More annual reports from Cleanaway:
2023 ReportPeers and competitors of Cleanaway:
US Ecology, Inc.Annual Report 2017
A SMARTER WAY
A BETTER WAY
A CLEANER WAY
CLEANAWAY WASTE MANAGEMENT LIMITED ABN: 74 101 155 220
Contents
SECTION 1
OVERVIEW
Footprint 2025
Perth Materials Recycling Facility
Chevron partnership
2017 Snapshot
Chairman’s Report
Chief Executive Officer’s Report
1
2
3
4
6
8
SECTION 2
BUSINESS
REVIEW
Solids Collections Report
Solids Post Collections Report
10
12
Liquids and Industrial Services Report 14
Our People
Safety
Managing our Environment
Part of the Community
16
18
20
22
29
30
SECTION 3
CORPORATE
INFORMATION
SECTION 4
FINANCIAL
REPORT
Board of Directors
Senior Executive Team
24
26
Financial Statements
Directors' Report
SECTION 5
OTHER
INFORMATION
Other Information
115
FOOTPRINT 2025
With a focus on resource recovery, we’re working
hard to make a sustainable future possible.
We’re proud of how far we’ve come over
the past year, and we’re not done yet.
Western Australia
Perth is now home to one of
the most advanced recycling
facilities in the southern
hemisphere – the Perth
Material Recycling Facility
(MRF). Able to process up to
250,000 tonnes of recyclable
materials annually using
state‑of‑the‑art sorting
technology, we aim to deliver
some of the highest diversion
in Australia.
South Australia
We have strengthened our
South Australian network
with the addition of two
transfer stations and
a recycling facility.
Queensland
Our Queensland network has
grown with a new commercial
recycling facility recovering paper,
cardboard and plastics, and
the addition of a construction
and industrial waste transfer
station. Upgrades to our waste oil
processing facility means that we
can now recycle Queenslanders’
used oils to a higher standard.
New South Wales
Our project to construct
a new transfer station
and recycling facility has
begun, while upgrades to
our Wetherill Park refinery
mean we can recycle
used motor and engine
oils to a higher standard,
offsetting Australia’s crude
oil requirements by up to
900,000 barrels annually.
Victoria
We were granted a planning
permit from the Victorian Minister
for Planning to extend landfilling
operations at the Melbourne
Regional Landfill (MRL) up until
2046. We also invested in
a major initiative to double the
renewable energy generated at
the MRL. We are now producing
enough electricity to power more
than 15,600 homes each year.
In Melbourne’s south‑eastern
growth corridor, we also opened
the new South East Melbourne
Transfer Station – improving
local waste consolidation and
reducing truck movements.
1
Cleanaway Waste Management Limited 2017 ANNUAL REPORTOVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONBUSINESSREVIEW1 Opening the southern hemisphere’s
most advanced recycling facility
Taking commingled recycling to the next level
In May 2017, the city of Perth became home to one of the most advanced recycling facilities in the
southern hemisphere, the Perth Materials Recycling Facility (Perth MRF). Capable of handling the city’s
entire household recyclable waste, the Perth MRF can process up to 250,000 tonnes annually. It utilises
state-of-the-art optical sorting technology, which allows us to handle up to eight different waste streams,
including paper and cardboard, glass, aluminium, steel, and plastics.
At the Perth MRF, we are proud to be able to deliver diversion rates of up to 97% – some of the highest
in Australia. Recycling more than ever before, it’s another way we’re making a sustainable future possible.
2
Working with Chevron Australia
to create a truly sustainable future
Going beyond simple waste management
In April 2017, Cleanaway was proud to be awarded the contract for the collection,
processing, treatment and disposal of all solid and liquid waste and recyclables across several
Chevron-operated sites, including Thevenard Island, Wheatstone LNG Plant, North West WA
and Perth supply bases and warehouses, as well as Barrow Island – a Class A nature reserve.
We also established an agreement with Traditional Owners of the lands near Onslow in WA’s
Pilbara region, the Thalanyji people, to provide business and employment opportunities to the
local community – making a sustainable future possible for all Australians.
3
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONBUSINESSREVIEW1 2017 Snapshot
With a dedicated team, national integrated network and one
of the largest fleets on the road, Cleanaway is Australia’s
leading provider of waste management, industrial and
environmental services.
Financial highlights
REVENUE
($ millions)
EBITDA1
($ millions)
EPS1
(cents)
DIVIDEND
(cents)
Continuing Operations
Continuing Operations
$1,454.4m $301.3m
4.9¢
2.1¢
2015
2016
2015
2017
2016
2015
2016
2015
2017
2017
2016
2017
2015
2016
2015
2017
2016
2015
2016
2015
2017
2017
2016
2017
2015
2016
2015
2017
2016
2015
2016
2015
2017
2017
2016
2017
2015
2016
2015
2017
2016
2015
2016
2015
2017
2017
2016
2017
Statutory results
Underlying results
–%
$1,454.4 million revenue
$1,350.7 million net revenue 2 ▲2.3%
▲22%
$314.0 million EBITDA
▲49%
$143.1 million EBIT
▲62%
$72.5 million NPAT 3
▲24%
2.1 ¢/share dividend
▲64%
4.6 ¢/share eps
–%
$1,454.4 million revenue
$1,350.7 million net revenue 2 ▲2.3%
▲7%
$301.3 million EBITDA
▲17%
$142.9 million EBIT
▲22%
$77.5 million NPAT 3
▲24%
2.1 ¢/share dividend
▲23%
4.9 ¢/share eps
1 Underlying financial results.
2 Net revenue is a non-IFRS measure and excludes landfill levies.
3 Attributable to ordinary equity holders.
4
Operations at a glance
4,100+
employees
Australia wide
3,000+
178
vehicles
nationally
sites
Australia wide
Australia‑wide
coverage
Waste to resource highlights
IN THE COMMUNITY
65+
community
organisations
supported
$830,000+
invested in
Australian
communities
1,550+
education
programs held
nationally
Organic liquid waste
re-used as nutrient
~77,000t
Biosolids re-used
as nutrient
~46,000t
Used oil collected
for reprocessing
~130ML
Paper and cardboard
recycled
~227,000t
Plastic packaging
recycled
~10,300t
Steel recycled
~13,300t
Landfill gas captured
120m+ m3
Renewable energy
generated
Enough renewable energy
generated to power
90m+ kWh
18,000+ homes
5
Cleanaway Waste Management Limited 2017 ANNUAL REPORTOVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONBUSINESSREVIEW1 Chairman’s Report
It is with great pleasure that I present
to you the Cleanaway Waste Management
Limited 2017 Annual Report, my first as
Chairman of the Company.
The financial performance of
Cleanaway showed considerable
improvement during FY2017,
against a backdrop of relatively
muted growth in the overall
Australian economy.
Net revenue, which represents gross
revenue less landfill levies collected,
increased 2.3% to $1.35 billion
compared to the corresponding
period last year. In turn, this
led to an increase in EBITDA
of 22.1% to $314.0 million and
EBIT up 48.9% to $143.1 million.
These improved EBITDA results were
due to improved performances
by all of our businesses being Solids
Collections, Solids Post Collections
and Liquids & Industrial Services.
Included within these results are
a number of significant items,
which in the Board's view should
be excluded to more closely
align with the operations of the
Company. At an EBITDA level, these
adjustments totalled $12.7 million
in profits. The underlying
adjustments comprised of:
• $22.0 million gain on the
sale of two closed landfills
in Melbourne.
• $12.8 million in restructuring,
rebranding and acquisition costs.
• $3.5 million reduction in the
remediation and rectification
provision for closed landfill sites.
6
“
The 2017 financial
year has seen
your Company
make encouraging
progress on the
implementation
of a number of
strategic initiatives
aimed at not
only improving
the financial
performance
of the Company
but also making
Cleanaway the
number one choice
for total waste
management
in Australia.”
MARK CHELLEW
CHAIRMAN
Statement has been lodged with
the ASX.
In closing, I would like to thank the
management team led by Vik Bansal
and all our employees for their
considerable efforts in “making
a sustainable future possible” and
also to thank my fellow Board
members for all their wise counsel
and support this past year.
I look forward to reporting on our
progress next year.
Mark Chellew
Chairman
On an underlying basis, EBITDA
increased 7.1% to $301.3 million
and EBIT 16.6% to $142.9 million.
I am also pleased to report that
on a statutory basis, our net
profit after tax increased 61.8%
to $72.5 million and earnings per
share increased 64.3% to 4.6 cents.
The financial condition of
Cleanaway is strong. Our balance
sheet is in excellent shape with
all our debt ratios well within our
banking covenants. Our average
debt maturity at 30 June
2017 is 3.4 years and we have
$230 million of headroom under
our banking facilities.
To further strengthen our financial
position, we recently signed a new
$90 million Green Term Loan Facility
with the Clean Energy Finance
Corporation that will support our
clean energy and resource recovery
investments as part of our Footprint
2025 strategy. This funding
is unsecured, has a tenor of
eight years and is consistent with
the terms of our existing syndicated
banking facilities.
Our strong financial and operational
performance and confidence in
the future growth of the Company
has allowed the Board to increase
dividends paid to shareholders.
The Board have declared
a fully franked final dividend
of 1.1 cents per share, payable
on 5 October 2017. This represents
an increase of 22.2% from the
0.9 cent final dividend paid last year.
Combined with the interim dividend
of 1.0 cents per share paid earlier
in the year, the dividends declared
in respect of FY2017 totalled
2.1 cents per share, an increase
of 23.5% on the total dividend
paid last year.
While the financial performance
of the Company is important,
a major focus of the Board and
Management remains the health
and safety of our employees
and contractors. Our business,
like most industrial, logistics and
infrastructure businesses face daily
operational and situational hazards.
We have a responsibility to ensure
all our employees and contractors
go home safe. A great deal of
effort is expended throughout the
Company to make sure this is the
case and I am pleased to report
that our Total Recordable Injury
Frequency Rate (TRIFR) has reduced
by 33% to 7.2 compared to the
previous year. While this is an
improvement, there is further work
to do to get to Goal Zero.
Our Sustainability Report is included
in this Annual Report which
goes to the heart of Cleanaway
making a sustainable future
possible. It provides information
about a range of initiatives and
priorities such as diversity and
inclusion, safety and environment
performance, resource recovery,
recycling and utilisation
of waste disposal by-products
to generate electricity.
I would also like to point
out to shareholders that the
Company has elected to disclose
its Corporate Governance
Statement on the Company website
http://www.cleanaway.com.au/
for-investors/corporate-governance/
and the Corporate Governance
7
Cleanaway Waste Management Limited 2017 ANNUAL REPORTOVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONBUSINESSREVIEW1 Chief Executive Officer's Report
• Creating the single brand,
Cleanaway, the glue that binds
all of this together; and
• The alignment of our people and
organisation as a whole onto
a common platform.
I am pleased to report that we have
made significant progress in all of
these areas. We are starting to see
benefits reflected both in our financial
performance, which continues to
improve, as well as in our safety
performance and the number of major
new contracts won over the past
12 months.
Safety remains our number one
priority. We operate in a hazardous
industry and we must all work
towards ensuring our employees and
contractors go home safe each day.
Over the past 12 months we saw
a 33% decline in our Total Recordable
Injury Frequency Rate (TRIFR) to 7.2.
This is a positive improvement, but
we still have work to do to reach our
target of Goal Zero.
While economic activity in Australia
was somewhat flat, at an operational
level we have seen improved
performances across the majority
of our business units. Compared
to the previous corresponding period:
• Solids Collections reported
increases in net revenue, EBITDA
and EBIT of 4.0%, 7.4% and
15.3% respectively.
• Solids Post Collections reported
increases in net revenue, EBITDA
and EBIT of 4.5%, 9.3% and 39.1%
respectively. These were particularly
strong results when taking into
consideration the transition to
closure of our Erskine Park landfill
in NSW.
• Liquids and Industrial Services
reported a decrease in revenue
of 2.9%, however EBITDA and
EBIT increased by 2.4% and
2.7% respectively.
Additional details on the performances
of our operations are covered
in subsequent pages of this
Annual Report.
The strategies we implemented two
years ago remain unchanged. Our Five
“
We have continued to
reset the operational
performance of our
business. We are
making progress
across a number
of strategic initiatives
targeted at growth
leading to both the
quantum and quality
of our earnings and
cash flows.”
VIK BANSAL
CHIEF EXECUTIVE OFFICER AND
MANAGING DIRECTOR
You may recall in last year’s Annual
Report, I detailed the actions and
initiatives we had implemented
to take Cleanaway on our “good
to great” journey. These included:
• Understanding where customer
value was created within
the Company;
• Implementing our Value
Operating Model;
• Re-evaluating and refreshing
our strategic plan leading to our
Footprint 2025 roadmap;
• Defining our Mission Statement, and
how we ‘make a sustainable future
possible’ for all stakeholders;
• Reinforcing the importance of our
values, which guide our behaviour
every day;
• The development of our five
strategic pillars, or as we call them,
our Five C’s;
• Wrapping all of the above into
“Our Cleanaway Way” providing
clarity on our "Why", "How"
and "What";
8
C’s continue to be our roadmap for
sustainable growth.
We now have a full sales structure and
leadership team in place with a clear
Go to Market strategy. We have seen
major contract wins in the Commercial
& Industrial (C&I) space, including
Chevron and Coles. Major municipal
contract wins have included The Hills
Shire and Central Coast in NSW, and
Noosa Shire in QLD, as well as the
Brisbane City Council Post Collections
contract and the Container Deposit
Scheme in NSW. Over the past 12
months we have seen the largest
number of new contracts won, on
a revenue basis, for a number of years
– which gives us confidence that our
growth initiatives are gaining traction.
As part of our “Footprint 2025”
I am pleased to report that we have
completed or started a number
of infrastructure assets including:
• A new recycling facility in Hemmant,
QLD;
• The new Material Recycling Facility
(MRF) in Perth, WA;
• The new South East Melbourne
Transfer Station, VIC;
• Increased investment in electricity
generation at the Melbourne
Regional Landfill;
• Upgrades to our oil refineries
in Sydney and Brisbane; and
• The commencement of construction
for a waste transfer station/material
recycling facility in Erskine Park, NSW
this year.
Further expanding our network of these
prized infrastructure assets allows us
to be highly competitive when it comes
to winning new contracts.
As promised two years ago, we have
successfully reduced the permanent
cost base of Cleanaway by over
$30 million. Our efforts will not stop
there. We remain focussed on ensuring
we are a “fit for purpose” organisation
and remain cost disciplined.
Productivity still needs to improve and
our operations teams are working on
delivering sustainable improvements.
Some of these will be supported
by the broader system improvements
already underway.
Over the past two years we
have stressed the importance of
a disciplined approach to cash and
capital expenditure. We know that
we must continue to increase the free
cash flow that we generate. To achieve
this we have focussed on keeping our
capital expenditure spending below
our depreciation and amortisation
expense. I am pleased to report that
in FY2017 we were able to maintain
that discipline – particularly as we
completed two major Footprint 2025
investments in the same period,
namely the new Material Recycling
Facility (MRF) in Perth and a new
transfer station in Melbourne.
As we have reported in the
past, we still have legacy landfill
remediation and rectification
spending commitments, and it will
remain a major cash outflow for the
next three years. We cannot fast
track or short circuit this process.
However, through the sale of two
closed landfills during the past year,
we have unlocked value and reduced
future spending on remediation
and rectification.
With regard to our capital outlays,
the Company is now at an interesting
point in its history. We now face an
equally interesting challenge – how
to maintain our growth momentum;
build a footprint of infrastructure
assets for the future; and spend cash
on remediation and rectification over
the next few years, while at the same
time increasing our free cash flow.
To meet this challenge, we have
developed a funding framework
that matches our capital outlays and
increases our free cash flow. We have
effectively developed three prime and
diverse sources of funding:
• Our core banking facilities which
total $600 million, are unsecured,
extendable and provide us with
multiple options to fund our
base growth and maintenance
capital expenditure.
• A Green Term Loan Facility with the
Clean Energy Finance Corporation
of $90 million that supports our
Footprint 2025 clean energy and
resource recovery investments.
This facility is unsecured, has
an eight year tenor with conditions
consistent with our existing
banking facilities.
• Finance lease facilities which we will
utilise for our government related
and municipal contracts. This facility
provides long tenure, and fixed cost
funding where the leasing period
matches the tenure of the contracts.
This in turn leads to a certainty of
margin. Most importantly, finance
leasing removes the cash outlays
required at the commencement
of the contract, thereby increasing
free cash flow.
Utilising these funding structures and
our strong balance sheet will allow
us to fund our growth and at the
same time increase the free cash
flow generated.
I continue to be encouraged by the
participation in our company-wide
employee engagement survey,
which has increased year-on-year.
We remain focussed on listening
to and addressing the feedback we
receive through these annual surveys,
working toward a highly engaged
team across the board.
Finally, I would like to thank the
Chairman and the Board for their
continued support given to me over
this past year.
In closing, this has again been a very
busy year at Cleanaway and I need
to acknowledge the efforts of each
one of our 4,100+ employees who
make Cleanaway the company that
it is. Their belief and commitment
to ensuring that we operate to our
full potential remains a strong sense
of inspiration for me, and for the
management team.
We remain focussed on making
a sustainable future possible, for
all our stakeholders, and continuing
our journey from “good to great”.
Vik Bansal
Chief Executive Officer
and Managing Director
9
Cleanaway Waste Management Limited 2017 ANNUAL REPORTOVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONBUSINESSREVIEW1 Solids Collections Report
With the largest Solid Waste Collections fleets on the road,
we are proud to service more than 90 municipal councils
and over 120,000 commercial and industrial customers
across all corners of Australia.
Solids Collections net revenue increased 4% in FY2017. A strong second half
performance showed a 5.4% uplift in net revenue when compared to the same
period in the previous year. We also saw volume growth across all major solid
waste collection categories.
Profitability improved over FY2017 with a 7.4% increase in EBITDA to
$160.9 million, and a further improvement in EBITDA margin from 19.2%
in FY2016 to 19.9%. EBIT margin also improved 120 basis points during the
year to 12.2%. These results are a reflection of the continued focus on various
growth and cost initiatives implemented through FY2016 and into FY2017.
A full sales structure and leadership team is now in place with a clear Go to
Market strategy. Major contract wins in the Commercial & Industrial (C&I) space,
including Chevron and Coles, as well as municipal contract wins including The Hills
Shire and Central Coast in NSW, Noosa Shire in QLD, and the Container Deposit
Scheme in NSW, are clear indicators that growth initiatives are gaining traction.
While pricing has improved in some areas, this will remain an area of focus into
FY2018. We have continued to invest in major resource recovery facilities across
Australia, with the opening of the Hemmant Recycling facility in QLD and the
Perth Materials Recycling Facility. A number of additional facilities are planned
for the coming years as part of the Footprint 2025 strategy.
NET EXTERNAL
REVENUE
($ millions)
$810.5m
EBITDA
($ millions)
$160.9m
160.9
149.8
138.2
$ million
$ million
%
$ million
%
FY17
810.5
160.9
19.9
98.8
12.2
FY16
779.0
149.8
19.2
85.7
11.0
FY17
V FY16
4.0%
7.4%
15.3%
2015
2016
2017
EBITDA
EBITDA margin
EBIT margin
Net external revenue
EBITDA
EBITDA margin
EBIT
EBIT margin
Represents underlying results.
10
Helping our customers deliver better service
Missed pick-ups, broken bins, contamination – these are just a few of the things we’re helping
our municipal customers better manage through the introduction of Cleanaview, launching in
Noosa Council, QLD on 1 September 2017, followed by The Hills Shire, NSW on 2 October 2017.
Near real time information and visibility of our truck locations will help local councils answer
queries from residents on the status of their bin pick-up, and be informed when a scheduled
job has been completed.
Technology on-board Cleanaway vehicles will provide our customers with more meaningful
information to help better manage the waste collected in weekly kerbside pick-ups. Beyond
helping councils to simply manage contamination, it means we’re arming our customers
with information to allow them to take proactive steps and educate residents about what
can and can’t be disposed of through their local collection, and how they can safely dispose
of other materials.
Delivering benefits beyond our municipal customers, it will help improve the quality of recyclables
delivered to our Material Recycling Facilities and reduce the amount of contaminated materials
which end up in landfill. Importantly, it also means that we can ensure prohibited and potentially
dangerous materials don’t end up in landfill, and can be disposed of safely.
In partnership with our municipal customers, Cleanaview is another way we are making
a sustainable future possible.
11
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION2BUSINESSREVIEWCleanaway Waste Management Limited 2017 ANNUAL REPORT Solids Post Collections Report
From transfer stations to landfill assets, Cleanaway
has one of the strongest post collections asset bases
in Australia. We are proud to be a leader in the safe and
sustainable management of waste.
In FY2017, Solids Post Collections' net revenue increased 4.5% to $185.0 million.
This was encouraging when taking into consideration the impending closure
of our Sydney based landfill.
Profitability improved over FY2017 with a 9.3% increase in EBITDA to
$96.1 million, and a further improvement in EBITDA margin from 49.7%
in FY2016 to 51.9%. EBIT margin also improved 520 basis points during the
year to 21.0%.
Overall, we saw landfill volumes up across the country.
Cleanaway’s network of highly engineered and regulated landfill assets reaches
into every mainland state in Australia. In FY2017 we invested in a major
renewable energy initiative at the Melbourne Regional Landfill, effectively
doubling the existing power generation capabilities. Ensuring that we extract
the maximum value from all waste – including residual waste which goes to
landfill, we now generate more than 120 million m3 of landfill gas from across
our network, which is converted to 90 million kWh of renewable energy, enough
to power more than 18,000 homes annually.
FY2017 saw the opening of the South East Melbourne Transfer Station, which
is now fully operational. It also saw Cleanaway awarded the strategic Brisbane
City Council Post Collections contract.
NET EXTERNAL
REVENUE
($ millions)
$185.0m
EBITDA
($ millions)
$96.1m
96.1
87.9
Construction will commence on our new Transfer Station in Erskine Park, NSW,
which is scheduled for completion in the second half of FY2018.
59.8
FY17
FY16
$ million
$ million
$ million
$ million
%
$ million
%
288.7
(103.7)
185.0
96.1
51.9
38.8
21.0
311.4
(134.4)
177.0
87.9
49.7
27.9
15.8
FY17
V FY16
(7.3)%
22.8%
4.5%
9.3%
39.1%
2015
2016
2017
EBITDA
EBITDA margin
EBIT margin
Gross external revenue
Less landfill levies
Net external revenue
EBITDA
EBITDA margin
EBIT
EBIT margin
Represents underlying results.
12
A new era in Melbourne’s South East begins
Investing in long‑term solutions for continued growth
The state-of-the-art South East Melbourne Transfer Station (SEMTS) was opened in May 2017,
marking the commencement of a new era in Melbourne’s south-east corridor. Designed with
capacity for growth, the SEMTS is poised to handle Melbourne’s growing waste management needs.
The site acts as a consolidation point for waste that will be then be transported to the Melbourne
Regional Landfill (MRL) in high capacity A-double trailers. This allows us to transport more waste
more efficiently, reducing the number of heavy vehicles on the road and easing congestion with
fewer cross-city truck movements. Facilities like SEMTS are an integral component of making
a sustainable future possible.
13
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION2BUSINESSREVIEWCleanaway Waste Management Limited 2017 ANNUAL REPORT Liquids and Industrial Services Report
Cleanaway is Australia’s largest hydrocarbons recycling
business in Australia and one of Australia’s leading Liquids
and Industrial Services businesses. Over the last year
we collected and processed approximately 130 million litres
of mineral oil – offsetting Australia’s annual requirements
for oil by 900,000 barrels.
In FY2017, although market conditions remain challenging, we saw the revenue
decline in Liquids and Industrial Services stabilise, with revenue in the second half
of FY2017 showing an increase compared to the same period in FY2016 and the
first half of FY2017. This represents the first half on half improvement in the past
seven years.
While revenue declined 2.9% compared to FY2016, tight cost control resulted
in EBITDA increasing 2.4%.
We saw a stronger performance from Hydrocarbons in the second half
of FY2017 as production levels returned to normal following plant upgrades
and subsequent shutdowns in the first half of FY2017.
During FY2017 we undertook upgrades to our refineries in Wetherill Park
in New South Wales, and Narangba, in Queensland. As a result of the upgrades,
our Wetherill Park refinery achieved Category 1 status under Australia’s Product
Stewardship for Oil (PSO) program.
Category 1 processing, as defined under the PSO, generates the highest
quality re-refined oil products, resulting in a non-carcinogenic re-refined
base-oil which can be used as engine lubricant, transformer or hydraulic oil.
In achieving Category 1 status, the facility must also comply with health, safety
and environmental standards consistent with those which apply to facilities
processing similar virgin products. This means that we can return higher volumes
of high quality re-refined oils to the market, reducing the requirements for virgin
oil products, in turn lowering the environmental impact.
Processing volumes of hazardous liquids has shown a slight improvement from
FY2016, however pricing remains highly competitive.
Improving the overall performance of this segment remains an area of focus
for FY2018.
Net external revenue
EBITDA
EBITDA margin
EBIT
EBIT margin
Represents underlying results.
$ million
$ million
%
$ million
%
FY17
424.0
58.9
13.9
32.1
7.6
FY16
436.6
57.5
13.2
33.0
7.6
FY17
V FY16
(2.9)%
2.4%
(2.7)%
NET EXTERNAL
REVENUE
($ millions)
$424.0m
EBITDA
($ millions)
$58.9m
55.8
57.5
58.9
2015
2016
2017
EBITDA
EBITDA margin
EBIT margin
14
Cleanaview – making our vehicles safer than ever
The safety of our people and of the communities in which we work remains our number one
focus, and we’re always looking for ways to continually improve.
With the launch of Cleanaview across our Liquids business in late 2017, we’ll begin to use on-board
technology to deliver further safety improvements, meaning that we’ll have safer drivers, driving
even safer trucks.
On-board technology will include automatic reminders to prompt drivers to take scheduled
breaks, better managing fatigue during shifts.
Automatic alerts will help our drivers stay safer on our roads, and with better visibility, we can
continue to improve driver safety each and every day.
15
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION2BUSINESSREVIEWCleanaway Waste Management Limited 2017 ANNUAL REPORT Our People
As we embrace diversity, we unlock strength and opportunity
A key focus for our people through FY2017 was embedding a culture which values diversity across
all aspects of our business, and embracing the unique perspectives and experiences this brings.
This focus will be extended through FY2018 with the introduction of a three-year Diversity and
Inclusion Engagement plan, formalising our commitment and detailing a range of initiatives
toward creating a more inclusive environment, and promoting opportunities for all employees.
Making a sustainable future possible for our people and for
the community
In FY2017, we launched our Reflect Reconciliation Action Plan (RAP) which was endorsed by our
Board of Directors, and formally ratified by Reconciliation Australia. Our first RAP is built around
the importance of understanding Aboriginal and Torres Strait Islander heritage and culture.
Outlining a broad range of initiatives and programs toward closing the gap, it is focussed
on a commitment to building cultural understanding between Aboriginal and Torres Strait
Islander peoples and non-Aboriginal Australians.
Action through training
As one of the first outputs of our RAP, we have created a National Traineeship Program providing
Aboriginal and Torres Strait Islander peoples with an opportunity to attain a trade qualification
and ‘on the job experience’, with a view to permanent employment. We have partnered with
a Registered Training Organisation (RTO) with considerable experience in delivering formal
training with a flexible learning model while still ensuring compliance with training packages
and standards.
Action through partnerships
We support initiatives which build positive relationships with traditional owners and their
communities. Cleanaway is proud to partner with the following traditional owner groups who
are passionate about the opportunities that investment and economic development hold for
the future of their peoples:
• Ngarluma people;
• Buurabalayji Thalanyji Aboriginal Corporation;
• Karlayura Group; and
• The Matera Foundation.
Action through procurement – Supply Nation
We have extended our commitment to diversity and inclusion through our procurement
practices, working with Supply Nation, the Australian leader in supplier diversity, to increase
our level of procurement from Indigenous businesses across the country.
Action through awareness
We are also developing and implementing a cultural awareness program to be delivered through
FY2018, actively working toward increasing the understanding and appreciation of different
cultures, including Aboriginal and Torres Strait Islander traditions and cultures.
16
Building strong partnerships
with Traditional Owners
Developing sustainable communities within
the Pilbara
At Cleanaway, we endorse the vision of a nation which values
Aboriginal and Torres Strait Islander heritage, cultures and peoples,
and recognises their unique position as the original custodians of
Australia. Our joint venture with Karlayura Group, a civil and mining
infrastructure project management company who deliver conveyor
maintenance services and supplies both skilled and unskilled local
Aboriginal labour, is one step we’ve taken towards making this
a reality.
