ABN 37 008 670 102
ANNUAL REPORT
2016
Coventry Group Ltd and its controlled entities
Contents
Chairman's report
Chief Executive Officer's 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
Auditors' Independance Declaration
Auditors' Report
Shareholder Information
Corporate Directory
1
3
5
6
7
8
9
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17
17
17
17
18
18
19
19
19
20
21
22
22
23
23
24
24
25
27
27
27
28
28
29
31
39
40
41
43
44
Chairman’s Report
If one was to ascribe a headline to the Coventry business at present it would be “improving but not
there yet”.
After a solid first half, the third quarter was a disappointment with sales below expectations in a
couple of segments and a number of key initiatives not delivering efficiencies and savings quickly
enough. The last quarter pleasingly delivered a small positive EBITDA and was cash positive. Our
senior leadership team, led by our CEO, is working extremely hard on and in the business with at
times frustratingly mixed results. I refer to this later in this commentary.
The AA Gaskets business continues to be a strong contributor and the addition of a new major
customer during the year certainly helped the result. A full year contribution from that major
customer should positively impact Gasket’s FY17 result. Pleasingly, our reputation as a quality
supplier to the vehicle after-market remains solid. After the sad passing of the GM of AA Gaskets
earlier this year a new GM appointment was recently made and we are very pleased to have secured
the services of an experienced professional with extensive industry experience. A sale and leaseback
of the Gaskets premises in Melbourne was completed in the last quarter of FY16.
Mining services is a tough and competitive market at present so we are again pleased with the
performance of the Cooper Fluids business. We couldn’t have better leadership in that business and
our reputation as a quality supplier of product and services is a credit to the Coopers team.
The finance team is now largely Melbourne based and we are clearly seeing the advantages of the
CEO and his finance team operating from the same location. Reduction in a somewhat bloated cost
structure has been achieved during the period and reducing the cost of doing business further
remains front of mind for the Board and management. Centralising support office functions is an
important part of that with the previous structure being spread across three states which was
inherently costly.
Eleven new Trade Distribution stores were opened during the period bringing the total opened
since 1 January 2015 to eighteen. This comes at a cost which some may question but the Board is
committed and determined to continue prudently expanding the store footprint as but one part of
its turnaround strategy. The present cost base of the trade distribution network is largely fixed in
nature and it needs scale to prosper. Growing the store network requires a pipeline of enthusiastic,
trained and committed managers. To that end our branch manager school commenced in July 2016
which brings to an end a period of underinvestment in staff development and is expected to yield
the Company’s management of the future.
Based on an extensive review carried out by management and external supply chain consultants in
2015 it was determined the Trade Distribution business had too many distribution centres all
employing the same poor practices. Feedback revealed our value proposition as an internal and
external supplier was not meeting acceptable levels. The decision was taken to close a number of
the distribution centres and implement proper systems, controls and measures into the remaining
four via a fully integrated Warehouse Management System (WMS).
An ambitious WMS implementation programme commenced in December 2015 and concluded in
July 2016. The delivery of efficiency gains has taken longer than expected. Such issues take time to
work through particularly in multiple geographic locations and within the framework of current
workplace law but efficiency gains and savings are expected to positively impact FY17 performance.
1 Whilst acknowledging improvement, all stakeholders will be disappointed at the speed of recovery
of the Trade Distribution business. There is no denying the effort the management team are
putting into the turnaround of this business and their commitment and dedication to the task is
commendable. The Board’s view is that in some areas their programme was overly ambitious given
the legacy issues to be overcome, and the impact of the dramatic decline in the engineering and
mining sectors in which the business principally operates cannot be overstated. Realistically,
a turnaround of this nature is a multi-year process and we fully expected some hurdles along the
way. We are only one year in and a large number of necessary changes have been made, others a
work in progress and many more on the drawing board. Stakeholders can rightly ask “how long will
it take?” As overseas comparative companies demonstrate, once the business has its cost structure,
systems and processes in order it needs scale to improve profitability. Sales growth initiatives are
now the single biggest focus for management and the CEO talks to this in his report.
In 2007 the Company entered into a single term twenty year lease for a large warehouse in
Perth which was no longer required following its exit from its motor parts business in 2012.
The warehouse is currently sub-let and this arrangement expires in October 2017. This is a
concern to the Board and every effort is being made to secure a new sub-tenant.
The Company remains a challenging and demanding place to work and on behalf of the Board
I would like to acknowledge the efforts of all those who are contributing diligently to the turnaround
of the Company’s performance.
The Board has determined that no final dividend will be paid. 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
2
CEO’s Report
As the Chairman has remarked the year delivered significant improvement in a number of key areas
but much remains to be done to deliver sustainable returns to our shareholders.
In 2012 we set out to improve the safety performance of the business and had some early success as
Lost Time Injuries (LTIs) reduce from 14 in F13 to six in F14. 12 months ago we reviewed our safety
efforts following an increase in Lost Time Injuries (LTIs) from six in F14 to 10 in F15. I am pleased
to report that these efforts have had a material impact on our safety performance with LTIs falling
from 10 to two. We believe that every injury is preventable and therefore our goal in F17 is to record
zero LTIs.
In February 2015 we announced a substantial restructure of the business that was to last until
December 2016. As at 30 June 2016 the restructure is mostly complete with a small number of vital
projects still to be completed. During the year the last duplicate Distribution Centre in the Trade
Distribution business was closed in Welshpool, Perth, leaving the Trade Distribution business with
four Distribution Centres, down from 13 in 2012. Following the closures, the roll out of Oracle’s
Warehouse Management System (WMS) commenced with the WMS being implemented in four
Distribution Centres and two of the largest branches on time and on budget. The WMS brings
sophisticated tools that allow the efficient picking and packing of products and in so doing is
designed to reduce cost and improve service. I am pleased to advise that since July 2016 the
Distribution Centres have met their targets and are now delivering significant cost reductions.
