference
to the number of units installed as a percentage of the number of units for the total contract, which is determined under the contract
with the customer. As the number of units is defined in the contract, any level of judgement required is minimal.
Interest revenue is recognised on a time proportionate basis that takes into account the effective interest rate applicable to the net
carrying amount of the financial asset.
Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and
joint venture entities are accounted for in accordance with the equity method of accounting.
Rental revenue from investment properties is accounted for on a straight line basis over the lease term.
31
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(d)
Revenue (cont.)
Profits on disposal of investments and property, plant and equipment are recognised at the point where title to the asset has passed.
All revenue is stated net of the amount of goods and services tax (GST).
(e)
Finance costs
Borrowing costs incurred for the construction of a qualifying asset are capitalised up to the point that the asset is ready for its intended
use. Other finance costs are recognised as an expense over the period to which the expense relates.
(f)
Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for
the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current
tax for current and prior periods is recognised as a liability or asset to the extent that it is unpaid or refundable.
Deferred tax
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. The tax cost base of assets is calculated based
on management’s intention for that asset on either use or sale as appropriate. No deferred income tax will be recognised from the
initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or
loss. In addition, no deferred income tax is recognised for a taxable temporary difference arising from an investment in a subsidiary,
associate or joint venture where the timing of the reversal of the temporary difference can be controlled and it is probable that the
difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled.
Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case
the deferred tax is adjusted directly against equity.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change
will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to
enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which
deductible temporary differences can be utilised. These amounts are reviewed at each balance date.
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 and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax consolidation
Brickworks Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the Tax
Consolidation regime. Brickworks Limited is the head entity of that group. The tax consolidated group has entered a tax sharing
agreement whereby each company in the group contributes to the income tax payable based on the current tax liability or current
tax asset of the entity. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone
taxpayer in its own right. Such amounts are reflected in amounts receivable from or payable to other entities in the group. In addition,
the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax
payment obligations. At balance date, the possibility of default is remote.
Tax expense, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated
group are recognised in the separate financial statements of the members of the tax consolidated group. Any current tax liabilities
and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax consolidated group are
recognised by the parent company (as head entity of the tax consolidated group).
(g)
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 period,
adjusted for bonus elements in ordinary shares issued during the period.
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 assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Diluted earnings
per share are shown as being equal to basic earnings per share if potential ordinary shares are non-dilutive to existing ordinary
shares.
(h)
Cash and cash equivalents
Cash and cash equivalents on the statement of financial position includes cash on hand, deposits held at call with banks, and other
short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown within borrowings in
current liabilities in the statement of financial position.
Cash and cash equivalents for the statement of cash flows are shown as a net of the cash and cash equivalents and bank overdraft
liability.
Cash and cash equivalents are stated at nominal value.
32
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(i)
Receivables
Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. A provision for
doubtful debts is established when there is existence of objective evidence that the Group may not be able to collect the debts. Bad
debts are written off against the provision for doubtful debts as incurred, when there is objective evidence that the Group will not be
able to recover the debt. Objective evidence of an impairment loss can include when a debtor is unable to be physically located, or
when a report from a liquidator or administrator of a debtor indicates that recovery of any amounts outstanding is unlikely.
Receivables from related parties are recognised and carried at nominal amounts due.
(j)
Inventories
Raw materials are measured at the lower of actual cost and net realisable value. Finished goods are measured at the lower of
standard cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate
portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. 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.
(k)
Land held for resale
Land held for development and resale is recognised when properties have been identified and incorporated into specific developments
that have been approved by relevant planning authorities and commenced. These properties are valued at the lower of cost and fair
value less costs to sell. Cost includes the cost of acquisition and development.
(l)
Property, plant and equipment
Land is carried at cost less any impairment losses.
Plant and equipment (including buildings) are measured at cost, less depreciation and impairment losses.
The carrying amounts of property, plant and equipment are reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs. The recoverable amount is the
higher of fair value less costs to sell, and the value in use, assessed on the basis of the expected net cash flows that will be received
from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in
determining recoverable amounts, using pre-tax discount rates.
Subsequent costs are included in the asset’s carrying amount 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. All other repairs and maintenance are charged to the
income statement during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated
over their useful lives to the economic entity commencing from the time the asset is held ready for use. Leasehold improvements are
depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.
The depreciation rates used for each class of depreciable assets are:
Class of fixed asset Depreciation rate
Buildings
2.5% - 4.0% prime cost
Plant and equipment 4.0% - 33.0% prime cost; 7.5% - 22.5% diminishing value
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting 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 on disposal with the carrying amount of the asset at the time of
disposal. These gains and losses are included in the income statement. When previously revalued assets are sold, amounts included
in the revaluation reserve relating to that asset are transferred to retained earnings.
(m)
Leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses
on a straight line basis over the term of the lease.
Leases of fixed assets are classified as finance leases where substantially all the risks and benefits incidental to the ownership of the
asset, but not the legal ownership, are transferred to entities in the economic entity.
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased
property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are
allocated between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that the economic entity will
obtain ownership of the asset, or over the term of the lease.
(n)
Financial assets
Regular way purchases and sales of investments are recognised and derecognised on trade date where purchase or sale of an
investment is under a contract whose terms require delivery of the investment within the timeframe established by the market
concerned, and are initially measured at cost, net of transaction costs.
33
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(n)
Financial assets (cont.)
Financial assets are classified into the following specified categories: financial assets at fair value through profit or loss, held-to-
maturity investments, available-for-sale financial assets, and loans and receivables. The classification depends on the nature and
purpose of the financial assets and is determined at the time of initial recognition.
Financial assets at fair value through profit and loss (held for trading)
The Group has classified certain shares as financial assets at fair value through profit or loss. Financial assets held for trading
purposes are classified as current assets and are stated at fair value (subsequent to initial recognition), with any resultant gain or loss
recognised in profit or loss.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the
Group’s management has the positive intention and ability to hold to maturity. These investments are carried at amortised cost using
the effective interest method, with any gains or losses recognised in income when the investments are derecognised or impaired.
Available-for-sale financial assets
Certain shares held by the Group are classified as being available-for-sale and are stated at fair value (subsequent to initial recognition).
Gains and losses arising from changes in fair value are recognised directly in reserves, until the investment is disposed of, at which
time the cumulative gain or loss previously recognised in the reserve is included in profit or loss for the period.
The fair value of financial instruments traded in active markets is based on quoted market bid prices at the reporting date. Where
shares are held in listed entities that are not actively traded on the market, quoted marked bid prices are used as the best information
on the amount obtainable from an arms length transaction.
Loans and Receivables
Trade receivables, loans and other receivables are recorded at amortised cost less impairment.
Derecognition
Sales of investments are recognised on trade date – the date the Group commits to sell the asset. Financial assets are derecognised
when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred
substantially all the risks and rewards of ownership.
Impairment
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets
is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a
security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale
financial assets, the cumulative loss is removed from equity and recognised in the income statement. Impairment losses recognised
in the income statement on equity instruments classified as available-for-sale are not reversed through the income statement.
(o)
Investments in associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates are accounted for in the parent entity financial statements using
the cost method and in the consolidated financial statements using the equity method of accounting, after initially being recognised
at cost.
Under the equity method, the investment in the associate is carried in the consolidated statement of financial position at cost plus post
acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying
amount of the investment and is not amortised. After applying the equity method, the Group determines whether it is necessary to
recognise an additional impairment loss with respect to the net investment in the associate. The consolidated income statement
reflects the Group’s share of the results of operations of the associate.
Where there has been a change recognised directly in the associate’s equity, the Group recognises its share of any changes and
discloses this in the consolidated statement of movements in equity.
The associate’s accounting policies conform to those used by the Group for like transactions and events in similar circumstances.
(p)
Investments in joint ventures
Investments in joint ventures are accounted for in the parent entity’s financial statements using the cost method and in the consolidated
financial statements using the equity method of accounting, after initially being recognised at cost.
Under the equity method, the investment is carried in the consolidated statement of financial position at cost plus post acquisition
changes in the Group’s share of net assets of the joint venture. The consolidated income statement reflects the Group’s share of the
results of operations of the joint ventures.
Where reporting dates of joint ventures are not identical to the Group and the joint venture is not a disclosing entity, the financial
information used is internal management reports for the same period as the Group’s financial year. The joint venture’s accounting
policies conform to those used by the Group for like transactions and events in similar circumstances.
Profits or losses on transactions with the joint venture are eliminated to the extent of the Group’s ownership interest until such time
as they are realised by the joint venture on sale.
(q)
Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is measured initially at its cost, including
transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains or losses arising from
changes in the fair value of investment property are included in profit or loss in the period in which they arise.
34
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(r)
Intangibles
Goodwill
Goodwill is initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity
exceeds the fair value attributed to its net assets (including contingent liabilities) at the date of acquisition. Goodwill on acquisition
of associates is included in investments in associates. Any goodwill acquired in a business combination is allocated to each of the
cash generating units (CGU’s) expected to benefit from the combination’s synergies. Impairment is determined by assessing the
recoverable amount of the CGU to which the goodwill relates. Where this recoverable amount is less than the carrying amount, an
impairment loss is recognised. Impairment losses recognised for goodwill are not subsequently reversed.
Goodwill is tested for impairment annually and when indicators of impairment exist, and following initial recognition 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.
Other intangible assets
Other intangible assets are valued at cost on acquisition. If the intangible is considered to have an indefinite life, it is carried at cost
less any impairment write down required to ensure it is not carried in excess of recoverable amount. If the intangible has a definite
life, it is amortised on a straight line basis over the expected future life of that right, which varies according to the term of the issue.
(s)
Acquisition of assets
The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless
of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or
liabilities incurred or assumed at the date of exchange. Costs directly attributable to business combinations are expensed as non-
regular items in the period in which the acquisition is settled. Where equity instruments are issued in an acquisition, the value of the
instruments is their published market price at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired,
the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of
the net assets acquired.
(t)
Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject
to amortisation are reviewed 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. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash generating units).
Non-financial assets other than goodwill that have had an impairment write-down are reviewed for possible reversal of the impairment
at each subsequent reporting date.
(u)
Payables
Trade payables and other accounts payable are recognised when the Group becomes obliged to make future payments resulting
from the purchase of goods and services.
