ABN 37 008 670 102
ANNUAL REPORT
2015
Coventry Group Ltd and its controlled entities
Contents
Chairmans report
Chief Executive Officers report
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements:
1. Significant accounting policies
2. Operating segments
3. Auditor's remuneration
4. Employment costs
5. Finance income and finance expenses
6. Taxes
7. Earnings per share
8. Cash, cash equivalents and term deposits
9. Trade and other receivables
10. Inventories
11. Parent entity disclosures
12. Property, plant and equipment
13. Intangible assets
14. Trade and other payables
15. Interest-bearing loans and borrowings
16. Employee benefits
17. Share based payments
18. Provisions
19. Capital and reserves
20. Financial risk management
21. Operating leases
22. Discontinued operations
23. Controlled entities
24. Reconciliation of cash flows from operating activities
25. Related parties
26. Restructuring and other related costs
Directors' report
Directors' declaration
1
2
4
5
6
7
8
15
16
16
16
16
17
18
18
18
1
8
19
19
20
20
21
21
21
22
23
25
26
26
26
27
28
29
42
1
Coventry Group Ltd and its controlled entities
Chairman’s Report
Consolidated statement of profit or loss and other comprehensive income
Contents
Chairmans report
Chief Executive Officers report
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements:
1. Significant accounting policies
2. Operating segments
3. Auditor's remuneration
4. Employment costs
6. Taxes
7. Earnings per share
5. Finance income and finance expenses
8. Cash, cash equivalents and term deposits
9. Trade and other receivables
10. Inventories
11. Parent entity disclosures
12. Property, plant and equipment
13. Intangible assets
14. Trade and other payables
15. Interest-bearing loans and borrowings
16. Employee benefits
17. Share based payments
18. Provisions
19. Capital and reserves
20. Financial risk management
21. Operating leases
22. Discontinued operations
23. Controlled entities
24. Reconciliation of cash flows from operating activities
25. Related parties
26. Restructuring and other related costs
Directors' report
Directors' declaration
1
2
4
5
6
7
8
15
16
16
16
16
17
18
18
18
1
8
19
19
20
20
21
21
21
22
23
25
26
26
26
27
28
29
42
I am pleased to present my first report as Chairman of Coventry Group Ltd. I was appointed to the board in
September 2014 and assumed the role of Chairman on 1 January 2015. FY15 was a year of great change at
Coventry Group, particularly at Board level and in executive management. A substantial refresh of the board has
seen the retirement or resignation of directors John Nickson (September 2014), Roger Flynn (January 2015) and
Barry Nazer (March 2015). Our long serving company secretary John Colli also resigned and left the business in
May 2015. Our thanks to all four gentlemen for their years of service to Coventry Group. Along with myself, Nick
Willis and Vicky Papachristos were appointed as non-executive directors during the period and bring diversity in
industry knowledge, commercial experience and gender to the board table.
On 1 January 2015 Peter Caughey was appointed Managing Director and CEO following the handover of
management responsibilities from Roger Flynn. Peter and the senior leadership group immediately commenced a
comprehensive review of the Coventry Group’s strategy and operations which touched all aspects of the business.
Our announcement to the market on 9 February 2015 articulated the aim of, and aspirations for, the review.
Pleasingly, Peter and his team have identified many opportunities for rationalising and streamlining operations,
reducing the cost of doing business, eliminating waste and growing revenue. The list is long and the restructure
remains a work in progress, however substantial progress has been made as outlined in our announcements to the
market on 15 June 2015 and 27 August 2015. Peter provides more detail in his report but we remain confident of a
turnaround in Company performance in FY16.
The Board and management are pleased with the solid results achieved in the Cooper Fluids and AA Gaskets
businesses. Cooper Fluids, being particularly leveraged to the mining industry, continues to be professionally led
and is well positioned to perform in the current business environment. As previously announced, the Managed
System Services business was closed during the period. The Board considered this loss making business non-core,
a great distraction for management and unlikely to generate a return in the foreseeable future. The Board and
management are greatly encouraged by the improved results from the Artia cabinet hardware business. Artia is a
minnow in the cabinet hardware market but has a quality product range, a recently restructured cost base and
reinvigorated management. The financial performance from the Konnect business remains a huge
disappointment. The extensive Konnect store network makes it a substantial player in the fasteners market in
Australasia however in key states in Australia it continues to trade at a loss. Much of the restructuring program
previously announced touches this business and there are a great many legacy issues to fix. The Board and
management have a simple goal to restore Konnect to profitability by removing unnecessary costs, improving
efficiency and therefore customer service, growing sales via a variety of channels and carefully and selectively
expanding the store footprint.
FY15 has been a very difficult and unsettling period for many in the business as we reposition the Company for the
future. On behalf of the Board I would like to acknowledge and thank all those people for their efforts and
continuing commitment.
The Board is pleased to advise it has declared a final dividend of 2.5 cents per share fully franked. The final
dividend will be paid on 27 October 2015 with the record date for entitlement being 13 October 2015. This brings
total dividends paid for the year ended 30 June 2015 to 35.25 cents per share. Looking ahead the Board will assess
the Company’s ability to pay dividends against earnings and the financial position of the business.
Neil G. Cathie
Chairman of the Board of Directors
1
1
CEO’s Report
People
Safety remains a focus at CGL. During the year LTI’s increased from 9 to 12 prompting a significant review of
our safety effort. As a result of the review the emphasis in safety management has moved from a system
focus to an emphasis on practical actions within the branch and distribution networks.
It is never easy to see so many colleagues leave the business through a redundancy program that reduced
full time positions from 709 to 572. I was pleased with the application and effort of the team in the face of
such adversity and would like to echo the Chairman’s comments in thanking the staff.
Financial Performance
Full Year to
30.6.15
Full Year to
30.6.14
% Change
Revenue ($M) (from continuing operations)
190.7
206.2
(Loss)/Profit before income tax ($M)
(Loss)/Profit after tax ($M)
NTA per share ($)
Earnings per share – basic (cents)
Restructure progress
-27.2
-24.6
2.16
-65.8
1.9
1.0
3.47
1.6
-7.5
N/A
N/A
-37.8
N/A
As announced in February 2015, the Board approved a substantial restructuring program that involved
closing the MSS business, stripping significant cost out of each division and corporate, cleansing the stock of
Konnect/Artia and preparing for a significant change in distribution to facilitate further cost reductions and
service improvements. Whilst the program was very ambitious I am pleased to report that it was largely
completed on time and on budget. The cost of the restructure program, which included the closure of three
distribution centres, the downsizing of the full time work force by more than 100 positions and the
movement of more than $4m. of stock to a useful position within the network was $7.8m., with provisions
of $7.5m. and write downs of $8.2m. The total impact of the program was $23.5m., compared to the $24-
25m. foreshadowed in the February announcement.
Review of businesses
o Coopers
The Coopers team, having removed 15 full time positions through the restructure, continued to
transform from a capital exposure to a maintenance focus. Throughout the period sales continued to
strengthen with Coopers significant technical expertise being much sought after.
o Konnect
The Konnect business continued to weaken throughout the period as the slump in mining and energy
took hold. Whilst Konnect was profitable in a number of states, significant exposure to Western
Australia and Queensland drove those businesses substantially into losses. Sales continued to fall from
June 2014 to February 2015, but pleasingly daily sales rates have stabilised over the past few months.
Margins continued to be under pressure as competition from existing players intensified. As major LNG
2
2
3
CEO’s Report (Continued)
projects finish over the balance of this year further softening cannot be ruled out. Positively impacting
the Konnect result was significant cost cutting which commenced in October 2014 and intensified from
February 2015 under the announced restructure program. As a result, the second half Konnect
performance was in line with the first half. Further cost reductions are anticipated as the remaining
Distribution Centres and associated transport is restructured throughout 2015/16. In addition, normal
business practice of relentlessly pursuing small improvements will return.
o Artia
The Artia business continues to improve on the back of significant cost reductions, a re-shaped business
model and a buoyant residential construction market. Artia made a profit in the second half for the first
time since 2008/09.
o Investments/Other
Interest bearing deposits
Deposits fell from $39.2m. to $nil and interest rates fell from 3.6% to 2.7% throughout the period,
reducing income from $2.0m to $0.8m.
AAG
CGL’s 72.5% share in AA Gaskets P/L continued to perform well, though not quite at the same level as
previous years. AAG will focus on cost and inventory in the coming 12 months.
Property
CGL signed a 20 year lease for the substantial 15,000 m2 warehouse and associated offices in Redcliffe,
Perth adjacent to the airport. Since the sale of Covs parts business to AHG in 2011 CGL has sub-let the
main property and offices to a variety of sub-tenants. In 2HF15 that profit was steady at $0.35m. In
2014 the CGL Board triggered an option in the lease agreement that increased the amount of floor
space available to sub-let and that floor space comes on line later this calendar year. The lease expires in
2027.
Discontinued Operations
MSS was discontinued and an abnormal loss after tax of $1.4m. was recorded.
Outlook
Despite the potential for softer markets in Konnect we expect a return to profitability for the Group in F16.
Working capital initiatives and a modest capital program for distribution centres and branch expansion
should see the company maintain a comfortable cash position.
Peter J.B. Caughey
Chief Executive Officer
3
3
Coventry Group Ltd and its controlled entities
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2015
In thousands of AUD
Continuing operations
Revenue from sale of goods
Cost of sales
Gross profit
Other revenue
Employment costs
Depreciation and amortisation expense
Occupancy costs
Communication costs
Freight
Vehicle operating costs
Restructuring and other related costs
Other expenses
Loss before financial income and tax
Financial income
Financial expense, including net foreign exchange loss
Net financial income
(Loss)/Profit before income tax
Income tax benefit/(expense)
(Loss)/Profit from continuing operations
Discontinued operation
Loss from discontinued operation, net of income tax
(Loss)/Profit for the year
Other comprehensive income/(loss):
Items that may be reclassified to profit or loss:
Foreign currency translation differences
Effective portion of changes in fair value of cash flow hedges
Other comprehensive (loss)/income for the year, net of income tax
Total comprehensive (loss)/income for the year
(Loss)/Profit attributable to:
Owners of the Company
Non-controlling interests
(Loss)/Profit for the year
Total comprehensive (loss)/income attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive (loss)/income for the year
(Loss)/Earnings per share:
Basic (loss)/earnings per share:
Diluted (loss)/earnings per share:
(Loss)/Earnings per share - continuing operations:
Basic (loss)/earnings per share:
Diluted (loss)/earnings per share:
Note
2015
2014
*Represented
190,706
(118,276)
206,160
(122,403)
4
26
5
5
6
22
72,430
5,357
(48,275)
(4,087)
(10,184)
(2,298)
(6,440)
(1,892)
(21,357)
(10,964)
(27,710)
776
(313)
463
(27,247)
4,106
(23,141)
(1,475)
(24,616)
(651)
13
(638)
(25,254)
(25,008)
392
(24,616)
(25,667)
413
(25,254)
83,757
4,224
(52,031)
(4,604)
(10,042)
(2,401)
(6,240)
(1,930)
-
(10,743)
(10)
1,951
(1)
1,950
1,940
(730)
1,210
(172)
1,038
667
-
667
1,705
609
429
1,038
1,322
383
1,705
7
7
(65.8 cents)
(65.8 cents)
1.6 cents
1.6 cents
(61.9 cents)
(61.9 cents)
2.1 cents
2.1 cents
* The representation relates to the reclassification of certain expenses in 'Other expenses' in the comparative period to align with
the presentation adopted for 30 June 2015 (refer Note 1(c)) and discontinued operations (refer Note 22).
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying
notes to the consolidated financial statements.
4
4
5
Coventry Group Ltd and its controlled entities
Consolidated statement of financial position
As at 30 June 2015
In thousands of AUD
Assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Inventories
Income tax receivable
Total current assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Other
Total non current assets
Total assets
Liabilities
Trade and other payables
Employee benefits
Finance leases
Income tax payable
Provisions
Total current liabilities
Employee benefits
Other
Finance leases
Total non current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity attributable to equity holders of the Company
Non-controlling interests
Total equity
Note
2015
2014
8
8
9
10
6
6
12
13
9
14
16
6
18
16
14
8,709
-
31,659
59,322
108
99,798
13,442
16,811
3,963
91
34,307
134,105
22,835
4,953
-
74
1,528
29,390
339
2,679
-
3,018
32,408
101,697
108,110
(1,133)
(7,898)
99,079
2,618
101,697
8,786
39,200
33,408
55,307
109
136,810
8,228
19,210
9,608
-
37,046
173,856
21,784
6,129
18
98
169
28,198
805
-
8
813
29,011
144,845
108,943
(514)
33,743
142,172
2,673
144,845
The consolidated statement of financial position is to be read in conjunction with the accompanying notes to the consolidated financial
statements.
5
5
Coventry Group Ltd and its controlled entities
Consolidated statement of changes in equity
For the year ended 30 June 2015
Share-
based
payments
reserve
Hedge
reserve
Translation
reserve
Total
reserve
Share
capital
Retained
earnings
Total for
members of
the
Company
Non
controlling
interests
Total
equity
In thousands of AUD
Balance at 1 July 2014
Total comprehensive (loss)/income for the year
(Loss)/Profit for the year
Other comprehensive (loss)/ income:
Foreign exchange translation differences
Effective portion of changes in fair value of cash flow hedges
Total other comprehensive (loss)/income
Total comprehensive (loss)/income for the year
Transactions with owners, recorded directly in equity
Own shares acquired
Share based payment transactions
Transfer between reserves
Dividends to equity holders/ re-invested
Balance at 30 June 2015
Amounts are stated net of tax
22
-
-
-
-
-
-
40
-
-
62
-
-
-
13
13
13
-
-
-
-
(536)
(514)
108,943
33,743
142,172
2,673
144,845
-
(672)
-
(672)
(672)
-
-
-
-
-
-
(672)
13
(659)
(659)
-
40
-
-
-
-
-
-
-
(25,008)
(25,008)
392
(24,616)
-
-
-
(672)
13
(659)
21
-
21
(651)
13
(638)
(25,008)
(25,667)
413
(25,254)
(833)
-
-
-
-
-
-
(833)
40
-
(16,633)
(16,633)
-
-
-
(833)
40
-
(468)
2,618
(17,101)
101,697
13
(1,208)
(1,133)
108,110
(7,898)
99,079
In thousands of AUD
Balance at 1 July 2013
Total comprehensive income for the year
Profit for the year
Other comprehensive income:
Foreign exchange translation differences
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
Issue of ordinary shares
Own shares acquired
Share based payment transactions
Transfer between reserves
Dividends to equity holders/ re-invested
Balance at 30 June 2014
Amounts are stated net of tax
Share-
based
payments
reserve
Translation
reserve
Total
reserve
Share
capital
Retained
earnings
Total for
members of
the
Company
Non
controlling
interests
Total
equity
305
(1,249)
(944)
108,460
41,261
148,777
2,840
151,617
-
-
-
-
-
-
(36)
(247)
-
22
-
713
713
713
-
-
-
-
-
-
713
713
713
-
-
(36)
(247)
-
-
-
-
-
908
(425)
-
-
-
(536)
(514)
108,943
609
-
-
609
-
-
-
247
(8,374)
33,743
609
429
1,038
713
713
1,322
908
(425)
(36)
-
(46)
(46)
383
-
-
-
-
667
667
1,705
908
(425)
(36)
-
(8,374)
142,172
(550)
2,673
(8,924)
144,845
6
6
7
Coventry Group Ltd and its controlled entities
Consolidated statement of cash flows
For the year ended 30 June 2015
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash (used in)/generated from operations
Interest paid
Income taxes (paid)/received
Note
2015
2014
221,163
(238,346)
(17,183)
(4)
(550)
Net cash (used in)/from operating activities
24
(17,737)
Cash flows from investing activities
Proceeds from sale of plant and equipment
Interest received
Proceeds from term deposits
Dividends received
Acquisition of business, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash from investing activities
Cash flows from financing activities
Repayment of borrowings on finance leases
Issue of shares
Payments for shares acquired
Dividends paid
Dividends paid to non-controlling interests
Net cash used in financing activities
12
13
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations
Cash and cash equivalents at 30 June
Monies invested in term deposits maturing in greater than 90 days at inception
Cash, cash equivalents and term deposits at 30 June
8
298
776
39,200
1
-
(3,791)
(213)
36,271
(20)
-
(833)
(16,633)
(468)
(17,954)
580
8,786
(657)
8,709
-
8,709
240,642
(236,080)
4,562
(1)
457
5,018
33
1,531
4,734
1
(2,012)
(3,311)
(387)
589
(46)
908
(425)
(8,374)
(550)
(8,487)
(2,880)
10,546
1,120
8,786
39,200
47,986
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes to the consolidated financial
statements.
