Boralex
Annual Report 2014

Plain-text annual report

Beacon Lighting Group Limited ANNUAL REPORT 20 14 ACN 164 122 785 For personal use onlyFor personal use onlyContents Chairman’s and Chief Executive Officer’s Report Board of Directors Management Team Corporate Governance Statement Directors’ Report Auditor’s Independence Declaration Index to the Financial Statements Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to Financial Statements Directors’ Declaration Independent Auditor’s Report to the Members of Beacon Lighting Group Limited Shareholders’ Information Corporate Directory Store Locations 1 5 6 8 12 20 22 23 24 25 26 27 59 60 63 64 66 Important Notice This financial report is the consolidated financial report of the consolidated entity consisting Beacon Lighting Group Limited, ACN 164 122 785 and its subsidiaries. Beacon Lighting Group Limited is a Company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is 5 Bastow Place Mulgrave Victoria 3170. A description of the nature of the consolidated entity’s operations and its principal activities is included in the Director’s report on page 12, which is not part of the financial report. The financial report was authorized for issue by the Directors on 22 August 2014. The Director’s have the power to amend and re-issue the financial statements. For personal use onlyFor personal use onlyChairman’s and Chief Executive Officer’s Report Beacon Lighting Group Limited is pleased to report the achievement of two significant milestones for FY2014. With the efforts of the Beacon Lighting team and the support of our new shareholders, we have been able to accomplish our long-term goal, with a very successful IPO in April 2014. In addition and pleasingly, Beacon Lighting has continued to trade strongly with record sales and profits in FY2014. Total sales for the business grew by 13.1%, Net Profit after Tax improved by 24.8% and Company store comparative sales were solid with a 5.7% increase on a 52 week comparable basis1. Throughout the year we have positioned the business to be at the forefront of product development, bringing the latest fashion, trends and technically advanced products to our valued customers. This along with the dedication and comprehensive lighting knowledge of our sales associates has ensured that Beacon Lighting has maintained our industry leading position in Australia. General Market Environment The general market conditions remain supportive of the lighting industry in Australia. Low interest rates, improvements in renovating and redecorating markets and stronger new housing numbers are all positive indicators for Beacon Lighting. Whilst we did see a dip in consumer confidence during the last quarter with the Federal Budget release, we have seen a recovery since then. Auction clearance rates throughout the year have also been strong, which means further opportunities for us in the ever-increasing home renovation and redecoration market. The continuing and rapid development of new LED technologies, increasing energy costs and new energy efficiency regulations continue to drive growth in the lighting category. Given this market environment and its outlook, the Directors believe there are many opportunities ahead for Beacon Lighting. Overview Beacon Lighting achieved a 13.1% sales increase over FY2013 on a 52-week comparable basis, growing sales to $150.3 million, which was consistent with the prospectus forecast. Our Company store comparative sales were solid, growing at a rate of 5.7%. As a result of operating efficiency gains, operating expenses reduced as a percentage of sales compared to the prospectus. Beacon Lighting achieved a Net Profit After Tax increase of 24.8% on a 52 week comparable basis to a record $11.8 million compared to last year. The Net Profit After Tax result also exceeded the prospectus forecast by 2.8%. Following the impact of our very successful IPO, Beacon Lighting has continued to maintain a conservative balance sheet. Our retained earnings, supported by our trade finance facilities, have funded the growth in new stores, store acquisitions, inventories and other assets. At the end of FY2014, Beacon Lighting operated 71 Company retail stores, 14 franchise stores, 3 commercial sales offices, Beacon International and Beacon Solar. During FY2014, we opened six new stores, which included the conversion of an independent lighting store in Bendigo (VIC) and one relocation. In addition the business acquired the Taren Point (NSW) Beacon Lighting franchise store. We continued to invest in the merchandising standards of our stores, ensuring the rapid changes in technology are easier for our customers to understand, and creating an exciting and engaging place to shop. Beacon Lighting also had a number of other notable achievements in FY2014 including: t 56% increase in LED product sales t 44% increase in online sales t 125% increase in VIP members t 20% increase in trade sales 1 Compared to the 52 week FY2013 Pro Forma historical result in the prospectus dated 12 March 2014. CHAIRMAN’S AND CHIEF EXECUTIVE OFFICER’S REPORT 1 For personal use onlyGrowth Strategies Capital investment Beacon Lighting intends to continue to drive sales and profits through a number of key growth strategies. These include new store rollouts, optimising the store portfolio and operations, introducing new product ranges and leveraging new technology in lighting to be first to market. We aim to enhance our online activities, leverage existing capabilities, actively look at acquisitions, support our emerging businesses and generate efficiency gains to ensure continued growth. Innovation is key to our business. Throughout the year we designed and developed over 400 new products, which represents close to 20% of the total range. Many of the products developed are industry leading and designed to blend fashion and design with the latest energy efficiency technology. New product innovation allows us to maintain excitement amongst our customers and achieve strong product margins. As a vertically integrated Company, 90% of the products sold are supplied through our own supply chain, and 80% of those items are exclusively branded. Our store rollout program is largely dependent on potential sites meeting key matrix requirements. Currently there are a number of opportunities in various locations, which is positive news for our continued store expansion and Company growth. Investments in our online assets continue to improve the shopping experience for our entire customer base. We have launched a new Beacon Solar website, refreshed our trade website, and introduced more engaging and informative content on our main Beacon Lighting retail website. We believe that a key to sales growth and business success is having knowledgeable, dedicated and enthusiastic sales associates to provide our customers with the best service experience and lighting advice. Beacon Lighting has continued its commitment to ongoing training with extensive e-learning modules, lighting consultancy training, sales skills training and management training. Beacon Lighting has invested in new stores and re-invested in all stores with the introduction of new merchandise display units. Corporate Governance The Board recognises the importance of good corporate governance for the benefit of our shareholders, associates and customers. Changes and developments in the corporate governance area are monitored and reviewed for implementation if required. The Board is committed to ensuring that Beacon Lighting is operated ethically and in accordance with high standards of corporate governance. Dividends The Directors have declared a dividend of 1.4 cents per share fully franked for the half year ended 29 June 2014, consistent with the dividend contemplated in the IPO prospectus. Going forward, it is expected that fully franked dividends of between 50% and 60% of Net Profit After Tax will be paid half yearly in March and September. Outlook Looking forward to FY2015, Beacon Lighting remains well positioned to take advantage of ongoing changes in the lighting industry. We will continue to introduce new and exciting product ranges to provide the latest in fashion, technology and energy efficiency to our customers. We intend to continue to invest and grow the business with the opening of new stores, undertaking major refurbishments, improving our merchandising, sales associate training and a number of other initiatives and projects. The Beacon Lighting team joins our shareholders in looking forward to another successful year in FY2015. Ian Robinson Executive Chairman Glen Robinson Chief Executive Officer 2 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyHighlights SALES1 ($m) 200.0 150.0 100.0 50.0 0.0 FY 2012 FY 2013 FY 2014 COMPARATIVE SALES GROWTH1,2 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 25.0 20.0 15.0 10.0 5.0 0.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 FY 2012 FY 2013 FY 2014 EBITDA1,3 ($m) FY 2012 FY 2013 FY 2014 NPAT1,4 ($m) FY 2012 FY 2013 FY 2014 1 52 week FY2012 & FY2013 Pro Forma result in the Prospectus dated 12 March 2014. 2 Company store comparative sales growth 3 Earnings before interest, Tax, Depreciation and Amortisation (EBITDA). 4 Net Profit After Tax (NPAT). HIGHLIGHTS 3 For personal use only For personal use onlyBoard of Directors Ian Robinson Executive Chairman 40 years of service Glen Robinson Chief Executive Officer BBus (Mgt) 19 years of service Eric (James) Barr Deputy Chairman Non-Executive Director Neil Osborne Non-Executive Director BCom, CPA, FAICD Ian Robinson purchased the first Beacon Lighting store in 1975. Over the subsequent 40 years, his role has grown from management of the first store to CEO. He assumed his current position in July 2013 when he relinquished the role of CEO. He continues to be actively involved in the management and operation of Beacon Lighting on a day-to-day basis. Ian is a Director of Lighting Council of Australia. He is also President of the Large Format Retailers Association. Ian is also a Director of Indice Ecotech Pty Ltd. Ian’s interest in shares of the Company are Noted in section 7 of the Director’s report. Glen Robinson assumed the current role of Chief Executive Officer in July 2013 and was appointed to the Board on 7 February 2014. He has a strong understanding of all aspects of the business with a particular passion for bringing the latest lighting products to market. Glen started at Beacon Lighting on the sales floor and progressed to Trainee Buyer, before becoming Merchandising Manager in 2003. In 2006 he was promoted to General Manager – Merchandise taking responsibility for Beacon Lighting’s product range from development through to in-store presentation. Glen’s interest in shares of the Company are Noted in section 7 of the Director’s report. Appointed to the Board on 7 February 2014 Eric Barr is the Deputy Chairman and also the Chairman of Beacon Lighting’s Remuneration and Nomination Committee. A Chartered Accountant, Eric retired in 2000 as a partner with PricewaterhouseCoopers after 20 years service providing multi-disciplinary services to numerous retailers. Since then he has been a Director of public and private companies in the United States and Australia, including 10 years as lead Director of Reading International Inc. Eric is a Director and Chairman of the Audit Committee of Asia Pacific Exchange Limited, Director of Western Bulldogs Forever Foundation Limited and Western Bulldogs Society Limited. Eric’s interest in shares of the Company are Noted in section 7 of the Director’s report. Appointed to the Board on 7 February 2014 Neil Osborne is also chairman of the Company’s Audit Committee. Neil has over 30 years’ experience in the retail industry. He was formerly an Accenture Partner, leading large strategic projects in Australia and Asia. He also spent 18 years with Coles Myer Ltd in senior positions including finance (including CFO Myer) and strategic planning. Neil is a non-Executive Director of Vita Group, Deputy Chairman of Australian United Retailers and is a non-Executive Director of Callista Software Services which is wholly owned by Deakin University. Neil’s interest in shares of the Company are Noted in section 7 of the Director’s report. BOARD OF DIRECTORS 5 For personal use onlyManagement Team Ian Bunnett Managing Director: Retail 9 years service Responsible for overseeing the Company’s national retail and commercial network, with the assistance of five state sales managers. Ian’s experience includes senior roles in an extensive retail career with Payless Shoes culminating in the position of General Manager of store operations. He joined Beacon Lighting as National Sales Manager in 2004 and was appointed to his current role in 2013. David Speirs Chief Financial Officer 11 years service Responsible for the finance department, distribution and information technology functions. David’s experience includes various businesses within Coles Myer followed by consulting roles with KPMG and Deloitte where he managed major projects for local and international retailers. David holds a BBus(Accounting), MBus(Accounting), Post Grad Dip(Finance) and is a FCPA. Barry Martens Chief Operating Officer 17 years service Responsible for all corporate operations, property, franchising, mergers and acquisitions. He also oversees the facilities maintenance and Beacon Solar divisions. Barry joined the Company as Marketing Manager, following a career in retail advertising with agencies, Clemenger Harvey and J. Walter Thompson, and also with retail chain Klein’s Jewellery heading its national marketing function. Barry holds a Certificate in Business Studies(Advertising). Elizabeth Mikkelsen Group Human Resources Manager 11 years service Responsible for the full range of human resources activities including payroll, safety and compliance. Elizabeth’s previous experience includes an optical retailer in Denmark and the Commonwealth Bank. Australian retail has dominated her career, spending nearly 15 years with Myer in human resources, training and line management positions. Elizabeth holds a BA(Psych(Hons)) and a Dip (Human Resources). Prue Robinson Marketing Director 8 years service Responsible for developing marketing and e-commerce strategies to generate traffic and to develop the Company’s market position and brand integrity. Also responsible for the internal marketing team. Prue developed her experience through a variety of roles including periods in Sydney and London before spending four years in marketing with Spotlight. Prue holds a BBus(Management & Marketing). Michael (Mick) Tan Chief Information Officer 13 years service Responsible for the strategic direction of the Company’s information technology support, infrastructure and development. Mick has over 30 years experience in information technology and its application in retail. He has worked in various companies specialising in retail point of sale systems including Fujitsu Systems Business (Malaysia). Mick holds a Dip(Management), an ICL Certificate(Systems Analysts & Design) and an ICL Certificate(Base Computer Concepts & Programming). Rodney Brown National Distribution Manager 2 years service Responsible for the supply chain operations within Australia and overseas, including the Company’s distribution centre and third party logistics warehouses. Rodney has extensive supply chain experience including domestic and international logistics and the management of distribution centres