ABN 17 000 028 526
ANNUAL REPORT 2016
BRICKWORKS LIMITED AND CONTROLLED ENTITIES
A.B.N. 17 000 028 526
FIVE YEAR SUMMARY
2012
$000
2013
$000
2014
$000
2015
$000
2016
$000 Growth
%
Total revenue
556,911
606,509
670,268
723,611
750,985
Building Products revenue
547,590
568,654
636,895
700,871
748,128
Earnings before interest and tax (excluding
significant items)
Building products
Property
Waste management
Investments
Associates
Head office and other expenses
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)
75,381
72,105
1,346
442
59,117
(12,479)
4%
7%
34%
17%
(49%)
58%
8%
(29%)
Total EBIT (excluding significant items)
108,451
135,039
143,207
165,903
195,912
18%
Borrowing costs
Income tax
(25,215)
(4,366)
(18,800)
(16,191)
(18,073)
(23,845)
(19,482)
(26,122)
(14,080)
(34,753)
28%
(33%)
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
and site relocation costs
Costs on start up of manufacturing facilities
Impairment of goodwill and timber access rights
Legal and advisory costs - Perpetual matter
Restructuring activities
Other significant items
Tax on significant items
Tax benefit arising from WHSP carrying value
78,870
100,048
101,289
120,299
147,079
22%
756
(18,483)
4,973
(25,140)
129
(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)
(970)
(2,040)
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
(14,523)
–
(206)
(5,201)
(1,025)
(47,258)
(2,828)
(2,929)
(315)
8,109
(2,842)
Total significant items
(35,566)
(14,883)
1,466
(42,209)
(68,889)
Net profit after income tax
(including significant items)
43,304
85,165
102,755
78,090
78,190
0%
Basic earnings per share (cents)
Underlying earnings per share (cents)
29.3
53.4
57.6
67.7
69.4
68.4
52.6
81.1
52.6
98.9
(0%)
22%
Dividends
Ordinary dividends per share (cents)
40.5
40.5
42.0
45.0
48.0
Ratios
Net tangible assets per share
Return on shareholders equity
Underlying return on shareholders equity
Interest cover ratio
Net debt to capital employed
$9.44
2.6%
4.7%
5.2
14.7%
$9.82
5.0%
5.8%
6.6
15.7%
$10.32
5.7%
5.6%
7.3
14.5%
$10.59
4.3%
6.6%
9.7
14.2%
$10.96
4.3%
8.0%
14.4
12.8%
3%
(1%)
21%
48%
(10%)
BRICKWORKS LIMITED
A.B.N. 17 000 028 526
A N N U A L R E P O R T 2 0 1 6
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, FAICD
Director since 2014
THE HON. ROBERT J. WEBSTER MAICD; MAIM
Director since 2001
MANAGING DIRECTOR:
LINDSAY R. PARTRIDGE AM BSc. Hons.Ceramic Eng; FAICD; Dip.CD
Joined the Company 1985
Director since 2000
CHIEF FINANCIAL OFFICER:
ROBERT C. BAKEWELL B.Comm; CA
From 1 June 2016
ALEXANDER J. PAYNE B.Comm; Dip CM; FCPA; FCIS; FCSA
Until 31 May 2016
COMPANY SECRETARY:
SUSAN L. LEPPINUS B.Ec; LLB; Grad Dip App Fin
From 29 April 2015
AUDITORS:
EY
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 2016.
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, FAICD
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 2016 of the Brickworks Group after income tax expense,
amounted to $78,190,000 compared with $78,090,000 for the previous year.
Dividends
The Directors recommend that the following final dividend be declared:
Ordinary shareholders – 32 cents per share (fully franked)
The record date for the final ordinary dividend will be 10 November 2016, with payment being made on
30 November 2016.
Dividends paid during the financial year ended 31 July 2016 were:
(a) Final ordinary dividend of 30 cents per share (fully franked) paid on 25 November 2015 (2015: 28 cents).
(b) Interim ordinary dividend of 16 cents per share (fully franked) paid on 3 May 2016 (2015: 15 cents).
REVIEW OF OPERATIONS
Highlights
• Statutory NPAT including significant items, up 0.1% to $78.2 million
• Underlying NPAT before significant items up 22.3% to $147.1 million
Building Products EBIT up 33.7% to $75.4 million (EBITDA $102.8 million)
Land and Development EBIT up 14.1% to $73.5 million
Investments EBIT up 8.6% to $59.6 million
• Net debt/capital employed of 12.8%, net debt $269.2 million
•
•
Final dividend of 32 cents fully franked, up 2 cents or 6.7%
Total full year dividend of 48 cents fully franked, up 3 cents or 6.7%
Overview1
Brickworks (ASX: BKW) posted a record underlying Net Profit After Tax (‘NPAT’) for the year ended 31
July 2016 of $147.1 million, up 22.3% 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 $78.2 million. The significant items, totalling
$68.9 million after tax, primarily relate to the impairment of goodwill in Austral Bricks Western Australia. In
addition significant restructuring activities in Austral Bricks and Auswest Timbers in that state resulted in the
closure of plants and the non-cash write down of assets. The asset carrying values of all other divisions are
supported by the net present value of their respective future cash flows2.
1 All underlying profit and earnings measures exclude significant items, unless otherwise stated.
2 Further information regarding the annual goodwill impairment assessment is contained in Note 15 (b) to the financial statements.
2
On record sales revenue of $748.1 million, Building Products’ underlying earnings before interest and tax
(‘EBIT’) was $75.4 million, up 33.7% on the prior year. EBITDA was up 26.0% to $102.8 million, on a combination
of continued volume growth and increased margins.
Land and Development EBIT was $73.5 million for the 12 months to 31 July 2016, primarily due to a strong
revaluation profit in the Joint Venture Industrial Property Trust3 (‘Property Trust’).
Investment EBIT, including the underlying contribution from Washington H. Soul Pattinson Limited (‘WHSP’),
was up 8.6% to $59.6 million. This was due primarily to an increase in earnings from TPG Telecom.
Underlying earnings per share (‘EPS’) were 98.9 cents, up 21.9% from 81.1 cents for the prior year.
Directors have declared a fully franked final dividend of 32 cents per share for the year ended 31 July 2016, up
6.7% from 30 cents. Together with the interim dividend of 16 cents per share, this brings the total dividends paid
for the year to 48 cents per share, up 3 cents or 6.7% on the prior year.
The record date for the final dividend will be 10 November 2016, with payment on 30 November 2016.
Financial Analysis
Gearing (gross debt to equity) was 16.3% at 31 July 2016, down from 17.8% at 31 July 2015. Total interest
bearing debt decreased to $300.0 million and net debt reduced to $269.2 million at 31 July 2016. Net debt to
capital employed was 12.8% at the end of the period.
Interest costs were down 20.5% to $13.6 million for the year on the reduced debt level and a lower average
interest rate. Total borrowing costs were $14.1 million, including the mark to market valuation of swaps.
Underlying interest cover was 14.4 times, up from 9.7 times at 31 July 2015.
Working capital, excluding land held for resale, was $189.0 million at 31 July 2016, up $32.8 million from the
prior year, due to an increase in cash, inventory and receivables.
During the year finished goods inventory was up by $8.1 million, due to increases in Austral Bricks Western
Australia and a stock build required to launch the new Specialised Building Systems division. Excluding these
businesses, stock levels were held relatively steady compared to the prior year.
Total cash flow from operating activities was $148.5 million, up 11.4% from $133.3 million in the prior year.
Building Products spend on capital expenditure and acquisitions increased to $52.7 million, from $46.6 million
in the prior year. Stay in business capital expenditure was $23.5 million, 85.8% of depreciation. Spend on major
upgrade projects totalled $20.6 million, primarily consisting of upgrades to the Rochedale plant in Queensland
and the Cardup plant in Western Australia. Spending on growth projects and acquisitions totalled $8.6 million
for the year, comprising the purchase of three small metal roofing and fascia and gutter installation businesses
based in New South Wales and Queensland, and a sawmill in Western Australia.
Land and Development spend on capital expenditure was $5.4 million, relating to various site infrastructure
works and development applications. In addition, a net amount of $13.6 million was invested into the Property
Trust to reduce gearing to 34.4%, funded by the settlement of the Coles CDC facility in August 2016.
The underlying income tax expense for the year increased to $34.8 million compared to $26.1 million for the
previous year, due to the increased earnings from the Building Products and Land and Development Groups.
Actual tax paid during the year was significantly lower at $10.2 million, due primarily to the benefits associated
with the fully franked dividends received from WHSP and the property revaluations booked this year.
Net tangible assets (‘NTA’) per share was $10.96 at 31 July 2016, up from $10.59 at 31 July 2015 and total
shareholders’ equity was up $14.2 million to $1.839 billion, after including the impact of the goodwill impairment.
Return on equity of underlying earnings was 8.0%, up from 6.6% in the prior year. This does not include a
$381.4 million increase in the market value of the company’s investment in WHSP over the period. Looking back
over the past fifteen years, this investment has delivered an average $85 million p.a. in value to Brickworks, not
recognised on the income statement.
Significant items reduced NPAT by $68.9 million for the full year, consisting primarily of the non-cash goodwill
impairment in Austral Bricks Western Australia of $47.3 million, in accordance with AASB 136.
There are no other Cash Generating Units where a reasonably possible change in a key assumption would result
in impairment to the carrying value of goodwill or other indefinite useful life intangibles.
In response to the current operating conditions in Austral Bricks Western Australia, management has taken
decisive action, with a restructuring program well underway. One-off costs of $4.8 million after tax were incurred
in relation to the restructuring initiatives within Austral Bricks Western Australia. This includes a non-cash write-
down of plant and equipment due to the planned closure of the Malaga plant, with production being transferred
to Cardup to allow the sale of the valuable Malaga site.
Following the acquisition of the Greenbushes sawmill in Western Australia, a restructure of Auswest Timbers
operations was implemented in the second half of the year, to significantly improve the efficiency of operations in
that state. One-off costs of $7.6 million after tax were incurred as a result of this restructure, including a non-cash
write-down of plant and equipment following the closure of the Deanmill site.
3 The Joint Venture Industrial Property Trust is a 50/50 partnership between Brickworks and Goodman Industrial Trust.
3
Significant Items ($m)
Gross
Tax
Goodwill impairment – Austral Bricks WA
Austral Bricks WA restructure
Auswest Timbers Restructure
Costs relating to Perpetual litigation
Other significant items
Significant items relating to WHSP
TOTAL
Perpetual Litigation Update
(47.3)
(6.8)
(10.8)
(2.8)
(6.6)
0.1
(74.2)
-
2.0
3.3
0.8
2.0
(2.8)
5.3
Net
(47.3)
(4.8)
(7.6)
(2.0)
(4.6)
(2.7)
(68.9)
On 20 February 2015, 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.
The cross-claim brought by Perpetual against Brickworks and WHSP is continuing. Following a lengthy discovery
process the parties are now in the process of preparing evidence for trial.
The Perpetual litigation has caused Brickworks to incur approximately $2.0 million after tax in costs during the
twelve months to 31 July 2016.
Brickworks’ Building Products Group
Summary of Housing Commencements – 12 months to June 2016
Estimated Starts4
Detached Houses
Other Residential
Total
Jun 16
Jun 15 Change
Jun 16
Jun 15 Change
Jun 16
Jun 15 Change
New South Wales5
27,739
26,704
3.9% 42,764
34,689
23.3% 70,503
61,393
14.8%
Queensland
22,632
23,174
(2.3%)
25,174
21,998
14.4% 47,806
45,172
5.8%
Victoria
33,735
32,341
4.3% 33,516
32,587
2.9% 67,251
64,928
3.6%
Western Australia
18,379
23,520 (21.9%)
7,004
8,082 (13.3%)
25,383
31,602
(19.7%)
South Australia
7,416
7,729
(4.0%)
2,958
2,867
3.2% 10,374
10,596
(2.1%)
Tasmania
1,991
2,326 (14.4%)
441
510 (13.5%)
2,432
2,836
(14.2%)
Total Australia6
112,749 116,662
(3.4%) 112,618 101,824
10.6% 225,367 218,486
3.1%
New Zealand7
26,836
22,969
16.8%
2,261
2,185
3.5% 29,097
25,154
15.7%
Total dwelling commencements for Australia were up 3.1% to 225,367 for the twelve months ended 30 June
2016. This level of residential building activity is the highest on record in Australia, driven by unprecedented
growth in other residential commencements over the past four years. In the 12 months to June 2016, other
residential developments represented around 50% of total commencements.
Other residential commencements increased a further 10.6% to 112,618 for the twelve months to 30 June 2016.
This level of other residential activity is more than double the 25 year average and almost three times the levels
recorded seven years ago.
Following three years of growth, detached housing commencements decreased 3.4% on the prior year, with
continued momentum in the major east coast states of New South Wales and Victoria offset by sharp declines
in Western Australia. Despite the strong conditions detached house commencements remain 15% below the
record level.
Conditions in New South Wales (including ACT) remain strong, with total residential commencements up 14.8%
on the prior year. Following four years of strong growth, total commencements in this region are at a new record
peak. Once again, growth was driven by other residential commencements, up 23.3% whilst detached houses
continued a trend of steady growth.
4 Original data sourced from ABSCat. 8752.0 Number of Dwelling Unit Commencements by Sector, States & Territories. June 16
quarter estimate from BIS Shrapnel.
5 Includes ACT, to align with Brickworks divisional regions.
6 Includes Northern Territory, not shown separately on table.
7 Building Consents data sourced from Statistics New Zealand – Building Consents.
4
Queensland experienced an increase in overall activity, with commencements up 5.8% to 47,806 for the twelve
months to 30 June 2016. Detached housing commencements were down 2.3%, and at levels more than 8%
below the 25 year average, represent an area of weakness in the Australian housing market.