The Karlayura Cleanaway Joint Venture will focus on providing
sustainable employment and business opportunities, while respecting
the need to preserve Aboriginal cultural traditions. We are committed
to delivering on the following key principles:
• Building strong relationships within local communities;
• Respecting heritage and culture;
• Creating real opportunities via direct and indirect employment;
• Education and training;
• Aboriginal business development; and
• Cultural support and awareness.
The Karlayura Cleanaway Joint Venture is one of the many ways
we are dedicated towards making a sustainable future possible
for all Australians. We have a strong commitment to collaboratively
working with Traditional Owners and have already formed many
partnerships with Aboriginal Corporations, with agreements in place
to provide employment and business development opportunities,
and more significantly, to make available opportunities to engage
with local communities.
My Country My Community,
Edikan, 2016
17
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION2BUSINESSREVIEWCleanaway Waste Management Limited 2017 ANNUAL REPORT Safety
Toward Goal Zero
TOTAL RECORDABLE
INJURY FREQUENCY
RATE
7.2 TRIFR
▼ 33% from 2016
The safety of our team and the
community in which we operate
comes first, last and everything
in between.
We remain focussed on our goal
of making our workplace injury
free as we continue striving toward
Goal Zero, realising our core value
of Home Safe for all of our people.
We track our progress towards Goal
Zero through improvements in our
Total Recordable Injury Frequency
Rate (TRIFR), which is calculated on
the basis of the number of recordable
injuries for every million hours worked.
In FY2017, we saw our
year-on-year TRIFR improve
by 33% from FY2016; which
is a significant achievement. This
reduction comes on top of a 60%
improvement over the five years
to 2016, and has been supported
by a continued improvement
across our suite of leading safety
performance indicators.
We are pleased to see a year-on-year
improvement in TRIFR, each year
since FY2012.
In real terms, our reduction in
TRIFR means that there were 37
fewer workers who sustained
either a medical treatment or lost
time injury, when compared to
the same period last year. Whilst
this is a significant achievement,
we recognise there is more work
to be done.
It is no accident that we have
seen an improvement in safety
performance. At Cleanaway,
we genuinely believe that strong
and visible safety leadership across
18
all levels of the organisation is critical
if we are to embed safety, both
as a key part of everyone's job and
as a shared responsibility. Over the
past year we have introduced
a number of initiatives to enable
visible safety leadership and
encourage agile learning. This focus
on safety leadership across all levels
of our company will remain a strong
focus across the coming year.
e
t
a
r
y
c
n
e
u
q
e
r
f
y
r
u
n
j
i
e
l
b
a
d
r
o
c
e
r
l
a
t
o
T
Underpinned by a consistently visible
demonstration of our commitment
to safety excellence, increasingly
standardised ways of working
supported by re-certification of our
enterprise wide HSE Management
system to Australian Standard
AS4801, and a capable and engaged
workforce, we firmly believe that
we can achieve Goal Zero.
Total Recordable Injury Frequency Rate (TRIFR)*
26.6
30
25
20
15
10
5
0
16.7
12.6
10.6
Employees
Contractors
10.8
1.6
9.2
7.2
0.9
6.3
2012
2013
2014
2015
2016
2017
* From FY2012 to FY2015, TRIFR was for employees only. From FY2016 onwards, statistics
include both employees and contractors.
Fleet > Safety > First
Safe Truck, Safe Driver, Safe Communities
Cleanaway operates one of the largest heavy vehicle and equipment fleets in Australia. The nature of
our business means that we operate these vehicles in close proximity to schools, shops, homes and other
road users on a daily basis. This calls for extra vigilance to ensure the safety of the communities in which
we operate, as well as that of our employees.
As part of our broader commitment to our Company value of Home Safe, in FY2017 we established and
implemented Fleet>Safety>First which covers all of Cleanaway’s heavy vehicles and trailers, light vehicles
and yellow gear equipment.
Fleet>Safety>First is a management system which underpins a standardised approach to vehicle safety and
compliance, incorporating robust processes and supporting tools – to protect our employees, contractors,
owner drivers, customers and suppliers, as well as the broader community in which we operate.
Founded on three Absolutes – Driver, Asset and Maintenance – and supported by 15 Standards,
Fleet>Safety>First matches safe assets with licenced and competent drivers and operators to help
us ensure the ongoing and sustainable safety of the community.
19
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION2BUSINESSREVIEWCleanaway Waste Management Limited 2017 ANNUAL REPORT
Managing our Environment
At Cleanaway, environmental sustainability is at the heart
of everything we do
As Australia’s leading waste management, environmental and industrial services
company, sustainability means not only managing and reducing our environmental
impact but also working with our customers on ways they can reduce theirs.
Waste may seem like an ordinary part of everyday life, but it has extraordinary
potential. By extracting maximum value from every tonne or litre of waste we
process, we are able to reduce greenhouse gas emissions; conserve precious
resources such as water and energy; and ensure that raw materials are not lost, but
returned to the value stream to be reused – reducing our reliance on new materials.
Working with our customers, industry and the community, we are investing
in knowledge, innovation, and assets to sustainably extract more value from each
tonne of waste we process.
Education and innovation to improve resource recovery
Working with our customers and the broader community on improved recycling
practices, we are able to both maximise the volume of recycling feedstock in our
MRFs, and reduce the volume of contaminants entering the recycling stream.
Not only does this increase the value of the clean recyclables that can be sold
for reuse, it also minimises the costs of processing and reduces the volume
of contaminated materials sent to landfill.
As an active member of the Australian Packaging Covenant, we continue to
work with industry and customers on simple and innovative recycling solutions.
Our Harvest customers can now recycle bagged plastic film and polystyrene
through their bulk bin, front lift and compactor cardboard collections, making
recycling more convenient for tens of thousands of businesses each week.
Supporting our collection activities, state-of-the-art facilities like our Perth
Materials Recovery Facility and the Hemmant Recycling and Resource Recovery
Centre provide improved sorting capabilities, allowing us to process these
recyclables more efficiently.
Whilst we will continue to work toward improved resource recovery rates, aiming
to divert more waste each year from landfill, there remains a level of residual waste
which today we are unable to sustainably recycle. These materials are managed
through our engineered landfills.
Sustainable landfill management
Our network of engineered landfills are the product of sophisticated design
and careful operation to ensure this residual waste has minimal impact on the
local environment, neighbours and surrounding communities.
At Cleanaway, the opportunity to sustainably extract value from waste does not
stop when waste enters our landfills. All of our landfills are designed to allow for
the efficient capture of renewable energy, in the form of landfill gas. Harnessing
the naturally produced landfill gas, we were able to generate over 90 million kWh
of renewable energy in FY2017, enough to power more than 18,000 homes.
The sustainable management of waste resources provides us with an enormous
opportunity to have a positive impact on the environment. However, beyond the
sustainable management of waste materials, we know that there are many more
ways where we can reduce our environmental impact.
A continued focus on
reducing greenhouse
gas emissions
With a significant mobile fleet used
to collect and transport waste for
recycling and disposal, combustion
of diesel fuel is one of the largest
contributors to our Scope 1
greenhouse gas emissions. Second
only to landfill gas combustion,
it contributes 19% of our total
Scope 1 emissions.
We have implemented a number
of initiatives to reduce emissions
associated with fuel combustion
across our fleet, which are primarily
driven by engine technology, vehicle
maintenance, route planning and
driver behaviour.
Our fleet standards require all new
heavy vehicles to comply with Euro
5 emission levels as a minimum. The
Euro 5 standards are global standards
which have been developed to reduce
the emissions of carbon monoxide,
hydrocarbons, oxides of nitrogen
and particulate matters, which are
considered harmful to human health.
In addition to the Euro 5 diesel engine
technology, a number of our vehicles
also run with an additive (AdBlue),
used with the Selective Catalytic
Reduction system to reduce emissions
of oxides of nitrogen from the exhaust
of diesel vehicles.
Our maintenance practices are
designed to meet or exceed
manufacturer’s requirements, which
ensures our vehicles run at the correct
state of tune, which optimises fuel use.
We are also beginning the
progressive rollout of Cleanaview,
new technology which will allow our
managers, supervisors and drivers to
better monitor and manage driving
habits which directly impact fuel
usage, such as speed, acceleration
and harsh braking.
As a result, in FY2017 we have
seen an overall reduction in our
greenhouse gas emissions to
approximately 689,000 tonnes CO2-e,
which represents a decrease of 2%
from the prior year.
20
Doubling power generation for Melbourne homes
Through investments in renewable energy
In FY2017, we invested in a major renewable energy initiative at the Melbourne Regional Landfill
(MRL), doubling the existing power generation capabilities.
Through the addition of four new modules to our existing gas regeneration infrastructure, we are able
to repurpose landfill gas to produce 8.8 megawatts of electricity per hour, and generate enough
electricity to power more than 15,600 homes in FY2018 from the MRL alone.
Not only does this create a source of renewable energy, it also contributes to a reduction in
greenhouse gases.
The future of the MRL has also been strengthened with both EPA works approval (subject to review
applications) and Victorian Government planning permits received. These approvals will extend landfill
activities at this important piece of Melbourne's infrastructure for well over 25 years.
A highly engineered facility, with best practice systems and technology we are proud to be able
to continue the safe management and disposal of Melbourne’s waste at MRL well into the future.
As we continue to invest in and grow our capacity to generate more renewable energy from waste
at facilities like the MRL, we continue to live our philosophy of treating waste as a sustainable resource.
It’s another way we are working to make a sustainable future possible.
21
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION2BUSINESSREVIEWCleanaway Waste Management Limited 2017 ANNUAL REPORT Part of the Community
Great neighbours
help build great
communities.
We’re dedicated
to building
strong, trusted
relationships with
the communities in
which we operate.
COMMUNITY
INFORMATION SESSIONS
60+
at various locations
around the country.
We believe in making a sustainable
future possible – and we know that
the next generation are the ones
who will be leading that charge
into the future. We are passionate
about working with the next
generation to help educate students
about better waste management
and recycling practices.
SCHOOL EDUCATION
SESSIONS
1,550+
engaging more than
41,500 students.
We have a proud
history of supporting
Australian communities
– from supporting
small, regional sporting
clubs and festivals,
to national community
organisations
and charities.
COMMUNITY SUPPORT
$830,000+
supporting more
than 65 communities
across Australia.
22
Bringing NSW’s Container Deposit
Scheme to Life
Increasing recycling and decreasing litter means a win for all
In July 2017, the NSW Environment Minister, Gabrielle Upton, announced that
Cleanaway, along with our Joint Venture partner TOMRA Systems ASA (TOMRA),
was appointed the network operator for the NSW Container Deposit Scheme (CDS).
The scheme, to be known as “Return and Earn”, will commence in December 2017 and
will be part of the largest litter reduction initiative ever launched in NSW, aiming to
keep containers and bottles out of the environment and seeing them recycled instead.
The Joint Venture will combine the logistics expertise of Cleanaway with the sorting
technologies from TOMRA to deliver the most modern and effective container deposit
scheme in Australia. The scheme will include both automated and manual collection
points and is designed with a focus on making it convenient for consumers to return
their containers wherever they are. In certain locations consumers can return their
containers through reverse vending machines and choose either an electronic refund
or voucher from the scheme’s redemption partners, or if they prefer, donate the
refund to charity.
For 40 years, South Australia’s container deposit scheme has encouraged the return
of bottles and cans for recycling. As a result, South Australia leads the nation and
enjoys a return rate for beverage containers of almost 80%.
We’re proud to be delivering the CDS in NSW – reducing litter and increasing
recycling across the state. An initiative which is consistent with our mission of making
a sustainable future possible, this is a win for consumers and the environment.
23
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION2BUSINESSREVIEWCleanaway Waste Management Limited 2017 ANNUAL REPORT Board of Directors
Mark
CHELLEW
Vik
BANSAL
Ray
SMITH
CHAIRMAN OF THE BOARD
Independent Non-Executive
Director since 1 March
2013 and was appointed
Chairman on 30 September
2016. Mark was formerly
the Executive Chairman
of Manufacturing Australia
Limited (retired September
2017) and the Managing
Director and Chief Executive
Officer of Adelaide Brighton
Limited (retired May 2014).
Mark has over 30 years
of experience in the building
materials and related
industries, including roles
such as Managing Director
of Blue Circle Cement in the
United Kingdom and senior
management positions
within the CSR group
of companies in Australia
and the United Kingdom.
He holds a Bachelor
of Science (Ceramic
Engineering), Masters
of Engineering (Mechanical
Engineering) and a Graduate
Diploma in Management.
CHIEF EXECUTIVE
OFFICER AND MANAGING
DIRECTOR
Appointed on 3 August
2015 and appointed to
the Board on 20 August
2015. Vik has over 20 years
experience in a range of
executive roles in Australia,
Asia and the United States
and a proven track record
of leading organisations
through business growth,
transition and improvement.
Previously, he was President
and Chief Operating Officer
for Valmont Industries Inc.,
a US$3.3 billion NYSE listed
global engineering and
manufacturing company
based out of Omaha,
Nebraska USA. Prior to that,
he held senior roles with
OneSteel Ltd and Eaton
Corporation in Australia.
He holds a Bachelor of
Electrical Engineering with
Honours and an MBA.
Vik currently volunteers
as a Non-Executive
Director of Disability
Services Australia. Vik has
completed the Advanced
Management Program from
INSEAD and is a Fellow
of the Australian Institute
of Company Directors and
a Fellow of the Institute
of Engineers Australia.
CHAIRMAN OF THE AUDIT
AND RISK COMMITTEE
MEMBER OF THE
REMUNERATION
AND NOMINATION
COMMITTEE
Independent Non-Executive
Director since 1 April 2011.
Ray is currently
a Non-Executive Director
of K&S Corporation Ltd
(since February 2008).
Formerly, he was
Non-Executive Director of
Crowe Horwath Australasia
Limited (resigned January
2015) and Warrnambool
Cheese and Butter Factory
Company Holdings Limited
(resigned May 2014) and
Trustee of the Melbourne
and Olympic Parks Trust
(retired November 2016).
Ray has significant corporate
and financial experience
in the areas of strategy,
acquisitions, treasury and
capital raisings, and was
Chief Financial Officer
of Smorgon Steel Group for
11 years. He holds tertiary
qualifications in Commerce.
He is a Fellow of CPA
Australia and a Fellow
of the Australian Institute
of Company Directors.
24
Emma
STEIN
Terry
SINCLAIR
MEMBER OF THE AUDIT
AND RISK COMMITTEE
MEMBER OF THE
HEALTH, SAFETY
AND ENVIRONMENT
COMMITTEE
Independent Non-Executive
Director since 1 August
2011. Emma is a Non-
Executive Director of
Programmed Maintenance
Services Ltd (since June
2010) and Alumina Limited
(since February 2011).
Formerly, a Non-Executive
Director of DUET Group
(resigned May 2017). Emma
has significant corporate
experience within industrial
markets and was the
UK Managing Director
for French utility Gaz de
France’s energy retailing
operations. She holds tertiary
qualifications in Science
and a Masters of Business
Administration (MBA).
Honorary Fellow of the
University of Western Sydney
and Fellow of the Australian
Institute of Company
Directors.
MEMBER OF THE AUDIT
AND RISK COMMITTEE
MEMBER OF THE
REMUNERATION
AND NOMINATION
COMMITTEE
Independent Non-Executive
Director since 1 April 2012.
Terry is the Chairman of
Marrakech Road Pty Limited
and Director of NetGet
Holdings Limited. Formerly,
he was the Managing
Director of Service Stream
Limited, Chairman of AUX
Investments (jointly owned
by Qantas and Australia
Post), Director of Sai Cheng
Logistics (China), Director
of Asia Pacific Alliance (HK)
and Head of Corporate
Development at Australia
Post. He also provides M&A
advisory services to private
equity and is currently an
advisor to KPMG in Saudi
Arabia and India. Terry
has significant experience
across Industrial, Resources
and Consumer Services
sectors including 20 years
in senior management
roles in BHP (Minerals, Steel
and Transport/Logistics).
He holds a Masters of
Business Administration
(MBA), a Graduate Diploma
in Management and tertiary
qualifications in Mining,
including Surveying.
Mike
HARDING
CHAIRMAN OF THE
REMUNERATION
AND NOMINATION
COMMITTEE
MEMBER OF THE
HEALTH, SAFETY
AND ENVIRONMENT
COMMITTEE
Independent Non-Executive
Director since 1 March 2013.
Mike is the Chairman of
Lynas Corporation Ltd (since
January 2015) and Downer
EDI Limited (since November
2010). Formerly, Chairman
of Roc Oil Company
Limited (resigned December
2014) and Non-Executive
Director of Santos Limited
(resigned May 2014). Mike
has significant experience
within industrial businesses,
having previously held
management positions
around the world with British
Petroleum (BP), including
President and General
Manager of BP Exploration
Australia. He holds a Masters
in Science, majoring in
Mechanical Engineering.
Philippe
ETIENNE
CHAIRMAN OF THE
HEALTH, SAFETY
AND ENVIRONMENT
COMMITTEE
MEMBER OF THE AUDIT
AND RISK COMMITTEE
Independent Non-Executive
Director since 29 May 2014.
Philippe is a Non-Executive
Director of Lynas
Corporation Limited (since
January 2015). Formerly,
the Managing Director and
Chief Executive Officer
of Innovia Security Pty
Ltd (retired September
2014) and Non-Executive
Director of Sedgman
Limited (February 2015
to November 2015). Philippe
has held a range of other
senior executive positions
with Orica in Australia,
the USA and Germany,
including strategy and
planning and responsibility
for synergy delivery
of large-scale acquisitions.
He holds a Bachelor of
Science in Physiology and
Pharmacology and a Master
of Business Administration
(MBA). A Graduate of
the Australian Institute of
Company Directors and has
completed post-graduate
qualifications in marketing.
25
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONBUSINESSREVIEW3Cleanaway Waste Management Limited 2017 ANNUAL REPORT Senior Executive Team
From left to right: Jeff Proctor, Mark Crawford, Johanna Birgersson, Vik Bansal, Dan Last, Brendan Gill, Stephen Freeman.
Vik BANSAL
CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR
Appointed on 3 August 2015, and appointed to the Board on 20 August 2015. Vik has over 20 years experience in a range of executive
roles in Australia, Asia and the United States and a proven track record of leading organisations through business growth, transition and
improvement. Previously, he was President and Chief Operating Officer for Valmont Industries Inc., a US$3.3 billion NYSE listed global
engineering and manufacturing company based out of Omaha, Nebraska USA. Prior to that, he held senior roles with OneSteel Ltd
and Eaton Corporation in Australia. He holds a Bachelor of Electrical Engineering with Honours and an MBA. Vik currently volunteers
as a Non-Executive Director of Disability Services Australia. Vik has completed the Advanced Management Program from INSEAD and
is a Fellow of the Australian Institute of Company Directors and a Fellow of the Institute of Engineers Australia.
Brendan GILL
CHIEF FINANCIAL OFFICER
Brendan joined Cleanaway in September 2014. Brendan has more than 30 years of experience as a finance professional, mainly in the
mining, steel and energy sectors. His career included 26 years at BHP Billiton in finance, including as Vice President Finance Carbon Steel,
CFO for both the Stainless Steel Materials and Nickel businesses and Global Lead Risk Management & Audit. Since leaving BHP Billiton,
Brendan has held CFO roles, most recently as CFO for Inova Resources (previously named Ivanhoe Australia). Brendan has a Bachelor
of Business, and is a member of CPA Australia.
26
Dan LAST
GENERAL COUNSEL AND COMPANY SECRETARY
Dan joined Cleanaway as General Counsel and Company Secretary in March 2014. Dan is an experienced General Counsel and Company
Secretary with over 15 years experience in law firms and senior in-house legal roles. Prior to joining Cleanaway, Dan was the General Counsel
and Company Secretary of Foster’s Group Limited. He has also worked in top tier law firms in Australia and overseas. Dan has a Bachelor
of Laws (Hons), a Bachelor of Commerce and is a Fellow of the Governance Institute of Australia, and a Graduate of the Australian Institute
of Company Directors.
Mark CRAWFORD
EXECUTIVE GENERAL MANAGER, OPERATIONS, SOLID WASTE SERVICES
Mark joined Cleanaway as Executive General Manager, Enterprise Services in February 2014 and became Executive General Manager,
Operations, Solid Waste Services in August 2017. Mark has more than 10 years operational experience gained in senior and executive roles.
He has worked across Australia and Asia Pacific to integrate complex business models and has extensive transformation experience across all
business disciplines. Prior to joining Cleanaway, Mark held a number of general management roles at Australia Post, most recently as General
Manager for the International business. Mark holds qualifications in Information Technology.
Stephen FREEMAN
EXECUTIVE GENERAL MANAGER, OPERATIONS, LIQUID WASTE AND INDUSTRIAL SERVICES
Stephen joined Cleanaway in November 2013 and was appointed Executive General Manager, Enterprise Operations in August 2016 and
then Executive General Manager, Operations, Liquid Waste and Industrial Services in August 2017. With more than 20 years experience
in senior positions across the waste management, transportation and logistics industries, he has considerable experience in establishing
a high-performance team culture, demonstrating a strong commitment to safety with an ongoing focus on sustainable business improvements
deliveries. Prior to joining Cleanaway, Stephen held a number of senior leadership roles at Toll Holdings, including as General Manager
Australia – Parts Logistics (formerly AutoLogistics), a contract business servicing the automotive and industrial industries. Stephen most recently
held the position of General Manager SA/NT with Cleanaway and also interim General Manager for WA from July 2014 until April 2015.
Jeff PROCTOR
EXECUTIVE GENERAL MANAGER, COMMERCIAL
Jeff joined Cleanaway in May 2017 as Executive General Manager, Commercial. Jeff has more than 25 years experience as a finance
professional working throughout Australia, Europe and Asia. Prior to joining Cleanaway, Jeff held the position of CFO with the Patrick
Group of companies, part of the Asciano Group. Along with his previous role as CFO at Chep Asia Pacific, Jeff brings substantial commercial
experience from the industrial and logistics sectors. In these roles, Jeff led significant business development and business transformation
activities. Jeff also has considerable experience in the media sector where he worked for major listed companies in Europe and Australia.
Jeff is a member of the Institute of Chartered Accountants in Australia and New Zealand.
Johanna BIRGERSSON
EXECUTIVE GENERAL MANAGER, HUMAN RESOURCES
Johanna joined Cleanaway in May 2014 and was appointed Executive General Manager, Human Resources in December 2015. Johanna has
more than 10 years human resources experience gained in senior and executive roles. Prior to joining Cleanaway, Johanna was the Director
People & Culture of TSC Group Holdings. She has also worked across a number of industry sectors including fire & electronic security,
plumbing & HVAC and hospitality. Johanna has a Bachelor of Arts and holds Post Graduate qualifications in Employee Relations and Human
Resources Management from the University of Melbourne.
27
OVERVIEWCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONBUSINESSREVIEW3Cleanaway Waste Management Limited 2017 ANNUAL REPORT 28
30
39
55
56
57
58
59
60
61
109
110
O
V
E
R
V
I
E
W
R
E
V
I
E
W
B
U
S
I
N
E
S
S
C
O
R
P
O
R
A
T
E
I
N
F
O
R
M
A
T
I
O
N
4
R
E
P
O
R
T
F
I
N
A
N
C
A
L
I
O
T
H
E
R
I
N
F
O
R
M
A
T
I
O
N
Contents of Financial Statements
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Notes to the Consolidated Financial Statements
Information about the Group and basis
of preparation
Statement of compliance
1. Corporate information
2.
3. Basis of preparation
4. Critical accounting estimates and judgements
Information about our financial performance
5. Segment reporting
6. Revenue
7. Other income
8. Net finance costs
9.
Income tax
10. Earnings per share
Information about working capital
11. Cash and cash equivalents
12. Trade and other receivables
13. Inventories
14. Trade and other payables
Information about our capital structure
15. Borrowings
16. Issued capital
17. Reserves
18. Dividends and distributions
19. Capital management
Other information about our financial position
20. Property, plant and equipment
21. Intangible assets
22. Equity accounted investments
23. Employee entitlements
24. Provisions
25. Other liabilities
Information about our group structure
26. Acquisition of businesses and
non-controlling interest
27. Subsidiaries
28. Deed of cross guarantee
29. Parent entity
Information about financial risks
and unrecognised items
30. Derivative financial instruments
31. Financial risk management
32. Contingent liabilities
33. Commitments
Other information
34. Share-based payments
35. Auditor’s remuneration
36. Events occurring after the reporting date
37. Related party transactions
Accounting policies
38. Significant accounting policies
39. New standards adopted
40. New standards and interpretations
not yet adopted
Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Cleanaway Waste Management Limited 2016 ANNUAL REPORT
29
29
Directors’ Report
The Directors present their Report (including the Remuneration Report) together with the Consolidated Financial Statements
of the Group, consisting of Cleanaway Waste Management Limited (the Company) and its controlled entities (Cleanaway
or the Group), for the financial year ended 30 June 2017 and the Independent Auditor’s Report thereon.
Directors
The names of Directors of the Company at any time during or since the end of the financial year are set out below. Directors
were in office for this entire period unless otherwise stated.
M P Chellew
V Bansal
R M Smith
E R Stein
T A Sinclair
R M Harding
P G Etienne
M M Hudson
Chairman and Non-Executive Director (appointed as Chairman on 30 September 2016)
Chief Executive Officer and Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (retired as Chairman on 30 September 2016 and as Non-Executive Director
on 26 October 2016)
The office of Company Secretary is held by D J F Last, LLB (Hons), B.Com, FGIA, GAICD.
Particulars of Directors’ qualifications, experience and special responsibilities can be found on pages 24 to 25.
Principal activities
During the financial year the principal activities of Cleanaway were:
Commercial and industrial, municipal and residential collection services for all types of solid waste streams,
•
including general waste, recyclables, construction and demolition waste and medical and washroom services;
Ownership and management of waste transfer stations, resource recovery and recycling facilities,
•
secure product destruction, quarantine treatment operations and landfills;
Sale of recovered paper, cardboard, metals and plastics to the domestic and international marketplace;
•
Collection, treatment, processing and recycling of liquid and hazardous waste, including industrial waste,
•
grease trap waste, oily waters and used mineral and cooking oils in packaged and bulk forms;
•
Industrial solutions including industrial cleaning, vacuum tanker loading, site remediation, sludge management,
parts washing, concrete remediation, CCTV, corrosion protection and emergency response services;
Refining and recycling of used mineral oils to produce fuel oils and base oils; and
•
Generation and sale of electricity produced utilising landfill gas.
•
There were no significant changes in the nature of the Group’s principal activities that occurred during the year.
Dividends and distributions
The Company declared a fully franked dividend on ordinary shares for the financial year ended 30 June 2017 of 2.1 cents per
share, being an interim dividend of 1.0 cents per share and final dividend of 1.1 cents per share. The record date of the final
dividend is 14 September 2017 with payment to be made 5 October 2017. The financial effect of the final dividend has not
been brought to account in the Financial Statements for the year ended 30 June 2017 and will be recognised in a subsequent
Financial Report.
Details of distributions in respect of the financial year are as follows:
RECOGNISED (PAID AMOUNTS)
Fully paid ordinary shares
Final dividend for 2016: 0.9 cents per share (2015: 0.8 cents per share)
Interim dividend for 2017: 1.0 cents per share (2016: 0.8 cents per share)
Total dividends and distribution paid
2017
$’M
14.3
15.9
30.2
2016
$’M
12.6
12.7
25.3
30
30
Directors’ Report
Directors’ Report
Review of results
Financial Results
The Group’s statutory profit after income tax for the year ended 30 June 2017 was $72.5 million (2016: $43.1 million) and
includes a gain on sale of $22.0 million (after tax $13.5 million) on the sale of two closed landfill sites in Brooklyn, Melbourne.
The Group substantially completed its restructuring programme during the year ended 30 June 2017 and incurred additional
expenses related to this programme of $14.6 million ($10.3 million after tax) compared with $23.2 million ($16.2 million
after tax) incurred on restructuring costs in the prior year.
The Group’s underlying profit after income tax (attributable to ordinary equity holders) for the year ended 30 June 2017
of $77.5 million was up by 22.4% on the prior year (2016: $63.3 million). During the year the Group has continued
to implement a variety of initiatives targeted at improving operating margins and overall profitability.
Operating review
The Group comprises two operating segments being Solids and Liquids & Industrial Services. Unallocated balances include the
Group’s share of profits from equity accounted investments and corporate balances. A description of the operating segments
and a summary of the associated segment results for the year are set out below:
Solids
Core business
Collections
Commercial and industrial (C&I), municipal and residential collection services for all types of solid
waste streams, including general waste, recyclables, construction and demolition waste and
medical and washroom services as well as resource recovery and recycling facilities, commodities
trading and secure product destruction and quarantine treatment operations.
Post Collections
Ownership and management of waste transfer stations and landfills, including the generation
and sale of electricity produced utilising landfill gas.
Financial metrics
Total revenue for the Solids segment increased by 0.4% to $1,062.5 million. Underlying
EBITDA 1 increased by 8.1% to $257.0 million. Underlying EBIT increased by 21.1% to
$137.6 million.