for Cadbury Schweppes and Fosters Brewing. Rodney holds a Certificate III (Purchasing), Certificate (Warehouse Management). Tracey Hutchinson Finance Manager & Company Secretary 2 years service Responsible for the finance and accounting functions including responsibility for the integrity of financial systems and reporting. Tracey’s experience includes senior financial management roles with various Australian divisions of ASX and internationally listed companies. Most recently Tracey was CFO and Company secretary for Eyecare Partners, formerly ASX listed. Tracey holds a BBus(Accounting), an MBus(Administration) and is a CPA. 6 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyFor personal use onlyCorporate Governance Statement The Board of Directors of Beacon Lighting Group Limited is responsible for the corporate governance of the Company. This statement outlines the corporate governance policies and practices formally adopted by Beacon Lighting. These policies and practices are in accordance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations with 2010 Amendments (3rd Edition) unless otherwise stated. The Board considers that the Company’s corporate governance practices and procedures substantially reflect the principles. The full content of the Company’s Corporate Governance policies and charters can be found on the Company’s website (www.beaconlightinggroup.com.au). Principle 1 Lay solid foundations for management and oversight Principle 2 Structure the Board to add value The Board’s responsibilities are defined in the Board Charter and there is a clear delineation between the functions reserved to the Board and those conferred upon the Chief Executive Officer and certain other officers of the Company. The Board Charter outlines: The experience and expertise relevant to the position of Director held by each Director in office at the date of the annual report is included in the Directors’ Report. The term in office held by each Director in office at the date of this report is as follows: • The guidelines for Board composition, including the processes around Director appointments and resignations. • The operation of the Board and the Board Committees. • The roles of the Board, the Chairperson, CEO and senior management. • Specifically includes risk management responsibilities (rather than these being delegated to a separate Risk Committee). A copy of Company’s website. the Company’s Board Charter is available on the The Board and Committee Evaluation Policy sets out the processes for the annual review of the performance of the Board as a whole, each Director and the Board Committees. The Board has established a Remuneration and Nomination Committee which is responsible for annually reviewing executive remuneration and incentive policies and practices. The Company has adopted a Diversity Policy. The Company does not propose to establish measurable gender diversity objectives in the foreseeable future as: • Our senior management team are extremely experienced and stable and we do not intend to make changes in the coming year. • We are strongly committed to making all selection decisions on the basis of merit and the setting of specific objectives for the quantum of males/females at any level would potentially influence decision making to the detriment of the business. The Diversity Policy affirms the commitment of the Company to embrace diversity and sets out the principles and work practices to ensure that all Associates have the opportunity to achieve their full potential. Name Ian Robinson Eric Barr Glen Robinson Neil Osborne Term in office 1 year Less than 1 year Less than 1 year Less than 1 year Note: these terms of office relate to the listed entity Beacon Lighting Group Limited only and do not relate to the subsidiary or operating entities. Principle 2.4 and 2.5 of the ASX Corporate Governance Principles and Recommendations recommends that the Board comprise a majority of Directors who are independent, and an independent Chairperson. The Board, as currently composed, does not comply with these recommendations. Ian Robinson is a substantial shareholder. He has been Chairman since July 2013 having previously held the position of Chairman and Chief Executive Officer. Eric Barr and Neil Osborne are shareholders of the Company. They are Non-Executive Directors in the current Board structure and bring objective judgement to bear on Board decisions commensurate with their commercial knowledge, experience and expertise. Glen Robinson is a senior executive of Beacon Lighting and has been Chief Executive Officer since July 2013. the ASX Corporate Governance Principles and Principle 2.1 of Recommendations the Board establishes a recommends nomination committee and that the committee have at least three members, a majority of whom are independent and be chaired by an independent Director. that The Remuneration and Nomination Committee has four members. Three are independent: Eric Barr and Neil Osborne, as independent Directors, and one external consultant. Ian Robinson, Executive Chairman, is the other member. The Committee is chaired by Eric Barr. 8 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyEric Barr, Glen Robinson and one external consultant. Two of the four members of the committee are Non-Executive Directors and have experience in, and knowledge of, the industry in which Beacon Lighting operates. Neil Osborne, Eric Barr and the external consultant each have accounting qualifications. The details of the number of Audit Committee meetings held and attended are included in the Directors’ Report. Minutes are taken at each Audit Committee meeting, with the minutes tabled in the following full Board meeting. The Audit Committee has adopted a formal charter which outlines its role in assisting the Board in the Company’s governance and exercising of due care, diligence and skill in relation to: • Reporting of financial information. • The application of accounting policies. • Financial risk management. • The Company’s internal control system. • Its relationship with the external auditor. In accordance with Principle 4.2 the Board received assurance for the year ended 29 June 2014 from the Chief Executive Officer and the Chief Financial Officer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects. In accordance with principle 4.3, the Company’s external auditor attends each annual general meeting and is available to answer shareholder questions about the audit. Principle 5 Make timely and balanced disclosure Principle 5.1 of the ASX Corporate Governance Principles and Recommendations recommends that Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Accordingly the Company has adopted a Continuous Disclosure Policy. This Policy sets out the standards, protocols and the detailed requirements expected of all Directors, officers, senior management and associates of the Company for ensuring the Company immediately discloses all price-sensitive information in compliance with the Listing Rules and Corporations Act relating to continuous disclosure. In relation to nominations, the Remuneration and Nomination Committee is responsible for: • Assessing current and future Director skills and experiences and identifying suitable candidates for succession. • Annually enquiring of the Executive Chairman and the Chief Executive Officer their processes for evaluating their direct reports. An internal process of evaluation will be undertaken annually on the performance of the Board and its committees. This review will provide satisfaction to the Board that its structure and performance is effective and appropriate to Beacon Lighting and the Board has the range of skills, knowledge and experience to direct the Company. To enable performance of their duties, all Directors: • Are provided with appropriate information in a timely manner and can request additional information at any time; • Have access to the Company Secretary; • Are able to seek independent professional advice at the Company’s expense in certain circumstances. Principle 3 Act ethically and responsibly The Company has adopted a written Code of Conduct which applies to all associates employed by the Company, including executives and non-executives. The objective of this Code is to ensure that high standards of corporate and individual behaviour are observed by all associates in the context of their employment. In summary, the Code requires associates to always act: • In a professional, fair and ethical manner, in accordance with Company values. • In accordance with applicable legislation and regulations, and internal policies and procedures. • In a manner that protects the Company interests, reputation, property and resources. The Code also reminds associates of their responsibility to raise any concerns in relation to suspected or actual breaches of the Code. Beacon Lighting has in place a policy concerning trading in Company securities. The Securities Trading policy includes detailed requirements for Directors, officers and key management regarding when they can trade Beacon Lighting securities. Principle 4 Safeguard integrity in corporate reporting the ASX Corporate Governance Principals and Principle 4.1 of Recommendations, recommends that the Audit Committee consist only of Non-Executive Directors and consists of a majority of independent Directors. The Audit Committee as currently composed does not comply with these recommendations. Beacon Lighting has an Audit Committee comprising of four members, three of whom are considered independent. The Audit Committee presently comprises Neil Osborne (Chairman), CORPORATE GOVERNANCE STATEMENT 9 For personal use onlyPrinciple 6 Respect the rights of security holders Principle 8 Remunerate fairly and responsibly Principle 8.1 of the Corporate Governance Principles and Recommendations, recommends that the remuneration committee should comprise a majority as independent Directors. The Remuneration and Nomination Committee as currently composed does not comply with this recommendation. The Company has established a Remuneration and Nomination Committee. The Remuneration and Nomination Committee has four members. Three are independent: Eric Barr and Neil Osborne, as independent Directors, and one external consultant. Ian Robinson, Executive Chairman, is the other member. The Committee is chaired by Eric Barr. In relation to remuneration, the Remuneration and Nomination Committee is responsible for: • Ensuring the Company has remuneration policies and practices appropriate to attracting and retaining key talent. • Reviewing and making recommendations in relation to the remuneration of Directors and senior management. • Reviewing and recommending the design of any executive incentive plans and approving the proposed awards to each executive under those plans. In accordance with its Charter, the Remuneration and Nomination Committee clearly distinguishes the structure of Non-Executive Directors’ remuneration from that of Executive Directors and senior executives. Directors’ and executives’ remuneration has been disclosed in the remuneration report section of the annual report. The Company has adopted a Communications Policy governing its approach to communicating with its shareholders, market participants, customers, associates and other stakeholders. This policy specifically includes: • The approach to briefing institutional investors, brokers and analysts. • Includes communications whether by meetings, via the Company’s websites, electronically or by any other means. Beacon Lighting provides a printed copy of its annual report to all requesting shareholders. The annual report contains relevant information about the Company’s operations during the year, changes in the state of affairs and, other disclosures required by the Corporations Act. The half year report contains summarised financial information and a review of Beacon Lighting operations during the period. The Beacon Lighting Corporate website provides all shareholders and the public access to our announcements to the ASX, and general information about Beacon Lighting and our business. The format of general meetings aims to encourage shareholders to actively participate in the meeting through being invited to comment, or raise questions of Directors on any matter relevant to the performance and operation of the Company. Principle 7 Recognise and manage risk Principle 7.1 of the ASX Corporate Governance Principles and Recommendations recommends that the Board of a listed Company have a committee to oversee risk. The Board, having regard to the Company’s stage of development does not currently comply with these recommendations. The Board Charter specifically includes risk management responsibilities (rather than these being delegated to a separate Risk Committee). The Board retains oversight responsibility for assessing the effectiveness of the Company’s systems for the management of material business risks. The Board, having regard to the Company’s stage of development does not consider a separate internal audit function is necessary at this stage. One of the Audit Committee responsibilities is to evaluate compliance with the Company’s risk management and internal control processes. The Board has received written assurances from management as to the effectiveness of the Company’s management of its material business risks. The Chief Executive Officer and Chief Financial Officer have provided written assurance that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. 10 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyFor personal use onlyDirectors’ Report The Directors of Beacon Lighting Group Limited (the ‘Company’) present their report together with the Consolidated Financial Statements of the Company and its controlled entities (the ‘Consolidated Entity’) for the 52 weeks ended 29 June 2014. 1. Directors The Directors of the Company during the whole financial period and up to the date of the report were: Ian Robinson Executive Director Chairman of the Board, Member of the Remuneration and Nomination Committee. The following Directors were appointed during the year: Glen Robinson Chief Executive Officer Member of the Audit Committee. Eric Barr Non-Executive Director Deputy Chairman of the Board, Chairman of the Remuneration and Nomination Committee and Member of the Audit Committee. Neil Osborne Non-Executive Director Chairman of the Audit Committee and Member of the Remuneration and Nomination Committee. Directors Appointed during the year Glen Robinson, Eric Barr and Neil Osborne were appointed as Directors on 7 February 2014 and continue in office at the date of this report. Martin Hanman was a Director of Beacon Lighting Corporation Pty Ltd from the beginning of the financial year until his resignation on 9 April 2014. Details of the expertise and experience of the Directors are outlined on page 5 of this annual report. 2. Principal Activities During the financial period the principal continuing activities of the Group consisted of the selling of lighting, globes, ceiling fans and energy efficient products in the Australian market. 3. Results The consolidated profit for the year attributable to the members of Beacon Lighting Group Limited was: Consolidated Entity 20141 $000 20131 $000 Profit before Income Tax 17,057 14,170 Income Tax Expense 5,260 4,304 Operating profit after tax attributable to the members of Beacon Lighting Group Limited 11,797 9,866 1 Year ended 29 June 2014 was a 52 week period compared to year ended 30 June 2013 being a 53 week period. 