Total commencements in Victoria of 67,251 for the year are the highest on record for any state, with a relatively
even split between detached houses and other residential developments. The rate of growth in Victoria has slowed
over the past twelve months, following a period of unprecedented increases in other residential commencements
over the prior 2 years.
Western Australia is in the midst of a cyclical decline in building activity, with a 21.9% reduction in detached
house commencements and a 13.3% decline in other residential commencements over the period.
Continued growth in New Zealand was recorded, with building consents for the year ended 30 June 2016
increasing by 15.7%.
The value of approvals in the non residential sector in Australia increased by 8.3% to $34.3 billion for the twelve
months to 30 June 2016. Within the non residential sector, Commercial building approvals decreased by 10.7%
to $11.0 billion for the period and Industrial building approvals increased 6.1% to $4.8 billion. The Educational
sub-sector, an important driver for bricks and masonry demand, was up 20.5% to $4.9 billion.
Building Products’ Results in Detail8
Year Ended July
Revenue
EBITDA
EBIT
Capital Expenditure and acquisitions
EBITDA margin
EBIT margin
Net Tangible Assets
Return on Net Tangible Assets
Full Time Employees
Safety (TRIFR)9
Safety (LTIFR)10
$mill
$mill
$mill
$mill
%
%
$mil
%
2016
748.1
102.8
75.4
52.7
13.7
10.1
620.0
12.2
1,490
19.2
1.6
2015
700.9
81.6
56.4
46.6
11.6
8.0
590.6
9.5
1,468
22.5
2.0
Change %
6.7
26.0
33.7
13.1
18.1
26.3
28.4
5.0
28.4
(14.7)
(20.0)
Revenue for the year ended 31 July 2016 was up 6.7% to a record $748.1 million, compared to $700.9 million
for the prior year. Financial year 2016 saw continued growth in building materials demand, with sales revenue
exceeding the prior year in all divisions except Auswest Timbers.
EBIT was $75.4 million, up 33.7% on the prior year, and EBITDA was $102.8 million. Earnings in the second
half of $42.8 million were 31.2% higher than the first half and 41.4% up on the prior corresponding period. This
acceleration of earnings growth was achieved despite extended periods of rain and cold weather during June
and July that impacted sales during the latter part of the year.
Unit margins were significantly higher for the year, supported by the growth of premium, higher priced products
across most divisions. This follows a sustained investment in product development and marketing over many
years, and the company’s collaboration with key influencers to position Brickworks as the leading style brand in
the industry.
Manufacturing costs were well controlled during the year, supported by an increase in production volume to meet
the higher demand, and prior period plant upgrades in some divisions.
Despite the ongoing success in managing production costs, Brickworks continues to face significant uncertainty
in relation to the availability and price of natural gas. With energy representing around 20% of the total cost of
bricks, securing a reliable and cost effective gas supply is critical to Brickworks’ operations.
Although gas has now been secured across all operations until the end of calendar 2018, pricing is extremely
volatile in each state from one year to the next. In response, the company is continuing to investigate and make
significant capital investments in a range of energy reduction, alternative fuels and green synthetic natural gas
(‘GSNG’) projects to mitigate the uncertainty surrounding future supply.
Sales and overhead costs were significantly lower as a percentage of revenue. This outcome was particularly
pleasing given the continued investment in marketing and increased spend on information technology to better
support our customer requirements.
Building Products earnings for the year also included a $7.2 million adverse impact due primarily to lower clay
receipts from building sites, and to a lesser extent the costs associated with launching the new Specialised
Building Systems division and a range of other minor items.
8 All references to earnings within Building Products represent underlying earnings, pre significant items.
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
Following four consecutive years of earnings growth, Building Products’ underlying Return on Net Tangible
Assets (‘RONTA’) was 12.2%, up from 9.5% in the prior year.
Full time equivalent employees increased by 22 during the year, taking the total number to 1,490 at 31 July
2016. This includes the addition of 20 employees as a result of acquisitions during the year. Brickworks’ on-going
commitment to maintaining a pro-active approach to workforce productivity is demonstrated by the increase in
revenue per employee to over $500,000, up 6.0% compared to the prior year.
There were 5 Lost Time Injuries (‘LTIs’) during the year, down from 6 in the prior year. This translated into a
reduction in the Lost Time Injury Frequency Rate (‘LTIFR’) to 1.6, compared to 2.0 in the 2015 financial year. The
Total Reportable Injury Frequency Rate (‘TRIFR’) decreased to 19.2 from 22.5 in the prior financial year.
Divisional Results
Austral Bricks delivered a 21.5% increase in earnings for the twelve months ended 31 July 2016, with sales
revenue up 6.9% to $405.8 million on sales volume of over 670 million bricks.
The company’s sustained investment in style and branding has contributed to the renaissance of face brick over
the past few years. Together with a focus on building strong and collaborative relationships with architects and
specifiers, this has resulted in Austral Bricks products being specified in many land-mark projects across the
country.
In New South Wales alone, Austral Bricks products were specified in over 50 high rise developments during
financial year 201611. For example, the 20 storey residential developments in Darling Square Sydney, utilising
500,000 bricks in 22 custom made shapes, and the Arc Development by Crown, also in Sydney that incorporates
8 storeys of intricate brickwork.
The success of this strategy has delivered increased sales of premium products, resulting in higher margins for
the 12 months to 31 July 2016.
At the recent Horbury Hunt awards that recognise excellence in the use of bricks in architectural design, Austral
Bricks feature in four of the six winning projects, including the residential, commercial, landscaping and overall
categories.
Performance on the east coast was particularly strong, driven primarily by the major markets of New South
Wales and Victoria. Austral Bricks has forged a strong competitive position in these markets following years of
investment in manufacturing plants and product development initiatives. Buoyant market conditions in these states
supported an increase in sales volume, and unit margins were significantly higher on the back of manufacturing
efficiencies and improved prices. In Victoria, the Wollert plant is performing well ahead of the original design
expectations, with production for the year at record levels.
Earnings in Queensland were also ahead of the prior year and gathered momentum in the second half. This
follows the completion of the first phase of the Rochedale plant upgrades, resulting in much improved product
quality and lower unit production costs. The final phase of the refurbishment program, comprising upgrades to
the kiln, kiln cars and packaging plant, is planned for financial year 2017.
Earnings in Western Australia were lower, with this market in the midst of a cyclical downturn in market activity
and intense competition for sales. As a result, sales volume was down on the prior year, despite a small decrease
in average selling price. Prices in this market are now lower than they were eight years ago.
A comprehensive restructuring plan is currently underway, aimed at delivering a market leading position in
Western Australia. During the year, work progressed on a major refit to the previously mothballed Cardup plant to
fit advanced automation, set to deliver improved product quality and significantly lower production costs. These
upgrade works will be completed early in calendar year 2017, allowing the transfer of production from the less
efficient Malaga plant, to be closed and made available to the Property Group for sale.
Earnings from the New Zealand Brick Distributors joint venture were lower for the year. Although overall
market activity in New Zealand remains robust, sales have been adversely impacted by bricklayer shortages and
the limited release of land suited to brick veneer construction as part of the Christchurch rebuild program.
Austral Masonry delivered another increase in earnings on sales revenue of $90.9 million, up 4.4% on the
prior year. Total sales volume increased to 479,000 tonnes for the year, driven by strong growth in south east
Queensland and New South Wales. In these markets, grey block sales were significantly higher, buoyed by the
increase in multi-residential building where blocks continue to be a popular choice for a wide range of walling
applications. Elsewhere, the Central Queensland market is currently depressed due to a downturn in mining
related activity, whilst demand remains stable in the tourist based economy of North 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. Over the year a number of new honed and
polished blocks were launched and are now gaining traction in applications such as feature walls in residential
dwellings. Meanwhile, increased sales of higher margin engineered retaining wall systems such as “Keystone”
and “Magnumstone” had a positive impact on the result.
Bristile Roofing earnings increased on the prior year, with revenue up 11.5% to $124.2 million, on sales volume
of almost 3.7 million square metres of tiles. On the east coast, demand in Victoria was particularly strong, driving
strong earnings growth in this state. Premium imported La Escandella terracotta tiles continue to gain market
traction with sales volume increasing by a further 24.0% on the prior year.
Despite the difficult conditions in Western Australia resulting in a significant decline in sales volume, earnings in
this state were held relatively steady, due to a range of initiatives implemented to control costs and an increased
focus on securing higher margin sales.
11 Buildings greater than four storeys.
6
Over the past 12 months, Bristile Roofing has expanded its product offer, through the acquisition of two metal
roofing and fascia and gutter installers in New South Wales and one in Queensland. These acquisitions provide
diversification and earnings growth opportunities, allowing Bristile to offer an all inclusive product range that
includes locally manufactured concrete tiles, premium imported ceramic tiles, metal roofing, re-roofing and fascia
and guttering.
Austral Precast delivered a strong turn-around in performance with earnings significantly higher than the prior
year and sales volume in excess of 20,000 panels for the year. Sales revenue of $74.0 million was up 11.4%,
with strong sales growth in New South Wales and Victoria offset by weakness in Western Australia. An increased
focus on the growing high rise market, through developing “whole of structure” solutions is progressing well, with
over 50% of sales now generated from this segment.
A range of process improvements and low cost capital initiatives resulted in improved operational efficiency
across all plants. Another key focus during the period was the creation of a unified national approach to back
office functions such as estimating, drafting and quoting.
Auswest Timbers revenue was down 5.7% to $52.5 million on sales volume of 62,000m³ for the year. Significant
progress has been made to enhance operational efficiency, with productivity improvements being wide spread
across all sites. Domestic demand benefited from the strong detached housing activity on the east coast, with
the Fyshwick mill supplying roof tile battens into this market. Export demand increased from the Korean, US and
UK markets, helping to offset weaker demand from China.
In February Auswest Timbers completed the purchase of a previously shut down timber mill at Greenbushes, in
the southwest of Western Australia. This low cost modern mill was purpose built to process smaller sized Jarrah
resource, in line with expected future log supply.
Since the purchase, the mill has been recommissioned, with production volume being transferred from the now
closed Deanmill site. Operational performance is ahead of expectation with the mill delivering almost 25% lower
costs and greater throughput.
Specialised Building Systems was established during the first half of the year, with a focus on distributing high
quality, market leading products to meet the evolving demands of the building industry. All products are rigorously
tested to ensure they meet or exceed the requirements of the Building Code of Australia.
Pronto™ panels have been well accepted by the market as a lightweight, durable, non load bearing walling
solution, with significant interest from our vast network of residential and commercial customers.
INEX™ boards, a range of lightweight cementitious sheets that can be used in a wide range of flooring and
walling applications, are also proving extremely popular. Production capacity is currently being increased to meet
the large pipeline of orders and strong demand for this product.
Terracade™ façade systems also continues to gain traction with increasing sales volume, particularly in
commercial and high rise residential applications. The product range has recently been expanded to include
baguettes, an important accessory that allows the business to offer a full product solution to architects.
7
Strategic update
“We believe in making beautiful products that last forever”
Our goal is to be Australia’s best building products company
Brickworks goal of being Australia’s best building products company is supported by a strategy that comprises:
1. Strengthening the core business:
• Operations excellence
•
•
•
Consolidation and growth
Customer and key influencer relationships
Style & product leadership
2. Building new growth businesses:
•
•
•
Investing in affiliated businesses
Distributing market leading products
Creating better building solutions
3. Sustaining our strong culture
•
Embed our values across the organisation
Strengthening the core business
Operational excellence activities are focussed on achieving the lowest cost position in each of our markets.
Restructuring and productivity improvements are a fundamental requirement in achieving this. As such the
company will always take a pro-active approach and act decisively when required, as illustrated by initiatives
underway in our Western Australian operations.
Achieving the lowest cost position also requires a willingness to invest capital in facilities in order to replace
outdated equipment or make significant cost improvements. In financial year 2016 major capital investments
were made to upgrade facilities and improve the competitive position in Austral Bricks Western Australia, Austral
Bricks Queensland and Auswest Timbers.
Looking ahead, a range of other capital investment opportunities across the Group are under consideration,
including a new technology skate kiln plant in Austral Bricks WA, a state-of-the-art masonry plant in New South
Wales, an automated precast facility in Victoria and a new brick kiln at Bowral.
Brickworks is also committed to market consolidation and growth opportunities within its core business. In recent
years market consolidating acquisitions in Austral Masonry have delivered a much improved industry structure,
resulting in increased scale and profitability.
Our investment during the year to expand into metal roofing, fascia and gutter installation is an example of the
growth opportunities that are available within our core business and the company will continue to consider other
opportunities as they arise.
Developing the strongest customer and key influencer relationships is an ongoing priority for Brickworks. For
more than 30 years, the company has been investing in customer relationships through industry leading incentive
programs that now extend across the entire customer base.
The roll out of our CBD design studios was completed during the year, with studios now established in all major
capital cities. Over the past 12 months, these studios have hosted hundreds of events and attracted thousands
of customers, architects and other key influencers. This has resulted in the increasing penetration of Brickworks
products in a number of key markets such as high rise and commercial developments, as outlined earlier.
The company has continued its sustained investment in style and product leadership. This strategy starts with
the creation of desirable products, but is ultimately aimed at consumers, to drive demand. For our customers
this provides greater product choice, versatility in design and ultimately a better end product. For Brickworks,
our leadership in style and our premium products allows us to differentiate from our competitors, penetrate new
markets and secure higher margins.
A national Austral Bricks branding campaign covering television, digital and print media was launched during the
year to support this priority. This campaign, featuring brand ambassador Kate Waterhouse, promotes Brickworks
personality as stylish, aspirational, innovative, beautiful and confident.