Deposits received on land sale agreements relate to amounts received as deposits on pending property transactions where the
revenue and associated profit has not been brought to account due to uncertainty surrounding the completion of the transaction.
(v)
Provisions
Provisions are recognised when the Group has a present obligation, the future sacrifice of economic benefits is probable, and the
amount of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting
date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present value of those cash flows. If the effect of the time value of
money is material, provisions are discounted using a pre-tax discount rate that reflects the risks specific to the liability. Any increase
in the provision due to the passage of time is recognised as a borrowing cost.
(w)
Employee benefits
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date.
Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the
liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of
the estimated future cash outflows to be made for those benefits. Consideration is made of expected future wage and salary levels,
employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on
Australian high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future
cash flows.
Share-based payments
Share-based compensation benefits are provided to employees through the Brickworks Employee Share Plan, details of which can be
found in the Remuneration Report in the Directors’ Report. Unvested shares are included in contributed equity as Reserved Shares.
35
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(w)
Employee benefits (cont.)
The fair value of the shares (market value at purchase date) is recognised as an employee benefits expense over the period in which
the service conditions are fulfilled with a corresponding increase in equity when the employees become entitled to the shares.
(x)
Restoration and rehabilitation
The landfill opportunities created through the extraction of clay and shale is considered to be a valuable future resource. No provision
is made for future rehabilitation costs when the rehabilitation process is expected to be cash flow positive.
Where the relevant site is identified as being unable to be used for landfill purposes once the clay and shale reserves are exhausted,
a provision is generated. This provision is raised based on the expected net present value of future cash flows associated with the
total rehabilitation cost of the site, and charged to expenses on a tonnes extracted basis.
(y)
Interest bearing liabilities
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds 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. Where the Group expects that it will continue to satisfy the criteria under its banking agreement
that ensures the financier is not entitled to call on the outstanding borrowings, and the term is greater than 12 months, the borrowings
are classified as non-current.
(z)
Financial instruments issued by the Group
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual
arrangement.
Transaction costs arising on the issue of financial instruments are recognised directly as a reduction, net of tax, of the proceeds of
the financial instruments to which the costs relate. If the financial instrument has an identifiable lifespan, these costs are amortised in
the income statement over the period of the instrument.
Interest and dividends are classified as expenses or as distributions of profit consistent with the classification of the related debt or
equity instruments.
(aa)
Derivatives
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. The method of recognising the resulting gain or loss 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 fair value hedges or cash flow hedges.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedge items, as well as
its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment,
both at inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will
continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement,
together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
equity in reserves. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts
accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss.
When a hedging instrument expires or is terminated, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is transferred to the income statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any such instrument are recognised
immediately in the income statement.
Fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar
maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.
(ab)
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires, with any resulting gain
or loss taken to the income statement.
(ac)
Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received
and the Group will comply with all attached conditions.
Grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs
that they are intended to compensate. Grants relating to the purchase of fixed assets are deducted from the carrying amount of the
asset, and recognised in profit or loss over the life of a depreciable asset as a reduced depreciation expense.
36
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(ad)
Reserved shares
Own equity instruments which are acquired for later payment as employee share-based payment awards are deducted from equity.
These shares are held in trust by the trustee of the Brickworks Deferred Employee Share Plan and vest in accordance with the
conditions attached to the granting of the shares, as outlined in the Remuneration Report. The fair value of the shares (market value
at purchase date) is recognised as an employee benefits expense with a corresponding increase in equity when the employees
become entitled to the shares. No gain or loss is recognised in profit or loss on the purchase, sale or issue of the Group’s own equity
instruments.
(ae)
Operating segments
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur
expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about
resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
Operating segments have been identified based on the information provided to the Managing Director.
The Group aggregates two or more operating segments when they have similar economic characteristics, and the segments are
similar in each of the following respects:
• Nature of the products;
• Nature of the production process;
•
• Methods used to distribute the products; and
• Nature of the regulatory environment.
• Management has determined that reportable segments are based around products. A number of identified operating segments
Type or class of customer for the products;
•
have been aggregated to form both the Building Products segment and the Property segment.
The accounting policies used by the Group in reporting segments internally are the same as those used by the Group in these
consolidated financial statements.
• Some items which are not attributable to specific segments, such as finance costs and some other expenses, are listed separately
in the segment note as ‘unallocated’ items.
(af)
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable
from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part
of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.
(ag)
Foreign currency transactions and balances
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which
that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional
and presentation currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction.
The balances of foreign currency monetary items are translated at the period end exchange rate. The balances of non-monetary
items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items
measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in
equity as a qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or
loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.
Group companies
The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency
are translated as follows:
• Assets and liabilities are translated at period end exchange rates prevailing at that reporting date;
•
Income and expenses are translated at average exchange rates for the period;
• Retained profits are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation
reserve in the statement of financial position. These differences are recognised in the income statement in the period in which the
operation is disposed.
37
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(ah)
Fair Value
Assets and liabilities of the Group that are measured at fair value are grouped into Levels 1 to 3 based in the degree to which the fair
value is observable.
•
•
•
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
All assets and liabilities measured at fair value are identified in the relevant notes to the financial statements, and are either categorised
as Level 1 or Level 2. There are no Level 3 categorised items in the Group. There were no transfers between category levels during
the current or prior financial year.
(ai)
Significant accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future, and the resulting accounting estimates will, by definition,
seldom equal the related actual results. 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.
Judgements that are made by management in the application of accounting standards that have significant effects on the financial
statements, and estimates with a significant risk of material adjustments in the next year, are disclosed in the relevant notes to the
financial statements, where applicable.
(aj)
Accounting standards issued but not yet effective
A number of Australian accounting standards have been issued but have not been adopted for the financial year ended 31 July 2015.
The Group is still assessing the impact of the following new or amended standards:
AASB 9: Financial Instruments (effective application for Brickworks 1 August 2018);
IFRS 15: Revenue from Contracts with Customers (effective application for Brickworks 1 August 2018).
(ak)
Comparative information
Certain comparative information was amended in these financial statements to conform to the current year presentation. These
amendments do not impact the Group’s financial result and do not have any significant impact on the Group’s statement of financial
position.
38
NOTE 2: PARENT ENTITY INFORMATION
Information relating to Brickworks Ltd
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Reserves
– capital profits
– general
– share based payments
Total reserves
Retained earnings
Total shareholders' equity
Net profit after income tax
Total comprehensive income
31 JULY 15
$000
31 JULY 14
$000
549
379
1,099,627
1,059,148
30,239
29,371
604,157
541,740
334,165
331,420
84,479
11,645
3,690
99,814
61,491
84,479
11,645
3,068
99,192
86,796
495,470
517,408
38,508
38,508
37,219
37,219
Information regarding guarantees entered into by the parent entity in relation to the debts of its subsidiaries are contained in
note 28(d).
There are no contingent liabilities or contractual commitments for the acquisition of property, plant or equipment of the parent
identity.
NOTE 3: REVENUE
Trading revenue
Sale of goods
Sale of current investments
Sale of land held for resale
Other operating revenue
Interest received – other corporations
Dividends received – other corporations
Rental revenue
Other
Total operating revenue
Other income
Net gain on sale of property, plant and equipment
Net gain on sale of non current investments
Other items
Total other income
CONSOLIDATED
695,233
–
18,256
713,489
280
–
1,759
8,083
631,980
37
25,930
657,947
252
2
1,781
10,286
723,611
670,268
317
–
3,166
3,483
3,013
40
928
3,981
39
NOTE 4: INCOME AND EXPENSES
(a) Specific expense disclosures
Depreciation and amortisation
– Buildings
– Plant and equipment
Total depreciation
– Intangible assets
Total amortisation
NOTE
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
3,824
21,308
25,132
98
98
3,733
21,020
24,753
172
172
Total depreciation and amortisation expense
25,230
24,925
Borrowing costs
– Paid to other corporations
– Mark to market swap valuation losses / (gains)
Total borrowing costs expensed
Rental expense on operating leases
– Minimum lease payments
Employee benefit expense
Defined contribution superannuation expense
Research and development expenditure
Bad and doubtful debts – trade debtors
Write down of inventories to net realisable value
17,112
2,370
19,482
19,490
(1,417)
18,073
22,451
24,752
157,550
10,976
2,268
786
1,972
141,395
9,866
1,814
1,070
1,089
(b) Property related income
The following items are relevant in explaining the financial performance for the year:
Profit from sale of land held for resale
Development profits from joint ventures
Fair value adjustment on recognition as
investment property
Share of fair value adjustment of properties
Share of property Trust rental profits
Share of profit on disposal of investment property held by JV
Total profits from Property Trusts
25
4,601
2,664
1,916
29,137
15,335
12,141
58,529
17,327
928
535
26,449
12,976
_
39,960
40
NOTE 4: INCOME AND EXPENSES (cont.)
(c) Significant items
Significant one-off transactions of associate (1)
Costs relating to Perpetual/Carnegie proposal (2)
Write down of assets to recoverable value
– Land held for resale (2)
Costs on closure of manufacturing facilities (2)
Costs on commissioning of manufacturing facilities (2)
(Costs) / benefit related to business acquisition (3)
Impairment of goodwill and timber access rights (2)
Other significant items (2)
Significant items before income tax
Income tax benefit / (expense) arising from WHSP carrying value (4)
Income tax benefit / (expense) on significant items (4)
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
(25,140)
(1,504)
–
–
(4,333)
(577)
(16,761)
(1,236)
(49,551)
4,520
2,822
(42,209)
4,973
(2,841)
(2,581)
(379)
–
–
(578)
(1,406)
958
1,914
1,466
(1) Disclosed in "Share of net profits of associates" line on statement of comprehensive income.
(2) Disclosed in “Other expenses” line on statement of comprehensive income.
(3) Disclosed in "Other expenses" and "Other income" line on statement of comprehensive income.
(4) Disclosed in "Tax expense" line on statement of comprehensive income.