12 BEACON LIGHTING GROUP ANNUAL REPORT 2014 4. Operating and Financial Review 4.1 Overview of Operations Beacon Lighting is Australia’s leading specialist retailer of lighting, ceiling fans and light globes, offering its customers knowledge, service and advice on a wide range of products. As a vertically integrated business, Beacon Lighting develops, designs, sources, imports, distributes, merchandises, promotes and sells its product range to meet the demands of customers. More than 90% of the products in Company stores are supplied through the Company’s wholesale supply chain and approximately 80% of the products are exclusively branded. As at 29 June 2014, Beacon Lighting operated the following businesses: • 71 Beacon Lighting Company Operated Stores; • 14 Beacon Lighting Franchise Stores; • 3 Commercial Sales Offices; • Beacon International; and • Beacon Solar During FY2014, Beacon Lighting opened 6 new stores, bought back the Taren Point (NSW) franchise store, relocated an existing store and merged one commercial sales office back into the retail network. The new stores that opened in FY2014 were Baldivis (WA), Kawana (QLD), McGraths Hill (NSW), Noarlunga (SA), Toowoomba (QLD) and Bendigo (VIC), which was an existing independent lighting store acquired and converted to a Beacon Lighting store. During the year, the Joondalup (WA) store was relocated and the Far North Queensland Commercial Sales Office was merged back into the Townsville retail store. For personal use only4.1.1 Financial Performance A summary of the actual FY2014 financial performance compared to the FY2014 Prospectus Forecast and the FY2013 Pro Forma historical results is presented in the following table. Consolidated Entity Sales Gross Profit Other Income & Other Revenue Operating Expenses3 EBITDA EBIT Net Profit After Tax (NPAT) Historical1 FY2013 $’000 Prospectus 2 FY2014 $’000 132,932 85,599 4,575 (73,559) 16,615 14,511 9,456 150,261 96,611 5,503 (82,823) 19,291 17,229 11,480 Actual FY2014 $’000 150,338 96,660 5,521 (82,095) 20,086 18,066 11,797 % Inc / Dec on Last Year % Inc / Dec on Prospectus 13.1% 12.9% 20.7% 11.6% 20.9% 24.5% 24.8% 0.1% 0.1% 0.3% (0.9%) 4.1% 4.9% 2.8% 1 Based on the 52 week FY2013 Pro Forma Historical result in the Prospectus dated 12 March 2014 2 Based on the FY2014 Pro Forma Statutory Forecast in the Prospectus 12 March 2014 3 Operating Expenses exclude depreciation and amortisation 4.1.2 Sales 4.1.6 Earnings In FY2014, Beacon Lighting sales increased by 13.1% as a result of new store openings, comparative Company store growth, wholesale sales to franchise stores and the combined sales of the Beacon Lighting Commercial, Beacon International and Beacon Solar businesses. Key to the total sales increase was the FY2014 comparative Company store sales of 5.7%. Following a first half comparative sales increase of 4.9%, the positive comparative sales momentum continued into the second half of the year with a comparative sales increase of 6.9%. The sales for FY2014 were in line with the Prospectus forecast. 4.1.3 Gross Profit Margin The gross profit margins at 64.3% of sales in FY2014 were consistent with the gross profit margins in FY2013 and the Prospectus forecast for FY2014. Despite the fall in AUD/USD exchange rate, Beacon Lighting was able to maintain the gross profit margins through effective management of retail prices and the introduction of new product ranges. 4.1.4 Other Income & Other Revenue Other income and other revenue, which primarily relates to franchise store royalties and franchise store contributions to the marketing fund along with third party related supplier income was ahead of last year and in line the Prospectus forecast. 4.1.5 Operating Expenses The operating expenses consist of the marketing, selling, distribution and general administration expenses. Despite the increase in the total operating expenses compared to FY2013, Beacon Lighting was able to effect productivity gains to reduce the FY2014 actual expenses compared to the Prospectus forecast. NPAT of $11.8 million was up by 24.8% in FY2014 compared to $9.5 million. The NPAT result was also up by 2.8% compared to the Prospectus forecast. The significant factors which impacted on the NPAT performance were the growth in sales, the stable gross profit margin and the management of operating expenses. The NPAT result as a percentage of sales has increased to 7.8% of sales in FY2014 from 7.1% of sales in FY2013. 4.1.7 Dividends The Directors have declared a dividend of 1.4 cents per share fully franked for the half year ended 29 June 2014. Thereafter, it is expected that fully franked dividends of between 50% and 60% of NPAT will be paid half yearly in March and September. 4.1.8 Financial Position Beacon Lighting continues to maintain banking facility agreements with the ANZ Bank and the Bank of Melbourne. Importantly, these banking facilities provide Beacon Lighting with trade finance facilities to meet the working capital requirements of stock funding. The facilities have not been fully drawn over the FY2014 period but provide Beacon Lighting with additional funding flexibility in the operation of the business. Beacon Lighting continues to operate well within the bank covenants. In FY2014, Beacon Lighting invested $5.0 million in capital expenditure items, principally associated with the expansion of the store network. An additional $1.3 million was also invested in stock for new stores and other parts of the supply chain. During FY2014, Beacon Lighting also acquired the Beacon Lighting Franchise store at Taren Point (NSW) and an existing independent lighting store in Bendigo (VIC), which was converted to a Beacon Lighting store. DIRECTOR’S REPORT 13 For personal use only4.2 Business Strategies 4.2.8 Efficiency Gains Beacon Lighting has strategically positioned itself to take full advantage of the dramatic changes that continue to occur in the global lighting market. Beacon Lighting intends to drive sales and profit growth through a number of different strategies. 4.2.1 New Store Rollout Beacon Lighting plans to open approximately six stores per year for the foreseeable future depending on suitable site identification, negotiation and availability. 4.2.2 Optimising Store Portfolio and Operations Beacon Lighting believes it is able to grow sales through improvements to its store portfolio and operations. The store portfolio is continually analysed to identify optimum size, format, fit out and merchandising. Store refurbishments, review of store operating procedures and further work on tailoring product ranges to local demographic market requirements have all been identified as strategies to drive top line growth. 4.2.3 New Products and Ranges Beacon Lighting currently offers an extensive range of products with fashion and energy efficiency in mind. Beacon Lighting has scope to further improve the breadth and depth of the range. This includes offering more product categories and more options within each category to better meet the needs of residential and trade customers. 4.2.4 Technology in Lighting The lighting industry is experiencing rapid change in technology. A need for greater energy efficiency is driving the development of LED technology. Although still in the relatively early stages of development, this represents a significant opportunity for Beacon Lighting as more people switch to LED to save on power. 4.2.5 Online Presence There are significant opportunities to enhance and develop the Company’s existing online presence to drive top line incremental sales. Various opportunities have been identified and the majority are yet to be initiated. These may include opportunities through third party websites and dedicated category websites. 4.2.6 Acquisitions Beacon Lighting intends to pursue local and international business acquisitions that complement the core business activities or leverage off existing business activities. This may include other lighting stores including franchised stores, other retail formats or wholesale operations. 4.2.7 Emerging Businesses Beacon Lighting intends to continue to support the emerging business divisions in Beacon Solar and Beacon International. Beacon Lighting recognises they have synergies with the core business and believe they can strengthen overall market penetration for the brand to drive additional top line sales and bottom line profit. Beacon Lighting believes it can make efficiency gains and better control its cost base as it grows, through further investing in systems and technology. There are also other opportunities to leverage the Company’s buying power to reduce supply chain costs and lead times, and improve inventory management. 4.3 Business Risks There are a number of risk factors, both specific to Beacon Lighting and of a general nature which may threaten both the future operating and financial performance of Beacon Lighting and the outcome of an investment in Beacon Lighting Group Limited. Many of the risks are outside the control and influence of the Directors and management but Beacon Lighting is well positioned to face these risks. The business risks faced by Beacon Lighting and how it manages these risks are set out below. 4.3.1 Retail Environment and General Economic Conditions Beacon Lighting is sensitive to the current state and future changes in the retail environment and general economic conditions. Beacon Lighting will manage the business to the current economic conditions. 4.3.2 Competition Beacon Lighting operates in a competitive retail market, which is subject to moderate barriers to entry and changing consumer preferences. Beacon Lighting believes that with its vertically integrated business model and the business strategies discussed previously its market leading position will be maintained. 4.3.3 Product Sourcing Beacon Lighting is a vertically integrated business, which relies heavily on third party manufacturing. Beacon Lighting will continue to monitor supplier performance and spread the product sourcing across many suppliers. 4.3.4 Exchange Rates The majority of goods that are purchased and imported by Beacon Lighting are purchased in US dollars and as a result, the Company is exposed to fluctuations in the AUD/USD exchange rates. Beacon Lighting mitigates this exchange risk by using a combination of forward contracts and options. 4.3.5 Product Failure As a vertically integrated business self-supplying over 90% of stock that is technically complex in nature, there is risk of some product failure. Beacon Lighting continues to make significant investment in engineering, product development and quality control to minimise this risk. 4.3.6 Operating Expenses Beacon Lighting operating expenses continue to increase. Some of these are contractual and some are beyond the control of the Company. The ongoing increase in scale of Beacon Lighting gives the business the opportunity to deliver operating expense efficiencies. 14 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use only4.4 Trading Outlook Beacon Lighting has had a solid start to the FY2015. New and exciting product ranges have been developed for the upcoming Spring / Summer catalogue release. We are also continuing to see further development in LED, fan and globe technology, which continues to provide fresh and new product ranges throughout the business. In July 2014, Beacon Lighting opened a new store at Mittagong (NSW). The company has already made leasing commitments at Port Macquarie (NSW), Pakenham (VIC), Maribyrnong (VIC), North Lakes (QLD), Coburg (VIC) and Camberwell (VIC) and expects these stores to open in FY2015. The company will also close the Hawthorn (VIC) store in the first half of the year. Beacon Lighting continues to review a portfolio of new store opportunities along with possible business acquisitions. Beacon Lighting expects the current growth strategies to continue to drive improved sales and profits in FY2015. 5. Significant Changes in the State of Affairs During the financial year the group undertook an IPO on the Australian Stock Exchange in order to facilitate the sale of 45% interest in Beacon Lighting Corporation Limited. Following the completion of the offer, Heystead Nominees Pty Ltd, a company owned by the Robinson Family owns 118,250,000 shares or 55% and other investors own 96,750,000 shares or 45% of the company. 6. Directors’ Meetings The numbers of meetings of the Company’s Board of Directors held during the financial period ended 29 June 2014, and the numbers of meetings attended by each Director were: Director’s Meetings Committee Meetings Audit Remuneration & Nomination DIRECTOR I Robinson G Robinson E Barr N Osborne H 7 7 7 7 A 7 7 7 7 H - 1 1 1 A - 1 1 1 H 2 - 2 2 A 1 - 2 2 H = Number of meetings held during the time the Director held office or was a member of the committee during the period. A = Number of meetings attended. 7. Directors’ Interests in Shares The relevant interest of each Director in the Company, as notified by the Directors to the ASX in accordance with section 205G(l) of the corporations Act 2000 (Cth), at the date of the report is as follows: Director I Robinson1 G Robinson1 E Barr N Osborne Ordinary Shares in the Company 118,635,000 118,635,000 150,000 300,000 1Heystead Nominees Pty Ltd and other Robinson Family member interests. 8. Directors’ Interests in Contracts Directors’ interests in contracts are disclosed in Note 30 of the financial statements. 9. Dividends Dividends paid to members during the financial period were as follows: Director Fully franked dividends provided or paid during the period 2014 $000 14,500 2013 $000 200 To avoid any doubt, $14.5m were paid prior to the group listing and does not include the dividend of $3.01m declared on the day of this report, disclosed in Note 32 of this report. DIRECTOR’S REPORT 15 For personal use only 10. Insurance of Officers 10.1 Indemnification of Directors 14. Audit Services 14.1 Auditor’s independence declaration The Company has indemnified each Director referred to in this Report, the Company Secretary and previous Directors and officers against all liabilities or loss (other than to the Company or a related body corporate) that may arise from their position as officers of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith or where indemnification is otherwise not permitted under the Corporations Act. The indemnity stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses, and covers a period of seven years after ceasing to be an officer of the Company. The indemnity is contained in a Deed of Access, Insurance and Indemnity, which also gives each officer access to the Company’s books and records. The Company has also indemnified the current and previous Directors of its controlled entities and certain members of the Company’s senior management for all liabilities or loss (other than to the Company or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith or where indemnification is otherwise not permitted under the Corporations Act. The auditor’s independence declaration to the Directors of the Consolidated Entity in relation to the auditor’s compliance with the independence requirements of the Corporations Act 2001 (Cth) and the professional code of conduct for external auditors, forms part of the Directors’ Report. No person who was an officer of the Consolidated Entity during the financial year was a Director or partner of the Consolidated Entity’s external auditor at a time when the Consolidated Entity’s external auditor 14.2 Audit and non-audit services provided by the external auditor During the 52 weeks ended 29 June 2014, the following fees were paid or were due and payable for services provided by the external auditor, PwC, of the Consolidated Entity: Consolidated Entity Audit & assurance services 2014 $000 2013 $000 10.2 Insurance premiums Audit & review of financial statements 199,410 150,000 During the financial period, Beacon Lighting Group Limited paid a premium of $11,993 to insure the Directors and officers of the company against any loss which he/she becomes legally obligated to pay on account of any claim first made against him/her during the policy period. 