The Collections business reported both increased revenues and earnings for the period.
Revenue increased by 4.0% and underlying EBITDA increased by 7.4% compared to the
previous corresponding period.
The Post Collections business reported increased earnings for the period, however revenues
decreased as a result of the planned closure of the Erskine Park landfill, located in Sydney,
during the current period. Revenue decreased 7.3% and underlying EBITDA increased 9.3%
compared to the previous corresponding period.
Performance
Collections
Overall volumes and margins have increased compared to the previous corresponding period.
Market-facing growth initiatives continue to be implemented across all major solid waste
collection categories and contributed to increased revenues during the year.
Post Collections
The Post Collections business was impacted by the planned closure of the Erskine Park landfill,
located in Sydney, NSW during the period. Landfill volumes across most other landfills, were
higher than the corresponding period.
Market conditions for the Solids operating segment has remained consistent with the prior year.
The market conditions for the 2018 financial year are not expected to vary materially from the
2017 financial year. Solids’ main priorities in the 2018 financial year will revolve around
continued focus on revenue growth through further improvements in customer service,
operational improvements and deriving value from increased resource recovery, through the
Group’s growing network of resource recovery facilities.
Market review and
priorities
1
EBITDA represents earnings before interest, income tax, and depreciation, amortisation and impairments.
31
31
Directors’ ReportOVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Directors’ Report
Operating review (continued)
Liquids and Industrial Services
Core business
Liquids and Industrial Services is a leading operator in the areas of:
•
Liquids and Hazardous Waste – collection, treatment, processing, refining and recycling
of liquid and hazardous waste, including hydrocarbons, for disposal or re-sale.
•
Industrial Services – services include plant and asset maintenance capabilities, high pressure
cleaning, vacuum loading, hydro excavation/non-destructive digging, site remediation,
sludge management, concrete remediation, CCTV, corrosion protection and emergency
response services.
Financial metrics
Total revenue decreased by 2.9% to $424.0 million, as a result of continued weak market
conditions. Underlying EBITDA increased by 2.4% from $57.5 million to $58.9 million.
Performance
Overall market conditions were challenging during the year ended 30 June 2017.
Selling prices of both base and fuel oil for the current period were down compared to the
previous corresponding period due to the continued volatility in global oil prices. The revenue
decline has stabilised with an improvement in revenue in the second half of the reporting period.
Results were impacted by bringing forward a number of engineering improvements to the waste
oil refineries in New South Wales and Queensland which resulted in these facilities being shut
down for a short period during the year ended 30 June 2017. Stronger performance from the
Hydrocarbons business has been recorded following these shutdowns.
The improvement in underlying earnings and margins is the result of significant restructuring
activities and improvements in cost management.
Market review
and priorities
Market conditions for Liquids and Industrial Services remained difficult over the 2017 financial
year as the demand for services from the manufacturing and industrial sectors remained weak.
The market conditions for the 2018 financial year are not expected to vary materially from the
2017 financial year.
Liquids and Industrial Services’ main priorities in the 2018 financial year will be to maintain tight
cost control and key contracts.
32
32
Directors’ Report
Directors’ Report
Operating review (continued)
Group results for the year ended 30 June 2017
UNDERLYING ADJUSTMENTS
STATUTORY 1
$’M
RE-
STRUCTURING
COSTS 4
$’M
RE–
BRANDING
COSTS 5
$’M
ACQUISITION
COSTS 6
$’M
REMEDIATION
AND
RECTIFICATION
COSTS 7
$’M
GAIN ON SALE
OF
PROPERTIES 8
$’M
Solids
Liquids and Industrial
Services
Equity accounted
investments
Waste management
Corporate
EBITDA 2
Depreciation and
amortisation
Impairment of assets
Change in fair value of
non-landfill land and
buildings
EBIT 3
Net finance costs
Profit/(loss) before
income tax
Income tax
(expense)/benefit
Profit/(loss) after
income tax
Attributable to:
Ordinary equity holders
OTHER 9
$’M
UNDERLYING 1
$’M
257.0
58.9
1.2
317.1
(15.8)
301.3
(158.4)
–
–
142.9
(33.8)
–
–
–
0.6
0.6
0.3
3.8
2.4
(3.5)
(22.0)
3.9
–
–
0.4
–
–
–
–
(22.0)
–
314.0
(165.9)
(4.4)
(0.6)
143.1
(34.1)
6.6
3.6
4.4
–
14.6
–
109.0
14.6
–
–
–
3.8
–
3.8
(36.5)
(4.3)
(1.2)
72.5
10.3
72.5
10.3
2.6
2.6
–
–
–
2.4
–
2.4
2.0
4.4
4.4
0.4
(22.0)
0.9
109.1
(0.1)
8.5
–
(31.6)
0.3
(13.5)
0.3
(13.5)
0.9
0.9
77.5
77.5
1
The use of the term ‘Statutory’ refers to IFRS financial information and ‘Underlying’ refers to non-IFRS financial information. Underlying earnings are
categorised as non-IFRS financial information and therefore have been presented in compliance with ASIC Regulatory Guide 230 – Disclosing non-IFRS
information. The exclusion of underlying adjustments provides a result which, in the Directors’ view, more closely reflects the ongoing operations of the
Group. The non-IFRS financial information is unaudited.
EBITDA represents earnings before interest, income tax, and depreciation, amortisation and impairments.
EBIT represents earnings before interest and income tax.
Relates to costs, accelerated depreciation and impairment of assets associated with the organisational restructure activities, ceased projects and site closures.
Relates to costs incurred during the period to rebrand the Group to ‘Cleanaway’ (effective 1 February 2016) and reflects part of the spend to be incurred.
2
3
4
5
6 Acquisition costs include transaction costs and other costs associated with the acquisition of businesses during the period. Tax expense on acquisition costs
relates to the tax consequences of acquiring the 50% non-controlling interest in Cleanaway Refiners of $2.3 million less deductions available on acquisition
costs of $0.3 million.
Relates to a reduction in the remediation and rectification provision in relation to closed landfill sites and the accelerated depreciation of site infrastructure
related to closing landfill sites.
7
8 On 3 March 2017, the Group sold two closed landfill sites in Brooklyn, Melbourne for proceeds of $0.8 million.
9 Net finance costs relate to the foreign exchange gain on the USPP borrowings of $2.3 million offset by fair value changes on the mark-to-market valuation
of derivative financial instruments of $2.6 million.
33
33
Directors’ ReportOVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Directors’ Report
Operating review (continued)
Group results for the year ended 30 June 2016
Solids
Liquids and Industrial Services
Equity accounted investments
Waste management
Corporate
EBITDA 2
Depreciation and amortisation
Change in fair value of non-landfill land and buildings
EBIT 3
Net finance costs
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) after income tax
Attributable to:
Ordinary equity holders
Non-controlling interest
UNDERLYING ADJUSTMENTS
STATUTORY 1
$’M
RESTRUCTURING
COSTS 4
$’M
REBRANDING
COSTS 5
$’M
OTHER
$’M
257.1
(160.8)
(0.2)
96.1
(34.5)
61.6
(18.5)
43.1
44.8
(1.7)
43.1
21.1
2.1
–
23.2
–
23.2
(7.0)
16.2
16.2
–
16.2
3.6
–
–
3.6
–
3.6
(1.1)
2.5
2.5
–
2.5
(0.5)
–
0.2
(0.3)
–
(0.3)
0.1
(0.2)
(0.2)
–
(0.2)
UNDERLYING 1
$’M
237.7
57.5
1.3
296.5
(15.2)
281.3
(158.7)
–
122.6
(34.5)
88.1
(26.5)
61.6
63.3
(1.7)
61.6
1
2
3
4
5
The use of the term ‘Statutory’ refers to IFRS financial information and ‘Underlying’ refers to non-IFRS financial information. Underlying earnings are
categorised as non-IFRS financial information and therefore have been presented in compliance with ASIC Regulatory Guide 230 – Disclosing non-IFRS
information. The exclusion of underlying adjustments provides a result which, in the Directors’ view, more closely reflects the ongoing operations of the
Group. The non-IFRS financial information is unaudited.
EBITDA represents earnings before interest, income tax, and depreciation, amortisation and impairments.
EBIT represents earnings before interest and income tax.
Relates to costs and accelerated depreciation associated with the organisational restructure activities, ceased projects and site closures.
Relates to costs incurred during the period to rebrand the Group to ‘Cleanaway’ (effective 1 February 2016) and reflects part of the spend to be incurred.
34
34
Directors’ Report
Directors’ Report
Operating review (continued)
Principal risks
The material business risks that could adversely impact the Group’s financial prospects in future periods are economic growth
and the regulatory environment.
Economic growth
Regulatory
environment
The state of the economy and the sectors of the economy to which the Group is exposed
materially impacts future prospects. Factors which have impacted results in recent periods
include increases and decreases in GDP and CPI, increases and decreases in the manufacturing,
industrial and construction industries and resource sector activity.
The regulatory environment materially impacts future prospects. Regulatory requirements which
have impacted historical results include state-based waste levies, carbon tax, environmental
regulations and planning regulations. Regulatory requirements, including environmental
regulations impacting waste management activities, have increased over time and could
potentially increase in the future.
The Group manages these risks in accordance with ASX Principle 7: Recognise and manage risk as set out in the Group’s
Corporate Governance Statement.
Financial position review
Operating cash flows decreased by 0.6% to $189.6 million (2016: increase of 8.2% to $190.7 million) due mainly to tax
payments of $8.6 million incurred during the year ended 30 June 2017 compared with receipt of a tax refund of $7.4 million
in the prior year.
The Group’s net assets have increased from $1,781.5 million to $1,825.0 million. At 30 June 2017 the Group had a net
current asset deficiency of $45.6 million (30 June 2016: net current asset surplus of $10.1 million). The net current asset
deficiency arises mainly due to the reclassification of the US Private Placement Notes (USPP Notes) as they mature in
December 2017. As set out in note 15, the Group has unutilised debt facilities of $230.2 million at 30 June 2017, available
to repay the USPP Notes and therefore the Directors are satisfied that the Group can meet its financial obligations as and
when they fall due.
At balance date the Group had total syndicated debt facilities of $600.0 million (2016: $600.0 million), USPP Notes of
US$48.0 million (2016: US$48.0 million) and an uncommitted bank guarantee facility of $60.0 million (2016: $60.0 million).
Significant changes in the state of affairs
Other than matters mentioned in this Report, no other significant changes in the state of affairs of the Group occurred
during the financial year under review.
Events subsequent to reporting date
On 3 July 2017 the Group acquired the assets and business of SA Waste for $12.2 million. The SA Waste business provides
waste collection and resource recovery services in Adelaide, South Australia and owns and operates two resource recovery
facilities. The initial accounting for the business combination was incomplete at the time the Group’s financial statements
were authorised for issue, and accordingly details of the financial effect of the business combination have not been disclosed.
On 17 August 2017 the Group entered into a funding agreement with the Clean Energy Finance Corporation. The agreement
provides the Group with a $90.0 million unsecured loan on a fixed rate 8 year term.
Likely developments and expected results of operations
The Group will continue to pursue strategies aimed at improving the profitability, return on capital employed and market
position of its principal activities during the next financial year.
Disclosures of information regarding the likely developments in the operations of the Group and the expected results
of those operations in future financial years have been included in the Operating Review section of this Report.
35
35
Directors’ ReportOVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Directors’ Report
Environmental regulation
The Group’s operations are subject to significant environmental regulation and the Group holds environmental licences
for its sites.
The Group is committed to achieving the highest standards of environmental performance. There were no material breaches
of environmental statutory requirements and no material prosecutions during the year. Aggregate fines paid during the year
to the date of signing this Annual Report were $142,004 (2016: $47,102).
The Group is registered under the National Greenhouse and Energy Reporting Act 2007, under which it is required to report
energy consumption and greenhouse gas emissions for its Australian facilities.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its
audit engagement agreement, against claims by third parties arising from the audit (for an unspecified amount). No payment
has been made to indemnify Ernst & Young during or since the end of the financial year.
Directors’ meetings
The number of Directors’ meetings and Committee meetings, and the number of meetings attended by each of the Directors
who was a member of the Board and the relevant Committee, during the financial year were:
BOARD
MEETINGS
AUDIT AND
RISK COMMITTEE
HEALTH, SAFETY AND
ENVIRONMENT COMMITTEE
REMUNERATION AND
NOMINATION COMMITTEE
MEETINGS
HELD WHILE
A DIRECTOR
NUMBER
ATTENDED
MEETINGS
HELD WHILE
A MEMBER
NUMBER
ATTENDED
MEETINGS
HELD WHILE
A MEMBER
NUMBER
ATTENDED
MEETINGS
HELD WHILE
A MEMBER
NUMBER
ATTENDED
Directors
M P Chellew 1
V Bansal
R M Smith 2
E R Stein
T A Sinclair
R M Harding 3
P G Etienne 4
M M Hudson 5
6
6
6
6
6
6
6
2
6
6
6
6
6
6
6
2
–
–
4
4
4
–
4
–
–
–
4
4
4
–
4
–
1
–
–
4
–
4
4
–
1
–
–
4
–
4
4
–
1
–
4
–
4
4
–
–
1
–
4
–
4
4
–
–
1 Appointed as Board Chairman on 30 September 2016. Ceased as Chairman of the Health, Safety and Environment Committee and a member of the
Remuneration and Nomination Committee following his appointment as Board Chairman.
2 Chairman of Audit and Risk Committee.
3 Chairman of Remuneration and Nomination Committee.
4 Appointed Chairman of the Health, Safety and Environment Committee on 26 October 2016.
5
Retired as Board Chairman and Director on 30 September 2016 and 26 October 2016 respectively.
Directors’ interests
The relevant interests of each Director in the shares and performance rights over such instruments issued by Cleanaway
Waste Management Limited, as notified by the Directors to the Australian Securities Exchange in accordance with
section 205G(1) of the Corporations Act 2001, as at the date of this report is as follows:
Directors
M P Chellew
V Bansal
R M Smith
E R Stein
T A Sinclair
R M Harding
P G Etienne
ORDINARY
SHARES
PERFORMANCE
RIGHTS
75,000
631,197
65,715
80,989
38,789
12,644
13,737
–
5,208,936
–
–
–
–
–
36
36
Directors’ Report
Directors’ Report
Shares under option
During the financial year ended 30 June 2017 and up to the date of this Report, no options were granted over unissued
shares. As at the date of this Report there are no unissued ordinary shares of the Company under option.
Details of performance rights granted under the short term incentive and long term incentive offers in the 2017 and 2016
financial year are set out in the Remuneration Report. Total performance rights outstanding as at 30 June 2017 are
13,971,599 (2016: 10,747,370). Performance rights outstanding at the date of this report are 13,133,172.
Shares issued on the exercise of performance rights
During the financial year ended 30 June 2017 and up to the date of this report, the Company issued 1,622,355 shares
as a result of the exercise of performance rights that vested during the year. During the financial year ended 30 June 2016
and up to the date of the 2016 report, the Company issued 1,245,350 ordinary shares as a result of the exercise
of performance rights that vested on 30 June 2016.
Directors’ and officers’ insurance
During the financial year, the Company paid insurance premiums to insure the Directors and Officers of the Company.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
against the Directors and Officers in their capacity as Directors and Officers of entities in the Group, and any other payments
arising from liabilities incurred by the Directors and Officers in connection with such proceedings. This does not include such
liabilities that arise from conduct involving a wilful breach of duty by the Directors and Officers or the improper use by the
Directors and Officers of their position or of information to gain advantage for themselves or someone else or to cause
detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against
legal costs and those relating to other liabilities. Disclosure of the premium paid is not permitted under the terms of the
insurance contract.
Non-audit services
The Company may decide to employ the auditors on assignments additional to their statutory audit duties where the
auditors’ expertise and experience with the Company and/or the Group are relevant. During the financial year ended
30 June 2017 non-audit services included other advisory services.
The Directors have considered the position and in accordance with written advice provided by resolution to the Audit
Committee, is satisfied that the provision of the non-audit services is compatible with, and did not compromise, the auditor
independence requirements of the Corporation Act 2001 for the following reasons:
All non-audit services were subject to the corporate governance procedures adopted by the Company to ensure they
•
do not impact the integrity and objectivity of the auditor; and
The non-audit services provided do not undermine the general principles relating to auditor independence as set out
•
in APES 110 Code of Ethics for Professional Accountants, as they did not involve the reviewing or auditing the auditor’s
own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the
Company or jointly sharing risks and rewards.
Details of the amounts paid or payable to the auditor and its related practices for audit and non-audit services are set out below.
Ernst & Young:
Audit services
Audit related services
Non-audit services:
Other advisory services
Total
2017
$
2016
$
968,625
82,235
1,435,270
9,000
20,600
1,071,460
–
1,444,270
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out
on page 55.
37
37
Directors’ ReportOVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Directors’ Report
Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191 issued by the Australian Securities and
Investments Commission, relating to the “rounding off” of amounts in the Directors’ Report. Amounts in the Directors’
Report have been rounded off in accordance with that Legislative Instrument to the nearest hundred thousand dollars or,
in certain cases, to the nearest dollar.
This Report, including the Remuneration Report set out on pages 39 to 54, is made in accordance with a resolution
of the Board.
M P Chellew
Chairman and Non-Executive Director
Melbourne, 22 August 2017
V Bansal
Chief Executive Officer and Managing Director
38
38
Directors’ Report
Remuneration Report (Audited)
Introduction
The Directors of Cleanaway Waste Management Limited present the Company’s Remuneration Report (the Report) which
forms part of the Directors’ Report for the financial year ended 30 June 2017.
This Report outlines the remuneration arrangements for Key Management Personnel (KMP) of the Group in accordance
with the requirements of the Corporations Act 2001 and its Regulations. The information in this Report has been audited
as required by section 308(3C) of the Corporations Act 2001.
Contents
The Report contains the following sections:
1. Key management personnel
2. Governance and role of the board
3. Non-Executive Directors’ remuneration
4. Executive reward strategy and framework
5. Executive key management personnel – reward outcomes
6. Executive key management personnel – contract terms
7. Executive key management personnel – additional remuneration tables
8. Shareholdings and other related party transactions
1.
1. Key management personnel
Key management personnel
PAGE
39
40
41
42
44
51
52
54
For the purposes of this Report, KMP are defined as those persons having authority and responsibility for planning, directing
and controlling the major activities of the Group, directly or indirectly, including any Director (whether Executive
or otherwise) of the Company.
KMP for the year ended 30 June 2017 includes the Non-Executive Directors, the Chief Executive Officer (CEO) & Managing
Director, and the Chief Financial Officer (CFO). Key changes during the year were:
•
The retirement of Mr Hudson as Chairman and Non-Executive Director;
The appointment of Mr Chellew as Chairman; and
•
The departure of Mr Aardsma as the Executive General Manager – Sales & Marketing.
•
The KMP disclosed in this Report for the year ended 30 June 2017 are detailed in the following table:
NAME
TITLE
NON-EXECUTIVE DIRECTORS
M P Chellew 1
R M Smith
E R Stein
T A Sinclair
R M Harding
P G Etienne
Chairman and Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
FORMER NON-EXECUTIVE DIRECTOR
M M Hudson 2
Chairman and Non-Executive Director
EXECUTIVES
V Bansal
B J Gill
FORMER EXECUTIVE
D A Aardsma 3
Chief Executive Officer (CEO) & Managing Director
Chief Financial Officer (CFO)
Executive General Manager – Sales & Marketing
1 Mr Chellew was appointed as Chairman on 30 September 2016.
2 Mr Hudson retired as Chairman on 30 September 2016 and as Non-Executive Director on 26 October 2016.
3 Mr Aardsma was employed on the basis of a fixed term Agreement and ceased to be a KMP prior to 1 July 2016.
PERIOD KMP
(IF LESS THAN FULL YEAR)
Until 26 October 2016
39
39
Remuneration Report (Audited)OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Remuneration Report (Audited)
2. Governance and role of the board
2. Governance and role of the board
2A. Remuneration and nomination committee
The Remuneration and Nomination Committee (Committee) assists the Board in its oversight of the Group’s: remuneration
and incentives strategy and arrangements; recruitment, retention and succession plans for the Board and executive
management team; corporate culture and engagement; and diversity and inclusion strategy.
The Committee’s charter is available online at: http://www.cleanaway.com.au/for-investors/corporate-governance/
The Committee is comprised entirely of independent Non-Executive Directors: Mike Harding (Chairman), Ray Smith,
Terry Sinclair and Mark Chellew, up until his appointment as Chairman on 30 September 2016. Other Non-Executive
Directors, who are not Committee members, are entitled to attend meetings as observers. The CEO and other Executives
are invited to attend Committee meetings as required, however they do not participate in decisions concerning their own
remuneration arrangements.
2B. Engagement of remuneration consultants
Under the Committee’s charter, the Committee, or any individual member, has the authority, with the Chairperson’s
consent, to seek any information it requires from any employee or external party.
In accordance with the Corporations Act 2001, any engagement of a remuneration consultant to provide a remuneration
recommendation in respect of KMP must be approved and received by the Committee. The remuneration recommendation
must be accompanied by a declaration from the remuneration consultant that it was free from undue influence of KMP.
For the year ended 30 June 2017, the committee requested remuneration recommendations from 3 degrees consulting
regarding remuneration levels for the executive management team, Non-Executive Director fees and long term incentive
design. 3 degrees consulting provided a formal declaration to the Chairman of the Board confirming that its
recommendations were made free from undue influence by the member or members of the KMP to whom the
recommendations related and, in view of this declaration and the process adopted in the engagement of 3 degrees
consulting and receipt of its recommendations, the Board is satisfied that each of the recommendations were free of undue
influence by such persons. The fees paid to 3 degrees consulting for these recommendations was $26,200 (2016: nil).
In addition to the above, 3 degrees consulting was engaged to provide broad ranging services to the Company during the
year ended 30 June 2017 including the provision of other market data and other remuneration related services and was paid
$85,900 (2016: nil) for these services.
40
40
Remuneration Report (Audited)
Remuneration Report (Audited)
3. Non-Executive Directors’ remuneration
3. Non-Executive Directors’ remuneration
3A. Current Non-Executive Director fees
The remuneration received by Non-Executive Directors for the years ended 30 June 2017 and 30 June 2016 is set out in the
following table:
NON-EXECUTIVE DIRECTORS
M P Chellew
R M Smith
E R Stein
T A Sinclair
R M Harding
P G Etienne
FORMER NON-EXECUTIVE DIRECTOR
M M Hudson
Total
FINANCIAL YEAR
SALARY AND FEES
$
SUPERANNUATION
BENEFITS
$
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
247,108
132,724
149,303
141,878
126,414
114,418
126,409
114,418
140,149
132,724
136,714
114,418
78,214
280,692
1,004,311
1,031,272
18,040
12,609
14,184
13,478
12,009
10,869
12,009
10,869
13,314
12,609
12,988
10,869
5,675
19,308
88,219
90,611
TOTAL
$
265,148
145,333
163,487
155,356
138,423
125,287
138,418
125,287
153,463
145,333
149,702
125,287
83,889
300,000
1,092,530
1,121,883
3B. Aggregate fee limit
The current aggregate amount of remuneration that can be paid to Non-Executive Directors of $1,200,000 was approved
by shareholders at the Company’s 2010 Annual General Meeting.
For the year ended 30 June 2017, the aggregate remuneration paid to all Non-Executive Directors was $1,092,530.
This represents a decrease of 2.6% compared with FY2016 and reflects the reduced number of Non-Executive Directors
following the retirement of Mr Hudson.
Fee structure
3C.
The fee structure (inclusive of superannuation) for the year ended 30 June 2017 is detailed in the following table:
Chairman
Non-Executive Director
BOARD
$
300,000
128,419
AUDIT AND
RISK COMMITTEE
$
30,069
5,000
HEALTH, SAFETY
AND ENVIRONMENT
COMMITTEE
$
20,046
5,000
REMUNERATION
AND NOMINATION
COMMITTEE
$
20,046
5,000
The Board has conducted a review of Non-Executive Director fees and has approved, with effect from 1 July 2017, a 2.5%
increase in the Non-Executive Director and Chairman base fees and an increase to Committee membership fees to $7,500
for each Committee membership. The Board took into consideration a number of factors including the additional time
commitment of Committee membership due to the reduced size of the Board since Mr Hudson’s retirement and the need
to ensure Non-Executive Director fees remain competitive with peer companies. The maximum aggregate fee limit for
Non-Executive Directors remains unchanged at $1,200,000.
The fee structure (inclusive of superannuation) from 1 July 2017 is detailed in the following table:
Chairman
Non-Executive Director
BOARD
$
307,500
131,629
AUDIT AND
RISK COMMITTEE
$
30,069
7,500
HEALTH, SAFETY
AND ENVIRONMENT
COMMITTEE
$
20,046
7,500
REMUNERATION
AND NOMINATION
COMMITTEE
$
20,046
7,500
41
41
Remuneration Report (Audited)OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Remuneration Report (Audited)
4. Executive reward strategy and framework
4. Executive reward strategy and framework
4A. Strategy and framework
The Group’s remuneration strategy is designed to attract, retain and motivate high calibre executives to ensure the
sustainable success of the Group for the benefit of all stakeholders. To achieve this, the Group ensures its executive
remuneration arrangements satisfy the following key criteria:
Alignment to the Group’s business strategy;
•
Competitive and reasonable as benchmarked against the external market;
•
Performance linked to individual and financial performance; and
•
Aligned to long term shareholder value.
•
The Board, upon the recommendation of the Remuneration and Nomination Committee, has developed a structure driven
by these key criteria which comprises a mix of fixed and variable (at risk) remuneration components illustrated in the
table below.
CLEANAWAY REMUNERATION STRATEGY
Align remuneration to the
Group’s business strategy
Remunerate competitively
to attract, motivate and
retain talent
Link outcomes to the
Group’s financial
performance and individual
strategic objectives
Align to long term
shareholder value
CLEANAWAY REMUNERATION STRUCTURE
TFR
Total Fixed Remuneration
STI
Short Term Incentive (at risk)
LTI
Long Term Incentive (at risk)
CASH
EQUITY
Annual TFR (Base Salary
plus superannuation)
Set based on market and
internal relativities,
performance and experience
80% of STI outcome paid
in September after
financial year end
STI outcome
based on the Group’s
annual financial and
individual performance
20% of STI outcome
is deferred as
Performance rights
Performance rights are
restricted for one year
LTI Performance rights
subject to performance
conditions over three years
50% subject to TSR
25% subject to ROIC
25% subject to EPS
42
42
Remuneration Report (Audited)
Remuneration Report (Audited)
4. Executive reward strategy and framework (continued)
4. Executive reward strategy and framework (c)
4B. Remuneration elements and mix
For the year ended 30 June 2017, the Board reviewed the remuneration mix for Executive KMP to determine appropriate
internal and external relativities. The target remuneration mix for Mr Bansal remained unchanged. The LTI opportunity for
Mr Gill was increased to 30% of TFR at target and 60% of TFR at maximum. The table below illustrates the FY17 target
remuneration mix for Executive KMP. The variable components of STI and LTI are expressed at target.
CEO
40%
24%
6%
36% Equity
30%
22% Equity
Other KMP
56%
22%
5%
17%
TFR
STI Cash
STI Deferred (equity)
LTI (equity)
4C. Shareholding guideline
The CEO and Executive team are encouraged to build and maintain a shareholding in the Company equivalent to:
CEO – 100% of annual total fixed remuneration (TFR); and
•
Executive management team – 50% of annual TFR.
•
It is expected that this shareholding will be accumulated within five years from 1 July 2015, or the initial appointment date
to an Executive role, whichever is later.
The number of performance rights and ordinary shares in the Company held by each Executive KMP is set out in sections 7A, 7B
and 8A.
43
43
Remuneration Report (Audited)OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Remuneration Report (Audited)
5. Executive key management personnel – reward outcomes
5. Executive key management personnel – reward outcomes
5A. Remuneration received
The remuneration received or receivable by Executive KMP for the years ended 30 June 2017 and 30 June 2016 is set out
in the following table:
FINANCIAL
YEAR
SALARY
AND FEES
$
OTHER
CASH
$
NON-
MONETARY
BENEFITS
$
STI
CASH
$
SHARE-BASED
PAYMENTS 1
$
POST
EMPLOY-
MENT
BENEFITS
$
TERMINA-
TION PAY
$
TOTAL
$
PERFOR-
MANCE
RELATED
B J Gill
EXECUTIVE KEY MANAGEMENT PERSONNEL
V Bansal 2
2017 1,217,884
2016 1,082,300
616,061
2017
607,066
2016
FORMER EXECUTIVE KEY MANAGEMENT PERSONNEL
D A Aardsma 3
J Perko 4
A G Roderick 5
R C Boucher Jr 6
Total
– 982,722
– 956,150
– 335,614
– 214,800
96,602 1,206,001 19,616
668,895 17,699
60,090
93,835 19,616
–
165,162 19,308
–
– 3,522,825
– 2,785,134
– 1,065,126
– 1,006,336
648,537 260,000 573,600
2016
–
164,539
2016
–
–
486,882
2016
–
–
2016
–
–
2017 1,833,945
– 1,318,336
2016 2,989,324 260,000 1,744,550 211,221
99,391
36,909
4,544
10,287
–
96,602 1,299,836 39,232
– 1,581,528
–
9,636
–
(191,812)
980,337
(194,431) 14,481 668,861
–
10,287
– 4,587,951
447,814 51,488 668,861 6,373,258
–
–
–
62%
58%
40%
38%
36%
0%
0%
0%
1
Share-based payments consist of performance rights. The fair value of the performance rights is measured at the date of grant using Monte Carlo simulation
and the Black Scholes model and is allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed is the
portion of the fair value of the performance rights recognised as an expense in each reporting period, net of any reversals for forfeited performance rights
or changes in the probability of performance rights vesting. Performance rights include the expense relating to the deferred share component of STI.