7
7
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies
Coventry Group Ltd (the “Company”) is a for profit company domiciled in Australia. The address of the Company’s
registered office is 525 Great Eastern Highway Redcliffe WA 6104 Australia. The consolidated financial statements
("financial report" or "consolidated financial report") of the Company for the financial year ended 30 June 2015
comprises the Company and its controlled entities (together referred to as the “Group”).
The financial report was authorised for issue by the directors on 27 August 2015.
(a)
Statement of compliance
This financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards
Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group complies with the
International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting
Standards Board (IASB).
(b) Basis of preparation
The financial report is presented in Australian dollars, which is the Company’s functional currency. The financial report
is prepared on the historical cost basis except share based payments which are stated at their fair value.
The Company is of a kind referred to in ASIC Class Order (‘CO’) 98/100 dated 10 July 1998 (updated by CO 05/641
effective 28 July 2005 and CO 06/51 effective 31 January 2007) and in accordance with that, amounts in the financial
report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.
The preparation of a financial report in conformity with IFRSs requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making
the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates. These accounting policies have been consistently applied by each entity in
the Group.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.
Judgements made by management in the application of IFRSs that have a significant effect on the financial report, and
estimates with a significant risk of material adjustment in the next year, are discussed in Note 1(u).
(c) Change in accounting policies
Except for the changes below, the Group has consistently applied the accounting policies as set out in Note 1(d) - (x)
to all periods presented in this consolidated financial report.
Restatement of comparative period disclosures
To achieve consistency with current period disclosures, the following reclassifications of comparative period balances
(for the financial year ended 30 June 2014) have occurred:
- Employee benefits expense has been renamed to 'Employment costs' and now includes both the direct and indirect
costs relating to employees and accordingly increased from $49,476,000 to $52,031,000 (after excluding discontinued
operations) with the offset being in 'Other expenses'.
- Vehicle operating costs is disclosed as a separate line and increased from $nil
to $1,930,000 (after excluding
discontinued operations) with the offset being in 'Other expenses'.
(d) Basis of consolidation
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date. In assessing control,
the Group takes into consideration potential voting rights that currently are exercisable.
The Group measures goodwill at the acquisition date as:
- the fair value of the consideration transferred; plus
- the recognised amount of any non-controlling interests in the acquiree; plus
- if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less
- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
8
9
8
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies
Coventry Group Ltd (the “Company”) is a for profit company domiciled in Australia. The address of the Company’s
registered office is 525 Great Eastern Highway Redcliffe WA 6104 Australia. The consolidated financial statements
("financial report" or "consolidated financial report") of the Company for the financial year ended 30 June 2015
comprises the Company and its controlled entities (together referred to as the “Group”).
The financial report was authorised for issue by the directors on 27 August 2015.
(a)
Statement of compliance
This financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards
Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group complies with the
International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting
Standards Board (IASB).
(b) Basis of preparation
The financial report is presented in Australian dollars, which is the Company’s functional currency. The financial report
is prepared on the historical cost basis except share based payments which are stated at their fair value.
The Company is of a kind referred to in ASIC Class Order (‘CO’) 98/100 dated 10 July 1998 (updated by CO 05/641
effective 28 July 2005 and CO 06/51 effective 31 January 2007) and in accordance with that, amounts in the financial
report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.
The preparation of a financial report in conformity with IFRSs requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making
the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates. These accounting policies have been consistently applied by each entity in
the Group.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.
Judgements made by management in the application of IFRSs that have a significant effect on the financial report, and
estimates with a significant risk of material adjustment in the next year, are discussed in Note 1(u).
(c) Change in accounting policies
Except for the changes below, the Group has consistently applied the accounting policies as set out in Note 1(d) - (x)
to all periods presented in this consolidated financial report.
Restatement of comparative period disclosures
To achieve consistency with current period disclosures, the following reclassifications of comparative period balances
(for the financial year ended 30 June 2014) have occurred:
- Employee benefits expense has been renamed to 'Employment costs' and now includes both the direct and indirect
costs relating to employees and accordingly increased from $49,476,000 to $52,031,000 (after excluding discontinued
operations) with the offset being in 'Other expenses'.
- Vehicle operating costs is disclosed as a separate line and increased from $nil
to $1,930,000 (after excluding
discontinued operations) with the offset being in 'Other expenses'.
(d) Basis of consolidation
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date. In assessing control,
the Group takes into consideration potential voting rights that currently are exercisable.
The Group measures goodwill at the acquisition date as:
- the fair value of the consideration transferred; plus
- the recognised amount of any non-controlling interests in the acquiree; plus
- if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less
- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(d) Basis of consolidation (continued)
Business combinations (continued)
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in
connection with a business combination are expensed as incurred.
Controlled entities
Controlled entities are entities controlled by the Company. Control exists when the Company is exposed to, or has
rights to, variable returns from its involvement with the entity and has the abiility to affect those returns through its
power over the entity. Investments in controlled entities are carried at their cost of acquisition in the Company’s
financial statements, net of impairment write downs. Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.
(e)
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at
the reporting date are retranslated to the functional currency at the exchange rate at that date. Foreign currency
differences arising on translation are recognised in the statement of comprehensive income. 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.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to Australian dollars at exchange rates at the reporting date. The revenues and expenses of foreign
operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the dates of
the transactions.
Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency
translation reserve (FCTR) in equity. However, if the operation is a non-wholly owned subsidiary, then the relevant
proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation
is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related
to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.
When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining
control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group
disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining
significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
When settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in
the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form
part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented
within equity in the FCTR.
(f) Cash, cash equivalents and term deposits
Cash and cash equivalents comprise cash balances and short term deposits with a maturity of three months or less at
acquisition date. Term deposits with a maturity of three months or greater at acquisition date are disclosed separately
in the consolidated statement of financial position.
Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are
included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
(g)
Inventories
Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs of completion and selling expenses.
The cost of
inventories and bringing them to their existing location and condition.
work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
inventories is based on weighted average cost and includes expenditure incurred in acquiring the
In the case of manufactured inventories and
An impairment allowance is made for obsolete, damaged and slow moving inventories.
Impairment allowances are
estimated by analysing the aging and stock holding by reference to the age of the individual inventory item or the
estimated time taken to sell that inventory item. Varying percentages are applied to the determined profile to estimate
the allowance for impairment.
9
8
9
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(h)
(i)
Trade and other receivables
Trade and other receivables are stated at amortised cost less impairment losses.
Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost
impairment losses.
less accumulated depreciation and accumulated
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets
includes the following:
- the cost of materials and direct labour,
- any other costs directly attributable to bringing the assets to a working condition for their intended use,
- when the Group has an obligation to remove the assets or restore the site, an estimate of the costs of dismantling
and removing the items and restoring the site on which they are located, and
- capitalised borrowing costs.
Cost includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of
property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is
capitalised as part of that equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net
proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
Leased assets
Leases in terms of which the Group assumes substantially all of the risks and rewards of ownership are classified as
finance leases. Other leases are classified as operating leases.
Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the
expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.
Depreciation
Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or
in respect of internally constructed assets, from the date that the asset is completed and ready for use.
Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values
using the straight-line basis over their estimated useful lives. Leased assets are depreciated over the shorter of the
lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the
lease term.
The estimated useful lives for the current and comparative years of significant items of property, plant and equipment
are as follows:
Class of Fixed Asset Depreciation Rate
- Plant and Equipment 5% - 40%
- Buildings 2%
Depreciation methods, useful
appropriate.
lives and residual values are reviewed at each reporting date and adjusted if
(j)
Intangible assets and goodwill
Goodwill
Goodwill that arises upon the acquisition of subsidiaries is presented with intangible assets. For the measurement of
goodwill at initial recognition, see Note 1(d).
Subsequent measurement
Goodwill
is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the
carrying amount of goodwill is included in the carrying amount of the investment, and any impairment loss is allocated
to the carrying amount of the equity accounted investee as a whole.
Computer software
Computer software comprises licence costs and direct costs incurred in preparing for the operation of that software,
including associated process re-engineering costs. Computer software is stated at cost less accumulated amortisation
and impairment losses.
10
11
10
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(h)
Trade and other receivables
Trade and other receivables are stated at amortised cost less impairment losses.
(i)
Property, plant and equipment
Recognition and measurement
impairment losses.
includes the following:
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets
- the cost of materials and direct labour,
- any other costs directly attributable to bringing the assets to a working condition for their intended use,
- when the Group has an obligation to remove the assets or restore the site, an estimate of the costs of dismantling
and removing the items and restoring the site on which they are located, and
- capitalised borrowing costs.
Cost includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of
property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is
capitalised as part of that equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net
proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
Leases in terms of which the Group assumes substantially all of the risks and rewards of ownership are classified as
finance leases. Other leases are classified as operating leases.
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the
expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.
Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or
in respect of internally constructed assets, from the date that the asset is completed and ready for use.
Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values
using the straight-line basis over their estimated useful lives. Leased assets are depreciated over the shorter of the
lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the
The estimated useful lives for the current and comparative years of significant items of property, plant and equipment
Leased assets
Subsequent costs
Depreciation
lease term.
are as follows:
Class of Fixed Asset Depreciation Rate
- Plant and Equipment 5% - 40%
- Buildings 2%
Depreciation methods, useful
lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
Goodwill
(j)
Intangible assets and goodwill
goodwill at initial recognition, see Note 1(d).
Subsequent measurement
Goodwill that arises upon the acquisition of subsidiaries is presented with intangible assets. For the measurement of
Goodwill
is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the
carrying amount of goodwill is included in the carrying amount of the investment, and any impairment loss is allocated
to the carrying amount of the equity accounted investee as a whole.
Computer software
and impairment losses.
Computer software comprises licence costs and direct costs incurred in preparing for the operation of that software,
including associated process re-engineering costs. Computer software is stated at cost less accumulated amortisation
Items of property, plant and equipment are measured at cost
less accumulated depreciation and accumulated
Subsequent expenditure
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(j)
Intangible assets and goodwill (continued)
Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful
accumulated amortisation and any accumulated impairment losses.
lives are measured at cost less
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific
asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is
recognised in profit or loss as incurred.
Amortisation
Except for goodwill, intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful
lives, from the date that they are available for use.
In current and comparative periods, goodwill was estimated to have an indefinite useful life and computer software
was estimated to have a useful life of 3 to 12 years.
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(k)
Impairment of assets (financial and non financial)
Assets with an indefinite useful life are not amortised but are tested annually for impairment in accordance with AASB
136. Assets subject
to annual depreciation or amortisation are reviewed for impairment whenever events or
circumstances arise that indicate that the carrying amount of the asset may be impaired.
An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount. The
recoverable amount of an asset is defined as the higher of its fair value less costs to sell and value in use.
All impairment losses are recognised in profit or loss. An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised
cost, the reversal is recognised in profit or loss.
(l)
Employee benefits
A provision is made for the Group’s liability for employee benefits arising from services rendered by employees to
balance date. These benefits include wages and salaries, annual leave and long service leave. Sick leave is non
vesting and has not been provided for.
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount
expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be estimated reliably.
The Group's net obligation in respect to long-term employee benefits is the amount of future benefit that employees
have earned in return for their service in the current and prior periods. That benefit is discounted to determine its
present value. Remeasurements are recognised in profit or loss in the period in which they arise.
The Group makes contributions to accumulation style superannuation funds for its employees. These contributions
are charged through the statement of comprehensive income.
A liability is recognised for short term incentive plans. The calculation is based on the achievement of annually agreed
key performance indicators by eligible employees.
A long term incentive plan was approved by shareholders in 2003 and allows specified employees to acquire shares of
the Company subject to the achievement of internal and external performance hurdles.
In 2014 a separate long term incentive was approved for a senior executive in which shares were issued to the
employee funded by a non recourse loan from the Company.
11
10
11
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(m)
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.
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, when appropriate, the risks specific to the liability.
Warranties
Provisions for warranty claims are made for claims received and claims expected to be received in relation to sales
made prior to reporting date, based on historical claim rates, adjusted for specific information arising from internal
quality assurance processes.
Restructuring
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and
the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.
Onerous contracts
A provision for onerous contracts is measured at the present value of the lower of the expected cost of terminating the
contract and the expected net cost of continuing with the contract. Before a provision is established, the Group
recognises any impairment loss on the assets associated with that contract.
Make good
Provision for make good in respect of leased properties is recognised where appropriate based on the estimated cost
to be incurred to restore premises to the required condition under the relevant lease agreements.
(n)
Trade and other payables
Trade and other payables are stated at amortised cost.
Trade payables are non interest bearing and are normally settled within 60 day terms.
(o) Revenue
Sale of goods
Revenue from sale of goods is measured at the fair value of the consideration received or receivable, net of returns,
rebates and goods and services tax payable to the taxation authority.
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer,
recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably,
there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
Rental income
Rental income is recognised in the statement of profit or loss and other comprehensive income on a straight line basis
over the term of the lease. Rental income from subleased property is recognised as other revenue.
(p)
Leases
Leased assets
Assets held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership
are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of
its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to the asset.
Assets held under other leases are classified as operating leases and are not recognised in the Group’s statement of
financial position.
Lease payments
Payments made and material incentives received under operating leases are recognised in profit or loss on a straight-
line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease
expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability.
12
13
12
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(m)
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.
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, when appropriate, the risks specific to the liability.
Provisions for warranty claims are made for claims received and claims expected to be received in relation to sales
made prior to reporting date, based on historical claim rates, adjusted for specific information arising from internal
Warranties
quality assurance processes.
Restructuring
Onerous contracts
Make good
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and
the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.
A provision for onerous contracts is measured at the present value of the lower of the expected cost of terminating the
contract and the expected net cost of continuing with the contract. Before a provision is established, the Group
recognises any impairment loss on the assets associated with that contract.
Provision for make good in respect of leased properties is recognised where appropriate based on the estimated cost
to be incurred to restore premises to the required condition under the relevant lease agreements.
(n)
Trade and other payables
Trade and other payables are stated at amortised cost.
Trade payables are non interest bearing and are normally settled within 60 day terms.
(o) Revenue
Sale of goods
Rental income
(p)
Leases
Leased assets
financial position.