11. Indemnity of Auditors Beacon Lighting Group Limited has agreed to indemnify their auditors, PricewaterhouseCoopers (PwC), to the extent permitted by law, against any claim by a third party arising from Beacon Lighting Group Limited’s breach of their agreement. The indemnity stipulates that Beacon Lighting Group Limited will meet the full amount of any such liabilities including a reasonable amount of legal costs. 12. Proceedings on Behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. 13. Events Subsequent to Reporting Date Other than the item described below, there has been no other matter or circumstance that has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial periods. A fully franked dividend of $3,010,000 was declared on August 22, 2014. IPO due diligence Other services Other IPO services IPO tax related services 164,495 38,836 118,935 - - - Tax services 30,190 22,800 Total remuneration of PWC 551,866 172,800 In addition to their statutory audit duties, PwC provided taxation and other assurance related services to the Company. The Board has a review process in relation to non-audit services provided by the external auditor. The Board considered the non-audit services provided by PwC and, in accordance with written advice provided, and endorsed, by a resolution of the Audit Committee, is satisfied that the provision of these non-audit services by the auditor is compatible with, and does not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services are subject to the corporate governance procedures adopted by the Company and are reviewed by the Audit Committee to ensure they do not impact the integrity and objectivity of the auditor; and • non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they do not involve reviewing or auditing the auditor’s own work, aiding in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards with the Company. 16 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use only 15. Auditor 1. Base salary and benefits PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001. 16. Remuneration Report 16.1 Remuneration overview The Board recognises that the performance of the Group depends on the quality and motivation of our Associates, including the executives and our 760 Associates employed by the Group across Australia and Internationally. The Group remuneration strategy therefore seeks to appropriately attract, reward and retain Associates at all levels in the business, but in particular for management and key executives. The Board aims to achieve this by establishing executive remuneration packages that include a mix of fixed remuneration, short term incentives and long term incentives. The Board has appointed the Remuneration and Nominations Committee whose objective is to assist the Board in relation to the Group remuneration strategy, policies and actions. In performing this responsibility, the Committee must give appropriate consideration to the Company’s performance and objectives, employment conditions and external remuneration relativities. No remuneration consultants were engaged by the Group in FY2014. 16.2 Principles used to determine the nature and amount of remuneration (a) Directors’ Fees The Executive Chairman and the Chief Executive Officer do not receive Directors’ fees but are remunerated as executives within the business. The Deputy Chairman and the Non-Executive Director are entitled to receive annual fees of $110,000 and $100,000 respectively. These fees are inclusive of their relevant responsibilities on the various Group Committees, and are also inclusive of superannuation. These fees exclude any additional fees for special services which may be determined from time to time. No additional retirement benefits are payable. The Non-Executive Director fees are reviewed annually to ensure that the fees reflect market rates. There are no guaranteed annual increases in any Directors’ fees. The Executive Chairman and Non-Executive Directors do not participate in the short or long term incentive schemes. (b) Executive Remuneration The current executive salary and reward framework has three components: 1. Base salary and benefits; 2. Short term cash incentives; and 3. Short term performance rights incentives. The combination of these components comprises the executives’ total remuneration. For the year ended 29 June 2014, the Group did not a have long term incentive program in place. Executive base salaries are structured as a part of the total employment remuneration package which comprises the fixed component of pay and other financial benefits being car allowances. In addition, superannuation is paid in accordance with legislated amounts. for executives are reviewed annually Base salaries to provide competitiveness with the market but there are no guaranteed base salary increases in any executive contracts. An executive’s remuneration is also reviewed on promotion. In addition to financial benefits, executives have received non-monetary benefits in the form of fuel cards and e-tags. These benefits ceased to exist from 31 March 2014 however the value of these benefits prior to that date have been included in this report. 2. Short term cash incentives Executives including the Chief Executive Officer but not the Executive Chairman are eligible to participate in an annual short term cash incentive which delivers rewards by way of cash bonuses, subject to the achievement of the Group financial performance targets. The Group’s Net Profit Before Tax (NBPT) result has been determined as the appropriate financial performance target to trigger the payment of cash incentives for each period. The amount of any short term cash incentive paid in a year is dependent upon the level of performance achieved against the Group’s financial performance target (NPBT) for the year. For the year ended 29 June 2014, the Group’s financial performance targets were met and the annual short term cash incentive will be paid in FY2015. 3. Short term performance rights incentives For year ended 29 June 2014, the Beacon Lighting Group did not issue any share based compensation or bonuses in relation to this component of executives incentives. The company will implement the Performance Rights plan for selected senior executives post the signing of the current year financial statements as contemplated by the IPO prospectus. Details will be disclosed at the time of issue and at the next reporting date. 16.3 Details of remuneration The following executives along with the Directors are identified as key management personnel with the authority and responsibility for planning, directing and controlling the activities of the Group, directly and indirectly, during the financial year. Ian Robinson Executive Chairman Glen Robinson Chief Executive Officer Ian Bunnett Managing Director – Retail David Speirs Chief Financial Officer Barry Martens Chief Operating Officer All of the above executives were employed by Beacon Lighting and were key management personnel for the entire year ended 29 June 2014 and year ended 30 June 2013 unless otherwise stated. The details of the remuneration of the Directors and other key management personnel for the Beacon Lighting Group Limited and the consolidated entity for the current and prior financial periods are set out in the following table: DIRECTOR’S REPORT 17 For personal use only Short Term Employment Benefits Post Employment Long Term Benefits Financial Year Salary & Fees $ Performance Based Payment $ Non-Monetary Benefits $ Super Contributions $ Annual & Long Service Leave $ Total $ Total Performance Related % DIRECTORS I Robinson (Chairman) 2014 2013 167,752 150,459 G Robinson (Chief Executive Officer) 1,873 15,312 31,949 216,886 3,023 13,541 (5,570) 161,453 2014 2013 169,647 19,222 6,025 15,307 658 210,859 141,862 11,009 7,605 11,778 4,269 176,523 E Barr (Non-Executive) 20141 2013 152,281 - N Osborne (Non-Executive) 20141 2013 72,472 - M Hanman (Non-Executive) 2014 2013 88,073 110,091 Total Remuneration Directors - - - - - - - - - - - - 7,817 - - - 8,146 9,909 - - - - - - 160,098 - 72,472 - 96,219 120,000 650,225 19,222 7,898 46,582 32,607 756,534 402,412 11,009 10,628 35,228 (1,301) 457,976 2014 2013 EXECUTIVES I Bunnett (Managing Director – Retail) 2014 2013 198,137 27,460 1,223 18,889 15,464 261,173 176,309 22,018 1,474 15,795 2,577 218,173 D Speirs (Chief Financial Officer) 2014 2013 176,809 27,460 2,921 18,660 16,359 242,209 163,726 29,358 5,880 17,378 1,656 217,998 B Martens (Chief Operating Officer) 2014 2013 192,776 27,460 1,869 16,494 8,872 247,471 181,625 29,358 2,591 15,326 4,364 233,264 Total Remuneration Executives 2014 2013 567,722 82,380 6,013 54,043 40,695 750,853 521,660 80,734 9,945 48,499 8,597 669,435 - - 9.12% 6.24% - - - - - - 2.54% 2.40% 10.51% 10.09% 11.34% 13.47% 11.10% 12.59% 10.97% 12.06% 1 Eric Barr and Neil Osborne were paid additional fees for work performed during the IPO of the company ($60,000 and $20,000 respectively). Eric Barr received $51,939 prior to being appointed as a Director for services provided. 18 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use only 16.4 Service Agreements All executives are on employment terms consistent with the remuneration framework outlined in this report. Each of the agreements has an open term with but may be terminated by either party with a required notice period of 12 weeks. Executives are eligible for statutory entitlements upon termination of employment, and no further payments will be made to exiting executives. Signed in accordance with a resolution of Directors Ian Robinson Executive Chairman Melbourne, 22 August 2014 Glen Robinson Chief Executive Officer DIRECTOR’S REPORT 19 For personal use onlyAuditor’s Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Beacon Lighting Group Limited for the year ended 29 June 2014, I declare that to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Beacon Lighting Group Limited and the entities it controlled during the period. Daniel Rosenberg Partner PricewaterhouseCoopers Melbourne 22 August 2014 PricewaterhouseCoopers, ABN 52 780 433 757 Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. 20 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use only21 For personal use onlyIndex to the Financial Statements Page Page Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements 1 Summary of Significant Accounting Policies 2 Financial Risk Management 3 Segment Information 4 Revenue from Ordinary Activities and Other Revenue 5 Other Income 6 Expenses 7 Income Tax Expense 8 Cash and Cash Equivalents 9 Trade and Other Receivables 10 Inventories 11 Derivative Financial Instruments 12 Other Current Assets 13 Property, Plant and Equipment 14 Deferred Tax Assets 15 Intangible Assets 16 Trade and Other Payables 23 24 25 26 27 32 35 35 35 36 37 38 38 39 40 40 41 42 43 44 17 Current Borrowings 18 Current Provisions 19 Current Tax Liabilities 20 Non Current Borrowings 21 Non Current Provisions 22 Contributed Equity 23 Reserves and Retained Profits 24 Dividends 25 Key Management Personnel Disclosures 26 Earnings Per Share 27 Remuneration Of Auditors 28 Contingencies 29 Commitments 30 Related Party Transactions 31 Subsidiaries 32 Events Occurring After the Reporting Period 33 Reconciliation of Profit After Income Tax to Net Cash Inflow From Operating Activities 34 Non-Cash Investing And Financing Activities 35 Critical Accounting Estimates 36 Parent Entity Financial Information 45 45 46 47 47 48 49 50 51 51 52 52 52 53 55 55 56 56 56 57 22 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use only CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities Consolidated Entity Notes Revenue from ordinary activities Sale of goods Other revenue Other income Expenses Cost of sales of goods Other expenses from ordinary activities Marketing Selling and distribution General and administration Finance costs Profit before income tax Income tax expense Profit for the period attributable to the members of the parent entity Other comprehensive income Items that may be reclassified to profit or loss Changes in the fair value of derivatives Income tax relating to these items Other comprehensive income for the period, net of tax Total comprehensive income for the period attributable to the members of the parent entity Earnings per share Basic earnings per share Diluted earnings per share 4 4 4 5 6 6 7 23(a) 26 26 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying Notes. 2014 $’000 150,338 4,181 154,519 1,340 2013 $’000 135,718 4,539 140,257 186 (53,678) (48,497) (9,629) (60,309) (14,177) (1,009) 17,057 (5,260) 11,797 (474) 143 (331) 11,466 Cents 5.49 5.49 (9,137) (55,319) (12,297) (1,023) 14,170 (4,304) 9,866 133 (40) 93 9,959 Cents 4.59 4.59 23 For personal use onlyCONSOLIDATED BALANCE SHEET As at 29 June 2014 and as at 30 June 2013 Beacon Lighting Group and its controlled entities. Consolidated Entity Current assets Cash and cash equivalents Trade and other receivables Inventories Derivative financial instruments Other current assets Total current assets Non-current assets Property, plant and equipment Deferred tax assets Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Provisions Derivative financial instruments Current tax liabilities Total current liabilities Non-current liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Other reserves Retained earnings Total equity Notes 8 9 10 11 12 13 14 15 16 17 18 11 19 20 21 22 23(a) 23(b) 2014 $’000 11,427 8,217 32,194 - 365 52,203 16,818 3,832 4,125 24,775 76,978 29,594 564 4,236 238 1,147 35,779 774 2,221 2,995 38,774 38,204 62,565 (43,910) 19,549 38,204 2013 $’000 7,602 15,207 29,073 93 580 52,555 14,025 2,467 3,356 19,848 72,403 22,892 639 2,879 - 1,157 27,567 267 2,056 2,323 29,890 42,513 2,150 (692) 41,055 42,513 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying Notes. 