The WMS is also driving better outcomes for customers with our key measure, Delivery In Full & On
Time (DIFOT) improving every month since April 2016. Along the way our staff and customers have
endured significant disruption and this has had a detrimental impact on sales. With the disruption
now in the past, the sales team will be working hard to return lost customers.
As part of our commitment to centralise core functions and to improve communication, the finance
team was relocated from Perth to Thomastown, Victoria. Whilst it was an expensive and somewhat
disruptive exercise communication and oversight have improved significantly as a result. Throughout
the restructure period corporate costs have been attacked with a reduction of $1.2 million p.a.
achieved for the year.
The Chairman has noted that the Coopers team is well led and this is evident in the improved
profitability despite a reduction in revenue. The Coopers team reacted quickly to the end of the
mining boom and repositioned itself for more services and maintenance focused work whilst
simultaneously reducing costs.
AA Gaskets also had a strong year gaining a significant customer in the Australasian market thanks in
no small part to our GM, Mr. Kerry Lee, who sadly passed away during the year. Next year that
customer is expected to trade for a full year and strengthen the result. The sale and leaseback of the
factory building was well timed to maximise value for our shareholders. In addition, inventory
reductions allowed for dividends from AA Gaskets to Coventry Group to exceed earnings. Recently
we have appointed a new General Manager who is an experienced operator in the Automotive
after-market industry and who will bring a fresh approach to inventory, costs and sales opportunities.
Inventory was also reduced in Coventry Group through a number of successful strategies. In order
to accelerate the reduction of inventory a demand planning and forecasting team has recently been
established. Combined with other initiatives a better inventory reduction result is expected in F17.
3
Proportionally to previous years capital expenditure in F16 was relatively high following a sustained
period of underinvestment. The peak of the program has now passed and capital expenditure
should return to more normal levels. The biggest single investment was in the WMS, expanding
Cooper’s large hydraulic cylinder servicing capabilities and opening new stores in the Trade
Distribution business.
The Trade Distribution business opened 11 new stores throughout the year with the majority in the
second half. Some have been instantly successful whilst others will take more time. Increasing store
density and therefore sales has the dual effect of defraying overheads and improving the
marketability of the business. The network is expected to keep growing at a similar rate for the
foreseeable future with availability of quality staff and affordable well positioned real estate being
the limiting factor.
In addition to new stores, a number of initiatives are underway to boost activity in the Trade Based
Distribution business. New products continue to be introduced and a new category management
team has been established. Category managers will inject a new level of expertise to areas such as
product selection, product launches, product pricing and inventory. We continue to transition from
traditional Sales Representatives in the field to ensuring that our Branch Managers are constantly in
the field talking to our customers, understanding and fulfilling their needs.
New channels to market will also drive sales. Our successful telesales team will continue to expand
in order to service our micro customers in an effective and efficient manner.
In summary F17 will be another busy year as we complete the restructure and expand our offer and
our store footprint. The environment is likely to remain challenging, especially for Coopers and Trade
Distribution. Given the circumstance we are fortunate to have dedicated and hard-working staff who
continue to work tirelessly to improve every facet of the business.
Peter J.B. Caughey
Chief Executive Officer
4
Coventry Group Ltd and its controlled entities
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2016
In thousands of AUD
Continuing operations
Revenue from sale of goods
Cost of sales
Gross profit
Other income
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, including net foreign exchange gain
Financial expense, including net foreign exchange loss
Net financial income
Loss before income tax
Income tax benefit
Loss from continuing operations
Discontinued operation
Loss from discontinued operation, net of income tax
Loss 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 income/(loss) for the year, net of income tax
Total comprehensive loss for the year
(Loss)/profit attributable to:
Owners of the Company
Non-controlling interests
Loss for the year
Total comprehensive (loss)/profit attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive (loss)/income for the year
Loss per share:
Basic loss per share:
Diluted loss per share:
Loss per share - continuing operations:
Basic loss per share:
Diluted loss per share:
Note
2016
2015
4
26
5
6
22
176,784
(105,606)
71,178
6,282
(44,554)
(3,327)
(9,943)
(2,315)
(6,671)
(1,611)
(1,851)
(10,330)
(3,142)
85
(17)
68
(3,074)
1,253
(1,821)
-
(1,821)
1,048
(93)
955
(866)
(2,867)
1,046
(1,821)
(1,942)
1,076
(866)
190,706
(118,276)
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)
7
7
(7.6 cents)
(65.8 cents)
(7.6 cents)
(65.8 cents)
(7.6 cents)
(61.9 cents)
(7.6 cents)
(61.9 cents)
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.
5
Coventry Group Ltd and its controlled entities
Consolidated statement of financial position
As at 30 June 2016
In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Total current assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Other receivables
Total non current assets
Total assets
Liabilities
Trade and other payables
Employee benefits
Income tax payable
Provisions
Total current liabilities
Employee benefits
Other payables
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
2016
2015
8
9
10
6
12
13
9
14
16
18
16
14
3,520
30,821
57,393
-
91,734
16,092
16,040
5,123
-
37,255
128,989
21,838
4,583
803
256
27,480
260
2,985
3,245
30,725
98,264
108,110
(166)
(11,711)
96,233
2,031
98,264
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
The consolidated statement of financial position is to be read in conjunction with the accompanying notes to the consolidated
financial statements.