Lease payments
Revenue from sale of goods is measured at the fair value of the consideration received or receivable, net of returns,
rebates and goods and services tax payable to the taxation authority.
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer,
recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably,
there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
Rental income is recognised in the statement of profit or loss and other comprehensive income on a straight line basis
over the term of the lease. Rental income from subleased property is recognised as other revenue.
Assets held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership
are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of
its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to the asset.
Assets held under other leases are classified as operating leases and are not recognised in the Group’s statement of
Payments made and material incentives received under operating leases are recognised in profit or loss on a straight-
line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease
expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability.
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(q)
Finance income and finance costs
Finance income comprises interest income on funds invested and dividend income. Interest income is recognised as it
accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date
that the Group’s right to receive payment is established, which in the case of quoted securities is normally the ex-
dividend date.
Finance costs comprise interest expense on borrowings and finance leases.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are
recognised in profit or loss using the effective interest method.
Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either
finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss
position.
(r) Operating segments
The Group determines and presents operating segments based on the information that internally is provided to the
CEO, who is the Group’s chief operating decision maker.
An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s
other components. All operating segments operating results are regularly reviewed by the Group’s CEO to make
decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial
information is available.
Operating segment results that are reported to the CEO include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office
expenses and income tax assets and liabilities.
Operating segment capital expenditure is the total cost incurred during the period to acquire property, plant and
equipment, and intangible assets other than goodwill.
(s)
Income tax
Income tax is recognised in the
Income tax on the profit or loss for the year comprises current and deferred tax.
statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accoutning nor taxable profit or loss;
temporary differences related to investments in
subsidiaries to the extent that the Group is able to control the timing of reversal of the temporary differences and it is
probable that they will not reverse in the foreseeable future and the taxable temporary differences arising on the intial
recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to
the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related
tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax asses are reassessed at each reporting date and recognised to the extent that it has
become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the rates that are expected to be applied to temporary differences when they reverse,
using tax rates enacted or substantively enacted at the reporting date.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to
pay the related dividend.
Tax consolidation
The Company and its wholly owned Australian resident entities have formed a tax consolidated group with effect from
1 November 2002 and are therefore taxed as a single entity from that date. The head entity within the tax
consolidated group is Coventry Group Ltd.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the
members of the tax consolidated group are recognised in the separate financial statements of the members of the tax
consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of assets
and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.
13
12
13
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(s)
Income tax (continued)
Tax consolidation (continued)
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the controlled entities is
assumed by the head entity in the tax consolidated group and recognised by the Company as an equity contribution or
distribution.
The Company recognises deferred tax assets arising from unused tax losses of the tax consolidated group to the
extent that it is probable that future taxable profits of the tax consolidated group will be available against which the
asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised
assessments of the probability of recoverability is recognised by the head entity only.
(t) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the
amount of GST incurred is not recoverable from the taxation authority.
In these circumstances, the GST is recognised
as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or
payable to, the taxation authority is included as a current asset or liability in the balance sheet. Cash flows are
included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing
and financing activities which are recoverable from, or payable to, the taxation authority are classified as operating
cash flows.
(u) Accounting estimates and judgements
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions
that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and
expense. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised
prospectively.
information about significant areas of estimation uncertainty and critical
In particular,
judgements in applying
accounting policies that have the most significant affect on the amount recognised in the financial statements are
described in the following notes:
- Note 1(g) – significant accounting policies – inventories
- Note 1(s) – significant accounting policies – income tax and recovery of deferred tax assets (Note 6)
- Note 13 – measurement of the recoverable amount of cash generating units containing goodwill
- Note 20 – allowance for trade receivable impairment losses
(v)
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and
share options are recognised as a deduction from equity, net of any tax effects.
(w) Discontinued operation
A discontined operation is a component of the Group's business, the operations and cash flows of which can be clearly
distinguished from the rest of the Group.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to
be classified as held-for-sale.
When an operation is classified as a discontinued operation, the comparative statement of profit or loss and other
comprehensive income is represented as if the operation had been discontinued from the start of the comparative
year.
(x) 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 2015, 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.
AASB 9 Financial Instruments (2010), AASB 9 Financial Instruments (2009)
AASB 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under AASB 9
(2009), financial assets are classified and measured based on the business model
in which they are held and
characteristics of their contractual cash flows. AASB 9 (2010) introduces additional changes relating to financial
liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement
financial assets and hedge
requirements of AASB 9 and add new requirements to address the impairment of
accounting.
AASB 9 (2010) and (2009) are effective for annual periods beginning on or after 1 January 2015, with early adoption
permitted. The adoption of these standards is not expected to have a material impact on the Group's financial assets.
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition guidance, including AASB 18 Revenue, AASB 11 Construction
Contracts. AASB 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption
permitted.
The Group is assessing the potential impact on its consolidated financial statements resulting from the application of
AASB 15.
14
14
15
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(s)
Income tax (continued)
Tax consolidation (continued)
distribution.
asset can be utilised.
(t) Goods and services tax
The Company recognises deferred tax assets arising from unused tax losses of the tax consolidated group to the
extent that it is probable that future taxable profits of the tax consolidated group will be available against which the
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised
assessments of the probability of recoverability is recognised by the head entity only.
Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the
amount of GST incurred is not recoverable from the taxation authority.
In these circumstances, the GST is recognised
as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or
payable to, the taxation authority is included as a current asset or liability in the balance sheet. Cash flows are
included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing
and financing activities which are recoverable from, or payable to, the taxation authority are classified as operating
cash flows.
(u) Accounting estimates and judgements
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions
that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and
expense. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised
prospectively.
In particular,
information about significant areas of estimation uncertainty and critical
judgements in applying
accounting policies that have the most significant affect on the amount recognised in the financial statements are
described in the following notes:
- Note 1(g) – significant accounting policies – inventories
- Note 1(s) – significant accounting policies – income tax and recovery of deferred tax assets (Note 6)
- Note 13 – measurement of the recoverable amount of cash generating units containing goodwill
- Note 20 – allowance for trade receivable impairment losses
(v)
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and
share options are recognised as a deduction from equity, net of any tax effects.
(w) Discontinued operation
distinguished from the rest of the Group.
be classified as held-for-sale.
A discontined operation is a component of the Group's business, the operations and cash flows of which can be clearly
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to
When an operation is classified as a discontinued operation, the comparative statement of profit or loss and other
comprehensive income is represented as if the operation had been discontinued from the start of the comparative
year.
(x) 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 2015, 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.
AASB 9 Financial Instruments (2010), AASB 9 Financial Instruments (2009)
AASB 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under AASB 9
(2009), financial assets are classified and measured based on the business model
in which they are held and
characteristics of their contractual cash flows. AASB 9 (2010) introduces additional changes relating to financial
liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement
requirements of AASB 9 and add new requirements to address the impairment of
financial assets and hedge
accounting.
permitted.
AASB 15.
AASB 9 (2010) and (2009) are effective for annual periods beginning on or after 1 January 2015, with early adoption
permitted. The adoption of these standards is not expected to have a material impact on the Group's financial assets.
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition guidance, including AASB 18 Revenue, AASB 11 Construction
Contracts. AASB 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption
The Group is assessing the potential impact on its consolidated financial statements resulting from the application of
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the controlled entities is
assumed by the head entity in the tax consolidated group and recognised by the Company as an equity contribution or
· Gaskets: Includes manufacturing and distribution of automotive and industial gaskets
· Managed System Services, MSS (discontinued): Includes information services solutions and support
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
2. Operating segments
The Group has 5 reportable segments as described below. For each of the strategic operating segments, the CEO reviews internal management accounts on a monthly basis. The
following summary describes the operations of each of the Group’s reportable operating segments:
· Fasteners: Includes distribution and marketing of industrial fasteners and associated industrial tools and consumables
· Fluids : Includes the design, manufacture, distribution, installation and maintenance of lubrication and hydraulic fluid systems and hoses
· Hardware : Includes the importation, distribution and marketing of hardware components and finished products to the cabinet making, joinery and shop fitting industries
Information regarding the results of each reportable operating segment is included below. Performance is measured based on operating segment profit before income tax as
included in the internal management reports that are reviewed by the CEO.
Information about reportable segments
Note
Fasteners
Fluids
Hardware
Gaskets
MSS
(discontinued)
Total
reportable
segment
Other business
units and
consolidation
adjustments
Total
In thousands of AUD
2015
2015
2015
2015
2015
2015
2015
2015
External sales
Other revenue
External revenue
101,033
2,290
103,323
60,419
258
60,677
15,885
125
16,010
13,369
221
13,590
2,640
193,346
2
2,896
2,642
196,242
(2,640)
2,461
(179)
190,706
5,357
196,063
Inter segment revenue
4
-
-
-
-
4
(4)
-
Total revenue
103,327
60,677
16,010
13,590
2,642
196,246
(183)
196,063
Reportable segment profit/(loss) before
finance costs, income tax and material
items
(7,509)
2,118
Net financial income/(loss)
(185)
-
51
7
Other material items:
Restructuring and other related costs
26
(9,986)
(901)
(436)
2,061
(2,106)
(5,385)
(968)
(6,353)
(1)
(164)
627
463
15
-
-
Reportable segment profit/(loss) before
income tax
(17,680)
1,217
(378)
2,076
(2,107)
Reportable segment assets
55,997
28,856
12,557
11,094
Reportable segment liabilities
18,731
6,099
864
781
Capital employed
Capital expenditure
Depreciation and amortisation
37,266
22,757
11,693
10,313
2,232
1,374
809
936
249
124
143
190
-
-
-
14
157
(11,323)
-
(16,872)
(10,034)
(21,357)
(10,375)
(27,247)
108,504
25,601
134,105
26,475
82,029
3,447
2,781
5,933
32,408
19,668
101,697
557
1,463
4,004
4,244
Information about reportable segments
Note
Fasteners
Fluids
Hardware
Gaskets
MSS
(discontinued)
Total
reportable
segment
Other business
units and
consolidation
adjustments
Total
In thousands of AUD
2014
2014
2014
2014
2014
2014
2014
2014
External sales
Other revenue
External revenue
112,688
838
113,526
62,891
267
63,158
17,726
499
18,225
12,855
202
13,057
4,465
210,625
2
1,808
4,467
212,433
Inter segment revenue
2
-
11
-
-
13
(4,465)
2,416
(2,049)
(13)
206,160
4,224
210,384
-
Total revenue
113,528
63,158
18,236
13,057
4,467
212,446
(2,062)
210,384
Reportable segment profit/(loss) before
finance costs, income tax and material
items
Net financial income/(loss)
Reportable segment profit/(loss) before
income tax
(81)
3,088
(2,007)
2,235
(243)
2,992
(3,000)
(8)
137
56
-
26
41
(2)
202
1,746
1,948
3,088
(1,981)
2,276
(245)
3,194
(1,254)
1,940
Reportable segment assets
53,153
32,600
11,103
12,296
1,732
110,884
62,972
173,856
Reportable segment liabilities
14,934
8,383
1,393
621
2,228
27,559
1,452
29,011
Capital employed
Capital expenditure
Depreciation and amortisation
38,219
24,217
9,710
11,675
(496)
83,325
61,520
144,845
1,188
1,195
2,441
911
280
138
107
209
548
118
4,564
2,571
915
2,151
5,479
4,722
Managed System Services (MSS)
MSS was deterrmined as a non-core business unit and as a part of the restructure was accordingly divested from the Group. In order to demonstrate the impact MSS had on the
Group result it was determined that it should be disclosed as a reportable segment to give users a greater understanding of the underlying earnings of the continuing business units.
The 2014 comparatives have been restated so as to include Managed System Services as a reportable (discontinued) segment.
Geographic information
Revenue based on the geographic location of customers was Australia $171,672,000 (2014: $187,527,000) and New Zealand $24,391,000 (2014: $22,857,000).
Non current assets, excluding deferred tax assets, based on the geographic location of the assets were Australia $19,913,000 (2014: $28,076,000) and New Zealand $952,000
(2014: $742,000).
14
15
15
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
3. Auditor's remuneration
In AUD
Audit services
Auditors of the Group
KPMG Australia:
Audit and review of financial reports
Prior year under accrued audit costs
Other services
Auditors of the Group
KPMG New Zealand:
Tax services
4. Employment costs
In thousands of AUD
Wages and salaries
Liability for annual leave and long service leave
Contributions to superannuation funds
Payroll taxes
Other associated personnel expenses
Share based payments
5. Finance income and finance expenses
In thousands of AUD
Interest income from other entities
Net foreign exchange gain
Dividends received
Financial income
Interest expense
Net foreign exchange loss
Financial expenses
Net financing income
6. Taxes
Current tax expense
Tax recognised in the profit or loss
In thousands of AUD
Current tax expense
Current year
Deferred tax expense
Origination and reversal of temporary differences
Over provision in prior periods
Revenue tax losses derecognised
Effect of lower tax rate applicable to foreign controlled entity
Consolidated
2015
2014
230,200
12,000
242,200
230,200
-
230,200
11,196
11,196
12,099
12,099
Consolidated
2015
36,379
2014
39,461
4,224
3,531
2,194
1,907
40
4,571
3,665
2,399
1,866
69
48,275
52,031
Consolidated
2015
775
-
1
776
3
310
313
463
2014
1,835
115
1
1,951
1
-
1
1,950
Consolidated
2015
2014
518
518
(8,616)
11
3,990
(9)
(4,624)
689
689
(54)
120
-
(25)
41
Tax (benefit)/expense on continuing operations
(4,106)
730
Income tax (benefit)/expense from continuing operations
Income tax benefit from discontinued operations
Total income tax (benefit)/expense
(4,106)
(632)
(4,738)
730
(73)
657
16
16
17
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
6. Taxes (continued)
Current tax expense (continued)
Reconciliation of effective tax rate
In thousands of AUD
(Loss)/profit for the period
Total income tax (benefit)/expense
(Loss)/profit excluding income tax
Income tax using the Company’s domestic tax rate of 30%
Revenue tax losses derecognised
Non-deductible expenditure
Over provision in prior periods
Effect of lower tax rate applicable to foreign controlled entity
Witholding tax - non-rebatable
Non-assessable, non-exempt foreign income
Consolidated
2015
2014
(23,141)
(4,106)
(27,247)
(8,174)
3,990
42
11
(9)
36
(2)
(4,106)
1,210
730
1,940
582
-
29
120
(25)
58
(34)
730
During the period ended 30 June 2015, the Group derecognised brought forward pre-consolidation tax losses of $13,301,000 represented by a deferred tax asset
of $3,990,000. In view of the increase in post consolidation tax losses brought to account as a consequence of the Group's restructure which are required to be
utilised in preference to the pre-tax consolidation losses, the Group has determined that the recognition criteria of these losses has no longer been met.
Income tax receivable and income tax payable
The current tax asset for the Group of $108,000 (2014: $109,000) represents the amount of income taxes recoverable in respect of the current and prior financial
periods and that arise from the payment of tax in excess of the amounts due to the Australian tax authority. The current tax liability for the Group of $74,000
(2014:$98,000) represents the amount of income taxes payable in respect of current and prior financial periods.