24 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyCONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities. Consolidated Entity Notes Balance as at 1 July 2013 Profit for the year Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs & tax Non controlling interests in acquired subsidiaries Dividends provided for or paid Total contributions by and distributions to owners Balance as at 29 June 2014 Balance at 25 June 2012 Adjustment on correction of lease liabilities Profit for the year Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners: Movement in other reserves Dividends provided for or paid Total contributions by and distributions to owners 22 23 24 21 23 24 - - 60,415 62,565 2,150 - - - - - - - Balance as at 30 June 2013 2,150 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying Notes. Contributed equity $’000 2,150 - - - Reserves $’000 (692) - (331) (331) Retained earnings $’000 41,055 11,797 - Total equity $’000 42,513 11,797 (331) 11,797 11,466 60,415 - 60,415 (42,887) (18,803) (61,690) - (14,500) (14,500) (42,887) (33,303) (15,775) (43,910) 19,549 38,204 - - - 93 93 (785) - (785) (692) 33,089 (1,700) 9,866 - 9,866 - (200) (200) 35,239 (1,700) 9,866 93 9,959 (785) (200) (986) 41,055 42,513 25 For personal use onlyCONSOLIDATED STATEMENT OF CASH FLOWS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities Consolidated Entity Notes Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Borrowing costs Income taxes paid Net cash inflow from operating activities 33 Cash flows from investing activities Payments for acquisitions Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Repayment of loans from related parties Payments of loans to related parties Net cash (outflow) from investing activities Cash flows from financing activities Repayment of borrowings (net) Dividends paid to Company's shareholders Proceeds from share capital raised Costs associated with share capital raised Payment to non-controlling interests Net cash inflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of period 24 8 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying Notes. 2014 $’000 167,236 (144,612) 117 (1,009) (6,026) 15,706 (790) (3,620) 26 9,200 - 4,816 (908) (14,500) 63,854 (1,289) (63,854) (16,697) 3,825 7,602 11,427 2013 $’000 154,777 (135,378) 187 (1,023) (4,990) 13,573 (1,748) (2,426) 2 1,312 (9,200) (12,060) (794) (600) - - - (1,394) 119 7,483 7,602 26 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 1. Summary of Significant Accounting Policies The principal accounting policies adopted in the preparation of this consolidated financial report is set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial report is for the consolidated entity consisting of Beacon Lighting Group Limited and its subsidiaries. (a) Basis of Preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Beacon Lighting Group Limited is a for-profit entity for the purpose of preparing the financial report. Beacon Lighting Group Limited operates within a retail financial period. The current financial period was a 52 week retail period ended on the 29 June 2014 (2013: 53 week period ending 30 June 2013). This treatment is consistent with section 323D of Corporation Act 2001. (i) New and amended standards adopted The Group has applied the following standards and amendments applicable for the first time for the June 2014 annual report: • AASB 10 Consolidated Financial Statements • AASB 119 Revised - Accounting for Employee Benefits • AASB 13 Fair Value Measurement • AASB 12 Disclosure of Interests in Other Entities AASB10 Consolidated Financial Statements AASB 10 was issued in August 2011 and replaces the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements. Under the new principles, the Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group has reviewed its investments in other entities to assess whether the consolidation in relation to these entities is different under AASB 10 than under AASB 127. No differences were found and therefore no adjustments to any of the carrying amounts in the financial statements are required as a result of the adoption of AASB 10. AASB119 Employee Benefits The adoption of the revised AASB 119 Employee Benefits has changed the accounting for the group’s annual leave obligations. As the entity does not expect all annual leave to be taken within 12 months of the respective service being provided, annual leave obligations are now measured on a discounted basis. However, the impact of this change was immaterial since the majority of the leave is still expected to be taken within a short period after the end of the reporting period. AASB13 Fair Value Measurement AASB 13 was released in September 2011 and aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across Australian Accounting Standards. The standard does not extend the use of fair value accounting but provides guidance on how it should be applied where its use is already required or permitted by other Australian Accounting Standards. This standard does not affect the Group’s accounting policy. AASB12 Disclosure of Interests in Other Entities Upon review of this standard, no change has been made to the carrying amounts in the Financial Statements as a result of the adoption of AASB 12. The group also elected to adopt the following standard early: • AASB2013-3 Amendments to AASB 136 Recoverable Amount Disclosures for Non-Financial Assets, which had a small impact on the impairment disclosures. (ii) Standards and interpretations not yet adopted AASB9 Financial Instruments AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities. Since December 2013, it also sets out new rules for hedge accounting. When adopted, the standard will affect the group’s accounting for its available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. There will be no impact on the group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities. The new hedging rules align hedge accounting more closely with the group’s risk management practices. The International Accounting Standard Board (IASB) has published the complete version of International Financial Reporting Standard (IFRS) 9 Financial instruments, which replaces the guidance in IAS 39. This final version includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the incurred loss impairment model used today. The final hedging part of IFRS 9 was issued in November 2013. Beacon Lighting Group Limited will consider the impact of the new standard on its financial assets once an equivalent AAS has been issued. IFRS 15 Revenue from contracts with customers IFRS 15: Revenue from contracts with customers was issued by the International Accounting Standards Board in May 2014 and is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The new standard replaces the principle under the current standard of recognising revenue when risks and rewards transfer to the customer. Beacon Lighting Group Limited will consider the impact of the new rules on its revenue recognition policy once an equivalent AASB has been issued. (iii) Compliance with IFRS The consolidated financial report of the Beacon Lighting Group Limited Group also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board. (iv) Historical cost convention This financial report has been prepared in accordance with the historical cost convention. Comparative information is reclassified where appropriate to enhance comparability. (v) Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. Refer to Note 35 Critical accounting estimates for detailed explanation of items requiring assumptions and estimates. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except as set out below: 27 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities Warranty provision A warranty provision was raised at 29 June 2014 due to the increased magnitude of this cost in line with the increase in business activity compared to the prior period. Provisions for product warranties are recognised when the Company has a legal or constructive obligation as a result of a past event; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. (b) Comparative Financial Information Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. Comparative information is reclassified where appropriate to enhance comparability and provide more appropriate information to users. During the period comparatives in respect of sales and cost of sales were reclassified to eliminate certain intra group transactions. As a result of this, Sale of goods and Cost of sales of goods were each reduced by $7.8m in the Consolidated statement of comprehensive income for the year ended 30 June 2013. (c) Principles of Consolidation The consolidated financial report incorporates the assets and liabilities of all subsidiaries of Beacon Lighting Group Limited (‘Company’ or ‘parent entity’) as at 29 June 2014 and the results of all subsidiaries for the period then ended. Beacon Lighting Group Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group (refer to Note 1(i)). Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Where control of an entity is obtained during a financial period, its results are included in the consolidated statement of comprehensive income from the date on which control commences. Where control of an entity ceases during a financial period its results are included for that part of the period during which control existed. Investments in subsidiaries are accounted for at cost in accounting records of Beacon Lighting Group Limited. (d) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. (e) Foreign Currency Translation (i) Functional and presentation currency Items included in the financial report of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial report is presented in Australian dollars, which is Beacon Lighting Group Limited’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. (iii) Specific commitments Hedging is undertaken in order to avoid or minimise possible adverse financial effects of movements in exchange rates. Gains or costs arising upon entry into a hedging transaction intended to hedge the purchase or sale of goods and services, together with subsequent exchange gains or losses resulting from those transactions are deferred in the statements of comprehensive income from the inception of the hedging transaction up to the date of the purchase or sale and included in the measurement of the purchase or sale. Any gains or losses arising on the hedging transaction after the recognition of the hedge purchase or sale are included in the consolidated statement of comprehensive income. In the case of hedges of monetary items, exchange gains or losses are brought to account in the financial period in which the exchange rates change. Gains or costs arising at the time of entering into such hedging transactions are brought to account in the consolidated statement of comprehensive income over the lives of the hedges. (f) Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. (i) Sale of goods Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer. Revenue recognised equals the fair value of the consideration received or receivable. In the current financial year bill and hold transactions where the customer has paid for goods in full inventory is on hand, but the customer has elected not to take possession of the inventory are recognised as sales. As a result incremental revenue of $276,000 and profit of $139,000 were recognised in FY2014. (ii) Trust distribution income Trust distribution revenue is recognised when the right to receive a distribution has been established. (iii) Interest income Interest income is recognised using the effective interest method. 28 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use only NOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. (g) Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax 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 related to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Beacon Lighting Group Limited and its wholly-owned Australian controlled entities have not implemented the tax consolidation legislation. (h) Leases Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as non current assets (Note 13). Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases (Note 29). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. (i) Business Combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition-date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. (j) Impairment of Assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost of disposal and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. (k) Cash and Cash Equivalents For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of 29 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated balance sheet. (l) Trade Receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than 30-60 days from the date of recognition. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the consolidated statement of comprehensive income. The amount of the impairment loss is recognised in profit or loss within general and administration expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss. (m) Inventories Finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, and an appropriate proportion of variable and fixed overhead expenditure. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. (n) Derivatives and Hedging Activities 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 the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge 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. 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 other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss within other income or general and administration expenses. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for instance when the forecast purchase of inventory that is hedged takes place). The gain or loss relating to the effective portion of forward foreign exchange contracts hedging imported inventory purchases is recognised in profit or loss within other income or general and administration expenses. The deferred amounts are ultimately recognised in profit or loss as cost of goods sold in the case of inventory. (o) Property, Plant and Equipment All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. • Furniture, Fittings & equipment 3 to 10 years • Leased plant and equipment 5 to 10 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. (p) Intangible Assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. (ii) Patents, Trademarks and Other Rights Patents, Trademarks and Other Rights have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the patents, trademarks and other rights over their useful life of 25 years. (q) Trade and Other Payables These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. 30 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. (r) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw- down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility. 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 period. (s) Employee Benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. Short-term employee benefit obligations are presented as provisions. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (u) Store Opening Costs Non-capital costs associated to the setup of a new store are expensed in the period in which they are incurred. (v) Dividends Provision is made for the amount of any dividends declared, determined or publicly recommended by the Directors on or before the end of the financial period but not distributed at balance date. (w) Contributed Equity Ordinary Shares are classified as equity. (x) Earnings Per Share (i) Basic earnings per share Basic earnings per share is determined by dividing net profit after income tax attributable to members of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the period. (ii) Other long-term employee benefit obligations (ii) Diluted earnings per share The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Re-measurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. (t) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. Diluted earnings per share adjusts the figure 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 (including performance rights) and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (y) Rounding Amounts The Company is of a kind referred to in ASIC Class Order 98/100, and in accordance with that Class Order, amounts in the financial statements have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. (z) Parent Entity Financial Information The financial information for the parent entity, Beacon Lighting Group Limited, disclosed in Note 36 has been prepared on the same basis as the consolidated financial report, except as set out below. Investments in subsidiaries Investments in subsidiaries are accounted for at cost in the financial report of Beacon Lighting Group Limited. 