NOTE 5: INCOME TAX
(a) Current Tax
Deferred Tax
Overprovided in prior years
(b) Reconciliation of income tax expense to prima facie tax payable
Prima facie tax payable on profit / (loss) before income tax at 30%
Adjust for tax effect of:
difference in foreign tax rates
rebateable dividends
capital losses recognised during year
impairment of goodwill and intangibles
share of net profits of associates
other non-allowable items
overprovision for income tax in prior year
Income tax expense attributable to profit
(c) Aggregate current and deferred tax arising in the reporting period
and not recognised in net profit or loss
Current tax – debited / (credited) directly to equity
Share of increments / (decrements) in reserves attributable to associates
Deferred tax – debited / (credited) directly to equity
24,962
(3,988)
(2,194)
18,780
6,571
15,645
(1,243)
20,973
29,061
37,119
(29)
(15,032)
–
5,029
1,682
264
(2,195)
18,780
–
(742)
(742)
(742)
(42)
(14,418)
(34)
–
(1,346)
937
(1,243)
20,973
–
8,822
8,822
8,822
41
NOTE 6: AUDITOR’S REMUNERATION
Audit of the financial report
Other regulatory audits
Taxation services
Other assurance services
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
500
–
–
–
500
464
8
68
80
620
The auditor of the Brickworks Ltd Group is Ernst & Young. Details of non-audit services provided by Ernst & Young are outlined in
the Directors’ Report.
NOTE 7: DIVIDENDS
Final ordinary dividend (prior year) of 28.0 cents per share paid
27/11/14 (2013 – 27.0c paid 28/11/13)
Interim ordinary dividend of 15.0 cents per share paid 05/05/15
(2014 – 14.0c paid 6/05/14)
Group's share of dividend received by associated company
Proposed final ordinary dividend of 30.0 cents per share not
recognised as a liability at year end (2014 – 28.0c)
41,553
39,971
22,261
(12,059)
51,755
20,725
(11,498)
49,198
44,521
41,451
All dividends paid and proposed have been or will be fully franked at the tax rate of 30%
Balance of franking account at year end adjusted for franking
credits arising from payment of income tax payable and
dividends recognised as receivables
132,830
138,678
Impact on franking account balance of dividends not recognised
(19,080)
(17,765)
There were no dividend reinvestment plans in operation at any time during or since the end of the financial year.
NOTE 8: EARNINGS PER SHARE
(a) Reconciliation of earnings
Net profit attributed to members of the parent entity
78,090
102,755
Earnings used in the calculation of basic EPS
78,090
102,755
Earnings used in the calculation of diluted EPS
78,090
102,755
(b) Weighted average number of ordinary shares outstanding
during the year used in calculation of basic EPS
Weighted average number of ordinary shares outstanding
during the year used in calculation of diluted EPS
Basic earnings per share
Diluted earnings per share
No.
No.
148,334,576
148,003,900
148,334,576
148,003,900
cents
52.6
52.6
cents
69.4
69.4
42
NOTE 9: CASH & CASH EQUIVALENTS
Cash on hand
Deposits at call
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
22,839
212
23,051
20,981
227
21,208
Deposits at call have carrying amounts that reasonably approximate fair value. Deposits are for periods of up to one month,
and earn interest at the respective short term deposit rates.
NOTE 10: RECEIVABLES
(a) Current
Trade receivables
Less: provision for doubtful debts
Net trade receivables
Add: other debtors
(b) Movement in provision for doubtful debts
Balance at the beginning of the year
Additional provisions recognised
Trade debts written off
Reversals of provisions not required
Balance at the end of the year
(c) Receivables past due
Receivables past due but not impaired
Past due 0 – 30 days
Past due 30+ days
100,681
(1,055)
99,626
3,478
103,104
1,643
1,431
(1,374)
(645)
1,055
3,696
2,827
6,523
94,080
(1,643)
92,437
5,836
98,273
958
1,487
(385)
(417)
1,643
2,843
1,661
4,504
Trade receivables and other debtors have carrying amounts that reasonably approximate fair value. Average terms are 30 days
from statement.
Before allowing new customers to trade on credit terms, an analysis of the potential customers credit quality is performed using
external credit reporting agencies and internal reporting to determine whether an account will be opened and the amount of the
limit to be applied to that account. Various levels of management are required to approve progressively higher credit limits, with
individual limits exceeding $1 million reported to the Board.
An analysis of trade receivable balances past due is performed constantly throughout the year, and an allowance is made for
estimated irrecoverable trade receivables based on historical experience of default, and known information on individual debtors.
In many instances security is held over individual debtors in the form of personal guarantees. All receivables not impaired are
expected to be collected in full.
43
NOTE 11: INVENTORIES
(a) Current
Raw materials and stores at cost
Work in progress at cost
Finished goods at cost
Finished goods at net realisable value
(b) Non-Current
Raw materials and stores at cost
NOTE 12: LAND HELD FOR RESALE
(a) Current
(b) Non-Current
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
33,116
20,997
124,084
178,197
509
30,672
17,357
127,888
175,917
567
178,706
176,484
8,129
8,134
5,455
8,182
13,079
18,991
Non-current land held for resale represents portions of properties which have been classified as ready for sale in accordance
with the accounting policy note. Exact timing of these sales is unable to be reliably forecast and the sale of these specific
blocks is not expected to occur within the following 12 months from balance date. These properties are disclosed in the
Property segment of note 26.
Land held for resale is measured at the lower of cost and fair value less costs to sell. In 2015 there have been no write downs
of land held for resale to the lower of those two values (2014: $2.6 million).
NOTE 13: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Investment in associated entities – listed
Investment in jointly controlled entities
24
25
1,146,302
309,371
1,157,013
266,286
1,455,673
1,423,299
44
NOTE 14: PROPERTY, PLANT AND EQUIPMENT
Land
Freehold land at cost
Leasehold land at cost
Buildings
At cost
Accum depreciation and impairment writedowns
Plant and equipment
At cost
Accum depreciation and impairment writedowns
Add: capital works in progress
Total plant and equipment
(a) Impairment write-downs
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
171,741
235
171,976
152,235
(50,124)
102,111
450,444
(292,941)
157,503
45,980
203,483
477,570
156,903
235
157,138
143,617
(46,414)
97,203
420,423
(275,324)
145,099
32,402
177,501
431,842
During the period impairment losses totalling $0.1 million (2014: $3.7 million) were recognised in relation to various assets.
All impairment losses are shown in the ‘Other Expenses’ line on the Statement of Comprehensive Income, and all losses are
included in the Building Products segment (refer note 26).
The carrying value of assets that have been subject to recoverable amount write-downs, by class, are outlined below:
Buildings
Assets not subject to write-downs
Plant and equipment
Assets not subject to write-downs
102,111
102,111
203,483
203,483
97,203
97,203
177,501
177,501
The carrying amount of temporarily idle buildings, plant and equipment at 31 July 2015 was Nil (2014: Nil).
45
NOTE 14: PROPERTY, PLANT AND EQUIPMENT (cont.)
(b) Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current
and previous financial year are set out below.
Consolidated
At 1 August 2013
Cost
Accumulated depreciation
Balance at 1 August 2013
Year ended 31 July 2014
Additions
Assets acquired by acquisition of business
Assets transferred to land held for resale
Disposals
Impairment losses
Depreciation expense
Land
$000
Buildings
$000
Plant & Equip.
$000
Total
$000
165,633
–
145,022
(43,176)
418,392
(256,011)
729,047
(299,187)
165,633
101,846
162,381
429,860
719
–
(8,591)
(623)
–
–
1,502
–
(2,271)
(141)
–
(3,733)
40,424
–
–
(3,127)
(1,157)
(21,020)
42,645
–
(10,862)
(3,891)
(1,157)
(24,753)
Balance at 31 July 2014
157,138
97,203
177,501
431,842
Year ended 31 July 2015
Additions
Assets acquired by acquisition of business
Assets transferred (to) / from land held for resale
Disposals
Impairment losses
Depreciation expense
7,664
1,820
5,355
(1)
–
–
7,549
1,380
–
(51)
(146)
(3,824)
45,472
1,927
–
(109)
–
(21,308)
60,685
5,127
5,355
(161)
(146)
(25,132)
Balance at 31 July 2015
171,976
102,111
203,483
477,570
NOTE 15: INTANGIBLE ASSETS
Goodwill
At cost
Less: impairment write-downs
Timber access rights
At cost
Less: accumulated amortisation / impairment writedown
Brand names
At cost
Less: accumulated amortisation
Other intangibles
At cost
Less: accumulated amortisation
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
284,574
(41,958)
284,574
(31,913)
242,616
252,661
8,655
(8,655)
–
14,300
(5,300)
9,000
646
(151)
495
8,655
(1,865)
6,790
14,300
(5,300)
9,000
646
(127)
519
252,111
268,970
46
NOTE 15: INTANGIBLE ASSETS (cont.)
(a) Intangible assets with indefinite useful lives
Brand names with a carrying value of $9.0 million (2014: $9.0 Million) have been assessed as having an indefinite useful life, as
the brand has been part of the brick industry since 1853, and Brickworks intends to continue trading under this brand. The brand
names have been allocated to the Austral Bricks (Vic), which forms part of the Building Products segment.
Management’s assessment of the appropriateness of the carrying value of indefinite useful life intangibles is based on key
assumptions which may vary. In addition to the projected cash flows to be generated by the ongoing use of these assets, these
are the discount rate (WACC) and the long term growth rate (LTGR). The rates used in calculating the value in use are consistent
with the rates outlined surrounding the impairment of goodwill below (note 15 (b) ). Given current volatility in financial markets
generally, it is difficult to predict how these variables may move. At balance date, it is not expected that a reasonably possible
change in key assumption would result in an impairment to these assets.
At 31 January 2015, the Group recognised an impairment charge against the carrying value of timber access rights for its full
amount of $6.8 million in relation to the Auswest Timber CGU (2014: nil). The impairment loss reflected a delay and risk in
achieving planned operational efficiencies in this business. This CGU forms part of the Building Products operating segment.
The recoverable amount determined using value in use methodology for the Auswest Timbers CGU at 31 January 2015 was $54.6
million. The key assumptions underpinning the value in use calculation are consistent with those applied in goodwill impairment
as disclosed in below (note 15(b)).