Building new growth businesses
Just over a decade ago, the Building Products Group was a two state brick manufacturer with operations in New
South Wales and Queensland. Since that time the company has invested in affiliated businesses to become
a diversified national building products business. Acquisitions in masonry, precast concrete and timber have
provided increased end-market exposure and geographic diversification.
Brickworks has maintained a disciplined approach to expansion, with each new acquisition being closely aligned
with existing products, allowing the company to leverage customer relationships by offering an expanded range
of complimentary products. The company will continue to maintain a diligent approach to assessing acquisition
opportunities beyond the existing core businesses.
8
The company is well placed to leverage its strong relationships and channels to market to distribute new market
leading products. The launch of Specialised Building Systems during the year is an example of this. This business
utilises a low capital cost model, through establishing manufacturing and distribution partnerships with “best in
class” suppliers and leveraging Brickworks market leading customer relationships.
During the year the company also executed a distribution agreement for INEX™ boards. This follows the success
of our exclusive distribution arrangements in place for premium La Escandella roof tiles and specialised bricks
from Spain.
The Building Products Group is continually developing new and innovative products and creating better building
solutions to meet our customers’ needs. For example, over the past 12 months the company has launched the
Pronto™ panel lightweight cladding system, introduced Swiftdeck, an easy to install timber decking system, and
continued to expand its “whole of structure” precast solution.
Sustaining our strong culture
Brickworks is proud of its dynamic, hard working, “can-do” culture that has evolved over many years as the
company has grown from a two state brick manufacturer to an ASX200 company.
The company recognises that this culture is a key differentiator from competitors and a fundamental component
of its success. As such, sustaining this strong culture and embedding it across the organisation is critical, and
forms an integral part of the Building Products strategy.
Significant work was undertaken during the year to define the key values that drive the company’s culture
and ensure that these values are embedded throughout the organisation, including through the recruitment,
performance review and succession planning processes.
Building Products Outlook
Current residential building activity in Australia is at the highest level on record, driven by strong population
growth over the past five years, low interest rates and rising house prices. With approvals remaining elevated,
commencements are likely to stay high for some time to come, particularly considering the significant weather
related delays experienced in June, July and August.
Although the overall housing market remains very strong, conditions vary significantly across the country. On the
east coast, strong demand in Victoria is being fuelled by the highest rate of net interstate migration in the country.
Meanwhile in New South Wales, housing activity is expected to stay robust for an extended period of time, due
to a large undersupply of housing that developed during the 2000’s and remains significant even today. Recent
analysis from BIS Shrapnel estimates that in New South Wales there is around 15 months of unsatisfied housing
demand, even at the current record rate of building.
These conditions are reflected in a full order book in all east coast divisions with builders in the major markets of
Sydney and Melbourne reporting a long pipeline of work. In Austral Precast, work in hand extends over 9 months,
fuelled by numerous large scale projects in the commercial and multi-residential high rise sector.
The continued buoyancy of the housing market on the east coast is being offset by a cyclical decline in building
activity in Western Australia, as employment prospects in this state deteriorate, leading to slowing population
growth, high vacancy rates and reduced housing demand.
Despite the current downturn, Western Australia has a strong and entrenched tradition of brick usage, with sales
per capita being more than 3 times any other state in Australia. Therefore as the country’s largest brick maker this
is a very attractive market to Brickworks. As such the company is making the necessary investment to upgrade
facilities and rationalise manufacturing operations in that state.
The ongoing capital upgrade works at the Cardup brick plant will be a key focus in the first half of financial year
2017, whilst further rationalisation of Auswest Timbers’ Western Australian production facilities are planned over
the coming months. These initiatives will deliver significantly lower costs and much improved prospects for these
operations over the long term; however earnings will be impacted in the short term.
Elsewhere, isolated issues remain a concern in some businesses. After many years of negotiation, the Victorian
state government continues to frustrate efforts to make the required investments in our East Gippsland timber
mills, by denying certainty of log supply.
These operations now have only 9 months supply contracted, with no clarity being provided beyond that term.
As one of the largest employers in this region, these investments would provide an important boost for the local
community, as well as enabling Auswest to cost effectively meet the strong demand for product from these mills.
However, if an acceptable log contract is unable to be secured, the East Gippsland facilities will be closed.
Overall, the short term outlook for Building Products remains positive, with a full order book and a long pipeline
of work at higher margins in our major east coast markets set to support earnings in 2017. Business growth
initiatives will provide diversification and underpin earnings in the event of a cyclical decline in market activity
over the medium term.
9
Land and Development
FY2016 Result
Year Ended July ($million)
Net Trust Income
Revaluation of properties
Development Profit
Sale of assets
Property Trust
Land Sales
Waste
Property Admin and Other
Total
2016
15.3
41.8
17.8
-
74.9
1.4
1.3
(4.2)
73.5
2015
Change %
15.3
30.9
2.7
12.1
61.1
4.6
2.6
(3.8)
64.4
-
35.3
>500
-
22.6
(69.6)
(50.0)
(10.5)
14.1
Land and Development produced an EBIT before significant items of $73.5 million for the year ended 31 July
2016, up 14.1% from $64.4 million for the prior year.
The improved result was due to growth in the industrial Property Trust, generating an EBIT of $74.9 million, up
22.6% from $61.1 million in the prior year.
Net property income distributed from the Trust was $15.3 million, in line with the prior year, despite the settlement
of the Coles CDC facility in August 2015. The lost rent from this sale was offset by lower interest payments, rent
increases on stabilised assets and the additional rental income of new developments at Oakdale Central and
Rochedale.
The reduction in interest payments were the result of lower average interest rates and reduced gearing within the
Property Trust. The Property Trust gearing12 level was 34.4% at 31 July 2016, down from 38.0% a year earlier.
Three new developments were completed during the period, including two facilities for DHL at Oakdale Central,
and the Beaumont Tiles facility at Rochedale. Revaluation profit on completion of these developments totalled
$17.8 million.
Property revaluations contributed a profit of $41.8 million. This was made up of the revaluation profit of stabilised
assets of $33.4 million, due to compression in capitalisation rates, and an additional EBIT of $8.4 million following
pre-leases being secured at Oakdale Central.
Land Sales contributed an EBIT of $1.4 million for the year. Transactions included the sale of 16 properties and
2 blocks of vacant land at Pemberton, Western Australia, originally part of the Pemberton mill leasehold land
parcel.
Waste Management contributed a profit of $1.3 million for the year, down from $2.6 million in the prior year. This
was due to the completion of the royalty period on the Horsley Park landfill in February 2016.
Property administration expenses totalled $4.2 million, up from $3.8 million in the prior year. These expenses
include holding costs such as rates and taxes on properties awaiting development.
Property Trust
The total value of assets held within the Property Trust at 31 July 2016 was $1.011 billion. This includes $787.3
million in leased properties and a further $223.8 million in land to be developed.
Borrowings of $347.4 million are held within the Property Trust, giving a total net asset value of $663.7 million.
Brickworks Group share of net asset value was $331.9 million, down $5.1 million from $337.1 million at 31 July
2015 due to the Coles CDC sale. Since this sale, Brickworks Group share of the Trust’s net asset value has
increased by $53.9 million.
The entire Property Trust portfolio consists of “A grade” facilities, each less than seven years old, with long lease
terms and stable tenants. The annualised gross rent exceeds $51 million, capitalisation rates range from 6.3% to
8.3% and there are currently no vacancies.
12 Borrowings divided by total Property Trust assets including land to be developed.
10
Summary of Property Trust Assets – Leased Properties Only
Note: The Trust also holds land to be developed with a value of $223.8 million
Estate
M7 Hub
Interlink Park
Wacol
Oakdale
Rochedale
Total
Asset Value
($m)
Gross Lettable
Area (m²)
Gross Rental
($m p.a.)
WALE13 (yrs)
Cap. Rate
117.6
356.8
12.8
276.0
24.1
787.3
64,125
192,207
10,384
146,556
12,912
426,184
8.2
23.1
1.2
17.1
1.5
51.1
4.1
6.2
2.1
6.8
12.0
6.1
6.4%
6.3%
8.3%
6.3%
6.3%
6.4%
Brickworks Development Land
Development land is excess to Building Products operations requirements and is held within the Land and
Development Group. Where appropriate, development land is rezoned residential and sold. Alternatively the land
is rezoned industrial and transferred into the Property Trust for future development.
Development
Land
Gross Land Area (ha)
Development
Area (ha)
Book Value
($m)
Potential
Value ($m)
NSW
VIC
QLD
WA
Total
FY16
FY15
Change
154
332
36
-
522
154
332
36
187
709
-
-
-
(187)
(187)
97
196
14
-
307
14
29
2
-
45
73
146
11
-
230
In total development land has the potential to be worth at least $230 million, assuming rezoning and development
approval of these properties.
The largest site held for development is at Craigieburn in Victoria. Delays have been experienced on the rezoning
of part of this site to residential, with the Metropolitan Planning Authority (“MPA”) still working on the finalisation
of its Quarry Investigating Area Plan. As a result Brickworks is now collaborating with other landowners in this
Area Plan to produce development concepts that may accelerate the project, subject to regulatory approvals.
Brickworks Operational Land
Operational land is utilised in the day to day activities of the Building Products Group. The total value of operational
land is around $368 million14, due primarily to valuable land held within New South Wales and Western Australian
operations.
Operational Land
Gross Land Area (ha)
FY15
Change
FY16
Book Value
($m)
Valuation
($m)
NSW
VIC
QLD
WA
SA & TAS
Total
486
567
464
1,968
272
3,757
435
567
470
1,781
272
3,525
51
-
(6)
187
-
232
47
22
29
40
7
145
163
23
41
128
13
368
During the year a 51 hectare parcel of industrial land adjoining Brickworks existing quarry was purchased at
Berrima. In addition the 187 hectare Cardup site in Western Australia was re-classified as operational land as a
result of the works in progress to re-start this facility.
13 Weighted average lease expiry.
14 Based on feasibility assessment by independent valuers on the future land value if rezoned and rehabilitated and excludes any
development profit to Brickworks.
11
Land and Development Outlook
Development activity in the Property Trust in financial year 2017 will be extremely strong, with a number of new
developments at both the Oakdale Central and Rochedale estates. At Oakdale Central in New South Wales, a
total of 83,945m² of new developments will be commenced during FY2017, whilst at Rochedale in Queensland
63,000m² will be commenced.
Asset Value
($m)
787.3
149.4
Gross
Lettable
Area (m²)
426,184
83,945
111.3
63,000
Current Leased Assets
New developments at
Oakdale
New developments at
Rochedale
Future Leased Assets15
1,048.1
573,129
Gross Rental
($m p.a.)
WALE (yrs)
Cap. Rate
51.1
9.4
6.8
67.3
6.1
8.2
13.2
7.1
6.4%
6.4%
6.1%
6.3%
Once completed, these new developments will contribute in excess of $16 million in gross rental income to
the Property Trust (greater than the $15.1 million rent received from the Coles CDC facility). Together with the
significantly lower interest payments within the Property Trust, net trust income attributable to Brickworks will
grow strongly over the next two years.
Medium term growth is also expected to be strong with further expansion to be focussed on the remaining land
at Oakdale Central (2.8 hectares) and Rochedale (7.0 hectares), followed by the vast Oakdale South Estate.
At Oakdale South, 28 hectares of land sales were secured in financial year 2016, subject to DA approval and
conditions. This includes a 6.4 hectare parcel to Toyota Motor Corporation Australia and 7.0 hectares to Sigma
Pharmaceuticals, and will generate sales to the Property Trust of around $90 million late in 2017. These sales will
underpin the commencement of infrastructure to the entire 70 hectare estate, opening up 43 hectares of land to
meet the pre-commitment market. Development of this land is likely to extend for around five years.
Looking further ahead, planning work is also well underway for the Oakdale West site, owned by Brickworks, with
a State Significant Development Applications for this 100 hectare (developable area) property lodged by early
October 2016. The first section of this property will then be ready for sale into the Property Trust in financial year
2017, generating a land sale profit to Brickworks. Development of this site within the Property Trust will then likely
extend for up to a decade from 2020.
Investments
The underlying EBIT from total investments was up 8.6% to $59.6 million in the year ended 31 July 2016.
Washington H. Soul Pattinson Limited (‘WHSP’) ASX Code: SOL
Brickworks Group’s investment in WHSP returned an underlying contribution of $59.1 million for the year ended
31 July 2016, up 8.3% from $54.6 million in the prior year. This was due primarily to an increase in earnings from
TPG Telecom.
The market value of Brickworks 42.72% share holding in WHSP was $1.782 billion at 31 July 2016, up $381.4
million from $1.401 billion at 31 July 2015. This investment continues to provide diversity and stability to earnings,
with cash dividends totalling $52.2 million received during the year, up 4.2% on the prior period.
WHSP has delivered outstanding returns over the long term, with fifteen year returns of 12.6% per annum to 31
July 2016 being 4.5% ahead of the All Ordinaries Accumulation Index.
WHSP holds a significant investment portfolio in a number of listed companies including Brickworks, TPG
Telecom, New Hope Corporation, Australian Pharmaceutical Industries, BKI Investment Company, Ruralco
Holdings and Apex Healthcare Bernhard.
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. This dividend helps to balance the cyclical earnings from Brickworks’ Building Products
and Land divisions.
Investments Outlook
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.
Building Products Group Outlook
Building Products earnings for the 2017 financial year will be underpinned by a full order book and a long pipeline
of work at higher margins in our major east coast markets. Land and Development earnings will be supported by
the sale of Oakdale West into the Property Trust, and an unprecedented level of development activity within the
Trust. Investment earnings are expected to deliver steadily increasing earnings and dividends over the long term.
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.
15 Excludes land to be developed and any changes in value of current leased assets.
12
After balance date events
On 17 August 2016 the Group’s $100 million working capital facility was extended until December 2018. This
facility was not drawn as at 31 July 2016.