31 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 2. Financial Risk Management The consolidated entity is exposed to a variety of financial risks comprising: a) Market risk (encompassing – foreign currency risk); b) Credit risk; and c) Liquidity risk Risk management is carried out under policies approved by the Chief Executive Officer. The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts and interest rate swaps to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of foreign exchange risks and aging analysis for credit risk. The Group holds the following financial instruments: Consolidated Entity Financial Assets Cash and cash equivalents Trade and other receivables Derivative financial instruments Financial Liabilities Trade and other payables Borrowings Derivative financial instruments (a) Market risk Foreign exchange risk 2014 $’000 11,427 8,217 - 19,644 29,594 1,338 238 31,170 2013 $’000 7,602 15,207 94 22,903 22,892 906 - 23,798 The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises when future commercial transactions and recognised financial assets and financial liabilities are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Group hedges its foreign exchange risk exposure arising from future commercial transactions and recognised assets and liabilities using forward contracts. The Group’s risk management policy is to hedge between 70% - 120% of cash flows arising from known inventory purchase commitments, mainly denominated in US dollars for the subsequent six months. Consolidated Entity Trade payables Forward exchange contracts - buy foreign currency (cash flow hedges) 2014 $’000 12,998 19,340 2013 $’000 8,948 2,108 32 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollar, was as follows: Group sensitivity At 29 June 2014 100% of Beacon lighting Groups purchases in USD are hedged using forward exchange contracts. Therefore any movements in the Australian dollar against the US dollar would have no impact on the Group’s pre tax profit or equity. Therefore a sensitivity analysis has not been performed. There is currently no Price or Interest rate risk applicable to the Group. (b) Credit risk Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, favorable derivative financial instruments and deposits with banks as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. Individual credit limits are set based on internal or external ratings in accordance with limits set by the Board. The compliance with credit limits by wholesale and retail customers is regularly monitored by line management. Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk. There are no significant concentrations of credit risk, whether through exposure to individual customers, specific industry sectors and/or regions. An analysis of trade receivables is disclosed in Note 9. (c) Liquidity risk Financing arrangements The Group and parent entity had access to the following financing facilities at the end of each reporting period: Consolidated Entity Floating rate – Total facilities Overdraft Trade finance facility Asset finance facility Floating rate – Total undrawn facilities Overdraft Trade finance facility Asset finance facility 2014 $’000 500 23,750 3,500 500 7,693 2,539 2013 $’000 500 19,500 1,015 500 6,323 771 Maturities of financial liabilities The tables below analyse the Group’s financial liabilities into relevant maturity groupings as follows: (a) based on their contractual maturities: (i) all non-derivative financial liabilities, and (ii) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows. (b) based on the remaining period to the expected settlement date: (i) derivative financial liabilities for which the contractual maturities are not essential for an understanding of the timing of the cash flows. 33 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. Contractual maturities of financial liabilities: Less than 6 months $’000 6 - 12 months $’000 Between 1 and 5 years $’000 Over 5 years $’000 Total contractual cash flows $’000 Carrying amount (assets) liabilities $’000 Consolidated Entity At 29 June 2014 Non-derivatives Trade and other payables 29,594 Finance lease liabilities Total non-derivatives Derivatives - 29,594 - 564 564 Net settled (forward foreign exchange contracts - cash flow hedges) 238 At 30 June 2013 Non-derivatives Trade and other payables 22,892 Finance lease liabilities Total non-derivatives Derivatives - 22,892 - - 639 639 - 774 774 - - 267 267 Net settled (forward foreign exchange contracts - cash flow hedges) (93) - - - - - - - - - - 29,594 1,338 30,932 29,594 1,338 30,932 238 238 22,892 906 23,798 22,892 906 23,798 (93) (93) (d) Fair Value measurements For information about the methods and assumptions used in determining the fair value of derivatives please refer to Note 11. Fair value hierarchy AASB 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2); and c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The following table presents the groups’ financial assets and financial liabilities measured and recognised at fair value at 29 June 2014, on a recurring basis. At 29 June 2014 Derivatives used for hedging - Net Position $’000 Level 2 (238) $’000 Total (238) 34 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities The fair value of financial instruments that are not traded in an active market (for example, over–the–counter derivatives) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. All of the resulting fair value adjustments are included in level 2. There are no financial assets and liabilities in Level 1 and Level 3, and there are no transfers between the levels. 3. Segment Information The chief operating decision maker for Beacon Lighting Group Limited and its controlled entities (the Company), is the Chief Executive Officer (CEO). The Company determines operating segments based on information provided to the CEO in assessing performance and determining the allocation of resources with the Company. Consideration is given to the manner in which products are sold, nature of the products supplied, the organisational structure and the nature of customers. Reportable segments are based on the aggregated operating segments determined by the manner in which products are sold, similarity of products, nature of the products supplied, the nature of customers and the methods used to distribute the product. The Company purchases goods in USD for sales into Australia. Therefore the Company’s one reportable segment is the selling of lighting, fans and energy efficient products in the Australian market. The total of the reportable segments’ revenue, profit, assets and liabilities, is the same as that of the Company as a whole and as disclosed in the consolidated statement of comprehensive income and consolidated statement of financial position. 4. Revenue from Ordinary Activities and Other Revenue Consolidated Entity (a) From ordinary activities Sale of goods (b) Other revenue Franchise fees Sundry revenue 5. Other Income Consolidated Entity Interest Customs duty refund Other income 2014 $’000 2013 $’000 150,338 135,718 3,859 322 4,181 4,088 451 4,539 154,519 140,257 2014 $’000 117 1,162 61 1,340 2013 $’000 186 - - 186 35 For personal use only NOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 6. Expenses Consolidated Entity (a) Profit before income tax includes the following specific expenses: Depreciation Plant and equipment Motor vehicles Amortisation Patents, trademarks and other rights Finance costs Interest and finance charges paid/payable Net loss on disposal of property, plant and equipment Rental expense relating to operating leases Minimum lease payments Employee benefits (b) Net foreign exchange gains and losses 2014 $’000 1,758 242 20 1,009 143 13,827 35,357 2013 $’000 1,836 279 20 1,023 34 13,084 31,456 Net foreign exchange (gains)/losses recognised in profit before income tax for the period (as either other income or expense) (134) 186 (c) Individually significant items Profit for the year includes the following items that are significant because of their nature, size or incidence Gains Other income – customs import duty refund Expenses Expense incurred in the collection of customs import duty refund Initial recognition of warranty provision expense 1,162 274 1,038 - - - 36 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 7. Income Tax Expense Consolidated Entity (a) Income tax expense Current tax Deferred tax Adjustments for current tax of prior periods Deferred income tax (revenue) included in income tax expense comprises: Decrease (increase) in deferred tax assets (Note 14) (Decrease) increase in deferred tax liabilities (Note 14) (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense Tax at the Australian tax rate of 30.0% (2013 – 30.0%) Tax effect of amounts which are not deductible (taxable)in calculating taxable income: Amortisation of acquired rights Entertainment Sundry items Adjustments for income tax expense of prior periods Income tax expense (c) Aggregate amounts of $552,000 deferred tax arose in the reporting period were not recognised in net profit or other comprehensive income but directly credited to equity (Note 14). 2014 $’000 5,913 (813) 160 5,260 (122) (691) (813) 17,057 5,117 - 14 15 5,146 114 5,260 2013 $’000 4,384 (360) 280 4,304 1,657 (2,017) (360) 14,170 4,251 29 12 15 4,307 (3) 4,304 37 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 8. Cash and Cash Equivalents Consolidated Entity Cash at bank and in hand Deposits at call (a) (a) Classification as cash equivalents 2014 $’000 10,177 1,250 11,427 2013 $’000 7,350 252 7,602 Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition and are repayable with 24 hours notice with no loss of interest. Risk exposure The Group’s and the parent entity’s exposure to interest rate risk is discussed in Note 2. 9. Trade and Other Receivables Consolidated Entity Trade receivables (a) Provision for impairment of receivables (b) Net amounts receivable from customers Receivable from Director related entity Other debtors (c) (a) Aging of trade receivables Trade receivables ageing analysis at period end is: Consolidated Entity Not past due Past due 31-60 days Past due 61-90 days Past due more than 91 days 38 BEACON LIGHTING GROUP ANNUAL REPORT 2014 2014 $’000 7,368 (178) 7,190 - 1,027 8,217 2014 $’000 6,198 671 277 222 7,368 2013 $’000 5,585 (213) 5,372 9,200 635 15,207 2013 $’000 4,246 635 571 133 5,585 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities (b) Provision for impairment of receivables Trade receivables are non interest bearing with 30 days end of month terms. An impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. A provision against impairment for the amount of $177,751 (2013: $212,564) has been raised against the bal- ance of trade receivables for 2014. The impairment losses have been included within expenses in the consolidated statement of comprehensive income. Trade receivables that are not impaired are largely expected to be received within trading terms or shortly thereafter. Movements in the provision for impairment of receivables are as follows: Consolidated Entity Opening balance Provision for impairment recognised during the year Receivables written off during the year as uncollectable Closing balance (c) Other debtors 2014 $’000 213 (22) (13) 178 2013 $’000 268 4 (59) 213 These amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at commercial rates where the terms of repayment exceed six months. Collateral is not normally obtained. Foreign exchange and interest rate risk Information about the Group’s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in Note 2. Fair value and credit risk Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above. Refer to Note 2 for more information on the risk management policy of the Group and the credit quality of the entity’s trade receivables. 10. Inventories Consolidated Entity Inventory at cost Goods in transit - at cost Inventory expense 2014 $’000 29,622 2,572 32,194 2013 $’000 26,310 2,763 29,073 Inventories recognised as expense during the 52 week period ended 29 June 2014 and included in cost of sales of goods amounted to $53,274,131 (2013: $48,616,894). Write-downs of inventories to net realisable value recognised as an expense during the 52 week period ended 29 June 2014 amounted to $511,460 (2013: $561,651). 39 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 11. Derivative Financial Instruments Consolidated Entity Derivatives used for hedging - Net Position 2014 $’000 (238) 2013 $’000 93 The Group’s and the parent entity’s risk exposures are provided in Note 2. Forward exchange contracts – cash flow hedges The Group purchases products in US currency. In order to protect against exchange rate movements, the group has entered into forward exchange contracts to purchase US dollars. These contracts are hedging highly probable forecasted purchases for the ensuing financial year. The contracts are timed to mature when payments for major purchases of inventory are scheduled to be made. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income. When the cash flows occur, the group adjusts the initial measurement of the component recognised in the balance sheet by removing the related amount from other comprehensive income. During the year ended 29 June 2014 there were no gains or losses (2013 – loss of $208,097) recognised in profit or loss for the ineffective portion of these hedging contracts. 