Capral Annual Report 2020

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FY2020 Annual Report · Capral

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CAPRAL LIMITED
2020 ANNUAL REPORT

ABN 78 004 213 692

CONTENTS

01 Capral’s Vision & Values

02 Key Statistics

03 Chairman’s Report

07 Managing Director’s Operations and Financial Review

11 Board of Directors

13 Sustainability Report

17 Directors’ Report

21 Remuneration Report

38 Auditor’s Independence Declaration

40 Consolidated Statement of Profit or Loss And Other Comprehensive Income

41 Consolidated Statement of Financial Position

42 Consolidated Statement of Cash Flows

43 Consolidated Statement of Changes In Equity

45 Notes to The Financial Statements

83 Directors’ Declaration

Independent Auditor’s Report

89 Member Details

92 Corporate Directory

CAPRAL ANNUAL REPORT 2018

Capral’s Vision & Values Annual Report 2020

CAPRAL’S VISION & VALUES

Our Vision is to be Australia’s first choice
supplier of aluminium products and solutions.

We are committed to our Values:

SAFETY FIRST
Everyone is responsible n Injuries can be prevented n All jobs can be done safely

CUSTOMER SUCCESS
Customers determine our success n Committed to service and quality n Be responsive to customer needs

PLAY FAIR
Be honest and respectful n Do the right thing by each other and the environment n Work as a team

BETTER EVERY DAY
Continuous improvement n Embrace change n Be innovative

OWN IT
Be accountable n Feel empowered n Take pride in our work n Act boldly

Annual Report 2020 Key Statistics

KEY STATISTICS

FOR THE YEAR ENDED 31 DECEMBER

Sales Volume - External – Tonnes

Revenue

EBITDA

Trading EBITDA1

Profit/(Loss) after Tax

Operating Cash Flow

Net Cash

1 Please refer to note on page 4.

2020

61,000

432.0

47.2

19.7

25.9

52.1

49.4

2019

56,700

419.0

19.9

11.0

(4.2)

10.7

17.9

VARIANCE

4,300

13.0

27.3

8.7

30.1

41.4

31.5

CHAIRMAN’S REPORT

ANNUAL REVIEW

Covid-19 reached every corner of the world during 2020,
directly impacting the health, economic well-being and
way of life of hundreds of millions of people. Companies
and their stakeholders did not escape the effects of the
pandemic’s global spread.

Australia, for numerous reasons including positive
governmental actions and programmes, has been one of
the few lucky countries. Capral and its stakeholders have
had the benefit of some of those programmes which have
allowed us to navigate and survive the consequences of
Covid-19 and emerge stronger to face new challenges and
opportunities. Capral’s qualification for JobKeeper allowed
the company to operate through the second quarter
without drastically cutting surplus staffing levels caused by
the steep drop in demand and the prevailing volatility and
uncertainties. JobKeeper support then enabled the
company to rapidly respond by increasing and leveraging
its workforce to meet the unexpected surge in demand
which unfolded over the remainder of the year.

FINANCIAL PERFORMANCE

During the second half of the year Capral benefited from a
strong shift to import replacement as the effects of
renewed anti-dumping measures took hold. In addition,
disruptions to import supply chains as a result of the
pandemic, shipping congestion and increasing sentiment
towards local supply added to demand. We are hopeful
that this opportunity to demonstrate Capral’s ability to add
value through local supply will enable us to retain a
significant portion of this increased volume. Governmental
assistance targeted to the residential construction market
through HomeBuilder and other incentives began to take
hold in the latter part of the year and should flow into
2021. Revenues of $432 million were 3% higher than the
$419 million reported in 2019 as a result of the increased
demand in the second half of 2020. Volumes increased
year on year by 8%. The sustainable operating efficiencies
flowing from last year’s reorganisation at Bremer Park
added significantly to this year’s profit and will continue to
contribute going forward.

Higher productivity and operational leverage in all parts of
the business delivered a Trading EBITDA¹ of $19.7 million,
$8.7 million higher than the previous year’s $11.0 million.
EBITDA of $47.2 million (2019: $19.9 million) included
JobKeeper benefit of $11.9 million.

Reported Net Profit After Tax (NPAT) includes $3.0 million
arising from recognition of deferred tax taken to account.
Excluding this item and JobKeeper, NPAT was $11.0 million
(66 cents per share). This compares to last year’s loss of
$4.2 million after abnormal charges of $6.7 million (loss
26 cents per share).

Strong cash flows were a feature of the company’s
performance throughout the year. A combination of
excellent trading results and focused asset management
delivered cash flows from operations, excluding JobKeeper,
of $40.2 million compared to $10.7 million in 2019.
Capral’s balance sheet at year-end reflected net cash of
$49.4 million (2019: $17.9 million). This enables us to
balance our utilisation of free cash between funding
internal growth, investing in capital projects, and paying
dividends to our shareholders.

We are committed to growing a sustainable business which
is aligned with all of our stakeholders. Our strong balance
sheet allows management to take advantage when
opportunities present themselves. One such opportunity is
the completion on 1st February 2021 of the acquisition of
the GJames NSW extrusion facility. As we add additional
people and enhance operational capability, this facility
should become earnings accretive in the year ahead. Capral
has set aside JobKeeper funds to invest in capital projects
that will create new jobs.

DIVIDENDS

Capral’s performance, particularly in the second half of the
year, supports the declaration of a fully franked dividend.
This dividend, and all incentive payments to employees, is
based upon and is paid out of earnings and cashflow
which totally exclude the JobKeeper benefit.

The Company has declared a fully franked dividend of 45
cents per ordinary share. This is higher than 2019 which
was adversely impacted by restructuring costs, and in line
with 2018. It will be paid on 26 March 2021 in respect of
the financial year ended 31 December 2020. The dividend
will be paid to all shareholders on the register of members
as at the Record Date of 11 March 2021. Our Dividend
Reinvestment Plan will be active for this dividend with
election to be made by 16 March 2021.

Chairman’s Report Annual Report 202004

CHAIRMAN’S REPORT
(CONTINUED)

SAFETY

BOARD CHANGES

Capral’s management continues to re-energise safety and
prioritise awareness thereof in our business. This focus on
continued safety improvement through education, risk
assessment, and monitoring of the workplace helped LTI/
MTI frequency rates drop to a record low of 5.8 lost time
injuries per 1 million hours worked in 2020.

LOOKING AHEAD

With 2020 behind us, we look forward with confidence to
building on the opportunities facing us during 2021,
despite the fact that second or third waves of the virus
continue to wreak hardship and uncertainty across the
globe. We can only hope that with knowledge, experience
and the emergence of vaccines, the pandemic will be
controlled and then eradicated. I direct you to the Outlook
section of the Managing Director’s Report for details of the
increased earnings guidance for 2021.

During the year, Ian Blair retired after 14 years of service as
an independent non-executive director. His sage advice
and guidance, for which we are most grateful, will be
missed. In his stead we welcomed Kathy Ostin to the board
as well as chair of the Audit & Risk Committee.

I wish to extend the board’s appreciation to all of Capral’s
stakeholders for their support during 2020 and we look
forward to meeting their aspirations in 2021. Thank you to
all of my Capral colleagues for their wisdom and assistance
throughout an extraordinary year.

Rex Wood-Ward
Chairman
25 February 2021

* Trading EBITDA is EBITDA adjusted for significant items that are material items of revenue or expense that are unrelated to the
underlying performance of the business. Capral believes that Trading EBITDA provides a better understanding of its financial
performance and allows for a more relevant comparison of financial performance between financial periods. These items are JobKeeper
benefit ($11.907 million), LME revaluation and unrealised foreign exchange differences ($0.839 million), other one-off costs that are
non-recurring in nature and including the depreciation and interest on Right of Use assets as proxy for rent ($16.570 million). Trading
EBITDA is presented with reference to the Australian Securities and Investment Commission Regulatory Guide 230 “Disclosing non-IFRS
financial information” issued in December 2011.

Annual Report 2020 Chairman’s Report05

Chairman’s Report Annual Report 202006

Annual Report 2020 Managing Director’s Operation and Financial Review

MANAGING DIRECTOR’S
Operations and Financial Review

OVERVIEW

»
Full Year result ahead of guidance
»
Volume at 61,000 tonnes was 8% above 2019
» Market conditions rebounded strongly in second half
»
Trading EBITDA¹ $19.7 million, up $8.7 million on 2019
»
EBITDA $47.2 million includes $11.9 million JobKeeper
benefit, up $27.3 million on 2019
Net Profit After Tax $25.9 million includes $3.0 million
deferred tax benefit, up $30.1 million on 2019
»
Normalised earnings per share at 66 cents
»
Balance sheet strong with net cash at $49.4 million
»
Fully franked final dividend of 45 cents per share
» Market share gains driven by growing “Australian

Made” sentiment, import disruptions and a renewal
of anti-dumping measures
Acquisition of additional 9,000t extrusion capacity in
NSW in February 2021
Best safety performance on record with TRIFR 5.8

FINANCIAL REVIEW

Market conditions varied significantly throughout the year.
After a solid start to 2020, demand for Capral’s products
plummeted during the period of COVID lockdown
restrictions. However, market conditions rebounded
strongly in the second half resulting in higher-than-
expected demand. In response, Capral operated its
manufacturing plants at close to capacity leading to good
operating leverage which drove increased earnings.

As COVID restrictions were imposed in April, demand fell
sharply. With economists and other commentators
forecasting dire conditions in key markets, Capral
accordingly developed plans to reduce its workforce.
Capral subsequently qualified for JobKeeper in May which
allowed the business to maintain all 798 employee jobs.
This enabled Capral to be well placed, when restrictions
lifted, to respond to increased demand and fulfill
customer’s requirements.

The residential market lifted in the second half on the back
of government housing stimulus programs and is on track
to record 175,000² starts in 2020, slightly above last year.
Commercial construction was adversely impacted by
COVID restrictions, as were our key industrial markets
(manufacturing, transport and marine). These markets have
also rebounded since restrictions were lifted.

The biggest impact on second half volume was a strong
shift to local manufacture and away from imports. This
growth was driven by; import supply chain disruption,
enforcement and renewal of anti-dumping measures, and a
growing “Australia Made” sentiment with the benefit of
shorter and more reliable lead times.

The LME price of aluminium declined 14% in the first half
of the year but strengthened at year end to finish slightly
up on December 2019. The average LME for 2020 was 5%
below last year.

In the second half of 2019 Capral completed a significant
restructure of its largest manufacturing operation at
Bremer Park in Queensland. This restructure successfully
transformed Capral’s operations resulting in a permanent
reduction of around $8 million in costs with $5 million of
savings flowing in 2020.

Capral delivered an increased profit in 2020 with a Trading
EBITDA¹ of $19.7 million (2019: $11.0 million) on 8%
higher volumes. EBITDA of $47.2 million (2019: $19.9
million) included JobKeeper benefit of $11.9 million.

Capral ended 2020 with a net cash balance of $49.4
million. This was assisted by abnormally low working
capital levels as a result of record debtors collection
performance and reduced inventory levels due to high
4th quarter demand.

Capral will pay a fully franked final dividend of 45 cents per
share, higher than 2019 which was reduced due to
restructuring costs, and in line with 2018.

KEY INITIATIVES AND STRATEGIES

Key high-level strategies remain consistent;

Build on our strengths; product offer, scale, capability
and our people
Optimise what we do; improve productivity in all
aspects of our business
Grow for the future; develop new & innovative
products solutions and services

During 2019 Capral completed the automation of the
Bremer Park packing line and commissioned a new
technology paint line at the Canning Vale plant.

Managing Director’s Operation and Financial Review Annual Report 202008

In the 4th quarter of 2020 Capral negotiated the acquisition
of the GJames extrusion operation in Smithfield, taking
control on 1 February 2021. The plant produces both
architectural and industrial grade extrusions, with an annual
capacity of 9,000 tonnes and is in excellent operating
condition. This strategically important acquisition provides
Capral with an expanded manufacturing presence in NSW,
savings in freight costs, and improved quality and service to
customers in the State. A 12-month toll manufacturing
agreement with GJames will allow a smooth transition and
cover fixed plant operating costs during this period. The
acquisition includes plant and equipment, spares, raw
material inventory and 21 employees. The total acquisition
price of approximately $9 million was fully funded by
Capral’s cash reserves. The Smithfield plant is expected to
provide incremental earnings in 2021. Capral is also planning
to install a new paint line in NSW during 2022 at an
approximate cost of $3 million. These two capital projects
are expected to create around 70 new Capral jobs. Capral
has expressly set aside JobKeeper funds to invest in capital
projects that create new jobs.

During 2021 we will also focus on growing our aluminium
distribution business with the long-term goal of increasing
the volume and profitability of Capral’s direct distribution
channel. We plan to launch new product ranges, customer
support tools, and other marketing and service initiatives to
assist this growth plan.

FAIR TRADE

Capral continues to lead the local industry in the pursuit of
fair trade. During 2020 the key outcomes were:

Renewal of measures on Chinese imports for a further
five years
Increased surveillance and prosecution by Australian
Border Force against anti-circumvention activities by
importers

» Measures imposed on certain imports from Malaysia

While import volumes reduced in 2020, they continue to
represent a substantial proportion of the total extrusion
market and continue to suppress prices and injure local
manufacturers.

SAFETY

Safety First is one of Capral’s key values and we continue to
focus on risk assessment, training, systems and safety culture.
Capral returned its best safety performance on record with a
total reportable injury frequency rate of 5.8 (2019: 11.4).

SUSTAINABILITY

Capral advanced its commitment to its environmental
obligations by creating a National Sustainability Committee
with employee representation across Capral’s various
operations and regions. A sustainability audit and survey
was completed during 2020 to identify improvement
opportunities for consideration and action.

RISKS

Capral is exposed to a range of risks that could impact the
achievement of its strategies and financial prospects;
further details are outlined in the Sustainability Report
(pages 13 and 14).

OUTLOOK

External forecasts for the residential market have lifted as
government housing stimulus takes effect, with starts now
expected to reach 185,0002 in 2021. The non-residential
market is forecast to rebound in 2021 after a COVID
disrupted year in 2020. The industrial markets are also
expected to remain reasonably robust.

LME is unpredictable and subject to a number of international
influences. Based on external forecasts, we do expect LME to
be at higher levels throughout the year ahead.

The overall market for Capral’s aluminium extrusion and
rolled products is forecast to grow modestly in 2021 and
we expect to retain a good proportion of market share
gained from imports. Trading EBITDA1 is forecast, absent
any unforeseen events, to be between $21 million and $23
million with EBITDA between $38 million and $40 million.
On that basis Capral would be in a position to continue the
payment of a franked dividend.

The focus in 2021 will be to derive benefits from the
Smithfield acquisition and continue the progress made at
Bremer Park and within our Distribution operations. We
plan to enhance our market offer, service and quality to
grow our customer base delivering higher revenue and
profitability into the future.

I wish to thank all Capral employees for their flexibility,
resilience and contribution to the 2020 result which was
produced under unprecedented personal and working
conditions.

Tony Dragicevich
Managing Director
25 February 2021

1 Refer to Trading EBITDA explanation in footnote to Chairman’s Report on Page 4
2 BIS Oxford Economics December 2020 forecast

Annual Report 2020 Managing Director’s Operation and Financial Review
10

Annual Report 2020 Board of Directors

BOARD OF DIRECTORS

Directors in office during the financial year and up to the date of this report:

Rex Wood-Ward
Chairman of Board (Independent)

Ian Blair M.Mgt, FCA
Non-executive Director (Independent)

Appointed 6 November 2008

Appointed 23 May 2006

Chairman of the Board and member of the Audit & Risk
Committee and the Remuneration & Nomination Committee.

Mr Wood-Ward has 45 years of experience in general
management, mergers and acquisitions, corporate strategy
and structuring, including in manufacturing and distribution.
Over his career he has been a director of over 10 publicly
listed companies in Australia, the United Kingdom and
South Africa.

Retired 17 June 2020
Chairman of the Audit & Risk Committee until 17 June
2020 and member of the Remuneration & Nomination
Committee until 17 June 2020.

Mr Blair is a Chartered Accountant and Company Director.
He spent almost 20 years as a partner in major accounting
firm Deloitte and retired after 5 years as CEO of that firm.
Mr Blair is currently Chairman of Bisley & Co Pty Ltd.

Directorships of other listed companies held in last 3 years
before end of the Financial Year: None

Tony Dragicevich B. Comm A.C.A
Managing Director (Non-independent)

Graeme Pettigrew FIPA, FAIM, FAICD
Non-executive Director (Independent)

Appointed 15 April 2013

Appointed 18 June 2010

Mr Dragicevich joined Capral in January 2013 and became
the Managing Director and Chief Executive Officer on 15
April 2013. Mr Dragicevich is an experienced CEO and
business leader who has been involved in the improvement
of a number of businesses, having previously served as
Managing Director of the Wattyl Group, and as Chief
Executive of GWA Bathroom and Fittings, Managing
Director of the Red Paper Group and General Manager
of Tasman Insulation.

Directorships of other listed companies held in last 3 years
before end of the Financial Year: None

Philip Jobe B. Comm
Non-executive director (Independent)

Appointed 24 April 2009

Member of the Audit & Risk Committee and the
Remuneration & Nomination Committee.

Mr Jobe became a non-executive director following the
expiry of his term as Capral’s Chief Executive Officer and
Managing Director in April 2013. Before joining Capral,
Mr Jobe was the Executive General Manager of Boral
Limited’s Cement Division, including Managing Director of
Blue Circle Southern Cement Pty Limited. This also
encompassed the role of Chairman of the Cement Industry
Federation. He also had executive responsibility for Boral’s
expanding Asian construction materials businesses.

Mr Jobe was previously Managing Director of Stegbar Pty
Limited from 1989 to 1994.

Chairman of the Remuneration & Nomination Committee and
member of the Audit & Risk Committee.

Mr Pettigrew has held chief executive roles at CSR Building
Products Pty Ltd and Chubb Australia Ltd and he recently retired
as a non-executive director of Adelaide Brighton Ltd. He has
relevant experience in the construction and building materials
industry, as well as manufacturing and distribution businesses.

Directorships of other listed companies held in last 3 years
before end of the Financial Year:

Non-executive director of Adelaide Brighton Ltd:
27 August 2004 to 17 May 2018.

Katherine Ostin B. Comm, GAICD, F FIN, CA
Non-executive director (Independent)

Appointed 17 June 2020

Chairman of the Audit & Risk Committee from 17 June
2020 and member of the Remuneration & Nomination
Committee from 17 June 2020.

Ms Ostin is a Chartered Accountant and Company Director.
She has diverse experience in Audit & Risk management
having previously been a KPMG Audit and Assurance
Partner responsible for a wide range of listed and unlisted
companies. Ms Ostin currently holds board positions at Dusk
Group Ltd, Swift Media Ltd and Eftpos Payments Australia
Ltd where she also chairs the Audit & Risk Committees. Ms
Ostin has also previously been non-executive director of a
number of not-for-profit organisations.

Directorships of other listed companies held in last 3 years
before end of the Financial Year: None

Directorships of other listed companies held in last 3 years
before end of the Financial Year:

Non-executive director of Swift Media Ltd:
1 October 2019 to date of this report.
Non-executive director of Dusk Group Ltd:
16 September 2020 to date of this report.

Board of Directors Annual Report 202012

Annual Report 2020 Sustainability Report

SUSTAINABILITY REPORT

SCOPE

Capral’s operations are affected by economic,
environmental and social sustainability risks. These risks are
managed within the internal control framework described
in Capral’s Corporate Governance Statement (available on
Capral’s website www.capral.com.au). This report should
be read with other sections of the Annual Report. The
exposure to economic factors is outlined below and further
information can be found in the Managing Director’s
Operations and Financial Review. Capral is committed to
continuous improvements including programs that focus in
the areas below:

HEALTH AND SAFETY

Capral’s Safety message is simple – Safety First. Safety is an
integral part of our business at all levels, it’s Capral’s way.
Through the continued investment in our people, we have
cultivated perceptions of risk and encouraged proactive
behaviours to further enhance our already robust Safety
Culture. At Capral, everyone is responsible to ensure we
develop and improve our safety environment. A workplace
that targets zero-injuries is a workplace where everyone cares
enough to engage in driving the safety process. Creating this
environment requires leadership at all levels. Capral’s Golden
Safety Rules and the online Integrated Safety Management
System, known as IMS Central supports this.

2020 presented many unprecedented challenges; however,
Capral Aluminium met those challenges front on. Our team
consistently pulled together at each hurdle without failure
and ultimately delivered an industry leading safety result.
Through IMS Central advancements, improved internal
audit practices and training, enhanced employee
involvement, and advancing our injury prevention and
treatment strategies, every Capral member was a
fundamental part of our 2020 success.

Below is a summary of the 2020 safety outcomes for the
Capral Group:

There were 9 reportable injuries, consisting of 3 LTIs
and 6 MTIs. LTI/MTI Frequency Rate was 5.8.
Capral further enhanced the Integrated Management
System (IMS)
ISO 45001 Occupational Health & Safety standard was
achieved and added to our Group IMS Certification.
Letter of Assurance continued across all sites in line
with the IMS system advancements and site
integrations resulting in a 4% improvement from 2019.
Several additional safety improvement programs and
reviews were conducted.

» Manufacturing plants that achieved LTI milestones:
Canning Vale (11 years), Austex Dies (9 years),
Campbellfield (5 years), and Bremer Park (1 year)
Distribution Centres that remained LTI/MTI free:
Darwin (11 years), Townsville (3 years) Campbellfield
and Wangara (2 years), Kilburn (1 year)
Aluminium Centres that achieved MTI/LTI milestones:
Hobart (24 years), Cardiff, Kunda Park and Springwood
(15 years), Cairns (13 years), Lynbrook (9 years) and
Gold Coast (7 years).

PEOPLE

The Capral Group employs over 800 people at over 20
locations in Australia. Capral has a stable workforce and
around half of our employees are covered by Enterprise
Agreements. There are no material workplace issues.