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 with an unremitting
determination to achieve continual improvement in safety.
The safety performance continued to improve for the Brickworks Group in FY2016. The lost time injury frequency
rate (LTIFR) reduced by 19.9% down to 1.6 while the total recordable injury frequency rate (TRIFR) was 19.2
down by 14.6%. Total workplace injury frequency rates also declined recording a 17.5% reduction from the
previous year.
Key to Brickworks’ continual improvement in safety performance are a number of initiatives which include
employee wellbeing programs focusing on employee health and welfare, ongoing employee education utilising
the Brickworks Online ELearning platform, diligent recruitment processes which include functional health
assessments for all new recruits and a robust WHS Management system specifically developed for Brickworks
businesses underpinned by a structured rigorous audit program. Another focus this year was trialling the
effectiveness of emerging technologies to improve health and safety outcomes in Brickworks. Employee fatigue
measurement devices are under evaluation.
The standardisation of the WHS management system in all divisions of the Company has provided a consistent
approach to managing safety to reduce risk. The computerisation of this management system has commenced
which will add a new dimension to managing safety providing real-time information throughout the Brickworks
Group. Engaging employees and contractors through consultation, to identify physical hazards and effective
controls has also proven to be another key activity in reducing workplace injury rates.
Brickworks has a strong measurement culture with workplace health and safety goals effectively communicated
throughout all levels of the business. Safety activities are monitored utilising lead and lag performance indicators
which are benchmarked both internally and externally to guide Brickworks workplace health and 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 emphasizing every employee’s responsibility for environmental
performance. Management of Brickworks’ environmental responsibilities, objectives and commitments will be
further improved by the national integration of management systems that is underway to form a Safety, Health
and Environment Management System (SHEMS). The manual elements and procedures common to both safety
and environment have been written, with the SHEMS to be implemented progressively during 2016/17 and
onwards. A key component of the implementation will be the migration of the SHEMS from a paper-based system
to one that operates on-line with greater performance and higher efficiency.
Brickworks maintains its commitment to reducing its energy consumption and carbon footprint through the use of
clean, renewable fuels as substitutes for natural gas which aligns with the Australian Government’s commitment
following the historic Conference of the Parties COP21 in Paris in December 2015.
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. Brickworks has been working with its suppliers of landfill gas to increase available
volumes and invests in kiln technology to accept the additional landfill gas. The network tariff reassignment
project and capacity management continued throughout the year, which resulted in substantial reductions in
electricity and network charges. 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.
An innovative reduction system was commissioned in Bowral, NSW. It is the first of its kind in Australia and
significantly reduced energy requirements. The site has seen a 33% reduction in electricity and 46% reduction in
natural gas consumption. The upgrade has also resulted in a decrease of carbon emissions by 12,456 tonnes of
carbon dioxide per year and reduction in air emissions.
The successful launch of the Carbon Neutral brick has created much interest from the design and architectural
community and we are currently reviewing the opportunity to undertake Environmental Product Disclosures on
similar products utilizing clean renewable fuel sources with lower embodied carbon.
13
Austral Bricks NSW won the Government of NSW inaugural Green Globe Award for Energy Efficiency in October
2015. The company was recognized for its efforts in relation to the switch from natural gas to landfill gas and the
addition of sawdust in its bricks. The project has resulted in a reduction of natural gas consumption and 12,000
tonnes a year of greenhouse gases.
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 referencing key legislation. Each operational
manufacturing and quarry 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.
New South Wales production facilities and mine areas are administered under the Protection of the Environment
Operations Act 1997, 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 Environment Protection 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 Environment Protection Act 1993, while mining and
rehabilitation plans are approved in accordance with 2011 Regulations under the Mining Act 1971.
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 and the Mineral
Resources Development Act 1995.
Audit and assurance programs are an integral aspect of Brickworks’ environment management systems assisting
in measuring performance and mitigating environmental risks. A total of 17 independent annual audit reports
covering 21 sites were completed this year, which were supplemented by two 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 continues to investigate all these instances of non-compliances, working
closely with the relevant authorities to resolve these issues. The Queensland Department of Environment and
Heritage Protection issued a summons to Austral Masonry (Qld) regarding the unlicensed operation of a small
sand quarry at Bundaberg. The site has been completely rehabilitated and the Company is working with the
regulator to resolve the matter without a need for a trial.
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:
14
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 2016 financial year, the Group
commenced the recommissioning of the Cardup plant and announced the planned
closure of the Malaga plant in WA.
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 ranging from 2 to 5 years, ensuring that a maximum of $200 million
will expire at any one point in time.
15
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
Director since 1984
New Hope Corporation Ltd
TPG Telecom Ltd
BKI Investment Company Ltd
Milton Group
Director since 1995
Director since 2000
Director since 2003
Director since 1998
Australian Pharmaceutical Industries Ltd
Director since 2000
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
Remuneration Committee and the Nomination Committee.
Other directorships:
Ruralco Holdings Ltd
Director since 2007
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:
Barangaroo Delivery Authority
Appointed 2009, Resigned 2014
GPT Group
Director since 2009
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 Remuneration Committee and the
Nomination Committee.
Deborah R. Page AM B.Ec, FCA, FAICD
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:
Service Stream Ltd
BT Investment Management Ltd
GBST Holdings Ltd
Investa Listed Funds Management Ltd
(responsible entity of ASX listed Investa
Office Fund)
Director since 2010
Director since 2014
Director since 2016
Appointed 2011, Resigned 2016
Australian Renewable Fuels Ltd
Appointed 2012, Retired 2015
The Colonial Mutual Life Assurance Society Ltd
(wholly owned subsidiary of CBA)
Appointed 2007, Resigned 2014
Commonwealth Insurance Ltd
(wholly owned subsidiary of CBA)
Appointed 2007, Resigned 2014
16
The Hon. Robert J. Webster MAICD
Director
Mr. Webster was appointed to the Board in 2001 and is a non executive Director. He is Senior Client Partner in
Korn Ferry’s Sydney office. He is the Lead Independent Director, Chair of the Nomination Committee, a member
of the Remuneration Committee and a member of the Audit and Risk Committee.
Other directorships:
Greater Sydney Land Services Board
Appointed 2013
Allianz Australia Insurance Ltd
Appointed 1997, Resigned 2013
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
Robert Bakewell B.Comm; CA
Chief Financial Officer from 1 June 2016
Mr Bakewell was appointed Chief Financial Officer in June 2016. He is a finance and commercial executive with
more than 20 years experience in listed Australian and international industrial companies including significant
experience in mergers and acquisitions, restructuring, balance sheet and capital management and investor
relations. Mr Bakewell was previously Chief Financial Officer of Arrium Limited since 2010 and prior to this held
various senior management roles with ABB.
Alexander J. Payne B.Comm; Dip CM; FCPA; FCIS; FCSA
Chief Financial Officer until 31 May 2016
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. Mr Payne will retire on 30 September 2016 after 30 years with the Company.
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
Committee
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
11
11
9
11
11
11
11
10
2
N/A
N/A
N/A
2
N/A
2
1
3
3
3
N/A
3
3
3
3
2
2
2
N/A
2
2
2
2
6
N/A
N/A
6
6
6
5
6
17
Directors interests
As at 20 September 2016, 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
5,774,100
5,748,142
189,982
15,209
102,268
4,800
15,922
As at 20 September 2016, 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 20 September 2016, 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 20 September 2016, 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.
18
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 that is closely aligned to the achievement of the Company’s strategy and business
objectives. During financial year 2015 the Board made a number of changes to its remuneration structure as
disclosed in last year’s Remuneration Report as follows:
•
•
•
enhanced disclosure particularly around the payment of short term incentives to Key Management Personnel
(KMP);
placed greater emphasis on and enhanced the level of disclosure of the performance criteria used to
determine shares allocated under the long term incentive plan (LTI); and
introduced a new TSR performance measure for the LTI which applies to the Managing Director (MD) and
the Chief Financial Officer (CFO).
Following the vote on the Remuneration Report at the Company’s 2015 Annual General Meeting and a review
of the relevant proxy advisor reports, the Board has enhanced its disclosure of the Company’s remuneration
framework particularly regarding:
•
•
•
•
the link between performance and payment of short term incentives (STI) to KMP including outcomes against
various performance hurdles of the STI;
the rationale behind the LTI and selected TSR measure for the MD and CFO;
enhanced disclosure regarding the pre-allocation performance measures for the LTI; and
historical performance of the Brickworks share price against index returns.
The key remuneration objectives remain driving higher performance and retaining key staff.
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
Mr R. Bakewell
Ms M. Kublins
Mr D. Fitzharris
Mr M. Finney
Chief Financial Officer until 31 May 2016. He remains a KMP until his retirement
on 30 September 2016
Chief Financial Officer from 1 June 2016
Executive General Manager – Property & Development
Group General Manager Sales – Brickworks Building Products
Group General Manager – National Operations and Austral Bricks East Coast
until 1 April 2016
Mr P. Scott
Group General Manager WA – Brickworks Building Products
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
19
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 KMP 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.
•
The consideration paid for the remuneration benchmarking for executive KMP provided by Guerdons was
$35,695.
• Remuneration information was provided to the Remuneration Committee as an input into decision making
only. The Remuneration Committee considered the information 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 information applies, 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. 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.
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
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 the individual and the division and/or Group in
which they work. 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 2.4. Short term
incentives paid reflect the increased profit generated by the Building Products and the Land and Development
division in FY2016.
The primary purpose of Brickwork’s LTI is the retention of the Company’s senior executive team, as many
years may be required for an individual to develop a complete knowledge of the operating and manufacturing
20
processes for building materials. 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 has developed an effective
retention based long term incentive plan which operates over a series of rolling 5 year periods. In addition, for
share allocations to the Managing Director and the Chief Financial Officer approved after 31 July 2015 a TSR
performance measure applies, recognising their Group roles and their 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. Because of the 5 year vesting periods that apply to all of the shares granted to Brickworks
executives, there are very strong incentives for share price growth to be achieved and maintained at an individual
and a group level. The ongoing inclusion of a TSR component in the long term incentive plans for the Managing
Director and the Chief Financial Officer further enhances the alignment of executive interests with those of
shareholders.
Brickworks’ ongoing emphasis on aligning LTI outcomes with medium-long term financial performance has
fostered the development and maintenance of an organisational culture that is characterised by co-operative
endeavour and mutual respect which has contributed to the following outperformance:
• An increase in the annual EBIT (before significant items) generated by the Building Products and Land and
Development divisions from $47.5 million in the 2012 financial year to $148.8 million in the year to 31 July
2016.
•
•
The Returns on NTA for the Building Products and Land and Development divisions demonstrate an increase
from 6.2% in 2012 to 16.1% in 2016.
The Operating Cash Flows generated by the Building Products and Land and Development divisions has
demonstrated continuous improvement from $45.7 million for the year ending 31 July 2012 to $121.8 million
for the year ending 31 July 2016.
While the Board is of the opinion that the Company’s current strategies and operational initiatives will deliver
superior long term results to shareholders and 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. Although
a detailed discussion on the current year results is included in the review of operations and is not duplicated in
full here, an analysis of the figures below demonstrates dividend growth, and consistent performance in a difficult
cyclical environment.
2012
2013
2014
2015
2016
Total revenue (millions)
$556.9
$606.5
$670.3
$723.6
$751.0
Combined Building Products & Property
EBIT before significant items (millions)
Net profit before significant items after tax
(millions)
$47.5
$82.4
$107.5
$120.7
$148.8
$78.9
$100.0
$101.3
$120.3
$147.1
Net profit after tax (millions)
$43.3
$85.2
$102.8
$78.1
$78.2
Net Tangible Assets (millions)
$1,393.1
$1,450.9
$1,516.8
$1,572.1
$1,630.2
Share price at year end
$10.08
$12.20
$14.30
$14.90
$15.03
Dividends – ordinary shares (cents)
40.5
40.5
42.0
45.0
48.0
Employee Productivity
Brickworks productivity measures have also improved over time. The following graph shows historical revenue per
employee. Despite having grown substantially employee productivity has not been compromised in the process.
21
Total Shareholder Returns
In addition, as can be seen in the graph below, Brickworks continues to outperform the All Ordinaries Accumulation
Index in terms of Total Shareholder Return over the medium to long term.
Returns for the 3 years to 31 July 2016 were 10.4%, representing a 1.9% outperformance compared to the All
Ordinaries Accumulation Index of 8.5%. Similarly returns over 5 years to 31 July 2016 were 12.3 %, representing
a 2.9% outperformance compared to the All Ordinaries Accumulation Index of 9.4%.
Over 15 years, Brickworks has delivered returns of 8.7% per annum, compared to index returns of 8.1% per annum.
2.2 Potential Remuneration Mix
Total remuneration for the Managing Director (MD) and the other executive KMP comprises both fixed
remuneration and an at risk component (STI and LTI). The mix shown in the graph below is the potential
remuneration based on the current remuneration at 31 July 2016 with STI and LTI based on maximum
opportunities. Any excess STI earned above 50% of total fixed remuneration will not be paid as a cash bonus but
will be added to the long term incentive share allocation for that year with deferral over 5 years. This structure is
designed to pay executives competitively based on their performance.
POTENTIAL MANAGING DIRECTOR
REMUNERATION MIX
AVERAGE POTENTIAL OTHER EXECUTIVE
KMP REMUNERATION MIX
Fixed Remuneration 51.2%
Fixed Remuneration 53.0%
STI – Cash 24.4%
LTI 24.4%
STI – Cash 23.6%
LTI 23.6%
2.3. Remuneration Component- Fixed Remuneration
There has been no material increase in total fixed remuneration for executive KMP during the 2016 financial year.