12. Other Current Assets Consolidated Entity Prepayments and other current assets 2014 $’000 365 2013 $’000 580 40 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 13. Property, Plant and Equipment Consolidated Entity At 30 June 2012 Cost Accumulated depreciation Net book amount Year ended 30 June 2013 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 30 June 2013 Cost Accumulated depreciation Net book amount Year ended 29 June 2014 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 29 June 2014 Cost Accumulated depreciation Net book amount Furniture, fittings and equipment $’000 Vehicles $’000 20,059 (7,819) 12,240 12,240 2,547 (14) (1,836) 12,937 22,441 (9,504) 12,937 12,937 4,555 (110) (1,758) 15,624 27,037 (11,413) 15,624 2,304 (1,104) 1,200 1,200 189 (22) (279) 1,088 2,471 (1,383) 1,088 1,088 407 (59) (242) 1,194 2,819 (1,625) 1,194 Total $'000 22,363 (8,923) 13,440 13,440 2,736 (36) (2,115) 14,025 24,912 (10,887) 14,025 14,025 4,962 (169) (2,000) 16,818 29,856 (13,038) 16,818 41 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 14. Deferred Tax Assets Consolidated Entity Gross Deferred Tax Assets The balance comprises temporary differences attributable to: 2014 $’000 2013 $’000 Employee benefits Inventory Debtor provision Derivatives Tax losses IPO capitalized expenses Marketing fund Other provisions/accruals Total deferred tax assets Deferred tax assets expected to be recovered within 12 months Deferred tax assets expected to be recovered after more than 12 months Gross Deferred Tax Liabilities The balance comprises temporary differences attributable to: Derivatives Other accruals and provisions Total deferred tax liabilities Deferred tax liabilities expected to be settled within 12 months Deferred tax liabilities expected to be settled after more than 12 months Movements in Net Deferred Tax Assets Opening balance Charged/(credited) to the consolidated statement of comprehensive income Charged/(credited) amounts recognized directly in equity Net Deferred Tax Assets 42 BEACON LIGHTING GROUP ANNUAL REPORT 2014 1,107 446 54 - 504 552 442 796 3,901 1,484 2,417 3,901 - 69 69 69 - 69 2,467 813 552 3,832 951 616 64 604 - - 365 627 3,227 2,872 355 3,227 632 128 760 760 - 760 2,107 360 - 2,467 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 15. Intangible Assets Consolidated Entity Year ended 30 June 2013 Opening net book amount Additions Amortisation charge Closing net book amount At 30 June 2013 Cost Valuation Accumulated amortisation and impairment Net book amount Year ended 29 June 2014 Opening net book amount Additions Amortisation charge for the year Closing net book amount At 29 June 2014 Cost Valuation Accumulated amortisation and impairment Net book amount Goodwill $’000 Patents,trademarks and other rights $’000 Other $’000 Total $’000 2,088 947 - 3,035 3,035 - - 3,035 3,035 790 - 3,825 3,825 - - 3,825 340 - (20) 320 - 500 (180) 320 320 - (20) 300 - 500 (200) 300 1 - - 1 1 - - 1 1 - (1) - 1 - (1) - 2,429 947 (20) 3,356 3,036 500 (180) 3,356 3,356 790 (21) 4,125 3,826 500 (201) 4,125 43 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities (a) Impairment tests for goodwill Goodwill is allocated to the Group’s one cash generating unit being the selling of lighting, fans and energy efficient products in the Australian market (refer Note 3). The recoverable amount is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. (b) Key assumptions used for value-in-use calculations Gross Margin Growth Rate Discount Rate 2014 % 64.0 2013 % 64.0 2014 % 3.0 2013 % 3.0 2014 % 11.0 2013 % 11.0 Management determined gross margin based on past performance and its expectations for the future. The weighted average growth rates used are consistent with forecasts included in industry reports. Management has considered reasonably possible changes in the key assumptions used in the value- in-use calculations, and has not identified any reasonably possible change that would cause a material impact in the carrying amount of the Group’s cash generating unit. 16. Trade And Other Payables Consolidated Entity Trade payables Customer deposits Sundry creditors Marketing fund Other payables 2014 $’000 22,898 2,388 2,693 1,407 208 29,594 2013 $’000 17,605 1,820 2,058 1,216 193 22,892 (a) Risk exposure Information about the Group’s exposure to foreign exchange risk is provided in Note 2. (b) Fair Value Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature. 44 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 17. Current Borrowings Consolidated Entity Unsecured Hire purchase liability (a) Total unsecured current borrowings (a) Hire purchase liability 2014 $’000 564 564 The Group utilises hire-purchase plans to acquire assets (i.e. fixtures and fittings and motor vehicles). The terms range from one to four years. Details on the accounting for these hire-purchase plans is disclosed in Note 1(h) of this report. Security and fair value disclosures Information about the security relating to each of the secured liabilities and the fair value of each of the borrowings is provided in Note 20. Risk exposures Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in Note 2. 18. Current Provisions Consolidated Entity Employee benefits (a) Warranty provision (b) Other provisions (c) (a) Employee benefits 2014 $’000 3,106 1,038 92 4,236 2013 $’000 639 639 2013 $’000 2,815 - 64 2,879 The current provision for employee benefits includes accrued annual leave and long service leave. For long service leave it covers all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount of the provision is presented as current, since the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is expected to be taken or paid within the next 12 months. Consolidated Entity Leave obligations not expected to be settled within 12 months 2014 $’000 2,161 2013 $’000 1,886 45 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities (b) Warranty provision The group generally offers 12 months warranty on its products. Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled in the next financial year. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest claims could differ from historical amounts. Factors that could impact the estimated claim information include the success of the group’s product and quality initiatives, as well as parts and labour costs. Were claim costs to differ by 10% from management’s estimates, the warranty provision would be an estimated $104,000 higher or lower. Product warranties were not material in previous financial years. Movement in warranty provision Consolidated Entity Carrying amount at the start of the year Charged/(credited) to profit or loss - amount incurred and charged Carrying amount at end of period (c) Other provisions Provision is made for the fringe benefit tax payable at the end of the reporting period. Movements in other provisions Consolidated Entity Carrying amount at the start of the year Charged/(credited) to profit or loss - amount incurred and charged Amounts used during the year Carrying amount at end of period 19. Current Tax Liabilities Consolidated Entity Provision for income tax 2014 $’000 - 1,038 1,038 2014 $’000 64 368 (340) 92 2014 $’000 1,147 2013 $’000 - - - 2013 $’000 76 267 (279) 64 2013 $’000 1,157 46 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 20. Non Current Borrowings Consolidated Entity Unsecured Hire purchase plan (a) Total unsecured non-current borrowings (a) Hire purchase plan 2014 $’000 774 774 2013 $’000 267 267 The Group utilises hire-purchase plans to acquire assets (i.e. furniture and fittings and motor vehicles), with one to four year terms. Details on the accounting for these hire-purchase plans is disclosed in Note 1(h) of this report. Risk exposures Information about the Group’s exposure to interest rate and foreign exchange risk is provided in Note 2. 21. Non Current Provisions Consolidated Entity Lease liabilities (a) Employee benefits Total non-current liabilities - provisions (a) Lease liabilities Adjustment on correction for lease liabilities 2014 $’000 1,638 583 2,221 2013 $’000 1,700 356 2,056 In the 2014 Annual Report, Beacon Lighting has corrected the balance sheet to account for leases with a fixed increment on a straight line basis over the term of the lease. As a result a liability of $1.70m has been recorded to the opening balance sheet of the 2013 financial year with no impact on the 2013 financial year profit before income tax. There is a $62,000 favourable impact to current year profit before income tax as a result of this correction. 47 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 22. Contributed Equity Consolidated Entity Number of ordinary shares, fully paid Consolidated Entity Movements in ordinary share capital Balance at the beginning of the year Elimination of prior year share capital Transaction costs arising on share issue net of tax Share capital raised Balance at the end of the year Consolidated Entity Movements in the number of ordinary shares Balance at the beginning of the year Elimination of prior year share capital New shares Issued Balance at the end of the year Ordinary shares 2014 $’000 2013 $’000 215,000,000 2,150,000 2014 $’000 2,150 (2,150) (1,289) 63,854 62,565 2014 $’000 2013 $’000 2,150 - - - 2,150 2013 $’000 2,150,000 (2,150,000) 215,000,000 215,000,000 2,150,000 - - 2,150,000 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. All shares carry one vote per share. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. Capital risk management The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Consistently with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by borrowings less cash plus total equity. Net debt is calculated as total borrowings less cash. 48 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 23. Reserves And Retained Profits Consolidated Entity (a) Other reserves Cash flow hedges Common control reserve Movement in cash flow hedges Opening balance Revaluation Closing balance Movement in common control reserve Opening balance Transactions arising from share capital restructure Closing balance Nature and Purpose of Other Reserves Cash flow hedges 2014 $’000 (238) (43,672) (43,910) 93 (331) (238) (785) (42,887) (43,672) 2013 $’000 93 (785) (692) - 93 93 - (785) (785) The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised in other comprehensive income, as described in Note 1(p). Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss. Common control reserve An internal reorganisation occurred prior to the initial public offering of shares in Beacon Lighting Group Limited (“BLG” or the “Group”) in April 2014. The business of Beacon Lighting is conducted through Beacon Lighting Corporation Pty Ltd (“BLC”) and its 100% owned subsidiaries. BLC was formerly known as Sonman Investments Pty Ltd. Prior to the restructure, BLC was 55% owned by Heystead Nominees Pty Ltd, a Company associated with the Robinson family and the remaining 45% owned by a minority shareholder. The internal reorganisation has resulted in BLG as the current listed Company and the ultimate parent Company of BLC and its wholly owned subsidiaries, and the acquisition of the 45% of non-controlling interests by BLG, prior to the IPO in April 2014. There was no change in control of the Group as a result of either the internal reorganisation or the subsequent initial public offering. Therefore, the reorganisation has been accounted for as a common control transaction, and presented in the consolidated accounts of BLG from the date the Group obtains the ownership interest. Assets and liabilities are recognised upon consolidation at their carrying amounts in the consolidated financial statements of the ultimate parent entity, Beacon Lighting Group. Consolidated Entity (b) Retained earnings Movements in retained earnings were as follows: Opening balance Adjustment on correction of lease liabilities (Note 21) Net profit for the period Transactions arising from share capital restructure Dividends Closing balance 2014 $’000 2013 $’000 41,055 11,797 (18,803) (14,500) 19,549 33,089 (1,700) 9,866 - (200) 41,055 49 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 24. Dividends (a) Ordinary shares Dividends of $14.5m were paid prior to the group listing, including dividends of $6.525m paid to the non-controlling interest shareholder during the year ended 29 June 2014. To avoid any doubt, this does not include the dividend of $3.01m declared on the day of this report. Consolidated Entity Declared final fully franked dividend of $0.067 (2013: $0.093) per fully paid share at a tax rate of 30% (2013: 30%) 2014 $’000 14,500 2013 $’000 200 (b) Franked dividends The franked portions of the final dividends recommended after 29 June 2014 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the 52 week period ended 29 June 2014. Consolidated Entity Franking credits available for subsequent reporting periods based on a tax rate of 30.0% (2013 - 30.0%) 2014 $’000 21,412 2013 $’000 21,796 The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for: • franking credits that will arise from the payment of the amount of the provision for income tax, • franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and • franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were paid as dividends. 50 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 25. Key Management Personnel Disclosures Consolidated Entity Key management personnel compensation Short-term employee benefits Post-employment benefits Long-term benefits Performance based benefits Detailed remuneration disclosures are provided in the remuneration report on pages 17 to 19. 26. Earnings Per Share Consolidated Entity Basic earnings per share - cents Diluted earnings per share - cents 2014 $ 573,735 54,043 40,695 82,380 750,853 2014 5.49 5.49 2013 $ 531,605 48,499 8,597 80,734 669,435 2013 4.59 4.59 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share1 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share1 215,000,000 215,000,000 215,000,000 215,000,000 1 Due to the number of ordinary shares increasing due to a reorganization of capital, the calculation of basic and diluted earnings per share for all periods presented have been adjusted retrospectively. 51 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 27. Remuneration Of Auditors During the period the following fees were paid or payable for services provided by PricewaterhouseCoopers, auditor of the parent entity. Consolidated Entity Audit and Assurance Services Audit and review of financial statements IPO due diligence Other services: Other IPO services IPO tax related services Taxation services Total remuneration of PwC 28. Contingencies There were no significant or material contingent liabilities including legal claims at 29 June 2014. 29. Commitments Lease commitments: group as lessee (a) Non-cancellable operating leases Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Consolidated Entity Within one year Later than one year but not later than five years Later than five years 2014 $ 199,410 164,495 38,836 118,935 30,190 551,866 2014 $’000 13,446 37,449 7,895 58,790 2013 $ 150,000 - - 22,800 172,800 2013 $’000 13,348 31,072 5,050 49,470 The Group leases various offices, warehouses and retail stores under non-cancellable operating leases expiring within one to seven years. The leases have varying terms, with rent payable monthly in advance. Various options exist to renew the leases at expiry for an additional term. On renewal, the terms of the leases are renegotiated. 