6
Coventry Group Ltd and its controlled entities
Consolidated statement of changes in equity
For the year ended 30 June 2016
In thousands of AUD
Balance at 1 July 2015
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
Share based payment transactions
Dividends to equity holders/ re-invested
Balance at 30 June 2016
Amounts are stated net of tax
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
62
13
(1,208)
(1,133)
108,110
(7,898)
99,079
2,618
101,697
-
-
-
-
-
42
-
104
-
-
(93)
(93)
(93)
-
-
-
1,018
-
1,018
1,018
-
-
-
-
1,018
(93)
925
925
42
-
-
-
-
-
-
-
-
(2,867)
(2,867)
1,046
(1,821)
-
-
-
1,018
(93)
925
30
-
30
(2,867)
(1,942)
1,076
1,048
(93)
955
(866)
(80)
(190)
(166)
108,110
(11,711)
96,233
-
(946)
42
(946)
-
(1,663)
2,031
42
(2,609)
98,264
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
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
-
-
-
-
-
-
(833)
-
-
(25,008)
(25,008)
392
(24,616)
-
-
-
(672)
13
(659)
21
-
21
(651)
13
(638)
(25,008)
(25,667)
413
(25,254)
-
-
(16,633)
(7,898)
(833)
40
(16,633)
99,079
-
-
(468)
2,618
(833)
40
(17,101)
101,697
13
(1,208)
(1,133)
108,110
7
Coventry Group Ltd and its controlled entities
Consolidated statement of cash flows
For the year ended 30 June 2016
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash used in operations
Interest paid
Income taxes paid
Note
2016
2015
202,187
(203,499)
(1,312)
(17)
(547)
221,163
(238,346)
(17,183)
(4)
(550)
Net cash used in operating activities
24
(1,876)
(17,737)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Interest received
Proceeds from term deposits
Dividends received
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash (used in)/from investing activities
Cash flows from financing activities
Repayment of borrowings on finance leases
Payments for share buy-back
Dividends paid
Dividends paid to non-controlling interests
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations
Cash and cash equivalents at 30 June
4,026
15
-
-
(4,203)
(1,554)
(1,716)
-
-
(946)
(1,663)
(2,609)
(6,201)
8,709
1,012
3,520
298
776
39,200
1
(3,791)
(213)
36,271
(20)
(833)
(16,633)
(468)
(17,954)
580
8,786
(657)
8,709
12
13
8
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes to the consolidated financial
statements.
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 235 Settlement Road Thomastown VIC 3074 Australia. The consolidated financial statements
("financial report" or "consolidated financial report") of the Company for the financial year ended 30 June 2016
comprises the Company and its controlled entities (together referred to as the “Group”).
The financial report was authorised for issue by the Directors on 25 August 2016.
(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 Corporations (Rounding in Financial/Directors' Reports) Instrument
2016/191 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 estimate 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
The Group has consistently applied the accounting policies as set out in Note 1(d) - (w) to all periods presented in this
consolidated financial report.
(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.
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 ability 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.
9 Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(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 is based on weighted average cost and includes expenditure incurred in acquiring the
inventories and bringing them to their existing location and condition.
In the case of manufactured inventories and
work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
An impairment allowance is made for obsolete, damaged and slow moving inventories.
Impairment allowances are
estimated by analysing the ageing 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.
(h)
Trade and other receivables
Trade and other receivables are stated at amortised cost less impairment losses.
10 Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1. Significant accounting policies (continued)
(i)
Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
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
- Plant and Equipment
- Buildings
Depreciation methods, useful
appropriate.
Depreciation Rate
5% - 40%
2%
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.
11 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
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
recognized 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
appropriate.
lives and residual values are reviewed at each reporting date and adjusted if
(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.
An Executive Incentive Plan was approved by shareholders in 2015. The Plan governs the future granting of
performance rights and issue of shares and is designed to align the interests of the Company's executives with the
shareholders in the medium to long term. Performance targets for 2016 were not met therefore no incentives triggered
under the plan.
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.
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.
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.
13
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 Groups' 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 on the profit or loss for the year comprises current and deferred tax.
Income tax is recognised in the
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 provided using the balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets
or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to
the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based
on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
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.
14 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 amounts 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; and
- 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) 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 2016, and have not been applied in preparing these consolidated financial statements.
These include:
- IFRS 9/AASB 9 'Financial Instruments';
- IFRS 15/AASB 15 'Revenue from contracts with customers'; and
- IFRS 16/AASB 16 'Leases'.
These have been assessed and, where relevant, do not have a material impact on the Groups consolidated financial
statements.
15 Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
2. Operating segments
The Group has 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:
·
Trade Distribution: Includes the importation, distribution and marketing of industrial fasteners and associated products and cabinet making hardware.
·
·
Fluids : Includes the design, manufacture, distribution, installation and maintenance of lubrication and hydraulic fluid systems and hoses.
Gaskets: Includes manufacturing and distribution of automotive and industrial gaskets.