(b) Impairment of Goodwill
(i) Allocation of goodwill and intangible assets with indefinite useful lives to cash generating units
Goodwill is allocated to the Group’s CGUs for impairment testing purposes. At 31 July 2015 the following CGUs representing
business operations have significant allocations of goodwill:
• Austral Bricks (NSW) $67.5 million
• Austral Bricks (SA) $8.0 million
• Austral Bricks (WA) $47.3 million
• Austral Bricks (Vic) $75.2 million
• Bristile Roofing (East Coast) $25.9 million
• Austral Masonry $18.7 million
Each of these CGUs have been valued based on value in use, using the assumptions outlined in point (iii) below.
(ii) Impairment Charge
The Group tests goodwill and other intangible assets with indefinite useful lives at least annually for any impairment in accordance
with the accounting policy stated in note 1(r).
At 31 January 2015, the Group recognised an impairment charge against the carrying value of goodwill for its full amount of
$10.0 million in relation to the Austral Precast CGU (2014: nil). The impairment loss reflected the delay and risk in achieving
planned operational efficiencies in this business. This CGU forms part of the Building Products operating segment.
The recoverable amount determined using value in use methodology for the Austral Precast CGU at 31 January 2015 was
$55.2 million.
(iii) Key assumptions
The recoverable amount of each CGU is determined on the basis of value-in-use (VIU), unless there is evidence to support a
higher fair value less cost to sell.
The valuations used to support the carrying amounts of each CGU (including goodwill, other intangible assets and property, plant
and equipment) are based on forward looking key assumptions that are by their nature uncertain. The nature and basis of the key
assumptions used to estimate the future cash flows and discount rates, and on which the Group has based its projections when
determining the recoverable value of each CGU, are set out below.
VIU calculations use cash flows projections, inclusive of working capital movements, and are based on financial projections
approved by the Board covering a five-year period. Estimates beyond five years are calculated with a growth rate that reflects the
long term growth rate for the State (or States) that the CGU predominately operates in.
The basis of estimation uses the following key operating assumptions:
• Sales volumes are management forecasts, taking into account external forecasts of underlying economic activity for the market
sectors and geographies in which each CGU operates. A major driver of sales volumes is housing approvals approvals and
commencements.
Management has assessed the reported forecast housing approval data from sources such as BIS Shrapnel and the Housing
Industry Association (HIA) over the budget period.
• Costs are calculated taking into account historical gross margins, known cost increases, and estimated inflation rates over the
period that are consistent with locations in which the CGU’s operate;
• Management expects to obtain sales price growth over the budget period. The increases assumed differ by CGU and between
different states where the CGU operates. Price rises are considered inherently achievable in a rational market where supply
of product approximates demand;
• Long term growth rates used in the cash flow valuation reflect the lower of 3% and the average 10 year historical growth rates
for states in which the CGU’s operate (sourced from the Australian Bureau of Statistics). The long term growth rate applied to
the significant divisions were Austral Bricks (NSW) 2.08% (2014: 2.12%), Austral Bricks (WA) 3.00% (2014: 3.00%), Austral
Bricks (Vic) 2.50% (2014: 2.73%), Austral Bricks (SA) 2.05% (2014: 2.36%), Bristile Roofing East Coast 2.53% (2014: 2.62%)
and Austral Masonry 2.53% (2014: 2.62%);
• Management uses an independent external advisor to calculate the appropriate discount rate applied consistently across all
CGUs. For 2015, the pre-tax discount rate was 12.48% (2014: 12.48%).
47
NOTE 15: INTANGIBLE ASSETS (cont.)
b) Impairment of Goodwill (cont.)
(iv) Sensitivity to changes in assumptions
The Austral Bricks (WA) CGU’s have been assessed in the current year as having no requirement for impairment, however the
future forecast cash flows are broadly in line with the current carrying value of the CGU. As a result, any adverse change in an
assumption which is not offset by a positive change in another assumption would lead to a reduced valuation on a value in use
basis, and hence would result in an impairment.
There are no other CGU’s where a reasonably possible change in a key assumption would result in an impairment to the carrying
value of goodwill or other indefinite useful life intangibles.
Timber
Access Rights
$000
Brand
Names
$000
Other
Intangibles
$000
(c) Reconciliations
Consolidated
At 1 August 2013
Cost
Accumulated amortisation / impairment
Balance at 1 August 2013
Year ended 31 July 2014
Additions
Amortisation
Goodwill
$000
284,574
(31,913)
252,661
–
–
Balance at 31 July 2014
252,661
Year ended 31 July 2015
Additions
Asset acquired through purchase
of subsidiary
Impairment losses
Amortisation
–
–
(10,045)
––
8,541
(1,717)
6,824
114
(148)
6,790
–
–
(6,716)
(74)
14,300
(5,300)
9,000
–
–
9,000
–
–
–
–
Total
$000
308,061
(39,033)
269,028
114
(172)
268,970
–
–
(16,761)
(98)
252,111
646
(103)
543
–
(24)
519
–
–
–
(24)
495
Balance at 31 July 2015
242,616
–
9,000
NOTE 16: PAYABLES
Current
Trade payables and accruals
NOTE
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
88,335
82,011
Payables have carrying amounts that reasonably approximate fair value. Average terms on trade payables are 30 days from
statement.
NOTE 17: INTEREST BEARING LIABILITIES
(a) Current
Commercial bills
Unamortised transaction costs
(b) Non-current
Commercial bills
Unamortised transaction costs
25,000
(555)
24,445
26,000
(459)
25,541
300,000
(761)
300,000
(1)
299,239
299,999
27
27
48
NOTE 17: INTEREST BEARING LIABILITIES (cont.)
(c) Commercial bills
Commercial bills are drawn under either a 364 day facility expiring in August 2016 or a 5 year facility amortised in three separate
tranches with the last tranche expiring December 2019. More information on the Group’s borrowing facilities can be found in note 27.
Interest is payable based on floating rates determined with reference to the BBSY bid rate at each maturity.
The fair value of commercial bills at 31 July 2015 approximated their nominal value (2014: nominal value).
A portion of the borrowings are hedged using a fixed interest rate swap contract, details of which can be found in notes 18 and 27.
NOTE 18: DERIVATIVE FINANCIAL INSTRUMENTS
(a) Current liability
Interest rate swap contract
(b) Non-Current liability
Interest rate swap contract
NOTE
27
27
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
234
428
5,152
2,588
The interest rate swap is being used to hedge the exposure to changes in the interest rate payable on its commercial bills (refer
note 17). The hedges in place at 31 July 2015 are not hedge accounted, and the fair value movement of the hedges is recognised
in the statement of comprehensive income.
The fair value of these derivatives are calculated using market observable inputs, including projected forward interest rates for
the period of the derivative. These are categorised as “Level 2” in the fair value hierarchy.
NOTE 19: PROVISIONS
(a) Current
Employee benefits
Remediation
Infrastructure costs
Workers compensation
Contractual payments
Other
(b) Non-current
Employee benefits
Remediation
(c) Reconciliations
Consolidated
Year ended 31 July 2015
Balance at the beginning of the year
Additional provisions recognised
Amounts used
Reversals of provisions
Balance at the end of the year
Current
Non-current
36,057
4,166
4,764
4,578
–
4,413
53,978
3,056
2,354
5,410
34,124
150
5,064
5,056
875
4,199
49,468
2,153
9,940
12,093
Remediation
$000
Infrastructure
Costs
$000
Workers
Compensation
$000
Contractual
Payments
$000
Other
$000
5,056
6,568
(4,126)
(2,920)
4,578
4,578
–
4,578
875
–
–
(875)
–
–
–
–
4,199
890
(468)
(208)
4,413
4,413
–
4,413
10,090
612
(2,325)
(1,857)
6,520
4,166
2,354
6,520
5,064
–
(300)
–
4,764
4,764
–
4,764
49
NOTE 19: PROVISIONS (cont.)
(d) Descriptions
Provision for Remediation
A provision has been recognised for the estimated costs of restoring operational and quarry sites to their original state in
accordance with relevant approvals. The settlement of this provision will occur as the operational site nears the end of its useful
life, or once the resource allocation within the quarry is exhausted, which varies based on the size of the resource and the usage
rate of the extracted material. In some cases this may extend decades into the future.
Provision for infrastructure costs
A provision has been recognised for Brickworks obligation for the estimated costs of completed infrastructure works in relation to
certain properties. The timing of future outflows is expected to occur within the next financial year.
Provision for workers compensation
The Brickworks group self-insures for workers compensation in certain states. The provision has been based on independent
actuarial calculations based on incidents reported before year end. The timing of the future outflows is dependant upon the
notification and acceptance of relevant claims, and would be expected to be satisfied over a number of future financial periods.
Provision for contractual payments
A provision has been recognised for Brickworks obligations to make future payments under contracts signed for otherwise
completed transactions.
Other provisions
Other provisions are made up from a number of sundry items.
NOTE 20: NET DEFERRED TAXES
CONSOLIDATED
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
31 JULY 15
$000
31 JULY 14
$000
Statement of Financial
Position
Movement through Profit
or Loss
Deferred taxes relate to the following:
Equity accounted associates
Property, plant and equipment
Provisions
Tax losses and rebates
Intangibles
Other sundry items
204,308
13,901
(17,281)
(1,159)
1,658
(441)
212,450
13,679
(17,563)
(8,759)
1,973
(1,901)
Net deferred taxes
200,986
199,879
(5,847)
481
268
–
(316)
1,426
(3,988)
16,829
(429)
528
–
(12)
(1,271)
15,645
The carried forward tax losses will be utilised in coming periods as the Group continues to make profits.
NOTE 21: CONTRIBUTED EQUITY
Fully paid ordinary shares
Treasury stock
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
343,108
(8,943)
338,204
(6,784)
334,165
331,420
(a) Ordinary shares
Opening balance
Shares issued during the year
Costs associated with shares issued
2015
2014
No. of
Shares
Value
$000
No. of
Shares
148,038,996
364,482
)
338,204
4,916
(12)
147,818,132
220,864
]
Value
$000
335,341
2,871
(8)
Balance at end of year
148,403,478
343,108
148,038,996
338,204
50
NOTE 21: CONTRIBUTED EQUITY (cont.)
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares
held. At shareholder’s meetings each share is entitled to one vote when a poll is called, otherwise each shareholder has one vote
on a show of hands.
There have been no options issued or on issue at any time during or since the end of the financial year.
The parent does not have authorised capital nor par value in respect of its issued shares.