2 Non-monetary benefits comprise costs associated with Mr Bansal’s accommodation in Melbourne and travel between Sydney and Melbourne.
3 Other cash comprises Mr Aardsma’s international service premium reflecting the expatriate nature of his assignment. Non-monetary benefits comprise costs
associated with Mr Aardsma’s relocation from the USA, personal travel between Australia and the USA, health insurance, tax preparation and car parking.
4 KMP until 11 September 2015. Non-monetary benefits comprises costs associated with Mr Perko’s travel between Australia and the USA and health
insurance. No termination pay provided.
5 KMP until 31 March 2016. Non-monetary benefits comprise costs associated with provision of a fuel card and e-tag. Termination pay represents payment
in lieu of notice.
6 KMP until 26 June 2015. During the year ended 30 June 2016, the Company paid PwC $10,287 for the preparation of Mr Boucher’s Australian and US
tax returns.
An explanation of the key remuneration elements (TFR, STI and LTI) as well as FY2017 outcomes is provided in the
following sections.
44
44
Remuneration Report (Audited)
Remuneration Report (Audited)
5. Executive key management personnel – reward outcomes (continued)
5. Executive key management personnel – reward outcomes (c)
5B. Total fixed remuneration
TFR consists of base salary plus statutory superannuation contributions and other non-monetary benefits such as car parking.
Executives receive a fixed remuneration package which is reviewed annually by the Committee and the Board taking into
consideration the following factors:
Company and individual performance;
•
The responsibilities of the role;
•
The qualifications and experience of the incumbent; and
•
Benchmark market data including those companies with which the Company competes for talent.
•
There are no guaranteed base pay increases included in any Executive KMP contract.
FY2017 total fixed remuneration outcomes
Executive KMP fixed remuneration was reviewed during the annual remuneration review along with other management
with the following outcomes:
Mr Bansal received a total increase in TFR of 4.2% from $1,200,000 to $1,250,000 effective 1 October 2016; and
•
Mr Gill received a total increase in TFR of 3.0% from $621,688 to $640,339 effective 1 October 2016.
•
FY2017 short term incentive
5C.
For the year ended 30 June 2017, Executive KMP and other senior executives and eligible employees participated in the
Group STI plan.
The table below represents the target and maximum annual STI opportunity as a percentage of TFR for Executive KMP
in 2017:
EXECUTIVE KEY MANAGEMENT PERSONNEL
V Bansal
B J Gill
FY2017
TARGET
FY2017
MAXIMUM
75%
50%
150%
100%
45
45
Remuneration Report (Audited)OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Remuneration Report (Audited)
5. Executive key management personnel – reward outcomes (continued)
5. Executive key management personnel – reward outcomes (c)
5C.
FY2017 short term incentive (continued)
Key features of the FY2017 STI plan
Purpose of the STI plan
Reward the achievement of key financial, health, safety & environment and if applicable,
individual KPI metrics that are key to the sustainable success of Cleanaway.
Performance period
1 July 2016 to 30 June 2017
Gateway
Achievement of a gateway based on budgeted Group EBITDA for Executive KMP.
•
The use of EBITDA as a gateway performance measure aligns executive management’s
focus on annual financial objectives.
•
Business Unit heads and other management roles also have gateways based on financial
or key strategic non-financial objectives.
•
Two critical health, safety and environment (HSE) metrics also act as gateway conditions:
That there are no work-related deaths; and
That there are no significant rated environmental incidents.
Key Performance
Metrics
Financial metrics – 80% weighting
•
HSE metrics – 20% weighting
•
Financial metrics
•
The three financial metrics and their respective weightings are:
Health, Safety &
Environment (HSE)
metrics
Group EBITDA – 30% weighting
Group Net Revenue – 20% weighting. Included as it reflects growth in our business.
Group Net Profit After Tax Return on Invested Capital (NPAT ROIC) – 30%
weighting. Included as it is aligned with Cleanaway’s focus on improving the returns
from the net assets employed in our business.
•
The two HSE metrics and their respective weightings are:
Group Total Recordable Injury Frequency Rate (TRIFR) – 15% weighting. Included
as it measures the outcome of our injury prevention strategies and programs.
Group Environmental Incidents – 5% weighting. Included as it measures the
outcome effectiveness of our environmental risk management strategies and
programs.
•
Each HSE metric has a threshold, target and stretch level of performance with
a corresponding STI outcome per schedule below.
Performance outcomes
Once gateways are achieved, performance against all financial and HSE metrics have
•
the following threshold, target and stretch STI outcomes:
Below threshold – 0%
At threshold – 75% of on-target STI opportunity
At target – 100% of on-target STI opportunity
At stretch – 200% of on-target STI opportunity
Deferral
•
•
20% of STI awarded to Executive KMP and Executive Management is deferred for
12 months in the form of deferred performance rights.
Performance rights are granted at face value determined by the volume weighted average
price of Cleanaway’s shares on the ASX during the period 24 June to 30 June 2017.
•
Performance rights do not attract dividends during the deferral period.
46
46
Remuneration Report (Audited)
Remuneration Report (Audited)
5. Executive key management personnel – reward outcomes (continued)
5. Executive key management personnel – reward outcomes (c)
5C.
FY2017 short term incentive (continued)
FY2017 short term incentive outcomes
The progress Cleanaway has achieved in its operational business performance for the year ended 30 June 2017 is reflected
in its improved financial and HSE outcomes. The STI payments received or receivable by Executive KMP for the year ended
30 June 2017 reflect these financial and non-financial results and are summarised in the following table:
TOTAL STI
$
CASH
COMPONENT 1
$
DEFERRED
SHARE
COMPONENT 1
$
PERCENTAGE OF
TARGET STI
OPPORTUNITY 2
PERCENTAGE OF
MAXIMUM STI
OPPORTUNITY 2
EXECUTIVE KEY MANAGEMENT PERSONNEL
V Bansal
B J Gill
FORMER EXECUTIVE KEY MANAGEMENT PERSONNEL
D A Aardsma
2017
2016
2017
2016
1,228,403
1,195,200
419,517
268,500
982,722
956,150
335,614
214,800
245,681
239,050
83,903
53,700
131.0%
146.0%
131.0%
86.4%
65.5%
73.0%
65.5%
43.2%
2016
573,600
573,600
–
127.5%
63.7%
1 As summarised in section 4A and 4B, Executive KMP STI is subject to 20% deferral for one year as performance rights.
2 Calculated based on total STI as a percentage of target and maximum STI opportunities respectively.
5D. Prior year short term incentive awards
As participants in the FY2016 STI, Mr Bansal and Mr Gill had part of their total STI award deferred as performance rights for
12 months. The vesting of these deferrals was subject to remaining employed by the Group throughout the deferral period.
Accordingly, these awards have vested as follows:
Mr Bansal’s FY2016 STI deferred component vested on 30 June 2017 (302,250 performance rights); and
•
•
Mr Gill’s FY2016 STI deferred component vested on 30 June 2017 (67,897 performance rights).
•
•
FY2017 long term incentive
5E.
Offers under the Cleanaway Long Term Incentive (LTI) Plan are made on an annual basis. For the year ended 30 June 2017,
an LTI offer was made to Mr Bansal following shareholder approval at the Company’s 2016 AGM as well as to other senior
executives including Mr Gill.
The table below represents the target and maximum annual LTI opportunity as a percentage of TFR for Executive KMP:
EXECUTIVE KEY MANAGEMENT PERSONNEL
V Bansal
B J Gill
FY2017
TARGET
FY2017
MAXIMUM
75%
30%
150%
60%
Following a review of LTI arrangements, the Board introduced an additional performance hurdle for the FY2017 LTI plan
so that 25% of performance rights granted will be subject to the achievement of Earnings per Share Compound Annual
Growth Rate (EPS CAGR) targets over the three year performance period.
The details of the FY2017 LTI offer are summarised in the table below. The number of performance rights granted to each
Executive KMP for the year ended 30 June 2017 is outlined in section 7A. The number of performance rights each Executive
KMP has on issue as at 30 June 2017 is outlined in section 7B.
47
47
Remuneration Report (Audited)OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Remuneration Report (Audited)
5. Executive key management personnel – reward outcomes (continued)
5. Executive key management personnel – reward outcomes (c)
5E.
FY2017 long term incentive (continued)
Key features of the FY2017 LTI plan
Purpose of the LTI plan
Focus Executive performance on drivers of shareholder value over a three year horizon
•
Align interests of Executive with those of shareholders
•
Performance period
1 July 2016 to 30 June 2019
Form of award
Performance rights
Number of Performance
Rights
Performance rights are granted at face value as a % of participant TFR.
•
The number of rights was determined by dividing a participant’s LTI opportunity by the
•
volume weighted average price (VWAP) of Cleanaway’s shares on the ASX during the
period 24 June to 30 June 2016.
Performance hurdles
Performance rights issued under the FY2017 plan are subject to three performance hurdles:
50% of the performance rights will be subject to relative Total Shareholder Return (TSR)
•
targets over the performance period. The Board considers relative TSR to be an
appropriate performance measure for Executive KMP reward as it focuses on the extent
to which shareholder returns (being income and capital gain) are generated relative
to the performance of a peer group of industrial companies of similar size (being the
constituents of the S&P/ASX200 Industrial Sector Index);
25% of the performance rights will be subject to Return On Invested Capital (ROIC) for the
•
year ending 30 June 2019. The Board considers ROIC to be an appropriate performance
measure for Executive KMP reward as it focuses on managing both the financial returns and
the invested capital base used to generate those returns; and
25% of the performance rights will be subject to Earnings per Share Compound
•
Annual Growth Rate (EPS CAGR). The Board considers EPS CAGR to be an appropriate
performance measure for Executive KMP reward as it represents an accurate measure
of short term and long term sustainable profit.
Vesting date
14 days after the release of the financial results for the financial year ending 30 June 2019.
Retesting
No retesting is available. LTI performance rights are only tested once at the end of the
relevant performance period and unvested rights lapse.
Dividends
LTI performance rights do not attract dividends.
Restriction on trading
Vested shares arising from performance rights may only be traded during trading windows
as stipulated in the Company’s Securities Trading Policy and with the approval of the
Chairman of the Board.
Where a participant resigns or is terminated prior to the end of the performance period,
the performance rights are forfeited unless the Board applies its discretion. The Board also
has discretion to determine the extent of vesting in the event of a change of control,
or where a participant dies, becomes permanently disabled, retires or is made redundant.
Performance rights lapse when performance hurdles are not met.
Issued: 4,672,668 all of which remain on issue as at 30 June 2017.
Forfeiture and Lapsing
Conditions
Number of performance
rights issued and
number remaining
on issue as at
30 June 2017
48
48
Remuneration Report (Audited)
Remuneration Report (Audited)
5. Executive key management personnel – reward outcomes (continued)
5. Executive key management personnel – reward outcomes (c)
5E.
FY2017 long term incentive (continued)
FY2017 LTI performance hurdle vesting conditions
Performance rights issued under the FY2017 plan are subject to three performance measures with the following performance
vesting schedules:
Relative TSR performance
measured over 3 years
from 1 July 2016 to
30 June 2019
ROIC performance as
measured for the year
ending 30 June 2019
EPS CAGR performance
measured over 3 years
from 1 July 2016 to 30
June 2019
Relative Total Shareholder Return (TSR) Ranking against the constituents of the S&P/ASX200
Industrial Sector Index:
Below 50th percentile – 0% vesting
•
At the 50th percentile – 50% vesting
•
50th to 75th percentile – straight line vesting between 50% and 100%
•
Above 75th percentile – 100% vesting
•
Return On Invested Capital (ROIC) to be achieved:
< 4.5% – 0% vesting
•
4.5% – 20% vesting
•
> 4.5% – ≤ 5.5% – straight line vesting between 20% and 50%
•
> 5.5% – ≤ 6.5% – straight line vesting between 50% and 100%
•
> 6.5% – 100% vesting
•
Earnings per Share Compound Annual Growth Rate (EPS CAGR) to be achieved:
< 7.5% – 0% vesting
•
7.5% – 20% vesting
•
> 7.5% – ≤ 10.0% – straight line vesting between 20% and 50%
•
> 10.0% – ≤ 12.5% – straight line vesting between 50% and 100%
•
> 12.5% – 100% vesting
•
49
49
Remuneration Report (Audited)OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Remuneration Report (Audited)
5. Executive key management personnel – reward outcomes (continued)
5. Executive key management personnel – reward outcomes (c)
Prior long term incentive awards
5F.
The following table outlines the terms of the outstanding LTI offers made from FY2014 to FY2016:
FY2014 LTI AWARD
FY2015 LTI AWARD 1
FY2016 LTI AWARD
Performance period
4 years: 1 July 2013
to 30 June 2017
4 years: 1 July 2014
to 30 June 2018
3 years: 1 July 2015
to 30 June 2018
Overview
Performance rights vesting
subject to:
Performance rights vesting
subject to:
Performance rights.
vesting subject to:
Relative TSR (50%)
•
EPS (50%)
•
Relative TSR (25%)
•
ROIC (25%)
•
Strategic Initiatives (50%)
•
Relative TSR (50%)
•
ROIC (50%)
•
Relative TSR
performance hurdles
TSR Ranking against the constituents of the S&P /ASX200 Industrial Sector Index:
Below 50th percentile – 0% vesting
•
At the 50th percentile – 50% vesting
•
50th to 75th percentile – straight line vesting between 50% and 100%
•
Above 75th percentile – 100% vesting
•
EPS / ROIC
performance hurdles
EPS in final year of performance
period:
Below 10 cents per share
•
Average ROIC:
Below 4.29%
•
– 0% vesting
– 0% vesting
10 cents per share
•
– 50% vesting
10 to 12.8 cents per share
•
– straight line vesting
between 50% and 75%
12.8 to 14.0 cents per share
•
– straight line vesting
between 75% and 100%
14.0 cents per share and
•
above – 100% vesting
4.29% – 20% vesting
•
4.29% to 5.29% –
•
straight line vesting
between 20% and 50%
5.29% to 7.29% –
•
straight line vesting
between 50%
and 100%
7.29% and above –
•
100% vesting
Average ROIC 3:
< 4.6% – 0% vesting
•
4.6% – 20% vesting
•
> 4.6% – < 5.6% –
•
straight line vesting
between 20% and 50%
5.6% – < 7.6% –
•
straight line vesting
between 50%
and 100%
≥ 7.6% and above –
•
100% vesting
Vesting date
14 days after the release of
FY17 results
14 days after the release
of FY17 and FY18 results
14 days after the release of
FY18 results
Grant date fair
value 2
TSR tranche: $0.93
EPS tranche: $1.18
TSR tranche: $0.17
ROIC & Strategic initiatives
tranches: $0.68
CEO grant:
TSR tranche: $0.32
•
ROIC:$0.63
•
Other KMP grant:
TSR tranche: $0.42
•
ROIC tranche:$0.72
•
Number of rights
remaining on issue
as at 30 June 2017
1,278,240
1,819,928
5,362,336
1 A three year performance period applies to the relative TSR and ROIC performance measures of the FY2015 LTI. The strategic initiatives are assessed over four years
ending 30 June 2018. The first Strategic Initiative was satisfied as disclosed previously. The details of the remaining Strategic Initiatives remain strategically and
commercially sensitive and will be disclosed following completion of the four year performance period.
2 As a share-based payment, the portion of the performance rights relating to market based conditions were valued for accounting purposes using the Monte Carlo
3
simulation method and the portion relating to EPS or ROIC using the Black Scholes Model.
Following the commencement of the current CEO in August 2015 the Board adopted a revised calculation of ROIC for the purposes of the LTI Plan consistent with its
new Strategy Plan. For the FY2016 LTI and subsequent LTI grants, ROIC performance will be measured as (i) consolidated net profit after tax (excluding interest
expense net of tax calculated at the corporate tax rate) of the Group (adjusted for material or other items so as to be expressed on an underlying basis)
divided by (ii) Average Invested Capital, as determined by the Board in each case in its sole discretion.
50
50
Remuneration Report (Audited)
Remuneration Report (Audited)
5. Executive key management personnel – reward outcomes (continued)
5. Executive key management personnel – reward outcomes (c)
5F.
Prior long term incentive awards (continued)
Prior long term incentive outcomes
FY2014 LTI
The FY2014 LTI was tested at 30 June 2017. Based on the Company’s relative TSR and EPS performance over the
performance period (from 1 July 2013 to 30 June 2017), the offer will partially vest – with the relative TSR tranche vesting
at 80.78% and the EPS tranche lapsing in full.
Executive KMP
None of the current or former Executive KMP participated in the FY2014 LTI.
FY2015 LTI
Two tranches of the FY2015 LTI were tested at 30 June 2017. The remaining tranche, subject to strategic initiative targets,
will be tested after 30 June 2018. Based on the Company’s relative TSR and ROIC performance over the performance period
(from 1 July 2014 to 30 June 2017), the offer will partially vest, with the relative TSR tranche vesting at 61.76% and the
ROIC tranche lapsing in full.
Executive KMP
Mr Gill is the only current or former Executive KMP to participate in the FY2015 LTI. 103,625 (61.76%) of his performance
rights will vest in relation to the relative TSR tranche and 167,785 (100%) of his performance rights will lapse in relation
to the ROIC tranche.
6. Executive key management personnel – contract terms
6. Executive key management personnel – contract terms
6A. Current Executive KMP
The CEO and Managing Director (Mr Bansal) and CFO (Mr Gill) are employed on the basis of an Executive Service Agreement
(Agreement). These Agreements contain a range of terms and conditions including remuneration and other benefits, notice
periods and termination benefits. The key contract terms are as follows:
Contract term: no fixed term.
•
Notice period: 12 months (resignation or termination without cause).
•
Redundancy: 12 months notice.
•
Any payment in lieu of notice and/or redundancy is not to exceed average annual base salary as defined by the Corporations
Act 2001 over the previous three years.
The Company may terminate Agreements immediately for cause, in which case the Executive is not entitled to any payment
in lieu of notice or contractual compensation.
The Agreements also provide for an Executive’s participation in the STI and LTI plans subject to Board approval of their
eligibility and in accordance with the terms and conditions of the respective plans.
In addition, Mr Bansal was entitled to:
Relocation support, with the Company covering the costs associated with Mr Bansal’s temporary accommodation
•
in Melbourne until the end of 2019. The cost to the Group in providing this support to Mr Bansal for the year ended
30 June 2017 is summarised in section 5A.
A one-off allocation of 328,947 performance rights to the value of $250,000 at the grant date with vesting subject
•
to a two-year service condition from his date of commencement. The service condition has been met and these
performance rights vested on 3 August 2017.
51
51
Remuneration Report (Audited)OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Remuneration Report (Audited)
7.
Executive key management personnel – additional remuneration tables
7. Executive key management personnel – additional remuneration tables
7A. Performance rights granted and movement during the year
The aggregate number of performance rights in the Company that were granted as compensation, exercised or lapsed
in relation to each Executive KMP for the year ended 30 June 2017 is set out in the following table:
RIGHTS
GRANTED
DURING THE
YEAR 1
NUMBER
VALUE OF
RIGHTS
GRANTED
DURING THE
YEAR 2
$
RIGHTS
EXERCISED
DURING THE
YEAR
NUMBER
VALUE OF
RIGHTS
EXERCISED
DURING THE
YEAR 3
$
LAPSED/
CANCELLED
DURING THE
YEAR
NUMBER
YEAR ENDED
30 JUNE 2017
BALANCE AT
1 JULY 2016
NUMBER
EXECUTIVE KEY MANAGEMENT PERSONNEL
3,167,167
V Bansal
1,161,274
B J Gill
2,672,966
553,677
2,571,199
541,935
–
–
–
–
FORMER EXECUTIVE KEY MANAGEMENT PERSONNEL
A G Roderick 4
43,736
–
–
(43,736)
(34,770)
BALANCE AT
30 JUNE 2017
NUMBER
5,840,133
1,714,951
–
–
–
–
1
2
Performance rights were granted to Mr Bansal under the FY2017 LTI Offer and FY2016 STI on 2 November 2016 and to other Executive KMP under the FY2017
LTI Offer and FY2016 STI on 7 October 2016.
The fair value of performance rights granted to Mr Bansal calculated using Monte Carlo simulation and the Black Scholes Model, is $0.86 to $1.03 per
Performance Right under the FY2017 LTI Offer. The fair value of performance rights granted to other Executive KMP calculated using Monte Carlo
simulation method and the Black Scholes Model, is $0.86 to $1.06 per Performance Right under the FY2017 LTI Offer.
Calculated as the market value of Cleanaway shares on the date of exercise.
3
4 Mr Roderick was a former Executive KMP in FY16 and exercised his FY2014 deferred STI on 11 July 2016 after vesting on 30 June 2016.
7B. Performance rights as at 30 June 2017
The number of performance rights included in the balance at 30 June 2017 for the Executive KMP is set out in the
following table:
ISSUED
2015
LTI
2016
OTHER
2016
LTI
2016
STI
2017
LTI
BALANCE AT
30 JUNE 2017
VESTED &
EXERCISABLE
AT THE END
OF THE YEAR
EXECUTIVE KEY MANAGEMENT PERSONNEL
V Bansal 1
B Gill
–
671,140
FORMER EXECUTIVE KEY MANAGEMENT PERSONNEL
D A Aardsma
–
328,947
–
2,838,220
490,134
302,250
67,897
2,370,716
485,780
5,840,133
1,714,951
302,250
67,897
–
–
–
–
–
–
1 As disclosed in last year’s Report, on joining Cleanaway, Mr Bansal received a one-off allocation of 328,947 performance rights with vesting subject
to a two-year service condition.
No terms of performance rights transactions have been altered by the Group during the reporting period. The Board has
not previously exercised its discretion to allow the early vesting of any performance rights under any of the incentive plans.
52
52
Remuneration Report (Audited)
Remuneration Report (Audited)
7.
Executive key management personnel – additional remuneration tables (continued)
7. Executive key management personnel – additional remuneration tables (c)
7C. Securities trading policy
The Company prohibits Executives from entering into any hedging arrangements or acquiring financial products (such
as equity swaps, caps and collars or other hedging products) over unvested performance rights which have the effect
of reducing or limiting exposure to risks associated with the market value of the Company’s securities.
No Directors or Executive KMP may directly or indirectly enter into any margin loan facility against the Company’s securities
unless the prior written consent of the Chairman of the Board is obtained.
7D. Company performance
Over recent years, Cleanaway has been addressing a number of operational, transformational and strategic challenges.
This is reflected in the financial performance summarised for key metrics below. Importantly, for remuneration purposes,
the Board takes a more holistic view of performance than the metrics summarised below. These are described in more
detail in section 5 of this Report.
Profit/(Loss) attributable to
ordinary equity holders – $’M
EPS – cents
Underlying EPS – cents
Dividends per share – cents
Shares on issue – number
Share price at 30 June
Change in share price
FY2013
FY2014
FY2015
FY2016
FY2017
(218.7) 1
(13.9)
4.4
–
1,578,563,490
$0.80
$0.07
11.5 2
0.7
5.8
1.5
1,579,323,967
$1.01
$0.21
(23.6) 3
(1.5)
2.9
1.5
1,579,914,690
$0.77
($0.24)
44.8 4
2.8
4.0
1.7
1,586,344,605
$0.80
$0.03
72.5 5
4.6
4.9
2.1
1,592,889,317
$1.38
$0.58
1
2
3
4
5
Includes underlying adjustments of $286.6 million after tax.
Includes underlying adjustments of $80.5 million after tax.
Includes underlying adjustments of $69.3 million after tax.
Includes underlying adjustments of $18.5 million after tax.
Includes underlying adjustments of $5.0 million after tax.
53
53
Remuneration Report (Audited)OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Remuneration Report (Audited)
8. Shareholdings and other related party transactions
8. Shareholdings and other related party transactions
8A. Shareholdings
The movement for the year ended 30 June 2017 in the number of ordinary shares in the Company held, directly or indirectly
or beneficially, by each KMP, including their related parties, is detailed in the following table:
NAME
NON-EXECUTIVE DIRECTOR
M P Chellew
R M Smith
E R Stein
T A Sinclair
R M Harding
P G Etienne
FORMER NON EXECUTIVE DIRECTOR
M M Hudson 1
EXECUTIVE KEY MANAGEMENT PERSONNEL
V Bansal
B J Gill
FORMER EXECUTIVE KEY MANAGEMENT PERSONNEL
D A Aardsma 2
BALANCE
AT THE START
OF THE YEAR
RECEIVED DURING
THE YEAR ON THE
EXERCISE OF RIGHTS
OTHER
CHANGES DURING
THE YEAR
BALANCE
AT THE END
OF THE YEAR
25,000
65,715
66,549
38,789
12,644
13,737
75,258
–
–
280,000
–
–
–
–
–
–
–
–
–
–
50,000
–
14,440
–
–
–
–
–
–
–
75,000
65,715
80,989
38,789
12,644
13,737
75,258
–
–
280,000
1
2
Balance reflects holdings on date of departure being 26 October 2016.
Balance reflects holdings on date of ceasing to be a KMP.
Loans to Executive key management personnel
8B.
There were no loans to Executive KMP made during the period and no outstanding balances at reporting date.
8C. Other transactions and balances with Executive key management personnel and their
related parties
Some of the Directors hold, or have previously held, positions in companies with which Cleanaway has commercial
relationships which are based on normal terms and conditions on an arm’s length basis. Transactions with entities where
the relationship is limited to common Non-Executive Directorship including any Chairperson roles are not considered related
party transactions. The Board has assessed all of the relationships between the Group and companies in which Directors hold
or held positions and has concluded that in all cases the relationships do not interfere with the Directors’ exercise of
objective, unfettered or independent judgement or their ability to act in the best interest of the Group.
During the year ended 30 June 2016, transactions that amounted to related party transactions were limited to transactions
with NGT Marketing. Mr Martin Hudson, Non-Executive Director of the Group (until 26 October 2016), held a beneficial
interest in NGT Marketing. The Group provided waste collections services to NGT Marketing for which it earned revenues
on normal commercial terms. The value of these services was not material at $2,466 for the year ended 30 June 2016.
During the period from 1 July 2016 to when Mr Hudson resigned as Non-executive Director on 26 October 2016, the Group
did not provide any services to NGT Marketing and therefore there were no transactions during the current reporting period
that are considered to be related party transactions.
Auditor’s Independence Declaration
Auditor’s Independence Declaration to the Directors of Cleanaway Waste Management Limited
As lead auditor for the audit of Cleanaway Waste Management Limited for the financial year ended 30 June 2017, I declare
to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Cleanaway Waste Management Limited and the entities it controlled during the financial year.
Ernst & Young
Brett Croft
Partner
22 August 2017
54
54
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
5555
Remuneration Report (Audited)
Auditor’s Independence Declaration
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of Cleanaway Waste Management Limited
As lead auditor for the audit of Cleanaway Waste Management Limited for the financial year ended 30 June 2017, I declare
to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Cleanaway Waste Management Limited and the entities it controlled during the financial year.