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Consolidated
In thousands of AUD
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
Hedge reserve
Employee benefits
Trade and other payables
Provisions
Tax loss carry forward
Tax assets/(liabilities)
Set off of deferred tax liability
Net deferred tax asset
Assets
Liabilities
Net
2015
2014
2015
125
1,372
791
29
-
1,576
185
459
8,911
13,448
(6)
13,442
2014
111
1,273
592
29
-
2,066
192
52
5,450
9,765
(1,537)
8,228
-
-
-
-
(6)
-
-
-
(6)
6
-
-
-
-
(1,532)
-
-
(5)
-
-
(1,537)
1,537
2015
125
1,372
791
29
(6)
1,576
185
459
8,911
13,442
-
-
13,442
2014
111
1,273
592
(1,503)
-
2,066
187
52
5,450
8,228
-
8,228
Tax losses in Coventry Group's Australian operation consist of post-consolidation carried forward tax losses of $27,320,000 (2014: $2,463,000), represented by
the deferred tax asset of $8,196,000 (2014: $739,000), that the Group expects to fully utilise against the forecasted taxable profits in the Australian tax group. The
tax losses in the New Zealand operations of $2,383,000 (2014: $2,403,000), represented by the deferred tax asset of $715,000 (2014: $721,000), can be fully
utilised against the future forecasted taxable profits in the New Zealand tax group.
The movement in deferred tax balances during the year is recognised in income $5,220,000 (2014: $227,000) and in equity -$6,000 (2014: -$479,000).
7. Earnings per share
(Loss)/earnings used in basic and diluted earnings per share calculation
Weighted average number of ordinary shares outstanding during the year used in
calculating basic and diluted earnings per share
Basic and diluted (loss)/earnings per share
Consolidated
2015
2014
(25,007,766)
609,122
37,996,635
38,077,358
(65.8 cents)
1.6 cents
17
17
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
8. Cash, cash equivalents and term deposits
In thousands of AUD
Cash on hand
Bank balances
Short term deposits (less than 90 days to maturity at inception)
Cash and cash equivalents
Term deposits (greater than 90 days to maturity at inception)
Cash, cash equivalents and term deposits
Consolidated
2015
26
8,683
-
8,709
-
8,709
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 20.
9. Trade and other receivables
In thousands of AUD
Trade receivables
Other
Prepayments
Total trade and other receivables
Current
Non current
Total trade and other receivables
2014
34
8,127
625
8,786
39,200
47,986
2014
31,764
31,764
875
769
1,644
Consolidated
2015
28,384
28,384
2,176
1,190
3,366
31,750
33,408
31,659
91
31,750
33,408
-
33,408
The Group’s exposure to credit risks and impairment losses relates to trade and other receivables and are disclosed in Note 20. Included in
“other expenses” in the statement of profit or loss and other comprehensive income are impairment losses on trade receivables for the Group
of $530,000 (2014: $297,000).
10. Inventories
In thousands of AUD
Finished goods
11. Parent entity disclosures
Consolidated
2015
59,322
59,322
2014
55,307
55,307
As at, and throughout, the financial year ending 30 June 2015 the parent entity of the Group was Coventry Group Ltd.
Results of the parent entity
In thousands of AUD
(Loss)/profit for the period
Other comprehensive income
Total comprehensive (loss)/profit for the period
Company
2015
2014
(25,112)
13
(25,099)
507
-
507
Financial position of parent entity at year end
Company
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Issued capital
Reserves
Retained earnings
Total equity
2015
79,084
138,855
25,210
28,229
108,110
75
2,441
110,626
2014
114,913
178,542
24,589
25,390
108,943
23
44,186
153,152
18
18
19
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
12. Property, plant and equipment
In thousands of AUD
Cost at 1 July 2014
Accumulated Depreciation at 1 July 2014
Carrying amounts at 1 July 2014
Additions
Depreciation charge for the year
Disposals
Write offs
Effect of movements in foreign exchange
Carrying amounts at 30 June 2015
Cost at 1 July 2013
Accumulated Depreciation at 1 July 2013
Carrying amounts at 1 July 2013
Acquisitions through business combinations
Other additions
Depreciation charge for the year
Impairment
Disposals
Effect of movements in foreign exchange
Carrying amounts at 30 June 2014
13. Intangible assets
In thousands of AUD
Cost at 1 July 2014
Accumulated Depreciation at 1 July 2014
Carrying amounts at 1 July 2014
Additions
Amortisation for the year
Disposals
Write offs
Effect of movements in foreign exchange
Carrying amounts at 30 June 2015
Cost at 1 July 2013
Accumulated Depreciation at 1 July 2013
Carrying amounts at 1 July 2013
Acquisitions through business combinations
Other additions
Amortisation for the year
Disposals
Effect of movements in foreign exchange
Carrying amounts at 30 June 2014
Note
Land and
buildings
Consolidated
Plant and
equipment
Total
26
2,299
450
1,849
-
(30)
-
-
-
1,819
2,299
420
1,879
-
-
(30)
-
-
-
39,766
22,405
17,361
3,791
(3,323)
(499)
(2,318)
(20)
14,992
36,497
19,475
17,022
596
3,311
(3,466)
25
(178)
51
42,065
22,855
19,210
3,791
(3,353)
(499)
(2,318)
(20)
16,811
38,796
19,895
18,901
596
3,311
(3,496)
25
(178)
51
1,849
17,361
19,210
Note
Goodwill
Consolidated
Distribution
rights
Computer
software
Total
26
41,701
38,290
3,411
-
-
(84)
-
-
3,327
40,542
38,290
2,252
1,159
-
-
-
-
3,411
641
641
-
-
-
-
-
-
-
641
641
-
-
-
-
-
-
-
16,308
10,111
6,197
213
(949)
(132)
(4,691)
(2)
636
15,918
8,883
7,035
-
387
(1,226)
-
1
58,650
49,042
9,608
213
(949)
(216)
(4,691)
(2)
3,963
57,101
47,814
9,287
1,159
387
(1,226)
-
1
6,197
9,608
Impairment testing for cash generating units (CGUs) containing goodwill.
For the purpose of impairment testing, goodwill is allocated to the Group's operating divisions. The aggregate carrying amounts of goodwill
allocated to each CGU are as follows.
In thousands of AUD
Cooper Fluid Systems
Managed System Services
Consolidated
2015
3,327
-
3,327
2014
3,327
84
3,411
The key assumptions, and the basis for determining the values assigned to each key assumption, used in the value in use calculations
include projected sales growth, projected gross margins, projected expenses/sales ratio and improvement
in working capital. These
assumptions are based on historical experience and projected performance incorporated in the company's restructure programme.
The impairment tests for the cash generating units were based on value in use calculations, in which projected pre-tax cash flows for the
following five years, together with a terminal value, were discounted at a pre-tax discount of approximately 14.0% (2014: 15.3%).
The discount rates were estimated based on an industry weighted average cost of capital. The projected cash flows were based on detailed
operating budgets for the year ending 30 June 2016 approved by the Board and forecasts for the following four years approved by
management. Beyond the 2020 forecasted cash flows, a terminal value growth rate of 2.5% was applied.
19
19
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
14. Trade and other payables
Note
Consolidated
In thousands of AUD
Trade payables
Non trade payables and accrued expenses
Current
Non current
26
2015
15,629
9,885
25,514
22,835
2,679
25,514
2014
16,137
5,647
21,784
21,784
-
21,784
The Group's exposure to currency and liquidity risk related to trade and other payables is disclosed in Note
20.
15. Interest-bearing loans and borrowings
In thousands of AUD
Financing facilities
Total facilities available at balance sheet date
Interchangeable multi currency revolving facility
Guarantee facility
Corporate credit card facility
Facilities utilised at balance sheet date
Interchangeable multi currency revolving facility
Guarantee facility
Corporate credit card facility
Facilities not utilised at balance sheet date
Interchangeable multi currency revolving facility
Guarantee facility
Corporate credit card facility
Consolidated
2015
2014
4,000
8,000
200
750
200
750
4,950
8,950
-
-
204
204
-
-
180
180
4,000
8,000
200
546
200
570
4,746
8,770
The facility arrangements are subject to bank charges irrespective of whether they are drawn down or not.
As a result the facility limits have been reduced in the year ended 30 June 2015 so as to minimise ongoing
costs, but retain a level of funding flexibility.
Interchangeable multi currency revolving facility
The interchangeable facility is available for working capital and acquisition finance.
The facility can be utilised as an AUD loan facility, AUD commercial bill or NZD term loan.
The balance of the AUD$4.0 million (2014: AUD$8.0 million) facility, including any undrawn loan facility may
be available for draw-down as an AUD commercial bill or NZD term loan. Interest is charged at prevailing
market rates.
During the period, the Group amended and restated this facility to remove Managed System Services from
the agreement. The agreement was extended to October 2016, when it will be subject to further review.
Guarantee facility
Bank guarantees may be arranged from time to time under this facility, whereby the bank guarantees the
performance of the Group in relation to certain contractual commitments, up to the limit specified in each
individual guarantee. The Guarantee facility available at 30 June 2015 was $0.2 million (2014: $0.2 million).
Corporate credit card facility
Credit cards for business use may be issued under this facility from time to time.
Securities
All of the above facilities are secured by fixed and floating charges over the assets and undertakings of the
Company, a general security agreement
from Coventry Group (NZ) Limited, and by a deed of cross
guarantee between those companies.
20
20
21
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
16. Employee benefits
Current
In thousands of AUD
Liability for long service leave
Liability for annual leave
Non-current
In thousands of AUD
Liability for long service leave
17. Share-based payments
Consolidated
2015
2,452
2,501
4,953
Consolidated
2015
339
339
2014
3,169
2,960
6,129
2014
805
805
Description of the share-based payment arrangements
During the year ended 30 June 2015 the Group had the following share-based payment arrangements.
Share option programmes (equity-settled)
Long term incentives are provided to senior management, including key management personnel, through
the Executive Long Term Incentive Plan (“ELTIP”) which was approved by shareholders at the annual
general meeting on 5 November 2003. No options were granted, vested, exercised or lapsed during and
since the end of the reporting period.
There are no options outstanding at the end of the period.
Reconciliation of outstanding share options
The number and weighted average exercise prices of share options under share option programme
replacement awards is as follows.
Outstanding at 1 July
Exercised during the year
Outstanding at 30 June
Number of
options
Weighted
average
exercise price
Number of
options
2015
-
-
-
2015
-
-
-
2014
550,000
(550,000)
-
Weighted
average
exercise
price
2014
$2.27
$2.27
-
The total employee benefits expense recognised for the reporting period under each ELTIP offer is as
follows:
In thousands of AUD
2010 Options – equity settled
2010 Options - cash settled
Consolidated
2015
2014
-
-
-
26
21
47
Loan funded share issue
In financial year 2014 200,000 shares were issued to Peter Caughey. These were funded by a non recourse
loan from the Company. The loan repayment is the lower of the original nominal loan value and the value of
200,000 shares at the time the loan is settled. The structure of the loan now has no 'down side' exposure,
the non cash accounting benefit in the year is $40,000 (2014: $22,000).
18. Provisions
Current
Note Warranty
Restructuring/
onerous
contracts (i)
Make Good
Total
In thousands of AUD
Balance at 1 July 2014
Provisions increased
Provisions used
Balance at 30 June 2015
(i) Refer Note 26 Restructuring and other related costs
128
308
(155)
281
29
1,004
(46)
987
12
260
(12)
260
169
1,572
(213)
1,528
21
21
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
Capital and reserves
19.
Share capital
In thousands of shares
On issue at 1 July (start of financial year)
Share buy back (i)
Issue of ordinary shares (ii)
On issue at 30 June – fully paid
The Company
Ordinary
shares
2015
2014
38,197
37,760
(361)
-
(163)
600
37,836
38,197
(i) In 2009 the Group announced an on-market share buy back of up to 10% of its issued ordinary shares. The 12 month
buy back period commenced on 23 November 2009 and has been renewed on a yearly basis. The latest renewal of the
share buy back was for a 12 month period which commenced on 23 November 2014.
(ii) For the financial year ended 30 June 2015, the company did not issue any ordinary shares (2014: 600,000 ordinary
shares were issued, being 400,000 related to the 2010 option scheme and 200,000 issued to Peter Caughey at market
rates).
Ordinary shares
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
Nature and purpose of reserves
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign operations where their functional currency is different to the presentation currency of the reporting entity, as
well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
Share based payments reserve
The share based payment reserve comprises the fair value of shares and options that are yet to vest under share based
payment arrangements.
Hedge reserve
the cumulative net change in the fair value of hedging
The hedging reserve comprises the effective portion of
instruments used in cash flow hedges pending subsequent recognition in profit or loss as the hedged cash flows affect
profit or loss.
Dividends
The following dividends were declared and paid by the Group:
Declared and paid during the financial year 2015
Cents per
share
Total amount
Franked /
Unfranked
Date of payment
Special Dividend 2014
Final 2014 Ordinary Dividend
Special Dividend 2015
Interim 2015 Ordinary Dividend
Total Amount
Payable after the end of year
$000
11.0
11.0
17.5
4.25
4,202
Fully Franked
25 July 2014
4,202
Fully Franked
19 September 2014
6,621
Fully Franked
1,608
Fully Franked
13 March 2015
13 March 2015
16,633
Cents per
share
Total amount
Franked /
Unfranked
Date of payment
$000
Final 2015 Ordinary Dividend (i)
2.5
946
Fully Franked
27 October 2015
(i)
The financial effect of these dividends have not been brought to account in the financial statements for the financial
year ended 30 June 2015, as they were declared after the year end, and will be recognised in subsequent financial
reports.
During the financial year ended 30 June 2014 a total of $8,374,000 dividends were declared and paid.
Dividend franking account
In thousands of AUD
30 per cent franking credits available to shareholders of the Company for
subsequent financial years
The Company
2015
2014
2,771
9,473
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for
dividends declared before balance date.
The impact on the dividend franking account of dividends declared and payable after the balance sheet date but not
recognised as a liability is to reduce the balance by $429,000.
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
20. Financial risk management
The Group has exposure to the following risks from their use of financial instruments:
Overview
Credit risk
Liquidity risk
Market risk
Credit risk
receivables from customers.
Trade and other receivables
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s cash and cash equivalent and term depoits and
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The
demographics of the Group’s customer base, including the default risk of the industry and country in which customers
operate, has less of an influence on credit risk. The Group has no significant concentration of customer base.
Management has established a credit policy under which each new customer is analysed individually for creditworthiness
before the Group’s standard payment and delivery terms and conditions are offered.
Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured
claim. The Group's terms and conditions of trade have been amended to incorporate the recent Personal Property
Security legislation. The Group does not normally require collateral in respect of trade and other receivables.
The Group has established an allowance for impairment that represents its estimate of incurred losses in respect of trade
and other receivables. Based on historic default rates, the Group believes that no impairment allowance is necessary in
respect of trade receivables not past due or past due by up to 60 days.
The aging of the Group’s trade receivables at the reporting date showed 87% of debtors were within terms (2014: 87%).
The amount of trade debtors that is past due but not impaired is $3,468,000 (2014: $3,791,000). The movement in the
allowance for impairment in respect of trade receivables during the year was $64,000 (2014: -$185,000).
Cash at bank and short or long term deposits are held with Australian and New Zealand banks with acceptable credit
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The maximum exposure
to credit risk at the reporting date was:
ratings.
Exposure to credit risk
In thousands of AUD
Cash and cash equivalents
Term deposits
Trade and other receivables
(i)
Note
Consolidated
Carrying amount
8
8
2015
8,708
-
30,450
39,158
2014
8,786
39,200
32,639
80,625
(i)
The above "other receivables" accounts only include those accounts that are contractually recoverable in the form of a
financial instrument and do not include statutory assets e.g. income tax receivable.