Our Values underpin how our business is conducted and
include:

Safety First: Everyone is responsible; Injuries can be
prevented; All jobs can be done safely
Customer Success: Customers determine our success;
Committed to service and quality; Be responsive to
customer needs
Play Fair: Act with integrity; Do the right thing; Work
as a team; Be honest and respectful
Better Every Day: Continuous improvement; Be
innovative; Embrace change
Own It: Be accountable; Feel empowered; Take pride
in our work; Act boldly.

Our Code of Conduct provides a set of guiding principles
and our people receive regular Code of Conduct training.

Capral respects the benefits arising from workplace
diversity. We strive to promote an environment conducive
to the appointment of well qualified people so that there is
appropriate diversity to maximise the achievement of our
goals. Further details of Capral’s objectives are contained
in Capral’s Corporate Governance Statement and Diversity
Policy, both available on Capral’s website.

TRAINING COMMITMENT

Understanding that skills, knowledge, and the capabilities of
our people are central to our business success; Capral has:

partnered with the Australian Institute of
Management (AIM) to develop a continuous learning
and development program where every experience
adds to employee confidence and professional
development. Through our AIM Online Program
employees are given the opportunity – and the
encouragement – to expand their knowledge and to
receive additional support, where needed via a series
of online and virtual learning workshops.

Sustainability Report Annual Report 202014

created new apprenticeship opportunities in Victoria,
Western Australia and Queensland. Apprentices will
undertake an indentured training program in their
chosen field for approximately 4 years.

Capral are committed to increasing its support and
development of its people; our training programs above
are very much a product of that thinking.

COMMUNITY INTERACTION

Throughout 2020 Capral continued to work with numerous
community organisations by making positive contributions
across a broad spectrum of areas. Key initiatives included
National awareness campaigns; grass roots and financial
sponsorship opportunities such as:

R U Ok? Day

»
» Movember
»
»
»

Goodna Street Life Kids Christmas Party
Newport Plus Board Riders Association
Local artists participating in Sculptures by the Sea;
and the Bathers Beach Sculpture Festival
Disability Sport and Recreation Victoria
Brisbane City Football Club
Variety Bash
Love Your Sister.

»
»
»
»

SCHOLARSHIP FUND

The inaugural recipient of the Richard Michael Leaders in
Engineering Scholarship was Mark Vlasanovic of Deakin
University.

The aim of the scholarship is to build a supported career
pathway in relevant engineering disciplines; and to foster
future leaders in the industry. Mark will receive up to
$10,000 per year for 2 years; together with work
placement opportunities at Capral’s Campbellfield site.

ENVIRONMENT

Capral’s commitment to environmental obligations in 2020
advanced with the development of the National Sustainability
Committee. All legislative environmental reporting
requirements were met, including recertification against ISO
14001:2015, Environmental Management Standard.

Capral continues to align and adopt industry best practices,
and our primary emissions remain as electricity and gas
consumption. As part of Capral’s ongoing commitment, a
sustainability audit was developed as part of Capral’s
Integrated Management System. Initial results identified
several improvement opportunities, all of which are being
progressively considered and implemented with our
operational capacity.

Capral continues to investigate and develop strategic
alliances with suppliers and customers towards minimising
Capral’s environmental footprint, where possible.

ECONOMIC SUSTAINABILITY

In addition to the information in the Managing Director’s
Operations and Financial Review, there are various risks
that could impact the achievement of Capral’s financial
performance and strategies. Capral has a risk management
and internal control system to identify, and implement
mitigation plans in relation to, the key risks. Set out below
are some of these key risks, some of which can be
mitigated where not beyond Capral’s control:

Aluminium Price: The market price of aluminium
fluctuates. LME and billet premium price increases place
upward pressure on working capital. To the extent that
price variations cannot be passed on to customers,
Capral is exposed to movements in the price of
aluminium. This exposure is mitigated where extrusions
are sold to customers with pricing arrangements linked
to changes in the market price of aluminium.
Exchange rate fluctuations: A strong Australian dollar
makes imports less expensive to Australian customers,
potentially impacting Capral’s volume and margins.
The price paid by Capral for some raw materials is in
US dollars and therefore a higher US dollar could
make the products more expensive. The risk is
mitigated to the extent Capral is able to pass the
increase on to the market in a timely manner and
currency hedging of raw material purchases.
Key customers: Capral’s performance is impacted by
the volume of sales to large customers. There is a risk
to Capral that the requirements of one or more key
customers may change.
Imports and local competitors: Capral is subject to
pressures from import and domestic competition.
Import extrusion market share is over 30% and there
is excess domestic extrusion capacity.
Anti-dumping: To the extent duties are reduced or
removed in relation to imports from China, this could
have an adverse impact on Capral volume and margins.
Residential and Commercial markets: Capral is exposed
to the cyclical nature of both residential and commercial
building activity which is currently falling from the top of
the cycle. As many of Capral’s costs are fixed, it may not
be easy to reduce its costs relative to the economic
downturn and therefore any material and/or extended
downturn may negatively affect Capral.
Industrial markets: Capral is also exposed to industrial
markets driven by transport, marine and the general
manufacturing sectors.
Economic downturn: An economic downturn, like the
global financial crisis in 2008, could have a material
adverse effect on the demand for Capral’s products
and financial performance.
Carry forward of historical tax losses: a change in
business may cause Capral to lose the future benefit
of some (but not all) of its historical tax losses.
Other: other risks include an inability to maintain a
competitive cost base, a major operational failure or
disruption to Capral’s facilities, and regulatory
compliance and change.

Annual Report 2020 Sustainability Report16

Annual Report 2020 Directors’ Report

DIRECTORS’ REPORT

Your directors present their report on the consolidated
entity consisting of Capral Limited (Capral) and the entities
it controlled at the end of, or during, the financial year
ended 31 December 2020 (Financial Year).

DIRECTORS

REVIEW OF OPERATIONS AND FINANCIAL
POSITION

A review of operations and financial position of the
consolidated entity are referred to in the Managing Director’s
Operations and Financial Review on pages 7 and 8.

The following persons were directors of Capral during the
Financial Year and up to the date of this report:

SIGNIFICANT CHANGES IN THE STATE OF
AFFAIRS

There were no significant changes in the state of affairs of
the consolidated entity during the year.

MATTERS SUBSEQUENT TO THE END OF THE
FINANCIAL YEAR

No matter or circumstance other than those disclosed in
Note 34 has arisen since the end of the Financial Year that
has significantly affected, or may significantly affect the
consolidated entity’s operations, the results of those
operations or the consolidated entity’s state of affairs in
future financial years.

LIKELY DEVELOPMENTS, BUSINESS STRATEGIES,
PROSPECTS AND RISKS

Information on likely developments, business strategies,
prospects and risks are detailed in the Managing Director’s
Operations and Financial Review on pages 7 and 8 and the
Sustainability Report on pages 13 and 14. Whilst Capral
continues to meet its continuous disclosure obligations, this
report omits information where it would be likely to result
in unreasonable prejudice to Capral. This includes
information that is commercially sensitive, is confidential or
could provide a third party with a commercial advantage
(such as internal budgets and forecasts).

OTHER INFORMATION FOR MEMBERS TO MAKE
AN INFORMED ASSESSMENT

Other than information set out in this report, there is no
information that members would reasonably require to
make an informed assessment of the operations, financial
position, business strategies and prospects for future
financial years of the consolidated entity.

NAME

PERIOD OFFICE HELD

R. L. Wood-Ward

6 November 2008 - Date of this report

A. M. Dragicevich

15 April 2013 - Date of this report

P. J. Jobe

I. B. Blair

K. Ostin

24 April 2009 - Date of this report

23 May 2006 - 17 June 2020

17 June 2020 - Date of this report

G. F. Pettigrew

18 June 2010 - Date of this report

Details of directors, their qualifications, experience, special
responsibilities (including committee memberships) and
directorships of other listed companies held in the last
three years before end of the Financial Year are set out
on page 11.

PRINCIPAL ACTIVITIES

During the Financial Year, the principal continuing activities
of the consolidated entity consisted of the manufacturing,
marketing and distribution of fabricated and semi-
fabricated aluminium related products.

DIVIDENDS

The Directors recommend that a final dividend of 45 cents
per ordinary share (fully franked) be declared. The record
date for the final ordinary dividend will be 11 March 2021,
with payment being made on 26 March 2021. Shareholders
can choose to receive their dividends as cash or reinvest for
an equivalent number of shares under the Dividend
Reinvestment Plan (DRP). The DRP election date will be 16
March 2021. The Board has decided to issue new shares to
satisfy the DRP for the 2020 final dividend. The DRP will be
at a discount of 2.5% to the 5 days Volume Weighted
Average Price (VWAP) calculated from 10 March 2021 to
16 March 2021, both days included. A final dividend of 15
cents per ordinary share (fully franked) was paid in March
2020, no other dividends or distributions have been paid
during the Financial Year.

Directors’ Report Annual Report 202018

COMPANY SECRETARY

Ms K Bradley-Ware - Joint Company Secretary, B Comm, CPA, LLB

Ms Bradley-Ware has over 20 years of experience as a Company Secretary and CFO. Ms Bradley-Ware is an employee of
Company Matters Pty Ltd, a company secretarial service provider. Prior to joining Company Matters, Ms Bradley-Ware was a
Company Secretary and Chief Financial Officer at ASX listed Pan Pacific Petroleum Limited (ASX: PPP) and prior to that, held
various roles in accounting across a variety of different industries including credit reporting, telecommunications and media.

Ms Bradley-Ware has provided support to a large number of ASX companies including Elixinol Global Limited (ASX: EXL),
Energy Action Limited (ASX: EAX), People Infrastructure Ltd (ASX: PPE), as well as various Infrastructure Joint Ventures and
Private Companies.

Ms Bradley-Ware was appointed as a Company Secretary on 11 December 2020.

Ms G Nairn - Joint Company Secretary, BA/LLB, FGIA

Ms Nairn has over 20 years legal and governance experience in various listed and public companies, as well as in private
practice.

Ms Nairn was an employee of Company Matters Pty Ltd, a company secretarial service provider. Prior to joining Company
Matters, Ms Nairn held various company secretarial roles, predominantly with listed entities, in a variety of sectors including
manufacturing, oil and gas, professional services and education.

Ms Nairn holds a Bachelor of Laws and a Bachelor of Arts, a Graduate Diploma in Applied Corporate Governance and is a
Fellow of the Governance Institute of Australia and a member of the Law Society of NSW.

Ms Nairn was appointed as a Company Secretary on 8 March 2019 and resigned on 11 December 2020.

Mr T Campbell – Chief Financial Officer and Joint Company Secretary, B.Com (Hons), CA

Mr Campbell was appointed Chief Financial Officer on 1 June 2011.

Mr Campbell is a member of the Australia and New Zealand Institute of Chartered Accountants.

Prior to joining Capral, Mr Campbell held various executive positions at UXC, Macsteel and The South African Breweries.

Mr Campbell was appointed as a Company Secretary on 8 March 2019.

DIRECTORS’ MEETINGS

The numbers of directors’ meetings (including meetings of committees) held, and the number of meetings attended, by
each director during the Financial Year, are as follows:

BOARD

AUDIT & RISK COMMITTEE

REMUNERATION &
NOMINATION COMMITTEE

DIRECTOR

HELD

ATTENDED

HELD

ATTENDED

HELD

ATTENDED

R.L. Wood-Ward

A.M. Dragicevich

P.J. Jobe

I.B. Blair

K. Ostin

G.F. Pettigrew

3¹

1 Attended meeting(s) in an ex-officio capacity

Annual Report 2020 Directors’ Report19

DIRECTORS’ INTERESTS AND BENEFITS

Ordinary Shares

Details of holdings of ordinary shares in Capral for the directors (including former directors who held office during the
Financial Year) at the beginning and end of the Financial Year and at the date of this report are as follows:

DIRECTOR

POSITION

R.L .Wood-Ward

Director and Chairman of the Board

A.M. Dragicevich

Managing Director

P.J. Jobe

I.B. Blair

K. Ostin

G.F. Pettigrew

Director

ORDINARY SHARES FULLY PAID IN THE COMPANY

BALANCE AT
1.1.20201

BALANCE AT
31.12.2020

BALANCE AT DATE
OF THIS REPORT

332,490

236,684

7,579

346,0662

270,0163

7,579

346,066

270,016

7,579

1 Shown as post 3 November 2020 share consolidation quantity
2 Acquired 13,5761 as part of Dividend Reinvestment Plan on 25 March 2020
3 Purchased 33,3321 on market on 7 May 2020

In addition to the interests shown above, indirect interests in Capral shares held by the Managing Director, Mr. Dragicevich
are as follows:

MR A. M. DRAGICEVICH
NATURE OF OTHER INTERESTS

Performance rights

BALANCE AT
1.1.20201

BALANCE AT
31.12.2020

BALANCE AT DATE
OF THIS REPORT

218,330

254,3302

254,330

1 Shown as post 3 November 2020 share consolidation quantity
2 66,670 performance rights lapsed on 1 March 2020; and 102,670 performance rights were issued on 29 April 2020

UNISSUED SHARES OR INTERESTS UNDER OPTION

At the date of this report, there are 700,000 (2019: 616,670) unissued shares or interests under option. Refer to sections
1 to 3 of the Remuneration Report.

Directors’ Report Annual Report 202020

Annual Report 2020 Remuneration Report (Audited)

REMUNERATION REPORT
(Audited)

This report sets out Capral’s remuneration of its directors
and executives. It also details the actual remuneration of its
key management personnel (including the directors) during
the Financial Year.

SECTION 1: THE REMUNERATION FRAMEWORK

(a) Key Principles

Capral’s remuneration framework and practices are based on
the principles that remuneration is performance driven, aligns
with shareholder interests, provides market competitive
remuneration that attracts qualified and experienced
candidates, and retains and motivates employees.

The variable components of remuneration (short and long
term) are driven by challenging targets focused on both
external and internal measures of financial and non-
financial performance. Details of performances measures
are set out in sections 1(g) and 1(h) below. Executive
remuneration is aligned with shareholder interests via an
emphasis on variable (incentive) remuneration, the award
of which is linked to performance benchmarks that support
business strategies and future success. A significant
proportion of executive remuneration is at-risk. Details of
the link between performance and remuneration is set out
in section 4.

(b) Role of Remuneration & Nomination

Committee

The Remuneration & Nomination Committee is responsible
for reviewing and making recommendations to the Board of
Directors (the Board) on remuneration policies for Capral
including, in particular, those governing the directors
(including the Managing Director) and executive managers.
The Committee operates in accordance with its Charter.

Remuneration of the Managing Director and certain
executive managers is reviewed at least annually by the
Remuneration & Nomination Committee and
recommendations are put to the Board for its approval.
Short- and long-term incentives are linked to performance
criteria. The Board can exercise its discretion in relation to
approving bonuses and incentives. Changes must be
justified by reference to measurable performance criteria
and having regard to Capral’s overall financial performance
and other special circumstances.

The Remuneration & Nomination Committee may seek
independent advice as appropriate in setting the structure
and levels of remuneration based on the principle that the
elements of remuneration should be set at an appropriate

level having regard to market practice for roles of similar
scope and skill. No remuneration recommendations have
been made by remuneration consultants in relation to the
Financial Year. Capral has reviewed generally available
market information regarding remuneration, as outlined
further below.

Capral has a Performance Planning and Review (PPR)
process to evaluate and discuss performance and
development plans at least annually with salaried
employees. This PPR process covers:

»
»

An agreement of objectives for the year ahead and
the setting of key performance measures against
which the achievement of those objectives will be
assessed. These are set by reference to financial
targets and key business strategies.
A review of performance against the previously
agreed objectives for the period under review.
Employee comment and feedback.
Short- and long-term training and development needs
and career aspirations.

The PPR process ensures that there is better understanding
of Capral’s objectives thereby increasing the likelihood of
their achievement. It also enables managers to evaluate
and develop employee skills and performance and identify
future development needs.

(d) Non-executive Directors

The structure of Capral’s non-executive director
remuneration is distinct from that applicable to the
Managing Director and other senior executives.

Remuneration of non-executive directors is established at a
level that enables Capral to attract and retain high quality
directors at a reasonable cost. Remuneration of non-
executive directors and their terms of office are governed
by Capral’s constitution and not by contract.

Remuneration of non-executive directors is allocated out of
the pool of funds, the limit of which is approved by
shareholders in general meeting; the fee pool limit is currently
$500,000 per annum. Each non-executive director is entitled
to the payment of an annual fee in cash and superannuation
contributions for their services. Additional fees are not paid
for sitting on Board committees; however, the extra
responsibility of the Chairman of the Board and committees is
recognised by the payment of a higher fee. The fees for the
non-executive directors are regularly reviewed having regard

Remuneration Report (Audited) Annual Report 202022

particular skills and previous remuneration, experience and
capability to lead Capral in delivering financial targets and
executing key business strategies. It forms part of his
executive employment contract and is subject to annual
review. The fixed remuneration of the Managing Director
has not increased since March 2019.

The Board has reviewed generally available market
information regarding fixed remuneration of the key
management personnel for over 10 ASX listed companies
in either building product related industries or with
comparable revenues and market capitalisation. The fixed
remuneration of Capral’s key management personnel is
generally in line with this group.

The fixed remuneration of Capral’s other key management
personnel has not increased since March 2019.

(g) Short Term Incentives

Capral’s short-term incentive schemes are designed to
encourage participants to assist Capral in achieving
continuous improvement by aligning their interests with
those of Capral and its stakeholders and rewarding them
when key performance measures are achieved.

For the Financial Year, there were 3 short term incentive
programs:

(1) Short Term Incentive Plan (STIP): The Managing

Director and senior employees have the opportunity
to earn a cash and deferred equity incentive, based on
a specified percentage of TEC dependent on each
individual’s level of responsibility. The actual incentive
earned is based on the achievement of financial and
non-financial objectives.

(2) Bonus scheme: other salaried employees can earn
fixed payments, as approved by the Managing
Director, for achieving key performance measures set
by their managers and outlined in the employee’s
individual PPR.

(3) Sales incentives: Sales employees participate in
quarterly sales incentive programs in relation to
revenue, gross margin, and debtor days targets.

to generally available market information and are currently
considered to be similar to those paid at comparable listed
companies. Non-executive directors do not receive any shares,
options or other securities as part of their remuneration
however they are eligible to participate in Capral’s equity
incentive plans, although none currently participate. There are
no schemes for retirement benefits (other than statutory
superannuation payments).

(e) Senior Management Remuneration

The remuneration policy for the Managing Director and
executives seeks to attract and retain people with the
required capabilities to lead Capral in the achievement of
business objectives and focus on delivering financial and
non-financial measures.

Remuneration is reviewed annually, and approved changes
applied from 1 March.

The Remuneration & Nomination Committee reviews the
remuneration arrangements of the Managing Director, his
direct reports and certain other executive managers. The
Managing Director reviews the remuneration arrangements
of the other members of senior management, based on
the recommendations of his direct reports.

For the Managing Director and other senior management,
remuneration consists of a fixed annual salary and
superannuation (refer to section 1(f) below) plus at-risk
components comprised of a short term incentive plan
(STIP) (refer to section 1(g) below) and a long term
incentive plan (LTIP) (refer to section 1(h) below).

The proportions of fixed and at-risk remuneration are
established for the Managing Director and other senior
management relative to their position in Capral. As a
general guide, at-risk remuneration is 50% for the
Managing Director, 25% for executive management and
10%-20% for other senior managers, for the achievement
of ‘target’ goals.

(f) Fixed remuneration

The level of the total employment cost (being base salary
plus superannuation) (TEC) is determined having regard to
job responsibilities, skills, experience and performance.
Salaries are reviewed annually, with any changes applied
from 1 March. Fixed remuneration of executives is generally
targeted at market median.

The fixed remuneration of the Managing Director is
determined by the Board having regard to other ASX listed
companies in building product related industries, his

Annual Report 2020 Remuneration Report (Audited)23

STIP is weighted 70% to financial objectives and 30% non-financial objectives. A summary of STIP is set out in the table below:

Frequency

Financial
Measures

Non-financial
Measures

Assessment of
performance
against measures

Awards determined annually with payment made in the March following the end of the
performance year.

Trading EBITDA for Capral and (for relevant General/Divisional Managers) Business Units
(30%). Key financial threshold measure as reflects underlying earnings after excluding the
impact of external economic factors such as the volatility of global aluminium prices and the
unrealised impact of foreign exchange rate fluctuations.
»
Net Profit After Tax for Capral (15%). Aligned to ability to pay dividends.
»
Free Cash Flow for Capral (15%). Selected to ensure effectiveness of cash management.
» % Working Capital to Annualised Sales for Capral and (for relevant General/ Divisional

Managers) Business Units (10%). Selected to ensure effectiveness of capital management.

Specific individual objectives are set to reflect measurable and numeric (where possible) strategic
initiatives and profit and safety improvement objectives. The key individual objectives include
performance to customers, sales targets/growth, productivity and operational improvements, key
projects and cost improvements. The weightings are generally 5% however may be higher or lower
depending on importance to company performance.

Performance against financial measures is assessed after the end of each financial year based on Capral’s
financial results. The performance against non-financial measures is assessed as part of the PPR process.

The Managing Director, in consultation with senior managers, is responsible for recommending to
the Board the amount of STIP, if any, to be paid.

Payments are subject to the achievement of applicable Capral, Divisional or Regional minimum annual
Trading EBITDA targets. Stretch payments are not made where target financial metrics are not met.

Discretionary
override

The Board retains absolute discretion regarding payments having regard to Capral’s overall financial
position and other special circumstances that have arisen during the year (ie normalisation or
clawback). The intent however is to minimise the exercise of discretionary adjustments to the
planned outcomes set at the start of the year. Material adjustments would be disclosed.