Ernst & Young
Brett Croft
Partner
22 August 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
5555
55
Auditor’s Independence DeclarationOVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Consolidated Income Statement
For the year ended 30 June 2017
Revenue
Other income
Labour related expenses
Collection, recycling and waste disposal expenses
Fleet operating expenses
Property expenses
Other expenses
Share of profits from equity accounted investments
Profit from operations before depreciation and amortisation
Depreciation and amortisation expense
Impairment of assets
Change in fair value of non-landfill land and buildings
Profit from operations
Net finance costs
Profit before income tax
Income tax expense
Profit after income tax
Attributable to:
Ordinary equity holders
Non-controlling interest
Profit after income tax
NOTES
6
7
22
20
8
9
2017
$’M
1,454.4
22.4
(589.4)
(359.0)
(131.8)
(40.1)
(43.7)
1.2
314.0
(165.9)
(4.4)
(0.6)
143.1
(34.1)
109.0
(36.5)
72.5
2016
$’M
1,455.1
1.6
(610.7)
(359.0)
(141.9)
(32.0)
(57.3)
1.3
257.1
(160.8)
–
(0.2)
96.1
(34.5)
61.6
(18.5)
43.1
72.5
–
72.5
44.8
(1.7)
43.1
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
56
56
Consolidated Income StatementFor the year ended 30 June 2017
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2017
Profit after income tax
Other comprehensive income
Revaluation of land and buildings (net of tax)
Net comprehensive (loss)/income recognised directly in equity
Total comprehensive income for the year
Attributable to:
Ordinary equity holders
Non-controlling interest
Total comprehensive income for the year
NOTES
2017
$’M
72.5
(5.7)
(5.7)
66.8
66.8
–
66.8
2016
$’M
43.1
3.1
3.1
46.2
47.9
(1.7)
46.2
Earnings per share attributable to the ordinary equity holders
of the Company:
Basic earnings per share (cents)
Diluted earnings per share (cents)
10
10
4.6
4.5
2.8
2.8
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
57
57
Consolidated Statement of Comprehensive IncomeFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Consolidated Balance Sheet
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Assets held for sale
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Equity accounted investments
Net deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Income tax payable
Borrowings
Employee entitlements
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Employee entitlements
Provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Parent entity interest
Non-controlling interest
Total equity
NOTES
2017
$’M
2016
$’M
Restated
11
12
13
30
20
21
22
9
14
15
23
24
25
15
23
24
25
16
17
43.2
247.9
11.1
8.3
8.8
15.5
334.8
936.5
1,585.3
11.5
89.5
2,622.8
2,957.6
177.6
16.7
62.4
46.0
55.6
22.1
380.4
307.8
8.4
302.6
133.4
752.2
1,132.6
1,825.0
2,083.0
40.4
(298.4)
1,825.0
–
1,825.0
48.3
224.3
16.7
10.9
8.8
14.3
323.3
897.1
1,568.0
11.1
110.3
2,586.5
2,909.8
178.8
10.7
0.8
39.9
59.8
23.2
313.2
358.6
8.4
341.5
106.6
815.1
1,128.3
1,781.5
2,076.4
43.3
(344.8)
1,774.9
6.6
1,781.5
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
58
58
Consolidated Balance SheetAs at 30 June 2017
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
At 1 July 2016
Profit for period
Other comprehensive income
Total comprehensive income for the year
Share-based payment expense
Dividends reinvested/(paid)
Acquisition of non-controlling interest
Balance at 30 June 2017
At 1 July 2015
Profit/(loss) for period
Other comprehensive income
Total comprehensive income for the year
Share-based payment expense
Dividends reinvested/(paid)
Balance at 30 June 2016
ORDINARY
SHARES
$’M
2,076.4
–
–
–
–
6.6
–
2,083.0
2,072.1
–
–
–
–
4.3
2,076.4
PARENT ENTITY INTEREST
RESERVES
$’M
43.3
–
(5.7)
(5.7)
2.8
–
–
40.4
38.6
–
3.1
3.1
1.6
–
43.3
RETAINED
EARNINGS
$’M
(344.8)
72.5
–
72.5
–
(30.2)
4.1
(298.4)
(364.3)
44.8
–
44.8
–
(25.3)
(344.8)
NON-
CONTROLLING
INTEREST
$’M
6.6
–
–
–
–
–
(6.6)
–
8.3
(1.7)
–
(1.7)
–
–
6.6
TOTAL
$’M
1,774.9
72.5
(5.7)
66.8
2.8
(23.6)
4.1
1,825.0
1,746.4
44.8
3.1
47.9
1.6
(21.0)
1,774.9
TOTAL
EQUITY
$’M
1,781.5
72.5
(5.7)
66.8
2.8
(23.6)
(2.5)
1,825.0
1,754.7
43.1
3.1
46.2
1.6
(21.0)
1,781.5
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
59
59
Consolidated Statement of Changes in EquityFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Consolidated Statement of Cash Flows
For the year ended 30 June 2017
Cash flows from operating activities
Profit before income tax
Adjustments for:
Depreciation and amortisation expense
Impairment of assets
Write back of remediation provision related to closed sites
Net finance costs
Share-based payments expense
Change in fair value of non-landfill land and buildings
Share of profits from equity accounted investments
Net gain on disposal of property, plant and equipment
Other non-cash items
Net cash from operating activities before changes in assets and liabilities
Changes in assets and liabilities:
(Increase)/decrease in receivables
Increase in other assets
Decrease/(increase) in inventories
(Decrease)/increase in payables
Increase/(decrease) in employee benefits
Decrease in other liabilities
Decrease in provisions
Cash generated from operating activities
Net interest paid
Income taxes (paid)/refunded
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Payments for purchase of businesses and non-controlling interest
Proceeds from disposal of property, plant and equipment
Dividends received from equity accounted investments
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of debt and equity raising costs
Payment of dividends to ordinary equity holders
Repayment of loan to related parties
Net cash used in financing activities
NOTES
2017
$’M
2016
$’M
109.0
61.6
165.9
4.4
(3.1)
34.1
1.9
0.6
(1.2)
(22.5)
(0.9)
288.2
(23.3)
(1.3)
0.7
(1.0)
5.4
(6.6)
(44.1)
218.0
(19.8)
(8.6)
189.6
(144.1)
(11.2)
(31.7)
2.4
0.8
(183.8)
72.0
(58.2)
(0.6)
(23.6)
(0.5)
(10.9)
(5.1)
48.3
43.2
160.8
–
–
34.5
1.3
0.2
(1.3)
(1.4)
1.3
257.0
2.8
(3.7)
(0.6)
1.5
(3.8)
(3.3)
(45.7)
204.2
(20.9)
7.4
190.7
(141.9)
(11.6)
(16.1)
4.2
2.6
(162.8)
21.0
(16.0)
(0.6)
(21.0)
–
(16.6)
11.3
37.0
48.3
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
11
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
60
60
Consolidated Statement of Cash FlowsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
1.
Corporate information
1. Corporate information
Cleanaway Waste Management Limited and its subsidiaries (the Group) is domiciled and incorporated in Australia.
The Consolidated Financial Report of Cleanaway Waste Management Limited consists of the Consolidated Financial
Statements of the Group and the Group’s interests in equity accounted investments.
The Consolidated Financial Statements of the Group for the year ended 30 June 2017 were authorised for issue in accordance
with a resolution of the Directors on 22 August 2017.
2. Statement of compliance
2. Statement of compliance
The Consolidated Financial Report is a general purpose financial report which has been prepared on a going concern
basis and in accordance with the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The Financial Report also complies with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
3. Basis of preparation
3. Basis of preparation
The Financial Report has been prepared on the basis of historical cost, except for the revaluation of certain non-current
assets (non-landfill land and buildings) and derivative financial instruments. Cost is based on the fair value of the
consideration given in exchange for assets.
The Financial Report is presented in Australian dollars and all values are rounded to the nearest hundred thousand dollars, except
when otherwise indicated. This presentation is consistent with the requirements of Legislative Instrument 2016/191, issued by the
Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial statements.
Refer to note 38 for a summary of the Group’s significant accounting policies.
At 30 June 2017 the Group had a net current asset deficiency of $45.6 million (30 June 2016: net current asset surplus
of $10.1 million). The net current asset deficiency arises mainly due to the reclassification of the US Private Placement
Notes (USPP Notes) as they mature in December 2017. As set out in note 15, the Group has unutilised debt facilities
of $230.2 million at 30 June 2017, available to repay the USPP Notes and therefore the Directors are satisfied that the
Group can meet its financial obligations as and when they fall due.
Comparative Information
Certain prior year balances have been adjusted to reflect reclassifications within the Consolidated Income Statement.
Also refer to note 39 which sets out the adjustments to prior year balances as a result of a change in accounting policy.
4. Critical accounting estimates and judgements
4. Critical accounting estimates and judgements
The preparation of the Financial Report requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group’s accounting policies. Actual results may vary from these
estimates under different assumptions and conditions. Significant accounting estimates and judgements in the Consolidated
Financial Report are:
Recoverable amount of property, plant and equipment and intangible assets
(a)
Each asset or cash generating unit (CGU) is evaluated every reporting period to determine whether there are any indications
of impairment or reversal of previously recognised impairment losses. If any such indication exists, a formal estimate
of recoverable amount is performed and where the carrying amount exceeds the recoverable amount, an impairment loss
is recognised. Goodwill and other intangible assets with an indefinite life are tested for impairment on an annual basis,
irrespective of whether there is an indication of impairment.
61
61
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
4. Critical accounting estimates and judgements (continued)
4. Critical accounting estimates and judgements (c)
The recoverable amount of each CGU is determined based on value-in-use calculations which require the use of estimates
and assumptions. The calculations use cash flow projections based on forecasts approved by management. The discounted
cash flows of the CGUs, other than those associated with landfill assets, are determined using five year forecasted cash flows
and a terminal value calculation. These cash flows include estimates and assumptions related to revenue growth, capital
expenditure, terminal value growth rates, oil prices (in relation to oil recycling activities) and expense profile.
Cash flows from the landfill assets include estimates and assumptions in relation to: waste volumes over the life of the landfill,
cell development capital expenditure, waste mix, revenue and growth, expense profile, and value and timing of land sales.
These estimates and assumptions are subject to risk and uncertainty; such that there is a possibility that changes in
circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances
some or all of the assets may be impaired or a previous impairment charge reversed. Any potential impact arising from
an impairment or reversal of an impairment would be recorded in the Consolidated Income Statement.
Further details on the Group’s impairment assessment and policy are disclosed in note 21 and note 38(e).
Landfill asset depreciation
(b)
Landfill assets comprise the acquisition of landfill land, airspace, cell development costs, site infrastructure and landfill site
improvement costs, and remediation assets. Landfill airspace, cell development costs and remediation assets are depreciated
on a usage basis. This depreciation method requires significant estimation of compaction rates, airspace and future costs.
Therefore changes in these estimates will cause changes in depreciation rates. The depreciation rates are calculated based
on the most up to date accounting estimates and applied prospectively.
Further details on the Group’s landfill asset accounting policy are disclosed in note 38(k).
Provision for landfill remediation and rectification
(c)
The Group’s remediation and rectification provisions are calculated based on the present value of the future cash outflows
expected to be incurred to remediate landfills which will include the costs of capping the landfill site, remediation and
rectification costs and post-closure monitoring activities. The measurement of the provisions requires significant estimates
and assumptions such as: discount rate, inflation rate, assessing the requirements of the Environment Protection Authority
(EPA) or other government authorities, the timing, extent and costs of activity required and the area of the landfill to be
remediated or rectified, which is determined by volumetric aerial surveys. These uncertainties may result in future actual
expenditure differing from the amounts currently provided.
The provisions for remediation and rectification for each landfill site are periodically reviewed and updated based on the facts
and circumstances available at the time. Changes to the estimated future costs for remediating open sites, still accepting
waste, are recognised in the Consolidated Balance Sheet by adjusting both the remediation asset and provision. For closed
sites, changes to the estimated costs are recognised in the Consolidated Income statement. Changes to estimated costs
related to rectification provisions are recognised in the Consolidated Income Statement.
Further details on the Group’s landfill remediation accounting policy are disclosed in note 38(o).
Taxation
(d)
Deferred tax assets, including those arising from tax losses not recouped, capital losses and temporary differences, are
recognised in the Consolidated Balance Sheet, only where it is considered more likely than not that they will be recovered,
which is dependent on the generation of sufficient future taxable profits. Management considers that it is probable that
future taxable profits will be available to utilise those temporary differences. 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 profits.
These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes
in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities
recognised on the Consolidated Balance Sheet and the amount of other tax losses and temporary differences not yet
recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities
may require adjustment, resulting in a corresponding credit or charge to the Consolidated Income Statement.
Further details on the Group’s taxation accounting policy are disclosed in note 38(d).
62
62
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
5. Segment reporting
5. Segment reporting
The Group has identified its operating segments on the basis of how the Chief Operating Decision Maker reviews internal
reports about components of the Group in order to assess the performance and allocation of resources to a particular
segment. Information reported to the Group’s Chief Executive Officer (Chief Operating Decision Maker) for the purpose
of performance assessment and resource allocation is specifically focused on the following segments:
Solids
•
Comprises the collection, treatment, recycle and disposal of all types of solid waste streams, including general waste,
recyclables, construction and demolition waste and medical and washroom services. Solids owns and manages waste
transfer stations, resource recovery and recycling facilities, secure product destruction, quarantine treatment operations
and landfills and participates in commodities trading of recovered paper, cardboard, metals and plastics to the domestic
and international marketplace. Solids also generate and sell electricity produced utilising landfill gas.
Liquids and Industrial Services
•
Comprises the collection, treatment, processing and recycling of liquid and hazardous waste, including industrial waste,
grease trap waste, oily waters and used mineral and cooking oils in packaged and bulk forms for resale, disposal and
to produce fuel oils and base oils, as well as services including industrial cleaning, vacuum tanker loading, site
remediation, sludge management, parts washing, concrete remediation, CCTV, corrosion protection and emergency
response services.
Unallocated balances include the Group’s share of profits from equity accounted investments and corporate balances.
Corporate balances relate to shared services functions that are not directly attributable to an identifiable segment. These
functions include management, finance, legal, information technology, marketing, and human resources that provide
support to the other segments identified above.
No operating segments have been aggregated to form the reportable segments.
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected
to be used for more than one period.
The Group has the following allocation policies:
Sales between segments are on normal commercial terms; and
•
Corporate charges are allocated where possible based on estimated usage of corporate resources.
• •
Segment assets and liabilities have not been disclosed as these are not provided to the Chief Operating Decision Maker.
This information is provided at a Group level only.
Net finance costs are not allocated to individual segments as the underlying instruments are managed on a Group basis.
Current taxes, deferred taxes and certain financial assets and liabilities are not allocated to those segments as they are also
managed on a Group basis.
Inter-segment revenues are eliminated on consolidation.
63
63
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
5. Segment reporting (continued)
5. Segment reporting (c)
OPERATING SEGMENTS
UNALLOCATED
2017
Revenue
Sales of goods and services
PSO benefits 1
Other revenue
Inter-segment sales
Total revenue
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Restructuring costs 2
Rebranding costs
Acquisition costs
Remediation and rectification costs
Gain on sale of properties
Revaluation of non-landfill land and buildings
Profit from operations (EBIT)
Net finance costs
Profit before income tax
Income tax expense
Profit after income tax
Capital expenditure:
Property, plant and equipment
Intangible assets
SOLIDS
$’M
1,034.9
–
16.0
11.6
1,062.5
257.0
(119.4)
137.6
LIQUIDS
AND
INDUSTRIAL
SERVICES
$’M
TOTAL
OPERATING
SEGMENTS
$’M
EQUITY
ACCOUNTED
INVESTMENTS
$’M
ELIMINATIONS
$’M
CORPORATE
$’M
GROUP
$’M
384.2
16.6
2.5
20.7
424.0
58.9
(26.8)
32.1
– 1,419.1
16.6
–
18.5
–
(32.3)
–
(32.3) 1,454.2
315.9
(146.2)
169.7
–
–
–
–
–
–
–
–
1.2
–
1.2
(15.8)
(12.2)
(28.0)
– 1,419.1
16.6
–
18.7
0.2
–
–
0.2 1,454.4
301.3
(158.4)
142.9
(14.6)
(3.8)
(2.4)
(0.4)
22.0
(0.6)
143.1
(34.1)
109.0
(36.5)
72.5
128.1
2.1
14.1
–
–
–
142.2
2.1
–
–
1.9
9.1
144.1
11.2
1
2
Product Stewardship for Oil benefits.
Includes accelerated depreciation of $3.6 million and impairment of assets of $4.4 million.
64
64
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
5. Segment reporting (continued)
5. Segment reporting (c)
OPERATING SEGMENTS
UNALLOCATED
2016
Revenue
Sales of goods and services
PSO benefits 1
Other revenue
Inter-segment sales
Total revenue
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Restructuring costs 2
Rebranding costs
Revaluation of non-landfill land and buildings
Other underlying adjustments
Profit from operations (EBIT)
Net finance costs
Profit before income tax
Income tax expense
Profit after income tax
Capital expenditure:
Property, plant and equipment
Intangible assets
1
2
Product Stewardship for Oil benefits.
Includes accelerated depreciation of $2.1 million.
SOLIDS
$’M
1,030.1
–
15.8
12.5
1,058.4
237.7
(124.1)
113.6
LIQUIDS
AND
INDUSTRIAL
SERVICES
$’M
TOTAL
OPERATING
SEGMENTS
$’M
EQUITY
ACCOUNTED
INVESTMENTS
$’M
ELIMINATIONS
$’M
CORPORATE
$’M
GROUP
$’M
392.9
14.1
1.8
27.8
436.6
57.5
(24.5)
33.0
– 1,423.0
14.1
–
17.6
–
(40.3)
–
(40.3) 1,454.7
295.2
(148.6)
146.6
–
–
–
–
–
–
–
–
1.3
–
1.3
–
–
0.4
–
0.4
(15.2)
(10.1)
(25.3)
1,423.0
14.1
18.0
–
1,455.1
281.3
(158.7)
122.6
(23.2)
(3.6)
(0.2)
0.5
96.1
(34.5)
61.6
(18.5)
43.1
100.6
–
34.4
–
–
–
135.0
–
–
–
6.9
11.6
141.9
11.6
65
65
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6. Revenue
6. Revenue
Sale of goods and services
Product Stewardship for Oil (PSO) benefits
Other revenue
Refer to note 38(a) for the Group’s accounting policy on revenue.
7. Other income
7. Other income
Gain on disposal of property, plant and equipment 1
Gain on disposal of investments
Net foreign currency exchange losses
2017
$’M
1,419.1
16.6
18.7
1,454.4
2016
$’M
1,423.0
14.1
18.0
1,455.1
2017
$’M
22.5
–
(0.1)
22.4
2016
$’M
1.4
0.3
(0.1)
1.6
1 Gain on disposal of property, plant and equipment in the year ended 30 June 2017 includes disposal of remediation and rectification provisions of $28.0
million (2016: nil). Refer to note 24.
8. Net finance costs
8. Net finance costs
Finance costs
Interest on borrowings
Amortisation of capitalised transaction costs
Unwind of discount on provisions and other liabilities
Foreign currency exchange gain/(loss) on USPP borrowings
Change in fair value of derivative instruments related to USPP borrowings
Finance income
Interest revenue
Net finance costs
Refer to note 38(c) for the Group’s accounting policy on finance costs.
2017
$’M
(18.8)
(0.5)
(14.9)
2.3
(2.6)
(34.5)
0.4
0.4
(34.1)
2016
$’M
(19.9)
(1.3)
(14.0)
(2.3)
2.3
(35.2)
0.7
0.7
(34.5)
66
66
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
9.
Income tax
9.
Income tax
(a) Amounts recognised in the Consolidated Income Statement
Current tax expense
Current year
Adjustments in respect of prior years
Deferred tax expense
Origination and reversal of temporary differences
Adjustments in respect of prior years
Income tax expense
2017
$’M
2016
$’M
19.0
(4.3)
14.7
16.8
5.0
21.8
36.5
10.2
(2.7)
7.5
8.0
3.0
11.0
18.5
(b) Amounts recognised directly in equity
Deferred income tax benefit on items charged directly to equity for the year totalled $3.5 million (2016: $1.1 million
expense), which relate to the tax effect of items recognised in the asset revaluation reserve of $2.6 million benefit
(2016: $1.4 million expense) and the employee equity benefits reserve of $0.9 million benefit (2016: $0.3 million benefit).
(c)
Reconciliation between tax expense and pre-tax net profit at the statutory rate
Profit before tax
Income tax using the corporation tax rate of 30% (2016: 30%)
Increase/(decrease) in income tax expense due to:
Share of profits from equity accounted investments
Non-deductible expenses
Adjustments in respect of prior years
Research and development tax credits
Entry of subsidiary into the Tax Consolidated Group
Non-deductible CGT loss on sale of properties
Employee share plan expenses
Other
Income tax expense
2017
$’M
109.0
32.7
(0.5)
0.8
0.7
(2.2)
2.3
1.9
–
0.8
36.5
2016
$’M
61.6
18.5
(0.4)
0.4
0.3
(2.0)
–
–
1.4
0.3
18.5
67
67
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
9.
Income tax (continued)
9.
Income tax (c)
(d) Deferred tax
Deferred tax in the Consolidated Balance Sheet relates to the following:
RECOGNISED
IN PROFIT OR
LOSS
$’M
RECOGNISED
IN OTHER
COMPREHENSIVE
INCOME
$’M
OPENING
BALANCE
$’M
RECOGNISED
DIRECTLY IN
EQUITY
$’M
ACQUIRED IN
BUSINESS
COMBINATION
$’M
50.6
17.1
123.1
6.8
(67.9)
(19.4)
110.3
(9.4)
(0.2)
(15.6)
1.0
2.5
(0.1)
(21.8)
2.6
–
–
–
–
–
2.6
–
–
–
0.9
–
–
0.9
–
0.2
–
–
(2.5)
–
(2.3)
OTHER
$’M
–
–
–
(0.2)
–
–
(0.2)
CLOSING
BALANCE
$’M
43.8
17.1
107.5
8.5
(67.9)
(19.5)
89.5
RECOGNISED
IN PROFIT OR
LOSS
$’M
RECOGNISED
IN OTHER
COMPREHENSIVE
INCOME
$’M
OPENING
BALANCE
$’M
RECOGNISED
DIRECTLY IN
EQUITY
$’M
ACQUIRED IN
BUSINESS
COMBINATION
$’M
OTHER
$’M
CLOSING
BALANCE
$’M
61.2
15.2
128.1
8.2
(71.3)
(19.5)
121.9
(9.2)
1.9
(5.0)
(2.2)
3.4
0.1
(11.0)
(1.4)
–
–
–
–
–
(1.4)
–
–
–
0.3
–
–
0.3
–
–
–
–
–
–
–
–
–
–
0.5
–
–
0.5
50.6
17.1
123.1
6.8
(67.9)
(19.4)
110.3
2017
Deferred tax assets
PP&E
Employee benefits
Provisions
Other
Deferred tax liabilities
Intangible assets
Other
Net deferred tax assets
2016 Restated 1
Deferred tax assets
PP&E
Employee benefits
Provisions
Other
Deferred tax liabilities
Intangible assets
Other
Net deferred tax assets
1
Refer to note 39.
68
68
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
10. Earnings per share
10. Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
(i)
Basic earnings per share
2017
4.6
4.5
2016
2.8
2.8
Basic earnings per share is calculated by dividing the net profit after income tax attributable to ordinary equity holders
of the Group by the weighted average number of ordinary shares outstanding during the financial year.
Reconciliation of earnings used as the numerator in calculating basic earnings per share:
Profit after income tax
Net loss attributable to non-controlling interests
Profit after tax attributable to ordinary equity holders
Reconciliation of weighted average number of ordinary shares:
Issued ordinary shares at 1 July
Effect of shares issued under dividend reinvestment plan
Effect of shares issued under employee incentive plans
Weighted average number of ordinary shares used as the denominator
in calculating earnings per share
2017
$’M
72.5
–
72.5
2016
$’M
43.1
1.7
44.8
2017
2016
1,586,344,605 1,579,914,690
2,777,898
546,917
3,242,419
730,907
1,590,317,931 1,583,239,505
(ii)
Diluted earnings per share
Diluted earnings per share adjusts basic earnings per share to take into account the after income tax effect of interest and
other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed
to have been issued for no consideration in relation to dilutive potential ordinary shares.
Dilutive potential ordinary shares are limited to performance rights issued under the Group’s long term and short term
incentive plans. Refer note 34 for details. The dilutive effect of the performance rights on basic earnings per share reported
above is not material.
11. Cash and cash equivalents
11. Cash and cash equivalents
Composition of cash and cash equivalents
Cash at bank and on hand
Refer to note 38(g) for the Group’s accounting policy on cash and cash equivalents.
2017
$’M
43.2
43.2
2016
$’M
48.3
48.3
69
69
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
12. Trade and other receivables
12. Trade and other receivables
Trade receivables
Provision for doubtful debts
Other receivables
Refer to note 38(h) for the Group’s accounting policy on trade and other receivables.
The ageing of the Group’s trade receivables at the reporting date was:
Not past due
Past due 0 – 30 days
Past due 31 – 120 days
Past due 121 days or more
The movement in the provision for doubtful debts during the year was as follows:
Opening balance
Provision recognised
Reversal of provision
Utilisation of provision
Closing balance
2017
$’M
245.0
(3.1)
241.9
6.0
247.9
2017
$’M
175.0
40.2
17.1
12.7
245.0
2017
$’M
7.8
2.6
(2.4)
(4.9)
3.1
2016
$’M
225.7
(7.8)
217.9
6.4
224.3
2016
$’M
157.5
42.0
15.3
10.9
225.7
2016
$’M
6.5
4.4
–
(3.1)
7.8
No single customer’s annual revenue is greater than 2.3% (2016: 2.6%) of the Group’s total revenue. Trade and other
receivables that are neither past due or impaired are considered to be of a high credit quality.
13.
13. Inventories
Inventories
Raw materials and consumables – at cost
Finished goods – at cost
Refer to note 38(i) for the Group’s accounting policy on inventories.
14. Trade and other payables
14. Trade and other payables
Trade payables
Other payables and accruals
Refer to note 38(m) for the Group’s accounting policy on trade and other payables.
2017
$’M
4.3
6.8
11.1
2016
$’M
10.5
6.2
16.7
2017
$’M
91.0
86.6
177.6
2016
$’M
85.5
93.3
178.8
70
70
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
15. Borrowings
15. Borrowings
Unsecured
US Private Placement Notes
Loans from related parties
Other
Total current
Unsecured
Bank loans
US Private Placement Notes
Total non-current
Total borrowings
2017
$’M
62.4
–
–
62.4
307.8
–
307.8
370.2
2016
$’M
–
0.5
0.3
0.8
293.9
64.7
358.6
359.4
Bank loans are net of capitalised transaction costs of $1.2 million (2016: $1.1 million). Refer to note 38(n) for the Group’s
accounting policy on borrowings.
Financing facilities
The facility limits and maturity profile of the Group’s main financing facilities are as follows:
FACILITY
Syndicated Facility Agreement
US Private Placement Notes (USPP)
Uncommitted bank guarantee facility
Facility A
Facility B
Facility C
working capital tranche
4 year revolver
5 year revolver
10 year tenure
AMOUNT
$135 million
$130 million
$335 million
US$48 million
MATURITY
1 July 2018
1 July 2020
1 July 2021
17 December 2017
$60 million 31 December 2017
The USPP Notes have been swapped to AUD fixed rate debt to mitigate the foreign currency risk arising from these
borrowings. Refer to note 30 for information on the derivative financial instruments. The USPP facility was fully drawn
down at reporting date.
The headroom available in the Group’s facilities at 30 June 2017 is summarised below:
Syndicated Facility Agreement
US Private Placement Notes (USPP)
Bank guarantee facilities 1
Facility A 1
Facility B 2
Facility C 2
AVAILABLE
$’M
135.0
130.0
335.0
62.4
62.9
725.3
UTILISED
$’M
(79.1)
(130.0)
(165.0)
(62.4)
(58.6)
(495.1)
NOT UTILISED
$’M
55.9
–
170.0
–
4.3
230.2
1
2
These facilities include $123.7 million (2016: $115.3 million) in guarantees and letters of credit which only give rise to a liability where the Group fails
to perform its contractual obligations.
These facilities represent the amount drawn down as ‘bank loans’ excluding the capitalised transaction costs of $1.2 million (2016: $1.1 million).
The headroom available in the Group’s facilities at 30 June 2016 is summarised below:
Syndicated Facility Agreement
US Private Placement Notes (USPP)
Bank guarantee facilities
Facility A
Facility B
Facility C
AVAILABLE
$’M
135.0
130.0
335.0
64.7
61.6
726.3
UTILISED
$’M
(58.0)
(130.0)
(165.0)
(64.7)
(57.3)
(475.0)
NOT UTILISED
$’M
77.0
–
170.0
–
4.3
251.3
71
71
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
16.
Issued capital
16. Issued capital
Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction
costs incurred by the Company arising on the issue of capital are recognised directly in equity as a reduction of the share
capital received.
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number
of shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Ordinary shares have no par value and all issued shares are fully paid.
2017
2016
Opening balance
Issue of shares under dividend reinvestment plan
Issue of shares under employee incentive plan
Closing balance
NUMBER
OF SHARES
1,586,344,605
5,760,784
783,928
1,592,889,317
17. Reserves
17. Reserves
Asset revaluation reserve
Employee equity benefits reserve
$’M
NUMBER
OF SHARES
2,076.4 1,579,914,690
5,776,895
653,020
2,083.0 1,586,344,605
6.6
–
$’M
2,072.1
4.3
–
2,076.4
2017
$’M
29.2
11.2
40.4
2016
$’M
34.9
8.4
43.3
(a) Asset revaluation reserve
The asset revaluation reserve is used to record revaluations of non-landfill land and buildings. Refer to note 38(k) for further
details on the Group’s non-landfill land and buildings valuation policy.