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region was
Australia $25,201,000 (2014: $28,749,000) and New Zealand $3,183,000 (2014: $3,015,000).
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by type of customers was trade
customers $24,045,000 (2014: $27,404,000) and wholesale customers $4,339,000 (2014: $4,360,000).
22
23
22
23
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
19.
Capital and reserves
Share capital
In thousands of shares
On issue at 1 July (start of financial year)
Share buy back (i)
Issue of ordinary shares (ii)
On issue at 30 June – fully paid
The Company
Ordinary
shares
2015
2014
38,197
37,760
(361)
-
(163)
600
37,836
38,197
(i) In 2009 the Group announced an on-market share buy back of up to 10% of its issued ordinary shares. The 12 month
buy back period commenced on 23 November 2009 and has been renewed on a yearly basis. The latest renewal of the
share buy back was for a 12 month period which commenced on 23 November 2014.
(ii) For the financial year ended 30 June 2015, the company did not issue any ordinary shares (2014: 600,000 ordinary
shares were issued, being 400,000 related to the 2010 option scheme and 200,000 issued to Peter Caughey at market
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
rates).
Ordinary shares
Nature and purpose of reserves
Translation reserve
Share based payments reserve
payment arrangements.
Hedge reserve
profit or loss.
Dividends
Special Dividend 2014
Final 2014 Ordinary Dividend
Special Dividend 2015
Interim 2015 Ordinary Dividend
Total Amount
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign operations where their functional currency is different to the presentation currency of the reporting entity, as
well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
The share based payment reserve comprises the fair value of shares and options that are yet to vest under share based
The hedging reserve comprises the effective portion of
the cumulative net change in the fair value of hedging
instruments used in cash flow hedges pending subsequent recognition in profit or loss as the hedged cash flows affect
The following dividends were declared and paid by the Group:
Declared and paid during the financial year 2015
Cents per
Total amount
Date of payment
Franked /
Unfranked
$000
4,202
Fully Franked
25 July 2014
4,202
Fully Franked
19 September 2014
6,621
Fully Franked
1,608
Fully Franked
13 March 2015
13 March 2015
16,633
$000
Franked /
Unfranked
share
11.0
11.0
17.5
4.25
share
2.5
Payable after the end of year
Cents per
Total amount
Date of payment
Final 2015 Ordinary Dividend (i)
946
Fully Franked
27 October 2015
The financial effect of these dividends have not been brought to account in the financial statements for the financial
year ended 30 June 2015, as they were declared after the year end, and will be recognised in subsequent financial
During the financial year ended 30 June 2014 a total of $8,374,000 dividends were declared and paid.
(i)
reports.
Dividend franking account
In thousands of AUD
The Company
2015
2014
2,771
9,473
30 per cent franking credits available to shareholders of the Company for
subsequent financial years
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for
dividends declared before balance date.
The impact on the dividend franking account of dividends declared and payable after the balance sheet date but not
recognised as a liability is to reduce the balance by $429,000.
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
20. Financial risk management
Overview
The Group has exposure to the following risks from their use of financial instruments:
Credit risk
Liquidity risk
Market risk
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s cash and cash equivalent and term depoits and
receivables from customers.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The
demographics of the Group’s customer base, including the default risk of the industry and country in which customers
operate, has less of an influence on credit risk. The Group has no significant concentration of customer base.
Management has established a credit policy under which each new customer is analysed individually for creditworthiness
before the Group’s standard payment and delivery terms and conditions are offered.
Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured
claim. The Group's terms and conditions of trade have been amended to incorporate the recent Personal Property
Security legislation. The Group does not normally require collateral in respect of trade and other receivables.
The Group has established an allowance for impairment that represents its estimate of incurred losses in respect of trade
and other receivables. Based on historic default rates, the Group believes that no impairment allowance is necessary in
respect of trade receivables not past due or past due by up to 60 days.
The aging of the Group’s trade receivables at the reporting date showed 87% of debtors were within terms (2014: 87%).
The amount of trade debtors that is past due but not impaired is $3,468,000 (2014: $3,791,000). The movement in the
allowance for impairment in respect of trade receivables during the year was $64,000 (2014: -$185,000).
Cash at bank and short or long term deposits are held with Australian and New Zealand banks with acceptable credit
ratings.
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The maximum exposure
to credit risk at the reporting date was:
In thousands of AUD
Cash and cash equivalents
Term deposits
Trade and other receivables
(i)
Note
Consolidated
Carrying amount
8
8
2015
8,708
-
30,450
39,158
2014
8,786
39,200
32,639
80,625
(i)
The above "other receivables" accounts only include those accounts that are contractually recoverable in the form of a
financial instrument and do not include statutory assets e.g. income tax receivable.
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region was
Australia $25,201,000 (2014: $28,749,000) and New Zealand $3,183,000 (2014: $3,015,000).
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by type of customers was trade
customers $24,045,000 (2014: $27,404,000) and wholesale customers $4,339,000 (2014: $4,360,000).
23
22
23
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
20. Financial risk management (continued)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
20. Financial risk management (continued)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
In addition, the Group maintains a $4.0 million multi-currency interchangeable facility on which interest is payable at
prevailing market rates.
Note 15 sets out the terms and conditions attaching to the Group’s facility.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements:
Consolidated
In thousands of AUD
Non derivative financial
liabilities
Trade and other payables
(i)
Carrying
amount
Contractual
cash flow
6 mths or
less
6-12 mths
1-2 years
More than 2
years
2015
22,272
(22,272)
(22,272)
- - -
22,272
(22,272)
(22,272)
- - -
The outflows associated with forward contracts used for hedging are US$2.7 million (A$3.5 million, 2014: $Nil) and will
have been made within 6 months or less.
Consolidated
In thousands of AUD
Non derivative financial
liabilities
Trade and other payables
(i)
Carrying
amount
Contractual
cash flow
6 mths or
less
6-12 mths
1-2 years
More than 2
years
2014
20,843
(20,843)
(20,843)
- - -
Finance lease liabilities
26
(26)
(9)
9
8 -
20,869
(20,869)
(20,852)
9
8 -
(i)
The above "other payables" carrying amount does not include statutory obligations e.g. amounts owing to the ATO.
Interest rate risk
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
In thousands of AUD
Fixed rate financial assets
Variable rate financial assets
(i)
Consolidated
Carrying amount
2015
2014
-
39,825
8,683
8,127
8,683
47,952
(i)
Variable financial assets do not include "cash on hand" as changes in interest rates do not affect this account.
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the
Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting
model. Therefore a change in interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
The impact of a change of 100 basis points in interest rates at the reporting date is immaterial.
Fair values
The fair values of financial assets and financial
liabilities of the Group approximate their carrying amounts in the
statement of financial position. For receivables, payables and term deposits with a remaining life of less than one year,
the notional amount less any impairment loss is deemed to reflect the fair value.
Market risk
Currency risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising the return.
The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than the Australian
dollar. The currencies giving rise to this risk are primarily US dollars, Euros and Japanese yen. The Group adopts a
policy of obtaining forward cover for 75% of its rolling 6 month USD forecasted exposure and for specific purchase orders
of low margin products. As a consequence the Group’s exposure to currency risk is not material.
Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business. The Group defines capital as cash, banking facilities and equity.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
21. Operating leases
Leases as lessee
Non cancellable operating lease rentals are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
More than five years
Leases as lessor
follows.
In thousands of AUD
Less than one year
Between one and five years
The Group leases various premises, plant and equipment and motor vehicles under operating leases. The leases
typically run for periods ranging from 1 month to 15 years and in some cases provide for an option to renew the lease
after expiry. None of the leases include contingent rentals.
During the financial year ended 30 June 2015, the Group recognised $8,901,000 (2014: $9,580,000) as an expense in
the statement of profit or loss and other comprehensive income in respect of operating leases.
At the end of the reporting period, the future minimum lease payments under non-cancellable leases are receivable as
Consolidated
2015
2014
8,506
19,072
20,408
47,986
7,939
13,038
18,183
39,160
Consolidated
2015
2,466
2,225
4,691
2014
2,102
4,047
6,149
The Group subleases various premises under operating leases. The leases typically run for periods ranging from 1 year
to 5 years and in some cases provide for an option to renew the lease after expiry.
During the financial year ended 30 June 2015, the Group recognised $2,301,000 (2014: $2,276,000) as income in the
statement of profit or loss and other comprehensive income.
24
25
24
25
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
20. Financial risk management (continued)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
In addition, the Group maintains a $4.0 million multi-currency interchangeable facility on which interest is payable at
prevailing market rates.
Note 15 sets out the terms and conditions attaching to the Group’s facility.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
2015
2014
Carrying
Contractual
6 mths or
amount
cash flow
less
6-12 mths
1-2 years
More than 2
years
22,272
(22,272)
(22,272)
- - -
22,272
(22,272)
(22,272)
- - -
The outflows associated with forward contracts used for hedging are US$2.7 million (A$3.5 million, 2014: $Nil) and will
have been made within 6 months or less.
Carrying
Contractual
6 mths or
amount
cash flow
less
6-12 mths
1-2 years
More than 2
years
Finance lease liabilities
26
(26)
(9)
9
8 -
20,869
(20,869)
(20,852)
9
8 -
20,843
(20,843)
(20,843)
- - -
The above "other payables" carrying amount does not include statutory obligations e.g. amounts owing to the ATO.
Interest rate risk
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
impact of netting agreements:
Consolidated
In thousands of AUD
Non derivative financial
liabilities
Trade and other payables
(i)
Consolidated
In thousands of AUD
Non derivative financial
liabilities
Trade and other payables
(i)
(i)
(i)
In thousands of AUD
Fixed rate financial assets
Variable rate financial assets
(i)
Consolidated
Carrying amount
2015
2014
-
39,825
8,683
8,127
8,683
47,952
Variable financial assets do not include "cash on hand" as changes in interest rates do not affect this account.
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the
Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting
model. Therefore a change in interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
The impact of a change of 100 basis points in interest rates at the reporting date is immaterial.
Fair values
The fair values of financial assets and financial
liabilities of the Group approximate their carrying amounts in the
statement of financial position. For receivables, payables and term deposits with a remaining life of less than one year,
the notional amount less any impairment loss is deemed to reflect the fair value.
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
20. Financial risk management (continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising the return.
Currency risk
The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than the Australian
dollar. The currencies giving rise to this risk are primarily US dollars, Euros and Japanese yen. The Group adopts a
policy of obtaining forward cover for 75% of its rolling 6 month USD forecasted exposure and for specific purchase orders
of low margin products. As a consequence the Group’s exposure to currency risk is not material.
Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business. The Group defines capital as cash, banking facilities and equity.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
21. Operating leases
Leases as lessee
Non cancellable operating lease rentals are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
More than five years
Consolidated
2015
8,506
19,072
20,408
47,986
2014
7,939
13,038
18,183
39,160
The Group leases various premises, plant and equipment and motor vehicles under operating leases. The leases
typically run for periods ranging from 1 month to 15 years and in some cases provide for an option to renew the lease
after expiry. None of the leases include contingent rentals.
During the financial year ended 30 June 2015, the Group recognised $8,901,000 (2014: $9,580,000) as an expense in
the statement of profit or loss and other comprehensive income in respect of operating leases.
Leases as lessor
At the end of the reporting period, the future minimum lease payments under non-cancellable leases are receivable as
follows.
In thousands of AUD
Less than one year
Between one and five years
Consolidated
2015
2,466
2,225
4,691
2014
2,102
4,047
6,149
The Group subleases various premises under operating leases. The leases typically run for periods ranging from 1 year
to 5 years and in some cases provide for an option to renew the lease after expiry.
During the financial year ended 30 June 2015, the Group recognised $2,301,000 (2014: $2,276,000) as income in the
statement of profit or loss and other comprehensive income.
25
24
25
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
22. Discontinued operations
As previously announced, given continuing losses, likely prospects and the commitment needed in management time to deliver
positive earnings, a decision was taken to exit the Managed System Services (MSS) business in January 2015.
Profit/(loss) attributable to the discontinued operations were as follows:
In thousands of AUD
2015
2014
Results of discontinued operations
Revenue
Expenses
Results from operating activities
Income tax benefit
Results from operating activities, net of tax
Gain/(loss) on sale of discontinued operation
Income tax on gain/(loss) on sale of discontinued operation
Profit/(loss) for the year
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
23. Controlled entities
AA Gaskets Pty Ltd
Fluidrive Pty Ltd
Managed System Services Pty Ltd (i)
Coventry Group (NZ) Limited
NZ Gaskets Limited (ii)
The ultimate parent entity is Coventry Group Ltd.
Country of
Incorporation
Australia
Australia
Australia
New Zealand
New Zealand
(i) The company was sold effective 27 March 2015
(ii) The company is a 100% controlled entity of AA Gaskets Pty Ltd and operates in New Zealand
24. Reconciliation of cash flows from operating activities
2,642
(4,749)
(2,107)
632
(1,475)
-
-
4,467
(4,712)
(245)
73
(172)
-
-
(1,475)
(172)
(4.0) cents
(1.0) cents
(4.0) cents
(1.0) cents
Ownership interest
2015
%
72.5
100
-
100
72.5
2014
%
72.5
100
100
100
72.5
In thousands of AUD
Cash flows from operating activities
(Loss)/profit for the period
Adjustments for :
Depreciation and amortisation
Impairment (reversal)/losses on property, plant and equipment
Interest income from other entities
Interest expense
Dividends received
Net write offs and loss on disposal of property, plant and equipment
Income tax (benefit)/expense
Operating (loss)/profit before changes in working capital and provisions
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in provisions and employee benefits
Interest paid
Income taxes (paid)/received
Net cash (used in)/from operating activities
Note
2015
2014
Consolidated
(24,616)
1,038
4,302 4,722
-
(776)
(25)
(1,531)
5
5 5
(1)
(1)
7,428 143
(4,738)
657
(18,396)
5,008
1,151 3,329
(4,571)
3,723
910
(2,963)
(345)
(467)
(17,183)
4,562
(4)
(1)
(550)
457
(17,737)
5,018
26
26
27
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
25. Related parties
Transactions with key management personnel
Key management personnel compensation
Key management personnel compensation comprised the following:
In AUD
Short-term employee benefits
Post-employment benefits
Termination benefits
Other long-term benefits
Benefits derived from non recourse loan
Equity compensation benefits
Consolidated
2015
1,699,434
183,083
450,658
43,737
39,742
-
2014
1,319,592
126,478
-
4,826
-
23,283
2,416,654
1,474,179
Information regarding individual directors and executives compensation and some equity instruments disclosures as required by
Corporations Regulation 2M.3.03 is provided in the remuneration report section of the Directors’ report.
Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the
previous financial year and there were no material contracts involving directors’ interests existing at year-end.
Key management personnel transactions
From time to time, key management personnel may purchase goods from companies within the Group on the same terms as
apply to other employees of the Group. The value of these transactions is insignificant.
Other related party transactions
The Group has a related party relationship with its controlled entities (see Note 23). All transactions with controlled entities are at
arms length.