Service condition

The Managing Director is eligible to receive a pro-rata payment where his employment is
terminated other than for cause. Other employees who leave Capral part way through a
performance period are not eligible for a payment for that period.

Clawback of
awards

Deferral

Plan review

In the event of fraud, misstatement or misrepresentation of the financials, the Board may exercise
its discretion to withhold some or all of a payment before it is made or recover some or all of
payments already made.

Any ‘Stretch’ STIP payments (after tax and based on the 12-month Volume Weighted Average Price
(VWAP) as at the end of the performance period) to the Managing Director and Executive Team is
satisfied by Capral Shares and held in escrow for 3 years. These shares can be issued or acquired on
market as determined by the Board. There is no deferred cash / equity component for other STIP
participants. The Board introduced deferred equity in 2018 to further strengthen alignment of
Capral’s executive managers with shareholders.

The STIP design is reviewed at least annually by the Remuneration & Nomination Committee and
approved by the Board. The Managing Director, in consultation with senior managers, is responsible
for recommending to the Board the STIP financial targets. The non-financial objectives are approved
by the Managing Director. The Managing Director’s non-financial targets are established and
approved by the Board.

Remuneration Report (Audited) Annual Report 202024

The Managing Director and key management personnel are eligible for the following awards of STIP relative to TEC:

POSITION

Managing Director

Other KMP

% OF TEC

MINIMUM

TARGET

STRETCH

25%

12.5%

50%

25%

100%

50%

Where objectives can be financially measured, ‘Minimum’ is generally set around 15% below Board approved Budget.
‘Target’ is generally set around Board approved Budget and ‘Stretch’ is generally set 30% above Budget.

The Board has reviewed available market information regarding short term incentive schemes of the key management
personnel for over 10 ASX listed companies in either building product related industries or with comparable revenues and
market capitalisation. The Board considers that Capral’s short-term incentive scheme is generally in line with this group.

(h) Long Term Incentives

Capral’s long-term incentive plan (LTIP) was designed to strengthen the alignment of the interests of senior managers with
shareholders and support a culture of share ownership and shareholder wealth. It also aims to provide competitive
remuneration for the retention of specifically targeted members of senior management.

The Managing Director, Mr Dragicevich, was granted 73,330 performance rights following shareholder approval in April
2018 and 78,330 performance rights following shareholder approval in April 2019. During the Financial Year, an additional
102,670 performance rights were granted to Mr Dragicevich following shareholder approval in April 2020.

On the recommendation of the Managing Director to the Remuneration & Nomination Committee, selected senior
executives participate in LTIP.

A summary of LTIP for the Managing Director and other senior executives is set out below:

Frequency

Awards determined annually.

Type of award

Performance rights subject to service requirements and vesting criteria. If the conditions are met,
shares will be issued around the vesting date.

Amount of award

The Managing Director is eligible to receive additional annual issues of up to 50% of the value of
TEC, subject to shareholder approval.

The value of individual awards for all other participating senior executives is generally less than
30% of TEC.

As a matter of practice, the aggregate amount of each annual award to all Executives is about
1.5% of issued capital and the number of rights awarded is based on the 12 month Volume
Weighted Average Price (VWAP) as at the start of the performance period.

Performance
period & vesting
dates

3 years with 31 December testing dates.
2018 award: vesting date of 1 March 2021.
2019 award: vesting date of 1 March 2022.
2020 award: vesting date of 1 March 2023.

Annual Report 2020 Remuneration Report (Audited)25

Performance
conditions

Performance rights granted under LTIP are subject to the participant remaining employed by Capral
at the vesting date and the achievement of the following performance conditions:

50% of rights are subject to an EPS performance condition. The actual EPS performance is
measured over a 3-year period, must meet, in aggregate, the 3 annual targets combined. The
EPS condition is calculated each year as follows: Net Profit After Tax Target as specified by the
Board for that year (adjusted for any extraordinary items approved by the Board) divided by
weighted average number of securities on issue during the year. The Net Profit After Tax
Target used for this condition is set at least at minimum Budget level. The Board may adjust
EPS to normalise results and exclude the effects of material business acquisitions/ divestments
and certain one-off costs; any material adjustments would be disclosed. The number of rights
that may vest is set out in Table B below.

50% of rights are subject to a TSR performance condition as against the entities with ordinary
shares and units (as the case may be) included in the S&P/ASX All Ordinaries Index as at
1 January in the year of grant but excluding those companies who are classified in the Global
Industry Classification Standard sector number 40. The number of rights which may vest is set
out in Table A below.

Refer to the explanation above (LTIP- Managing Director) regarding the setting of the EPS condition
and the use of EPS and TSR tests.

Performance against the EPS and TSR conditions are assessed at the end of the 3-year period
(31 December testing date).

There is no re-testing of EPS or TSR conditions. Vested rights convert on the relevant vesting date a
one-for-one basis to ordinary shares. Unvested rights lapse.

If employment ceases all unvested rights will immediately lapse. However, if the cessation relates to
the redundancy or permanent disability / death of the employee or other reason determined by the
Board then the Board has absolute discretion to determine that some or all of the rights vest.

The Board has discretion to allow awards to vest on a change of control. In exercising this
discretion, the Board is not bound to award all shares.

Assessment of
performance
against measures

Treatment of
awards on
cessation of
employment

Treatment of
awards on change
of control

Dividend/
participation rights

There is no entitlement to dividends on performance rights during the vesting period or to
participate in respect of issues of shares to shareholders.

Clawback of
awards

Plan review

In the event of fraud, misstatement or misrepresentation of the financials, the Board may exercise
its discretion to forfeit some or all of the award prior to the issue of shares or recover some or all of
the award already made.

The LTIP design is reviewed at least annually by the Remuneration & Nomination Committee and
approved by the Board. The Managing Director makes recommendations to the Remuneration &
Nomination Committee regarding the proposed LTIP award participants and the amount of the
entitlements.

Remuneration Report (Audited) Annual Report 202026

Vesting of rights subject to the TSR and EPS performance conditions at each testing date is determined in accordance with
Tables A and B respectively below:

TABLE A

PERCENTILE OF TSR

< 50th

50th

> 50th and < 75th

> 75th

TABLE B

EPS TARGET

> 5% below target

5% below target

% RIGHTS VESTING

None

Between 50 and 100 (pro rata)

100

% RIGHTS VESTING

None

< 5% below target to 10% above target

Between 50 and 100 (pro rata)

> 10% above target

100

The Board has reviewed generally available market information regarding long term incentive schemes of the key
management personnel (including the Managing Director) for over 10 ASX listed companies in either building product
related industries or with comparable revenues and market capitalisation. The Board considers that Capral’s long-term
incentive scheme is generally in line with this group.

(i) Anti-Hedging Policy

Capral’s personnel are not permitted to enter into transactions with securities (or any derivative thereof) which limit the
economic risk of any unvested entitlements awarded under any Capral equity-based remuneration scheme currently in
operation or which will be offered by Capral in the future. As part of Capral’s due diligence undertaken at the time of the
financial results, participants in any Capral equity plan are required to confirm that they have not entered into any such
prohibited transactions.

Annual Report 2020 Remuneration Report (Audited)27

SECTION 2: ACTUAL REMUNERATION OF KEY MANAGEMENT PERSONNEL

During the Financial Year there were a number of remuneration outcomes. The expensed remuneration is set out in detail
in the remuneration table below however in summary the key outcomes were as follows:

(a) Remuneration

No general pay increases were implemented for executives. Total expensed remuneration for the key management
personnel (including the directors) remained largely unchanged as compared to the prior year. Capral directors had their
remuneration reduced by 25% for 9 fortnights. The Managing Director had his hours reduced by 25% via a combination of
annual leave reduction and leave without pay. All other key management personnel and executives had their hours reduced
by 20% for 9 fortnights.

(b) STIP

STIP payments in respect of the 2020 year are above the prior year. No JobKeeper benefit had been taken into account in
determining STIP payments.

102,670 performance rights were granted to the Managing Director in April 2020 following shareholder approval
(2019: 78,330) and 180,650 rights were granted under the 2020 LTIP award to executives in March 2020 (2019: 141,660).

Performance rights granted to the Managing Director and executives under LTIP awards were tested after the year end with
the outcomes detailed in section 3 below. No JobKeeper benefit had been taken into account in determining LTIP calculation.

For the financial year ending 31 December 2020, Capral intends to:

» maintain the fixed remuneration of the Managing Director and executives at 2020 level, thus no increases: but
»

grant further performance rights under the LTIP to the Managing Director (subject to shareholder approval) and
selected executives.

Remuneration Report (Audited) Annual Report 202028

(d) Remuneration Table - key management personnel

The following table sets out the remuneration of the key management personnel (including the directors) during the
Financial Year and the 2019 financial year.

The key management personnel of the consolidated entity are the non-executive directors, Managing Director,
Chief Financial Officer, General Manager Operations and Company Secretary. These people have the authority and
responsibility for planning, directing and controlling the day-to-day activities of Capral.

NAME

YEAR

TITLE

SHORT-TERM EMPLOYEE BENEFITS

SALARY
AND FEES

BONUS1

NON -
MONETARY
BENEFITS

DIRECTORS

A.M. Dragicevich5

R.L. Wood-Ward4

P.J. Jobe4

I.B. Blair6

K. Ostin7

G.F. Pettigrew4

EXECUTIVES

T. Campbell8

R. Michael *

R. Rolfe *

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Managing Director

Chairman

Non-executive director

CFO/ Co. Sec.

Chief Financial Officer

GM Operations

GM Operations9

Gen. Counsel

Gen. Counsel/ Co. Sec10

684,688

687,843

109,616

120,000

54,808

55,000

28,834

70,000

35,714

63,942

70,000

401,000

394,406

51,113

36,102

357,500

106,250

Total 2020

Total 2019

1,378,602

463,750

1,484,464

1 All bonus amounts are on an accrual basis.
2 Termination benefits include leave accrued and payments made in lieu of notice at the end of employment with Capral.
3 All LTIP performance rights listed are securities that have not yet vested. In relation to the performance rights of the key management

personnel refer to Note 37 of the financial statements.

4 Due to COVID-19 pandemic crisis, Capral directors had their remuneration reduced by 25% for 9 fortnights.
5 Due to COVID-19 pandemic crisis, Mr Dragicevich had his hours reduced by 25% via a combination of annual leave reduction and leave

without pay.

6 Mr Blair resigned as director on 17 June 2020 and due to COVID-19 pandemic crisis, Mr Blair had his remuneration reduced by 25% for

9 fortnights pro-rata.

POST -

EMPLOYMENT

BENEFITS

OTHER LONG-

TERM BENEFITS

TERMINATION

BENEFITS2

SHARE-BASED PAYMENTS

TOTAL

PERFORMANCE

SUPER-

ANNUATION

DEFFERED

PERFORMANCE

EQUITY1

RIGHTS3

24,808

26,675

10,414

11,400

5,207

5,225

2,739

6,650

3,393

6,074

6,650

24,000

20,144

4,856

4,449

76,635

86,049

308,100

1,453,305

78,209

113,426

93,450

32,836

26,947

657,536

441,497

42,210

(57,343)

40,836

6,020

46,571

401,550

111,045

2,431,582

42,210

89,050

1,701,773

827,944

120,030

131,400

60,015

60,225

31,573

76,650

39,107

70,016

76,650

Annual Report 2020 Remuneration Report (Audited)29

OTHER LONG-
TERM BENEFITS

TERMINATION
BENEFITS2

SHARE-BASED PAYMENTS

TOTAL

TOTAL
PERFORMANCE
RELATED

POST -
EMPLOYMENT
BENEFITS

SUPER-
ANNUATION

The following table sets out the remuneration of the key management personnel (including the directors) during the

Financial Year and the 2019 financial year.

The key management personnel of the consolidated entity are the non-executive directors, Managing Director,

Chief Financial Officer, General Manager Operations and Company Secretary. These people have the authority and

responsibility for planning, directing and controlling the day-to-day activities of Capral.

NAME

YEAR

TITLE

SHORT-TERM EMPLOYEE BENEFITS

SALARY

AND FEES

BONUS1

NON -

MONETARY

BENEFITS

DIRECTORS

A.M. Dragicevich5

R.L. Wood-Ward4

P.J. Jobe4

I.B. Blair6

K. Ostin7

G.F. Pettigrew4

EXECUTIVES

T. Campbell8

R. Michael *

R. Rolfe *

Managing Director

Chairman

Non-executive director

CFO/ Co. Sec.

Chief Financial Officer

GM Operations

GM Operations9

Gen. Counsel

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

684,688

687,843

109,616

120,000

54,808

55,000

28,834

70,000

35,714

63,942

70,000

401,000

394,406

51,113

357,500

106,250

Gen. Counsel/ Co. Sec10

36,102

Total 2020

Total 2019

1,378,602

463,750

1,484,464

24,808

26,675

10,414

11,400

5,207

5,225

2,739

6,650

3,393

6,074

6,650

24,000

20,144

4,856

4,449

76,635

86,049

DEFFERED
EQUITY1

PERFORMANCE
RIGHTS3

308,100

78,209

113,426

1,453,305

827,944

120,030

131,400

60,015

60,225

31,573

76,650

39,107

70,016

76,650

93,450

32,836

26,947

657,536

441,497

(57,343)

40,836

6,020

46,571

401,550

111,045

2,431,582

42,210

89,050

1,701,773

1 All bonus amounts are on an accrual basis.

2 Termination benefits include leave accrued and payments made in lieu of notice at the end of employment with Capral.

3 All LTIP performance rights listed are securities that have not yet vested. In relation to the performance rights of the key management

personnel refer to Note 37 of the financial statements.

4 Due to COVID-19 pandemic crisis, Capral directors had their remuneration reduced by 25% for 9 fortnights.

5 Due to COVID-19 pandemic crisis, Mr Dragicevich had his hours reduced by 25% via a combination of annual leave reduction and leave

6 Mr Blair resigned as director on 17 June 2020 and due to COVID-19 pandemic crisis, Mr Blair had his remuneration reduced by 25% for

without pay.

9 fortnights pro-rata.

7 Mrs Ostin was appointed as a director on 17 June 2020 and due to COVID-19 pandemic crisis, Mrs Ostin had her remuneration

reduced by 25% for 9 fortnights pro-rata.

8 Mr Campbell was appointed as a Company Secretary on 8 March 2019. Due to COVID-19 pandemic crisis, Mr Campbell has had his

hours reduced by 20% via annual leave reduction.

9 Mr Michael passed away on 15 February 2019.
10 Mr Rolfe resigned as Company Secretary and ceased to be a key management personnel on 8 March 2019. However, he remained as General

Counsel on a part-time basis and left employment with Capral on 17 January 2020.

* Capral’s key management personnel (other than directors).

Remuneration Report (Audited) Annual Report 202030

SECTION 3: PERFORMANCE RIGHTS, OPTIONS AND BONUSES PROVIDED AS COMPENSATION

Performance rights - Managing Director

During the Financial Year and the financial year ended 31 December 2019, performance rights were granted as equity
compensation benefits under the LTIP, to the Managing Director as disclosed as at balance date below. The performance
rights were granted at no cost to him.

102,670 performance rights were granted to the Managing Director in April 2020 following shareholder approval. These
rights have a vesting date of March 2023.

78,330 performance rights were granted to the Managing Director in April 2019 following shareholder approval. These
rights have a vesting date of March 2022.

73,330 performance rights were granted to the Managing Director in April 2018 following shareholder approval. These
rights have a vesting date of March 2021. The EPS condition (36,665 rights) was tested as at 31 December 2020. Capral did
not achieve the EPS condition and consequently 36,665 rights will lapse in March 2021. The TSR condition (36,665 rights)
was also tested as at 31 December 2020. Capral’s relative TSR performance over the period from January 2018 to
December 2020 was in the 72nd percentile and consequently 93.98% of the rights subject to the TSR condition will vest,
and thus 2,207 of the rights will lapse in March 2021. Consequently, a total of 34,458 rights will vest and convert into
Capral shares on a 1 for 1 basis, and 2,207 rights will lapse during March 2021.

66,666 performance rights were granted to the Managing Director in May 2017 following shareholder approval. A total of
66,666 rights lapsed, as at 1 March 2020.

TRANCHE

GRANT
NO.

GRANT
DATE

FAIR
VALUE
PER RIGHT
AT
GRANT
DATE ($)

TEST
DATE

LAPSED
NO.

VESTED
NO.

2020 OFFER

A. Dragicevich

Total 2020 Offer

2019 OFFER

A. Dragicevich

EPS 50%

TSR 50%

51,335

102,670

29/04/2020

16/04/2019

$1.56

31/12/2022

$2.04

31/12/2022

EPS 50%

TSR 50%

39,165

78,330

Total 2019 Offer

$3.00

31/12/2021

$2.10

31/12/2021

Annual Report 2020 Remuneration Report (Audited)

TRANCHE

GRANT
NO.

GRANT
DATE

FAIR
VALUE
PER RIGHT
AT
GRANT
DATE ($)

TEST
DATE

LAPSED
NO.

VESTED
NO.

2018 OFFER

A. Dragicevich

Total 2018 Offer

2017 OFFER

A. Dragicevich

Total 2017 Offer

EPS 50%

TSR 50%

EPS 50%

TSR 50%

19/4/2018

11/05/2017

36,665

73,330

33,333

66,666

$3.60

31/12/2020

$3.00

31/12/2020

$3.30

31/12/2019

(33,333)

$2.10

31/12/2019

(33,333)

(66,666)

Performance rights – other key management personnel

During the Financial Year and the financial year ended 31 December 2019, performance rights were granted as equity
compensation benefits under the LTIP, to certain executives including key management personnel as disclosed as at balance
date below. The performance rights were granted at no cost to the participants.

180,650 performance rights were granted under the 2020 LTIP award to executives in March 2020. These rights have a
vesting date of March 2023.

141,660 performance rights were granted under the 2019 LTIP award to executives in March 2019. These rights have a
vesting date of March 2022.

123,360 performance rights were granted under the 2018 LTIP award to executives in March 2018. These rights have a
vesting date of March 2021. The EPS condition (61,680 rights) was tested as at 31 December 2020. Capral did not achieve
the EPS condition and consequently 61,680 of these rights will lapse in March 2021. The TSR condition (61,680 rights) was
also tested as at 31 December 2020. Capral’s relative TSR performance over the period from January 2018 to December
2020 was in the 72nd percentile and consequently 93.98% of the rights subject to the TSR condition will vest, and thus
(3,713 rights) will lapse in March 2021. Consequently, a total of 57,967 rights will vest and convert into Capral shares on a
1 for 1 basis, and 65,393 rights will lapse during March 2021.

161,667 performance rights were granted under the 2017 LTIP award to executives in March 2017. A total of 121,667 rights
lapsed, as at 1 March 2020.

Remuneration Report (Audited) Annual Report 2020

EXECUTIVES/
OFFER

2020 OFFER

T. Campbell

Total 2020 Offer

2019 OFFER

T. Campbell

Total 2019 Offer

2018 OFFER

T. Campbell

Total 2018 Offer

2017 OFFER

T. Campbell

FAIR
VALUE
PER RIGHT
AT
GRANT
DATE ($)

TEST
DATE

LAPSED
NO.

VESTED
NO.

TRANCHE

GRANT
NO.

GRANT
DATE

30,670

03/03/2020

EPS 50%

TSR 50%

15,335

30,670

$2.82

31/12/2022

$2.10

31/12/2022

21,670

22/03/2019

EPS 50%

TSR 50%

10,835

21,670

$3.15

31/12/2021

$2.25

31/12/2021

16,670

06/03/2018

EPS 50%

TSR 50%

8,335

16,670

$3.90

31/12/2020

$3.60

31/12/2020

16,670

10/03/2017

EPS 50%

TSR 50%

8,335

16,670

Total 2017 Offer

$4.50

31/12/2019

$3.90

31/12/2019

(16,670)

(8,335)

(16,670)

Annual Report 2020 Remuneration Report (Audited)

Options

No options were issued under the LTIP during the Financial Year and the financial year ended 31 December 2019.

Equity grants and during the Financial Year

Details of the performance rights granted, as well as the movement during the Financial Year in rights previously granted,
to Key Management Personnel are as follows:

2020 -
PERFORMANCE
SHARE RIGHTS

A. Dragicevich

T. Campbell

HELD AT
START OF
YEAR

GRANTED AS
COMPENSA-
TION

218,326

55,010

102,670

30,670

LAPSED

(66,666)

(16,670)

273,336

133,340

(83,336)

The non-executive directors hold no performance rights.

Bonuses

VESTED /
FORFEITED

OTHER
CHANGES

HELD AT END
OF YEAR

254,330

69,010

323,340

During the Financial Year, STIP bonus payments were made to the Managing Director and key management personnel. The
Managing Director’s STIP payments for 2020 equated to 93% of his TEC (above the Capral Trading EBITDA1 ‘target’ level
detailed in section 1 above) and the Board considers it appropriate having regard to the achievement of certain key
financial measures as well as critical non-financial measures regarding customers, capital projects, anti-dumping activities
and other strategic plans. The other key management personnel’s STIP payments were 47% of TEC (above the Capral
Trading EBITDA1 ‘target’ level detailed in section 1 above).

During the financial year ended 31 December 2019, no STIP bonus payments were made to the Managing Director and key
management personnel as Capral Trading EBITDA1 was below ‘minimum’ level.

The percentages of bonus accrued and forfeited (as a result of not meeting the performance criteria at ‘target’ level) during
the Financial Year and the financial year ended 31 December 2019 are disclosed below:

2020

EXECUTIVES

A. Dragicevich

T. Campbell

2019

EXECUTIVES

A. Dragicevich

T. Campbell

Note:

% OF BONUS
PAID3

% OF BONUS
FORFEITED

% OF COMPENSATION FOR THE YEAR
CONSISTING OF STIP BONUS2

186

188

% OF BONUS
PAID3

% OF BONUS
FORFEITED

% OF COMPENSATION FOR THE YEAR
CONSISTING OF STIP BONUS2

100

1 Trading EBITDA (non-IFRS measure) is EBITDA adjusted for items assessed as unrelated to the underlying performance of the business
and allows for a more relevant comparison between financial periods. Any JobKeeper related benefit have been excluded in full and
not taken into account for any financial measure.