(b) Treasury stock
Opening balance
add: bonus shares purchased / issued by share plan
less: bonus shares vested during period
Balance at end of period
588,071
441,311
(319,582)
709,800
(6,784)
(5,953)
3,794
(8,943)
613,891
264,710
(290,530)
588,071
(6,621)
(3,441)
3,278
(6,784)
Treasury stock are those shares held by the employee share plans that have not vested to the participant at balance date.
More information on the employee share plans is contained in note 31 of these financial statements.
NOTE 22: RESERVES
(a) Composition of reserves
– capital profits
– equity adjustment
– general
– foreign currency translation
– share based payments
– associates & JV's
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
88,102
(25,315)
36,125
(1,516)
3,690
221,358
88,102
(26,057)
36,125
(1,514)
3,068
223,834
322,444
323,558
(b) Descriptions
Capital profits reserve
The Capital profits reserve represents amounts allocated from Retained Profits that were profits of a capital nature.
Equity adjustments reserve
Equity adjustments reserve includes amounts for tax adjustments posted direct to equity.
General reserve
The General reserve represents amounts reserved for the future general needs of the operations of the entity.
Foreign currency translation reserve
The Foreign currency translation reserve represents differences on translation of foreign entity financial statements.
Share based payments reserve
The share based payments reserve represents the value of bonus shares (treasury stock) that have been expensed through profit
and loss but are yet to vest to the employee.
Associates & JV’s reserve
The associates reserve represents Brickworks share of its associate’s & JV’s reserve balances. The Company is unable to
control this reserve in any way, and does not have any ability or entitlement to distribute this reserve, unless it is received from its
associates or JV’s in the form of dividends.
51
NOTE
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
NOTE 23: CASH FLOW INFORMATION
(a) Reconciliation of net profit after tax to cash flow from operations
Net profit after tax
78,090
102,755
Non-cash flows in net profit
Amortisation of intangible assets
Amortisation of borrowing costs
Depreciation of non-current assets
Mark to market interest rate swaps
Impairment of goodwill and intangibles
Write down of property, plant & equipment to recoverable value
Write down of land held for resale to recoverable value
(Profits) / losses on disposal of property, plant & equipment
(Profits) / losses on sale of investments
Non cash profit on sale of land held for resale
Share of profits of associates not received as dividends
Changes in assets and liabilities net of the effects of acquisitions
of businesses
(Increase) / decrease in trade and sundry debtors
(Increase) / decrease in inventories
(Increase) / decrease in land held for resale
(Increase) / decrease in prepayments
(Increase) / decrease in share trading portfolio
(Increase) / decrease in treasury stock
Increase / (decrease) in creditors and accruals
Increase / (decrease) in taxes payable
Increase / (decrease) in other current provisions
Increase / (decrease) in other non-current provisions
Increase / (decrease) in deferred tax liabilities
98
(855)
25,132
2,370
16,761
146
–
(317)
–
–
(23,010)
(4,023)
(1,863)
13,079
1,788
–
2,745
6,319
11,871
5,083
(6,683)
6,521
172
469
24,753
(1,417)
–
28
2,581
(3,013)
(40)
(17,327)
(29,627)
(11,219)
8,713
(840)
291
(4)
2,699
3,562
(970)
(2,391)
305
21,002
Net cash flows from / (used in) operating activities
133,252
100,482
(b) Reconciliation of cash
Cash at the end of the financial year as shown in the statement of cash
flows is reconciled to items in the statement of financial position as follows:
Cash & cash equivalents
23,051
21,208
NOTE 24: ASSOCIATED COMPANIES
Information relating to significant associates:
Name
Ownership interest
Carrying value
2015
%
2014
%
2015
$000
2014
$000
Profit contribution
2014
$000
2015
$000
Washington H Soul Pattinson & Co Ltd
42.72
42.72
1,146,302
1,157,013
29,434
49,355
Market value of shares at balance date
1,400,932
1,529,777
Washington H. Soul Pattinson & Co Ltd (WHSP) is involved in coal, pharmaceutical, telecommunications and investment. WHSP’s
balance date is 31 July annually. At 31 July 2015 WHSP owned 44.23% (2014: 44.34%) of issued ordinary shares of Brickworks Ltd.
WHSP is incorporated in Australia.
52
NOTE 24: ASSOCIATED COMPANIES (cont.)
(a) Summary of associates financial information, adjusted to reflect
adjustments made in using the equity method
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Outside equity interest (OEI)
Equity excluding (OEI)
Brickworks’ share
Revenue
Profit after income tax from continuing operations
Other comprehensive income
Total comprehensive income
Dividends received
(b) Associates’ expenditure commitments
Capital commitments
Lease commitments
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
1,445,953
2,413,868
(161,398)
(267,274)
1,542,546
2,445,419
(156,644)
(326,216)
(747,857)
(796,741)
2,683,292
2,708,364
1,146,302
1,157,013
641,604
658,116
50,827
28,174
79,001
50,106
155,588
44,956
200,544
48,061
– *
– *
24,301
79,615
The entity has no legal liability for any expenditure commitments incurred by associates.
* Note: Associated company (WHSP) figures for 2015 were not publicly available at the time of preparation of this report.
(c) Contingent liabilities of associates
Contingent liabilities incurred jointly with other investors
– *
29,255
The entity has no legal liability for any contingent liabilities incurred by associates.
* Note: Associated company (WHSP) figures for 2015 were not publicly available at the time of preparation of this report.
NOTE 25: JOINTLY CONTROLLED ENTITIES
Information relating to jointly controlled entities (JV’s) is set out below:
Name
BGAI CDC Trust
BGAI Erskine Trust
BGAI TTP Trust
BGAI Capicure Trust
BGAI Heritage Trust
BGAI Oakdale Trust
BGAI Wacol Trust
BGAI Oakdale South Trust
BMGW Rochedale Trust
New Zealand Brick Distributors
Fair value adjustments
Ownership interest
2014
2015
%
%
Carrying value
2015
$000
2014
$000
Profit contribution
2014
$000
2015
$000
68,244
75,098
–
7,026
23,426
58,196
5,743
38,651
26,256
6,731
44,353
66,579
–
6,704
21,114
50,319
5,745
37,958
26,056
7,458
25,073
17,151
–
707
3,917
9,217
548
–
–
1,472
1,916
11,556
13,179
197
942
2,899
7,261
471
–
–
1,881
3,455
309,371
266,286
60,001
41,841
50.00
50.00
N / A
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
N / A
50.00
50.00
50.00
50.00
50.00
50.00
53
NOTE 25: JOINTLY CONTROLLED ENTITIES (cont.)
The principal activity of each of the above JV’s is property development, management and leasing, and they share the same risk and
return characteristics, being the industrial property market in Australian Capital cities. All JV’s are incorporated in Australia and have
balance dates of 30 June, as the other partner in the JV has this balance date. They are accounted for using the Equity method. No
JV has a quoted market price.
The profit contribution includes all fair value adjustments (including impairments) to Investment properties totalling $31.1 million
(2014: $27.0 million). Refer note 4(b) for more detail on these profits.
During the financial year, the Group did not sell any investments in jointly controlled entities (2014: net proceeds of $11.3 million).
The Group’s share of net profits in joint ventures (Note 4(b)) includes $12.1 million of equity accounted Group’s share of profit on
disposal of Coles Chilled Distribution Centre (Coles CDC) held by BGAI CDC Trust.
Summarised information below has been aggregated due to the similarity of the risk and return characteristics.
(a) Summary of JV’s financial information, adjusted to reflect adjustments
made in using the equity method
2015
$000
2014
$000
Cash and cash equivalents
Current assets
Non-current assets
Current financial liabilities
Current liabilities
Non-current financial liabilities
Non-current liabilities
Net assets
Brickworks’ share
Revenues
Depreciation and Amortisation
Interest income
Interest expense
Income tax expense
Profit after income tax from continuing operations
Other comprehensive income
Total comprehensive income
Dividends received
(b) JV’s expenditure commitments
Capital commitments
Lease commitments
The entity has no legal liability for any contingent liabilities incurred by JV’s.
(c) Contingent liabilities of JV’s
Contingent liabilities incurred jointly with other investors
The entity has no legal liability for any contingent liabilities incurred by JV’s.
5,037
275,457
774,405
(20,900)
(35,146)
(378,585)
(395,974)
618,742
309,371
89,871
162
100
29,187
–
123,291
(2,327)
120,964
16,319
29,564
–
–
5,254
24,536
914,499
(38,480)
(49,034)
(357,332)
(357,428)
532,573
266,286
87,068
181
139
24,283
–
76,770
(233)
76,537
15,741
507
–
–
54
NOTE 26: SEGMENT INFORMATION
Building Products
31 JULY 15 31 JULY 14
Property
Investments
31 JULY 15 31 JULY 14 31 JULY 15 31 JULY 14 31 JULY 15 31 JULY 14
Consolidated
REVENUE
Segment revenue from sales
to external customers
RESULT
$000
$000
$000
$000
$000
$000
$000
$000
700,871
636,895
22,460
33,082
280
291
723,611
670,268
Segment EBITDA
81,594
70,006
64,384
62,427
54,854
44,644
200,832
177,077
Less depreciation and
amortisation
Segment EBIT (before
significant items)
(25,230)
(24,925)
–
–
–
–
(25,230)
(24,925)
56,364
45,081
64,384
62,427
54,854
44,644
175,602
152,152
(Less) / add significant items
(22,855)
(938)
–
(2,581)
(25,140)
4,973
(47,995)
1,454
Segment result
33,509
44,143
64,384
59,846
29,714
49,617
127,607
153,606
Unallocated expenses
Borrowing costs
Significant items
Other unallocated expenses
Profit before income tax
Income tax benefit / (expense)
Profit after income tax
ASSETS
(19,482)
(1,556)
(9,699)
(18,073)
(2,860)
(8,945)
96,870
123,728
(18,780)
(20,973)
78,090
102,755
Segment assets
1,055,109 1,020,013
316,552
291,174 1,146,856 1,157,413 2,518,517 2,468,600
Unallocated assets
Total assets
LIABILITIES
–
–
2,518,517 2,468,600
Segment liabilities
139,160
132,115
4,998
7,510
176,922
182,071
321,080
321,696
Unallocated liabilities
Borrowings
Other
Total unallocated liabilities
Total liabilities
OTHER
Aggregate share of the profit
of investments accounted
for using the equity method
Aggregate carrying amount
of investments accounted
for using the equity method
Acquisition of non-current
segment assets
Non-cash expenses other than
depreciation & amortisation
323,684
49,503
325,540
24,868
373,187
350,408
694,267
672,104
1,472
1,879
58,529
39,962
29,434
49,355
89,435
91,196
6,731
7,458
302,640
258,828 1,146,302 1,157,013 1,455,673 1,423,299
66,181
43,043
892
204
33,290
30,862
–
–
–
–
–
–
67,073
43,247
33,290
30,862
55
NOTE 26: SEGMENT INFORMATION (cont.)