The aggregate amounts included in the profit before tax for the year that resulted from transactions with controlled entities are:
The parent entity only:
Dividend revenue
Revenue from sale of goods
Purchase of inventories
2015
2014
1,232,500 1,450,000
306,925 342,077
8,386 19,278
Aggregate amounts receivable from controlled entities:
Advance account subject to interest charges (Australian controlled entities)
662,540 -
Advance account not subject to interest charges (Australian controlled entities)
- 1,539,386
Other receivables
Aggregate amounts payable to controlled entities
385,148 133,953
133,817 294,809
During the year ended 30 June 2015, the Company entered into a intercompany loan with Coventry Group (NZ) Limited (CGL
NZ). The intercompany loan is subject to an interest charge of 5.63% p.a and at 30 June 2015 had balance owing of $662,540
(2014: $nil) made up of principal amount of $654,662 and interest accrued of $7,878. The intercompany loan to subsidiaries
MSS ($2,320,000) and Fluiddrive ($1,048,000) were waived.
During the year ended 30 June 2015, the Company charged CGL NZ management fees of $631,418 (2014: $486,428).
27
27
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
26. Restructuring and other related costs
In February 2015 Coventry Group made two market announcements communicating a fundamental re-organisation and
restructure of the Group. These changes were undertaken to remove cost from the organisation, to improve efficiency and
enable the ongoing business to better service its customer base.
The re-organisation has meant simplifying the group structure and removing duplicated functions and resources which has re-
organised teams into 'One CGL'. The expenses are both directly and indirectly a consequence of the restructure.
Consolidated
In thousands of AUD
Restructure and other associated costs
Redundancy costs
Fixed assets disposal and write offs
Write offs of the Oracle deployment costs
Stock relocation & reset
Stock assessment and write off's
Third party consultants, temporary staff and relocations
Branch relocations
Onerous leases and exit costs
Other costs and legal fees
Change in estimate of sublease period for rental with fixed increases
Cumulative 'non-cash' effect of straight lining leases with fixed increases
Discontinued operations (MSS)
2015
2,241
2,318
4,691
1,928
2,910
1,703
197
1,353
1,122
215
2,679
21,357
2,106
23,463
Redundancy costs
The costs associated with the reduction of over 100 positions from the Group.
Fixed assets disposal and write offs
As a consequence of the restructure, staffing reductions and changes to operations, assessments were made on the carrying
value of assets and whether those assets would be used in the revised structure. This initiative supports the change over to the
'One CGL' structure which removes duplication and increases efficiency.
Write offs of the Oracle deployment costs
The Oracle asset is made up of two components, its deployment and setup cost that was initiated eight years ago, and the cost
of the licences. The original set up of the system was for a very different and 'siloed' entity. Today CGL is a very different
organisation and this 'siloed' structure no longer exists in the restructured Group. The Group, however, is utilising the licenses
and is in the process of adding modules to support planned operational efficiencies and cost savings. That element of the Oracle
asset remains valuable to the Group as a whole and has not been impaired.
Stock relocation & reset
The business over time has experienced changing buying patterns from its customer base and with an extensive range of
products, which are in excess of 150,000 lines, stock in certain geographies had become unsaleable or slow moving. The
business has moved relevant inventory to DC's where sales are more likely or scrapped the inventory where that made greater
economic sense.
Stock assessment and write off's
Through the restructuring exercise detailed review of all aged inventory was undertaken. The cost represents the aged stock that
was written off and associated costs of its disposal.
Third party consultants, temporary staff and relocations
The restructure was a major change to the business and required short term resource and skills to enact the changes swiftly and
deliver the desired outcome. Specialists in supply chain were engaged to help optimise the DC and distribution network.
In addition to the support given by vendors the Group employed short term personnel to help manage change and process re-
engineering within the Group.
Onerous leases and exit costs
Following the DC and distribution review a number of business locations were deemed superfluous to ongoing requirements and
have been exited. The costs associated with exit, non-occupation or onerous lease costs have been captured under this heading.
Cumulative 'non-cash' effect of straight lining leases with fixed increases
Through the restructuring exercise a detailed review of all leasing obligations was undertaken. This led to the recording of a non-
cash, non-current lease accrual so as to account on a straight line basis for material leases with fixed increases embedded in
them.
Discontinued operations (MSS)
As foreshadowed in the market announcement of 26 February 2015 the IT service business, MSS was sold at the end of March.
As part of that sale and the period leading up to it the customer accounts and contracts were wound down in an orderly manner
and that business has been exited. Due to the size of the loss incurred in the financial year and for users to better understand the
impact MSS has had on the Group it has been included separately in the segmental reporting note (see Note 2).
28
28
29
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
The directors present their report together with the financial report of Coventry Group Ltd (the “Company”) and of the Group,
being the Company and its subsidiaries for the year ended 30 June 2015.
Contents of directors' report
Page
1.
2.
3.
4.
5.
6.
7.
8.
9.
Directors
Principal activities
Consolidated results
Dividends
Review of operations and results
Earnings per share
Significant change in the company's affairs
Events subsequent to reporting date
Likely developments
10.
Remuneration report - audited
10.1 Key Management Personnel (KMPs)
10.2 Principles used to determine the nature and amount of compensation
10.3 Details of compensation
10.4 Service contracts
10.5 Equity instruments
Environmental regulation
Insurance of officers
Corporate governance
11.
12.
13.
14.
Share options
15.
16.
17.
Non-audit services
Lead auditor's independence declaration
Company secretary
18.
Rounding off
Directors' declaration
30
31
32
32
32
33
33
33
33
34
34
35
36
36
37
37
37
37
37
37
37
38
42
29
29
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
1. Directors
Information on Directors
The directors of the Company at any time during or since the end of the financial year and up to the date of this report are:
Name, qualifications, independence status and special responsibilities
Experience and other directorships
Neil George Cathie, FCPA, GAICD, FCIS
Chairman
Chairman of remuneration committee; member audit and risk committee
Peter John Batman Caughey, B.Eng, MBA, MAICD
Managing Director
Chief Executive Officer
Vicky Papachristos, BE (Chem), MBA, GAICD
Independent non-executive director
Member of audit and risk committee
Kenneth Royce Perry, B.Sc (Hons), MBA, MAICD, FAusIMM
Independent non-executive director
Chairman of audit and risk committee; member of remuneration committee
Nicholas John Willis, B.Sc, FAIM
Independent non-executive director
Member of remuneration committee
Mr Cathie was appointed as a director of the Company in September 2014
and as Chairman in January 2015. He has extensive experience in very
relevant areas including having a 27 year career at Australia’s largest and
most successful plumbing and bathroom distributor, Reece Australia Ltd,
during which time he served as its Chief Financial Officer, Company
Secretary and General Manager, Finance and IT. In these roles, Mr Cathie
has worked closely with a strong Board and line management team in a
growing company as well as having a primary external facing role of the
ASX listed Reece Australia Ltd. Mr Cathie spent 7 years with a chartered
accountancy firm early in his career and has held other CFO roles. He is
currently a director of and advisor to a number of private companies.
He held no other listed company directorships during the past 3 financial
years.
Mr Caughey was appointed Managing Director and Chief Executive Officer
in January 2015. He was previously the Business Leader of Konnect since
September 2012 and Artia since April 2013. Prior to joining Coventry Group
Ltd Mr Caughey had a number of roles in building products over 20 years
working at CSR Limited and Brickworks Limited. Most recently before
joining Coventry Group Ltd he was General Manager - Austral Bricks,
- Corporate
Victoria and prior
Development, both at Brickworks Limited.
to that Group General Manager
He held no other listed company directorships during the past 3 financial
years.
Ms Papachristos was appointed as a director of the Company in April 2015.
She is an experienced non-executive director with a strong sales and
marketing background having spent over 25 years as an executive with
major corporations in Australia and the USA. Her work has spanned
petrochemicals, banking & payments, sport, IT & retailing holding senior
roles in Shell, Westpac, Myer, Visa, the Olympics and as well as an IT start-
up. Ms Papachristos has launched several major banking & retail programs
including Myer One, Rebel Sport and the Ansett Frequent Flyer Visa. In
2006 she formed Currant Marketing – an independent consultancy in the
fields of marketing,
loyalty, sales, customer and digital strategy. Ms
Papachristos holds a Chemical Engineering degree from Monash
University, an MBA from the AGSM and is a Member of the GAICD. She is
passionate about women in the corporate arena and making a change from
bottom-up as well as top-down.
She held no other listed company directorships during the past 3 financial
years.
Mr Perry was appointed a director of the Company in September 2009. He
was Chief Executive Officer of VDM Group Limited, a publicly listed
Australian engineering, construction and contracting business until March
2011. Prior to this appointment
in February 2010, Mr Perry was the
Managing Director of Brandrill Limited from 2002 to 2009 when the
company merged with Ausdrill Limited. Mr Perry has over 25 years'
experience in senior management roles, including serving as President of
Rio Tinto Group's Taiwanese steel mill and as the Director General of the
Department of Minerals and Energy (WA) between 1994 and 1997.
Subsequently he worked for Resource Finance Corporation, a private
merchant and investment bank specialising in the natural resources sector.
Mr Perry is also a member of various private boards.
He held no other listed company directorships during the past 3 financial
years.
Mr Willis was appointed a director of the Company in September 2014. He
has extensive and highly relevant experience in industry spaces of
Coventry including leading the national marketing and operation functions in
ACI Insulation and Laminex Industries and as Group General Manager at
Ramset Building Products. In these roles he has had many years at a
senior level in ASX listed companies. Mr Willis has led businesses of the
same type as Coventry, involving sourcing products from multiple domestic
and overseas suppliers and distributing products across Australia, New
Zealand, Asia and the United Kingdom, with a distributed branch network
supplying the building, construction, resource and other industries. He also
has been instrumental
in acting as a consultant and mentor in turning
around a number of private companies in recent years.
He held no other listed company directorships during the past 3 financial
years.
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
1. Directors (continued)
Directors’ Interests
As at the date of this report particulars of the relevant interest of each director in the securities of the Company are as follows:
Number of
Ordinary Shares
229,501
50,000
-
30,000
5,400
PJB Caughey
NG Cathie
V Papachristos
KR Perry
NJ Willis
report.
Directors’ Meetings
PJB Caughey
RB Flynn
JH Nickson
BF Nazer
NG Cathie
V Papachristos
KR Perry
NJ Willis
Fasteners
Fluids
Hardware
-
-
-
-
During the 2014/15 financial year and as at the date of this report no director has declared any interest in a contract or proposed contract with the Company, the
nature of which would be required to be reported in accordance with subsection 300(11)(d) of the Corporations Act 2001, except as follows:
Mr PJB Caughey has a service contract with the Company which entitles him to benefits in the Company as disclosed in the Remuneration Report section of this
The following table sets out the number of meetings of the Company’s board of directors and each board committee, held during the year ended 30 June 2015,
and the number of meetings attended by each director.
Board of Directors
Audit & Risk Committee
Remuneration Committee
Held
Attended
Held
Attended
Held
Eligible to
attend
Eligible to
attend
Eligible to
attend
Attended
16
16
16
16
16
16
16
16
6
10
5
13
11
3
16
11
6
10
5
12
11
3
16
11
-
-
4
4
4
4
4
-
-
-
1
3
3
1
4
-
-
-
1
3
3
1
4
-
-
3
-
3
3
-
3
3
-
1
-
1
3
-
3
3
-
1
-
1
3
-
3
3
Note: Directors may pass resolutions in writing without a formal meeting being convened. Such resolutions are deemed by the Company’s Constitution to be
meetings. The above table does not include such meetings.
2. Principal activities
The principal activities of the Group during the financial year were:
distribution and marketing of industrial fasteners, stainless steel fasteners and hardware, construction fasteners, specialised fastener products
and systems, and associated industrial tools and consumables.
design, manufacture, distribution, installation and maintenance of lubrication and hydraulic fluid systems and hoses.
importation, distribution and marketing of hardware components and finished products to the cabinet making, joinery and shop fitting industries.
Gasket Manufacturing
manufacture and distribution of automotive and industrial gaskets.
30
31
30
31
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
1. Directors (continued)
Directors’ Interests
As at the date of this report particulars of the relevant interest of each director in the securities of the Company are as follows:
PJB Caughey
NG Cathie
V Papachristos
KR Perry
NJ Willis
Number of
Ordinary Shares
229,501
50,000
-
30,000
5,400
During the 2014/15 financial year and as at the date of this report no director has declared any interest in a contract or proposed contract with the Company, the
nature of which would be required to be reported in accordance with subsection 300(11)(d) of the Corporations Act 2001, except as follows:
Mr PJB Caughey has a service contract with the Company which entitles him to benefits in the Company as disclosed in the Remuneration Report section of this
report.
Directors’ Meetings
The following table sets out the number of meetings of the Company’s board of directors and each board committee, held during the year ended 30 June 2015,
and the number of meetings attended by each director.
Board of Directors
Audit & Risk Committee
Remuneration Committee
Held
Eligible to
attend
Attended
Held
Eligible to
attend
Attended
Held
Eligible to
attend
Attended
16
16
16
16
16
16
16
16
6
10
5
13
11
3
16
11
6
10
5
12
11
3
16
11
-
-
4
4
4
4
4
-
-
-
1
3
3
1
4
-
-
-
1
3
3
1
4
-
-
3
-
3
3
-
3
3
-
1
-
1
3
-
3
3
-
1
-
1
3
-
3
3
PJB Caughey
RB Flynn
JH Nickson
BF Nazer
NG Cathie
V Papachristos
KR Perry
NJ Willis
Note: Directors may pass resolutions in writing without a formal meeting being convened. Such resolutions are deemed by the Company’s Constitution to be
meetings. The above table does not include such meetings.
She held no other listed company directorships during the past 3 financial
years.
Fasteners
2. Principal activities
The principal activities of the Group during the financial year were:
-
-
-
-
distribution and marketing of industrial fasteners, stainless steel fasteners and hardware, construction fasteners, specialised fastener products
and systems, and associated industrial tools and consumables.
Fluids
design, manufacture, distribution, installation and maintenance of lubrication and hydraulic fluid systems and hoses.
Hardware
importation, distribution and marketing of hardware components and finished products to the cabinet making, joinery and shop fitting industries.
Gasket Manufacturing
manufacture and distribution of automotive and industrial gaskets.
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
1. Directors
Information on Directors
The directors of the Company at any time during or since the end of the financial year and up to the date of this report are:
Name, qualifications, independence status and special responsibilities
Experience and other directorships
Neil George Cathie, FCPA, GAICD, FCIS
Chairman
Chairman of remuneration committee; member audit and risk committee
Peter John Batman Caughey, B.Eng, MBA, MAICD
Managing Director
Chief Executive Officer
Vicky Papachristos, BE (Chem), MBA, GAICD
Independent non-executive director
Member of audit and risk committee
Kenneth Royce Perry, B.Sc (Hons), MBA, MAICD, FAusIMM
Independent non-executive director
Chairman of audit and risk committee; member of remuneration committee
Nicholas John Willis, B.Sc, FAIM
Independent non-executive director
Member of remuneration committee
Mr Cathie was appointed as a director of the Company in September 2014
and as Chairman in January 2015. He has extensive experience in very
relevant areas including having a 27 year career at Australia’s largest and
most successful plumbing and bathroom distributor, Reece Australia Ltd,
during which time he served as its Chief Financial Officer, Company
Secretary and General Manager, Finance and IT. In these roles, Mr Cathie
has worked closely with a strong Board and line management team in a
growing company as well as having a primary external facing role of the
ASX listed Reece Australia Ltd. Mr Cathie spent 7 years with a chartered
accountancy firm early in his career and has held other CFO roles. He is
currently a director of and advisor to a number of private companies.
He held no other listed company directorships during the past 3 financial
years.