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
Trade Distribution
Fluids
Gaskets
Total reportable
segment
Other business units
and consolidation
adjustments
Total
In thousands of AUD
2016
2016
2016
2016
108,484
53,181
15,119
176,784
External sales
Other income
Other revenue
Gain on sale of property, plant and equipment
Total other income
External revenue
Inter segment revenue
Total revenue
Reportable segment profit/(loss) before
finance costs, income tax and material items
Net financial income/(loss)
Other material items:
Restructuring and other related costs
26
Reportable segment profit/(loss) before
income tax
Reportable segment assets
Reportable segment liabilities
Capital employed
Capital expenditure
Depreciation and amortisation
1,165
-
1,165
109,649
15
109,664
(967)
19
(1,484)
(2,432)
68,761
15,622
53,139
3,885
1,306
205
-
205
53,386
2
53,388
211
2,012
2,223
1,581
2,012
3,593
17,342
180,377
-
17
17,342
180,394
2016
-
2,689
-
2,689
2,689
(17)
2,672
2016
176,784
4,270
2,012
6,282
183,066
-
183,066
2,823
4,926
6,782
(8,073)
(1,291)
-
(94)
2,729
26,953
5,968
20,985
1,024
981
22
-
4,948
10,651
2,841
7,810
117
211
41
27
68
(1,578)
5,245
106,365
24,431
81,934
5,026
2,498
(273)
(8,319)
22,624
6,294
16,330
731
829
(1,851)
(3,074)
128,989
30,725
98,264
5,757
3,327
Information about reportable segments
Note
Trade Distribution
Fluids
Gaskets
MSS
(discontinued)
Total reportable
segment
Other business units
and consolidation
adjustments
Total
In thousands of AUD
External sales
Other revenue
External revenue
Inter segment revenue
Total revenue
2015
2015
2015
2015
2015
116,918
2,415
119,333
4
60,419
258
60,677
-
13,369
221
13,590
-
119,337
60,677
13,590
2,640
2
2,642
-
2,642
193,346
2,896
196,242
4
196,246
Reportable segment profit/(loss) before
finance costs, income tax and material items
Net financial income/(loss)
Other material items:
(7,458)
-
(178)
Restructuring and other related costs
26
(10,422)
(901)
-
15
-
(1)
-
2,118
2,061
(2,106)
(5,385)
(164)
(11,323)
-
(16,872)
Reportable segment profit/(loss) before
income tax
Reportable segment assets
Reportable segment liabilities
(18,058)
1,217
2,076
(2,107)
68,554
19,595
28,856
6,099
11,094
781
2015
(2,640)
2,461
(179)
(4)
(183)
(968)
627
2015
190,706
5,357
196,063
-
196,063
(6,353)
463
(10,034)
(21,357)
(10,375)
(27,247)
Capital employed
48,959
22,757
10,313
Capital expenditure
Depreciation and amortisation
2,481
1,498
809
936
143
190
(i)
The 2015 comparatives have been restated to combine Fastners and Hardware as Trade Distribution.
Geographic information
Revenue based on the geographic location of customers was Australia $155,888,000 (2015: $171,672,000) and New Zealand $27,178,000 (2015: $24,391,000).
Non current assets, excluding deferred tax assets, based on the geographic location of the assets were Australia $20,074,000 (2015: $19,913,000) and New Zealand $1,089,000 (2015: $952,000).
-
-
-
14
157
108,504
25,601
134,105
26,475
5,933
32,408
82,029
19,668
101,697
3,447
2,781
557
1,463
4,004
4,244
16
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/(over) 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
Tax (benefit)/expense on continuing operations
Income tax benefit from continuing operations
Income tax benefit from discontinued operations
Total income tax benefit
Consolidated
2016
2015
207,000
12,550
219,550
230,200
12,000
242,200
7,750
7,750
11,196
11,196
Consolidated
2016
33,614
3,882
3,323
2,010
1,683
42
2015
36,379
4,224
3,531
2,194
1,907
40
44,554
48,275
Consolidated
2016
15
70
-
85
17
-
17
68
Consolidated
2016
(498)
(498)
(738)
-
-
(17)
(755)
2015
775
-
1
776
3
310
313
463
2015
518
518
(8,616)
11
3,990
(9)
(4,624)
(1,253)
(4,106)
(1,253)
-
(1,253)
(4,106)
(632)
(4,738)
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 for the period
Total income tax benefit
Loss excluding income tax
Income tax using the Company’s domestic tax rate of 30%
Tax profit on sale of land and buildings
Revenue tax losses derecognised
Non-deductible expenditure
Over provision in prior periods
Effect of lower tax rate applicable to foreign controlled entity
Withholding tax - non-rebatable
Non-assessable, non-exempt foreign income
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
Consolidated
2016
(1,821)
(1,253)
(3,074)
(922)
(305)
-
(9)
-
(17)
-
-
2015
(23,141)
(4,106)
(27,247)
(8,174)
-
3,990
42
11
(9)
36
(2)
(1,253)
(4,106)
Assets
Liabilities
Net
2016
66
1,234
1,050
29
-
1,441
155
77
12,178
16,230
(138)
16,092
2015
125
1,372
791
29
-
1,576
185
459
8,911
13,448
(6)
13,442
2016
(11)
(100)
-
-
-
(27)
-
-
-
(138)
138
-
2015
-
-
-
-
(6)
-
-
-
-
(6)
6
-
2016
55
1,134
1,050
29
-
1,414
155
77
12,178
16,092
-
2015
125
1,372
791
29
(6)
1,576
185
459
8,911
13,442
-
16,092
13,442
Tax losses in Coventry Group's Australian operation consist of post-consolidation carried forward tax losses of $38,538,000 (2015: $27,320,000), represented by the deferred tax
asset of $11,561,000 (2015: $$8,196,000), 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 $2,203,000 (2015: $2,383,000), represented by the deferred tax asset of $617,000 (2015: $715,000), 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 $755,000 (2015: $5,220,000) and in equity $Nil (2015: -$6,000).
7. Earnings per share
Earnings used in basic and diluted earnings per share calculation
Weighted average of shares in year used in basic and diluted earnings per share
Earnings per share
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
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 20.
Consolidated
2016
2015
(2,867,189)
(25,007,766)
37,836,479
37,996,635
(7.6 cents)
(65.8 cents)
Consolidated
2016
25
3,162
333
3,520
2015
26
8,683
-
8,709
18
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
9. Trade and other receivables
In thousands of AUD
Trade receivables
Other receivables
Prepayments
Total trade and other receivables
Current
Non current
Total trade and other receivables
Consolidated
2016
28,180
28,180
1,889
752
2,641
2015
28,384
28,384
2,176
1,190
3,366
30,821
31,750
30,821
-
30,821
31,659
91
31,750
The Group’s exposure to credit risks and impairment losses related to trade and other receivables 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 $378,000 (2015: $530,000).
10. Inventories
In thousands of AUD
Finished goods
Consolidated
2016
57,393
57,393
2015
59,322
59,322
$324,000 (2015: $472,000) of inventory write-downs were recognised during the year.