2.4. Remuneration Component - Short Term Incentives (STI)
The table below outlines the STI Plan:
Purpose
Timing
The STI is an annual bonus designed to reward executives for meeting or
exceeding financial and non financial objectives over a one year period.
The STI is awarded in cash up to a maximum of 50% of total fixed remuneration
(including base salary, superannuation and car allowance).
Any excess STI earned above 50% of total fixed remuneration will not be paid as
a cash bonus but will be added to the long term incentive share allocation for that
year with deferral over 5 years.
22
Target opportunities
Performance measures
The MD and CFO have a target STI opportunity of 50% of base salary while other
executives have a target STI opportunity of between 12.5% and 50% of base
salary. STI 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.
Each year the Remuneration Committee sets KPI’s for the MD and CFO for the
financial year, with a view to directly aligning the individuals’ annual incentive
opportunity to execution of the Group’s business strategy.
The MD determines the KPI’s which are aligned to the delivery of the strategy and
performance of the business.
Payments under the STI are determined by performance against KPIs.
STI performance measures and weightings vary by executive depending on
individual accountabilities for the financial year 2016. The metrics and their
rationale for selection are as follows:
Rationale for selection
Financial measures
Divisional profit compared with
the base target
Cash generation
Non-financial measures
Strategic
Operational
Safety, Heath and Environment
People
Focus senior executive attention on results
and performance for segments for which they
have direct responsibility.
Managing cash to ensure cash and working
capital is available whenever and wherever
required by the business.
Focuses senior executives on strategic
initiatives such as new product development,
network strategy, rationalisation of surplus
assets, restructuring and rationalisation of
operations to deliver growth and improve
business performance.
Key operational deliverables align
management to the strategic initiatives of the
Group with a focus on long-term sustainability
of earnings such as production and returns on
net tangible assets, efficiencies, operational
and manufacturing improvements.
Rewards employees for demonstrated
leadership in enhancing workplace safety and
taking a sustainable approach to operations
through scientific innovation.
Effective leadership, talent development,
retention and succession planning are critical
to the success of the business and underpin
financial performance.
Weighting of
performance measures
The STI for all KMP is weighted 75% for financial measures and 25% for non-
financial measures.
The payout schedule against the financial measures is outlined below:
Percentage of financial component payable (ie. 75% of total STI)
% of profit target achieved
Between base target and upper
target
> upper target
% of cash target achieved
Between base target and upper
target
Straight-line between 50% and 100%
Pro rata equal to the percentage over
budget to a maximum of 50% of total fixed
remuneration
Straight line between 50% and 100%
There is no upside available against cash and non-financial measures.
23
Performance
assessment
MD and CFO
At the end of the financial year the Remuneration Committee assesses actual
performance against their respective KPIs and recommends the STI quantum to
be paid to the individuals for approval by the Board.
These assessment methods have been chosen as they provide the Remuneration
Committee with an objective assessment of each individual’s performance.
Other Executives
At the end of the financial year the MD assesses the actual performance against
their respective KPIs and determines the STI quantum to be paid to the senior
executives. The MD provides these assessments to the Remuneration Committee
annually.
The Remuneration Committee and the MD have the discretion to take into
account any significant non-cash items, for example acquisitions and divestments
and one-off events/abnormal/non-recurring items in determining whether the
financial KPIs have been achieved, wherever and whenever this is considered
appropriate for linking remuneration reward to Company performance.
Other features
Unvested Performance Shares
On retirement or redundancy of KMP unvested performance shares remain on
foot and vest according to the original terms of the five year grant period.
Clawback
Although there are currently no clawback clauses for STI payments, each
executive has a strong ongoing interest in the financial performance of the
Company and thereby the value of the Company’s shares.
Termination
For resignations or terminations for cause, the STI payment is forfeited unless
otherwise determined by the MD or the Board.
STI outcomes
The table below outlines the weighting of financial and non-financial KPIs in relation to each executive KMP
for financial year 2016 and the performance achieved. Unless otherwise stated all earnings measures exclude
significant items.
Executive
Financial
75%
Non-financial
25%
Measure(s)
Performance Measure(s)
MD & CFO
• NPAT for Building
Products and Land &
Development against
target
• Operating cash flow for
Building Products and
Land & Development
against target
• NPAT against target
EGM Land &
Development
109% achieved • Mixture of Strategic,
Operational, Safety,
Health and Environment
and People relevant to
the executive
111% achieved
Performance
100%
achievement of
non-financial
KPIs
114% achieved • Mixture of Strategic and
Operational relevant to
the executive
100%
achievement of
non-financial
KPIs
• Divisional cash
107% achieved
generation against target
GM Sales –
Brickworks
Building
Products
• Divisional EBIT against
target for Bristile Roofing
East Coast, Austral
Bricks East Coast,
Austral Masonry, Austral
Precast and Export
107% achieved • Mixture of Strategic,
Operational, Safety,
Health and Environment
and People relevant to
the executive
98%
achievement of
non-financial
KPIs
• Divisional cash
124% achieved
generation against target
for Bristile Roofing East
Coast, Austral Bricks
East Coast, Austral
Masonry, Austral Precast
and Export
24
• Divisional EBIT against
Not achieved
target
• Mixture of Strategic,
Operational, Safety,
Health and Environment
and People relevant to
the executive
60%
achievement of
non-financial
KPIs.
• Divisional cash
Not achieved
generation against target
GM WA
Brickworks
Building
Products
STI achieved
The table below outlines the weighting of financial and non-financial KPIs in relation to each executive KMP for
2016 and the performance achieved.
The following table outlines the percentage of target STI achieved (and forfeited) in relation to financial and non-
financial KPI’s, and the total STI awarded, for each executive KMP for 2016.
Financial
Non-financial
Executive
STI On
Target
Opportunity
Weighting
%
Achieved
%
Forfeited
%
Weighting
%
Achieved
%
Forfeited
%
STI
awarded
$
STI over
performance
subject to
LTI
$
637,500
300,000
227,500
75%
75%
75%
114%
114%
107%
280,000
75%
103%
0%
0%
0%
0%
25%
25%
25%
100%
100%
100%
0%
0%
0%
669,000
34,067
324,250
6,605
239,045
–
25%
98%
2%
280,000
5,427
163,875
75%
0%
100%
25%
60%
40%
25,000
–
MD
CFO
EGM Land &
Development
GM Sales –
Brickworks
Building
Products
GM WA
Brickworks
Building
Products
25
2.5.
Remuneration Component – Long- Term Incentives (LTI)
What is the LTI?
The Group operates an LTI Plan through the Brickworks Deferred Employee Share Plan
in which employees receive Brickworks Limited shares. No consideration is payable by
participants for shares under the terms of the plan.
Scope
Purpose
Opportunity
The LTI is a broad based employee share plan with 590 employees participating as at
31 July 2016 via 1,399,459 shares on allocation of which 50.62% remain unvested (and
49.38% vested). In addition 46,818 shares in the plan were forfeited during the year to 31
July 2016.
The primary purpose of the 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.
For the 2016 financial year, the value of shares granted was dependent upon the
employee’s position within the Group and their base salary. For the MD and all other
executive KMP, this entitlement was up to 50% 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 fixed remuneration and outperformance against the STI measures
being recognised by the grant of additional LTI shares.
Pre-allocation
performance
measures
Performance criteria will be considered by the Board at its discretion before plan shares
are allocated. This includes an assessment of the factors below and having regard to
general market conditions that have an impact on demand for Brickworks products.
LTI allocations to KMP will reflect the level of performance achieved against these criteria.
Unless otherwise stated all earnings measures exclude significant items.
Executive
Measure
MD & CFO
• Return on NTA Building Products and Land and
Development over past 3 years against target
Performance
Achieved
• NPAT for Building Products and Land and
Development over past 3 years against target
Achieved
• Operating cash flow for Building Products and Land
& Development against target over the past 3 years
Achieved
• Strategic goals including consolidation and growth,
securing lowest cost manufacturing facilities and
create better building solutions
Achieved
EGM Land &
Development
• Return on NTA Land and Development over past 3
Achieved
years against target
• EBIT for Land and Development over past 3 years
Achieved
against target
• Divisional cash generation for Land and
Achieved
Development against target over the past 3 years
• Strategic goals including on-going rezoning of
Achieved
surplus land and its reallocation to the Property
Trust
GM Sales –
Brickworks
Building Products
• Return on NTA for Bristile Roofing East Coast,
Achieved
Austral Bricks East Coast, Austral Masonry, Austral
Precast and Export over the past 3 years against
target
• EBIT for Bristile Roofing East Coast, Austral Bricks
East Coast, Austral Masonry, Austral Precast and
Export over the past 3 years against target
Achieved
• Divisional cash generation against target for Bristile
Achieved
Roofing East Coast, Austral Bricks East Coast,
Austral Masonry, Austral Precast and Export over
the past 3 years
• Strategic goals including development and
strengthening of customer relationships and
channels to market with a focus on complementary
products across the Group
Substantially
achieved
26
GM WA
Brickworks
Building Products
• Return on NTA for Austral Bricks WA and Bristile
Not achieved
Roofing West Coast over the past 3 years against
target
• EBIT for Austral Bricks WA and Bristile Roofing West
Not achieved
Coast over the past 3 years against target
• Divisional cash generation against the target for
Not achieved
Austral Bricks WA and Bristile Roofing West Coast
over the past 3 years
• Strategic goals including plant rationalisation and
modernisation
Partially
achieved
Post-allocation
performance
measures
For allocations approved and made after 31 July 2015, 50% of shares allocated to the
MD and CFO will be assessed for vesting against an annual TSR target of 7.0% (TSR
Shares). A TSR based vesting test will not apply to any allocation made or agreed to be
made before 31 July 2015 and not yet vested.
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 MD and the CFO will continue to vest progressively at
20% per year based on tenure.
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 subject to the overriding
requirement that for each allocation shares can only vest up to the maximum of the
amount of that allocation:
• If the 7.0% TSR target (as explained above) is met, 100% of TSR Shares will vest;
• If a 6.0% TSR target (as explained above) is met, then 50% of the TSR Shares will vest;
• If the TSR target (as explained above) of 6.0% is not met, then no shares will vest in
that initial year of testing. To ensure a long term focus is maintained by the MD and
CFO, 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 may only be made up by outperformance by the
end of the 6th year from the date of first allocation;
• If the TSR target (as explained above) of 8.0% is met, there will be an incremental
vesting of up to 50%, of each prior year’s entitlement, if any of the allocation did
not vest. To ensure long term focus is maintained, by the MD and CFO this enables
underperformance in previous years to be partially made up by this over performance
in this and 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.
The broad based nature of the LTI that applies to 40% of the Company’s workforce means
that a TSR target is appropriately applied to the MD and CFO who have a material impact
on the overall share price. This TSR measure should not be extended to employees that
do not have control over Brickworks share price.
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. An
absolute 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.
27
Rationale
for chosen
performance
measures and
hurdles
There has been actuarial input in relation to the new TSR performance measure which,
confirms that the vesting tests provide an appropriate balance between the key objectives
of performance and retention. The share price graph on page 22 also helps to illustrate
the appropriateness of a 7% absolute TSR given historical performance of Brickworks
shares against the All Ordinaries Accumulation Index on a 1, 3 and 5 year basis.
An absolute TSR also avoids the situation where an LTI may be awarded despite
particularly low or negative TSR being achieved which aligns the plan with shareholder
interests.
Also 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.
In addition, the TSR performance target for each allocation in any 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 purpose of this is to average
the share price calculation over a particular cycle to remove vesting exposure and to
ensure a long term focus on the business by the MD and CFO is achieved.
Other features
Unvested Performance Shares
On retirement or redundancy unvested performance shares for executive KMP remain on
foot and vest according to the original terms of the five year grant period including TSR
performance testing.
Clawback
Although there are currently no clawback clauses for LTI payments, each executive has
a strong ongoing interest in the financial performance of the Company and thereby the
value of the Company’s shares.
Change of Control
If a change of control event occurs in relation to Brickworks Limited then any shares held
by the employee share plan trust on behalf of a participant will vest immediately upon the
announcement to ASX of a change of control event.
Treatment of Dividends
The employee receives the voting rights and any future dividends immediately upon the
granting of shares. This reflects the relatively long term nature of the 5 year performance
period and that the primary purpose of the LTI is one of retention. Executive’s entitlements
to dividends attributable to the unvested performance shares reflect the reality that if
there is no dividend entitlement, the number of performance shares that would need to be
granted to achieve the same retention impact, is likely to be approximately 10% to 15%
greater than current allocations.
Sources of Shares
The Board has the discretion to either purchase shares on-market or to issue new shares
for participants.
During the year shares granted to the MD through the LTI were purchased on market.
Shares granted to employees other than the MD were issued as new shares.
Derivatives
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.
2.5.1. Other Company wide share plan
In addition to the Brickworks 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.
2.5.2. Market purchases
In accordance with ASX Listing Rule 10.14, the Company contribution to the Brickworks Exempt 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 2016, there were 722 employees participating in the Brickworks Deferred Employee Share Plan and
the Brickworks Exempt Employee Share Plan, holding 1,508,253 shares (1.01% of issued capital).
28
During the year, all monthly share purchases through the Brickworks Employee Share Plans were performed
on market, as were shares granted to the MD through the Deferred Employee Share Plan. Shares granted
through the Deferred Employee Share Plan to employees other than the MD were issued as new shares.
3. Employment Contracts
3.1 Termination payments
A payment will be made by the Company to a KMP 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.
Brickworks does not have fixed term contracts with its executive KMP. It can terminate an executive KMPs
employment on 2 month’s notice (or payment in lieu of notice) and executives can terminate on 2 month’s
notice (apart from the CFO who must be given 3 months notice, and the MD who must be given 6 months
notice).
If the MD 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.
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.
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
29
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 2016 are disclosed in the following table.