2 Total compensation used for calculating % purposes excludes equity compensation benefits under the LTIP and termination benefits.
3 Bonuses relating to a financial year are payable in the following financial year.

Remuneration Report (Audited) Annual Report 202034

Shareholdings of Key Management Personnel - fully paid ordinary shares of the Company

Details of the holdings of Capral’s ordinary shares of key management personnel during the Financial Year are as follows:

2020

DIRECTORS

R.L. Wood-Ward

A.M. Dragicevich

P.J. Jobe

I.B. Blair

K. Ostin

G.F. Pettigrew

EXECUTIVES

T. Campbell

HELD AT
START OF
YEAR

GRANTED AS
COMPENSATION

RECEIVED ON
VESTING OF
PERFORMANCE
RIGHTS/
EXERCISE OF
OPTIONS

OTHER
CHANGES
DURING THE
YEAR

HELD AT END
OF YEAR

332,490

236,684

7,579

24,953

601,706

13,576

33,332

46,908

346,066

270,016

7,579

24,953

648,614

SECTION 4: RELATIONSHIP BETWEEN REMUNERATION AND COMPANY PERFORMANCE

There is a link between company performance and executive reward. For the Financial Year and the previous 4 financial
years, Capral has made STIP payments based upon the achievement of performance (financial and non-financial) measures.

Whilst continuing to ensure that Capral attracts and retains qualified, experienced and motivated employees in accordance with
the remuneration policy by remunerating employees at a competitive level, Capral has placed more emphasis on at-risk
remuneration in order to align remuneration of the employees to the performance of Capral and encourage shareholder wealth.

During the Financial Year and the previous 4 financial years (2016-2019), Capral’s financial performance was as follows,
with the minimum targets (M) that were set for the 2020 STIP financial measures also shown:

YEAR ENDED 31 DEC

2020 (A)

2020 (M)

2019 (A)

2018 (A)

2017 (A)

2016 (A)

Trading EBITDA $’0001

Free Cash Flow $’000

Net (Loss)/Profit $’000

% Working Capital to Annualised Sales

Dividend - cents per share

Basic earnings / (loss) - cents per share

Share price (closing) $

Note:

19,668

13,175

11,021

14,268

18,409

20,265

20,7522

11,4642

13.21

45.0

69.51

5.95

5,300

7,000

15.65

42.44

n/a

4753

3,1053

14.68

15.0

19.26

3.45

1,573

6,415

13.92

45.0

40.11

3.60

8,883

11,266

12,085

14,350

13.89

37.5

76.20

4.50

13.87

37.5

90.60

5.10

1 Trading EBITDA (non-IFRS measure) is Statutory EBITDA adjusted for items assessed as unrelated to the underlying performance of the
business and allows for a more relevant comparison between financial periods. Any JobKeeper related benefit have been excluded in
full and not taken into account.

2 Free Cash Flow, Net Profit and Basic Earnings per share adjusted to exclude any JobKeeper benefit of $11.907 million, Deferred Tax

Benefit of $3.048 million and other one-off items of $0.499 million.

3 Free Cash Flow, Net Profit and Basic Earnings per share adjusted to exclude Restructuring Cost and other one-off items of $7.345 million.

In the Financial Year, Capral’s Trading EBITDA, Free Cash Flow and Net Profit After Tax were all significantly above 2019 levels.

The minimum targets were surpassed in all instances (excluding any JobKeeper benefit) and as a result, STIP will be payable to

Capral key management and other senior personnel. Discretionary Bonusses will also be payable to other qualifying

employees. At a Divisional and Regional level minimum Trading EBITDA measures were achieved in all business units, and

there were mixed results relating to Working Capital and sales volume measures.

The following provides examples of other key measures (that are not commercially sensitive) used to assess executive

performance:

PERFORMANCE AREA

MEASURE

OUTCOME

Safety

Rate improved significantly on 2019 and Group Stretch targets were

Reduction in total

reportable injury

frequency rate

Hours lost & return to

work hours lost from

injuries

met

Stretch performance targets met

Customers

Volume retention/ growth

Sales areas met most of the specific growth and revenue targets as

well as margin measures. Performance varied by region/ division

Production

Operational efficiency

Manufacturing plants met most of their operational efficiency/

improvement targets

Supply Chain

Initiatives were generally achieved

Supply chain and

inventory reduction

programs

AL & LSL balance

reduction

campaign

People

Overall leave balance reduction initiatives were not achieved.

Performance varied by region/ division

Anti-dumping

Pursue anti-dumping

Overall the outcomes were successful.

Costs

Cost reduction initiatives

Many of the specific cost and expense reduction initiatives were

achieved. Performance varied by region/ division

The 2020 STIP payments are higher than those paid in 2019, aligned to financial performance. There is a clear link between

financial performance and the level of STIP awarded.

LTIP is linked to Capral’s performance as the value of the performance rights awarded depends on Capral’s share price and

dividend payments, and whether the awards vest relate to earnings growth and Capral’s relative TSR performance. There is

a link between Capral’s performance and the vesting of rights under LTIP awards. In this regard:

In 2020:

Capral’s relative TSR performance over the period from January 2018 to December 2020 achieved the 72nd

percentile, above the minimum 50th percentile. Consequently, 93.98% or 92,425 of the rights subject to the TSR

condition that were awarded in 2018 to executives vested.

Given earnings in, 2018, 2019 and 2020, the aggregate EPS result for the 3 year period to 2020 was 128.92 cents

per share against an aggregate target of 147.13 cents per share and therefore the EPS condition of the 2018

award was not achieved. Consequently, no rights subject to the EPS condition of the 2018 award will vest and

convert into Capral shares.

Annual Report 2020 Remuneration Report (Audited)35

In the Financial Year, Capral’s Trading EBITDA, Free Cash Flow and Net Profit After Tax were all significantly above 2019 levels.
The minimum targets were surpassed in all instances (excluding any JobKeeper benefit) and as a result, STIP will be payable to
Capral key management and other senior personnel. Discretionary Bonusses will also be payable to other qualifying
employees. At a Divisional and Regional level minimum Trading EBITDA measures were achieved in all business units, and
there were mixed results relating to Working Capital and sales volume measures.

The following provides examples of other key measures (that are not commercially sensitive) used to assess executive
performance:

PERFORMANCE AREA

MEASURE

OUTCOME

Safety

Reduction in total
reportable injury
frequency rate

Hours lost & return to
work hours lost from
injuries

Rate improved significantly on 2019 and Group Stretch targets were
met

Stretch performance targets met

Customers

Volume retention/ growth

Sales areas met most of the specific growth and revenue targets as
well as margin measures. Performance varied by region/ division

Production

Operational efficiency

Manufacturing plants met most of their operational efficiency/
improvement targets

Supply Chain

People

Anti-dumping

Supply chain and
inventory reduction
programs

AL & LSL balance
reduction

Pursue anti-dumping
campaign

Initiatives were generally achieved

Overall leave balance reduction initiatives were not achieved.
Performance varied by region/ division

Overall the outcomes were successful.

Costs

Cost reduction initiatives

Many of the specific cost and expense reduction initiatives were
achieved. Performance varied by region/ division

The 2020 STIP payments are higher than those paid in 2019, aligned to financial performance. There is a clear link between
financial performance and the level of STIP awarded.

LTIP is linked to Capral’s performance as the value of the performance rights awarded depends on Capral’s share price and
dividend payments, and whether the awards vest relate to earnings growth and Capral’s relative TSR performance. There is
a link between Capral’s performance and the vesting of rights under LTIP awards. In this regard:

In 2020:

Capral’s relative TSR performance over the period from January 2018 to December 2020 achieved the 72nd
percentile, above the minimum 50th percentile. Consequently, 93.98% or 92,425 of the rights subject to the TSR
condition that were awarded in 2018 to executives vested.
Given earnings in, 2018, 2019 and 2020, the aggregate EPS result for the 3 year period to 2020 was 128.92 cents
per share against an aggregate target of 147.13 cents per share and therefore the EPS condition of the 2018
award was not achieved. Consequently, no rights subject to the EPS condition of the 2018 award will vest and
convert into Capral shares.

Note:

Remuneration Report (Audited) Annual Report 202036

In 2019:

Capral’s relative TSR performance over the period from January 2017 to December 2019 achieved the 34th
percentile, below the minimum 50th percentile. Consequently, none of the rights subject to the TSR condition
that were awarded in 2017 to executives vested.
Given earnings in, 2017, 2018 and 2019, the aggregate EPS result for the 3-year period to 2019 was 131.4 cents
per share against an aggregate target of 184.5 cents per share and therefore the EPS condition of the 2017
award was not achieved. Consequently, no rights subject to the EPS condition of the 2017 award will vest and
convert into Capral shares.

SECTION 5: SUMMARY OF KEY EMPLOYMENT CONTRACTS

Details of the key contract terms for the Managing Director and other key management personnel as at the end of the
Financial Year are as follows:

CONTRACT DETAILS

A. DRAGICEVICH

T. CAMPBELL

Expiry date

No fixed end date

Notice of termination by Capral

6 months

Notice of termination by employee

6 months

Termination payments
(in lieu of notice)

6 months salary plus accrued but
unpaid STIP (pro rata for incomplete
financial year).

6 months salary. STIP entitlement for
incomplete financial years is subject to
Board discretion

In addition, unvested LTIP rights may
vest if employment is terminated by
Capral other than for cause.6 weeks
annual leave per annum.

Annual Report 2020 Remuneration Report (Audited)37

Environmental regulations

Manufacturing licences and consents required by laws and
regulations are held by the consolidated entity at each
relevant site as advised by consulting with relevant
environmental authorities. All applications for and renewals
of licences have been granted and all consents have been
given by all relevant authorities.

Directors’ and officers’ indemnities and
insurance

Under Capral’s constitution, Capral is required to
indemnify, to the extent permitted by law, each director
and secretary of Capral against any liability incurred by that
person as an officer of Capral. The directors listed on page
17 and the secretary listed on page 18 have the benefit of
this indemnity. During the Financial Year, Capral paid a
premium for directors’ and officers’ liability insurance
policies which cover current and former directors, company
secretaries and officers of the consolidated entity. Details
of the nature of the liabilities covered and the amount of
the premium paid in respect of the directors’ and officers’
insurance policies are not disclosed, as such disclosure is
prohibited under the terms of the contracts.

Indemnities to auditors

In respect of non-audit services provided in relation to
reviews of consulting and compliance advice during the
Financial Year, Deloitte Touche Tohmatsu, Capral’s auditor,
has the benefit of an indemnity (including in respect of legal
costs) for any third party claim in connection with the use,
distribution or reliance on their work (except to the extent
caused by the wilful misconduct or fraud of Deloitte Touche
Tohmatsu, or where it has agreed that the third party may
rely on the work or it may be used in a public document).

Proceedings on behalf of Capral

No person has applied to the Court under section 237 of
the Corporations Act for leave to bring proceedings on
behalf of Capral, or to intervene in any proceedings to
which Capral is party, for the purpose of taking
responsibility on behalf of Capral for all or part of those
proceedings. No proceedings have been brought or
intervened in on behalf of Capral with leave of the Court
under section 237 of the Corporations Act.

Non-audit services

Capral may decide to employ the auditor on assignments
additional to their statutory audit services where the
auditor’s expertise and experience with the consolidated
entity are important.

The Board has considered this position and in accordance
with the advice received from the Audit & Risk Committee,
it is satisfied that the provision of these services during the
Financial Year by the auditor is compatible with, and did
not compromise, the general standard of auditor
independence imposed by the Corporations Act for the
following reasons:

(1)

the non-audit services provided do not involve
reviewing or auditing the auditor’s own work and
have not involved partners or staff acting in a
management or decision-making capacity for Capral
or in the processing or originating of transactions;

(2) all non-audit services and the related fees have been

reviewed by the Audit & Risk Committee to ensure
complete transparency and that they do not affect the
integrity and objectivity of Deloitte Touche Tohmatsu; and

(3)

the declaration required by section 307C of the
Corporations Act 2001 confirming independence has
been received from Deloitte Touche Tohmatsu.

Details of the amounts paid or payable to Capral’s auditor
(Deloitte Touche Tohmatsu) for audit and non-audit
services provided during the Financial Year are set out in
Note 32 of the financial statements.

Auditor’s independence declaration

The auditors’ independence declaration as required under
section 307C of the Corporations Act is set out on page 38.

Rounding of amounts

Capral is a company of the kind referred to in ASIC
Corporations Instrument 2016/191, dated 24 March 2016,
and in accordance with that ASIC Corporations Instrument
amounts in the Directors’ Report and the Financial Report
are rounded off to the nearest thousand dollars, unless
otherwise indicated.

Signed in accordance with a resolution of directors made
pursuant to section 298(2) of the Corporations Act 2001.

On behalf of the directors

R. L. Wood-Ward
Chairman

A. M. Dragicevich
Managing Director

Sydney
25 February 2021

Remuneration Report (Audited) Annual Report 2020
38

AUDITOR’S INDEPENDENCE DECLARATION

Deloitte Touche Tohmatsu
ABN 74 490 121 060

Eclipse Tower
Level 19
60 Station Street
Parramatta NSW 2150
PO Box 38
Parramatta NSW 2124 Australia

DX 28485
Tel: +61 (0) 2 9840 7000
Fax: +61 (0) 2 9840 7001
www.deloitte.com.au

The Board of Directors
Capral Limited
Level 4
60 Philip Street
Parramatta NSW 2150

Dear Directors,

Capral Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Capral Limited.

As lead audit partner for the audit of the financial statements of Capral Limited for the financial year
ended 31 December 2020, I declare that to the best of my knowledge and belief, there have been no
contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

David White
Partner
Chartered Accountants
Parramatta, 25 February 2021

Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Organisation.

Annual Report 2020 Auditor’s Independence Declaration

Auditor’s Independence Declaration Annual Report 202040

CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the financial year ended 31 December 2020

CONTINUING OPERATIONS

Note

Sales revenue

Scrap and other revenue

Revenue

Other income

Raw materials and consumables used

Employee benefits expense

Depreciation and amortisation expense

Finance costs

Freight expense

Occupancy costs

Repairs and maintenance expense

Restructuring costs

Other expenses

Profit/(loss) before tax

Income tax benefit

Profit/(loss) for the year

Other comprehensive income
Items that will not be reclassified
subsequently to profit or loss

Gain on revaluation of properties

Other comprehensive income for the year

2020

$’000

406,721

25,288

432,009

2019

$’000

391,634

27,322

418,956

305

212

(266,419)

(260,587)

(75,402)

(18,352)

(6,030)

(12,038)

(569)

(5,642)

173

(86,088)

(18,439)

(5,762)

(12,237)

(810)

(6,516)

(6,095)

(25,163)

(26,874)

22,872

3,048

(4,240)

25,920

(4,240)

Total comprehensive income/(loss) for the year

25,920

(4,240)

Earnings per share

Basic earnings per share

Diluted earnings per share

($ per share)

1.57

1.51

(0.26)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.

Annual Report 2020 Financial StatementsCONSOLIDATED STATEMENT
OF FINANCIAL POSITION
as at 31 December 2020

ASSETS

Current assets

Cash and cash equivalents

Trade and other receivables

Inventories

Other financial assets

Prepayments

Total current assets

Non-current assets

Deferred tax assets

Property, plant and equipment

Right-of-use assets

Other intangible assets

Total non-current assets

Total assets

LIABILITIES

Current liabilities

Trade and other payables

Lease liabilities

Provisions

Other financial liabilities

Deferred income

Total current liabilities

Non-current liabilities

Lease liabilities

Provisions

Total non-current liabilities

Total liabilities

Net assets

EQUITY

Issued capital

Reserves

Accumulated losses

Total equity

Note

30 (c)

2020

$’000

49,396

66,250

79,130

2,517

2019

$’000

17,938

62,564

78,907

1,625

197,293

161,044

5,905

38,814

70,776

321

115,816

313,109

77,242

13,528

14,820

1,615

127

107,332

82,948

4,639

87,587

194,919

118,190

426,965

44,006

2,857

40,431

76,860

452

120,600

281,644

65,409

13,877

13,385

1,086

103

93,860

90,654

4,104

94,758

188,618

93,026

425,744

35,018

23 (b)

(352,781)

(367,736)

118,190

93,026

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Financial Statements Annual Report 202042

CONSOLIDATED STATEMENT OF CASH FLOWS
for the financial year ended 31 December 2020

Note

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Interest and other costs of finance paid

Net cash provided by operating activities

35(ii)

Cash flows from investing activities

Payments for property, plant and equipment

Payments for intangible assets

Interest received

Proceeds from sale of property, plant and equipment

Net cash flows used in investing activities

Cash flows from financing activities

Payments of dividends

Proceeds from dividend reinvestment plan

Payment of lease liabilities excluding financing component

Net cash flows used in financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial year

Effect of foreign exchange rate changes

Cash and cash equivalents at the end of the financial year

35(i)

2020

$’000

471,524

(413,864)

57,660

(5,511)

52,149

(3,986)

(3,955)

(2,422)

1,221

(15,092)

(16,293)

31,901

17,938

(443)

49,396

2019

$’000

463,691

(447,388)

16,303

(5,581)

10,722

(5,045)

(240)

4,691

(586)

(4,803)

(15,103)

(19,906)

(9,770)

27,566

142

17,938

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Annual Report 2020 Financial Statements43

CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 December 2020

FULLY PAID
ORDINARY
SHARES

EQUITY-
SETTLED
COMPENSATION
RESERVE

ASSET
REVALUATION
RESERVE

DIVIDEND
RESERVE*

ACCUMULATED
LOSSES

Note

$’000

TOTAL

$’000

425,744

10,999

1,014

27,933

(334,162)

131,528

190

(315)

(4,240)

190

(315)

(29,334)

(4,803)

425,744

10,874

1,014

23,130

(367,736)

93,026

425,744

10,874

1,014

23,130

(367,736)

93,026

1,221

445

10,965

14,955^

25,920

(2,422)

445

(2,422)

1,221

426,965

11,319

1,014

31,673

(352,781)

118,190

Balance as at
1 January 2019

Loss for the year

Share-based payments
expense

Shares acquired on
conversion of vested
rights

Initial adoption of
AASB 16 Leases

Dividends paid

Balance as at
31 December 2019

Balance as at
1 January 2020

Profit for the year

Share-based
payments expense

Dividends paid

Dividends
reinvestment plan

Balance as at
31 December 2020

* Dividend reserve represents undistributed profits since the financial year 2010.
^ JobKeeper benefit ($11.907 million) and income tax benefit ($3.048 million) in relation to deferred tax assets on tax losses are excluded

from dividend reserve.

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Financial Statements Annual Report 202045

NOTES TO
THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2020

1A. GENERAL INFORMATION

1C. SIGNIFICANT ACCOUNTING POLICIES

Capral Limited (the Company) is a public listed company
incorporated and operating in Australia. The Company’s
shares are quoted on the Australian Securities Exchange
(ASX Code: CAA).

The Company’s registered office and its principal place of
business is as follows:

Registered office & principal place of business

71 Ashburn Road
Bundamba
QLD 4304
Tel: (07) 3816 7000

The principal continuing activities of the consolidated entity
consist of the manufacturing, marketing and distribution of
fabricated and semi-fabricated aluminium related products.

1B. ADOPTION OF NEW AND REVISED

ACCOUNTING STANDARDS

In the current year, the Group has applied the below
amendments to AASB Standards and Interpretations issued
by the Board that are effective for an annual period that
begins on or after 1 January 2020. Their adoption has not
had any material impact on the disclosures or on the
amounts reported in these financial statements.

Amendments to References to the Conceptual Framework
in AASB Standards

Amendments to AASB 3 Definition of a business

Amendments to AASB 101 and AASB 108 Definition of
material

At the date of authorisation of these financial statements,
the Group has not applied the following new and revised
AASB Standards that have been issued but are not yet
effective:

Amendments to AASB 101 Classification of Liabilities as
Current or Non-current

Amendments to AASB 3 Reference to the Conceptual
Framework

Amendments to AASB 16 Property, Plant and Equipment—
Proceeds before Intended Use

Amendments to AASB 137 Onerous Contracts – Cost of
Fulfilling a Contract

Statement of Compliance

The financial report is a general purpose financial report
which has been prepared in accordance with the Corporations
Act 2001, Accounting Standards and Interpretations, and
complies with other requirements of the law.

The financial report includes the financial statements of the
Company and the financial statements of the Group. For
the purpose of preparing the consolidated financial
statements, the Company is a for-profit entity.

Accounting Standards include Australian equivalents to
International Financial Reporting Standards (‘A-IFRS’).
Compliance with A-IFRS ensures that the financial
statements and notes of the Group comply with
International Financial Reporting Standards (‘IFRS’).

The financial statements were authorised for issue by the
directors on 25 February 2021.

Basis of Preparation

The financial report has been prepared on the basis of
historical cost, except for the revaluation of certain
non-current assets and financial instruments. Cost is based
on the fair values of the consideration given in exchange
for assets. All amounts are presented in Australian dollars,
unless otherwise noted.

The Company is of a kind referred to in ASIC Corporations
Instrument 2016/191, dated 24 March 2016, issued by the
Australian Securities and Investments Commission, relating
to the “rounding off” of amounts in the financial report.
Amounts in the financial report have been rounded off in
accordance with that ASIC Corporations Instrument to the
nearest thousand dollars, or in certain cases, the nearest
dollar as indicated.

The following significant accounting policies have been
adopted in the preparation and presentation of the
financial report:

(A) BASIS OF CONSOLIDATION

The financial statements incorporate the financial
statements of the Company and entities (including special
purpose entities) controlled by the Company (and its
subsidiaries) (referred to as ‘the Group’ in these financial
statements).