Opening balance
Revaluation of land and buildings (net of tax)
Closing balance
2017
$’M
34.9
(5.7)
29.2
2016
$’M
31.8
3.1
34.9
Employee equity benefits reserve
(b)
The employee equity benefits reserve is used to record the value of equity benefits provided to employees as part of their
remuneration. Refer to note 34 for further details on these share-based payment plans.
Opening balance
Share-based payment expense (net of tax)
Closing balance
2017
$’M
8.4
2.8
11.2
2016
$’M
6.8
1.6
8.4
72
72
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
18. Dividends and distributions
18. Dividends and distributions
The Company declared a fully franked dividend on ordinary shares for the financial year ended 30 June 2017 of 2.1 cents per
share, being an interim dividend of 1.0 cents per share and final dividend of 1.1 cents per share. The record date of the final
dividend is 14 September 2017 with payment to be made on 5 October 2017.
Details of distributions in respect of the financial year are as follows:
Dividends paid during the period
Final dividend relating to prior period
Interim dividend relating to current period
Dividends determined in respect of the period
Interim dividend relating to current period
Final dividend relating to current period
Dividends paid during the period
Final dividend relating to prior period
Interim dividend relating to current period
Dividends determined in respect of the period
Interim dividend relating to current period
Final dividend relating to current period
Franking credit balance
2017
$’M
14.3
15.9
30.2
15.9
17.5
33.4
2016
$’M
12.6
12.7
25.3
12.7
14.3
27.0
2017
CENTS PER
SHARE
2016
CENTS PER
SHARE
0.9
1.0
1.9
1.0
1.1
2.1
0.8
0.8
1.6
0.8
0.9
1.7
The available amounts are based on the balance of the franking account at year end, adjusted for:
(a) Franking credits that will arise from the payment of current tax liabilities;
(b) Franking debits that will arise from the payment of franked or partially franked dividends recognised as a liability at the
year end; and
(c) Franking credits that will arise from the receipt of dividends recognised as receivables by the Tax Consolidated Group
at the year end.
30% franking credits available for subsequent financial years 1
1
The payment of the final 2017 dividend determined after 30 June 2017 will reduce the franking account by $7.5 million.
2017
$’M
17.9
2016
$’M
12.8
73
73
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
19. Capital management
19. Capital management
When managing capital, the Group’s objective is to ensure that it uses a mix of funding options, to optimise returns to equity
holders and manage risk. The facility limits and maturity profile of the Group’s main financing facilities are contained
in note 15.
The capital structure of the Group comprises: debt, which includes borrowings; cash and cash equivalents; and equity
attributable to equity holders of the parent, such equity comprising issued capital, reserves and retained earnings as disclosed
in the Consolidated Balance Sheet. The Group is subject to and complies with externally imposed capital requirements.
The gearing ratio of the Group at reporting date was as follows:
Current borrowings
Non-current borrowings
Less cash and cash equivalents
Net debt
Total equity
Gearing ratio 1
1
The gearing ratio is calculated as Net debt divided by Net debt plus Total equity.
2017
$’M
62.4
307.8
(43.2)
327.0
1,825.0
15.2%
2016
$’M
0.8
358.6
(48.3)
311.1
1,781.5
14.9%
74
74
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
20. Property, plant and equipment
20. Property, plant and equipment
2017
Opening net book value
Additions
Acquisitions of businesses
Net movement in landfill assets 1
Disposals
Transfer of assets
Revaluations
Impairment of assets 2
Depreciation
Closing net book value
Cost or fair value
Accumulated depreciation
Net book value
NON-LANDFILL
LAND AND
BUILDINGS
$’M
160.2
–
–
–
–
(5.8)
(8.9)
–
(2.2)
143.3
150.0
(6.7)
143.3
LANDFILL
ASSETS
$’M
198.6
–
–
23.4
(5.2)
75.7
–
(1.9)
(48.9)
241.7
564.8
(323.1)
241.7
LEASEHOLD
IMPROVEMENTS
$’M
32.0
–
–
–
(0.1)
14.5
–
–
(2.7)
43.7
51.1
(7.4)
43.7
PLANT AND
EQUIPMENT
$’M
447.2
–
9.2
–
(1.2)
94.1
–
(2.5)
(99.5)
447.3
1,434.9
(987.6)
447.3
CAPITAL WORK
IN PROGRESS
$’M
59.1
175.5
–
–
–
(174.1)
–
–
–
60.5
60.5
–
60.5
TOTAL
$’M
897.1
175.5
9.2
23.4
(6.5)
4.4
(8.9)
(4.4)
(153.3)
936.5
2,261.3
(1,324.8)
936.5
1 Net movement in landfill assets reflects adjustments to the remediation provision for open landfill sites. Refer to accounting policy note 38(k).
2 During the period impairments of $4.4 million were recognised upon the early closure of the Wingfield Solvent Plant (Liquids & Industrial Services) and
the Nuriootpa Landfill (Solids).
2016
Opening net book value
Additions
Acquisitions of businesses
Net movement in landfill assets
Disposals
Transfer of assets
Transfer to assets held for sale
Revaluations
Project and site closures
Depreciation
Closing net book value
Cost or fair value
Accumulated depreciation
Net book value
NON-LANDFILL
LAND AND
BUILDINGS
$’M
153.9
–
–
–
(0.5)
4.7
–
4.5
(0.4)
(2.0)
160.2
164.7
(4.5)
160.2
LANDFILL
ASSETS
$’M
142.6
–
–
28.9
–
70.8
–
–
–
(43.7)
198.6
476.5
(277.9)
198.6
LEASEHOLD
IMPROVEMENTS
$’M
32.8
–
–
–
–
3.2
–
–
–
(4.0)
32.0
38.4
(6.4)
32.0
PLANT AND
EQUIPMENT
$’M
441.8
–
–
–
(2.0)
106.4
–
–
–
(99.0)
447.2
1,362.8
(915.6)
447.2
CAPITAL WORK
IN PROGRESS
$’M
89.3
164.1
0.2
–
–
(187.7)
(2.2)
–
(4.6)
–
59.1
59.1
–
59.1
TOTAL
$’M
860.4
164.1
0.2
28.9
(2.5)
(2.6)
(2.2)
4.5
(5.0)
(148.7)
897.1
2,101.5
(1,204.4)
897.1
75
75
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
20. Property, plant and equipment (continued)
20. Property, plant and equipment (c)
Accounting for landfill assets
The Group is responsible for a total of 15 landfills (2016: 17 landfills). Of the 15 landfills, nine are closed. Those that are
open are expected to close between 2018 and 2062. The Group’s remediation provisions are based on an average 30 year
post-closure period.
It is the Group’s policy at time of development or acquisition of a landfill and at each reporting date to:
(a) Capitalise the cost of cell development to landfill assets;
(b) Capitalise the cost of purchased landfill assets;
(c) Depreciate the capitalised landfill assets over the useful life of the landfill asset or site; and
(d) Recognise income generated from the landfill assets in the reporting period earned.
Refer to note 38(k) for further details on the Group’s accounting policy on landfill assets.
Valuations of non-landfill land and buildings
Non-landfill land and buildings are shown at fair value in the Consolidated Balance Sheet, based on periodic valuations
by external independent valuers, less subsequent depreciation of buildings. The current valuation selection process ensures
that each property is valued at least every three years. The latest independent valuations were completed at 30 June 2017.
Land and buildings are combined for the purposes of determining fair value as this is how management view its property
and associated value. The fair values are reviewed at the end of each reporting period to ensure that the carrying value
of land and buildings is not materially different to their fair values.
Any revaluation increment (net of tax) is credited to the asset revaluation reserve included in the equity section of the
Consolidated Balance Sheet. Any revaluation decrement directly offsetting a previous increment in the same asset is directly
offset against the surplus in the asset revaluation reserve, otherwise it is charged to the Consolidated Income Statement.
The following table shows an analysis of the fair values of land and buildings recognised in the Consolidated Balance Sheet
by level of the fair value hierarchy:
2017
Residential
Regional industrial
Metropolitan industrial
Total
2016
Residential
Regional industrial
Metropolitan industrial
Total
LEVEL 1
$’M
–
–
–
–
–
–
–
–
LEVEL 2
$’M
0.2
–
–
0.2
1.7
–
–
1.7
LEVEL 3
$’M
–
40.5
102.6
143.1
–
44.2
114.3
158.5
TOTAL 1
$’M
0.2
40.5
102.6
143.3
1.7
44.2
114.3
160.2
AMOUNT
EXPENSED
$’M
(0.2)
(0.4)
–
(0.6)
–
(0.2)
–
(0.2)
1
The amounts in this table are based on the most recent valuation for each property and include subsequent accumulated depreciation recognised.
Amounts taken to the Consolidated Income Statement are shown in change in fair value of land and buildings.
There were no transfers between levels during the year.
Level 2 valuations are based on a direct comparison approach whereby a property’s fair value is estimated based on comparable
transactions and are then adjusted to take into account any differences in the assets. The unit of comparison applied by the
Group is the price per square metre (sqm).
76
76
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
20. Property, plant and equipment (continued)
20. Property, plant and equipment (c)
The following table presents the details of the valuation approaches used under Level 3:
Regional industrial
Metropolitan industrial
VALUATION
TECHNIQUE
Summation
Capitalisation
Direct comparison
Summation
Capitalisation
Direct comparison
KEY UNOBSERVABLE
INPUTS
Price per square metre
Depreciation replacement cost
Capitalisation rate
Leased income per square metre
Price per square metre
Price per square metre
Depreciation replacement cost
Capitalisation rate
Leased income per square metre
Price per square metre
RANGE
2017
$2-250
$172-1019
9.75%
$125
$60-1401
$15-360
$35-726
7%-10%
$40-153
$70-1831
RANGE
2016
$5-250
$207-1019
9.75%
$125
$60-1401
$15-360
$35-671
7%-10%
$40-94
$70-1831
Under the summation method a property’s fair value is estimated based on comparable transactions for the land on a price
per square metre basis together with an estimate of the cost to replace any buildings or structures on site less depreciation.
Under the income capitalisation method, a property’s fair value is estimated based on the normalised net operating lease
income generated by the property, which is divided by the capitalisation rate (discounted by a rate of return). Significant
increases/(decreases) in any of the significant unobservable inputs, in isolation, under the direct comparison, summation
or capitalisation methods would result in a significantly higher/(lower) fair value measurement.
If non-landfill land and buildings were measured using the cost model, the carrying amounts would be as follows:
Land
Cost
Buildings
Cost
Accumulated depreciation
Closing net book value
21.
21. Intangible assets
Intangible assets
Opening net book value
Additions
Acquisitions of businesses
Disposals
Transfers from PP&E
Amortisation
Net book value
Cost
Accumulated amortisation
Net book value
1
Refer to note 39.
2017
$’M
2016
$’M
75.2
82.2
72.4
(23.6)
48.8
71.1
(21.4)
49.7
GOODWILL
2017
$’M
1,219.9
–
9.5
–
–
–
1,229.4
1,229.4
–
1,229.4
2016
$’M
Restated 1
1,219.5
–
0.4
–
–
–
1,219.9
1,219.9
–
1,219.9
OTHER INTANGIBLES
2017
$’M
348.1
12.1
8.3
–
–
(12.6)
355.9
428.2
(72.3)
355.9
2016
$’M
344.2
15.9
0.2
(1.7)
1.6
(12.1)
348.1
407.8
(59.7)
348.1
TOTAL
2017
$’M
1,568.0
12.1
17.8
–
–
(12.6)
1,585.3
1,657.6
(72.3)
1,585.3
2016
$’M
Restated 1
1,563.7
15.9
0.6
(1.7)
1.6
(12.1)
1,568.0
1,627.7
(59.7)
1,568.0
77
77
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
21.
Intangible assets (continued)
21. Intangible assets (c)
Intangible assets are monitored at an operating segment level for the Solids business and at a cash-generating unit (CGU)
level for the Liquids and Industrial Services business. CGUs for the Liquids and Industrial Services business consists of:
Liquids & Hazardous Waste, excluding Hydrocarbons;
•
Hydrocarbons; and
•
Industrial Services.
•
The carrying amount of goodwill and intangible assets allocated to the operating segment or CGUs is as follows:
2017
Goodwill
Brand names
Other intangible assets
Total
2016
Restated 1
Goodwill
Brand names
Other intangible assets
Total
1
Refer to note 39.
LIQUIDS &
HAZARDOUS
WASTE
$’M
58.4
–
0.9
59.3
INDUSTRIAL
SERVICES
$’M
47.9
–
–
47.9
CORPORATE
$’M
–
–
15.7
15.7
TOTAL
$’M
1,229.4
78.6
277.3
1,585.3
58.4
–
1.0
59.4
47.9
–
–
47.9
–
–
10.1
10.1
1,219.9
78.6
269.5
1,568.0
SOLIDS
$’M
1,123.1
78.6
260.7
1,462.4
1,113.6
78.6
258.4
1,450.6
At 30 June 2017, other intangible assets include the Melbourne Regional Landfill asset of $240.8 million (2016:
$242.2 million) and customer contracts of $9.6 million (2016: $5.2 million).
Annual impairment testing
After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment
losses. Goodwill and brand names are not amortised but are subject to impairment testing. In accordance with the Group’s
accounting policies, the Group performs its impairment testing annually at 30 June. Goodwill and non-current assets are
however reviewed at each reporting period to determine whether there is an indicator of impairment. Where an indicator
of impairment exists, a formal review is undertaken to estimate the recoverable amount of related assets.
Results of impairment testing
Based on impairment testing performed, the recoverable amounts of each CGU exceed the carrying amounts at 30 June 2017.
Key assumptions used for annual impairment testing
The recoverable amounts of the operating segment or CGUs is determined based on value-in-use calculations using five year
forecasted cash flows of the CGUs and a terminal value calculation, other than those associated with landfill assets. Cash
flows from the landfill assets are limited to the available airspace of the landfill. These calculations use cash flow projections
based on actual operating results, the 2018 budget approved by the Board and the latest five year strategic plan adjusted for
known developments and changes in information since the plan was formulated.
The terminal growth and discount rate assumptions used in the 30 June 2016 impairment testing were reviewed and have
been determined to remain valid for the 30 June 2017 testing. The terminal value growth rate has been based on published
long-term growth rates. The discount rate has been based on an industry Weighted Average Cost of Capital (WACC) with
cash flow projections being adjusted for CGU specific risks.
Forecast revenue, EBITDA and capital spend assumptions used in the 30 June 2017 impairment testing have been adjusted
for known and anticipated future operational changes and additional potential risk identified since 30 June 2016. These
changes are reflected in the summary of key assumptions table below. Based on these key assumptions the recoverable
amount of each CGU continues to exceed the carrying amounts at 30 June 2017.
78
78
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
21.
Intangible assets (continued)
21. Intangible assets (c)
The table below provides a summary of the key assumptions used in the impairment testing at 30 June 2017 and the
corresponding percentages for 30 June 2016:
ASSUMPTIONS
Revenue growth 1
EBITDA growth 1
Capital spend rate 2
Terminal value growth rate
Post-tax discount rate
Pre-tax discount rate
SOLIDS
LIQUIDS & HAZARDOUS
WASTE
JUNE
2017
4.8%
7.0%
10.2%
3.0%
7.7%
11.0%
JUNE
2016
3.7%
5.7%
10.1%
3.0%
7.7%
11.0%
JUNE
2017
5.5%
11.4%
6.2%
2.0%
7.7%
11.0%
JUNE
2016
2.6%
5.8%
5.2%
2.0%
7.7%
11.0%
HYDROCARBONS
INDUSTRIAL SERVICES
JUNE
2017
2.9%
3.6%
7.3%
2.0%
7.7%
11.0%
JUNE
2016
1.3%
6.4%
6.8%
2.0%
7.7%
11.0%
JUNE
2017
1.9%
7.3%
5.3%
2.0%
7.7%
11.0%
JUNE
2016
3.8%
18.0%
4.3%
2.0%
7.7%
11.0%
1 Growth rates have been calculated with 30 June 2017 revenue and underlying normalised EBITDA as a base.
Reflects capital spend as a percentage of revenue, calculated as the five year average of forecast spend.
2
Revenue growth assumptions
Solids’ forecast revenue growth is based on expected volume and price growth considering current business performance,
benefits from acquired businesses and growth from targeted initiatives implemented across major markets in order
to increase sales revenue. Growth rates have been determined with reference to external sources including the Reserve
Bank of Australia GDP growth and CPI forecast, and industry specific forecasts that are closely linked to waste generation.
The forecast revenue growth as at 30 June 2017 has been adjusted given an increase in forecast CPI and GDP growth.
Growth in the short term also reflects recent major new commercial and municipal contract wins.
Liquid & Hazardous Waste, Hydrocarbons and Industrial Services forecast revenue growth considers GDP and CPI, adjusted
for management’s best estimate of growth achievable in the current economic and competitive environment.
EBITDA growth assumptions
EBITDA growth is primarily the result of changes in the revenue growth assumptions outlined above, together with the
continued benefits of the Cost Reduction Program delivered partway through the 2017 financial year. Controls are in place
to ensure that costs remain at the lower levels currently achieved.
The Liquid & Hazardous Waste CGU reflects an increase in the EBITDA growth from 30 June 2016 as the Cost Reduction
Programme is expected to deliver significant savings and increased earnings are expected to be leveraged from
revenue growth.
The Industrial Services CGU reflects a decrease in the EBITDA growth from 30 June 2016 due to growth already achieved
in the year ended 30 June 2017 mainly from cost reductions.
Capital spend assumptions
Capital spend incorporates consideration of industry benchmarks but also reflects the continued capital discipline as part
of the overall Cost Reduction and Capital Efficiency Program. The Solids segment is the most capital intensive part of the
business and Industrial Services CGU is the least as its primary source of revenue is technical labour services.
79
79
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
21.
Intangible assets (continued)
21. Intangible assets (c)
Impact of possible changes in key assumptions
Any variation in the key assumptions used to determine recoverable amount would result in a change to the estimated
recoverable amount. If variations in assumptions had a negative impact on recoverable amount it could indicate a requirement
for some impairment of non-current assets. If variations in assumptions had a positive impact on recoverable amount it could
indicate a requirement for a reversal of previously impaired non-current assets, with the exception of goodwill.
Estimated reasonably possible changes (absolute numbers) in the key assumptions would have the following approximate
impact on impairment of each CGU as at 30 June 2017:
Decrease in CAGR% – Revenue
Decrease in CAGR% – EBITDA
Increase in capital spend rate
Decrease in terminal value growth rate
Increase in post-tax discount rate
REASONABLY
POSSIBLE CHANGE
1% to 2%
2% to 3%
0.5% to 1%
1%
0.3% to 1%
SOLIDS
$’M
Nil – (245.7)
Nil
Nil
Nil
Nil
LIQUIDS &
HAZARDOUS
WASTE
$’M
Nil – (74.6)
Nil
Nil
Nil
Nil
HYDROCARBONS
$’M
Nil
Nil
Nil
Nil
Nil
INDUSTRIAL
SERVICES
$’M
Nil – (18.3)
Nil – (1.4)
Nil
Nil
Nil
Whilst the table above outlines management’s best estimates of key assumptions and reasonably possible changes in these,
changes in the level of business activity may also materially impact the determination of recoverable amount. Should the
macroeconomic factors that are specific to the Australian domestic market change, this could impact the level of activity
in the market as well as competition and thereby affect the Group’s revenue and cost initiatives. If conditions change
unfavourably, changes in recoverable amount estimates may arise.
Each of the sensitivities above assumes that the specific assumption moves in isolation, whilst all other assumptions are held
constant. In reality, a change in one of the aforementioned assumptions may accompany a change in another assumption.
Action is also usually taken to respond to adverse changes in economic assumptions that may mitigate the impact of any
such change.
Modelling incorporating the assumptions identified in the key assumptions table provides that the recoverable amount
exceeds the carrying amount (headroom) as outlined below. The recoverable amount of the operating segment or CGUs
would equal its carrying amount if the key assumptions were to change as follows:
Headroom $’M
Decrease in CAGR% – Revenue 1
Decrease in CAGR% – EBITDA 1
Increase in capital spend rate 1
Decrease in terminal value growth rate 1,2
Increase in post-tax discount rate 1
LIQUIDS &
HAZARDOUS
WASTE
$’M
82.2
1.0%
4.1%
1.6%
3.5%
2.6%
HYDROCARBONS
$’M
30.6
3.3%
5.5%
2.3%
8.3%
5.5%
SOLIDS
$’M
580.4
1.4%
3.2%
2.2%
3.0%
1.5%
INDUSTRIAL
SERVICES
$’M
31.0
1.2%
2.9%
1.0%
1.8%
1.4%
1
2
Percentage changes presented above represents the absolute change in the assumption value (for example post-tax discount rate increasing by 1.6%
from 7.7% to 9.3%).
Terminal value for Liquids and Hazardous Waste and Hydrocarbons would reflect negative value as it is currently modelled at 2%.
Refer to note 38(l) for further details on the Group’s intangible assets accounting policy.
80
80
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
22. Equity accounted investments
22. Equity accounted investments
The Group holds a 50% interest in the following equity accounted investments but does not have control. Control
is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. The Group does not have power over these entities
either through management control or voting rights.
OWNERSHIP INTEREST
REPORTING
DATE
2017
%
2016
%
50
50
50
50
50
50
50
50
NAME OF ENTITY
Solids:
Wonthaggi Recyclers Pty Ltd
Earthpower Technologies Sydney Pty Ltd
COUNTRY
Australia
Australia
30 June
30 June
Liquids and Industrial Services:
Total Waste Management Pty Ltd
Western Resource Recovery Pty Ltd
Australia 31 December
Australia 31 December
Share of equity accounted investments’ balance sheet
Total assets
Total liabilities
Net assets as reported by equity accounted investments
Share of net assets equity accounted
Share of equity accounted investments’ revenue and profit
Revenues (100%)
Expenses
Profit before income tax (100%)
Share of profit before income tax
Share of income tax expense
Share of net profit recognised
CARRYING VALUE
OF INVESTMENT
2017
$’M
0.7
–
5.5
5.3
11.5
2017
$’M
39.6
(16.7)
22.9
11.5
2017
$’M
36.5
(33.2)
3.3
1.7
(0.5)
1.2
2016
$’M
0.5
–
4.6
6.0
11.1
2016
$’M
29.0
(6.8)
22.2
11.1
2016
$’M
40.9
(37.6)
3.3
1.7
(0.4)
1.3
Impairment losses and commitments
During the year the equity accounted investments were tested for impairment and no adjustments were made as a result
(2016: nil). As at the reporting date the Group had no contractual obligation to provide funding for capital commitments
of equity accounted investments (2016: nil).
81
81
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
23. Employee entitlements
23. Employee entitlements
Current
Annual leave
Long service leave
Other
Total current employee entitlements
Non-current
Long service leave
Total non-current employee entitlements
2017
$’M
23.2
11.5
11.3
46.0
8.4
8.4
2016
$’M
22.6
11.8
5.5
39.9
8.4
8.4
Refer to note 38(q) for the Group’s accounting policy on employee entitlements.
During the year the Group contributed $28.1 million (2016: $28.5 million) to defined contribution plans. These contributions
are expensed as incurred.
24. Provisions
24. Provisions
Current
Rectification provisions
Remediation provisions
Other
Total current provisions
Non-current
Rectification provisions
Remediation provisions
Other
Total non-current provisions
2017
$’M
13.6
29.5
12.5
55.6
25.7
264.0
12.9
302.6
2016
$’M
14.7
31.5
13.6
59.8
39.8
288.1
13.6
341.5
Included in other provisions is an amount of $12.9 million (2016: $12.8 million) in relation to workers compensation
self-insurance of the Group under the Comcare scheme. The workers compensation self-insurance provision is reassessed
annually based on actuarial advice.
The table below provides a roll forward of the provisions:
Opening balance
Provisions made
Provisions used or reversed
Provisions disposed
Unwinding of discount
Change in assumptions 1
Rectification and remediation spend
Closing balance
RECTIFICATION
REMEDIATION
OTHER
TOTAL
2017
$’M
54.5
–
–
(6.3)
1.1
(0.6)
(9.4)
39.3
2016
$’M
70.4
–
–
–
1.3
–
(17.2)
54.5
2017
$’M
319.6
9.3
–
(21.7)
7.9
11.5
(33.1)
293.5
2016
$’M
315.1
20.3
–
–
6.9
8.2
(30.9)
319.6
2017
$’M
27.2
16.5
(18.3)
–
–
–
–
25.4
2016
$’M
26.1
10.1
(9.0)
–
–
–
–
27.2
2017
$’M
401.3
25.8
(18.3)
(28.0)
9.0
10.9
(42.5)
358.2
2016
$’M
411.6
30.4
(9.0)
–
8.2
8.2
(48.1)
401.3
1
The change in assumptions represents changes in environmental guidelines and cost estimates.
The provision for remediation has been estimated using current expected costs and techniques applicable to the operation
of each landfill and the disturbed area. These costs have been adjusted for the future value of the expected costs at the
time of works being required. These costs have then been discounted to estimate the required provision at a rate
of 2.81% (2016: 2.81%). Refer to note 38(o) for a summary of the accounting policy for provisions for landfill remediation
and rectification.
82
82
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
25. Other liabilities
25. Other liabilities
Current
Deferred settlement liabilities resulting from business combinations
Landfill creation liability
Deferred revenue
Other liabilities
Total current other liabilities
Non-current
Deferred settlement liabilities resulting from business combinations
Landfill creation liability
Other liabilities
Total non-current other liabilities
2017
$’M
5.7
13.6
0.7
2.1
22.1
74.9
58.5
–
133.4
2016
$’M
4.9
12.1
1.6
4.6
23.2
75.0
28.4
3.2
106.6
26. Acquisition of Businesses and non-controlling interest
26. Acquisition of Businesses and non-controlling interest
Year ended 30 June 2017
Business combinations
During the year ended 30 June 2017, the Group completed four business combinations. Details of these business
combinations are provided below:
BUSINESS ACQUIRED
Waste 2 Resources
DATE OF ACQUISITION
1 July 2016
Young Ezy Bins
1 August 2016
Matera Waste
8 September 2016
Warren Blackwood
30 September 2016
DESCRIPTION OF THE BUSINESS
Collections business based in Brisbane, Queensland which
operates in three sectors: Construction and demolition
collections; Commercial and Industrial collections; and
Resource recovery centres.
General Waste collections business based in the Young Shire
in Central New South Wales.
Construction and demolition collections business operating
in Perth, Western Australia.
Leading waste collection and transfer station business in
SouthWest Western Australia, servicing commercial and
industrial customers and 13 municipal council contracts.
The aggregated fair value of the identifiable assets and liabilities of the four business combinations at their dates
of acquisition were:
Assets
Property, plant and equipment
Intangible assets
Liabilities
Employee entitlements
Deferred tax liability
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration
2017
$’M
9.2
8.3
17.5
0.7
2.3
3.0
14.5
9.5
24.0
83
83
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
26. Acquisition of businesses and non-controlling interest (continued)
26. Acquisition of businesses and non-controlling interest (c)
Business combinations (continued)
The intangible assets identified as part of the acquisitions included customer contract and customer relationship intangibles.
These intangible assets were valued based on the expected cash flows from the customers of the acquired businesses,
applying the existing contracted terms for the customer contracts and an expected attrition rate of the customer base for the
customer relationship intangible. Goodwill acquired comprises the value of expected synergies arising from integration of the
acquired businesses and is non-deductible for income tax purposes.
Cash
Contingent consideration
Total purchase consideration
Transaction costs of the acquisitions (included in cash flows from operating activities)
Cash consideration paid (included in cash flows from investing activities)
Net cash flow on acquisition
2017
$’M
23.5
0.5
24.0
2017
$’M
1.6
23.5
25.1
From the dates of acquisition to 30 June 2017, the businesses contributed $20.8 million of revenue and $1.2 million to profit
before tax to the Group, after amortisation of customer intangibles of $1.0 million. If the businesses had all been acquired
at the beginning of the reporting period, revenue of $24.1 million and profit before tax of $1.3 million, after amortisation
of customer intangibles of $1.2 million would have been contributed to the Group.
Acquisition of additional interest in Cleanaway Refiners Pty Ltd
On 25 July 2016 the Group acquired the non-controlling interest in Cleanaway Refiners Pty Ltd for $2.5 million. Prior to the
acquisition the Group held a 50% controlling interest in this entity.
Cash consideration paid to non-controlling shareholders
Carrying value of the additional interest in Cleanaway Refiners Pty Ltd
Gain recognised in retained earnings
Year ended 30 June 2016
There were no significant business combinations during the year ended 30 June 2016.