Directors
RD Millner
MJ Millner
BP Crotty
DN Gilham
DR Page
RJ Webster
LR Partridge
Total Directors
Other Key
Management
Personnel
AJ Payne1
RC Bakewell2
M Kublins
DT Fitzharris
M Finney3
P Scott
D Millington4
Total Other KMP
Year
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Year
2016
2015
2016
2016
2015
2016
2015
2016
2015
2016
2015
2015
2016
2015
Base fees /
salary
Non-
monetary
benefits
Post
Employment
(Super)
Total
fixed
remuneration
Short Term
Incentive
Long Term
Incentive
218,995
214,612
109,589
107,306
120,776
114,155
109,589
107,306
120,776
118,037
116,667
114,155
1,318,667
1,269,173
2,115,059
2,044,744
–
–
–
–
–
–
–
–
–
–
–
–
20,805
20,388
10,411
10,194
11,474
10,845
239,800
235,000
120,000
117,500
132,250
125,000
10,411
120,000
10,194
11,474
11,213
11,083
117,500
132,250
129,250
127,750
10,845
125,000
–
–
–
–
–
–
–
–
–
–
–
–
Total
239,800
235,000
120,000
117,500
132,250
125,000
–
–
–
–
–
–
– 120,000
–
–
–
–
–
117,500
132,250
129,250
127,750
125,000
5,965
6,891
5,965
6,891
19,333
1,343,965
669,000
658,072
2,671,037
18,827
1,294,891
642,084
530,803
2,467,778
94,991
2,216,015
669,000
658,072
3,543,087
92,506
2,144,141
642,084
530,803
3,317,028
Base fees /
salary
Non-
monetary
benefits
Post
Employment
(Super)
Total
fixed
remuneration
Short Term
Incentive
Long Term
Incentive
Total
629,167
609,673
121,756
480,167
465,673
540,667
521,173
414,635
605,259
466,667
455,173
159,188
2,653,059
2,816,139
12,432
7,532
2,039
5,728
5,358
31,743
41,916
15,729
6,332
5,621
4,457
13,744
73,292
79,339
19,333
18,827
660,932
320,638
290,636
1,272,206
636,032
304,007
244,899
1,184,938
3,244
127,039
–
–
19,333
18,827
19,333
18,827
12,872
18,827
19,333
18,827
10,957
127,039
988,590
914,848
505,228
239,045
244,317
489,858
242,500
182,490
591,743
280,000
179,435
1,051,178
581,916
270,000
140,805
443,236
–
–
992,721
443,236
630,418
290,000
137,505
1,057,923
491,621
478,457
183,889
25,000
84,000
–
88,310
98,890
–
604,931
661,347
183,889
93,448
2,819,799
864,683
802,698
4,487,180
105,092
3,000,570
1,190,507
804,589
4,995,666
Note: In addition to the total benefits above, these KMPs accrued leave entitlements during the year as follows:
- L R Partridge: net increase of $3,024 in accrued leave entitlements (2015: $35,593 decrease)
- A J Payne: net decrease of $16,229 (2015: $889 decrease)
- R C Bakewell: net increase of $7,839
- M Kublins: net decrease of $16,522 (2015: $15,532 increase)
- D T Fitzharris: net increase of $8,016 (2015: $9,631 increase)
- M Finney: net increase of $30,975 (2015: $28,747 increase)
- P Scott: net decrease of $20,502 (2015: $12,286 decrease)
- D Millington: (2015: $23,231 increase)
1 Alex Payne was CFO until 31 May 2016. He remains a KMP until his retirement on 30 September 2016. In addition to the
remuneration presented in the table above an additional liability of $630,195 has been recognised in the Group’s financial
statements as at 31 July 2016 in relation to Mr Payne’s contractual retirement benefit.
2 Robert Bakewell was appointed CFO from 1 June 2016.
3 Mark Finney is no longer KMP from 1 April 2016.
4 David Millington is no longer KMP from 1 February 2015 but still remains a senior Brickworks executive.
30
The profit (before tax and excluding significant items) generated by the Land and Development division increased
by 14% whereas the total remuneration paid to the Executive General Manager – Land and Development
increased by 8%.
The profit (before tax and excluding significant items) generated by the Building Products division increased
by 34% whereas the total remuneration received by the Group General Manager Sales – Brickworks Building
Products increased by 6%.
5.2 Director and Key Management Personnel shareholdings
Held 31 July
2015
Granted as
Remuneration
Date Granted as
Remuneration
Purchases
Shares
Disposed of
Held 31
July 2016
Directors
RD Millner
MJ Millner
B Crotty
DN Gilham
DR Page
RJ Webster
LR Partridge
5,674,100
5,648,142
15,209
102,268
2,400
15,922
158,434
-
-
-
-
-
-
-
-
-
-
-
-
74,805
2 October 2015
Other Key Management Personnel
AJ Payne
RC Bakewell
M Kublins
DT Fitzharris
P Scott
246,449
31,587
2 October 2015
-
84,516
87,592
59,841
-
28,976
21,438
5,457
-
2 October 2015
2 October 2015
2 October 2015
100,000
100,000
-
-
2,400
-
-
-
-
-
-
-
-
-
-
-
-
-
5,774,100
5,748,142
15,209
102,268
4,800
15,922
(43,257)
189,982
(50,062)
227,974
-
-
(7,089)
106,403
(32,999)
(13,858)
76,031
51,440
Shareholdings shown above reflect all direct, indirect and beneficial holdings by KMP, 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 KMP 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 or lapsed
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.
31
Auditor’s independence declaration
The Directors received an independence declaration from the auditor, EY. A copy has been included on page 33
of the report.
Provision of non-audit services by external auditor
During the year the external auditors, EY, provided non-audit services to the Group, totalling $87,542. The non-
audit services were for the provision of other assurance services, tax and accounting advice of general in nature,
relating to the interpretation and application of tax laws and accounting standards.
The Directors are satisfied that the provision of non-audit services is compatible with general standard of
independence for auditors imposed by the Corporations Act 2001. The nature and the scope of each type of
services provided means that auditor independence was not compromised.
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, EY, 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 EY during or since the financial year.
Auditor rotation
In accordance with section 324DAA of the Corporations Act 2001 a new lead audit partner has been appointed
for the financial year ended 31 July 2016.
Proceedings on behalf of the Company
No person has applied for leave of the 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 22 September 2016.
R.D. MILLNER
Director
L.R. PARTRIDGE AM
Director
32
33
Revenue
Cost of sales
Gross profit
Other income
Distribution expenses
Administration expenses
Selling expenses
NOTE
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
3
750,985
723,611
(518,579)
(513,908)
232,406
209,703
3
2,128
3,483
(63,792)
(61,419)
(27,880)
(26,621)
(70,043)
(64,107)
Borrowing costs expense
4
(14,080)
(19,482)
Impairment of non-current assets
14,15
(62,185)
(16,907)
Other expenses
(23,577)
(17,215)
Share of net profits of associates and joint ventures
accounted for using the equity method
24, 25
134,699
89,435
Profit before income tax expense
107,676
96,870
Income tax expense attributable to profit
5
(29,486)
(18,780)
Profit after income tax expense
78,190
78,090
Other comprehensive income
Items that may subsequently be reclassified to net profit
Foreign currency translation
20
(2)
Share of (decrements) / increments in reserves attributable to
associates and joint ventures
(18,388)
(2,472)
Income tax on items of other comprehensive income
5,517
742
Other comprehensive income for the period, net of tax
(12,851)
(1,732)
Total comprehensive income for the period
Net profit attributable to members of the parent entity
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
65,339
78,190
76,358
78,090
65,339
76,358
52.6
52.6
52.6
52.6
These statements should be read in conjunction with the accompanying notes.
34
BRICKWORKS LIMITEDAND CONTROLLED ENTITIES A.B.N. 17 000 028 526STATEMENT OF PROFIT & LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 JULY 2016 BRICKWORKS LIMITED
AND CONTROLLED ENTITIES A.B.N. 17 000 028 526
STATEMENT OF FINANCIAL POSITION AS AT 31 JULY 2016
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 16
$000
31 JULY 15
$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
30,783
106,558
188,394
9,652
8,781
344,168
7,998
4,137
23,051
103,104
178,706
5,455
6,536
316,852
8,129
8,182
1,462,830
488,454
208,274
1,455,673
477,570
252,111
2,171,693
2,201,665
2,515,861
2,518,517
81,593
-
-
13,771
50,134
88,335
24,445
234
16,488
50,703
145,498
180,205
299,224
5,820
9,287
217,547
531,878
677,376
299,239
5,152
8,685
200,986
514,062
694,267
1,838,485
1,824,250
336,905
311,255
1,190,325
334,165
322,444
1,167,641
1,838,485
1,824,250
These statements should be read in conjunction with the accompanying notes.
35
BRICKWORKS LIMITED
AND CONTROLLED ENTITIES A.B.N. 17 000 028 526
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2016
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These statements should be read in conjunction with the accompanying notes.
36
BRICKWORKS LIMITED
AND CONTROLLED ENTITIES A.B.N. 17 000 028 526
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2016
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 16
$000
31 JULY 15
$000
815,781
(758,613)
-
442
(13,405)
114,548
(10,246)
769,483
(702,444)
18,256
280
(18,360)
66,425
(388)
Net cash flows from operating activities
23(a)
148,507
133,252
Cash flows from investing activities
Purchases of investments
Proceeds from the sale or return of investments
Payment for business net of cash acquired
Proceeds from sale of property, plant and equipment
Purchases of property, plant and equipment
28(b)
(20,050)
27,572
(3,321)
3,241
(54,798)
(892)
–
(5,495)
477
(60,685)
Net cash flows used in investing activities
(47,356)
(66,595)
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash flows used in financing activities
Net increase in cash held
Cash at beginning of year
Cash at end of year
99,000
(124,000)
(68,419)
441,000
(442,000)
(63,814)
(93,419)
(64,814)
7,732
23,051
30,783
1,843
21,208
23,051
9
These statements should be read in conjunction with the accompanying notes.
37
BRICKWORKS LIMITED
AND CONTROLLED ENTITIES A.B.N. 17 000 028 526
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2016
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 22 September 2016.
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 amendments to accounting standards became effective for the Group during the year:
• AASB 2015-3‘Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 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.
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.
38
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(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 into 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, after eliminating the effect
of earnings related to the Company’s shareholding arrangements and 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.
(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.
39
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(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 property, plant and equipment 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 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.
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.
40
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(n)
Financial assets (cont.)
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 arm’s 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.
(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
41
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(r)
Intangibles (cont.)
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 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.
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.
42
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(x)
Restoration and rehabilitation (cont.)
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.
(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.
43
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(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:
Type or class of customer for the products;
• 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 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.
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:
Income and expenses are translated at average exchange rates for the period;
• Assets and liabilities are translated at period end exchange rates prevailing at that reporting date;
•
• 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.
(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.
44
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(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 2016.
The application of the following standards may have a material impact on the amounts reported and disclosures made in the Group’s
consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect until the Group performs
a detailed review:
AASB 16: Leases
AASB 15: Revenue from
Contracts with Customers
The standard will be first applicable for the year commencing 1 August 2019. The impact of
this standard is expected to be material to the Group. However, until the Group undertakes
a detailed review, it is not practicable to provide a reasonable estimate of the effect of this
standard.
The standard will be first applicable for the year commencing 1 August 2018. The impact of
this standard is not expected to be material to the Group, however the impact on the profits
of associates is yet to be determined.
AASB 9: Financial Instruments
The standard will be first applicable for the year commencing 1 August 2018. The impact of
this standard is not expected to be material to the Group.
(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.
45
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 16
$000
31 JULY 15
$000
7,436
549
1,079,267
1,099,626
18,103
30,239
607,151
604,156
336,905
334,165
84,479
11,645
5,351
101,475
33,736
84,479
11,645
3,690
99,814
61,491
472,116
495,470
40,664
40,664
38,508
38,508
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 land held for resale
Other operating revenue
Interest received – other corporations
Rental revenue
Other
Total operating revenue
Other income
Net gain on sale of property, plant and equipment
Property development profits
Other items
Total other income
CONSOLIDATED
746,424
–
695,233
18,256
746,424
713,489
442
1,496
2,623
280
1,759
8,083
750,985
723,611
1,765
–
363
2,128
317
2,932
234
3,483
46
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 16
$000
31 JULY 15
$000
4,209
23,168
27,377
24
24
3,824
21,308
25,132
98
98
Total depreciation and amortisation expense
27,401
25,230
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
13,646
434
14,080
17,112
2,370
19,482
23,035
22,451
167,898
11,659
903
472
3,067
157,550
10,976
2,268
786
1,972
(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
–
–
8,439
51,220
15,263
–
74,922
4,601
2,664
1,916
29,137
15,335
12,141
58,529
47
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
NOTE 4: INCOME AND EXPENSES (cont.)