Notes to the Financial Statements Annual Report 202046

Control is based on whether an investor has:

»
»

power over the investee
exposure, or rights, to variable returns from its
involvement with the investee, and
the ability to use its power over the investee to affect
the amount of the returns.

The results of the subsidiaries acquired or disposed of
during the year are included in the consolidated statement
of profit or loss and other comprehensive income from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.

Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies
into line with those used by other members of the Group.
All intra-group transactions, balances, income and
expenses are eliminated in full on consolidation.

(B) BORROWING COSTS

Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to
get ready for their intended use or sale, are added to the
cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment
income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for
capitalisation. All other borrowing costs are recognised in
profit or loss in the period in which they are incurred.

Acquisitions of subsidiaries and businesses are accounted
for using the acquisition method. The consideration for
each acquisition is measured at the aggregate of the fair
values (at the date of exchange) of assets given, liabilities
incurred or assumed, and equity instruments issued by the
Group in exchange for control of the acquiree. Acquisition-
related costs are recognised in profit or loss as incurred.

Where applicable, the consideration for the acquisition
includes any asset or liability resulting from a contingent
consideration arrangement, measured at its acquisition-
date fair value. Subsequent changes in such fair values are
adjusted against the cost of acquisition where they qualify
as measurement period adjustments (see below). All other
subsequent changes in the fair value of contingent
consideration classified as an asset or liability are accounted
for in accordance with relevant Standards. Changes in the
fair value of contingent consideration classified as equity
are not recognised.

The acquiree’s identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under
AASB 3 are recognised at their fair value at the acquisition
date, except that:

deferred tax assets or liabilities and liabilities or assets
related to employee benefit arrangements are
recognised and measured in accordance with AASB
112 Income Taxes and AASB 119 Employee Benefits
respectively;

liabilities or equity instruments related to the
replacement by the Group of an acquiree’s share
based payment awards are measured in accordance
with AASB 2 Share-based Payment; and

assets (or disposal groups) that are classified as held
for sale in accordance with AASB 5 Non-Current
Assets Held for Sale and Discontinued Operations are
measured in accordance with that Standard.

(D) CASH AND CASH EQUIVALENTS

Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that
are readily convertible to known amounts of cash and
which are subject to an insignificant risk of change in value
and have a maturity of three months or less at the date of
acquisition. Bank overdrafts are shown within borrowings
in current liabilities in the statement of financial position.

(E) DERIVATIVE FINANCIAL INSTRUMENTS

The Group enters into a variety of derivative financial
instruments to manage its exposure to interest rate and
foreign exchange rate risk, including foreign exchange
forward contracts.

Further details of derivative financial instruments are
disclosed in Note 30 to the financial statements. Derivatives
are initially recognised at fair value at the date a derivative
contract is entered into and are subsequently remeasured
to their fair value at each reporting date.

The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and
effective as a hedging instrument, in which event the
timing of the recognition of profit or loss depends on the
nature of the hedge relationship. The fair value of hedging
derivatives is classified as a non-current asset or a non-
current liability if the remaining maturity of the hedge
relationship is more than 12 months, and as a current asset
or current liability if the remaining maturity of the hedge
relationship is less than 12 months. The Group’s derivatives
do not qualify for hedge accounting and are not
designated into an effective hedge relationship and are
classified as a current asset and current liability.

Embedded Derivatives

Derivatives embedded in hybrid contracts with hosts that are
not financial assets within the scope of AASB 9 (e.g.
financial liabilities) are treated as separate derivatives when
they meet the definition of a derivative, their risks and
characteristics are not closely related to those of the host
contracts and the host contracts are not measured at FVTPL.

Annual Report 2020 Notes to the Financial Statements47

(F) EMPLOYEE BENEFITS

(i) Salaries, wages and leave benefits

A liability is recognised for benefits accruing to employees
in respect of wages and salaries, including non-monetary
benefits, annual leave and long service leave, when it is
probable that settlement will be required, and they are
capable of being measured reliably. Liabilities recognised in
respect of short-term employee benefits are measured at
their nominal values using the remuneration rate expected
to apply at the time of settlement. Liabilities recognised in
respect of long-term employee benefits are measured at
the present value of the estimated future cash outflows to
be made by the Group in respect of services provided by
employees up to reporting date.

(ii) Share-based payments

Equity-settled share-based payments with employees are
measured at the fair value of the equity instrument at the
grant date.

comprehensive income and financial assets at fair value
through profit or loss account. The classification depends
on the nature and purpose of the financial assets and is
determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating
the amortised cost of a financial asset and of allocating
interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the
financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for
debt instruments other than financial assets ‘at fair value
through profit or loss’.

Financial assets at FVTPL are measured at fair value at the
end of each reporting period, with any fair value gains or
losses recognised in profit or loss to the extent they are not
part of a designated hedging relationship.

The fair value of the performance rights is estimated at
grant date using a Monte-Carlo Simulation analysis taking
into account the terms and conditions upon which the
securities are granted.

The net gain or loss recognised in profit or loss on the
financial assets is included in the other income or other
expenses. Fair value is determined in the manner described
in Note 30.

The fair value of the options is estimated at grant date
using a binomial tree model taking into account the terms
and conditions upon which the securities are granted.

The expected life used in the model has been adjusted,
based on management’s best estimate, for the effects of
non-transferability, exercise restrictions, and behavioural
considerations.

The fair value determined at the grant date of the equity-
settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group’s
estimate of shares that will eventually vest.

Further details on how the fair value of equity-settled
share-based transactions have been determined can be
found in Note 37.

(iii) Defined contribution plan

Contributions to defined contribution superannuation plans
are expensed when incurred.

(G) FINANCIAL ASSETS

Investments are recognised and derecognised on trade
date where the purchase or sale of an investment is under
a contract whose terms require delivery of the investment
within the timeframe established by the market concerned,
and are initially measured at fair value, net of transaction
costs except for those financial assets classified as at fair
value through the profit or loss which are initially measured
at fair value. Subsequent to initial recognition, investments
in subsidiaries are measured at cost in the Company’s
financial statements. Other financial assets are classified
into the following specified categories: financial assets at
amortised cost; financial assets at fair value through other

Trade and other receivables

Trade and other receivables that were measured at
amortised cost under AASB 139 continue to be measured
at amortised cost under AASB 9 as they are held within a
business model to collect contractual cash flows. Trade and
other receivables are measured at amortised cost using the
effective interest method less impairment. Interest is
recognised by applying the effective interest rate.

Impairment of financial assets

Impairment of financial assets is based on an expected
credit loss (“ECL”) model under AASB 9 rather than
incurred loss model. ECLs are a probability-weighted
estimate of credit losses. The group calculated ECLs based
on consideration of customer-specific factors and actual
credit loss experience over the past 3 years. As a
percentage of revenue, the Group’s actual credit loss
experience has not been material.

In accordance with AASB 9 paragraph 7.2.20 the group
will recognise a loss allowance at an amount equal to
lifetime expected credit losses at each reporting date. The
group calculated ECLs based on consideration of customer-
specific factors and actual credit loss experience over the
past 3 years.

For financial assets carried at amortised cost, the amount of
the impairment is the difference between the asset’s
carrying amount and the present value of estimated future
cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by
the impairment loss directly for all financial assets with the
exception of trade receivables where the carrying amount

Notes to the Financial Statements Annual Report 202048

is reduced through the use of an allowance account. When
a trade receivable is uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts
previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance
account are recognised in profit or loss.

Derecognition of financial assets

The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire,
or it transfers the financial asset and substantially all the
risks and rewards of ownership of the asset to another
entity. If the Group neither transfers nor retains
substantially all the risks and rewards of ownership and
continues to control the transferred asset, the Group
recognises its retained interest in the asset and an
associated liability for the amounts it may have to pay.
If the Group retains substantially all the risks and rewards
of ownership of a transferred financial asset, the Group
continues to recognise the financial asset and also
recognises a collateralised borrowing for the
proceeds received.

(H) FINANCIAL INSTRUMENTS ISSUED BY THE

GROUP

Debt and equity instruments

Debt and equity instruments are classified as either
liabilities or as equity in accordance with the substance of
the contractual arrangement.

Compound instruments

Financial liabilities at fair value through profit
or loss

Financial liabilities at fair value through profit or loss are
stated at fair value, with any resultant gain or loss
recognised in profit or loss. The net gain or loss recognised
in profit or loss incorporates any interest paid on the
financial liability. Fair value is determined in the manner
described in Note 30.

Other financial liabilities

Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
Refer note 1c (o).

(I) FOREIGN CURRENCY

In preparing the financial statements, transactions in
currencies other than the entity’s functional currency
(foreign currencies) are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance
date, monetary items denominated in foreign currencies
are retranslated at the rates prevailing at the balance date.
Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the
rates prevailing on the date when the fair value was
determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not
retranslated.

The component parts of compound instruments are
classified separately as financial liabilities and equity in
accordance with the substance of the contractual
arrangement. At the date of issue, the fair value of the
liability component is estimated using the prevailing market
interest rate for a similar non-convertible instrument.

Exchange differences are recognised in profit or loss in the
period in which they arise except for exchange differences
which relate to assets under construction for future
productive use, which are included in the cost of those
assets where they are regarded as an adjustment to
interest costs on foreign currency borrowings.

(J) GOVERNMENT GRANT

Grants are recognised where there is a reasonable
assurance that the grant will be received and all attached
conditions will be complied with.

The Government grants towards staff are recognised as a
deduction from the related Employee benefits expenses.
The Group received salaries subsidies from government
during COVID-19, as disclosed in Note 2 & 33.

This amount is recorded as a liability on an amortised cost
basis until extinguished on conversion or upon the
instruments reaching maturity. The equity component
initially brought to account is determined by deducting the
amount of the liability component from the fair value of
the compound instrument as a whole. This is recognised
and included in equity, net of income tax effects and is not
subsequently remeasured.

Financial guarantee contract liabilities

Financial guarantee contract liabilities are measured initially
at their fair values and subsequently at the higher of the
amount recognised as a provision and the amount initially
recognised less cumulative amortisation.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at
fair value through profit or loss’ or other financial liabilities.

Annual Report 2020 Notes to the Financial Statements49

(K) IMPAIRMENT OF OTHER TANGIBLE AND

INTANGIBLE ASSETS EXCLUDING GOODWILL

At each reporting date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit (CGU) to
which that asset belongs.

Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment at
least annually and whenever there is an indication that the
asset may be impaired. Recoverable amount is the higher of
fair value less costs to sell and value in use. In assessing value
in use, the estimated future cash flows are discounted to
their present value using a post-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted. If the
recoverable amount of an asset (or CGU) is estimated to be
less than its carrying amount, the carrying amount of the
asset (CGU) is reduced to its recoverable amount. An
impairment loss is recognised in profit or loss immediately,
unless the relevant asset is carried at fair value, in which case
the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the
carrying amount of the asset (CGU) is increased to the
revised estimate of its recoverable amount, but only to the
extent that the increased carrying amount does not exceed
the carrying amount that would have been determined had
no impairment loss been recognised for the asset (CGU) in
prior years. A reversal of an impairment loss is recognised
in the profit or loss immediately, unless the relevant asset is
carried at fair value, in which case the reversal of the
impairment loss is treated as a revaluation increase.

(L) 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 national income tax rate for each jurisdiction adjusted
by changes in deferred tax assets and liabilities attributable
to temporary differences between the tax bases of assets
and liabilities and their carrying amounts in the financial
statements, and to unused tax losses.

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.

The Company and its wholly owned Australian entities
have implemented the tax consolidation legislation.

The current and deferred tax amounts for the tax-
consolidated group are allocated to the members of the
tax-consolidated group (including the Company as the
head entity) using the ‘separate taxpayer within group’
approach, with deferred taxes being allocated by reference
to the carrying amounts in the financial statements of each
member entity and the tax values applying under tax
consolidation. Current tax liabilities and assets and deferred
tax assets arising from unused tax losses and relevant tax
credits arising from this allocation process are then
accounted for as immediately assumed by the head entity,
as under Australian taxation law the head entity has the
legal obligation (or right) to these amounts.

(M) INTANGIBLE ASSETS

Intangible assets acquired in a business combination are
identified and recognised separately from goodwill

where they satisfy the definition of an intangible asset and
their fair value can be measured reliably.

Patents, trademarks and licences

Patents, trademarks and licences are recorded at cost less
accumulated amortisation and impairment. Amortisation is
charged on a straight-line basis over their estimated useful
lives, which vary from 5 to 16 years.

The estimated useful life and amortisation method is reviewed
at the end of each annual reporting period, with any changes
being recognised as a change in accounting estimate.

Software

Software assets including system development costs have a
finite useful life and are carried at cost less accumulated
amortisation and impairment losses. Amortisation is
calculated using the straight-line method to allocate the
cost over the assets estimated useful lives, which vary from
3 to 5 years.

(N) INVENTORIES

Inventories representing aluminium log, other supplies and
finished goods are valued at the lower of cost and net
realisable value.

Net realisable value represents the estimated selling price
less all estimated costs of completion and costs necessary
to make the sale.

Aluminium log is valued at moving average of direct
purchase cost. Cost of rolled product has been determined
principally on moving average of direct purchase costs.
Costs for finished and partly finished includes moving
average metal cost, direct labour, and appropriate
proportion of fixed and variable factory overhead.

Notes to the Financial Statements Annual Report 202050

(O) LEASES

The Group assesses whether a contract is or contains a
lease, at inception of the contract. The Group recognises a
right-of-use asset and a corresponding lease liability with
respect to all lease arrangements in which it is the lessee,
except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets
(such as copiers). For these leases, the Group recognises the
lease payments as an operating expense on a straight-line
basis over the term of the lease unless another systematic
basis is more representative of the time pattern in which
economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value
of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit
in the lease. If this rate cannot be readily determined, the
Group uses its incremental borrowing rate.

Lease payments included in the measurement of the lease
liability comprise:

Fixed lease payments (including in-substance fixed
payments), less any lease incentives receivable;
Variable lease payments that depend on an index or
rate, initially measured using the index or rate at the
commencement date; and
Payments of penalties for terminating the lease, if the
lease term reflects the exercise of an option to
terminate the lease.

The lease liability is subsequently measured by increasing
the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the
carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:

The lease term has changed or there is a significant
event or change in circumstances resulting in a
change in the assessment of exercise of a purchase
option, in which case the lease liability is remeasured
by discounting the revised lease payments using a
revised discount rate.
The lease payments change due to changes in an
index or rate or a change in expected payment under
a guaranteed residual value, in which cases the lease
liability is remeasured by discounting the revised lease
payments using an unchanged discount rate (unless
the lease payments change is due to a change in a
floating interest rate, in which case a revised discount
rate is used).
A lease contract is modified and the lease
modification is not accounted for as a separate lease,
in which case the lease liability is remeasured based
on the lease term of the modified lease by discounting
the revised lease payments using a revised discount
rate at the effective date of the modification.

The right-of-use assets comprise the initial measurement of
the corresponding lease liability, lease payments made at or
before the commencement day, less any lease incentives
received and any initial direct costs. They are subsequently
measured at cost less accumulated depreciation and
impairment losses.

The depreciation starts at the commencement date of the
lease.

Rental income from operating leases is recognised on a
straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the
leased asset and recognised on a straight-line basis over
the lease term.

For comparatives, leases are classified as finance leases
when the terms of the lease transfer substantially all the
risks and rewards incidental to ownership of the leased
asset to the lessee. All other leases are classified as
operating leases.

Operating lease payments are recognised as an expense on
a straight-line basis over the lease team, except where
another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset
are consumed.

In the event that lease incentives are received to enter into
operating leases, such incentives are recognised as a liability.
The aggregate benefits of incentives are recognised as a
reduction of rental expense on a straight-line basis, except
where another systematic basis is more representative of the
time pattern in which economic benefits from the leased
asset are consumed.

(P) PROPERTY, PLANT AND EQUIPMENT

Land and buildings are measured at fair value less any
subsequent accumulated depreciation and subsequent
accumulated impairment losses. Fair value is determined on
the basis of a periodic, independent valuation by external
valuation experts, based on discounted cash flows or
capitalisation of net income, as appropriate.

Periodic reviews are conducted every three to five years.
The fair values are recognised in the financial statements of
the Group and are reviewed at the end of each reporting
period to ensure that the carrying value of land and
buildings is not materially different from their fair values.
Any revaluation increase arising on revaluation of land and
buildings are credited to the asset revaluation reserve
except to the extent that the increase reverses a revaluation
decrease for the same asset previously recognised as an
expense in profit or loss, in which case the increase is
credited to the profit and loss to the extent of the decrease
previously charged. A decrease in carrying amount arising
on the revaluation of land and buildings is charged as an
expense in profit or loss to the extent that it exceeds the
balance, if any, held in the revaluation reserve relating to a
previous revaluation of that asset.

Annual Report 2020 Notes to the Financial Statements51

Depreciation on revalued buildings is charged to profit or
loss. On the subsequent sale or retirement of revalued
property, the attributable revaluation surplus remaining in
the revaluation reserve, net of any related taxes, is
transferred directly to retained earnings.

Plant and equipment, and leasehold improvements are
stated at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly
attributable to the acquisition of the item.

In the event that settlement of all or part of the purchase
consideration is deferred, cost is determined by discounting
the amounts payable in the future to their present value as
at the date of acquisition. Depreciation is provided on
property, plant and equipment, including freehold
buildings but excluding land. Depreciation is calculated on
a straight-line basis so as to write off the net cost or other
revalued amount of each asset over its expected useful life
to its estimated residual value.

Leasehold improvements are depreciated over the period
of the lease or estimated useful life, whichever is shorter,
using the straight-line method. The estimated useful lives,
residual values and depreciation method are reviewed at
the end of each annual reporting period, with the effect of
any changes recognised on a prospective basis.

Right-of-use assets are depreciated over the shorter period
of lease term and useful life of the underlying asset.

(Q) PROVISIONS

Provisions are recognised when the Group has a present,
legal or constructive obligation as a result of past events, it
is probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the
amount of the obligation.

The amount recognised as a provision is the best estimate
of the consideration required to settle the present
obligation at reporting date, taking into account the risks
and uncertainties surrounding the obligation. Where a
provision is measured using the cashflows estimated to
settle the present obligation, its carrying amount is the
present value of those cashflows. When some or all of the
economic benefits required to settle a provision are
expected to be recovered from a third party, the receivable
is recognised as an asset if it is virtually certain that the
reimbursement will be received and the amount of the
receivable can be measured reliably.

Onerous contracts

Present obligations arising under onerous contracts are
recognised and measured as a provision. An onerous
contract is considered to exist where the Group has a
contract under which the unavoidable costs of meeting the
obligations under the contract exceed the economic
benefits expected to be received under it.

Restructuring

A restructuring provision is recognised when the Group has
developed a detailed formal plan for the restructuring and
has raised a valid expectation in those affected that it will
carry out the restructuring by starting to implement the plan
or announcing its main features to those affected by it.

The measurement of a restructuring provision includes only
the direct expenditures arising from the restructuring,
which are those amounts that are both necessarily entailed
by the restructuring and not associated with the ongoing
activities of the entity.

Provision for restoration and rehabilitation
(provision for make good on leased assets)

A provision for restoration and rehabilitation (provision for
make good on leased assets) is recognised when there is a
present obligation as a result of production activities
undertaken, it is probable that an outflow of economic
benefits will be required to settle the obligation, and the
amount of the provision can be measured reliably. The
estimated future obligations include the costs of removing
the facilities and restoring the affecting areas.

(R) REVENUE RECOGNITION

Revenue is recognised when (or as) a performance
obligation is satisfied, i.e. when ‘control’ of the goods or
services underlying the particular performance obligation is
transferred to the customers.

The Group recognises revenue from the sale of products
and when it transfers control of a product to a customer,
which is the point in time that the customer obtains control
of the goods being on acceptance of the goods by the
customer.

Revenue is measured at the fair value of the consideration
received or receivable. Sales revenue comprises sales of
goods and services at net invoice values less returns, trade
allowances and applicable rebates.

Royalties

Royalty income is recognised on an accrual basis in
accordance with the substance of the relevant agreement.

Royalties are recognised on the subsequent sale or usage,
and the performance obligation to which the royalty has
been allocated has been satisfied.

Rental income

The Group’s policy for recognition of income from
operating leases is described in note 1c (n).

Interest revenue

Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of
the financial asset to that asset’s net carrying amount.

Notes to the Financial Statements Annual Report 202052

(S) GOODS AND SERVICES TAX

Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST) except:

(i) where the amount of GST incurred is not recoverable
from the taxation authority, it is recognised as part of
the cost of acquisition of an asset or as part of an
item of expense; or

Critical judgements in applying the Group’s
accounting policies

The following are the critical judgements (apart from those
involving estimations which are dealt with above), that
management has made in the process of applying the Group’s
accounting policies and that have the most significant effect
on the amounts recognised in the financial statements.

(ii) for receivables and payables which are recognised

Inventories

inclusive of GST.

The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables. Cash flows are included in the cash flow
statement on a gross basis. The GST component of cash
flows arising from investing and financing activities which
is recoverable from, or payable to, the taxation authority, is
classified as operating cash flows.

(T) EARNINGS PER SHARE

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit/
(loss) attributable to equity holders of the Group, excluding
any costs of servicing equity other than ordinary shares, by
the weighted average number of ordinary shares outstanding
during the year, adjusted for bonus elements in ordinary
shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into
account the weighted average number of shares assumed
to have been issued for no consideration in relation to
dilutive potential ordinary shares.

1D. CRITICAL ACCOUNTING JUDGEMENTS
AND KEY SOURCES OF ESTIMATION
UNCERTAINTY

In the application of the Group’s accounting policies, which
are described in note 1, management is required to make
judgements, estimates and assumptions about carrying
values of assets and liabilities that are not readily apparent
from other sources. The estimates and associated
assumptions are based on historical experience and various
other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of
making the judgements. Actual results may differ from
these estimates.

The estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if
the revision affects only that period, or in the period of the
revision and future periods if the revision affects both
current and future periods.

Note 9 sets out the categories of inventory carried. The net
realisable value of inventories is the estimated selling price
in the ordinary course of business less estimated costs to
sell which approximates fair value less cost to sell. The key
assumptions require the use of management judgement
and are reviewed annually.

These key assumptions are the variables affecting the
estimated costs to sell and the expected selling price. Any
reassessment of cost to sell or selling price in a particular
year will affect the cost of goods sold.

Indicators of impairment and reversal of
impairment

Note 14 sets out the categories of property, plant and
equipment held. In assessing whether there is any
indication that property, plant and equipment may be
impaired, or whether a reversal of previous impairment
losses should be recognised, management has used,
among others, the following key assumptions:

(i)

the cyclical nature of both residential and commercial
building activity,

(ii) aluminium prices which impact margins to the extent

that price variations are passed on to customers or
not, and

(iii) anti-dumping outcomes in relation to import duties

imposed on overseas suppliers.

The key assumptions required the use of management
judgement and are reviewed biannually.

Employee benefits

Key assumptions used in the calculation of leave benefit
provisions at balance date:

(i)

future on-cost rates,

(ii) experience of employee departures and period of

service, and

(iii) future increase in wages and salaries.

Useful lives of property, plant and equipment

The Group reviews the estimated useful lives of property,
plant and equipment at the end of each annual reporting
period. During the financial year, the directors determined
that there were no revisions to the useful lives of property,
plant and equipment.

Annual Report 2020 Notes to the Financial Statements53

Lease renewal

Deferred taxation

The Group reassess whether it is reasonably certain to
exercise an extension option, or not to exercise a termination
option, upon the occurrence of either a significant event or a
significant change in circumstances that:

»
»

is within the control of the Group; and
affects whether the Group is reasonably certain to
exercise an option not previously included in its
determination of the lease term, or not to exercise an
option previously included in its determination of the
lease term.

Incremental borrowing rate (AASB 16)

The rate is defined as the rate of interest that the lessee
would have to pay to borrow over a similar term and with a
similar security the funds necessary to obtain an asset of a
similar value to the right-of-use asset in a similar economic
environment.

The recognition of deferred tax assets is based upon
whether it is more likely than not that sufficient and
suitable taxable profits will be available in the future
against which the reversal of temporary differences can be
deducted. To determine the future taxable profits,
reference is made to the latest available profit forecasts.
Where the temporary differences are related to losses,
relevant tax law is considered to determine the availability
of the losses to offset against the future taxable profits.
Recognition of deferred tax assets therefore involves
judgement regarding the future financial performance of
the particular legal entity or tax group in which the
deferred tax asset has been recognised.

1E. COMPARATIVE INFORMATION

Where necessary, comparative amounts have been
reclassified and repositioned for consistency with current
period disclosures.

Notes to the Financial Statements Annual Report 202054

2. PROFIT FOR THE YEAR

(a) Other expenses

Profit before tax includes the following specific net expenses:

Inventory:

Write-down of inventory to net realisable value

Reversal of write-down of inventory

Note

Amortisation of intangible assets

Total amortisation

Depreciation - owned assets:

Buildings

Leasehold improvements

Plant and equipment

Total depreciation - owned assets

Depreciation - right of use assets:

Buildings

Plant and equipment

Total depreciation – right of use assets

Total depreciation and amortisation

Occupancy costs:

Sublease income received

Site costs

Expense relating to leases of low value assets

Other charges against assets:

(Decrease)/increase in impairment of trade receivables

Employee benefit expense

Post-employment benefits:

- defined contribution plans

Equity-settled share-based payments

Termination benefits

Other employee benefits

Restructuring costs

Machinery and equipment dismantling and relocation

Redundancy costs

Other site closure costs

Finance costs
Interest and finance charges paid/payable

- third party financier

Net finance costs are comprised of:

Interest and fees on bank overdrafts and loans

Interest component of lease liabilities

Impact of discounting on long-term provisions

Total interest expense

(b) Gains and Losses

Net gain on foreign exchange

Net gain on disposal of property, plant and equipment

CONSOLIDATED

2020
$’000

2019
$’000

1,089

(71)

131

175

323

5,093

5,591

10,360

2,270

12,630

18,352

(2,680)

3,249

569

(51)

6,148

445

68,789

75,402

(173)

1,778

(1,450)

106

170

253

5,019

5,442

10,904

1,987

12,891

18,439

(2,159)

2,969

810

103

6,364

190

79,498

86,088

2,342

3,248

505

6,095

5,512

5,581

908

4,604

518

6,030

1,035

1,122

4,459

181

5,762

403

Annual Report 2020 Notes to the Financial Statements55

CONSOLIDATED

2020
$’000

2019
$’000

406,721

391,634

25,286

25,288

303

305

27,314

27,322

212

22,872

6,862

(4,240)

(1,272)

1,064

(3,966)

154

(8,080)

3,048

106

5,132

3. REVENUE AND OTHER INCOME

Revenue from continuing operations

Sales revenue - sale of goods (i)

Other revenue

Scrap revenue (i)

Interest - other

Total other revenue

Other income
Royalties

Other miscellaneous income

(i) Recognised at a point in time.

INCOME TAX EXPENSE

(a) Reconciliation of income tax benefit/(expense) to prima

facie tax benefit/(expense)
Profit/(loss) from continuing operations before income tax benefit/(expense)

Income tax calculated @ 30% (2019:30%)

Tax effect of non-assessable / non-deductible items:

Effect of items that are temporary differences for which deferred tax
assets have not been previously recognised

Effect of items that are not deductible or taxable in determining
taxable profit

Effect of tax losses utilised

Effect of tax losses not recognised as deferred tax assets

Previously unrecognised and unused tax losses now recognised as
deferred tax assets

Income tax benefit

(b) Tax losses

Accumulated unused gross tax losses for which no deferred tax asset has
been recognised

Potential tax benefit @ 30% (2019:30%)

258,1351

77,441

295,2261

88,568

All unused tax losses were incurred by Australian entities.

1 Subject to income tax recoupment rules in subsequent years.

5. CHANGES IN ACCOUNTING ESTIMATES

There were no significant changes in accounting estimates other than the recovery of deferred tax assets during the
Financial Year (2019: none). Deferred tax assets are recognised for deductible temporary differences and tax losses as
management considers that it is probable that future taxable profits will be available in the foreseeable future. Significant
management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon
the likely timing and the level of future taxable profits.

Notes to the Financial Statements Annual Report 202056

6. SEGMENT INFORMATION

The information reported to the Managing Director, as the Group’s chief operating decision maker, for the purposes of
resource allocation and assessment of performance is focused on the type of goods supplied, being aluminium products.
As such, in 2019 and 2020, the Group operated in one reportable segment under AASB 8 Operating Segment.

Major Products and Services

The Group produces a wide range of extruded aluminium products and systems. It distributes those manufactured
products in addition to a small number of bought-in products through two distribution channels.

The Group supplies to three market segments through each of its distribution channels:

Residential - supply of aluminium and other components for windows and doors, showers and wardrobes and security
products,
Commercial - supply of aluminium and other components for windows and doors, internal fit outs and other
commercial building related products, and
Industrial - supply of aluminium extrusions and rolled products for industrial uses.

Management does not report on the revenues from external customers for each of the market segments.

Geographic Information

The Group operates in one geographical area, Australia.

Information About Major Customers

There are no individual major customers who contributed more than 10% of the Group’s revenue in either the Financial
Year or in 2019.

7. CURRENT ASSETS - CASH AND CASH EQUIVALENTS

Cash at bank and cash in hand

CONSOLIDATED

2020
$’000

49,396

2019
$’000

17,938

Annual Report 2020 Notes to the Financial Statements8. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES

Trade receivables - at amortised cost

Loss allowance (i)

Other receivables

Disclosed in the financial statements as:

Current trade and other receivables

Non-current other receivables

CONSOLIDATED

2020
$’000

63,815

(145)

63,670

2,580

66,250

2019
$’000

62,508

(311)

62,197

367

62,564

The average credit period on sales of goods is approximately 49 days (2019: 49 days). No interest is charged on trade
receivables.

(i) Movement in the loss allowance

Balance at beginning of the financial year

Amounts written off during the financial year

Decrease/(increase) in allowance recognised in profit or loss

Balance at end of the financial year

CONSOLIDATED

2020
$’000

(311)

115

(145)

2019
$’000

(620)

412

(103)

(311)

The Group always measures the loss allowance for trade receivables at an amount equal to lifetime ECL. The expected
credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the
debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors,
general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as
the forecast direction of conditions at the reporting date. Allowances are made for known doubtful debts at the time of
appointment of administrators, liquidators, or other formal insolvency events.

Included in the Group’s trade receivables are debtors with balances in 61 days and over of $560,000 (2019: $580,000),
refer to note 30(h). The Group has not provided all of these balances as the Group believes that these past due balances
are still recoverable. In relation to some of the balances the Group holds personal property securities registrations and/or
personal guarantees and/or trade indemnity insurance for 90% of the amount outstanding (after applying the deductible).
The average age of these receivables is 82 days (2019: 75 days). Aging past due but not impaired was calculated based on
agreed customers individual terms.

Notes to the Financial Statements Annual Report 202058

8. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES CONTINUED

Aging past due but not impaired:

1-30 days past due

31-60 days past due

61+ days past due

Total

CONSOLIDATED

2020
$’000

10,327

1,483

548

12,358

2019
$’000

14,838

1,621

461

16,920

Included in the loss allowance is the expected credit loss for individually impaired trade receivables with a balance of
$80,000 (2019: $235,000). The impairment recognised represents the difference between the carrying amount of these
trade receivables and the present value of the expected proceeds.

1-30 days past due

31-60 days past due

61+ days past due

Total

CONSOLIDATED

2020
$’000

2019
$’000

105

119

235

Major concentrations of credit risk are in the construction, transport, consumer durable and electrical industries in
Australia. Furthermore, the Company has credit insurance cover which requires ongoing management of credit accounts
with monthly reports provided to the Insurer. Accordingly, there is no further credit provision required in excess of the loss
allowance. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial
difficulty and there is no realistic prospect of recovery.

CONSOLIDATED

2020
$’000

2019
$’000

9. CURRENT ASSETS - INVENTORIES

Raw materials and stores

Work in progress

Finished goods

16,010

2,136

60,984

79,130

All inventories are net of allowance for obsolescence and are expected to be recovered within 12 months.
Included in the inventories balance is inventories in transit of $11.231 million (2019: $7.076 million).

10. CURRENT ASSETS - PREPAYMENTS

Prepayments

11. DEFERRED TAX ASSETS

Balance at beginning of the financial year

Amounts recognised during the financial year

Balance at end of the financial year

2,517

2,857

3,048

5,905

18,071

1,930

58,906

78,907

1,625

2,857

The Group has recognised deferred tax assets with respect to tax losses carry forward of $5,905,000 (2019: $2,857,000)
(the Company $5,698,000 - 2019: $2,650,000) based upon the forecasted operational performance the recovery of these
prior year losses in the short term is probable.

Annual Report 2020 Notes to the Financial Statements59

12. NON-CURRENT ASSETS - INVESTMENTS

Details of subsidiaries

The financial statements incorporate the assets, liabilities and results of the following subsidiaries:

EQUITY HOLDING

2020
%

100

2019
%

100

COUNTRY OF
INCORPORATION

Australia

ENTITY NAME

Austex Dies Pty Limited

13. RELATED PARTIES

Parent entities

The ultimate parent entity within the Group is Capral Limited.

Equity interests in controlled entities

Interests in controlled entities are set out in Note 12.

Transactions with key management personnel

Refer to Note 37 in relation to securities granted and forfeited during the Financial Year under the Long Term Incentive Plan
that include rights granted and shares issued, to Capral’s Managing Director and Chief Financial Officer (who are key
management personnel).

Details of the compensation of, and transactions with, each Director of the Company and key management personnel of
the Group are set out in the Directors’ Report and in particular, the Remuneration Report.

Transactions with other related parties

In 2020, the parent entity has settled a non-interest-bearing loan of $5,150,000 (2019: $4,750,000) advanced from a
controlled entity, Austex Dies Pty Limited. The loan was payable on demand.

The Company has entered into the following transactions with controlled entities:

Purchase of dies of $4,097,473 (2019: $3,585,280) – Austex Dies Pty Limited

These transactions were conducted on arm’s length commercial terms and conditions at market rates.

During the Financial Year, the Company received a dividend of $5,150,000 (2019: $nil) from Austex Dies Pty Limited.

Notes to the Financial Statements Annual Report 202060

14. PROPERTY, PLANT AND EQUIPMENT

Freehold land

At valuation (i)

Accumulated depreciation

Net book amount

Buildings

At valuation (i)

Accumulated depreciation

Net book amount

Leasehold improvements

At cost

Accumulated depreciation

Accumulated impairment

Net book amount

Total land and buildings

Plant, machinery and equipment

At cost

Accumulated depreciation

Accumulated impairment

Net book amount

Capital work in progress at cost

Net plant, machinery and equipment

Total property, plant and equipment - net book value

The following useful lives are used in the calculation of depreciation:

Buildings

Leasehold improvements

Plant and equipment

(i) Valuations of land and building:

20-33 Years

5-25 Years

3-25 Years

CONSOLIDATED

2020
$’000

1,200

3,520

(727)

2,793

12,321

(7,760)

(1,970)

2,591

6,584

210,141

(147,641)

(32,099)

30,401

1,829

32,230

38,814

2019
$’000

1,200

3,520

(572)

2,948

12,091

(7,440)

(1,970)

2,681

6,829

214,469

(149,934)

(32,099)

32,436

1,166

33,602

40,431

An independent valuation of the Group’s land and buildings was performed in November 2017 using Capitalisation and
Direct Comparison approaches to determine the fair value of the land and buildings. The valuations, which conform to
International Valuation Standards, were determined by reference to recent market transactions on arm’s length terms at the
time. The fair value of the Land and Buildings is $1,200,000 and $2,950,000 respectively.

Annual Report 2020 Notes to the Financial Statements14. PROPERTY, PLANT AND EQUIPMENT CONTINUED

Reconciliations

Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the
current and prior financial year are set out below:

FREEHOLD
LAND AT
FAIR VALUE

BUILDINGS
AT FAIR
VALUE

LEASEHOLD
IMPROVE-
MENTS AT
COST

PLANT AND
EQUIPMENT
AT COST

CAPITAL
WORK IN
PROGRESS
AT COST

CONSOLIDATED

$’000

2020
Opening net book amount

Additions

Disposals

Transfers

Depreciation charge (Note 2(a))

Net book amount at
31 December 2020

2019
Opening net book amount

Additions

Disposals

Transfers

Depreciation charge (Note 2(a))

Net book amount at
31 December 2019

TOTAL

$’000

40,431

3,986

(12)

1,200

2,948

2,681

(175)

202

(323)

32,436

2,338

(2)

722

(5,093)

1,166

1,617

(10)

(944)

(5,591)

1,200

2,793

2,591

30,401

1,829

38,814

1,200

3,013

110

(5)

(170)

2,108

805

(9)

29,805

3,721

(666)

4,595

(253)

(5,019)

8,805

1,144

(4,000)

(4,783)

44,931

5,780

(4,680)

(158)

(5,442)

1,200

2,948

2,681

32,436

1,166

40,431

Impairment of non-current assets

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-
generating unit (CGU) to which that asset belongs. Management views the Group as representing one CGU.

If there is an indication of impairment, the recoverable amount of property, plant & equipment and intangible assets will be
determined by reference to a value in use discounted cash flow valuation of the Group, utilising financial forecasts and
projections.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a post-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have
not been adjusted. Cash flows that may result from prior period tax losses are not taken into account. If the recoverable
amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (CGU) is
reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately.

The result of Impairment assessment as at 31 December 2020

As a result of the non-current assets recoverable amount assessment performed, Capral has determined that no
impairment write-down of non-current assets as at 31 December 2020 was necessary. The recoverable amount of the CGU
estimated by management exceeded the carrying amount of assets by $4,026,000.

Notes to the Financial Statements Annual Report 202062

14. PROPERTY, PLANT AND EQUIPMENT CONTINUED

The key assumptions used in preparing the value in use cash flow valuation as at 31 December 2020
are as follows:

The table below shows key assumptions in the value in use calculation as at 31 December 2020 and value of the input to
which the key assumption must change in isolation for the estimated recoverable amount to be equal to its carrying value.

WACC (Post-tax)

Average volumes increase 2022-25 p.a

Long-term growth rate

INPUT TO THE MODEL

BREAKEVEN INPUT

9.00%

1.00%

9.21%

0.92%

0.55%

The valuation is based on forecast and projected cash flows for a 5-year period commencing January 2021 with a terminal
value being applied at the end of this period. The cash flow assumptions are based on management approved budgets for
the period from January 2021 to December 2021. Beyond this date cash flow projections until 31 December 2025 are
based on projected volume growth and expected improvements in EBITDA per tonne (refer below). Sales volumes are
projected to grow at 1.0% per annum. This growth rate corresponds with the average long-term growth rate based on
external economic sources.

Volumes

In determining assumptions in relation to sales volumes into the commercial and residential/domestic market, Capral have
based these on reputable third-party long term economic forecast reports with reference to historical performance and
seasonal trends. The volume projections estimate the sales volumes at around 67,000 tonnes at the end of the 5-year period.

Margins

In setting price and margin assumptions, historical performance trends and the impact of previous price increases were
reviewed in assessing the timing and quantum of future price increases.

Recent history in relation to direct costs and the impact of changing volumes on manufacturing variances were assessed in
setting assumptions on absorbed conversion costs.

In forecasting the margin, Management has considered the production capacity of Capral compared to current volumes
and concluded that increase in production volumes to satisfy demand expected by independent market predictions can be
attained by predominately increasing variable cost with very limited additional fixed cost expenditure. This is reflected in the
resultant average EBITDA per tonne increase of 1.0% per annum from 2022 to 2025.

Working Capital and Capital Expenditure

These assumptions were set in light of strategic initiatives and approved maintenance and safety capital expenditure of an
average around $3,500,000 per annum, with working capital flexed in relation to the assumed production capacity for
volumes throughout the forecast period and historical performance and considering revisions to trading terms with key
suppliers and customers.

Discount rate

A discount rate of 9.0%, representing the Company’s post-tax weighted average cost of capital has been applied to the
cash flow projections.

Economic Factors

Assumptions including Gross Domestic Production (GDP), the Consumer Price Index (CPI), expected wage and salary
increases, foreign exchange and the future impact of aluminium prices have been made with reference to third party
economic forecasts and the Company’s strategic plans and budgets.

Prior Period Tax Losses

Cash flows that may result from prior period tax losses are not taken into account in determining the recoverable amount
of assets.

Annual Report 2020 Notes to the Financial Statements63

OTHER
INTELLECTUAL
PROPERTY

SOFTWARE

$’000

15,927

(8,367)

(7,560)

15,927

(8,356)

(7,560)

24,364

(21,577)

(2,466)

321

24,364

(21,457)

(2,466)

441

TOTAL

$’000

40,291

(29,944)

(10,026)

321

40,291

(29,813)

(10,026)

452

15. OTHER INTANGIBLES ASSETS

CONSOLIDATED

2020
Cost

Accumulated amortisation

Accumulated impairment

Net book value

2019
Cost

Accumulated amortisation

Accumulated impairment

Net book value

Reconciliations

Reconciliations of the carrying amounts of each class of intangibles at the beginning and end of the current Financial Year
are set out below:

CONSOLIDATED

2020
Opening net book amount

Additions

Disposals

Transfers

Amortisation

Net book amount at 31 December 2020

2019
Opening net book amount

Additions

Transfers

Amortisation

Net book amount at 31 December 2019

OTHER
INTELLECTUAL
PROPERTY

SOFTWARE

$’000

TOTAL

$’000

(11)

(1)

441

452

(120)

321

308

228

(105)

441

(131)

321

308

240

(106)

452

Notes to the Financial Statements Annual Report 202064

16. RIGHT-OF-USE ASSETS

CONSOLIDATED

Cost
At 31 December 2019

Additions

Transfers

At 31 December 2020

Accumulated depreciation
At 31 December 2019

Disposals

Depreciation charge

At 31 December 2020

Net Book Value
At 31 December 2020

At 31 December 2019

BUILDINGS

PLANT &
EQUIPMENT

$’000

77,838

5,754

83,592

11,913

792

12,705

TOTAL

$’000

89,751

6,546

96,297

(10,904)

(1,987)

(12,891)

(10,360)

(21,264)

62,328

66,934

(2,270)

(4,257)

8,448

9,926

(12,630)

(25,521)

70,776

76,860

17. ASSETS PLEDGED AS SECURITY

In accordance with the security arrangements of liabilities disclosed in Note 26, all assets of the Group have been pledged
as security. The holder of the security does not have the right to sell or repledge the assets other than in the event of
default under the principal finance agreement where the security is enforced.

18. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES

Trade payables (i)

Goods and services tax payable

Other payables

CONSOLIDATED

2020
$’000

63,017

1,500

12,725

77,242

2019
$’000

56,246

1,478

7,685

65,409

(i) The average credit period on purchases is 74 days from the end of the month (2019: 73 days). No interest is charged on the trade

payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

19. LEASE LIABILITIES

Current

Non-current

Maturity analysis

Within one year

Later than one year but not later than five years

Later than five years

CONSOLIDATED

2020
$’000

13,528

82,948

96,476

13,528

43,743

39,205

96,476

2019
$’000

13,877

90,654

104,531

13,877

41,580

49,074

104,531

Annual Report 2020 Notes to the Financial Statements20. PROVISIONS

Current

Employee benefits

Make good on leased assets1

Restructuring2

Other3

Non-current

Employee benefits

Make good on leased assets1

Other

CONSOLIDATED

2020
$’000

2019
$’000

13,609

555

656

14,820

1,580

3,059

4,639

11,431

445

1,126

383

13,385

1,483

2,621

4,104

1 Provision for make good on leased assets comprises obligations relating to site closure and other costs associated with operating lease

rental properties.