11. Parent entity disclosures
As at, and throughout, the financial year ending 30 June 2016 the parent company of the Group was Coventry Group Ltd.
Results of the parent entity
In thousands of AUD
Loss for the period
Other comprehensive income
Total comprehensive loss for the period
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Issued capital
Reserves
Retained earnings
Total equity
Company
2016
(1,774)
(93)
(1,867)
2015
(25,112)
13
(25,099)
Company
2016
67,656
131,007
20,256
23,422
2015
79,084
138,855
25,210
28,229
108,110
108,110
23
(548)
75
2,441
107,585
110,626
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 2015
Accumulated Depreciation at 1 July 2015
Carrying amounts at 1 July 2015
Additions
Depreciation charge for the year
Disposals
Write offs
Effect of movements in foreign exchange
Carrying amounts at 30 June 2016
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
Note
Land and
buildings
Consolidated
Plant and
equipment
Total
26
2,299
480
1,819
83
(22)
(1,880)
-
-
-
2,299
450
1,849
-
(30)
-
-
-
1,819
39,766
24,774
14,992
4,120
(2,911)
(142)
(35)
16
42,065
25,254
16,811
4,203
(2,933)
(2,022)
(35)
16
16,040
16,040
39,766
22,405
17,361
3,791
(3,323)
(499)
(2,318)
(20)
14,992
42,065
22,855
19,210
3,791
(3,353)
(499)
(2,318)
(20)
16,811
20
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
13. Intangible assets
In thousands of AUD
Carrying amounts at 1 July 2015
Additions
Amortisation for the year
Disposals
Write offs
Effect of movements in foreign exchange
Carrying amounts at 30 June 2016
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
Note
Goodwill
Consolidated
Computer
software
Total
26
26
3,327
-
-
-
-
-
636
1,554
(394)
-
-
-
3,963
1,554
(394)
-
-
-
3,327
1,796
5,123
3,411
-
-
(84)
-
-
3,327
6,197
213
(949)
(132)
(4,691)
(2)
636
9,608
213
(949)
(216)
(4,691)
(2)
3,963
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
Consolidated
2016
3,327
2015
3,327
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.
Trade Distribution
For the year ended 30 June 2016, the Group's value in use model showed the recoverable amount exceeded the carrying amount of the
Trade Distribution CGU by $7.5 million. The value assigned to the key assumptions was:
- WACC 10.7%
- Cash flow/Sales ratio* increasing from negative 5.5% to positive 3.8% in year 5 as the CGU invests in the growth of its distribution
channels.
The model is sensitive to reasonable possible changes in the key assumptions keeping all other assumptions constant, the headroom would
be eliminated if the WACC increased to 12.7% or the cash flows/Sales ratio target was not achieved for each year until year 5.
Cooper Fluids Systems
For the year ended 30 June 2016, the Group's value in use model showed the recoverable amount exceeded the carrying amount of the
Cooper Fluids Systems CGU by $3.7 million. The value assigned to the key assumptions was:
- WACC 11.3%
- Cash flow/Sales ratio* increasing from negative 1.4% to positive 3.7% in year 5 as the CGU continues to expand its service offering.
The model is sensitive to reasonable possible changes in the key assumptions keeping all other assumptions constant, the headroom would
be eliminated if the WACC increased to 12.7% or the cash flows/Sales ratio target was not achieved for each year until year 5.
* Cash flow/Sales ratio is the ratio of the free cash flows (being the direct operating cash flows including working capital movements and
capex) to the sales revenue of the CGU.
21
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
14. Trade and other payables
In thousands of AUD
Trade payables
Non trade payables and accrued expenses
Current
Non current
Note
Consolidated
2016
17,501
7,322
24,823
21,838
2,985
24,823
2015
15,629
9,885
25,514
22,835
2,679
25,514
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
Overdraft Facility
Interchangeable multi currency revolving facility
Guarantee facility
Corporate credit card facility
Facilities utilised at balance sheet date
Corporate credit card facility
Facilities not utilised at balance sheet date
Overdraft Facility
Interchangeable multi currency revolving facility
Guarantee facility
Corporate credit card facility
Consolidated
2016
2015
3,000
-
200
750
3,950
272
272
3,000
-
200
478
3,678
-
4,000
200
750
4,950
204
204
-
4,000
200
546
4,746
Overdraft
The interchangeable multi currency revolving facility was replaced by the overdraft facility which is available for
working capital management only.
The balance of the AUD$3.0 million facility, is available for draw-down in AUD only. Interest is charged at
prevailing market rates.
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 2016 was $0.2 million (2015: $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.
22
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
Executive incentive plan
Consolidated
2016
2,177
2,406
4,583
Consolidated
2016
260
260
2015
2,452
2,501
4,953
2015
339
339
An Executive Incentive Plan was approved by shareholders in 2015. The Plan governs the future granting of
performance rights and issue of shares and is designed to align the interests of the Companies executives with
the shareholders in the medium to long term. Performance targets for 2016 were not met therefore no
incentives triggered under the Plan.
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. These shares are issued and held in escrow with a trading lock
until the loan is paid in January 2017. The structure of the loan has no 'down side' exposure, the non cash
accounting benefit in the year is $42,000 (2015: $40,000).
18. Provisions
Current
In thousands of AUD
Balance at 30 June 2015
Provisions increased
Provisions used
Balance at 30 June 2016
Restructuring/
Warranty
onerous
contracts
Make Good
Total
281
(50)
(157)
74
987
(124)
(681)
182
260
-
(260)
-
1,528
(174)
(1,098)
256
23
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)
On issue at 30 June
The Company
Ordinary
shares
2016
37,836
-
37,836
2015
38,197
(361)
37,836
(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 16
December 2015.
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 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 profit or loss.