Mr Caughey was appointed Managing Director and Chief Executive Officer
in January 2015. He was previously the Business Leader of Konnect since
September 2012 and Artia since April 2013. Prior to joining Coventry Group
Ltd Mr Caughey had a number of roles in building products over 20 years
working at CSR Limited and Brickworks Limited. Most recently before
joining Coventry Group Ltd he was General Manager - Austral Bricks,
Victoria and prior
to that Group General Manager
- Corporate
Development, both at Brickworks Limited.
He held no other listed company directorships during the past 3 financial
years.
Ms Papachristos was appointed as a director of the Company in April 2015.
She is an experienced non-executive director with a strong sales and
marketing background having spent over 25 years as an executive with
major corporations in Australia and the USA. Her work has spanned
petrochemicals, banking & payments, sport, IT & retailing holding senior
roles in Shell, Westpac, Myer, Visa, the Olympics and as well as an IT start-
up. Ms Papachristos has launched several major banking & retail programs
including Myer One, Rebel Sport and the Ansett Frequent Flyer Visa. In
2006 she formed Currant Marketing – an independent consultancy in the
fields of marketing,
loyalty, sales, customer and digital strategy. Ms
Papachristos holds a Chemical Engineering degree from Monash
University, an MBA from the AGSM and is a Member of the GAICD. She is
passionate about women in the corporate arena and making a change from
bottom-up as well as top-down.
Mr Perry was appointed a director of the Company in September 2009. He
was Chief Executive Officer of VDM Group Limited, a publicly listed
Australian engineering, construction and contracting business until March
2011. Prior to this appointment
in February 2010, Mr Perry was the
Managing Director of Brandrill Limited from 2002 to 2009 when the
company merged with Ausdrill Limited. Mr Perry has over 25 years'
experience in senior management roles, including serving as President of
Rio Tinto Group's Taiwanese steel mill and as the Director General of the
Department of Minerals and Energy (WA) between 1994 and 1997.
Subsequently he worked for Resource Finance Corporation, a private
merchant and investment bank specialising in the natural resources sector.
Mr Perry is also a member of various private boards.
He held no other listed company directorships during the past 3 financial
years.
Mr Willis was appointed a director of the Company in September 2014. He
has extensive and highly relevant experience in industry spaces of
Coventry including leading the national marketing and operation functions in
ACI Insulation and Laminex Industries and as Group General Manager at
Ramset Building Products. In these roles he has had many years at a
senior level in ASX listed companies. Mr Willis has led businesses of the
same type as Coventry, involving sourcing products from multiple domestic
and overseas suppliers and distributing products across Australia, New
Zealand, Asia and the United Kingdom, with a distributed branch network
supplying the building, construction, resource and other industries. He also
has been instrumental
in acting as a consultant and mentor in turning
around a number of private companies in recent years.
He held no other listed company directorships during the past 3 financial
years.
30
31
31
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
3. Consolidated results
Results of the Group for the year ended 30 June 2014 were as follows:
In thousands of AUD
Continuing operations
Revenue from sale of goods
(Loss)/profit before tax
Income tax benefit/(expense)
(Loss)/profit from continuing operations for the year
Discontinued operations
Revenue from sale of goods
Loss before tax
Income tax benefit
Loss from discontinued operations for the year
(Loss)/profit for the year
(Loss)/profit after tax for the year attributable to:
- equity holders of the Company
- minority interest
(Loss)/profit after tax for the year
4. Dividends
Dividends paid or declared by the Company to members since the end of the previous financial year were:
2015
2014
190,706
(27,247)
4,106
(23,141)
2,640
(2,107)
632
(1,475)
(24,616)
(25,008)
392
(24,616)
206,160
1,940
(730)
1,210
4,465
(245)
73
(172)
1,038
609
429
1,038
Paid during the year 2014
Special Dividend 2014
Final 2014 Ordinary Dividend
Special Dividend 2015
Interim 2015 Ordinary Dividend
Total Amount
Paid during the year 2014
Final 2015 Ordinary Dividend (i)
Cents per
share
11.0
11.0
17.5
4.25
Cents per
share
2.5
Total amount
Franked / Unfranked
Date of payment
$000
4,202
4,202
6,621
1,608
16,633
Fully Franked
Fully Franked
Fully Franked
Fully Franked
25 July 2014
19 September 2014
13 March 2015
13 March 2015
Total amount
Franked / Unfranked
Date of payment
MSS was discontinued and a total loss of $1.4 million was recorded.
$000
946
946
Fully Franked
27 October 2015
The Group net cash position $8.7 million ($48.0 million – 30 June 2014). This is in line with the estimated position expected when the strategic review was carried
out. Principally the business has funded the trading loss, the cost of the strategic review and returned the remaining cash back to shareholders, which is seen on
(i) The financial effect of these dividends have not been brought to account in the financial statements for the financial year ended 30 June 2015, as they were
declared after the year end, and will be recognised in subsequent financial reports.
5. Review of operations and results
People
Safety remains a focus for the Group. During the year Lost Time Injuries (LTI’s) increased from 9 to 12 prompting a significant review of our safety effort. As a
result of the review the emphasis in safety management has moved from a system focus to an emphasis on practical actions within the branch and distribution
networks such as hazard identification and rectification.
It is never easy to see so many staff leave the business through a redundancy program that reduced full time positions from 709 to 572. The remaining team
worked through these difficult circumstances with application and effort to deliver the changes required in the restructure.
Financial Performance
Revenue ($M) (from continuing operations)
(Loss)/Profit before income tax ($M)
(Loss)/Profit after tax ($M)
NTA per share ($)
Earnings per share – basic (cents)
Restructure progress
Full Year to
30.6.15
Full Year to
30.6.14
% Change
190.7
-27.2
-24.6
2.16
-65.8
206.2
1.9
1.0
3.47
1.6
-7.5
N/A
N/A
-37.8
N/A
As announced in February 2015, the Board approved a substantial restructuring program that involved closing the MSS business, stripping significant cost out of
each division and corporate, cleansing the stock of Konnect/Artia and preparing for a significant change in distribution to facilitate further cost reductions and
service improvements.
Whilst the program was very ambitious it was largely completed on time and on budget. The cost of the restructure program, which included the closure of three
distribution centres, the downsizing of the full time work force by more than 100 positions and the movement of more than $4 million of stock to a useful position
within the network was $7.8 million, with provisions of $7.5 million and write downs of $8.2 million. The total impact of the program was $23.5 million, compared to
the $24-25 million foreshadowed in the February announcement.
32
33
32
33
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
5. Review of operations and results (continued)
Review of businesses
Fasteners (Konnect)
The Konnect business continued to weaken throughout the period as the slump in mining and energy took hold. Whilst Konnect was profitable in a number of
states, significant exposure to Western Australia and Queensland drove those businesses into substantial losses. Sales continued to fall from June 2014 to
February 2015, but pleasingly daily sales rates have stabilised over the past few months.
Margins continued to be under pressure as competition from existing players intensified. As major LNG projects finish over the balance of this year further
softening cannot be ruled out. Positively impacting the Konnect result was significant cost cutting which commenced in October 2014 and intensified from February
2015 under the announced restructure program. As a result, the second half Konnect performance was in line with the first half.
Further cost reductions throughout 2015/16 are planned as the remaining Distribution Centres are restructured and new transport initiatives are implemented. The
introduction of a company-wide Continuous Improvement Programme is heavily concentrated on Konnect.
The Coopers team, having removed 15 full time positions through the restructure, continued to transform from a capital cycle exposure to a maintenance focus.
Throughout the period sales continued to strengthen with Coopers’ significant technical expertise being much sought after.
The Artia business continues to improve on the back of significant cost reductions, a re-shaped business model, a buoyant residential construction market and as
a result of efficiencies gained by sharing its cost structure with Fasteners. Artia made a profit in the year for the first time since 2008/09.
Deposits fell from $39.2 million to $nil due mostly to dividend payments, restructure costs and losses. Combined with declining deposit rates, there has been a
reduction in interest income from $2.0 million to $0.8 million.
The Group's 72.5% share in AA Gaskets P/L continued to perform well, though not quite at the same level as previous years due to increasing costs. AAG will
The Group leases substantial warehouse and office space in Redcliffe, Perth WA. A 20 year lease for this space was entered into some years ago and expires in
2027. Over time, with the Group's reduced occupancy of the Redcliffe site, approximately 80% of the available space is sub-let to a variety of sub-tenants. In the
current year this arrangements generated a small profit for the Group but there are occupancy risks looking ahead which have been identified and are being
Fluids (Cooper Fluid Systems)
Hardware (Artia)
Investments/Other
Interest bearing deposits
AAG
Property
focus on cost and inventory in 2015/16.
carefully managed.
Discontinued Operations
Balance Sheet
the cashflow statement in these accounts.
Group working capital (defined as current assets less cash and current liabilities) at 30 June 2015 was $61.7 million, this being $1.1 million higher than the balance
a year earlier. The main driver being an increase in inventory. This increase supports business initiatives and is seen as short term in nature.
Fixed assets have reduced in carrying value reflecting their value to the newly reconfigured Group. These changes are detailed in Note 26 in these accounts.
Despite the potential for softer markets in Konnect we expect a return to profitability for the Group during 2015 - 2016. Working capital initiatives and a modest
capital program for distribution centres and branch expansion should see the company maintain a comfortable cash position.
Basic loss per share for the year ended 30 June 2015 was 65.8 cents. This compares to a basic profit per share of 1.6 cents for the previous year.
The directors are not aware of any significant change in the Group’s state of affairs that occurred during the financial year not otherwise disclosed in this report or
Outlook
6. Earnings per share
7. Significant change in the company's affairs
the consolidated accounts.
8. Events subsequent to reporting date
The directors are not aware of any matter or circumstance having arisen since the end of the financial year and the date of this report that has significantly
affected, or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
9. Likely developments
The Group will continue with the announced restructure plan in order to pursue its operating strategy to create shareholder wealth.
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
3. Consolidated results
Results of the Group for the year ended 30 June 2014 were as follows:
In thousands of AUD
Continuing operations
Revenue from sale of goods
(Loss)/profit before tax
Income tax benefit/(expense)
Discontinued operations
Revenue from sale of goods
Loss before tax
Income tax benefit
(Loss)/profit from continuing operations for the year
Loss from discontinued operations for the year
(Loss)/profit for the year
(Loss)/profit after tax for the year attributable to:
- equity holders of the Company
- minority interest
(Loss)/profit after tax for the year
2015
2014
190,706
(27,247)
4,106
(23,141)
2,640
(2,107)
632
(1,475)
(24,616)
(25,008)
392
(24,616)
206,160
1,940
(730)
1,210
4,465
(245)
73
(172)
1,038
609
429
1,038
4. Dividends
Dividends paid or declared by the Company to members since the end of the previous financial year were:
share
11.0
11.0
17.5
4.25
share
2.5
$000
4,202
4,202
6,621
1,608
16,633
$000
946
946
Paid during the year 2014
Cents per
Total amount
Franked / Unfranked
Date of payment
Final 2015 Ordinary Dividend (i)
Fully Franked
27 October 2015
(i) The financial effect of these dividends have not been brought to account in the financial statements for the financial year ended 30 June 2015, as they were
declared after the year end, and will be recognised in subsequent financial reports.
Safety remains a focus for the Group. During the year Lost Time Injuries (LTI’s) increased from 9 to 12 prompting a significant review of our safety effort. As a
result of the review the emphasis in safety management has moved from a system focus to an emphasis on practical actions within the branch and distribution
networks such as hazard identification and rectification.
It is never easy to see so many staff leave the business through a redundancy program that reduced full time positions from 709 to 572. The remaining team
worked through these difficult circumstances with application and effort to deliver the changes required in the restructure.
Special Dividend 2014
Final 2014 Ordinary Dividend
Special Dividend 2015
Interim 2015 Ordinary Dividend
Total Amount
5. Review of operations and results
People
Financial Performance
Revenue ($M) (from continuing operations)
(Loss)/Profit before income tax ($M)
(Loss)/Profit after tax ($M)
NTA per share ($)
Earnings per share – basic (cents)
Restructure progress
service improvements.
Full Year to
Full Year to
% Change
30.6.15
190.7
-27.2
-24.6
2.16
-65.8
30.6.14
206.2
1.9
1.0
3.47
1.6
-7.5
N/A
N/A
-37.8
N/A
Whilst the program was very ambitious it was largely completed on time and on budget. The cost of the restructure program, which included the closure of three
distribution centres, the downsizing of the full time work force by more than 100 positions and the movement of more than $4 million of stock to a useful position
within the network was $7.8 million, with provisions of $7.5 million and write downs of $8.2 million. The total impact of the program was $23.5 million, compared to
the $24-25 million foreshadowed in the February announcement.
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
5. Review of operations and results (continued)
Review of businesses
Fasteners (Konnect)
The Konnect business continued to weaken throughout the period as the slump in mining and energy took hold. Whilst Konnect was profitable in a number of
states, significant exposure to Western Australia and Queensland drove those businesses into substantial losses. Sales continued to fall from June 2014 to
February 2015, but pleasingly daily sales rates have stabilised over the past few months.
Margins continued to be under pressure as competition from existing players intensified. As major LNG projects finish over the balance of this year further
softening cannot be ruled out. Positively impacting the Konnect result was significant cost cutting which commenced in October 2014 and intensified from February
2015 under the announced restructure program. As a result, the second half Konnect performance was in line with the first half.
Further cost reductions throughout 2015/16 are planned as the remaining Distribution Centres are restructured and new transport initiatives are implemented. The
introduction of a company-wide Continuous Improvement Programme is heavily concentrated on Konnect.
Fluids (Cooper Fluid Systems)
The Coopers team, having removed 15 full time positions through the restructure, continued to transform from a capital cycle exposure to a maintenance focus.
Throughout the period sales continued to strengthen with Coopers’ significant technical expertise being much sought after.
Hardware (Artia)
The Artia business continues to improve on the back of significant cost reductions, a re-shaped business model, a buoyant residential construction market and as
a result of efficiencies gained by sharing its cost structure with Fasteners. Artia made a profit in the year for the first time since 2008/09.
Investments/Other
Interest bearing deposits
Deposits fell from $39.2 million to $nil due mostly to dividend payments, restructure costs and losses. Combined with declining deposit rates, there has been a
reduction in interest income from $2.0 million to $0.8 million.
Paid during the year 2014
Cents per
Total amount
Franked / Unfranked
Date of payment
AAG
Fully Franked
Fully Franked
Fully Franked
Fully Franked
25 July 2014
19 September 2014
13 March 2015
13 March 2015
The Group's 72.5% share in AA Gaskets P/L continued to perform well, though not quite at the same level as previous years due to increasing costs. AAG will
focus on cost and inventory in 2015/16.
Property
The Group leases substantial warehouse and office space in Redcliffe, Perth WA. A 20 year lease for this space was entered into some years ago and expires in
2027. Over time, with the Group's reduced occupancy of the Redcliffe site, approximately 80% of the available space is sub-let to a variety of sub-tenants. In the
current year this arrangements generated a small profit for the Group but there are occupancy risks looking ahead which have been identified and are being
carefully managed.
Discontinued Operations
MSS was discontinued and a total loss of $1.4 million was recorded.
Balance Sheet
The Group net cash position $8.7 million ($48.0 million – 30 June 2014). This is in line with the estimated position expected when the strategic review was carried
out. Principally the business has funded the trading loss, the cost of the strategic review and returned the remaining cash back to shareholders, which is seen on
the cashflow statement in these accounts.
Group working capital (defined as current assets less cash and current liabilities) at 30 June 2015 was $61.7 million, this being $1.1 million higher than the balance
a year earlier. The main driver being an increase in inventory. This increase supports business initiatives and is seen as short term in nature.