The economic entity has the following business segments:
Building products division manufactures vitrified clay, concrete and timber products used in the building industry. Major product lines
include bricks, blocks, pavers, roof tiles, floor tiles, precast walling and flooring panels and timber products used in the building industry.
Property division considers further opportunities to better utilise land owned by the Brickworks Group, including the sale of property
and investment in property trusts.
Investment division holds investments in the Australian share market, both for dividend income and capital growth, and includes the
Group’s investment in Washington H Soul Pattinson and Co. Ltd.
The Group has a large number of customers to which it provides products. There are no individual customers that account for more
than 10% of external revenues.
The Group operates predominantly within Australia, with some product manufactured by the clay products division exported to other
countries, particularly New Zealand. Total revenue from sales outside of Australia in the 12 months ended 31 July 2015 was $18.0
million (2014: $14.7 million). The carrying value of non-current assets held outside of Australia at 31 July 2015 was $7.0 million
(2014: $6.9 million).
NOTE 27: FINANCIAL INSTRUMENTS
(a) Capital Management
The Brickworks Group manages its capital to ensure that all entities in the Group can continue as going concerns, while striving
to maximise returns to shareholders through an appropriate balance of net debt and total equity. The balance of capital can be
influenced by the level of dividends paid, the issuance of new shares, returns of capital to shareholders, or adjustments in the
level of borrowings through the acquisition or sale of assets.
Brickworks’ capital structure is regularly measured using net debt to capital employed, calculated as net debt divided by (net debt
plus total equity). Net debt is calculated as total borrowings (note 17) less cash and cash equivalents (note 9), and total equity
of the parent entity includes issued capital (note 21), reserves (note 22) and retained earnings.
The Group’s strategy during the year was to maintain the total debt to capital employed (at the consolidated level) below a
banking covenant limit of 40% imposed per the variable interest rate facitlity agreement disclosed in Note 17 (2014: 40%).
Net debt to capital employed
Net debt
Total equity
Net debt to capital employed
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
301,949
1,824,250
304,792
1,796,496
14.2%
14.5%
The Group is not subject to any externally imposed capital requirements.
(b) Financial Risk Management
The Group’s activities expose it to a variety of financial risks, primarily to the risk of changes in interest rates, but also, to a lesser
extent, credit risk of third parties with which the Group trades and fluctuations in foreign currency exchange rates. The Group’s
overall risk management program seeks to minimise any significant potential adverse effects on the financial performance of the
Group. Where approved by the Board, certain derivative financial instruments such as interest rate swaps or foreign exchange
contracts may be used to hedge certain risk exposures. The Brickworks Group derivative policy prohibits the use of derivative
financial instruments for speculative purposes.
(c) Terms, conditions and accounting policies
Details of the accounting policies adopted in relation to financial instruments are included in the summary of significant accounting
policies to the accounts. Information regarding the significant terms and conditions of each significant category of financial
instruments are included within the relevant note for that category.
56
NOTE 27: FINANCIAL INSTRUMENTS (cont.)
(d) Financial assets and liabilities by category
Details of financial assets and liabilities as contained in the annual report are as follows:
Financial assets and liabilities by category
Financial Assets
Cash and cash equivalents
Loans and receivables – current
Total Loans and receivables
Total financial assets
Financial Liabilities
Other financial liabilities
Payables – current
Interest bearing liabilities – current
Derivative financial instruments – current
Interest bearing liabilities – non-current
Derivative financial instruments – non-current
Total other financial liabilities
Total financial liabilities
NOTE
9
10(a)
16
17(a)
18(a)
17(b)
18(b)
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
23,051
103,104
103,104
126,155
88,335
25,000
234
300,000
5,152
418,721
418,721
21,208
98,273
98,273
119,481
82,011
26,000
428
300,000
2,588
411,027
411,027
Fair values of financial assets and liabilities are disclosed in the notes to the accounts where those items are listed.
(e) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group has adopted a policy of only dealing with creditworthy counterparties. The credit risk on liquid funds and derivative
financial instruments is considered low because these assets are held with banks with high credit ratings assigned by international
credit-rating agencies.
The maximum exposure to trade credit risk at balance date to recognised financial assets is the carrying amount net of provision
for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements. The Brickworks
Group debtors are based in the building and construction industry, however the Group minimises its concentration of credit risk
by undertaking transactions with a large number of customers. The Group ensures there is not a material credit risk exposure
to any single debtor.
The Group holds no significant collateral as security, and there are no other significant credit enhancements in respect of these
financial assets. The credit quality of financial assets that are neither past due nor impaired is appropriate, and is reviewed
regularly to identify any potential deterioration in the credit quality. There are no significant financial assets that would otherwise
be past due or impaired whose terms have been renegotiated.
57
NOTE 27: FINANCIAL INSTRUMENTS (cont.)
(f) Liquidity risk
The Brickworks Group manages liquidity risk by maintaining a combination of adequate cash reserves, bank facilities and
reserve borrowing facilities, continuously monitored through forecast and actual cash flows, and matching the maturity profiles
of financial assets and liabilities.
Details of credit facilities available to the Group, and the amounts utilised under those facilities, are as follows:
Unused credit facilities
Credit facilities
Amount utilised
Unused credit facility
NOTE
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
450,000
325,000
125,000
400,000
326,000
74,000
In December 2014 the Group entered into a new $350.0 million unsecured variable interest rate facility with a syndicate of
Australian and overseas banks. The funds drawn on this facility were used to repay the $300.0 million facility disclosed in the
financial statements as at 31 July 2014, which was subsequently cancelled.
As at 31 July 2015 the unsecured variable interest rate facility was drawn to $325.0 million (2014: $300.0 million). The facility
is in three tranches as outlined below:
Tranche
A
B
C
Amount ($m)
$150.0
$100.0
$100.0
Drawn ($m)
$125.0
$100.0
$100.0
Expiry
Dec 2017
Dec 2018
Dec 2019
Included in current liabilities was $25.0 million from Tranche A which as at 31 July 2015 the Group expected to settle within 12
months from the balance date. The amount was subsequently repaid in September 2015.
In addition, the Group has a $100 million 364 day working capital facility with an Australian Bank, which was not drawn at balance
date (2014: $26.0 million). This facility expires in August 2016.
These facilities are subject to various terms and conditions, including various negative pledges regarding the operations of the
Group, and covenants that must be satisfied at specific measurement dates. A critical judgement is that the Group will continue
to meet its criteria under these banking covenants to ensure that there is no right for the banking syndicate to require settlement
of the facility in the next 12 months.
An analysis of the maturity profiles of the Group’s undiscounted financial liabilities, based on contractual maturity and obligated
payments, is as follows:
Liquidity risk maturity analysis
1 year or less
Trade and other payables
Commercial bills
Derivatives
Total 1 year or less
1 to 5 years
Commercial bills
Derivatives
Total 1 to 5 years
(g) Currency risk
NOTE
16
18(a)
18(b)
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
88,335
25,928
234
82,011
26,712
428
114,497
109,151
340,623
5,152
345,775
341,100
2,588
343,688
The Brickworks Group does not have any material exposure to unhedged foreign currency receivables. Export sales are all made
through Australian agents or direct to overseas customers using Australian Dollars or letters of credit denominated in Australian
Dollars. The trading of the Group’s foreign subsidiary, which is in New Zealand dollars (NZD) is not material to the Group as a
whole. Accordingly, any reasonably foreseeable fluctuation in the exchange rate of the NZD would not have a material impact on
either profit after tax or equity of the Brickworks Group.
The Group has a limited exposure to foreign currency fluctuations due to its importation of goods. The main exposure is to US
dollars (USD) and Euros (EUR). It is the policy of the Group to enter into forward foreign exchange contracts to cover specific
currency payments, as well as covering anticipated purchases for up to 12 months in advance. The overall level of exposure to
foreign currency purchases is not material to the Group. Accordingly, any reasonably foreseeable fluctuation in the exchange
rate of the USD or EUR would not have a material impact on either profit after tax or equity of the Brickworks Group.
58
NOTE 27: FINANCIAL INSTRUMENTS (cont.)
(h)
Interest rate risk
Brickworks’ significant interest rate risk arises from fluctuations in the BBSY bid rate relating to Brickworks long and short term
borrowings. Primarily, the exposure to interest rate risk is on the variable interest rate facility referred to in note 27(f) above.
The Brickworks Group manages its exposure to interest rate risk within the Group’s derivative policy. The Group uses interest
rate derivatives, where appropriate, to eliminate some of the risk of movements in interest rates on borrowings, and increase
certainty around the cost of borrowed funds. The policy has target ranges for fixed interest rate borrowings.
At 31 July 2015, if interest rates had been +/- 1% per annum throughout the year, with all other variables being held constant,
the operating profit after income tax for the year would have been $1.25 million higher or lower respectively (2014: $1.34 million
higher / lower). There would not have been any other significant impacts on equity.
Interest rate swaps
The Brickworks Group has entered into interest rate swaps contracts which allow the Group to raise borrowings at floating rates
and effectively swap them into a fixed rate (average rate 3.87%, 2014: 4.64%). The contracts require settlement of net interest
receivable or payable usually around 90 days. The settlement dates coincide with the dates on which interest is payable on the
underlying long term debt and are brought to account as an adjustment to borrowing costs.