Dividends
The following dividends were declared and paid by the Group:
Declared and paid during the financial year 2016
Cents per share
Total amount
Franked /
Unfranked
Date of payment
Final 2015 Ordinary Dividend
2.5
$000
946
Fully Franked
27 October 2015
No final dividend for the year ended 30 June 2016 has been declared by the Directors.
During the financial year ended 30 June 2015 dividends of $16,633,000 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
2016
2015
4,246
2,771
24
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 deposits 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 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 ageing of the Group’s trade receivables at the reporting date showed 91% of debtors were within terms (2015: 87%). The amount of trade debtors that is
past due but not impaired is $4,068,000 (2015: $3,468,000). The movement in the allowance for impairment in respect of trade receivables during the year
was $-159,000 (2015:$64,000).
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
Trade and other receivables
(i)
Note
8
Consolidated
Carrying amount
2016
3,520
30,069
33,589
2015
8,708
30,450
39,158
(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 $24,100,000 (2015: $25,201,000)
and New Zealand $4,080,000 (2015: $3,183,000).
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 $3 million overdraft 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
2016
21,838
(21,838)
(21,838)
-
-
-
The outflows associated with forward contracts used for hedging are US$4.7 million (A$6.5 million), 2015: US$2.7 million, (A$3.5 million ) 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
2015
22,835
(22,835)
(22,835)
-
-
-
(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
Variable rate financial assets
(i)
Consolidated
Carrying amount
2016
2015
3,162
8,683
(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. The following
summaries the major methods and assumptions used in estimating the fair values of financial instruments.
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. The Group’s exposure to currency risk is not significant.
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.
26
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
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
2016
7,292
17,484
14,974
39,750
2015
8,506
19,072
20,408
47,986
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. Lease payments
are reviewed periodically to reflect market rentals. None of the leases include contingent rentals.
During the financial year ended 30 June 2016, the Group recognised $8,381,000 (2015: $8,901,000) 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
More than five years
Consolidated
2016
2,229
9,072
3,895
15,196
2015
2,466
2,225
-
4,691
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 $2,576,000 (2015: $2,301,000) as income in the statement of
profit or loss and other comprehensive income.
22. Discontinued operations
Managed System Services (MSS) - exited January 2015.
Profit/(loss) attributable to the discontinued operations were as follows:
In thousands of AUD
2016
2015
Results of discontinued operations
Revenue
Expenses
Results from operating activities
Income tax benefit
Loss for the year
Basic loss per share
Diluted loss per share
23. Controlled entities
AA Gaskets Pty Ltd
Fluidrive Pty Ltd (i)
Coventry Group (NZ) Limited
NZ Gaskets Limited (ii)
-
-
-
-
-
-
-
2,642
(4,749)
(2,107)
632
(1,475)
(4.0) cents
(4.0) cents
Ownership interest
2016
%
72.5
-
100
72.5
2015
%
72.5
100
100
72.5
Country of
Incorporation
Australia
Australia
New Zealand
New Zealand
The ultimate parent entity is Coventry Group Ltd.
(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
27
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
24. Reconciliation of cash flows from operating activities
In thousands of AUD
Cash flows from operating activities
Loss for the period
Adjustments for :
Depreciation and amortisation
Interest income from other entities
Interest expense
Dividends received
Net (gain)/loss on disposal of property, plant and equipment
Income tax benefit
Operating loss 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
Net cash used in operating activities
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
Note
Consolidated
2016
2015
(1,821)
(24,616)
5
6
3,327
(15)
17
-
(2,003)
(1,253)
(1,748)
614
2,243
(333)
(2,088)
(1,312)
(17)
(547)
(1,876)
4,302
(776)
5
(1)
7,428
(4,738)
(18,396)
1,151
(4,571)
3,723
910
(17,183)
(4)
(550)
(17,737)
Consolidated
2016
1,254,421
99,570
50,612
61,598
41,533
2015
1,699,434
183,083
450,658
43,737
39,742
1,507,734
2,416,654
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
Management fees
Aggregate amounts receivable from controlled entities:
Advance account subject to interest charges (Australian controlled entities)
Other receivables
Aggregate amounts payable to controlled entities
2016
2015
4,386,250 1,232,500
640,973
-
1,621,243
251,593
1,621,243
36,970
306,925
8,386
631,418
662,540
385,148
133,817
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 2016 the balance owing of $1,877,785 (2015:
$662,540).
During the year ended 30 June 2016, the Company charged CGL NZ management fees of $1,621,243 (2015: $631,418).
28
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.
As number of restructure initiatives are ongoing, restructure costs were incurred in the year ended 30 June 2016.
In thousands of AUD
Restructure and other associated costs
Redundancy costs
Fixed assets disposal and write off
Write off of 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)
Consolidated
2016
2015
883
35
-
-
-
1,213
-
10
(290)
-
-
1,851
-
1,851
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 relocating the groups head office teams to Melbourne.
Fixed assets disposal and write off
As a consequence of the restructure, staffing reductions and changes to operations, further assessment was made on the carrying
value of certtain assets.
Third party consultants, temporary staff and relocations
The restructure is a major change to the business and requires short term resource and skills to enact the changes swiftly and
deliver the desired outcome.
29
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2016
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 2016.
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 Executive incentive plan
Environmental regulation
Insurance of officers
Corporate governance
Non-audit services
Lead auditor's independence declaration
Company secretary
11.
12.
13.
14.
15.
16.
17.
Rounding off
Directors' declaration
31
32
33
33
33
34
34
34
35
35
35
36
37
37
38
38
38
38
38
38
38
39
30 Coventry Group Ltd
Directors’ report
For the year ended 30 June 2016
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
Managing Director
Chief Executive Officer
Vicky Papachristos, BE (Chem), MBA, AICD
Independent non-executive director
Member of audit and risk committee
Kenneth Royce Perry, B.Sc (Hons), MBA, MAICD
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
In 2006 she formed Currant Marketing – an independent consultancy in the fields of
Visa.