Fixed assets have reduced in carrying value reflecting their value to the newly reconfigured Group. These changes are detailed in Note 26 in these accounts.
Outlook
Despite the potential for softer markets in Konnect we expect a return to profitability for the Group during 2015 - 2016. Working capital initiatives and a modest
capital program for distribution centres and branch expansion should see the company maintain a comfortable cash position.
6. Earnings per share
Basic loss per share for the year ended 30 June 2015 was 65.8 cents. This compares to a basic profit per share of 1.6 cents for the previous year.
7. Significant change in the company's affairs
The directors are not aware of any significant change in the Group’s state of affairs that occurred during the financial year not otherwise disclosed in this report or
the consolidated accounts.
8. Events subsequent to reporting date
The directors are not aware of any matter or circumstance having arisen since the end of the financial year and the date of this report that has significantly
affected, or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
As announced in February 2015, the Board approved a substantial restructuring program that involved closing the MSS business, stripping significant cost out of
each division and corporate, cleansing the stock of Konnect/Artia and preparing for a significant change in distribution to facilitate further cost reductions and
9. Likely developments
The Group will continue with the announced restructure plan in order to pursue its operating strategy to create shareholder wealth.
33
32
33
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2015
10. Remuneration report - audited
Remuneration is referred to as compensation throughout this remuneration report.
10.1 Key Management Personnel ( KMPs )
KMPs are the persons who have authority and responsibility for planning, directing and controlling the activities of the Company and the Group.
The following were KMPs of the Group at any time during the reporting period and unless otherwise indicated were KMPs for the entire period:
Non-executive directors
KR Perry
NG Cathie (appointed 19 September 2014)
NJ Willis (appointed 19 September 2014)
V Papachristos (appointed 27 April 2015)
BF Nazer (retired 31 March 2015)
JH Nickson (retired 19 September 2014)
Executives
Executive directors
PJB Caughey, CEO & Managing Director (appointed 1 January 2015)
RB Flynn, Executive Chairman (ceased 1 January 2015)
KS Smith, Chief Financial Officer (CFO) & Company Secretary (resigned as CFO 28 July 2015)
10.2 Principles used to determine the nature and amount of compensation
Non-executive directors
Non-executive directors receive cash fees for their board and committee work and do not receive performance based payments. Non-executive directors do not
receive termination benefits. The aggregate remuneration paid to non-executive directors is capped at the level approved by shareholders.
Directors’ fees
Non-executive directors’ fees are determined within an aggregate directors’ fees pool limit, which is periodically recommended for approval by shareholders. The
total pool currently stands at $550,000 per annum, which was last approved by shareholders in November 2004 with effect from 1 July 2004. The Board
determines the allocation of the maximum amount approved by shareholders amongst the respective directors, having regard to their duties and responsibilities.
Directors’ fees are not directly linked to Company performance nor are bonuses paid to non-executive directors. There is no provision for retirement allowances to
be paid to non-executive directors.
As at 30 June 2015 the non-executive directors fees were allocated as follows (includes statutory superannuation contributions):
Chairman (base fee)
Non-executive Directors (base fee)
Interstate Non-executive Director (base fee)
Chairman of Audit & Risk Committee (in addition to base fee)
Member of Audit & Risk Committee (in addition to base fee)
Chairman and Member of Remuneration Committee (in addition to base fee)
Executive pay
Remuneration policies
2015
2014
$
$
127,500
85,000
85,000
15,000
5,000
5,000
-
93,955
97,233
16,388
-
5,463
Remuneration of directors and senior executives is the responsibility of the Remuneration Committee. The Committee has resolved to set remuneration packages
which are appropriate in the context of the company’s size, complexity and performance but which will attract the calibre of executive required to drive necessary
change in order to enhance performance. The Committee seeks external advice in relation to these matters where necessary.
Remuneration for senior executives is currently largely cash based, comprising fixed remuneration (which includes superannuation and benefits) and short term
incentives. There was no share based remuneration during the year. The CEO and senior executives have employment contracts with notice periods executable
by either party. There are no arrangements in place to provide the CEO or any senior executive with a retirement benefit other than those which accrue by law.
Superannuation contributions are paid at the superannuation guarantee rate.
Short-term cash incentives of up to 35% of fixed annual compensation are payable to the senior executives upon the achievement of various annual performance
targets. The short term incentives paid for the year were based solely on the effective and timely implementation of key elements of the company-wide restructure
plan announced to the market in February 2015. The Committee determined a discretionary short term incentive was appropriate in circumstances which required
the focus and commitment to make many difficult decisions about the operations and staffing of the business and to swiftly implement a broad range of initiatives.
The Committee was satisfied the key restructure milestones had been met and therefore recommended the short term incentives paid.
An Executive Long Term Incentive Plan (“ELTIP”) was approved by shareholders at the 2003 annual general meeting. No options were issued under the plan in
the year.
In January 2014 the Group issued 200,000 fully paid ordinary shares under an interest free (conditional on employment) non recourse loan to Peter Caughy.
No vote on remuneration report – 2014 Annual General Meeting
At the 2014 Annual General Meeting the Company received over 25% of votes cast on a poll against the 2014 remuneration report. This constituted a second
consecutive annual vote against the remuneration report. Consequently a vote was taken whether to proceed with a 'spill' meeting and this motion failed. The
Directors have visited a sample of the shareholders of the Company to obtain their views and commentary on the vote against the remuneration report and are
addressing those concerns.
Consequences of performance on shareholder wealth
In considering the Group’s performance and affect on shareholder wealth, the Remuneration Committee have regard to the following measures in respect of the
current financial year and the previous four financial years.
In AUD
Profit/(loss) attributable to equity
holders of the Company
Dividends paid
Change in share price
2015
2014
2013
2012
2011
(25,008,000)
609,000
5,458,000
18,524,000
(17,341,000)
16,633,000
8,374,000
8,324,000
10,593,000
5,594,000
(1.30)
0.10
0.05
0.35
0.45
The main imperative for the Group has been to rapidly restructure in order to reduce cost and set up for future performance. This has been detailed in note 26 of
these accounts. The accomplishment of these changes has been the primary target with regard to setting KMP targets.
34
34
35
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Coventry Group Ltd
Directors’ report (continued)
For the year ended 30 June 2015
10. Remuneration report - audited (continued)
10.4 Service contracts
Compensation and other terms of employment for the CEO and Managing Director and other key management personnel are formalised in
employment contracts. Major provisions of the contracts relating to compensation are set out below:
PJB Caughey, CEO & Managing Director (appointed CEO & Managing Director 1 January 2015)
- The contract has no fixed term.
- Fixed annual compensation to be reviewed annually by the Remuneration Committee.
- Long service leave is payable by the Company in accordance with relevant state legislation.
- The contract provides for participation in short-term and long-term incentive plans.
-
Other than for an act that may have a serious detrimental effect on the Company, such as wilful disobedience, fraud or misconduct, termination
of employment requires 6 months notice by the Company.
KS Smith, Chief Financial Officer & Company Secretary (appointed Company Secretary 3 September 2014)
Mr Smith resigned as Chief Financial Officer as at 28 July 2015 and an interim CFO has been appointed in his place.
- While employed by the Group Mr Smith's fixed annual compensation was reviewed annually by the Remuneration Committee.
- Long service leave was payable by the Company in accordance with relevant state legislation.
- The contract provided for participation in the short-term incentive plan.
- Other than for serious misconduct, termination of employment required 8 weeks notice by the Company.
RB Flynn, Executive Chairman (ceased 1 January 2015)
In accordance with the employment contract, Mr Flynn was given 12 months notice of termination in September 2014. In addition to his fixed
annual compensation up to 31 December 2014, Mr Flynn was paid $450,658 in lieu of notice and resigned as executive chairman. Also all
statutory entitlements were paid.
10.5 Equity instruments
During the financial year no options were granted, exercised or lapsed and there are no options outstanding.
Non recourse share loan
In January 2014 the Group issued 200,000 fully paid ordinary shares under an interest free (conditional on employment) non recourse loan to
Peter Caughy.
The shares were issued at a price of $2.87 per share which was the volume weighted average price for the 20 trading days preceding the
decision to issue the shares. Until the loan is repaid the shares are escrowed with a trading lock. The loan is repayable 3 years after the shares
are issued or immediately upon ceasing to be an employee of the Company or at any time prior to that date. Interest will be charged in the event
of resignation of employment prior to the full 3 year period being completed.
The structure of the loan now has no 'down side' exposure, the non cash accounting benefit in the year is $39,742 (2014: $22,557).
Movements in shares
The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by each key
management person, including their related parties, is as follows:
Held at
1 July 2014
Held on
appointment
Purchases
Sales
Held at
Resignation/
Retirement
Held at
30 June 2015
Directors
BF Nazer (i)
JH Nickson (ii)
KR Perry
NG Cathie
NJ Willis
PJB Caughey
RB Flynn (iii)
V Papachristos
Executives
KS Smith
(i) Retired 31 March 2015
(ii) Retired 19 September 2014
(iii) Ceased 1 January 2015
104,420
132,653
-
-
-
229,501
600,496
-
21,322
-
-
-
-
-
-
-
-
-
36
-
-
30,000
50,000
5,400
-
-
-
-
-
-
-
-
-
-
22,878
-
21,322
104,420
132,653
-
-
-
-
577,618
-
-
-
-
30,000
50,000
5,400
229,501
-
-
-
36
37
Coventry Group Ltd
Directors’ report (continued)
For the year ended 30 June 2015
11. Environmental regulation
The Group mainly operates warehousing and distribution facilities throughout Australia and New Zealand which have general obligations under
environmental legislation of the respective statutory authorities in relation to pollution prevention.
The Company has reviewed its obligations under the National Greenhouse & Energy Reporting Act 2007 (the Act). As the Group is under the
minimum greenhouse and energy thresholds stipulated in the Act, there are no registration and reporting requirements that have to be complied
with as at the date of this report.
For the financial year ended 30 June 2015 and as at the date of this report, the Group has not been prosecuted nor incurred any infringement
penalty for environmental incidents.
12. Insurance of officers
During the financial year the Company has paid premiums in respect of contracts insuring the directors and officers of the Company against
certain liabilities incurred in those capacities. The contracts prohibit further disclosure of the nature of the liabilities and the amounts of the
premiums.
13. Corporate governance
The Statement of Corporate Governance Practices is set out in a separate section of the Company's 2015 annual report and discloses the
Company’s main corporate governance practices throughout the financial year.
14. Share options
Options granted to directors, key management personnel and senior executives
There were no options issued or granted pursuant to the Executive Long Term Incentive Plan outstanding as at the date of this report.
15. Non-audit services
During the year KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties. The Board has
considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the
Audit and Risk Committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did
not compromise, the auditor independence requirements of the Corporations Act 2001, for the following reasons:
all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the
Company’s Audit and Risk Committee 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 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 to the auditor of the Company, KPMG, and its related practices for audit and non-audit services provided during the
year are set out in Note 3 to the full financial report.
16. Lead auditor's independence declaration
The lead auditor’s independence declaration made in accordance with Section 307C of the Corporations Act 2001 is set out on page 39 and
forms part of this directors’ report.
17. Company secretary
Mr John Colli was appointed to the position of Company Secretary in November 1998 and resigned in May 2015.
Mr Keith Smith was appointed to the position of Company Secretary in September 2014. Mr Smith also held the role of Chief Financial Officer
during the period and resigned the position on 28 July 2015.
37
37
38
39
39
40
41
41
42
43
Shareholder Information
as at 4 September 2015
TWENTY LARGEST SHAREHOLDERS
Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY
LIMITED
RBC INVESTOR SERVICES AUSTRALIA PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
SANDHURST TRUSTEES LTD
BNP PARIBAS NOMS PTY LTD
DORSETT INVESTMENTS PTY LTD
CITICORP NOMINEES PTY LIMITED
ONE MANAGED INVT FUNDS LTD
SWANWALL HOLDINGS PTY LTD
CITICORP NOMINEES PTY LIMITED
FFSF ASSET MANAGEMENT PTY LTD
10.
11. MRS ANNE KYLE
12. DEVADIUS PTY LTD
13.
FORUM INVESTMENTS PTY LTD
14.
15. MR CLIFFORD MAXWELL KYLE
16.
17. MR GEOFFREY KYLE
18.
BUDUVA PTY LTD
19. MS JOAN MERLE SMITH
20. MRS JUDITH ANNE SMIRK
DISTRIBUTION OF SHAREHOLDING
Size of Holding
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Ordinary Shares
Number
3,523,861
% of Total
9.31
2,119,519
1,965,483
1,698,111
1,540,000
1,477,312
1,356,660
1,347,834
1,227,418
1,210,500
1,000,000
836,619
665,000
374,468
341,208
329,624
322,500
275,000
234,427
206,663
22,052,207
Number
of holders
1,842
1,053
328
301
38
3,562
5.60
5.19
4.49
4.07
3.90
3.59
3.56
3.24
3.20
2.64
2.21
1.76
0.99
0.90
0.87
0.85
0.73
0.62
0.55
58.28
%
51.71
29.56
9.20
8.45
1.08
100.00
Number
of shares
657,793
2,825,735
2,436,903
7,534,999
24,381,049
37,836,479
%
1.74
7.47
6.44
19.91
64.44
100.00
Unmarketable parcel of shares
388
10.89
187,758
0.05
SUBSTANTIAL SHAREHOLDERS
The Company's register of substantial shareholders showed the following particulars as at 4 September 2015.
Name of Substantial Shareholder
Wilson Asset Management Group
Investors Mutual Limited
Schroder Investment Management Australia Limited
Dorsett Investments Pty Ltd (1)
Sandon Capital Pty Ltd (1)
Extent of Interest
(No of shares)
1,968,443
5,754,221
3,296,438
2,973,776
2,973,776
Date of last
notification
09.03.2015
03.03.2015
23.12.2014
19.06.2014
19.06.2014
(1)
Dorsett Investments and Sandon Capital issued substantial shareholder notices on 19.06.14 indicating they were
associates. Their underlying holdings are 1,356,660 shares (3.6%) and 1,592,785 shares (4.1%) respectively.
UNQUOTED EQUITY SECURITIES
Nil
VOTING RIGHTS
Each member present at a general meeting of the Company in person or by proxy, attorney or official representative is entitled:
- on a show of hands - to one vote
- on a poll - to one vote for each share held
43
43
Corporate Directory
Coventry Group
ABN 37 008 670 102
Registered and Principal Administrative Office
25 Redcliffe Road
Redcliffe, Western Australia 6104
Postal Address
Po Box 231
Cloverdale, Western Australia 6985
Website
www.cgl.com.au
Secretary
Keith Smith
Bankers
Australian and New Zealand Banking Group Limited
Auditors
KPMG
Level 8
235 St Georges Terrace
Perth, Western Australia 6000
Share Registry
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne, Victoria 3001
or
Level 2
45 St Georges Terrace
Perth, Western Australia 6000
Telephone from within Australia: 1300 763 414
Telephone from outside Australia: +(61) 3 9415 4856
Facsimile: +(61) 3 9473 2500
Email: web.queries@computershare.com.au
Website: www.investorcentre.com
Securities Exchange Listing
The Company's shares are listed on the ASX Limited and trade under the code CYG. The home
exchange is Perth.
Shareholder Enquiries/Change of Address
Shareholders wising to enquire about their shareholdings, dividend payments, or change their address
should contact the Company's share registry.
44
44