52 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities (b) Hire purchase commitments Commitments in relation to finance leases are payable as follows: Consolidated Entity Within one year Later than one year but not later than five years Minimum lease payments Future finance charges Total lease liabilities Representing lease liabilities: Current (Note 17) Non-current (Note 20) 30. Related Party Transactions (a) Subsidiaries Interests in subsidiaries are set out in Note 31. (b) Key management personnel Disclosures relating to key management personnel are set out in Note 25. Consolidated Entity (c) Transactions with other related parties The following transactions occurred with related parties: Purchases of goods Purchases of goods from other related parties Purchases of goods and supply of services from/to other related parties Other transactions Interest received from other related parties Consulting fees paid to other related parties Rent paid to other related parties 2014 $’000 632 824 1,456 (118) 1,338 564 774 1,338 2013 $’000 701 282 983 (77) 906 639 267 906 2014 $’000 2013 $’000 - 47,610 - 49,090 1,404,101 895,124 - - 32,722 1,387,925 53 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities The Robinson family has a 55% interest as owner of the Derrimut distribution centre leased by Beacon Lighting on arms length commercial terms. The current rent is $920,000 per annum increasing by 3% annually. The lease expires in March 2021 with two further rights of renewal for periods of seven years each. The remaining 45% interest is held by interests associated with Gusaka Pty Ltd. The Robinson family is in the process of negotiating to acquire the remaining 45% interest. The Robinson family has a 55% interest as owner of the Heidelberg store leased by Beacon Lighting on arms length terms. The current rent is $153,276 per annum increasing by 3% annually. The lease expires in 2017 with one further right of renewal for a period of seven years. The remaining 45% interest is held by interests associated with Gusaka Pty Ltd. The Robinson family is in the process of negotiating to acquire the remaining 45% interest. The Robinson family has a 100% interest as owner of the Fyshwick store leased by Beacon Lighting on arms length terms. The current rent is $205,855 per annum increasing by 3% annually. The lease expires in 2017 with one further right of renewal for a period of seven years. These disclosures are made due to Beacon Lighting having obtained, at the time of listing, a waiver from Listing Rule 10.1 permitting the lease arrangements described above continuing without shareholder approval conditional on disclosure being made in the Annual Report as set out here. Ian Robinson has a 100% interest in Carbonetix Pty Ltd. Carbonetix Pty Ltd and Beacon Solar have an arms length working alliance whereby business opportunities are jointly explored. Beacon Lighting provides Carbonetix Pty Ltd with administrative services and receives an arms length fee for these services. Beacon Lighting subleases office space to Carbonetix Pty Ltd at an arms length fee. (d) Outstanding balances There are no outstanding balances arising from sales/purchases of goods and services with related parties at the end of the reporting period. No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties. Consolidated Entity (e) Loans to/from related parties Loans to other related parties Beginning of the year Loans advanced Loans repaid End of period 2014 $’000 2013 $’000 9,200,000 - (9,200,000) - 1,311,772 9,200,000 (1,311,772) 9,200,000 No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties. The related party loan receivable is non-interest bearing and therefore no interest has been charged on this loan during the 52 week period ended 29 June 2014. 54 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 31. Subsidiaries The consolidated financial report incorporate the assets, liabilities and results of the following principal subsidiaries in accordance with the accounting policy described in note 1(b): Name of Entity Incorporation Shares Equity holding1 Beacon Lighting Corporation Pty Ltd Brightlite Unit Trust Beacon Lighting Wholesalers Unit Trust Beacon Lighting Franchising Unit Trust Tanex Unit Trust Enviro Renew Pty Ltd Manrob Investments Pty Ltd Beacon Solar Pty Ltd Light Source Solutions Limited Beacon International Limited 1592603 Ltd (formerly known as Beacon Lighting International Ltd) Australia Australia Australia Australia Australia Australia Australia Australia Hong Kong Hong Kong Hong Kong Beacon Lighting International (formerly known as Fanaway Technology Ltd) Hong Kong Fanaway Trading Limited Fanaway International Trading Limited Hong Kong Hong Kong 1The proportion of ownership interest is equal to the proportion of voting power held. 32. Events Occurring After the Reporting Period 2014 % 2013 % Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 Other than the item described below, there has been no other matter or circumstance that has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial periods. A fully franked dividend of $3,010,000 was declared on August 22, 2014. 55 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 33. Reconciliation of Profit After Income Tax to Net Cash Inflow from Operating Activities Consolidated Entity Profit for the period Depreciation and amortisation Net loss on sale of non-current assets Amortisation Fair value adjustment to derivatives Net exchange differences Change in operating assets and liabilities: (Increase) decrease in receivables (Increase) decrease in inventories (Increase) decrease in deferred tax assets (Increase) decrease in other operating assets (Decrease) increase in payables (Decrease) increase in provision for income taxes payable (Decrease) increase in deferred tax liabilities (Decrease) increase in other provisions Net cash inflow from operating activities 34. Non-Cash Investing and Financing Activities Consolidated Entity Acquisition of plant and equipment by means of finance leases 2014 $’000 11,797 2,000 143 20 - 134 (2,246) (3,122) (1,365) 215 6,619 (10) - 1,521 15,706 2014 $’000 1,341 2013 $’000 9,866 2,135 34 220 208 (118) 432 (2,346) 1,657 (54) 3,553 (388) (2,017) 391 13,573 2013 $’000 161 35. Critical Accounting Estimates The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the group’s accounting policies. This note provides an overview of the area that involves a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. Detailed information about the groups estimates and judgements is included in Note 18. The area involving significant estimates or judgements are the estimation of provision for warranty claims – Note 19. 56 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyNOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 29 June 2014 and the 53 weeks ended 30 June 2013 Beacon Lighting Group and its controlled entities 36. Parent Entity Financial Information (a) Summary financial information The individual financial report for the parent entity show the following aggregate amounts: Consolidated Entity Balance sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Contributed equity Retained profits Total Equity Loss for the period Total comprehensive income (b) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 29 June 2014 or 30 June 2013. 2014 $’000 2013 $’000 15,068 88,737 103,805 1,951 - 1,951 101,854 86,884 14,970 101,854 (30) (30) - - - - - - - - - - - - 57 For personal use onlyFor personal use onlyDirectors’ Declaration In the opinion of the Directors: (a) the Financial Statements, notes and the additional disclosures set out on pages 23 to 57 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity’s financial position as at 29 June 2014 and of its performance for the 52 weeks year ended on that date, and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (c) Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by the section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors. Ian Robinson Executive Chairman Melbourne, 22 August 2014 Glen Robinson Chief Executive Officer 59 For personal use only INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BEACON LIGHTING GROUP LIMITED Independent auditor’s report to the members of Beacon Lighting Group Limited Report on the financial report We have audited the accompanying financial report of Beacon Lighting Group Limited (the company), which comprises the balance sheet as at 29 June 2014, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for Beacon Lighting Group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at 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 control as the directors determine is 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 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 judgement, 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 control relevant to the consolidated 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 control. 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. PricewaterhouseCoopers, ABN 52 780 433 757 Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. For personal use onlyINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BEACON LIGHTING GROUP LIMITED Independent auditor’s report to the members of Beacon Lighting Group Limited (continued) Report on the financial report (continued) Auditor’s opinion In our opinion: (a) the financial report of Beacon Lighting Group 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 29 June 2014 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. (b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the remuneration report included on pages 17 to 19 of the directors’ report for the year ended 29 June 2014. 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. Auditor’s opinion In our opinion, the remuneration report of Beacon Lighting Group Limited for the year ended 29 June 2014 complies with section 300A of the Corporations Act 2001. PricewaterhouseCoopers Daniel Rosenberg Partner Melbourne 22 August 2014 61 For personal use only62 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use onlyShareholders’ Information In accordance with Section 4.10 of the Australian Stock Exchange Limited Listing Rules, the Directors provide the following information. SHAREHOLDING ANALYSIS (a) Distribution of shareholders (c) Class of shares and voting rights At 11 August 2014, the distribution of shareholdings was as follows: Size of Shareholding 1 - 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 Over 100,000 Number of Shareholders 54 281 338 777 37 Total number of shareholders 1,487 Holdings of less than a marketable parcel 6 (b) Substantial shareholdings The number of shares held by the substantial shareholders listed in the Company’s register of substantial shareholders as at 11 August 2014 were: Number of Shares % Held 118,635,000 55.18% Shareholder Heystead Nominees Pty Ltd (including Robinson Family members) At 11 August 2014, there were 1,487 holders of ordinary shares of the Company. All of the issued shares in the capital of the parent entity are ordinary shares and each shareholder is entitled to one vote per share. Twenty largest shareholders, as at 11 August 2014: Rank Name Number of Shares %Holding 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. HEYSTEAD NOMINEES 118,250,000 55.00% NATIONAL NOMINEES CITICORP NOMINEES 19,757,388 13,825,952 HSBC CUSTODY NOMINEES 8,967,474 J P MORGAN NOMINEES UBS NOMINEES PTY LTD 7,496,573 7,153,078 RBC INVESTOR SERVICES 3,270,672 CITICORP NOMINEES 2,109,197 RELIABLE BUSINESS CO LTD 1,363,636 BNP PARIBAS NOMS PTY LTD 1,198,236 MIRRABOOKA INVESTMENTS 1,064,133 AMCIL LIMITED HSBC CUSTODY NOMINEES D J RITCHIE SUPER FUND TRUEBELL CAPITAL MR NEIL OSBORNE MR ROBERT BRYAN 608,075 535,989 400,000 300,000 300,000 250,000 UBS WEALTH MANAGEMENT 250,000 FABATOTO PTY LTD ADRIAN & PHILIPPA KELLY 225,000 225,000 9.19% 6.43% 4.17% 3.49% 3.33% 1.52% 0.98% 0.63% 0.56% 0.49% 0.28% 0.25% 0.19% 0.14% 0.14% 0.12% 0.12% 0.10% 0.10% Top 20 holders of ISSUED CAPITAL 187,550,403 87.23% Total Remaining Holders Balance 27,449,597 12.74% 215,000,000 100.00% 63 For personal use onlyCorporate Directory DIRECTORS Ian Robinson Glen Robinson Eric(James) Barr Neil Osborne Executive Chairman Chief Executive Officer Deputy Chairman Non-Executive Director COMPANY SECRETARY Tracey Hutchinson REGISTERED OFFICE 5 Bastow Place Mulgrave Victoria WEBSITE Corporate site www.beaconlightinggroup.com.au Retail site www.beaconlighting.com.au Other business divisions www.beaconlightingtradeclub.com.au www.beaconsolar.com.au www.beaconlightingcommercial.com.au www.beaconinternational.com www.fanaway.com LEGAL ADVISORS Baker & McKenzie Level 19, 181 William Street, Melbourne Victoria AUDITORS PricewaterhouseCoopers Freshwater Place 2 Southbank Boulevard, Southbank Victoria SHARE REGISTRY Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street, Abbotsford Victoria STOCK EXCHANGE LISTING Beacon Lighting Group Limited (BLX) shares are listed on the ASX 64 BEACON LIGHTING GROUP ANNUAL REPORT 2014 For personal use only65 For personal use onlyStore Locations www.beaconlighting.com.au VIC Abbotsford 250 Hoddle St Albury Wodonga Harvey Norman Centre 94 Borella Rd, Albury NSW Ballarat Wendouree Homemaker Centre 333 Gillies St Bendigo 285 High St Kangaroo Flat Chirnside Park Showroom Centre 286 Maroondah Hwy Cranbourne Homemaker Centre Corner South Gippsland Hwy & Thompsons Rd Essendon DFO Homemaker Hub 120 Bulla Rd, Strathmore Fountain Gate Casey Lifestyle Centre 430 Princes Hwy Frankston 22 McMahons Rd Geelong 354 Melbourne Rd Hawthorn 47 Camberwell Rd Heidelberg 2-4 Dora Street Hoppers Crossing 283 Old Geelong Rd Moorabbin 867 Nepean Hwy Nunawading 262 Whitehorse Rd Oakleigh 807 Warrigal Rd Scoresby 1391 Ferntree Gully Rd South Wharf DFO Level 1, Homemaker Hub 20 Convention Centre Place Springvale IKEA Homemaker Centre 917 Princes Hwy St Kilda 366 St Kilda Rd Sunshine 497 Ballarat Rd Thomastown Homemaker Centre Cnr Dalton and Settlement Rds Watergardens Homemaker Centre 440 Keilor-Melton Hwy, Taylors Lakes Waurn Ponds Homemaker Centre 235 Colac Rd (Princes Hwy) TAS Moonah 7-9 Derwent Park Rd Launceston 40 William Street NSW Albury Wodonga Harvey Norman Centre 94 Borella Rd, Albury Alexandria Style Homemaker Centre, Cnr O’Riordan & Doody Sts Artarmon Home HQ North Shore Cnr Reserve Rd & Frederick St Bankstown Home Central 9 - 67 Chapel Rd South Belrose Supa Centa Belrose 4-6 Niangala Cl Campbelltown Homebase 24 Blaxland Rd Castle Hill Home Hub Hills, Cnr Victoria & Hudson Ave Crossroads Homemaker Centre Parkers Farm Place, Casula Gosford West Hometown 356 Manns Rd Hornsby Cnr Pacific Hwy & Yardley Ave, Waitara Kotara Homemaker Centre 108 Park Ave Lake Haven Home Mega Centre Cnr Pacific Hwy & Lake Haven Drv 66 BEACON LIGHTING GROUP ANNUAL REPORT 2014 Joondalup 3 Sundew Rise Malaga Home Centre 655 Marshall Rd Mandurah 28 Gordon Rd Mandurah Home City 430 Pinjarra Rd Midland Midland Central Cnr Clayton & Lloyd Sts Myaree Melville Square Cnr Leach Hwy & Norma Rd Osborne Park Hometown 381 Scarborough Beach Rd Subiaco 320 Hay St SA Gepps Cross Home HQ 750 Main North Rd Melrose Park Melrose Plaza 1039 South Rd Mile End Homemaker Centre 121 Railway Tce Munno Para Harvey Norman Centre 600 Main North Rd, Smithfield Noarlunga Harvey Norman Centre 2 Seaman Dr NT Darwin Homemaker Village 356-362 Bagot Rd, Millner McGraths Hill Home Central, 264-272 Windsor Rd Mittagong Highlands Homemaker Centre, 205 Old Hume Hwy Parramatta Cnr Church and Daking Sts Penrith Homemaker Centre 2 Patty’s Place Prospect Homebase 19 Stoddart Rd Rutherford Harvey Norman Centre, 366 New England Hwy Shellharbour 146 New Lake Entrance Rd Taren Point 105 Parraweena Rd Warners Bay Homemaker Centre 240 Hillsborough Rd ACT Fyshwick 175 Gladstone St QLD Burleigh Stockland Centre 177-207 Reedy Creek Rd Cairns 331 Mulgrave Rd Cannon Hill Homemaker Centre 1881 Creek Rd Capalaba Freedom Home Centre 67 Redland Bay Rd Carseldine Homemaker Centre 1925 Gympie Rd, Bald Hills Fortitude Valley Homemaker City North 650 Wickham St Helensvale Homeworld 502 Hope Island Rd Hervey Bay 140 Boat Harbour Drv Jindalee Homemaker City 182 Sinnamon Rd Kawana 2 Eden St, Minyama Macgregor 550 Kessels Rd Maroochydore Sunshine Homemaker Centre 72 Maroochydore Rd Morayfield Supa Centre 344 Morayfield Rd Noosa Noosa Civic Eenie Creek Rd Rockhampton Red Hill Homemaker Centre Cnr Yaamba & Richardson Rds Southport Bunnings Complex 542 Olsen Ave Toowoomba Harvey Norman Centre, 910 Ruthven St Townsville Mega Centre Cnr Dalrymple Rd & Duckworth St, Garbutt Underwood Homemaker HQ 1-21 Kingston Rd Windsor Homemaker City 190 Lutwyche Rd WA Baldivis Safety Bay Rd Bunbury Homemaker Centre 42 Strickland St Cannington 21 William St Clarkson Ocean Keys Homemaker Centre 61 Key Largo Drv Jandakot South Central Cockburn 87 Armadale Rd For personal use only For personal use only

Continue reading text version or see original annual report in PDF format above