The notional principal amounts reduce from $150.0 million over the next three years (2014: $175.0 million over three years) as
detailed below:
Settlement
Less than 1 year
1 to 3 years
3 to 5 years
Total notional principal at balance date
Financial Assets
2015
Avg %
5.96
–
3.45
2014
Avg %
6.24
5.96
3.52
2015
$000
25,000
–
2014
$000
50,000
25,000
125,000
100,000
150,000
175,000
Interest rates on money market instruments (deposits) vary with current short term bank bill rate movements. At balance date,
the effective weighted interest rates on these financial assets was 1.85% (2014: 2.35%).
There are no other financial assets with exposure to interest rate risk.
(i) Other price risk
The Brickworks Group does not have material direct exposure to equity price risk, as the value of the share trading portfolio is
insignificant, and hence any fluctuation in equity prices would not be material to either profit after tax or equity of the Brickworks
Group.
Brickworks has significant indirect exposure to equity price risk through its investment in WHSP. Although this investment is
accounted for as an equity accounted investment, WHSP has a significant listed investment portfolio which is accounted for
at fair value through equity, and contribute to the profit on subsequent disposal. As a result, fluctuations in equity prices would
potentially impact on both net profit after tax (where portions of the portfolios are traded) and equity (for balances held at the end
of the period) which would result in adjustments to Brickworks net profit after tax and equity.
At the time of preparing this report, there was no publicly available information regarding the effects of any reasonably foreseeable
fluctuations in equity values on net profit or equity of WHSP at 31 July 2015.
NOTE 28: CONTROLLED ENTITIES AND BUSINESS ACQUISITIONS
(a) List of significant controlled entities
Details of the significant wholly owned entities within the Brickworks Group of companies are as follows. There are other wholly
owned subsidiaries not included in this list as they are individually insignificant to the Group. All wholly owned entities within the
Group have been consolidated into these financial statements.
Controlled entities incorporated in Australia
ABN
Group’s Interest
A.C.N. 000 012 340 Pty Ltd
A.C.N. 074 202 592 Pty Ltd
AP Installations (NSW) Pty Ltd
AP Installations (Qld) Pty Ltd
Austral Bricks (NSW) Pty Ltd
Austral Bricks (Qld) Pty Ltd
Austral Bricks (SA) Pty Ltd
Austral Bricks (Tas) Pty Ltd
Austral Bricks (Tasmania) Pty Ltd
Austral Bricks (Vic) Pty Ltd
Austral Bricks (WA) Pty Ltd
Austral Bricks Holdings Pty Ltd
2015
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
2014
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
38 000 012 340
82 074 202 592
19 165 402 602
21 165 402 611
60 125 934 849
62 125 934 858
66 125 934 876
83 125 934 947
14 009 501 053
64 125 934 867
34 079 711 603
55 120 364 365
59
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
NOTE 28: CONTROLLED ENTITIES AND BUSINESS ACQUISITIONS (cont.)
Austral Facades Pty Ltd
Austral Masonry (NSW) Pty Ltd
Austral Masonry (Qld) Pty Ltd
Austral Masonry (Vic) Pty Ltd
Austral Masonry Holdings Pty Ltd
Austral Panels Pty Ltd
Austral Precast (NSW) Pty Ltd
Austral Precast (Qld) Pty Ltd
Austral Precast (Vic) Pty Ltd
Austral Precast (WA) Pty Ltd
Austral Precast Holdings Pty Ltd
Austral Roof Tiles Pty Ltd
Auswest Timbers (ACT) Pty Ltd
Auswest Timbers Holdings Pty Ltd
Auswest Timbers Pty Ltd
Bowral Brickworks Pty Ltd
Brickworks Building Products Pty Ltd
Brickworks Building Products (NZ) Pty Ltd
Brickworks Head Holding Co Pty Ltd
Brickworks Industrial Developments Pty Ltd
Brickworks Properties Pty Ltd
Brickworks Property Finance Co Pty Ltd
Brickworks Sub Holding Co No. 1 Pty Ltd
Brickworks Sub Holding Co No. 2 Pty Ltd
Brickworks Sub Holding Co No. 3 Pty Ltd
Brickworks Sub Holding Co No. 4 Pty Ltd
Brickworks Sub Holding Co No. 5 Pty Ltd
Brickworks Sub Holding Co No. 6 Pty Ltd
Brickworks Sub Holding Co No. 7 Pty Ltd
Brickworks Sub Holding Co No. 8 Pty Ltd
Bristile Guardians Pty Ltd
Bristile Holdings Pty Ltd
Bristile Pty Ltd
Bristile Roofing (East Coast) Pty Ltd
Bristile Roofing Holdings Pty Ltd
Christies Sands Pty Ltd
Clifton Brick Holdings Pty Ltd
Clifton Brick Manufacturers Pty Ltd
Daniel Robertson Australia Pty Ltd
Davman Builders Pty Ltd
Dry Press Publishing Pty Ltd
Hallett Brick Pty Ltd
Hallett Roofing Services Pty Ltd
Horsley Park Holdings Pty Ltd
International Brick & Tile Pty Ltd
J. Hallett & Son Pty Ltd
Metropolitan Brick Company Pty Ltd
Nubrik Concrete Masonry Pty Ltd
Nubrik Pty Ltd
Pilsley Investments Pty Ltd
Prestige Brick Pty Ltd
Prestige Equipment Pty Ltd
Southern Bricks Pty Ltd
Terra Timbers Pty Ltd
The Austral Brick Co Pty Ltd
The Warren Brick Co Pty Ltd
Visigoth Pty Ltd
63 144 804 553
45 141 647 092
30 000 646 695
53 120 364 356
97 141 629 996
61 144 804 544
81 125 934 938
20 145 070 855
16 145 070 837
22 145 070 884
88 140 573 646
67 144 804 571
34 087 808 811
51 120 364 347
28 071 093 591
39 000 165 579
63 119 059 513
64 076 976 880
95 120 360 036
47 120 364 329
12 094 905 996
28 158 536 353
89 120 360 009
61 120 364 392
59 120 364 383
57 120 364 374
16 125 922 821
18 125 922 830
97 125 922 849
99 125 922 858
40 079 711 630
32 008 668 540
19 056 541 096
77 090 775 634
49 120 364 338
63 007 635 529
83 004 493 181
63 004 529 104
53 087 575 611
66 004 434 342
93 000 002 979
20 007 622 317
93 007 880 220
65 008 392 014
31 003 281 123
40 007 870 779
13 008 666 840
29 004 767 113
59 004 028 559
70 008 768 330
24 009 266 273
68 006 727 920
83 007 749 840
93 091 183 050
52 000 005 550
24 000 006 682
72 076 286 710
60
NOTE 28: CONTROLLED ENTITIES AND BUSINESS ACQUISITIONS (cont.)
(b) Business acquisitions
On 12 December 2014 the Group acquired the business and assets of Capricornia Rockblock Pty Limited located in Rockhampton
in Central Queensland for $5.5 million. The acquisition of this business delivered Austral Masonry the leading position in a region
where it previously did not have a significant market presence. Details of the net assets acquired under this transaction are set
out below:
Cost of acquisition
Cash paid
Net assets acquired:
Inventory
Property, plant & equipment
Deferred tax assets
Other assets
Employee entitlements assumed
Fair value of net assets acquired
Direct costs relating to the acquisition
2015
$000
5,495
354
5,127
61
3
(50)
5,495
(577)
Upon acquisition the acquired business was integrated within the existing Brickworks business and systems. As a result, specific
financial information relating to the acquired business is not available and therefore it is impracticable to disclose the revenue
and profit or loss of the acquiree since the acquisition date.
There were no business acquisitions during the year ended 31 July 2014.
(c) Controlled entities disposed of
There were no controlled entities within the Group that were disposed of during the current or prior period.
(d) Closed group
A deed of cross-guarantee between Brickworks Ltd and a number of its subsidiaries (the “closed group”) was enacted during the
2010 financial year and relief was obtained from preparing a financial statement for those subsidiaries under an ASIC instrument
of relief under subsection 340(i) of the Corporations Act 2001.Under the deed, Brickworks guarantees to support the liabilities
and obligations of those subsidiaries. The controlled entities have also given a similar guarantee. For details of those entities
covered under the deed, refer to note 28 (a). The members of the closed group and the parties to the deed of cross guarantee
are identical. The following are the aggregate totals, for each category, relieved under the deed:
CONSOLIDATED INCOME STATEMENT
Profit before income tax expense
Income tax (benefit) / expense
Profit after income tax expense
RETAINED PROFITS
Retained profits at the beginning of the year
Profit after income tax expense
Dividends paid
Share of associate’s transfer to outside equity interests
Retained profits at the end of the year
CLOSED GROUP
31 JULY 15
$000
31 JULY 14
$000
35,340
(555)
35,895
83,115
8,620
74,495
1,090,557
35,895
(51,754)
(214)
1,065,771
74,495
(49,198)
(511)
1,074,484
1,090,557
61
CLOSED GROUP
31 JULY 15
$000
31 JULY 14
$000
23,052
100,880
–
171,829
5,455
–
5,935
307,151
165,915
10,000
8,129
8,182
1,153,033
469,676
252,111
21,208
96,290
-
169,191
13,079
-
7,848
307,616
159,365
10,000
8,134
18,991
1,164,469
424,977
268,970
2,067,046
2,054,906
2,374,197
2,362,522
85,795
24,679
16,488
53,858
79,957
25,969
6,735
49,311
180,820
161,972
(10,597)
304,392
-
5,410
158,987
458,192
639,012
(34,053)
302,587
-
12,093
170,777
451,404
613,376
1,735,185
1,749,146
334,165
326,536
1,074,484
331,420
327,168
1,090,558
1,735,185
1,749,146
NOTE 28: CONTROLLED ENTITIES AND BUSINESS ACQUISITIONS (cont.)
(d) Closed group (cont.)
CONSOLIDATED BALANCE SHEET
CURRENT ASSETS
Cash assets
Receivables
Held for trading financial assets
Inventories
Land held for resale
Current tax assets
Prepayments
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Other financial assets
Inventories
Land held for resale
Investments accounted for using the equity method
Property, plant and equipment
Intangibles
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Interest-bearing liabilities
Income tax provision
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Payables
Interest-bearing liabilities
Derivative financial instruments
Provisions
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained profits
TOTAL EQUITY
62
CONSOLIDATED
31 JULY 15
$000
31 JULY 14
$000
NOTE 29: CONTINGENT LIABILITIES
Contingent liabilities at balance date not provided for in these financial statements:
Bank guarantees issued in the ordinary course of business
26,543
27,901
The Directors do not anticipate that any of the bank guarantees issued on behalf of the Group will be called upon.