2017
$’M
2.5
(6.6)
(4.1)
84
84
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
27. Subsidiaries
27. Subsidiaries
The Group’s principal subsidiaries at 30 June 2017 are set out below.
EFFECTIVE INTEREST
Baxter Business Pty Ltd 2
Cleanaway Hygiene Pty Ltd 2
Cleanaway Industrial Solutions Pty Ltd 2
Cleanaway Landfill Holdings Pty Ltd 2
Cleanaway Operations Pty Ltd 2
Cleanaway Organics Pty Ltd 2
Cleanaway Pty Ltd 2
Cleanaway Recycling Pty Ltd 2
Cleanaway Refiners Pty Ltd 1, 2
Cleanaway Resource Recycling Pty Ltd 2
Cleanaway Solid Waste Pty Ltd 2
Cleanaway Superior Pak Pty Ltd 2
Cleanaway Waste Management Limited (Parent entity)
Enviroguard Pty Ltd 2
Environmental Recovery Services Pty Ltd 2
ERS Australia Pty Ltd 2
Landfill Land Holdings Pty Ltd 2
Landfill Operations Pty Ltd 2
Mann Waste Management Pty Ltd 2
Nationwide Oil Pty Ltd 2
NQ Resource Recovery Pty Ltd 2
Olmway Pty Ltd 1
Rubus Holdings Pty Ltd 2
Rubus Intermediate One Pty Ltd 2
Rubus Intermediate Two Pty Ltd 2
Transpacific Baxter Pty Ltd 2
Transpacific Biofuels Pty Ltd 1
Transpacific Cleanaway Holdings Pty Ltd 2
Transpacific Co Pty Ltd 2
Transpacific Environmental Services Pty Ltd 2
Transpacific Resources Pty Ltd 2
Transwaste Technologies Pty Ltd 2
Transwaste Technologies (1) Pty Ltd 2
Western Landfill Pty Ltd 2
Waste Management Pacific (SA) Pty Ltd 2
Waste Management Pacific Pty Ltd 2
2017
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
50
100
100
100
100
100
100
100
100
100
2016
%
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
50
100
100
100
100
100
100
100
100
100
1 Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. As subsidiaries, the Group has power over the investees through management control and the casting vote
of Olmway Pty Ltd and Transpacific Biofuels Pty Ltd. The Group has the capacity to dominate decision making in relation to the relevant activities so as
to enable those entities to operate as part of the Group in pursuing its objectives. The Group acquired the non-controlling interest of Cleanaway Refiners
Pty Ltd on 25 July 2016. Refer to note 26 for details.
These subsidiaries are parties to a deed of cross guarantee with Cleanaway Waste Management Limited created on 29 June 2007 pursuant to ASIC Class
Order 98/1418 and are relieved from the requirement to prepare and lodge an audited Financial Report. Refer to note 28 for Consolidated Statement
of Profit or Loss and Other Comprehensive Income and Consolidated Balance Sheet of the entities who are a party to the Deed of Cross Guarantee.
2
3 All entities were incorporated in Australia.
85
85
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
28. Deed of cross guarantee
28. Deed of cross guarantee
The Consolidated Statement of Profit or Loss and Other Comprehensive Income and the Consolidated Balance Sheet of the
entities who are a party to the Deed of Cross Guarantee are:
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
Other income
Labour related expenses
Collection, recycling and waste disposal expenses
Fleet operating expenses
Property expenses
Other expenses
Share of profits from equity accounted investments
Profit from operations before depreciation and amortisation
Depreciation and amortisation expense
Impairment of assets
Change in fair value of non-landfill land and buildings
Profit from operations
Net finance costs
Profit before income tax
Income tax expense
Profit after income tax
Other comprehensive income
Revaluation of land and buildings
Net comprehensive income recognised directly in equity
Total comprehensive income for the year
Refer to note 27 for details of subsidiaries who are a party to the Deed of Cross Guarantee.
2017
$’M
1,460.8
22.4
(589.4)
(359.0)
(131.8)
(40.1)
(70.0)
1.2
294.1
(165.9)
(4.4)
(0.6)
123.2
(34.1)
89.1
(30.4)
58.7
2016
$’M
1,432.6
2.2
(610.3)
(340.3)
(140.9)
(31.4)
(55.9)
1.3
257.3
(156.8)
–
(0.2)
100.3
(34.4)
65.9
(18.8)
47.1
(5.7)
(5.7)
53.0
3.1
3.1
50.2
86
86
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
28. Deed of cross guarantee (continued)
28. Deed of cross guarantee (c)
BALANCE SHEET
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
Other financial assets
Property, plant and equipment
Intangible assets
Equity accounted investments
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Income tax payable
Borrowings
Employee benefits
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Employee benefits
Provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
2017
$’M
2016
$’M
Restated
43.2
247.9
11.1
32.6
334.8
2.6
936.5
1,585.1
11.5
87.7
2,623.4
2,958.2
177.6
10.7
62.4
46.0
55.6
22.1
374.4
307.8
8.4
302.6
133.6
752.4
1,126.8
1,831.4
2,083.0
40.0
(291.6)
1,831.4
47.6
223.9
14.4
33.6
319.5
89.6
866.5
1,563.7
10.6
109.3
2,639.7
2,959.2
173.2
10.7
0.3
39.6
59.8
22.9
306.5
358.6
8.3
341.5
109.4
817.8
1,124.3
1,834.9
2,076.4
41.7
(283.2)
1,834.9
The effect of the deed is that all subsidiaries that are parties to the deed have guaranteed to pay any deficiency in the event
of winding up of any subsidiary or if they do not meet their obligations under the terms of overdrafts, loans, leases or other
liabilities subject to the guarantee.
87
87
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
29. Parent entity
29. Parent entity
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Retained earnings
Reserves
Total equity
Profit/(loss) for the period
Total comprehensive income/(loss) for the period
The parent entity guarantees the contractual commitments of its subsidiaries as requested.
30. Derivative financial instruments
30. Derivative financial instruments
Derivatives – at fair value
2017
$’M
17.6
2,648.1
80.0
389.0
2,083.0
164.9
11.2
2,259.1
124.0
124.0
2016
$’M
14.2
2,620.9
12.9
465.2
2,076.4
70.9
8.4
2,155.7
(6.7)
(6.7)
2017
$’M
8.3
8.3
2016
$’M
10.9
10.9
The derivative balance relates to a foreign currency swap held by the Group to hedge against foreign currency movements
in the USPP Notes. Refer to note 38(j) for the Group’s accounting policy on derivative financial instruments.
31. Financial risk management
31. Financial risk management
The Group is exposed to market risk, credit risk and liquidity risk. The Group has in place a Treasury Policy that focuses
on managing these risks. The policy is reviewed by the Audit and Risk Committee and approved by the Board. The treasury
activities are reported to the Audit and Risk Committee and Board on a regular basis with the ultimate responsibility being
borne by the Chief Financial Officer (CFO).
The Group’s overall financial risk management focuses on mitigating the potential financial effects to the Group’s financial
performance. The Group also enters into derivative transactions to manage the interest rate and currency risks arising from
the Group’s operations and its sources of finance. It is the Group’s policy that no speculative trading in financial instruments
shall be undertaken.
(a) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in market prices. Market risk includes foreign currency risk and interest rate risk.
Foreign currency risk
Foreign currency risk arises as a result of having assets and liabilities denominated in a currency that is not the Group’s
functional currency (balance sheet risk) or from transactions or cash flows denominated in a foreign currency (cash flow risk).
Foreign currency risk is not material to the Group.
The US Private Placement (USPP) Notes currency risk has been economically hedged by a foreign currency swap for the
currency exposure which has been in place since inception and converts to AUD fixed rate debt. Although the Group’s
related foreign currency risk has been economically hedged, hedge accounting has not been applied. The foreign currency
risk associated with the USPP Notes is fully hedged by the related foreign currency swap arrangement.
88
88
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
31. Financial risk management (continued)
31. Financial risk management (c)
The value of the USPP Notes at 30 June 2017 and 30 June 2016 is shown in the table below:
US PRIVATE PLACEMENT NOTES
30 June 2017
30 June 2016
Interest rate risk
USD
$’M
48.0
48.0
AUD
$’M
62.4
64.7
Interest rate risk is the risk that the fair value of the financial instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. The Group’s exposure primarily relates to its exposure to variable interest
rates on borrowings.
At 30 June 2017, there were no interest rate swaps in place.
At the reporting date the interest rate profile of the Group’s interest bearing financial instruments was:
Fixed rate instruments
USPP borrowings (USD)
Other
Variable rate instruments
Borrowings
30 JUNE 2017
30 JUNE 2016
WEIGHTED
AVERAGE
INTEREST RATE
%
10.8
–
WEIGHTED
AVERAGE
INTEREST RATE
%
10.8
8.0
BALANCE
$’M
(62.4)
–
(62.4)
BALANCE
$’M
(64.7)
(0.8)
(65.5)
3.1
(307.8)
(307.8)
3.6
(293.9)
(293.9)
The Group’s fixed rate borrowings are carried at amortised cost and therefore not subject to interest rate risk since neither
the carrying amount nor the future cash flows will fluctuate due to a change in market interest rates.
An analysis of the interest rates over the 12 month period was performed to determine a reasonable possible change
in interest rates on the variable rate borrowings. A change of 100 basis points in interest rates, based on borrowings at the
reporting date would have increased/(decreased) profit by $3.1 million (2016: $2.9 million).
Credit risk
(b)
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
contractual obligations, with the maximum exposure being equal to the carrying amount of these instruments. Management
has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed
on all customers requiring credit over a certain amount. The Group does not require collateral in respect of financial assets.
For certain export sales the Group requires the vendor to provide a letter of credit.
The Group minimises concentrations of credit risk by undertaking transactions with a large number of customers. In addition,
receivable balances are monitored on an ongoing basis with the intention that the Group’s exposure to bad debts is minimised.
Credit risk on foreign exchange contracts is minimal as counterparties are large Australian and international banks with
acceptable credit ratings determined by a recognised ratings agency. Credit risk from balances with banks and financial
institutions is managed by the Group in accordance with the Group’s Treasury policy where it only deals with large reputable
financial institutions.
89
89
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
31. Financial risk management (continued)
31. Financial risk management (c)
The Group’s maximum exposure to credit risk at the reporting date was:
CARRYING AMOUNT
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
NOTES
11
12
30
2017
$’M
43.2
247.9
8.3
299.4
2016
$’M
48.3
224.3
10.9
283.5
Refer to note 12 for an analysis of credit risk and impairment associated with the Group’s trade receivables balance.
Liquidity risk
(c)
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s objective
is that the Group has access to sufficient cash resources to meet its financial obligations as they fall due, including taxes
and dividends, and to provide funds for capital expenditure and investment opportunities as they arise.
The Group regularly reviews existing funding arrangements and assesses future funding requirements based upon known
and forecast information. The Group’s liquidity position is reported to the Board on a monthly basis.
The headroom in the Group’s syndicated facilities at 30 June 2017 is $230.2 million (2016: $251.3 million). The current
portion of the Group’s borrowings at 30 June 2017 is $62.4 million (2016: $0.8 million). The Group considers liquidity risk
to be low due to the level of headroom available and the maturity profile of existing facilities.
The following table discloses the contractual maturities of financial liabilities, including estimated interest payment and
excluding the impact of netting agreements:
2017
US Private Placement Notes
Unsecured bank loans
Trade and other payables
Other liabilities
Total
2016
US Private Placement Notes
Loans from related parties
Unsecured bank loans
Trade and other payables
Other liabilities
Total
< 1
YEAR
$’M
65.1
9.7
177.6
21.4
273.8
7.0
0.5
10.6
178.8
21.6
218.5
1 – 2
YEARS
$’M
–
23.2
–
22.1
45.3
68.2
–
10.6
–
22.4
101.2
2 – 5
YEARS
$’M
–
309.4
–
65.1
374.5
–
–
311.5
–
30.0
341.5
> 5
YEARS
$’M
–
–
–
119.3
119.3
CONTRACTUAL
CASH FLOWS
$’M
65.1
342.3
177.6
227.9
812.9
CARRYING
AMOUNT
$’M
62.4
307.8
177.6
154.8
702.6
–
–
–
–
209.6
209.6
75.2
0.5
332.7
178.8
283.6
870.8
64.7
0.5
293.9
178.8
128.2
666.1
The Group has bank guarantees and insurance bonds in place in respect of its contractual performance related obligations.
These guarantees and indemnities only give rise to a liability where the Group fails to perform its contractual obligations.
In the event that the Group does not meet its contractual obligations, these instruments are immediately callable and have
a maximum exposure of $135.3 million (2016: $128.7 million) in relation to these bank guarantees and insurance bonds.
Refer to note 33(c) for details of the Group’s guarantees.
Financial assets and liabilities measured at fair value
(d)
All assets and liabilities for which fair value is measured or disclosed in the financial statements are classified within the fair
value hierarchy on the basis of nature, characteristics and risks and described as follows based on the lower level of input
that is significant to the fair value measurement as a whole.
Level 1 – the fair value is calculated using prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
90
90
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
31. Financial risk management (continued)
31. Financial risk management (c)
There were no transfers between levels during the year.
The Group enters into currency rate swaps with financial institutions with investment grade credit ratings. These derivatives
are valued using techniques with market observable inputs. The valuation techniques include forward pricing and swap
models, using present value calculations.
The following table provides the fair value measurement hierarchy of the Group’s derivative financial instruments:
2017
Assets
Derivative financial instruments – USD foreign currency swap
LEVEL 1
$’M
LEVEL 2
$’M
LEVEL 3
$’M
TOTAL
$’M
–
8.3
–
8.3
2016
Assets
Derivative financial instruments – USD foreign currency swap
–
10.9
–
10.9
The carrying value of all financial assets and liabilities other than derivative financial instruments approximate fair value.
32. Contingent liabilities
32. Contingent liabilities
Taxation authority reviews
The New Zealand Taxation Authority is currently reviewing particular aspects of the Group’s tax position which have arisen
during the period of the Group’s ownership of the New Zealand business. While assessments have been issued in respect
of some aspects of this review, no amounts of tax are currently payable by the Group, as discussions with Inland Revenue
in relation to these matters are still continuing and the tax audit process has not yet concluded. At this time, it is too early
to identify the outcomes and related adjustments that may arise, if any. The timing, in respect of the resolution of these
matters, will depend on the outcome of the continuing discussions with Inland Revenue, the completion of the tax audit
process and the initiation and conclusion of any court proceedings, if deemed necessary.
Other claims
On 18 August 2014 a Cleanaway vehicle was involved in a motor vehicle accident on the South Eastern Freeway in Glen
Osmond, South Australia. Tragically the incident caused the death of two members of the public, and two other persons
were seriously injured. During the year ended 30 June 2017, Cleanaway was charged with traffic and work health and
safety offences in relation to the incident and there is a potential that other claims may emerge in due course. The extent
of Cleanaway’s liability and the timing for these matters to be resolved is not known at this time.
Certain companies within the Group are party to various legal actions or commercial disputes or negotiations that have arisen
in the normal course of business. It is expected that any liabilities or assets arising from these legal actions would not have
a material effect on the Group.
33. Commitments
33. Commitments
(a) Operating lease commitments
The Group leases property, plant and equipment under operating leases expiring over terms generally not exceeding ten
years. Leases generally provide the Group with a right of renewal at which time all terms are renegotiated. Future minimum
rentals payable under non-cancellable operating lease rentals are payable as follows:
Within one year
Between one and five years
More than five years
2017
$’M
24.4
61.9
54.5
140.8
2016
$’M
23.3
64.2
48.5
136.0
91
91
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
33. Commitments (continued)
33. Commitments (c)
Capital expenditure and other commitments
(b)
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
Property, plant and equipment
Intangible assets
2017
$’M
70.2
5.5
75.7
2016
$’M
48.0
3.4
51.4
Guarantees
(c)
The Group is, in the normal course of business, required to provide guarantees and letters of credit on behalf of subsidiaries,
joint ventures and associates in respect of their contractual performance related obligations. These guarantees and
indemnities only give rise to a liability where the entity concerned fails to perform its contractual obligations.
Bank guarantees outstanding at balance date in respect of contractual performance
Insurance bonds outstanding at balance date in respect of contractual performance
2017
$’M
123.7
11.6
135.3
2016
$’M
115.3
13.4
128.7
34. Share-based payments
34. Share-based payments
Total share-based payment expense included in the Consolidated Income Statement is set out in note 17(b).
Performance rights outstanding at the reporting date consist of the following grants:
OFFER
GRANT DATE
END OF
PERFORMANCE
OR SERVICE
PERIOD
PERFORMANCE
RIGHTS AT
30 JUNE 2016
GRANTED
DURING THE
PERIOD
VESTED DURING
THE PERIOD
FORFEITED/
EXPIRED
DURING THE
PERIOD
PERFORMANCE
RIGHTS AT
30 JUNE 2017
LONG TERM INCENTIVE PLAN
2013 LTI
2014 LTI
2015 LTI
2016 LTI (A)
2016 LTI (B)
2017 LTI (A)
2017 LTI (B)
19 Jun 2013 30 Jun 2016
24 Mar 2014 30 Jun 2017
10 Mar 2015 30 Jun 2017
30 Oct 2015 30 Jun 2018
16 Mar 2016 30 Jun 2018
7 Oct 2016 30 Jun 2019
2 Nov 2016 30 Jun 2019
SHORT TERM INCENTIVE PLAN
2014 STI
2016 STI
1 & 29 Oct 2014 30 Jun 2016
7 Oct & 2 Nov 2016 30 Jun 2017
786,366
1,480,949
1,912,388
2,838,220
2,808,170
–
–
–
–
–
–
–
2,301,952
2,370,716
(191,598)
–
–
–
–
–
–
(594,768)
(202,709)
(92,460)
–
(284,054)
–
–
–
1,278,240
1,819,928
2,838,220
2,524,116
2,301,952
2,370,716
592,330
–
–
509,480
(592,330)
–
–
–
–
509,480
OTHER GRANTS
One-off (A)
Total
Vested and exercisable at 30 June 2017
20 Aug 2015
3 Aug 2017
328,947
10,747,370
–
5,182,148
–
(783,928)
–
328,947
(1,173,991) 13,971,599
509,480
The vesting date for LTI offers is on or after 14 days after the date on which the annual financial results of the Group for the
financial year associated with the end of the performance period is released to the ASX. Other offers vest on or after the end
of the relevant performance or service period.
92
92
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
34. Share-based payments (continued)
34. Share-based payments (c)
Long term incentive (LTI) plan
(a)
The Cleanaway LTI plan is designed to provide long-term incentives for senior executives to deliver long-term shareholder
returns. Under the plan, participants are granted performance rights which only vest if certain performance standards
are met.
Offers made in previous reporting periods
The following table outlines the terms of the outstanding LTI offers made in previous reporting periods which remain on issue:
PERFORMANCE
PERIOD
Overview
2014 LTI AWARD
4 YEARS: 1 JULY 2013
TO 30 JUNE 2017
2015 LTI AWARD
UP TO 4 YEARS: 1 JULY 2014
TO 30 JUNE 2018
2016 LTI AWARD
UP TO 3 YEARS: 1 JULY 2015
TO 30 JUNE 2018
Performance rights, of which:
Performance rights, of which:
Performance rights, of which:
Up to 50% vest if a certain
•
relative TSR ranking is
achieved against the
constituents of the
S&P/ASX 200 Industrial
Sector Index
Up to 50% vest if a certain
•
earnings per share target
is achieved
Measured over 3 years to 30 June
2017
Measured over 3 years to 30
June 2018
Up to 25% vest if a certain
•
Up to 50% vest if a certain
•
relative TSR ranking is achieved
against constituents of the
S&P/ASX 200 Industrial Sector
Index
relative TSR ranking is
achieved against the
constituents of the S&P/ASX
200 Industrial Sector Index
Up to 25% vest if a certain
•
Return on Invested Capital
target is achieved
Up to 50% vest if a certain
•
Return on Invested Capital
target is achieved
Measured over 4 years to 30 June
2018
Up to 50% vest if certain
•
strategic initiatives are achieved
Offer made in current reporting period – 2017 LTI award
During the period, the Group issued performance rights attached to the Group’s LTI plan to the CEO (grant B) and other
senior executives (grant A). The performance rights will vest in three tranches if the following performance hurdles, tested
independently, are met:
Tranche 1 – Up to 50% of the performance rights vest if a certain relative TSR ranking is achieved against constituents
•
of the S&P/ASX 200 Industrial Sector Index.
Tranche 2 – Up to 25% of performance rights vest if a certain Return on Invested Capital (ROIC) target is achieved.
•
Tranche 3 – Up to 25% of performance rights vest if a certain underlying earnings per share (EPS) compound annual
•
growth rate (CAGR) target is achieved.
Performance rights granted during the period were fair valued by an external party using the Monte Carlo Simulation and
Black Scholes model.
The following table sets out the assumptions made in determining the fair value of these performance rights:
SCHEME
Number of rights
Grant date
Performance period
Risk free interest rate (%)
Volatility 1 (%)
Fair value – Relative TSR tranche
Fair value – ROIC tranche
Fair value – EPS CAGR tranche
2017 LTI – GRANT A
2,301,952
7 October 2016
1 July 2016 – 30 June 2019
1.65%
35.0%
$0.86
$1.06
$1.06
2017 LTI – GRANT B
2,370,716
2 November 2016
1 July 2016 – 30 June 2019
1.71%
35.0%
$0.86
$1.03
$1.03
1
Expected volatility is based on the historic volatility of Cleanaway shares over a range of periods.
93
93
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
34. Share-based payments (continued)
34. Share-based payments (c)
The performance targets of the 2017 LTI award are set out in the table below.
Relative TSR performance
measured over 3 years
from 1 July 2016 to 30
June 2019
ROIC performance as
measured for the year
ending 30 June 2019
Relative Total Shareholder Return (TSR) Ranking against the constituents of the S&P/ASX200
Industrial Sector Index:
Below 50th percentile – 0% vesting
•
At the 50th percentile – 50% vesting
•
50th to 75th percentile – straight line vesting between 50% and 100%
•
Above 75th percentile – 100% vesting
•
Return On Invested Capital (ROIC) to be achieved:
< 4.5% – 0% vesting
•
4.5% – 20% vesting
•
> 4.5% – ≤ 5.5% – straight line vesting between 20% and 50%
•
> 5.5% – ≤ 6.5% – straight line vesting between 50% and 100%
•
> 6.5% – 100% vesting
•
EPS CAGR performance
measured over 3 years
from 1 July 2016 to 30
June 2019
Earnings per Share Compound Annual Growth Rate (EPS CAGR) to be achieved:
< 7.5% – 0% vesting
•
7.5% – 20% vesting
•
> 7.5% – ≤ 10.0% – straight line vesting between 20% and 50%
•
> 10.0% – ≤ 12.5% – straight line vesting between 50% and 100%
•
> 12.5% – 100% vesting
•
Short term incentive (STI) plan
(b)
The Cleanaway STI plan is an annual plan that is used to motivate and reward senior executives across a range of
performance measures over the financial year. Under the plan, participants are granted a combination of cash and rights
to deferred shares if certain performance standards are met. The Group uses EBITDA targets as the main performance
standard for the STI plan. Vesting of the performance rights granted is deferred for one year.
(c) Other grants
One-off grant A
On joining Cleanaway, the CEO was entitled to a one-off allocation of 328,947 performance rights to the value of $250,000
at the grant date with vesting subject to a two-year service condition. The service condition has been met and these
performance rights vested on 3 August 2017.
94
94
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
35. Auditor’s remuneration
35. Auditor’s remuneration
Details of the amounts paid or payable to the auditor and its related practices for audit and non-audit services are set
out below.
Ernst & Young:
Audit services
Audit related services
Non-audit services:
Other advisory services
2017
$
2016
$
968,625
1,435,270
82,235
9,000
20,600
1,071,460
–
1,444,270
36. Events occurring after the reporting date
36. Events occurring after the reporting date
On 3 July 2017 the Group acquired the assets and business of SA Waste for $12.2 million. The SA Waste business provides
waste collection and resource recovery services in Adelaide, South Australia and owns and operates two resource recovery
facilities. The initial accounting for the business combination was incomplete at the time the Group’s financial statements
were authorised for issue, and accordingly details of the financial effect of the business combination have not been disclosed.
On 17 August 2017 the Group entered into a funding agreement with the Clean Energy Finance Corporation. The agreement
provides the Group with a $90 million unsecured loan on a fixed rate 8 year term.
95
95
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
37. Related party transactions
37. Related party transactions
(a) Key management personnel
Disclosures relating to key management personnel (KMP) are set out in the Remuneration Report on pages 39 to 54.
The KMP compensation included in employee expenses are as follows:
Short-term employee benefits
Post-employment benefits
Termination benefits
Equity compensation benefits
2017
$
4,253,194
127,451
–
1,299,836
5,680,481
2016
$
6,236,367
142,099
668,861
447,814
7,495,141
Some of the Directors hold, or have previously held, positions in companies with which Cleanaway has commercial
relationships which are based on normal terms and conditions on an arm’s length basis. Transactions with entities where
the relationship is limited to a common Non-Executive Directorship including any Chairperson roles are not considered
related party transactions. The Board has assessed all of the relationships between the Group and companies in which
Directors hold or held positions and has concluded that in all cases the relationships do not interfere with the Directors’
exercise of objective, unfettered or independent judgement or their ability to act in the best interest of the Group.
During the year ended 30 June 2016, transactions that amounted to related party transactions were limited to transactions
with NGT Marketing. Mr Martin Hudson, Non-Executive Director of the Group (until 26 October 2016), held a beneficial
interest in NGT Marketing. The Group provided waste collections services to NGT Marketing for which it earned revenues
on normal commercial terms. The value of these services were not material at $2,466 for the year ended 30 June 2016.
During the period from 1 July 2016 to when Mr Hudson resigned as Non-executive Director on 26 October 2016, the
Group did not provide any services to NGT Marketing and therefore there were no related party transactions in the current
reporting period.
(b) Wholly-owned Group transactions
The wholly-owned Group consists of Cleanaway Waste Management Limited and its subsidiaries listed at note 27.
Transactions between Cleanaway Waste Management Limited and other entities in the wholly-owned Group during the
years ended 30 June 2017 and 30 June 2016 consisted of:
(i) Loans advanced by Cleanaway Waste Management Limited and other subsidiaries;
(ii) Loans repaid to Cleanaway Waste Management Limited and other subsidiaries;
(iii) The payment of interest on the above loans;
(iv) The payment of dividends to Cleanaway Waste Management Limited and other subsidiaries;
(v) Management fees charged to subsidiaries; and
(vi) Sales between subsidiaries.
The above transactions are all eliminated on consolidation.
(c) Other related parties
There were no material transactions with, or amounts receivable from or payable to, other related parties during the years
ended 30 June 2017 and 30 June 2016.
96
96
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38. Significant accounting policies
38. Significant accounting policies
The following significant accounting policies have been adopted in the preparation and presentation of the Consolidated
Financial Report. These policies have been consistently applied to all years presented unless otherwise stated.
Revenue
(a)
Amounts disclosed as revenue represent the fair value of consideration received or receivable, including environmental levies
but excluding goods and services taxes paid. Revenue from the sale of goods is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer and can be measured reliably. Risks and rewards are considered
passed to the buyer at the time of delivery of goods to customers. Revenue from the rendering of services is recognised upon
completion of performing the services. Revenue is recognised for the major business activities as follows:
Solids
Revenue from collection and disposal of waste is recognised when the service has been performed. In some circumstances,
revenue may be earned from the collection of the waste, however costs related to the treatment and disposal of that waste
is yet to be incurred. Unprocessed waste may give rise to deferred revenue, where invoices to customers are raised in
advance of performance obligations being completed, or require an accrual for the costs of disposing of residual waste
to be created once the Group has an obligation for disposal. These amounts are reflected as deferred revenue or accruals
in the financial statements as appropriate.
Liquids and Industrial Services
Revenue from collection and treatment of liquid waste is recognised when the waste has been collected and treated.
Contract revenue is measured by reference to labour hours incurred to date and actual costs incurred. Revenue from sale of
oil and by-products is recognised on shipment or passing of control of the goods.
Interest
Interest revenue is recognised on an accruals basis, taking into account the interest rates applicable to the financial assets.
Dividends
Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates
or joint venture entities are accounted for in accordance with the equity method of accounting.
Repairs and maintenance
(b)
Plant and equipment of the Group is required to be overhauled on a regular basis. This is managed as part of an ongoing
major cyclical maintenance program. The cost of this maintenance is recognised as an expense as incurred, except where
it relates to the replacement of a component of an asset, or where it extends the useful life of the asset, in which case the
costs are capitalised and depreciated in accordance with the Group’s policy. Other routine operating maintenance, repair
and minor renewal costs are also recognised as expenses as incurred.
Finance costs
(c)
Finance costs are recognised as expenses in the period in which they are incurred.