(c) Significant items
Profit before income tax expense includes the following
signficant benefits/(expenses):
Significant one–off transactions of associate (1)
129
(25,140)
Write down of property, plant and equipment to recoverable value (3)
(14,523)
Costs related to business acquisition (2)
Costs on closure of manufacturing facilities and site relocation(2)
Costs on commissioning of manufacturing facilities (2)
(206)
(5,201)
(1,025)
–
(577)
–
(4,333)
Impairment of goodwill and timber access rights (3)
(47,258)
(16,761)
Legal & advisory costs – Perpetual matter (2)
Restructuring activities (2)
Other significant items (2)
Income tax benefit / (expense) on significant items (4)
Income tax benefit / (expense) arising from WHSP carrying value (4)
(2,828)
(2,929)
(315)
8,109
(2,842)
(1,504)
(1,236)
–
2,822
4,520
(1) Disclosed in “Share of net profits of associates” line on Statement of Profit or Loss and Other Comprehensive Income
(2) Disclosed in “Other expenses” line on Statement of Profit or Loss and Other Comprehensive Income
(3) Disclosed in “Impairment of non–current assets” line on Statement of Profit or Loss and Other Comprehensive Income
(4) Disclosed in “Tax expense” line on Statement of Profit or Loss and Other Comprehensive Income
NOTE 5: INCOME TAX
(a) Income tax expense
Current Tax
Deferred Tax
Overprovided in prior years
Utilisation of carried forward capital losses
(b) Reconciliation of income tax expense to prima facie tax payable
Prima facie tax payable on profit before income tax at 30%
Adjust for tax effect of:
difference in foreign tax rates
rebateable dividends
impairment of goodwill and intangibles
deferred tax items recognised
share of net profits of associates
other non–allowable items
over provided in prior years
utilisation of carried forward capital losses
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
14,727
18,784
(2,766)
(1,259)
29,486
24,962
(3,988)
(2,194)
–
18,780
32,303
29,061
(12)
(15,645)
14,177
–
655
2,033
(2,766)
(1,259)
29,486
–
(5,517)
(5,517)
(5,517)
(29)
(15,032)
5,029
(1,253)
1,682
1,518
(2,196)
–
18,780
–
(742)
(742)
(742)
48
NOTE 6: AUDITOR’S REMUNERATION
Audit of the financial report
Other regulatory audits
Taxation services
Other assurance services
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
490
25
26
37
578
500
–
–
–
500
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 30.0 cents per share paid
25/11/15 (2014 - 28.0c paid 27/11/14)
Interim ordinary dividend of 16.0 cents per share paid 03/05/16
(2015 - 15.0c paid 5/05/15)
Group's share of dividend received by associated company
Proposed final ordinary dividend of 32.0 cents per share not
recognised as a liability at year end (2015 – 30.0c)
44,621
41,553
23,798
(12,900)
55,519
22,261
(12,059)
51,755
47,596
44,521
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
135,938
132,830
Impact on franking account balance of dividends not recognised
(20,398)
(19,080)
NOTE 8: EARNINGS PER SHARE
(a) Reconciliation of earnings
Net profit attributed to members of the parent entity
78,190
78,090
Earnings used in the calculation of basic EPS
78,190
78,090
Earnings used in the calculation of diluted EPS
78,190
78,090
(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.
148,674,235
148,334,576
148,674,235
148,334,576
cents
cents
52.6
52.6
52.6
52.6
49
NOTE 9: CASH & CASH EQUIVALENTS
Cash on hand
Deposits at call
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
30,040
743
30,783
22,839
212
23,051
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
Provision for doubtful debts
Net trade receivables
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
94,441
(856)
93,585
12,973
100,681
(1,055)
99,626
3,478
106,558
103,104
1,055
1,217
(671)
(745)
856
3,233
2,106
5,339
1,643
1,431
(1,374)
(645)
1,055
3,696
2,827
6,523
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.
50
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 16
$000
31 JULY 15
$000
33,840
21,841
132,374
33,116
20,997
124,084
188,055
178,197
339
509
188,394
178,706
7,998
8,129
9,652
4,137
5,455
8,182
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 2016 there have been no write downs
of land held for resale to the lower of those two values (2015: Nil).
NOTE 13: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Investment in associated entities – listed
Investment in jointly controlled entities
24
25
1,150,243
312,587
1,146,302
309,371
1,462,830
1,455,673
51
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
Capital works in progress
Total plant and equipment
(a) Impairment write-downs
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
176,555
235
171,741
235
176,790
171,976
153,516
(51,608)
152,235
(50,124)
101,908
102,111
465,890
(295,336)
170,554
39,202
450,444
(292,941)
157,503
45,980
209,756
203,483
488,454
477,570
During the period impairment losses totalling $14.9 million (2015: $0.1 million) were recognised in relation to various assets
primarily as a result of plant closures. All impairment losses are shown in the ‘Impairment of non-current assets’ line on the
Statement of Profit or Loss and Other 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 subject to write-downs
Assets not subject to write-downs
101,908
101,908
456
209,300
102,111
102,111
–
203,483
209,756
203,483
The carrying amount of temporarily idle buildings, plant and equipment at 31 July 2016 was Nil (2015: Nil).
52
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 2014
Cost
Accumulated depreciation
Balance at 1 August 2014
Year ended 31 July 2015
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
157,138
–
157,138
7,664
1,820
5,355
(1)
–
–
140,379
(43,176)
433,512
(256,011)
731,029
(299,187)
97,203
177,501
431,842
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
Year ended 31 July 2016
Additions
Assets acquired by acquisition of business
Assets transferred (to) / from land held for resale
Disposals
Impairment losses
Depreciation expense
5,442
–
–
(628)
–
–
6,015
–
–
(692)
(1,317)
(4,209)
43,341
19
(152)
(157)
(13,610)
(23,168)
54,798
19
(152)
(1,477)
(14,927)
(27,377)
Balance at 31 July 2016
176,790
101,908
209,756
488,454
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 16
$000
31 JULY 15
$000
288,019
(89,216)
284,574
(41,958)
198,803
242,616
8,656
(8,656)
–
14,300
(5,300)
9,000
646
(175)
471
8,655
(8,655)
–
14,300
(5,300)
9,000
646
(151)
495
208,274
252,111
53
NOTE 15: INTANGIBLE ASSETS (cont.)
(a) Intangible assets with indefinite useful lives
Brand names with a carrying value of $9.0 million (2015: $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) CGU, 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.
In 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. 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.
(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 2016 the following CGUs representing
business operations have significant allocations of goodwill:
• Austral Bricks (NSW) $67.5 million (2015: $67.5m)
• Austral Bricks (SA) $8.0 million (2015: $8.0m)
• Austral Bricks (WA) $nil (2015: $47.3m)
• Bristile Roofing (East Coast) $29.4 million (2015: $25.9m)
• Austral Bricks (Vic) $75.2 million (2015: $75.2m)
• Austral Masonry $18.7 million (2015: $18.7m)
Each of these CGUs have been valued based on value-in-use methodology, using the assumptions outlined in point (iii) below.
(ii) Recognised impairment losses
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 July 2016, the Group recognised an impairment loss against the carrying value of goodwill for its full amount of $47.3 million
in relation to the Austral Bricks (WA) CGU. The impairment loss reflects the significant decline in building activity and strong
competition in Western Australia. The Austral Bricks (WA) CGU forms part of the Building Products operating segment.
The impairment loss of $10 million recognised during the financial year ended 31 July 2015 was in relation to the Austral Precast
CGU.
(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 used the following key operating assumptions:
• Sales volumes are management forecasts reflecting independent 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 construction activity 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 assumed increases differ by CGU and between
different states where the CGU operates. Price increases are considered inherently achievable in a rational market where
supply of product approximates demand;
• Terminal value earnings are based on average earnings over the 5 year forecast period moderated to reflect management’s
view of long term earnings across the cycle;
• Long term growth rates used in the cash flow valuation reflect the lower of 2.5% (2015:3.0%) 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) 2.14% (2015: 2.08%), Austral Bricks (WA) 2.50% (2015: 3.00%),
Austral Bricks (Vic) 2.37% (2015: 2.50%), Austral Bricks (SA) 2.05% (2015: 2.05%), Bristile Roofing East Coast 2.5% (2015:2.53%)
and Austral Masonry 2.50% (2015: 2.53%);
• Management uses an independent external advisor to calculate the appropriate discount rate applied consistently across all
CGUs. For 2016, the pre-tax discount rate was 11.75% (2015: 12.48%).
54
NOTE 15: INTANGIBLE ASSETS (cont.)
(b) Impairment of Goodwill (cont.)
(iv) Sensitivity to key assumptions
An impairment loss of $42.3 million has been recognised with respect to the goodwill allocated to the Austral Bricks (WA) CGU.
The forecast future cash flows are broadly in line with the remaining 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 additional 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.
(c) Reconciliations
Consolidated
At 1 August 2014
Cost
Accumulated amortisation / impairment
Balance at 1 August 2014
Year ended 31 July 2015
Additions
Impairment losses
Amortisation
Balance at 31 July 2015
Year ended 31 July 2016
Additions
Impairment losses
Amortisation
Balance at 31 July 2015
NOTE 16: PAYABLES
Current
Trade payables and accruals
Goodwill
$000
Timber
Access Rights
$000
Brand
Names
$000
Other
Intangibles
$000
294,619
(41,958)
252,661
–
(10,045)
–
242,616
3,445
(47,258)
–
198,803
8,507
(1,717)
6,790
–
(6,716)
(74)
–
–
–
–
–
14,300
(5,300)
9,000
–
–
9,000
–
–
–
622
(103)
519
–
(24)
495
–
–
(24)
Total
$000
318,048
(49,078)
268,970
–
(16,761)
(98)
252,111
3,445
(47,258)
(24)
9,000
471
208,274
NOTE
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
81,593
88,335
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
–
–
–
300,000
(776)
299,224
25,000
(555)
24,445
300,000
(761)
299,239
27
27
55
NOTE 17: INTEREST BEARING LIABILITIES (cont.)
(c) Commercial bills
Commercial bills are drawn under either:
- a 5 year syndicated facility amortised in three separate tranches with the last tranche expiring December 2019 or
- a working capital facility which as at 31 July 2016 was due to expire on 18 August 2016. In August 2016 the working capital facility
was extended until December 2018. This facility was not drawn as at 31 July 2016 (2015: Nil).
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 2016 approximated their nominal value (2015: 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 16
$000
31 JULY 15
$000
–
234
5,820
5,152
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 2016 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
Other
(b) Non-current
Employee benefits
Remediation
Other
(c) Reconciliations
38,008
3,014
4,262
3,693
1,157
50,134
3,566
2,340
3,381
9,287
36,057
4,166
4,764
4,578
1,138
50,703
3,056
2,354
3,275
8,685
Consolidated
Year ended 31 July 2016
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
Remediation
$000
Infrastructure
Costs
$000
Workers
Compensation
$000
Other
$000
4,578
6,756
(4,283)
(3,358)
3,693
3,693
–
3,693
4,413
456
(331)
–
4,538
1,157
3,381
4,538
6,520
758
(1,924)
–
5,354
3,014
2,340
5,354
4,764
–
(502)
–
4,262
4,262
–
4,262
56
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 dependent upon the
notification and acceptance of relevant claims, and would be expected to be satisfied over a number of future financial periods.
Other provisions
Other provisions are made up from a number of sundry items.
NOTE 20: NET DEFERRED TAXES
CONSOLIDATED
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
31 JULY 16
$000
31 JULY 15
$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
223,581
10,366
(17,256)
(286)
1,697
(555)
204,308
13,901
(17,281)
(1,159)
1,658
(441)
Net deferred taxes
217,547
200,986
23,249
(3,517)
(670)
-
40
(318)
18,784
(5,847)
481
268
–
(316)
1,426
(3,988)
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 16
$000
31 JULY 15
$000
348,231
(11,326)
343,108
(8,943)
336,905
334,165
(a) Ordinary shares
Opening balance
Shares issued during the year
Costs associated with shares issued
2016
2015
No. of
Shares
Value
$000
No. of
Shares
148,403,478
333,660
–
343,108
5,136
(13)
148,038,996
364,482
)
Value
$000
338,204
4,916
(12)
Balance at end of year
148,737,138
348,231
148,403,478
343,108
57
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
2016
2015
No. of
Shares
708,241
408,465
(310,794)
Value
$000
(8,943)
(6,287)
3,904
No. of
Shares
588,071
441,311
(321,141)
Balance at end of period
805,912
(11,326)
708,241
Value
$000
(6,784)
(5,953)
3,794
(8,943)
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 16
$000
31 JULY 15
$000
88,102
(19,798)
36,125
(1,496)
5,352
202,970
88,102
(25,315)
36,125
(1,516)
3,690
221,358
311,255
322,444
(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.
58
NOTE
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
NOTE 23: CASH FLOW INFORMATION
(a) Reconciliation of net profit after tax to cash flow from operations
Net profit after tax
78,190
78,090
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
(Profits) / losses on disposal of property, plant & equipment
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 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
24
540
27,377
434
47,258
14,927
(1,764)
4,403
(20,151)
(3,455)
(9,544)
-
(2,245)
(6,772)
(2,716)
(720)
602
22,119
98
(855)
25,132
2,370
16,761
146
(316)
2,745
(23,010)
(4,023)
(1,863)
13,079
1,788
6,318
11,871
5,083
(6,683)
6,521
Net cash flows from / (used in) operating activities
148,507
133,252
(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
30,783
23,051
NOTE 24: ASSOCIATED COMPANIES
Information relating to significant associates:
Name
Ownership interest
Carrying value
Profit contribution
2016
%
2015
%
2016
$000
2015
$000
2016
$000
2015
$000
Washington H Soul Pattinson & Co Ltd
42.72
42.72
1,150,243
1,146,302
59,246
29,434
Market value of shares at balance date
1,782,354
1,400,932
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 2016 WHSP owned 44.14% (2015: 44.23%) of issued ordinary shares of Brickworks
Ltd. WHSP is incorporated in Australia.
59
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 16
$000
31 JULY 15
$000
405,587
3,496,439
(179,908)
(322,334)
1,445,953
2,413,868
(161,398)
(267,274)
(707,268)
(747,857)
2,692,516
2,683,292
1,150,243
1,146,302
620,661
641,604
149,420
(38,563)
110,857
52,151
– *
– *
50,827
28,174
79,001
50,106
7,002
66,025
The entity has no legal liability for any expenditure commitments incurred by associates.
* Note: Associated company (WHSP) figures for 2016 were not publicly available at the time of preparation of this report.
(c) Contingent liabilities of associates
Contingent liabilities incurred jointly with other investors
– *
30,076
The entity has no legal liability for any contingent liabilities incurred by associates.