2 The restructuring process was finalised successfully in the first half of 2020. The remaining $173,440 was released to the profit or loss

in June 2020.

3 Other current provisions include provisions for insurance claims and provisions for customer claims including metal returns net of scrap

and pricing adjustments.

CONSOLIDATED

$’000

MAKE GOOD ON

LEASED ASSETS RESTRUCTURING

OTHER

TOTAL

Movements in carrying amounts

Carrying value at the beginning of the financial year

Provision utilised/released in the year

Additional amounts provided

Carrying value at the end of the financial year

3,066

(71)

619

3,614

1,126

(1,126)

383

(383)

656

21. DEFERRED INCOME - CURRENT

Deferred income – other

CONSOLIDATED

2020
$’000

127

4,575

(1,580)

1,275

4,270

2019
$’000

103

Notes to the Financial Statements Annual Report 202066

2020

2019

22. ISSUED CAPITAL

No. 000

(a) Share capital

2020

$’000

2019

$’000

Ordinary shares: fully paid

16,563

484,391

426,965

425,744

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

(b) Movement in ordinary share capital

DATE

January 2019

DETAILS

Balance at the beginning of the financial year
Shares issued against performance rights

December 2019

Balance at the end of the financial year

January 2020

Balance at the beginning of the financial year

NUMBER OF
SHARES

480,289,334
4,101,561

484,390,895

ISSUE
PRICE

-
-

March 2020

Shares issued pursuant to a dividend reinvestment plan

12,468,294

$0.0979

November 2020

Shares consolidation 30:1

December 2020

Balance at the end of the financial year

(480,296,520)

16,562,669

$'000

425,744
-

425,744

1,221

426,965

On 3 November 2020, Capral consolidated its shares at a ratio of 30:1. The share consolidation does not impact the value
of the total issued capital and was undertaken to establish a more appropriate and effective capital structure.

Annual Report 2020 Notes to the Financial Statements23. RESERVES AND ACCUMULATED LOSSES

Asset revaluation reserve

Equity-settled compensation reserve

Dividend reserve

Accumulated losses

23 (a) Movements in reserves were:

Equity-settled compensation reserve

Balance at the beginning of the financial year

Expense recognised

Shares acquired on conversion of vested rights

Balance at the end of the financial year

Asset revaluation reserve

Balance at the beginning of the financial year

Revaluation increase

Balance at the end of the financial year

Dividend reserve

Balance at the beginning of the financial year

Net profit attributable to members of Capral

Dividends paid

Balance at the end of the financial year

23 (b) Accumulated losses

Balance at the beginning of the financial year

Net profit/(loss) for the year

Initial adoption of AASB 16 Leases

Balance at the end of the financial year

24. DIVIDENDS
Ordinary shares:

Franking credits

CONSOLIDATED

2020
$’000

1,014

11,319

31,673

44,006

2019
$’000

1,014

10,874

23,130

35,018

(352,781)

(308,775)

(367,736)

(332,718)

10,874

445

11,319

1,014

23,130

10,965

(2,422)

31,673

(367,736)

14,955

(352,781)

10,999

190

(315)

10,874

1,014

27,933

(4,803)

23,130

(334,162)

(4,240)

(29,334)

(367,736)

2,422

4,803

Franking credits available for subsequent financial years based on a tax rate of
30% (2019:30%)

17,952

18,990

Notes to the Financial Statements Annual Report 202068

25. EARNINGS PER SHARE

Basic earnings per share

Diluted earnings per share

CONSOLIDATED

2020
$

1.57

1.51

2019
$

(0.26)

Net profit after tax used in the calculation of basic and diluted profit per share for 2020 was $25,920,000 (2019: Loss
$4,240,000). The weighted average numbers of ordinary shares on issue used in the calculation of basic and diluted
earnings per share were 16,458,199 and 17,138,897 (2019: 16,116,772) respectively.

EPS calculations in both current year and prior year were based on post 3 November 2020 share consolidation, 30 shares
to 1 share.

26. STAND BY ARRANGEMENT AND CREDIT FACILITIES

Secured facilities

Facilities used:

Trade loan

Cash loan

Bank guarantees

Trade finance – letters of credits

Asset finance – in the form of finance lease

Total facilities used

Total available facilities

CONSOLIDATED

2020
$’000

41,128

3,833

23,290

1,128

28,251

12,877

2019
$’000

50,000

3,888

23,881

3,563

31,332

18,668

The original expiry of the facilities is 31 January 2021. Subsequent to 30 June 2020, the facilities have been restructured to
align more closely to Capral’s requirements and renewed for another term to 30 April 2022.

The ANZ facilities are fully secured against the Capral group consisting of:

»
»

$40 million Multi-option Facility which includes a Trade Loan Facility, Trade Instruments and Trade Finance; and
$1.128 million reducing Asset Finance Facility, reducing to $nil during 2021.

During the year, the following facilities with ANZ has been cancelled:

»
»

$5 million Cash Loan Facility;
$3.872 million reducing Asset Finance Facility.

27. COMMITMENTS FOR EXPENDITURE CAPITAL

Commitments for the acquisition of plant and equipment contracted for at the
reporting date but not recognised as liabilities payable

CONSOLIDATED

2020
$’000

2019
$’000

Within one year

866

620

Annual Report 2020 Notes to the Financial Statements69

28. COMMITMENTS FOR EXPENDITURE - OPERATING LEASES

The recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and
leases of low value assets. Refer to note 19 for maturity analysis of lease liabilities at 31 December 2020.

At 31 December 2020, the Group is committed to $27,154 (2019: $117,398) for low value leases and has no short term
lease commitments.

Non-cancellable operating lease receivable

Within one year

Later than one year but not later than five years

Later than five years

CONSOLIDATED

2020
$’000

2,778

11,972

12,301

27,051

2019
$’000

2,697

11,623

15,428

29,748

Operating lease receivables relate to the sublease of office and plant premises with a lease term of 10 years, with an option
to extend for a further term of 5 years.

Notes to the Financial Statements Annual Report 202070

29. FAIR VALUE MEASUREMENT

Some of the Group’s assets and liabilities are measured at fair value at the end of each reporting period. The following
table gives information about how the fair values of these assets and liabilities are determined (in particular, valuation
technique(s) and input(s) used).

FAIR VALUE AS AT

31/12/20

31/12/19

FAIR VALUE
HIERARCHY

VALUATION
TECHNIQUE(S)
AND KEY
INPUT(S)

Assets – nil

Level 2

Liabilities –
$1,575,137

Liabilities –
$1,086,584

ASSETS /
LIABILITIES

Foreign
currency
forward
contracts
(see note
30(f))

Discounted cash
flow. Future cash
flows are estimated
based on forward
exchange rate (from
observable forward
exchange rates at the
end of the reporting
period) and contract
forward rates,
discounted at a rate
that reflects the
credit risks of various
counterparties.

Capitalisation and
Direct Comparison
approaches.

SIGNIFICANT
UNOBSERVABLE
INPUT(S)

RELATIONSHIP OF
UNOBSERVABLE
INPUT(S)

n/a

Comparable
market net rental
and comparable
market sales
transactions.

The higher/(lower)
the comparable
market net rental
amount and the
higher/(lower) the
comparable market
sales transactions,
the higher the fair
value.

Land and
buildings

Land –
$1,200,000

Level 3

Buildings –
$2,793,000

Buildings –
$2,948,000

30. FINANCIAL INSTRUMENTS

(a) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while
maximising the return to stakeholders through the optimisation of the debt and equity balance.

The Group’s overall strategy remains unchanged from 2019.

The capital structure of the Group consists of debt, as disclosed in Note 26, cash and cash equivalents, and equity holders
of the parent, comprising issued capital, reserves and accumulated losses, as disclosed in Notes 7, 22 and 23 respectively.
The Directors review the capital structure on a regular basis, and at least annually. As a part of this review the Directors
consider the cost of capital and the risks associated with each class of capital. Based on the determinations of the Directors,
the Group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs
as well as the issue of new debt or the redemption of existing debt.

The Group prepares monthly management accounts, comprising Balance Sheet, Profit and Loss Statement and Cash Flow
Statement updates for the current financial year and the current year forecast. The forecast is used to monitor the Group’s
capital structure and future capital requirements, taking into account future capital requirements and market conditions.

Annual Report 2020 Notes to the Financial Statements71

30. FINANCIAL INSTRUMENTS CONTINUED

The Group complied with its borrowing financial covenants under its current facility detailed in Note 26 as at 31 December
2020 and 31 December 2019 as follows:

FINANCIAL COVENANT DESCRIPTION

REQUIRED VALUE

2020 ACTUAL VALUE

2019 ACTUAL VALUE

EBITDA Interest Cover Ratio
(A ratio of EBITDA to Interest Expense)

Minimum Tangible Net Worth
(Tangible Net Worth – Total Tangible Assets Less
Total Liabilities)

Borrowing Base Ratio
(A ratio of Aggregate Facility Amount Owing to
Eligible Debtors owing up to 90 days)

Distributions
(Any payment or distribution of money or other
assets to shareholders)

Security Cover Ratio
(A ratio of Facility Amount Owing to Security Cover
Property Value specified by the Financial Institution)

> 3.00:1

33.56:1

7.95:1

AUD 50.0m

AUD 139.4m

AUD 119.0m

< 0.80:1

0.47:1

0.46:1

Variable*

AUD 1.2M

AUD 4.8M

< 1.00:1

0.46:1

0.45:1

* lower than the lowest of profit or free cash flow of prior year.

(b) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in Note 1(c).

Financial Assets
Trade and other receivables

Cash and cash equivalents

Other financial assets1

Financial Liabilities
Trade and other payables

Lease liabilities

Other financial liabilities2

CONSOLIDATED

2020
$’000

66,250

49,396

77,242

96,476

1,615

2019
$’000

62,564

17,938

65,409

104,531

1,086

1 capitalised borrowing costs $nil (2019: capitalised borrowing costs $10,000).
2 foreign exchange contract mark-to-market $1,575,000 and capitalised borrowing costs $40,000 (2019: foreign exchange contract

mark-to-market $1,086,000).

(d) Financial risk management objectives

The Group’s treasury function monitors and manages the financial risks relating to the operations of the Group through
internal risk reports. These risks include market risk (including currency risk, interest rate risk and equity price risk), credit
risk and liquidity risk. These risks are analysed below.

(e) Market risk

The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (refer note 30(f))
and interest rates (refer note 30(g)). From time to time, the Group enters into a variety of derivative financial instruments to
manage its exposure to interest rate and foreign currency risk, including foreign exchange forward contracts to hedge the
exchange rate risk arising on the purchase of aluminium log and rolled product from overseas in US dollars.

At a Group and Company level, market risk exposures are measured using a sensitivity analysis. There has been no material change
to the Group’s exposure to market risks or the manner in which it manages and measures the risk during the Financial Year.

Notes to the Financial Statements Annual Report 202072

30. FINANCIAL INSTRUMENTS CONTINUED

(f) Foreign currency risk management

The Group undertakes certain transactions in foreign currencies, resulting in exposures to exchange rate fluctuations.
Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts. It is
the policy of the Group to enter into forward foreign exchange contracts from time to time to manage any material risk
associated with anticipated foreign currency sales and purchase transactions.

The carrying amount of the Group’s and Company’s foreign currency denominated monetary assets and monetary liabilities
at the reporting date is as follows:

USD (cash)

EURO (cash)

USD (trade payables)

EURO (trade payables)

JPY (trade payables)

USD (trade receivables)

CONSOLIDATED

2020
$’000

10,388

209

(10,684)

355

(24)

1,182

2019
$’000

671

(13,086)

(242)

(26)

1,799

Foreign currency sensitivity

The Group is exposed to EUR, JPY and USD (2019: EUR, JPY and USD).

To mitigate foreign currency risk at reporting date, the Group entered into foreign exchange forward contracts. The Group’s
exposure to foreign exchange rate fluctuations was primarily limited to trade payables and trade receivables outstanding at
reporting date denominated in currencies other than Australian dollar (AUD). The total value of trade payables denominated
in currencies other than the AUD at reporting date was $10,353,000 (2019: $13,354,000). The total value of trade receivables
denominated in currencies other than the AUD at reporting date was $1,182,000 (2019: $1,799,000).

The following table details the Group’s sensitivity to a 10% increase and decrease in the AUD against the relevant
unhedged foreign currency. 10% represents management’s assessment of the possible change in foreign exchange rates.
The sensitivity analysis includes only foreign currency denominated monetary items outstanding at 31 December 2020 and
31 December 2019 and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive
number indicates an increase in profit.

Profit or loss (after tax)

- AUD strengthens by 10% against USD

- AUD weakens by 10% against USD

- AUD strengthens by 10% against EUR

- AUD weakens by 10% against EUR

- AUD strengthens by 10% against JPY

- AUD weakens by 10% against JPY

CONSOLIDATED

2020
$’000

864

(1,056)

(32)

(3)

2019
$’000

1,026

(1,254)

(27)

(3)

Annual Report 2020 Notes to the Financial Statements73

30. FINANCIAL INSTRUMENTS CONTINUED

Forward foreign exchange contracts

It is the policy of the Group to enter into forward foreign exchange contracts to cover specific material foreign currency
payments and receipts.

The following table details the forward foreign currency (FC) contracts outstanding at the end of the reporting period:

FOREIGN CURRENCY

FAIR VALUE

OUTSTANDING CONTRACTS

Buy EUR

Buy JPY

Buy GBP

Buy CNH

Buy USD

31/12/20
FC$’000

716

3,900

240

16,164

31/12/19
FC$’000

1,540

1,950

240

31/12/20
$’000
GAIN/(LOSS)

31/12/19
$’000
GAIN/(LOSS)

(43)

(2)

(3)

(90)

(1)

(996)

23,172

(1,527)

(g) Interest rate risk management

The Group interest rate risk arises from borrowings, cash and derivatives.

The Group is exposed to interest rate risk as the Group borrows funds at floating interest rates. Hedging activities are
evaluated regularly to align with interest rate views and defined risk appetite, ensuring optimal hedging strategies are
applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles. The
Group’s exposure to interest rate risk at the reporting date was considered insignificant and as a result the Group did not
enter into interest rate options.

The Group’s exposures to interest rates on financial assets and financial liabilities are detailed below.

Interest rate sensitivity

The sensitivity analysis below shows the effect on profit or loss after tax for the Financial Year if there is a change in interest
rates with all other variables held constant. This is determined by applying the change in interest rates to both derivative
and non-derivative instruments at the reporting date that have an exposure to interest rate changes. A 6-basis point
(0.06%) increase and a 6 basis point (0.06%) decrease represents Management’s assessment of the possible change in
interest rates (2019: 5bp or 0.05% increase and 5bp or 0.05% decrease). A positive number indicates an increase in profit.

Profit or loss (after tax)

Impact of a 6bp (2019: 5bp) increase in AUD interest rates

- Cash and cash equivalents

Impact of a 6bp (2019: 5bp) decrease in AUD interest rates

- Cash and cash equivalents

(h) Credit risk management

CONSOLIDATED

2020
$’000

2019
$’000

(21)

(6)

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has exposures to credit risk on cash and cash equivalents, receivables and derivative financial assets. The
credit risk on financial assets of the Group which have been recognised on the statement of financial position, other than
investments in shares, is generally the carrying amount, net of any allowances for doubtful debts.

Notes to the Financial Statements Annual Report 202074

30. FINANCIAL INSTRUMENTS CONTINUED

The Group does not have any significant exposure to any individual customer or counterparty. Major concentrations of
credit risk are in the construction, transport, consumer durable and electrical industries in Australia. The Company has
credit insurance cover which requires ongoing management of credit accounts with monthly reports provided to the
Insurer. Experienced credit management and associated internal policies ensure constant monitoring of the credit risk for
the Company.

There is no concentration of credit risk with respect to receivables as the Group has a large number of customers.

The ageing of trade receivables is detailed below:

Current

1-30 days

31-60 days

60+ days

CONSOLIDATED

2020
$’000

51,377

10,327

1,551

560

63,815

2019
$’000

45,353

14,849

1,726

580

62,508

(i) Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, who ensure there is an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term funding and
liquidity management requirements. The Group manages liquidity risk by maintaining adequate banking facilities and
reserve borrowing facilities, complying with covenants, monitoring forecast and actual cash flows, and matching the
maturity profiles of financial assets and liabilities. Included in Note 26 is a list of additional undrawn facilities that the Group
has at its disposal to further reduce liquidity risk.

Liquidity and interest risk tables

Financial assets are made up of cash of $49,396,000 (2019: $17,938,000) and trade and other receivables of $66,250,000
(2019: $62,564,000). Cash is liquid and trade and other receivables are expected to be realised on average within 49 days
(2019: 49 days). Cash balances earn 0.00% interest per annum (2019: 0.03%). Trade and other receivables are interest-free.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table
has been prepared based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
Group can be required to pay. The table includes both interest and principal cash flows. The contractual maturity is a fair
representation of management’s expectations of actual repayments.

CONSOLIDATED

2020
Trade and other payables

Floating rate debt

2019
Trade and other payables

Floating rate debt

WEIGHTED
AVERAGE
EFFECTIVE
INTEREST
RATE

LESS THAN
1 YEAR

1-3
YEARS

$’000

3-5
YEARS

$’000

GREATER
THAN
5 YEARS

$’000

77,242

1.58%

77,242

65,409

2.83%

65,409

Annual Report 2020 Notes to the Financial Statements75

30. FINANCIAL INSTRUMENTS CONTINUED

(j) Fair value of financial instruments

The fair values of financial assets, financial liabilities and derivative instruments are determined as follows:

(i)

the fair value of financial assets and financial liabilities (excluding derivative instruments) are determined in accordance
with generally accepted pricing models based on the discounted cash flow analysis using prices from observable
market data; and

(ii) the fair value of derivative instruments are calculated using quoted prices. Where such prices are not available, the
discounted cash flow analysis is employed using observable market data for non-option derivatives. For option
derivatives, option pricing models are used with key inputs sourced from observable market data.

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.

31. CONTINGENT LIABILITIES

Claims and possible claims, indeterminable in amount, have arisen in the ordinary course of business against entities in the
consolidated entity. The Company has fully provided for all known and determinable claims. Based on legal advice obtained,
the Directors believe that any resulting liability will not materially affect the financial position of the consolidated entity.

The Company’s bankers have granted guarantees in respect of rental obligations on lease commitments, use of utilities
infrastructure and international trade facilities. At 31 December 2020 these guarantees totalled $3,833,087 (2019: $3,888,087).

32. REMUNERATION OF AUDITORS

During the year the auditor of the parent entity and its related practices earned
the following remuneration:

Auditor of the parent entity
Audit or review of financial reports of the entity or any entity in the
consolidated entity

Other services:

- government grant audit

- tax compliance

- tax consulting

- ATO combined assurance review

Total remuneration

CONSOLIDATED

2020
$

2019
$

285,400

287,700

31,500

39,945

166,588

523,433

5,000

47,250

339,950

It is the Group’s policy to employ the Company’s auditors, Deloitte Touche Tohmatsu, on assignments additional to their
statutory duties where their expertise and experience is considered invaluable to the assignment.

Notes to the Financial Statements Annual Report 202076

33. JOBKEEPER PAYMENT SCHEME

In response to the economic impact from the COVID-19 pandemic crisis, the Australian Government introduced the
JobKeeper payment scheme to assist eligible employers with payroll subsidy. As trade and travel restrictions were imposed
in Australia, Capral self-assessed the eligibility criteria and enrolled in the JobKeeper payment scheme on 14 May 2020.
Capral nominated around 730 eligible employees under the scheme. JobKeeper benefit of $11.9 million was included in
profit and was received by 31 December 2020. The receipts have been accounted as a reduction to the employee benefits
expense in the statement of profit or loss and other comprehensive income.

The impact on the financial position, financial performance and cash flows of the entity have been described below:

Employee Benefits expense

Profit before income tax

Total current assets

Net assets

Cash flows from operating activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at end of the financial year

EXCLUDING
JOBKEEPER

JOBKEEPER
BENEFIT

INCLUDING
JOBKEEPER

$’000

(87,343)

10,965

185,386

106,283

40,242

19,994

37,489

$’000

11,941

11,907

$’000

(75,402)

22,872

197,293

118,190

52,149

31,901

49,396

Whilst Capral has recognised $11.9 million in JobKeeper benefit in the financial year ended 31 December 2020, this amount
does not represent the net benefit to the Company. Had Capral not been eligible for JobKeeper payments, a proportion of
its workforce was planned to be stood down during the first half-year.

The JobKeeper benefit comprises of receipts of $12,069,000, less TopUp payments of $128,000 and advice cost of $34,000.

Capral has expressly set aside JobKeeper funds to invest in capital projects that will create jobs. In 2020 Capral negotiated
the acquisition of the GJames extrusion operation in Smithfield, taking control in February 2021. Capral is also planning to
install a new paint line in NSW during 2022. These two capital projects are expected to create around 70 new Capral jobs.

34. EVENTS AFTER REPORTING DATE

The directors consider that prolonged general economic impacts arising from COVID-19 may have a negative impact on
Capral’s operations. In the unlikely event of an extended general shutdown of the economy throughout the Australian
States and Territories, it may impact the recoverability of Capral’s carrying value of assets going forward.

On 17 December 2020, Capral announced that it had entered into an agreement to acquire the NSW Aluminium Extrusion
assets of GJames Extrusion Co. Pty Ltd (GJames), located in Smithfield. Capral has acquired the assets of NSW Aluminium
Extrusion from GJames on 1 February 2021 for a price of $7,100,000. Capral is in the process of finalising the price for
spare parts, raw material inventory and employee benefits liabilities. Capral is in the process of determining the provisional
fair value of the assets and liabilities acquired.