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
AICD. 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.
31 Coventry Group Ltd
Directors’ report
For the year ended 30 June 2016
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
300,176
72,200
-
30,000
5,400
During the 2015/16 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 PJ 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
NG Cathie
NJ Willis
V Papachristos
KR Perry
PJB Caughey
Held
10
10
10
10
10
Eligible to
attend
10
10
10
10
10
Attended
Held
Eligible to attend
Attended
Held
Eligible to attend
Attended
10
9
10
9
10
4
-
4
4
-
4
-
4
4
-
4
-
4
4
-
3
3
-
3
-
3
3
-
3
-
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:
Trade Distribution
-
-
-
-
-
-
-
-
distribution and marketing of industrial fasteners, stainless steel fasteners and hardware, construction fasteners, specialised fastener products and systems, and
associated industrial tools and consumables
importation, distribution and marketing of hardware, components and finished products to the commercial cabinet making, joinery and shop fitting industries.
Fluids
design and installation of lubrication systems
distribution of hose, connectors, fittings and hydraulic hose assemblies
design and supply of service truck components
installation of fire suppression systems
design and distribution of fluid handling systems, pneumatic component sales and sale of hydraulic associated products and consumables
rock hammer service and repairs
Gasket Manufacturing
- manufacture and distribution of automotive and industrial gaskets.
32
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2016
3. Consolidated results
Results of the Group for the year ended 30 June 2016 were as follows:
In thousands of AUD
Continuing operations
Revenue from sale of goods
Loss before tax
Income tax benefit
Loss 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 for the year
Loss after tax for the year attributable to:
- equity holders of the Company
- minority interest
Loss after tax for the year
2016
2015
176,784
(3,074)
1,253
(1,821)
-
-
-
-
(1,821)
(2,867)
1,046
(1,821)
190,706
(27,247)
4,106
(23,141)
2,640
(2,107)
632
(1,475)
(24,616)
(25,008)
392
(24,616)
4. Dividends
Dividends paid or declared by the Company to members since the end of the previous financial year were:
Paid during the year 2016
Final 2015 Ordinary Dividend
5. Review of operations and results
People
Cents per
share
2.5
Total amount
Franked / Unfranked
Date of payment
$000
946
Fully Franked
27 October 2015
With only 2 lost time injuries in 2016 CGL’s safety performance has improved considerably though more has to be done to achieve the goal of zero safety incidents.
CGL’s commitment to training has never been greater. Around 5,000 hours of on-line training has been supplemented with face to face training for selling skills. In addition, the Branch
Manager training school opened in June. The school provides three days of intense face-to-face learning for existing and potential Branch Managers.
Financial Performance
Revenue ($M) (from continuing operations)
(Loss)/Profit before income tax ($M)
(Loss)/Profit after tax ($M)
NTA per share ($)
Basic loss per share (cents)
Restructure
Full Year to
30.6.16
Full Year to
30.6.15
% Change
176.8
-3.1
-1.8
2.03
-7.6
190.7
-27.2
-24.6
2.16
-65.8
-7.30%
N/A
N/A
-6.0%
N/A
The restructuring program announced in February 2015 has almost concluded with most major milestones completed. During that time the business has undergone a significant
amount of change with underperforming businesses closed, nine distribution centres closed, the operational merger of Artia and Konnect into Trade Distribution and the introduction of
significant system improvements in our warehouse operations in particular via the implementation of a sophisticated Warehouse Management System (WMS). The formal
restructuring program is expected to conclude in December 2016 by which time a range of key supply chain initiatives will be delivered.
The restructure has resulted in a significant amount of change, which has occurred largely on time and on budget. The restructure is largely delivering on the targeted improvements,
however on a few occasions the targeted improvements have not been reached as rapidly as anticipated. Efficiencies flowing from the Warehouse Management System (WMS) is an
example of an ultimately successful implementation but with delayed results. The aggressive rate of implementation would not normally have been attempted and it is a credit to the
CGL staff and contractors that so much was able to be achieved in such a short time frame. Benefits had been anticipated to flow in the second half of F16, but have been delayed
until FY17. Another delay has been the realisation of targeted freight savings. New systems must be deployed, thus delaying the realisation of these benefits to the second half of
FY17.
In order to lock in the benefits of the restructure a formal Continuous Improvement Program has been established to ensure that business continues to become more efficient and to
promote a simple single system of doing business.
33
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2016
5. Review of operations and results (continued)
Review of businesses
Trade Distribution
Through the year market conditions for mining facing branches were the toughest in recent memory. In addition, engineering fabrication in Melbourne and Adelaide was deeply affected
by the downturn in mining investment. In order to counteract the downturn a strategy of diversifying more deeply into construction and opening new branches has softened the
downturn, but not completely counteracted it. Consequently revenue fell for the year.
During the year the expansion plans of the business were accelerated with 11 new stores opened, taking the total number of stores to 66. Further small-format stores are expected to
be opened in FY17.
Further softening of the engineering sector can’t be ruled out whilst the construction cycle, without significantly more infrastructure spend from Government, is likely to be peaking.
Cost reductions were achieved as expected. A portion of the cost reductions were re-invested in new stores, training and in additional resources that will allow better forecasting and
smarter distribution networks to allow future reductions in inventory and cost.
Fluids
Like Trade Distribution, the mining services business, Coopers, faced a difficult market throughout the year. Though revenue declined the Coopers management team continues to do
an excellent job of diversifying into maintenance revenue streams and continuously reducing costs. Whilst continuously under pricing pressure from customers, Coopers continuously
strives to remain competitive and retain its highly sort after staff in order to remain relevant in a tough industry.
Investments/Other
AAG
CGL’s 72.5% investment in AAG, where CGL controls three of four Board seats, continues to improve. During the year the factory building was sold and leased back as the Board
judged that property prices were peaking. Despite the additional lease payments, AAG earnings increased. The property sale realised a profit of $2 million.