* Note: Associated company (WHSP) figures for 2016 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 Capicure Trust
BGAI Heritage Trust
BGAI Oakdale Trust
BGAI Wacol Trust
BGAI Oakdale South Trust
BMGW Rochedale Trust
NZ Brick Distributors
Fair value adjustments
Ownership interest
2015
2016
%
%
Carrying value
2016
$000
2015
$000
Profit contribution
2015
2016
$000
$000
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
554
91,189
9,512
28,317
98,996
5,743
41,721
29,957
6,598
68,244
75,098
7,026
23,426
58,196
5,743
38,651
26,256
6,731
–
24,813
3,230
7,013
27,620
590
–
3,217
531
8,439
25,073
17,151
707
3,917
9,217
548
–
–
1,472
1,916
312,587
309,371
75,453
60,001
60
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 $59.7 million
(2015: $31.1 million). Fair value adjustments represent a significant accounting estimate and are determined by reference to
independent market valuations. 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 (2015: Nil).
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 adjust-
ments made in using the equity method
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.
2016
$000
2015
$000
15,164
34,383
957,784
(20,900)
(18,024)
(329,358)
(348,969)
625,174
312,587
57,818
40
124
19,079
–
134,028
5,037
275,457
774,405
(20,900)
(35,146)
(378,585)
(395,974)
618,742
309,371
89,871
162
101
29,187
–
123,291
(2,318)
(2,327)
131,710
120,964
61,896
16,319
26,365
29,564
–
–
–
–
61
NOTE 26: SEGMENT INFORMATION
Building Products
31 JULY 16 31 JULY 15
Property
Investments
Consolidated
31 JULY 16 31 JULY 15
31 JULY 16 31 JULY 15
31 JULY 16 31 JULY 15
$000
$000
$000
$000
$000
$000
$000
$000
748,128
700,871
2,415
22,460
442
280
750,985
723,611
REVENUE
Segment revenue from sales
to external customers
RESULT
Segment EBITDA
102,782
81,594
73,451
64,384
59,559
54,854
235,792
200,832
Less depreciation and
amortisation
Segment EBIT (before
significant items)
(27,401)
(25,230)
-
-
-
-
(27,401)
(25,230)
75,381
56,364
73,451
64,384
59,559
54,854
208,391
175,602
(Less) / add significant items
(70,357)
(22,855)
-
-
129
(25,140)
(70,228)
(47,995)
Segment result
5,024
33,509
73,451
64,384
59,688
29,714
138,163
127,607
Unallocated expenses
Borrowing costs
Significant items
Other unallocated expenses
Profit before income tax
Income tax expense
Profit after income tax
ASSETS
(14,080)
(3,928)
(12,479)
(19,482)
(1,556)
(9,699)
107,676
96,870
(29,486)
(18,780)
78,190
78,090
Segment assets
1,037,804 1,055,110
320,382
316,551 1,157,675 1,146,856 2,515,861 2,518,517
Unallocated assets
Total assets
LIABILITIES
-
-
2,515,861 2,518,517
Segment liabilities
131,836
139,160
4,262
4,998
174,947
176,922
311,045
321,080
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
299,224
67,107
323,684
49,503
366,331
373,187
677,376
694,267
531
1,472
74,922
58,529
59,246
29,434
134,699
89,435
6,598
6,731
305,989
302,640 1,150,243 1,146,302 1,462,830 1,455,673
54,430
66,181
23,739
892
101,779
33,290
-
-
-
-
-
-
78,169
67,073
101,779
33,290
62
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, fiber cement walling 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. Limited.
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 2016 was $19.5 million
(2015: $18.0 million). The carrying value of non-current assets held outside of Australia at 31 July 2016 was $6.9 million (2015: $7.0
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 a sum of net
debt and 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 facility agreement disclosed in Note 17 (2015: 40%).
Net debt to capital employed
Net debt
Total equity
Net debt to capital employed
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
269,217
1,838,485
301,949
1,824,250
12.8%
14.2%
The Group is not subject to any other 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.
63
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 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
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
9
10(a)
16
17(a)
18(a)
17(b)
18(b)
30,783
106,558
137,341
81,593
-
-
300,000
5,820
387,413
387,413
23,051
103,104
126,155
88,335
25,000
234
300,000
5,152
418,721
418,721
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.
64
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 16
$000
31 JULY 15
$000
450,000
(300,000)
450,000
(325,000)
150,000
125,000
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 2016 the unsecured variable interest rate facility was drawn to $300.0 million (2015: $325.0 million). The facility
is in three tranches as outlined below:
Tranche
A
B
C
Amount ($m)
150.0
100.0
100.0
Drawn ($m)
100.0
100.0
100.0
Expiry
Dec 2017
Dec 2018
Dec 2019
In addition, the Group has a $100 million working capital facility, which was not drawn at balance date (2015: Nil) which as at 31
July 2016 was due to expire on 18 August 2016 . In August 2016 the facility was extended until December 2018.
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 16
$000
31 JULY 15
$000
81,593
-
-
81,593
328,175
5,820
333,995
88,335
25,928
234
114,497
340,623
5,152
345,775
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.
65
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 2016, 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 $1.26 million higher or lower respectively (2015: $1.25 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 3.45%, 2015: 3.87%). 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 $125.0 million over the next three years (2015: $150.0 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
2016
Avg %
-
3.47
3.43
2015
Avg %
5.96
-
3.45
2016
$000
-
75,000
2015
$000
25,000
-
50,000
125,000
125,000
150,000
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 2.05% (2015: 1.85%).
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 2016.
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. 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
Austral Facades Pty Ltd
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
63 144 804 553
66
2016
%
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
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
100.0
NOTE 28: CONTROLLED ENTITIES AND BUSINESS ACQUISITIONS (cont.)
(a) List of significant controlled entities (cont.)
Controlled entities incorporated in Australia
ABN
Group’s Interest
2016
%
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
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
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
Austral Masonry (NSW) Pty Ltd
Austral Masonry (Qld) Pty Ltd
Austral Masonry (Vic) Pty Ltd
Austral Masonry Holdings 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 Cement Pty Limited
Brickworks Construction Materials Pty Limited
Brickworks Head Holding Co Pty Ltd
Brickworks Industrial Developments Pty Ltd
Brickworks Properties Pty Ltd
Brickworks Property Finance Co Pty Ltd
Brickworks Specialised Building Systems Pty Ltd
(formerly Austral Panels 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
Lumetum 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
45 141 647 092
30 000 646 695
53 120 364 356
97 141 629 996
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
14 607 791 088
83 607 788 590
95 120 360 036
47 120 364 329
12 094 905 996
28 158 536 353
61 144 804 544
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
98 607 790 634
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
67
NOTE 28: CONTROLLED ENTITIES AND BUSINESS ACQUISITIONS (cont.)
(b) Business acquisitions
During the financial year ended 31 July 2016 the Group acquired 3 fascia and gutter businesses. Details of the net assets
acquired under these transactions are set out below.
Date acquired
Cost of acquisition
Cash paid
Net assets acquired:
Inventory
Property, plant & equipment
Deferred tax assets
Trade and other payables
Employee entitlements assumed
Fair value of net assets acquired
Goodwill arising on acquisition
Direct costs relating to the acquisition
CJM
$000
Adams Direct
$000
31 August 2015 15 February 2016
MFS
$000
7 March 2016
Total 2016
$000
388
850
2,083
3,321
12
-
14
(50)
(45)
(69)
457
(15)
-
-
12
-
(40)
(28)
878
(34)
-
19
19
-
(65)
(27)
12
19
45
(50)
(150)
(124)
2,110
3,445
(109)
(158)
Upon acquisition these acquired businesses were integrated into the existing Brickworks business and systems. As a result,
specific financial information relating to the acquired businesses is not available and therefore it is impracticable to disclose the
revenue and profit or loss of the acquirees since the acquisition date.
In prior year the Group acquired the business and assets of Capricornia Rockblock Pty Limited located in Rockhampton in
Central Queensland for $5.5 million. 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)
(c) Controlled entities disposed of
There were no controlled entities within the Group that were disposed of during the current or prior period.
68
NOTE 28: CONTROLLED ENTITIES AND BUSINESS ACQUISITIONS (cont.)
(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. The entities covered under
the deed are listed in 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 (expense) / benefit
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 16
$000
31 JULY 15
$000
32,266
(7,206)
25,060
35,340
555
35,895
1,074,484
25,060
(55,519)
13
1,090,558
35,895
(51,754)
(215)
1,044,038
1,074,484
69
NOTE 28: CONTROLLED ENTITIES AND BUSINESS ACQUISITIONS (cont.)
(d) Closed group (cont.)
CONSOLIDATED BALANCE SHEET
CURRENT ASSETS
Cash assets
Receivables
Inventories
Land held for resale
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
Derivative financial instruments
Income tax provision
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
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
CLOSED GROUP
31 JULY 16
$000
31 JULY 15
$000
30,783
104,916
181,434
9,652
8,599
335,384
122,396
10,000
7,998
4,137
1,156,841
480,323
208,275
23,052
100,880
171,829
5,455
5,935
307,151
176,511
10,000
8,129
8,182
1,153,033
469,676
252,111
1,989,970
2,077,642
2,325,354
2,384,793
80,163
-
-
13,771
50,006
85,795
24,445
234
16,488
53,858
143,940
180,820
299,224
5,820
9,287
169,172
483,503
627,443
299,239
5,152
5,410
158,987
468,788
649,608
1,697,911
1,735,185
336,905
316,968
1,044,038
334,165
326,536
1,074,484
1,697,911
1,735,185
70
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
26,836
26,543
CONSOLIDATED
31 JULY 16
$000
31 JULY 15
$000
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
14,268
10,929
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
81,675
97,059
Payable
– not later than one year
– later than one year but not later than five years
– later than five years
24,788
50,775
6,112
81,675
24,947
58,668
13,444
97,059
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 2016, the Brickworks Employee Share Plans had 722 members taking part who owned a combined 1,508,253 shares or
1.01% of issued ordinary capital (2015: 739 members, 1,413,008 shares, 0.95%). 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 11
Granted Sept 12
Granted Sept 13
Granted Sept 14
Granted Sept 15
Total Unvested
Vested
Total
Opening
Balance
45,505
99,701
171,554
340,422
-
657,182
629,699
1,286,881
Granted
-
-
-
-
408,465
408,465
-
408,465
71
Vested
(37,824)
(45,644)
(53,061)
(79,883)
(78,939)
(295,351)
295,351
Forfeited /
Withdrawn
(7,681)
(10,456)
(14,806)
(23,897)
(16,077)
(72,917)
(244,757)
Closing
Balance
-
43,601
103,687
236,642
313,449
697,379
680,293
-
(317,674)
1,377,672
The amount recognised in the statement of comprehensive income in relation to equity based compensation arrangements for the
year ended 31 July 2016 was $5,556,605 (2015: $4,415,505).
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 2016 was $10,552,262 (2015: $9,777,529), based on the closing
share price at 31 July 2016 ($15.03 per share) (2015: $14.90 per share). The fair value of shares granted during the period was
$6,287,339 (2015: $5,953,285), 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 $572.6 million
(2015: $617.3 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 (2015: Nil). 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 $526,533 (2015:
$417,000) 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
On 17 August 2016 the Group’s $100 million working capital facility was extended until December 2018. This facility was not drawn
as at 31 July 2016 (2015: Nil). Further information in relation to the Group’s banking facilities is provided in Note 17.
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.
72
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 34 to 72, 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 2016 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 2016.
This declaration is made in accordance with a resolution of the Board of Directors.
Dated 22 September 2016
R.D. MILLNER
Director
L.R. PARTRIDGE AM
Director
73
Ernst & Young
200 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
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 2016, 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
74
Opinion
In our opinion:
a.
the financial report of Brickworks Limited is in accordance with the Corporations Act 2001,
including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 31 July 2016
and of its performance for the year ended on that date; and
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
2016. 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 2016,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Anthony Jones
Partner
Sydney
22 September 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
75
STATEMENT OF SHAREHOLDERS
ORDINARY SHARES AT 31 AUGUST 2016
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 36 shares
7,689
81.58%
3,869
2,921
455
398
46
7,689
636
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
20 LARGEST SHAREHOLDERS AS DISCLOSED ON THE SHARE REGISTER
AS AT 31 AUGUST 2016
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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
MILTON CORPORATION LIMITED
J S MILLNER HOLDINGS PTY LIMITED
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
MRS MARGARET DOROTHY STONIER
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
CPU SHARE PLANS PTY LTD
MR ROBERT DOBSON MILLNER + MR MICHAEL JOHN MILLNER
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
T G MILLNER HOLDINGS PTY LIMITED
ARGO INVESTMENTS LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
Number of
Shares
65,645,140
9,437,917
Number of
Shares
65,645,140
10,648,000
9,180,772
7,708,213
4,510,978
3,284,584
3,234,567
2,968,836
2,088,939
1,704,569
1,684,579
1,502,970
1,384,164
1,361,292
1,166,417
875,000
678,509
584,009
577,001
543,918
%
44.14
7.16
6.17
5.18
3.03
2.21
2.17
2.00
1.40
1.15
1.13
1.01
0.93
0.92
0.78
0.59
0.46
0.39
0.39
0.37
121,332,457
81.58
76
TABLE OF IMPORTANT DATES
2016 annual result released
Record date for final ordinary dividend
Annual General Meeting
Payment date for final ordinary dividend
2017 half-year end
2017 half-year result announced
Record date for interim ordinary dividend
Payment date for interim ordinary dividend
2017 financial year end
2017 annual result released
22 September 2016
10 November 2016
29 November 2016
30 November 2016
31 January 2017
23 March 2017
11 April 2017
2 May 2017
31 July 2017
21 September 2017
The above dates are indicative only and are subject to change