Finance costs include foreign exchange movements of the US Private Placement (USPP) borrowings which are offset by
a corresponding foreign currency swap agreement. This foreign currency swap has not been formally designated as a hedge and
therefore does not qualify for hedge accounting. The derivative financial instrument is carried at fair value on the Consolidated
Balance Sheet with any changes in fair value being recognised in finance costs in the Consolidated Income Statement.
97
97
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38. Significant accounting policies (continued)
38. Significant accounting policies (c)
Income tax
(d)
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Group’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, the deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax
is determined using tax rates (and laws) that have been enacted or substantially enacted at the reporting date and are
expected to apply when the related deferred income asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset
where there is a legally enforceable right to offset current tax assets and liabilities and they relate to income taxes levied
by the same taxation authority on the same taxable entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
The Company and all its wholly-owned Australian resident entities are part of a Tax Consolidated Group under Australian taxation
law. Cleanaway Waste Management Limited is the Head Entity in the Tax Consolidated Group. The Tax Consolidated Group has
entered into a tax sharing and a tax funding agreement.
Impairment of assets
(e)
A financial asset is assessed at each reporting date to determine whether there is objective evidence that it is impaired.
Impairment losses on financial assets are directly written off to the Consolidated Income Statement. Impairment of loans and
receivables is recognised when it is probable that the carrying amount will not be recovered in full due to significant financial
difficulty or other loss event of the debtor.
Goodwill and intangible assets that have an indefinite useful life are not amortised but are tested annually for impairment,
or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other
than goodwill that previously suffered an impairment loss are reviewed for possible reversal of the impairment loss at each
subsequent reporting date.
Foreign currency
(f)
Foreign currency transactions are translated at the foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the reporting date are translated into Australian dollars at the
foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the
Consolidated Income Statement and are reported on a net basis. Non-monetary assets and liabilities that are measured
in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
98
98
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38. Significant accounting policies (continued)
38. Significant accounting policies (c)
Cash and cash equivalents
(g)
Cash and cash equivalents comprise cash at banks, short-term deposits and petty cash balances. Cash at bank earns interest
at floating rates based on daily bank deposit rates. Short-term deposits are at call, and earn interest at the respective
short-term deposit rates.
Effective 30 June 2017, the Group has changed the way in which it presents its Consolidated Statement of Cash Flows from
the direct method to the indirect method. The indirect method provides a reconciliation from operating profit before tax
to operating cash flows on the face of the Consolidated Statement of Cash Flows. This format is consistent with how cash
flows are reported internally and is therefore considered more useful to readers of the Financial Report.
Trade and other receivables
(h)
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
Trade receivables are generally due for settlement within 30 days and therefore are all classified as current. Collectability
of trade debtors is reviewed on an ongoing basis. Debts which are known as uncollectable are written off when identified.
A provision for impairment is raised when collection of an amount is no longer probable.
The Group’s exposure to credit risk related to trade and other receivables is disclosed in note 31(b).
Inventories
(i)
Inventories are valued at the lower of cost and net realisable value. The cost of inventories is based on the method most
appropriate to each particular class of inventory and includes expenditure incurred in acquiring the inventories, production
or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of
manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal
operating capacity.
Derivative financial instruments
(j)
The Group has a derivative financial instrument in place to manage its exposure to foreign exchange movements in the value
of the USPP borrowings which are denominated in USD.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. As noted in note 31(a), this derivative is not designated as a hedge
and therefore all fair value movements are recorded in finance costs in the Consolidated Income Statement.
(k)
Property, plant and equipment
Landfill assets
The Group owns landfill assets. A landfill site may be either developed or purchased by the Group.
Landfill assets comprise the acquisition of landfill land, cell development costs, site infrastructure and landfill site
improvement costs and the asset related to future landfill site restoration and aftercare costs (landfill remediation asset).
Landfill land will be recognised separately from other landfill related assets when it is considered to have value at the end
of the landfill site’s useful life for housing or commercial development. This land is not depreciated; it is carried at its original
cost and tested for impairment.
Cell development costs include excavation costs, cell lining costs and leachate collection costs. Cell development costs are
capitalised as incurred. Closed cells are capped and may return a future revenue stream to the Group, such as from the sale
of landfill gas.
The landfill remediation assets comprises capping costs and costs to remediate and monitor the site over the life of the
landfill including post closure. Capping costs together with cost of aftercare (see Provision for landfill remediation in note
38(o)) are recognised upon commencement of cell development. The depreciation, for cell development costs and the
remediation asset, is calculated by the tonnes of airspace consumed during the reporting period divided into the total
airspace available at the beginning of the reporting period, such that all costs are fully depreciated upon receiving last waste
into the landfill. A landfill is deemed full when its permitted airspace is consumed and it cannot legally accept any more
waste. Alternatively, a landfill may be deemed full earlier should other factors exist, for example, if it is not economically
viable to continue accepting waste.
Site infrastructure and landfill site improvement costs include capital works such as site access roads and other capital costs
relating to multiple cells on the landfill site. These costs are capitalised as incurred and depreciated using the useful life of the
asset or the life of the landfill up until receiving last waste.
99
99
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38. Significant accounting policies (continued)
38. Significant accounting policies (c)
Landfill sales
A landfill may be disposed of as an operating landfill or it may be retained until post-closure and then sold. The Group’s
policy on landfill sales is as follows:
•
•
If the landfill is sold as an operating landfill, recognise the profit on sale of an asset; or
If the completed landfill is intended to be sold and meet the relevant requirements, transfer the landfill balance
to non-current assets held for sale.
Non-landfill land and buildings
Non-landfill land and buildings are shown at fair value, based on periodic valuations (at least every three years) by external
independent valuers, less subsequent depreciation of buildings. The fair values are recognised in the Consolidated 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 to their fair values.
Movements in market prices and the level of transactions impact the ability of the Group to estimate fair value.
Any revaluation increase arising on the revaluation of land and buildings is credited to the asset revaluation reserve, except
to the extent that it 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 Consolidated Income Statement 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 the
Consolidated Income Statement to the extent that it exceeds the balance, if any, held in the asset revaluation reserve relating
to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to the Consolidated Income Statement. On the subsequent sale or retirement
of a revalued property, the attributable revaluation surplus remaining in the asset revaluation reserve, net of any related
deferred taxes, is transferred directly to retained earnings.
Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is
directly attributable to bringing the asset to the location and condition necessary for its intended use. 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. Purchased software that is integral to the functionality
of the related equipment is capitalised as part of that equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount of the property, plant and equipment and are recognised net within “other income”
in the Consolidated Income Statement. When revalued assets are sold, the amounts included in the revaluation reserve
are transferred to retained earnings.
Depreciation
Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation
of assets, with the exception of landfill remediation and cell development assets, is calculated on a straight-line basis
so as to write off the net cost or revalued amount of each asset over its expected useful life to the Group. Leasehold
improvements are depreciated over the period of the lease or estimated useful lives, whichever is the shorter, using the
straight-line method. Landfill remediation and cell development assets are depreciated on a usage basis over the individual
landfill expected life.
Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items.
The expected useful lives are as follows:
Buildings and site improvements
Plant and equipment
Leasehold improvements
Landfill assets
15 to 40 years
2.5 to 20 years
5 to 10 years
1 to 50 years
100
100
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38. Significant accounting policies (continued)
38. Significant accounting policies (c)
(l)
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired business, subsidiary or associate at the date of acquisition. Goodwill on the acquisition of businesses
or subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates.
Goodwill is not amortised. Instead goodwill is tested for impairment annually, or more frequently if events or changes
in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and
losses on the disposal of a business include the carrying amount of goodwill relating to the business sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing.
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding,
is recognised in the Consolidated Income Statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new
or substantially improved products and processes, is capitalised if the product or process is technically and commercially
feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes the costs
of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use.
Borrowing costs related to the development of qualifying assets are also capitalised. Other development expenditure
is recognised in the Consolidated Income Statement as an expense as incurred. Capitalised development expenditure
is stated at cost less accumulated amortisation and impairment losses.
Other intangible assets
Other intangible assets include customer contracts recognised on business combinations and licences. Other intangible
assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
Amortisation
Amortisation is charged to the Consolidated Income Statement on a straight-line basis over the estimated useful lives of
intangible assets unless such lives are indefinite (e.g. brand names). Goodwill and intangible assets with an indefinite useful
life are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they
are available for use. The estimated useful lives of customer contracts are 3 to 10 years.
(m) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which
are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition. Trade and other payables are
presented as current liabilities unless payment is not due within 12 months after the reporting period.
Other payables and accruals includes tipping and disposal costs accruals as well as general accruals.
101
101
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38. Significant accounting policies (continued)
38. Significant accounting policies (c)
Borrowings
(n)
Borrowings are initially recognised at fair value of the consideration received net of issue costs incurred. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value
being recognised in the Consolidated Income Statement over the period of the borrowings on an effective interest basis.
Foreign exchange gains and losses arising on borrowings are reflected in finance costs in the Consolidated Income Statement.
Borrowings are derecognised when the obligation specified in the contract is discharged, cancelled or expired. The difference
between the carrying amount of a financial liability that has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income
or other expenses.
Provision for landfill remediation and rectification
(o)
Landfill sites are constructed to receive waste in accordance with a licence. These licences generally require that once
a landfill is full, it is left in a condition as specified by the Environmental Protection Authority (EPA) or other government
authorities, and monitored for a defined period of time (usually 30 years).
Therefore remediation occurs on an ongoing basis, as the landfill is operating, at the time the landfill closes and through
post-closure. Remediation comprises:
the costs associated with capping landfills (covering the waste within the landfill); and
•
costs associated with remediating and monitoring the landfill in accordance with the licence or environmental requirements.
•
The constructive obligation to remediate the landfill sites is triggered upon commencement of cell development. Accordingly
landfill remediation costs are provided for when development commences and at the same time a landfill remediation asset
is recognised.
The provision is stated at the present value of the future cash outflows expected to be incurred, which increases each period
due to the passage of time and is recognised in current and non-current provisions in the Consolidated Balance Sheet.
The annual change in the net present value of the provision due to the passage of time is recognised in the Consolidated
Income Statement as a time value adjustment in finance costs.
Due to the long term nature of remediation obligations, changes in estimates occur over time. Any change in the provision
for future landfill site restoration and aftercare costs arising from a change in estimate of those costs, and related to landfill
sites which are still accepting waste, is recognised as an addition or reduction to the remediation asset in the Consolidated
Balance Sheet. Changes to the remediation provision once last customer waste is received, are expensed to the Consolidated
Income Statement.
Rectification provisions differ to remediation. Rectification costs must be provided for at a reporting period end when there
is an obligation to bring an asset back to the normal operating standard required under the licence and EPA or council
requirements. Rectification provisions are calculated based on the net present value of all costs expected to rectify the site.
All rectification costs are expensed to the Consolidated Income Statement.
102
102
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38. Significant accounting policies (continued)
38. Significant accounting policies (c)
Provisions
(p)
A provision is recognised in the Consolidated Balance Sheet when the Group has a present legal or constructive obligation
as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation,
and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material,
provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability.
(q)
Employee entitlements
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and vesting sick leave expected to be settled
within 12 months of the reporting date are recognised in other payables and employee benefits in respect of employees’
services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.
Long service leave
The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in employee
benefits and is measured in accordance with the other employee benefits described above. The liability for long service leave
expected to be settled more than 12 months from the reporting date is recognised in employee benefits and measured as the
present value of expected future payments to be made in respect of services provided by employees up to the reporting date.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the reporting date on the corporate bond rate with terms
to maturity and currency that match, as closely as possible, the timing of estimated future cash outflows.
Short term incentive (STI) compensation plans
A liability for employee benefits in the form of STI’s is recognised when it is probable that STI criteria has been achieved
and an amount is payable in accordance with the terms of the STI plan. Liabilities for STI’s are expected to be settled within
12 months and are measured at the amounts expected to be paid when they are settled.
Share-based payment transactions
Share-based payments are provided to Executives and employees via the Cleanaway Waste Management Limited Annual
Incentive Plan and the Long Term Incentive Plan.
Share-based compensation payments are measured at fair value at the date of grant and expensed to employee benefit
expense with a corresponding increase in the employee benefits reserve over the period in which the service and, where
applicable, performance conditions are fulfilled. Fair value is measured by using the Monte Carlo simulation or the
Black-Scholes option pricing model, the term of the Performance Right, the impact of dilution, the share price at grant date
and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term
of the Performance Right.
103
103
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38. Significant accounting policies (continued)
38. Significant accounting policies (c)
Fair value measurement
(r)
The Group measures financial instruments, such as derivatives and non-financial assets such as land and buildings, at fair
value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either:
•
•
In the principle market for the asset or liability, or
In the absence of a principle market, in the most advantageous market for the asset or liability.
The principle or the most advantageous market must be accessible by the Group.
The fair value of an asset or liability is measured using the assumptions that the market participants act in their economic
best interest.
A fair value measurement of non-financial asset takes into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use.
The Group uses the following valuation techniques that are appropriate in the circumstances and for which sufficient data is
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs:
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
•
Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement
•
is directly or indirectly observable;
Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement
•
is unobservable.
Basis of consolidation
Subsidiaries
(s)
(i)
The Consolidated Financial Report comprises the financial statements of the Group and its subsidiaries as at 30 June 2017.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts
and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee;
•
Rights arising from the contractual arrangements; and
•
The Group’s voting rights and potential voting rights.
•
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over
the subsidiary and ceases when the Group loses control of the subsidiary.
Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the
Consolidated Income Statement from the date the Group gains control until the date when the Group ceases to control
the subsidiary.
All intra-group balances, transactions and unrealised gains and losses resulting from intra-group transactions are eliminated
in full.
Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented
separately in the Consolidated Income Statement and within equity in the Consolidated Balance Sheet, separately from
parent shareholders’ equity.
If the Group loses control over a subsidiary it derecognises the related assets (including goodwill), liabilities, non-controlling
interest and other components of equity, while any resultant gain or loss is recognised in the Consolidated Income
Statement. Any investment retained is recognised at fair value.
104
104
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38. Significant accounting policies (continued)
38. Significant accounting policies (c)
(ii)
Equity accounted investments
Equity accounted investments are those entities over which the Group has either significant influence (associate entities)
or joint control and has rights to the net assets of the entity (joint venture entities). The Group does not have power over
these entities either through management control or voting rights. Investments in associates and joint ventures are accounted
for using the equity method of accounting and are collectively referred to as “equity accounted investments” in this report.
Under the equity method of accounting, the investments in associates and joint ventures are initially recognised at cost and
adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the associate or joint venture
in the Consolidated Income Statement. Dividends received from associates and joint ventures are recognised as a reduction
in the carrying amount of the investment.
Where the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint
venture, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the associate or joint venture.
Unrealised gains on transactions with associates and joint ventures are eliminated to the extent of the Group’s interest in the
associates and joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
of the asset transferred. Accounting policies of the associates and joint ventures have been changed where necessary
to ensure consistency with the policies adopted by the Group.
Business combinations
(t)
Business combinations are accounted for using the acquisition method, whereby the identifiable assets, liabilities and
contingent liabilities (identifiable net assets) are measured using their fair values at the date of acquisition. Goodwill arises
in a business combination when the consideration transferred to the acquiree is greater than the net of the acquisition-date
amounts of the identifiable assets acquired and the liabilities assumed. Acquisition related costs, incurred in a business
combination transaction, are expensed as incurred.
105
105
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
39. New standards adopted
39. New standards adopted
AASB 12, Income Taxes (‘AASB 12’)
Following the November 2016 publication of the IFRS Interpretation Committee’s agenda decision addressing the expected
manner of recovery of intangible assets with indefinite useful lives for the purposes of measuring deferred tax, the Group has
retrospectively changed its related accounting policy. The Interpretations Committee considered a request to clarify how
an entity determines the expected manner of recovery (through use or sale) when measuring deferred tax for an intangible
asset with an indefinite useful life. They concluded that an entity determines its expected manner of recovery using the
existing principles in AASB 12 Income Taxes, however in doing so also provided commentary that an entity may not amortise
an intangible asset with an indefinite useful life, but this is not evidence that an entity is not consuming benefit through use.
Previously, the Group reflected an accepted view that an indefinite life asset will only be recovered through sale, as it was not
being amortised. As the Group considers it will recover the carrying value of its indefinite life intangible assets through use,
it has implemented the guidance on a retrospective basis as an accounting policy change in accordance with AASB 108
Accounting Policies, Changes to Accounting Estimates and Errors. The impact of this change was as follows:
Impact of change on the Consolidated Balance Sheet:
Increase/(decrease) of previously reported balances:
Intangible Assets: Goodwill
Deferred tax asset
2016
$’M
24.0
(24.0)
This change did not have an impact on the 2016 comparative amounts reported in the Consolidated Statements
of Comprehensive Income and the Consolidated Statement of Cash Flows.
In addition, the Group has adopted new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board that are relevant to its operations and effective for the current reporting period.
New and revised Standards, amendments thereof and Interpretations issued by the Australian Accounting Standards Board
that are relevant to the Group are limited to:
AASB 2016-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality;
•
and
AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative : Amendments to AASB 101.
•
The adoption of these new and revised Standards and Interpretations has not resulted in any changes to the Group’s
accounting policies and had no material effect on the amounts reported for the current or prior year.
106
106
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
40. New standards and interpretations not yet adopted
40. New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after
1 July 2017 and have not been applied in preparing these consolidated financial statements. Those which may be relevant
to the Group are set out below. The Group does not plan to adopt these standards early.
New standards
STANDARD/INTERPRETATION
AASB 9 Financial Instruments, and the relevant amending standards
AASB 9 replaces AASB 139. This standard includes a model for classification
and measurement, a single, forward-looking ‘expected loss’ impairment model
and a substantially-reformed approach to hedge accounting.
Based on an initial impact assessment, the new standard is not expected to
significantly impact the Group’s determination of doubtful debts or the
accounting for derivative financial instruments.
AASB 15 Revenue from Contracts with Customers, and the relevant
amending standards
AASB 15 replaces the existing revenue recognition standards AASB 111
Construction Contracts, AASB 118 Revenue and related Interpretations. AASB
15 specifies the accounting treatment for revenue arising from contracts with
customers (except for contracts within the scope of other accounting
standards).The core principle of AASB 15 is that an entity recognises revenue
to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. An entity recognises revenue in
accordance with that core principle by applying the following steps:
(a) Step 1: Identify the contract(s) with a customer.
(b) Step 2: Identify the performance obligations in the contract.
(c) Step 3: Determine the transaction price.
(d) Step 4: Allocate the transaction price to the performance obligations.
(e) Step 5: Recognise revenue when (or as) a performance obligation
is satisfied.
The Group is undertaking a comprehensive review of the implementation
impacts of AASB 15 and has not yet reached a final determination of the
impacts of this accounting standard. However, based on an initial impact
assessment, the new standard is not expected to significantly impact revenue
recognition or the treatment of contract costs of the Group.
AASB 16 Leases, and the relevant amending standards
AASB 16 supersedes AASB 117 Leases. The key features of AASB 16 from
a lessee perspective are as follows:
•
Lessees are required to recognise assets and liabilities for all leases with
a term of more than 12 months, unless the underlying asset is of low
value.
A lessee measures right-of-use assets similarly to other non-financial
•
assets and lease liabilities similarly to other financial liabilities.
Assets and liabilities arising from a lease are initially measured on a present
•
value basis. The measurement includes non-cancellable lease payments
(including inflation-linked payments), and also includes payments
to be made in optional periods if the lessee is reasonably certain
to exercise an option to extend the lease, or not to exercise an option
to terminate the lease.
The likely impact on the Group of adopting this new standard has not
been determined.
EFFECTIVE FOR ANNUAL
REPORTING PERIODS
BEGINNING ON OR AFTER
1 January 2018
EXPECTED TO BE
INITIALLY APPLIED IN THE
FINANCIAL YEAR ENDING
30 June 2019
1 January 2018
30 June 2019
1 January 2019
30 June 2020
107
107
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017OVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
40. New standards and interpretations not yet adopted (continued)
40. New standards and interpretations not yet adopted (c)
EFFECTIVE FOR ANNUAL
REPORTING PERIODS
BEGINNING ON OR AFTER
1 January 2017
EXPECTED TO BE
INITIALLY APPLIED IN THE
FINANCIAL YEAR ENDING
30 June 2018
1 January 2017
30 June 2018
1 January 2017
30 June 2018
Amendments from improvement projects
STANDARD/INTERPRETATION
AASB 107 Disclosure Initiative – Amendments to AAS 107
This amendment amends AASB 107 Statement of Cash Flows to help users
of financial statements better understand changes in an entity’s debt.
AASB 112 Recognition of Deferred Tax assets for Unrealised Losses
– Amendments to AASB 112
The AASB has issued amendments to AASB 112 Income Taxes to clarify the
accounting for deferred tax assets for unrealised losses on debt instruments
measured at fair value.
The AASB has clarified that an entity needs to consider whether tax law
restricts the sources of taxable profits against which it may make deductions
on the reversal of that deductible temporary difference. Furthermore, the
amendments provide guidance on how an entity should determine future
taxable profits and explain the circumstances in which profit may include the
recovery of some assets for more than their carrying amount.
AASB 2 Classification and Measurement of Share-based Payment Transactions
– Amendments to AASB 2
This amendment amends AASB 2 Share-based Payment in relation to the
classification and measurement of share-based payment transactions. The
amendments address three main areas:
The effects of vesting conditions on the measurement of a cash-settled
•
share-based payment transaction.
The classification of a share-based payment transaction with net settlement
•
features for withholding tax obligations.
The accounting where a modification to the terms and conditions
•
of a share-based transaction change its classification from cash-settled
to equity-settled.
The amendments from improvement projects identified above are not expected to have a material impact on the Group.
108
108
Notes to the Consolidated Financial StatementsFor the year ended 30 June 2017
Directors’ Declaration
In the Directors’ opinion:
(a) the financial statements and notes together with the additional disclosures included in the Directors’ Report designated
as audited, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the
financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), and the
Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2;
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable;
(d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with
section s295A of the Corporations Act 2001 for the financial year ended 30 June 2017; and
(e) as at the date of this declaration, there are reasonable grounds to believe that the members of the closed Consolidated
Group identified in note 27 will be able to meet any obligation or liabilities to which they are or may become subject to,
by virtue of the deed of cross guarantee.
This declaration is made in accordance with a resolution of the Directors.
M P Chellew
Chairman and Non-Executive Director
V Bansal
Chief Executive Officer and Managing Director
Melbourne, 22 August 2017
109
109
Directors’ DeclarationOVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Cleanaway Waste Management Limited
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Cleanaway Waste Management Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the Consolidated Balance Sheet as at 30 June 2017, the Consolidated Statement
of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows for the
year then ended, notes to the financial statements, including a summary of significant accounting policies, and the
Directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 and of its consolidated
financial performance for the year ended on that date; and
(b) 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 and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (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 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 judgment, were of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and
in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures
designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
110
110
110
Independent Auditor’s Reportto the Members of Cleanaway Waste Management Limited
Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Cleanaway Waste Management Limited
1.
Carrying value of non-current assets, including brand name and goodwill
WHY SIGNIFICANT
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
At 30 June 2017, the Group held $1,308.9 million
in intangible assets with indefinite useful lives. These
intangible assets comprise goodwill and brand names and
are monitored at an operating segment or cash generating
unit (“CGU”) level respectively for the Solids and Liquids
businesses. In accordance with the requirements of
Australian Accounting Standards, the Group annually tests
these indefinite useful life assets for impairment.
The assessment of the carrying value of the intangible
assets (the impairment test) incorporates judgments and
estimates relating to discount rates, forecast revenue,
EBITDA growth rates and levels of capital expenditure.
In addition, various assumptions have been made for
economic variables such as commodity prices, GDP and
inflation rates as well as expected outcomes from the
execution of the sales transformation and cost reduction
programs currently in place. The Group prepared a value in
use discounted cash flow model to assess the carrying value
of non-current assets.
Note 21 to the financial report provides disclosure on the
Group’s impairment tests and highlights the impact of
reasonably possible changes to key assumptions.
The audit procedures we performed included testing the
mathematical accuracy of the discounted cash flow model
and evaluation of the assumptions and methodologies used
by the Group. We involved our valuation specialists to assist
in the execution of these audit procedures.
In respect of the Group’s discounted cash flow model,
we assessed the judgments and estimates. In doing so, we:
Assessed the assumptions in the Group’s board
•
approved forecasts;
Considered the current year actual results in
•
comparison to prior year forecasts in order to assess
forecast accuracy;
Assessed the key assumptions in comparison
•
to independent economic and industry forecasts
(where available);
Assessed the assumptions for terminal growth rates;
•
Considered the achievability of cost saving targets and
•
associated initiatives;
Considered the capital expenditure forecasts;
•
Assessed the discount rates through comparing the
•
cost of capital for the Group with comparable
businesses; and
Considered comparable businesses valuation multiples
•
as a cross-check of the Group’s cash flow model
outcomes.
We performed sensitivity analysis in respect of the key
assumptions to ascertain the extent of changes in those
assumptions which either individually or collectively would
be required for the intangible assets to be impaired.
We also assessed the adequacy of the disclosures made
in the financial report – in particular those that have the
most significant effect on the determination of the
recoverable amount of the intangible assets.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
111
111
111
Independent Auditor’s Reportto the Members of Cleanaway Waste Management LimitedOVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Cleanaway Waste Management Limited
2.
Valuation and completeness of the rectification and remediation provisions
WHY SIGNIFICANT
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Under the National Environment Protection Council Act
1994 the Group has an obligation and responsibility to
rectify and remediate the land in which landfill activities
occur. Such liabilities must be accounted for in accordance
with Australian Accounting Standards – AASB 137
Provisions, Contingent Liabilities, and Contingent Assets.
The audit procedures we performed included testing the
mathematical integrity of the discounted cash flow model
and evaluation of the assumptions and methodologies used
by the Group. We involved our environmental specialists
(specialising in remediated land) to assist in the execution
of these procedures.
At 30 June 2017, the Group held $332.8 million in
rectification and remediation provisions. The rectification
and remediation provisions were based on a discounted
cash flow model and incorporated critical estimates
in relation to capping and post closure costs and a cost
escalation rate, the timing of expected expenditure,
the possibility of new practices and methodologies
being available in the future and the determination
of an appropriate discount rate. Refer to note 24 to the
financial report for the Group’s disclosure.
These estimates were developed based on the specific plans
for each site, taking into consideration historical experience
and emerging practice in relation to rectification and
remediation activities.
With respect to the Group’s rectification and remediation
provisions, we performed the following on the Group’s
discounted cash flow model:
Assessed the competence, independence and
•
objectivity of the external expert engaged by the
Group involved in the development and maintenance
of the rectification and remediation model;
Assessed the cost estimates for capping and post
•
closure activities with reference to available external
data and relevant Environment Protection Authority
(“EPA”) regulations;
Considered correspondence between the Group and
•
the EPA;
Assessed the remaining airspace in the landfills; and
•
Assessed the discount rate applied with reference
•
to observable market inputs and involvement from
our valuation specialists.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
112
112
112
Independent Auditor’s Reportto the Members of Cleanaway Waste Management Limited
Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Cleanaway Waste Management Limited
Information other than the Financial Report and Auditor’s Report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Company’s 2017 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’
Report that is to be included in the Annual Report, prior to the date of this auditor’s report, and we expect to obtain the
remaining sections of the Annual Report after the date of this auditor’s report.
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 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 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.
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 Group’s ability to continue as a going
concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment 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 from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
113
113
113
Independent Auditor’s Reportto the Members of Cleanaway Waste Management LimitedOVERVIEWCORPORATE INFORMATIONOTHER INFORMATIONBUSINESSREVIEWFINANCIAL REPORT4Cleanaway Waste Management Limited 2017 ANNUAL REPORT
Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Cleanaway Waste Management Limited
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 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, related safeguards.
From the matters communicated to the Directors, we determine those matters that were of most significance in the audit
of the financial report of the current year 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 Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 39 to 54 of the Directors' Report for the year ended 30 June 2017.
In our opinion, the Remuneration Report of Cleanaway Waste Management Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
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.
Ernst & Young
Brett Croft
Partner
Melbourne
22 August 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
114
114
114
Independent Auditor’s Reportto the Members of Cleanaway Waste Management Limited
Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Cleanaway Waste Management Limited
Other Information
Independent Auditor’s Report
to the Members of Cleanaway Waste Management Limited
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 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, related safeguards.
From the matters communicated to the Directors, we determine those matters that were of most significance in the audit
of the financial report of the current year 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 Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 39 to 54 of the Directors' Report for the year ended 30 June 2017.
In our opinion, the Remuneration Report of Cleanaway Waste Management Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
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.
Ernst & Young
Brett Croft
Partner
Melbourne
22 August 2017
Top 20 Shareholders as at 22 August 2017
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
JJ RICHARDS & SONS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED Continue reading text version or see original annual report in PDF
format above