Members of the economic entity are parties to various legal actions against them that are not provided for in the financial
statements. These actions are being defended and the directors do not anticipate that any of these actions will result in material
adverse consequences for the Company or the Consolidated Entity.
NOTE 30: CAPITAL AND LEASING EXPENDITURE COMMITMENTS
(a) Capital projects contracted for but not provided for at balance date
Payable not later than one year
10,929
10,359
The capital commitments relate to contracts to supply or construct buildings or various items of plant and equipment for use in
the Building Products segment of the business.
(b) Operating lease commitments
Non-cancellable operating leases contracted for but not capitalised
in the financial statements
Payable
– not later than one year
– later than one year but not later than five years
– later than five years
97,059
117,702
24,947
58,668
13,444
97,059
26,017
70,435
21,250
117,702
Operating leases are for the rental of land (used for sales and display centres), manufacturing equipment and motor vehicles.
The leases are non-cancellable with rent payable monthly in advance.
Leases for properties are on terms of between 3 and 10 years, with renewal options of similar lengths.
NOTE 31: EMPLOYEE SHARE PLANS
(a) Salary sacrifice arrangements
Brickworks Limited has an employee share ownership plan, which allows all employees who have achieved 3 months service
with the Group to purchase Brickworks Limited shares, using their own funds plus a contribution of up to $156 per annum from
the Company. All shares acquired under salary sacrifice arrangements are fully paid ordinary shares, purchased on-market
under an independent trust deed.
At 31 July 2015, the Brickworks Employee Share Plans had 739 members taking part who owned a combined 1,413,008
shares or 0.95% of issued ordinary capital (2014: 654 members, 1,296,803 shares, 0.88%). These figures exclude shares held
by employees outside the Brickworks Employee Share Plans. This represented shares purchased under the salary sacrifice
arrangements described above, as well as shares held as part of the Brickworks equity based compensation plans shown below.
The reduction in employee shareholder numbers reflects an overall reduction in eligible employee numbers during the financial
year.
(b) Equity-based compensation plans
The following table shows the number of fully paid ordinary shares held by the Brickworks Deferred Employee Share Plan
that had been granted as remuneration. This table does not include any shares held in the plan that were purchased by the
employee under the salary sacrifice arrangements described above.
Unvested
Granted Sept 10
Granted Sept 11
Granted Sept 12
Granted Sept 13
Granted Sept 14
Total Unvested
Vested
Total
Vested
(62,758)
(40,184)
(49,641)
(57,071)
(85,236)
(294,890)
294,890
Forfeited /
Withdrawn
(4,605)
(11,192)
(11,073)
(11,365)
(7,415)
(45,650)
(277,990)
Closing
Balance
–
45,505
99,701
171,554
340,422
657,182
629,699
–
(323,640)
1,286,881
Opening
Balance
67,363
96,881
160,415
239,990
–
564,649
612,799
1,177,448
Granted
–
–
–
–
433,073
433,073
–
433,073
63
NOTE 31: EMPLOYEE SHARE PLANS (cont.)
(b) Equity-based compensation plans (cont.)
The amount recognised in the statement of comprehensive income in relation to equity based compensation arrangements for
the year ended 31 July 2015 was $4,415,505 (2014: $3,261,361).
The unvested shares vest to employees at 20% per year for each of the following 5 years, provided ongoing employment is
maintained Unvested shares are unavailable for trading by the employee.
The fair value of vested shares held by the share plan at 31 July 2015 was $9,777,529 (2014: $9,251,156), based on the closing
share price at 31 July 2015 ($14.90 per share) (2014: $14.30 per share). The fair value of shares granted during the period was
$5,953,285 (2014: $3,941,553), based on the price paid for these shares when they were acquired on market.
All shares granted by the Company provide dividend and voting rights to the employee.
More information regarding the Brickworks Employee Share Plans is outlined in the Remuneration Report included in the
Directors’ Report.
NOTE 32: RELATED PARTIES
During the year material transactions took place with the following related parties:
Various intercompany loans are in existence between the Parent entity and some of its wholly owned subsidiaries. The loans are
unsecured, interest free and have no fixed terms for repayment. The loans are a net asset to the Parent entity of $617.3 million (2014:
$636.0 million).
Property transactions with various trusts (Iisted in note 25) which are jointly owned by the Brickworks Group and Goodman Australia
Industrial Fund, an unlisted property trust. During the year there was no sale of land held for resale by the Brickworks Group to these
trusts (2014: $25.9 million revenue and $14.8 million profit). All transactions with the property trusts are at arm’s length values.
During the year the Group engaged Korn Ferry International, an entity which employs The Hon. Robert Webster, to provide consulting
services regarding executive evaluation and development. The total value of services provided was $417,000 (2014: $260,000) and
were on arm’s length terms.
Directors and their director-related entities are able, with all staff members, to purchase goods produced by the Brickworks group on
terms and conditions no more favourable than those available to other customers.
There were no other transactions with key management personnel during the period.
NOTE 33: EVENTS OCCURING AFTER BALANCE DATE
The Group’s share of net profits in joint ventures (Note 4(b)) includes $12.1 million of equity accounted Group’s share of profit on
disposal of Coles CDC held by BGAI CDC Trust. The settlement of the transaction occurred on 28 August 2015, resulting in sale
proceeds of $253.0 million to the trust. These funds were used to payout interest rate swaps and reduce debt within the trust. In
addition a $60.0 million distribution was paid to the Group, resulting in the Group’s net debt decreasing to $256.3 million as at 31
August 2015.
On 31 August 2015 the Group acquired the assets and the business of CJM Roof & Building Services Pty Limited for the total
consideration of $388,000.
There have been no other events subsequent to balance date that could materially affect the financial position and performance of
Brickworks Limited or any of its controlled entities.
64
In the opinion of the Directors:
DIRECTOR’S DECLARATION
1.
the complete set of the financial statements and notes of the consolidated entity, as set out on pages 27 to 64, and the additional
disclosures included in the Remuneration Report section of the Directors’ Report designated as audited, are in accordance with
the Corporations Act 2001:
(a) comply with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001; and
(b) give a true and fair view of the financial position as at 31 July 2015 and of the performance for the year ended on that date
of the consolidated entity;
2.
3.
the financial report also complies with International Financial Reporting Standards as issued by the International Accounting
Standards Board;
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
4. as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in
note 28(a) will be able to meet any obligations or liabilities to which they are or may become subject to, by virtue of the Deed of
Cross Guarantee.
This declaration is made after receiving the declaration required to be made to the Directors in accordance with s295A of the
Corporations Act 2001 for the financial year ended 31 July 2015.
This declaration is made in accordance with a resolution of the Board of Directors.
Dated 24 September 2015
R.D. MILLNER
Director
L.R. PARTRIDGE AM
Director
65
66
680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Independent auditor's report to the members of Brickworks Limited Report on the financial report We have audited the accompanying financial report of Brickworks Limited, which comprises the consolidated statement of financial position as at 31 July 2015, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year. Directors' responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor's responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is referred to in the directors’ report. 67
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Opinion In our opinion: a. the financial report of Brickworks Limited is in accordance with the Corporations Act 2001, including: i giving a true and fair view of the consolidated entity's financial position as at 31 July 2015 and of its performance for the year ended on that date; and ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the remuneration report We have audited the Remuneration Report included in the directors' report for the year ended 31 July 2015. 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. Opinion In our opinion, the Remuneration Report of Brickworks Limited for the year ended 31 July 2015, complies with section 300A of the Corporations Act 2001. Ernst & Young Renay Robinson Partner Sydney 24 September 2015 STATEMENT OF SHAREHOLDERS
ORDINARY SHARES AT 31 AUGUST 2015
Number of holders
Voting entitlement is one vote per fully paid ordinary share
% of total holdings by or on behalf of twenty largest shareholders
Distribution of shareholdings:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,000 – 100,000
100,001 and over
Holdings of less than marketable parcel of 34 shares
8,477
81.36%
4,313
3,232
481
408
43
8,477
606
The names of the substantial shareholders as disclosed in substantial shareholder notices received by the Company:
Shareholder
Washington H Soul Pattinson & Co. Ltd
Perpetual Ltd and subsidiaries
Permanent Trustee Company Ltd
20 LARGEST SHAREHOLDERS AS DISCLOSED ON THE SHARE REGISTER
AS AT 31 AUGUST 2015
Number of
Shares
65,645,140
15,774,358
7,111,550
Number of
Shares
65,645,140
8,423,019
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
WASHINGTON H SOUL PATTINSON & COMPANY LIMITED
CITICORP NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
7,732,628
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
MILTON CORPORATION LIMITED
J S MILLNER HOLDINGS PTY LIMITED
BNP PARIBAS NOMS PTY LTD
MR KENNETH BAKER
UBS NOMINEES PTY LTD
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
MR ROBERT DOBSON MILLNER + MR MICHAEL JOHN MILLNER
CPU SHARE PLANS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
T G MILLNER HOLDINGS PTY LIMITED
ARGO INVESTMENTS LIMITED
DIVERSIFIED UNITED INVESTMENT LIMITED
7,397,395
5,761,801
4,034,395
3,234,567
2,918,836
2,746,729
1,868,370
1,553,680
1,502,970
1,361,292
1,301,758
1,274,989
1,209,726
1,032,502
653,509
584,009
500,000
%
44.23
5.68
5.21
4.98
3.88
2.72
2.18
1.97
1.85
1.26
1.05
1.01
0.92
0.88
0.86
0.82
0.70
0.44
0.39
0.34
120,737,315
81.36
68
TABLE OF IMPORTANT DATES
2015 annual result released
Record date for final ordinary dividend
Annual General Meeting
Payment date for final ordinary dividend
2016 half-year end
2016 half-year result announced
Record date for interim ordinary dividend
Payment date for interim ordinary dividend
2016 financial year end
2016 annual result released
24 September 2015
5 November 2015
24 November 2015
25 November 2015
31 January 2016
24 March 2016
12 April 2016
3 May 2016
31 July 2016
29 September 2016
The above dates are indicative only and are subject to change