Capral has received two formal customer claims relating to third-party supply of non-conforming marine grade plate. The
plate has been replaced where required and Capral is working with the supplier and its insurers to resolve the issue. The
cost of replacement plate and the anticipated insurance excess have been fully provided in the financial year ended
31 December 2020 accounts.

No other matter or circumstance has arisen since the end of the Financial Year that has significantly affected, or may significantly
affect the Group’s operations, the results of those operations or the Group’s state of affairs in future financial years.

Annual Report 2020 Notes to the Financial Statements35. NOTES TO THE CASH FLOW STATEMENT

(i) Reconciliation of cash and cash equivalents

Reconciliation of cash and cash equivalents

For the purposes of the Statement of Cash Flows, cash and cash equivalents
includes cash on hand and at bank and short term deposits at call net of bank
overdrafts. Cash as at the end of the financial year as shown in the Statement of
Cash Flows is reconciled to the related items in the Statement of Financial Position
as follows:

Cash at bank and on hand

CONSOLIDATED

2020
$’000

2019
$’000

49,396

17,938

(ii) Reconciliation of profit/(loss) for the year to net cash flows from operating activities

Profit/(loss) for the year

Non-cash items:

Depreciation and amortisation - owned assets

Depreciation and amortisation – right of use assets

Gain on sale of property, plant and equipment

Income tax benefit

Share-based payments expense

Interest income reclassified to investing activities

Change in assets and liabilities:

(Increase)/decrease in current receivables

Decrease in financial assets

(Increase)/decrease in inventories

Increase in prepayments

Increase/(decrease) in trade and other payables

Increase/(decrease) in employee benefit provisions

Increase in other provisions

Increase/(decrease) in deferred income

Increase in other financial liabilities

Net cash provided by operating activities

25,920

(4,240)

5,722

12,630

(17)

(3,048)

445

(2)

(3,686)

(179)

(893)

12,707

965

1,022

529

52,149

5,548

12,891

(12)

190

(8)

2,839

551

6,080

(428)

(13,712)

(3,388)

3,538

(44)

917

10,722

(iii) Details of finance facilities are included in note 26 to the financial statements.

(iv) Non-cash financing activities

There were no non-cash financing activities during the Financial Year or the 2019 year.

Notes to the Financial Statements Annual Report 2020
78

36. PARENT ENTITY DISCLOSURES

FINANCIAL POSITION

Assets

Current assets - third parties

Total assets

Liabilities

Current liabilities - third parties

Total liabilities

Equity

Issued capital

Accumulated losses

Equity-settled compensation reserve

Dividend reserve

Total Equity

Financial Performance

Profit/(loss) for the year

Other comprehensive income

Total comprehensive profit/(loss) for the year

Contingent liabilities of the parent entity

Refer note 31

Commitments for the acquisition of property, plant and equipment by
the parent entity

COMPANY

2020
$’000

2019
$’000

197,962

312,687

107,844

195,304

426,965

(352,574)

11,319

31,673

117,383

30,280

161,815

281,528

94,281

193,670

425,744

(371,890)

10,874

23,130

87,858

(4,813)

Within one year

866

620

Annual Report 2020 Notes to the Financial Statements79

37. SHARE-BASED PAYMENTS

Performance Share Rights

Executive and Senior Management

Refer to section 2 of the Remuneration Report for details of rights issued under the Long Term Incentive Plan.

The following share-based payment arrangements were in existence during the current reporting period:

PERFORMANCE
RIGHT SERIES (LTIP)

Issued 6 March 20181

Issued 22 March 20192

Issued 3 March 20203

NUMBER AS
AT 31 DEC 20

GRANT DATE

LAST TESTING
DATE

EXERCISE
PRICE
$

FAIR VALUE AT
GRANT DATE
$4

61,680

70,830

90,325

6/03/2018

31/12/2020

6/03/2018

31/12/2020

22/03/2019

31/12/2021

22/03/2019

31/12/2021

3/03/2020

31/12/2022

3/03/2020

31/12/2022

3.600

3.900

2.250

3.150

2.100

2.820

1 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2018

have an average vesting date of 1 March 2021.

2 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2019

have an average vesting date of 1 March 2022.

3 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2020

have an average vesting date of 1 March 2023.

4 Shown as post 3 November 2020 share consolidation equivalent fair value.

The following share-based payment arrangements were in existence during the comparative reporting period:

Issued 10 March 20171

Issued 6 March 20182

Issued 22 March 20193

NUMBER AS
AT 31 DEC 19

GRANT DATE

LAST TESTING
DATE

EXERCISE
PRICE
$

FAIR VALUE AT
GRANT DATE
$

1,825,000

10/03/2017

31/12/2019

1,825,000

10/03/2017

31/12/2019

2,025,000

6/03/2018

31/12/2020

6/03/2018

31/12/2020

2,125,000

22/03/2019

31/12/2021

2,125,000

22/03/2019

31/12/2021

0.130

0.150

0.120

0.130

0.075

0.105

1 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2017

have an average vesting date of 1 March 2020.

2 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2018

have an average vesting date of 1 March 2021.

3 In accordance with the terms of the LTIP arrangement, performance rights issued during the financial year ended 31 December 2019

have an average vesting date of 1 March 2022.

Inputs into the model

03 March 2020

22 March 2019

06 March 2018

10 March 2017

PERFORMANCE RIGHTS (LTIP)

Grant date

Dividend yield

Risk free yield

Expected volatility

Last testing date

Exercise price

Share price at grant date^

Performance right life

3/03/2020

22/03/2019

6/03/2018

10/03/2017

9.5%

0.5%

47.5%

7.7%

1.4%

45%

6.3%

2.15%

55%

5.7%

2.14%

60%

31/12/2022

31/12/2021

31/12/2020

31/12/2019

n.a

$3.750

3 years

n.a

$3.900

3 years

n.a

$4.800

3 years

n.a

$5.400

3 years

^ Shown as post 3 November 2020 share consolidation equivalent share price.

Notes to the Financial Statements Annual Report 202080

37. SHARE-BASED PAYMENTS CONTINUED

Managing Director

During the Financial Year, 102,670 rights were issued to Mr A. Dragicevich.

During the comparative financial year, 78,330 rights were issued to Mr A. Dragicevich.

The following rights were in existence during the current reporting period, subject to the achievement of performance
conditions and have been independently valued as follows:

SHARE RIGHTS

Issued 19 April 20181

Issued 16 April 20192

Issued 29 April 20203

NUMBER AS
AT 31 DEC 20

GRANT DATE

LAST TESTING
DATE

EXERCISE
PRICE
$

FAIR VALUE AT
GRANT DATE
$4

36,665

39,165

51,335

19/04/2018

31/12/2020

19/04/2018

31/12/2020

16/04/2019

31/12/2021

16/04/2019

31/12/2021

29/04/2020

31/12/2022

29/04/2020

31/12/2022

$3.000

$3.600

$2.100

$3.000

$1.560

$2.040

1 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2018

have an average vesting date of 1 March 2021.

2 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2019

have an average vesting date of 1 March 2022.

3 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2020

have an average vesting date of 1 March 2023.

4 Shown as post 3 November 2020 share consolidation equivalent fair value.

The following rights were in existence during the comparative reporting period, subject to the achievement of performance
conditions and have been independently valued as follows:

SHARE RIGHTS

Issued 11 May 20171

Issued 19 April 20182

Issued 16 April 20193

NUMBER AS
AT 31 DEC 19

GRANT DATE

LAST TESTING
DATE

EXERCISE
PRICE
$

FAIR VALUE AT
GRANT DATE
$

1,000,000

11/05/2017

31/12/2019

1,000,000

11/05/2017

31/12/2019

1,100,000

19/04/2018

31/12/2020

1,100,000

19/04/2018

31/12/2020

1,175,000

16/04/2019

31/12/2021

1,175,000

16/04/2019

31/12/2021

$0.070

$0.110

$0.100

$0.120

$0.070

$0.100

1 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2017

have an average vesting date of 1 March 2020.

2 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2018

have an average vesting date of 1 March 2021.

3 In accordance with the terms of the LTIP arrangement, performance rights issued during the Financial Year ended 31 December 2019

have an average vesting date of 1 March 2022.

Annual Report 2020 Notes to the Financial Statements81

37. SHARE-BASED PAYMENTS CONTINUED

Inputs into the model

29 April 2020

16 April 2019

19 April 2018

11 May 2017

Grant date

Dividend yield

Risk free yield

Expected volatility

Last testing date

29/4/2020

16/4/2019

19/4/2018

11/5/2017

12.2%

0.2%

47.5%

8.0%

1.5%

45%

6.7%

2.25%

55%

7.4%

1.83%

60%

31/12/2022

31/12/2021

31/12/2020

31/12/2019

Share price at grant date^

Performance right life

$2.880

3 years

$3.750

3 years

$4.500

3 years

$4.200

3 years

^ Shown as post 3 November 2020 share consolidation equivalent share price.

The following table reconciles the outstanding securities granted to the Managing Director and senior management at the
beginning and end of the Financial Year:

Performance rights

Number of share performance rights:

Balance at the beginning of the financial year

Granted during the financial year

Forfeited during the financial year

Vested during the financial year

Lapsed during the financial year

Share consolidation 30:1

2020

2019

18,500,000

8,500,000

(350,000)

(5,650,000)

(20,300,000)

20,350,000

7,000,000

(2,100,000)

(6,620,202)

(129,798)

Balance at the end of the financial year

700,000

18,500,000

The performance rights outstanding at the end of the Financial Year were 700,000 (2019: 18,500,000), with a weighted
average remaining contractual life of 1.1 years.

38. KEY MANAGEMENT PERSONNEL COMPENSATION

The aggregate compensation made to directors and other members of key management personnel of the Company and
the Group is set out below:

Short-term benefits

Post-employment benefits

Other long-term benefits

Termination benefits

Share-based payments

CONSOLIDATED/COMPANY

2020
$

1,842,352

76,635

512,595

2,431,582

2019
$

1,484,464

86,049

42,210

89,050

1,701,773

Notes to the Financial Statements Annual Report 2020DIRECTORS’ DECLARATION

The directors declare that:

(a)

(b)

in the directors’ opinion, there are reasonable grounds to believe that Capral will be able to pay its debts as and when
they become due and payable;

in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations
Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and
performance of Capral and the consolidated entity;

(c)

in the directors’ opinion, the financial statements and notes thereto are in accordance with International Financial
Reporting Standards issued by the International Accounting Standards Board; and

(d)

the directors have been given declarations required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001.

On behalf of the directors

R.L. WOOD-WARD
CHAIRMAN

A. DRAGICEVICH
MANAGING DIRECTOR

Sydney
25 February 2021

Directors’ Declaration Annual Report 202084

Deloitte Touche Tohmatsu
ABN: 74 490 121 060

Eclipse Tower
Level 19
60 Station Street
Parramatta NSW 2150
PO Box 38
Parramatta NSW 2124 Australia

Tel: +61 (0) 2 9840 7000
Fax: +61 (0) 2 9840 7001
www.deloitte.com.au

Independent Auditor’s Report
to the Members of Capral Limited

Report on the Audit of the Financial Report

We have audited the financial report of Capral Limited (the “Company” ) and its subsidiaries (the
“Group”) which comprises the consolidated statement of financial position as at 31 December 2020,
the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies and
other explanatory information, and the directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:

(i)

giving a true and fair view of the Group’s financial position as at 31 December 2020 and of
its financial performance for the year then ended; and

(ii)

complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.

We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.

Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Organisation.

Annual Report 2020 Independent Auditor’s Report

Key Audit Matter

How the scope of our audit responded to the
Key Audit Matter

Carrying value of property, plant and

equipment and right of use

As disclosed in Note 14, the Group has
property, plant and equipment held at a
written down value of $38,814,000 as at 31
December 2020, net of impairment losses of
$34,069,000 recognised up to and including
FY2013. As disclosed in Note 16, right of use
amounts to $70,776,000 as at 31 December
2020.

Management has assessed the recoverable
amount of property plant and equipment by
initially assessing for any indicators of
indicator of
impairment. A potential
impairment was
identified. Accordingly,
management prepared a value-in-use
discounted cash flow model (“impairment
model”) to assess whether the carrying
value of property, plant and equipment
exceeded their recoverable value.

Note 1c(k) outlines the determination of the
carrying value of the property, plant and
equipment and right of use which requires
significant judgement by management in
assessing for any indicators of impairment
and preparing a value-in-use discounted
cash flow model, including;

 estimating future growth rates,
 discount rates, and
 the expected cash flows and

capital expenditure.

Deferred tax asset (DTA) in relation to
Carry Forward Tax Losses

As disclosed in Note 11, the Group has
deferred tax assets recognised of $5.905m
and has potential deferred tax assets of
$77.441m not
recognised as at 31
December 2020.

Deferred tax assets in respect of tax losses
are recognised where it is probable that the
Group will have future taxable profits
against which such losses will be used.

The Group’s ability to recognise deferred tax
assets in relation to tax losses is assessed

Our procedures included, but were not limited to:

▪

Assessing the process undertaken and
conclusions reached by management in
determining indicators of impairment
Reviewing the FY21 budget, the basis on
which it has been prepared, and assessing
the historical accuracy of forecasting by
management
Assessing other key assumptions in the
impairment model including:
discount rate;
forecasted cash flows and capital
expenditure;
lease payments and sustaining
capital expenditures on leases
growth rates, in particular with
reference to historic growth rates
forecast macro-economic
and
conditions impacting demand in
the industry; and
terminal growth rate.

o
o

Engaging our valuation specialists to
assist with evaluating the appropriateness
of the discount rate used
Recalculating the mathematical accuracy
and integrity of the impairment model
Performing a sensitivity analysis on the key
assumptions and inputs in the impairment
model, to assess the extent of change in
those assumptions that either individually
or collectively would result in impairment
or reversal of impairment, and
Assessing the headroom in the impairment
model and whether it is indicative of a need
to reverse previously recorded impairment
charges.

We also assessed the appropriateness of the
disclosures in Notes 1c(k), 14 and 16 to the
financial statements.

Our procedures included but were not limited to:

▪

Engaging our tax specialists to assist us in
assessing the availability of tax losses to
the Group
Reviewing management’s forecasts in
respect of the Group’s taxable income
Assessing the key assumptions in
management’s calculations including:

Comparing the consistency of the
assumptions used to the inputs
and assumptions in management’s
impairment model

Independent Auditor’s Report Annual Report 201986

judgement

by management at each reporting period.
Significant
required by
management in their assessment of the
quantity of tax losses available and whether
it is probable that some or all of these tax
losses can be utilised in the foreseeable
future. This assessment includes estimating
the Group’s
future short-term taxable
profits and the probability of those forecasts
being met.

o Assessing whether the period used

to forecast taxable profits is
appropriate

o Assessing the likelihood of the

Group achieving these forecasts

We also assessed the appropriateness of the
Group’s disclosure in respect of the deferred tax
assets and unutilised tax losses in the notes to the
financial statements.

Management’s assessment resulted in an
additional $3.048m of tax losses being
recognised in the year ended 31 December
2020.

Other Information

The directors are responsible for the other information. The other information comprises the
Chairman’s Report, Managing Director’s Operations and Financial Review, Sustainability Report and
Directors’ Report, which we obtained prior to the date of this auditor’s report, and also includes the
following information which will be included in the Group’s annual report (but does not include the
financial report and our auditor’s report thereon): Members Details and Corporate Directory, which
is expected to be made available to us after that date.

Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed on the other information that we obtained prior
to the date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

When we read the Members Details and Corporate Directory, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action.

Responsibilities of the Directors 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 gives a true and fair view and is free from material misstatement, whether
due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered

Annual Report 2020 Independent Auditor’s Report

material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
intentional omissions,
involve collusion,
fraud may
from error, as
misrepresentations, or the override of internal control.

forgery,

• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.

Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group’s audit. We
remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.

From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 21 to 36 of the Directors’ Report for
the year ended 31 December 2020.

In our opinion, the Remuneration Report of Capral Limited, for the year ended 31 December 2020,
complies with section 300A of the Corporations Act 2001.

Independent Auditor’s Report Annual Report 201988

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.

DELOITTE TOUCHE TOHMATSU

David White
Partner
Chartered Accountants
Parramatta, 25 February 2021

Annual Report 2020 Independent Auditor’s Report

MEMBER DETAILS
Top Holders (Grouped) as of 28 February 2021

1. TWENTY LARGEST HOLDERS

Details of Capral’s twenty largest shareholders were as follows:

RANK

NAME

UNITS

UNITS (%)

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

CITICORP NOMINEES PTY LTD

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

NATIONAL NOMINEES LIMITED

PRUDENTIAL NOMINEES PTY LTD

BRAZIL FARMING PTY LTD

MR ANTHONY MATTHEW DRAGICEVICH

BNP PARIBAS NOMS PTY LTD

MR ANDREW ROY NEWBERY SISSON

MR JOHN GEORGE WHITING + MRS DIANA PATRICIA WHITING

AGO PTY LTD

LUTON PTY LTD

MR CHRISTIAN JAMES HAUSTEAD

MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED

RAVENSCOURT PROPRIETARY LIMITED

SOUTHERN STEEL INVESTMENTS PTY LIMITED

BNP PARIBAS NOMINEES PTY LTD

MRS GLENDA CLAIRE ORGILL

DEBUSCEY PTY LTD

MR JORIS ARJEN LUGTENBURG + MRS ADRIANE LUGTENBURG

3,199,169

3,002,547

1,973,136

1,264,692

583,334

543,559

279,399

227,481

140,000

133,334

131,199

130,797

120,000

116,778

105,108

100,000

96,815

94,076

91,687

85,000

19.32

18.13

11.91

7.64

3.52

3.28

1.69

1.37

0.85

0.81

0.79

0.72

0.71

0.63

0.60

0.58

0.57

0.55

0.51

TOTALS: TOP 20 HOLDERS OF ORDINARY FULLY PAID SHARES (TOTAL)

Total Remaining Holders Balance

12,418,111

4,144,558

74.98

25.02

Member Details Annual Report 202090

2. SUBSTANTIAL SHAREHOLDERS

Substantial shareholders as notified to Capral in accordance with the Corporations Act 2001:

NAME

Allan Gray Australia

Perpetual Limited

First Sentier Investors Holdings Pty Limited

Castle Point Funds Management Ltd

Total

3. NUMBER OF HOLDERS

NO. OF SHARES

% OF SHARES HELD

AS NOTIFIED ON

3,320,039

1,918,146

1,613,051

883,182

7,734,418

20.56

11.88

9.99

5.33

47.76

25/03/2020

26/03/2020

19/2/2020

23/12/2020

(a) Quoted equity securities: There were 1,628 holders of ordinary shares.

(b) Unquoted equity securities - options: There were Nil unquoted options.

(c) Unquoted equity securities - performance rights: There were 700,000 unquoted performance rights issued to
18 holders under the Capral Long Term Incentive Plan. There is 1 holder who holds 20% or more performance
rights under this plan.

4. VOTING RIGHTS

(a) Voting rights attaching to the fully paid ordinary shares are, on a show of hands, one vote per person present as
a member proxy, attorney, or representative thereof and on a poll, one vote per share for every member present
in person or by proxy or by attorney or by representative.

(b) Holders of options and performance rights do not have any voting rights on the equity securities held by them.

Ordinary shares issued on exercise of options or vesting of performance rights will carry the same voting rights as
all other fully paid ordinary shares of Capral.

Annual Report 2020 Member Details91

5. DISTRIBUTION OF EQUITY SECURITIES

(a) Quoted ordinary shares

RANGE OF SHARES

NUMBER OF HOLDERS

1 - 1,000

1,001 - 5,000

5,001 - 10,000

10,001 - 100,000

100,001 and over

Total

(b) Unquoted performance rights

1,078

346

1,628

Performance rights granted under the Capral Long Term Incentive Plan (including to the Managing Director) with
various vesting and expiry dates and a nil exercise price:

RANGE OF SHARES

NUMBER OF HOLDERS

1 - 1,000

1,001 - 5,000

5,001 - 10,000

10,001 - 100,000

100,001 and over

Total

6. MARKETABLE PARCELS

The number of shareholders holding less than a marketable parcel* of shares is 427 holders.

(* Minimum parcel size of shares: 91)

7. ON-MARKET BUY BACK

There is no current on-market buy back.

Member Details Annual Report 2020
92

CORPORATE DIRECTORY

CAPRAL’S REGISTERED OFFICE

71 Ashburn Road, Bundamba QLD 4304
Telephone: +61 (0)7 3816 7000
Fax: +61 (0)7 3816 7111

CAPRAL’S PRINCIPAL ADMINISTRATION OFFICE / INVESTOR ENQUIRIES

Level 4, 60 Phillip Street, Parramatta, NSW 2150
Telephone: +61 (0)2 9682 0710
Email: InvestorRelations@capral.com.au

SHARE REGISTRY

Computershare Investor Services Pty Limited
ABN 48 078 279 277
Level 2, 60 Carrington Street, Sydney NSW 2000
Telephone: 1800 855 080
Fax: +61 (0)3 9473 2118

AUDITOR

Deloitte Touche Tohmatsu
ABN 74 490 121 060
Eclipse Tower, Level 19, 60 Station Street
Parramatta NSW 2150

SECURITIES EXCHANGE LISTING

Capral’s shares are quoted on the Australian Securities Exchange (Code: CAA)

COMPANY SECRETARY

Ms Kim Bradley-Ware (Joint)
Mr William Joseph Campbell (Joint)

CORPORATE GOVERNANCE STATEMENT

http://www.capral.com.au/ – under Corporate / Investors / Corporate Governance

Annual Report 2020 Corporate DirectoryCapral Limited
ABN 78 004 213 692

71 Ashburn Rd, Bundamba QLD 4304
T 07 3816 7000 | F 07 3816 7111
capral.com.au