Property
In 2007 CGL entered into a 20 year lease for substantial warehouse and office space in Redcliffe, Perth. The sale of Covs auto parts business in 2011 and the significant reduction in
Head Office over the past 18 months has meant that the majority of space is no longer required. It has been sub-leased throughout this time.
During the year CGL began to lease an additional 2,000m2 of office space and 1,000m2 of warehouse space, also at Redcliffe, negotiated in 2014. The additional warehouse space
has been utilised by CGL however the additional office space remained unlet throughout the financial year but subsequently leased in July 2016.The expiry of the largest sub-lease of
15,000 m2 of warehouse space is a concern. The sub-lease expires in October 2017 and every effort is being made to find a new tenant.
6. Earnings per share
Basic loss per share for the year ended 30 June 2016 was 7.6 cents. This compares to a basic loss per share of 65.8 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.
9. Likely developments
Complete the restructure plan and continue to operate in the markets in which it currently participates.
34 Coventry Group Ltd
Directors’ report
For the year ended 30 June 2016
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
Executive directors
KR Perry
NG Cathie
NJ Willis
V Papachristos
Executives
PJB Caughey, CEO & Managing Director
KS Smith, Chief Financial Officer (CFO) & Company Secretary (resigned as CFO 28 July 2015)
Joe Nicolazzo Chief Financial Officer (CFO) (appointed 21 September 2015)
Christopher Lloyd Company Secretary (appointed 28 October 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 2016 the non-executive directors fees were allocated as follows (includes statutory superannuation contributions):
Chairman (base fee)
Non-executive Directors (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
2016
$
127,500
85,000
15,000
5,000
5,000
2015
$
127,500
85,000
15,000
5,000
5,000
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 40% 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 on the continuing implementation of key elements of the company-wide restructure plan and the company's safety record.
An Executive Incentive Plan was approved by shareholders at the 2015 annual general meeting. The plan was not triggered during 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 Caughey.
35
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36
Coventry Group Ltd
Directors’ report (continued)
For the year ended 30 June 2016
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.
Joe Nicolazzo , Chief Financial Officer (appointed 21 September 2015)
- 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 serious misconduct, termination of employment requires 18 weeks notice by the Company.
Chris Lloyd , Company Secretary (appointed Company Secretary 27 October 2015)
- Not a direct employee of the company, compensated by payment for consulting services.
10.5 Executive incentive plan
There was no share based remuneration during the financial year.
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 Caughey.
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 $41,533 (2015: $39,742).
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
30 June 2015
Held on
appointment
Purchases
Sales
Directors
KR Perry
NG Cathie
NJ Willis
PJB Caughey
V Papachristos
30,000
50,000
5,400
229,501
-
-
-
-
-
-
-
22,200
-
70,675
-
Held at
Resignation/
Retirement
Held at
30 June 2016
-
-
-
-
-
-
-
-
-
-
30,000
72,200
5,400
300,176
-
37
38 39 40 41 42 Shareholder Information
as at 16 September 2016
TWENTY LARGEST SHAREHOLDERS
Name
1.
2.
3.
4.
J P MORGAN NOMINEES AUSTRALIA LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ONE MANAGED INVT FUNDS LTD
NATIONAL NOMINEES LIMITED
DORSETT INVESTMENTS PTY LTD
BNP PARIBAS NOMS PTY LTD
SANDHURST TRUSTEES LTD
MRS ANNE KYLE
5.
6.
7.
8.
9.
10. DEVADIUS PTY LTD
11. CITICORP NOMINEES PTY LIMITED
12. ELLAND ROAD PTY LTD
13. ARUMA BEACH PTY LTD
14. TPSC SMIRK PTY LTD
15. FFSF ASSET MANAGEMENT PTY LTD
16. GARSIND PTY LTD
17. MR CLIFFORD MAXWELL KYLE
18. BUDUVA PTY LTD
19. MR GEOFFREY KYLE
20. BENTALE PTY LTD
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 % of Total
9.53
3,606,778
2,693,480
1,886,621
1,668,714
1,407,459
1,356,660
1,114,923
1,060,000
1,000,000
836,619
565,000
442,000
415,000
400,000
374,468
370,000
361,208
325,000
325,000
250,000
20,458,930
7.12
4.99
4.41
3.72
3.59
2.95
2.80
2.64
2.21
1.49
1.17
1.10
1.06
0.99
0.98
0.95
0.86
0.86
0.66
54.07
Number
of holders
1788
919
276
329
43
3355
%
53.29
27.39
8.23
9.81
1.28
100.00
Number
of shares
633,290
2,418,037
2,043,033
9,226,462
23,515,657
37,836,479
%
1.67
6.39
5.40
24.39
62.15
100.00
Unmarketable parcels field information:
1489
44.38
399,288
1.06
SUBSTANTIAL SHAREHOLDERS
The Company’s register of substantial shareholders showed the following particulars as at 16 September 2016.
Name of Substantial Shareholder
Schroder Investment Management Australia Limited
Investors Mutual Limited
Sandon Capital Investments Pty Ltd1
Extent of Interest
(No of shares)
2,426,073
4,590,000
2,297,056
Date of last
notification
15.09.2016
25.05.2016
22.03.2016
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 Corporate Directory
Coventry Group
ABN 37 008 670 102
Registered and Principal Administrative Office
235 Settlement Road,
Thomastown, Victoria 3074
Postal Address
PO Box 526
Thomastown, Victoria 3074
Website
www.cgl.com.au
Secretary
Christopher Lloyd
Bankers
Australian and New Zealand Banking Group Limited
Auditors
KPMG
147 Collins Street
Melbourne, Victoria 3000
Share Registry
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne, Victoria 3001
or
Level 11
172 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
45