(cid:3)
(cid:3)
ANNUAL REPORT
2017(cid:3)
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. Impairment of non-financial assets
15. Trade and other payables
16. Interest-bearing loans and borrowings
17. Employee benefits
18. Share based payments
19. Provisions
20. Capital and reserves
21. Financial risk management
22. Operating leases
23. Controlled entities
24. Reconciliation of cash flows from operating activities
25. Related parties
26. Restructuring, impairment and other significant costs
Directors' report
Directors' declaration
Auditor's Independence Declaration
Auditor's Report
Shareholder Information
Corporate Directory
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52
Chairman’s Report
At a group level, by any measure, 2017 was an extremely disappointing year for all shareholders. After an
encouraging 2016, the 2017 first half results, even allowing for some difficult market conditions, indicated that
in some parts of the business change was not occurring fast enough or effectively enough. The second half
showed some tentative but encouraging signs of improvement but not enough to put any sort of gloss on the
full year result. That said we have a number of businesses in the group which are market-leading in their field,
well managed and are solidly profitable. These businesses include Cooper Fluids, AA Gaskets and Trade
Distribution New Zealand and the CEO will expand on their performance in his report.
Whilst broadly supportive, a number of shareholders have expressed very strong views about the Group’s
continuing poor financial performance. The board is not sitting on its hands and continues to assess the
corporate strategy and a variety of different paths however one of its primary goals is to turn Trade
Distribution Australia around such that it becomes again a key contributor to group profitability. Trade
Distribution Australia, with years of declining revenue and a disproportionately high cost base has failed to
produce the expected turnaround despite a range of initiatives implemented in good faith over time. Its poor
financial results and a high level of corporate overheads are eroding the good results coming from the other
segments of the business and has been the primary reason for the majority of the significant items recorded
this period. The Board knows full well this cannot continue and, as a result, further changes to the operations
of this business have been or are being made. The CEO expands on this in his report.
Considerable change occurred in senior management ranks during the second half. In March 2017 our
previous Managing Director and CEO Mr Peter Caughey resigned and left the business. We were very
pleased to announce the appointment of Mr Robert Bulluss as CEO in May 2017. Robert was previously
Coventry Group CFO and joined us after a long and successful career at Bunzl plc a leading B2B
procurement and distribution business with a network of stores in its Industrial and Safety division. In addition
to his finance skills Robert has a strong operations focus and his commitment to sustainable, profitable growth
is underpinning plans for the Trade Distribution business in Australia. In March 2017 Mr Mark Page was
appointed General Manager of Trade Distribution in Australia. Mark joined Coventry Group after a long and
successful career with Reece Ltd, Australia’s leading distributor of plumbing products. Also in March 2017 Mr
Mike Wansink was appointed General Manager of Trade Distribution in New Zealand. Mike has successfully
led the New Zealand business for the past 5 years.
At Board level, Ms Vicky Papachristos resigned on 28 July 2017 and Mr Nick Willis has decided not to stand
for re-election at the 2017 Annual General meeting of the Company and will resign from the Board on 31
August 2017. On 29 August 2017 Mr Robert Bulluss joined the Board as Managing Director and CEO. As a
consequence of these recent Board changes, a review of its composition is being undertaken with the
assistance of external advisors.
We have seen some promising signs towards the end of the financial year. Pleasingly, the three month period
May 2017 to July 2017 saw group revenue increase 6.5% on the same period last year. This improvement
was largely driven by Cooper Fluids with Trade Distribution slightly down on the same period last year. It is an
unpalatable fact that the revenue decline in Trade Distribution Australia has been a decade in the making and
is not going to turn around in one quarter. With the board’s endorsement, our CEO’s focus on improving stock
availability and service levels at branches is expected to reap rewards during 2018 and into 2019 and
investment in new branches, people and system and process improvement is carefully occurring where
required to drive sales and customer growth.
A detailed review of our inventory and the accounting estimates associated with inventory provisioning has
been undertaken by the CEO following his appointment. The scope of the review was Trade Distribution
across Australia and New Zealand and Cooper Fluids. As a result of a revised strategy for the business, an
increase in our slow stock provisioning has been deemed necessary. A non-cash increase in provisioning of
$7.1m has been booked and the CEO talks to this, and a newly launched Inventory Clearance Program, in his
report.
(cid:3)
(cid:1005)(cid:3)
In Australia there will be some consolidation of the Trade Distribution branch network in the coming months.
The key purpose of this initiative is to build scale in a number of existing branches whilst exiting locations
which are too small and are trading unprofitably. The CEO provides specific branch detail in his report. The
board endorses his recommendation that consolidating some branches and improving resources within a
merged offering will assist us in providing an enhanced level of customer service and aligns with our
strategies for sustainable profitable growth.
In New Zealand the Trade Distribution branch network expanded during the year and we believe there are
further opportunities to grow the network.
In May 2017 the Group was subjected to a cyber-attack when a malicious piece of ransomware was executed
within our computer networks resulting in a significant disruption to business operations. Recovery was time
consuming and costly. Our internal information technology personnel were aided in the recovery process by
KPMG and Telstra and we are grateful for the responsiveness, commitment and professionalism of all parties.
As part of the recovery there has been a review and strengthening of the Group’s defensive controls and
monitoring processes. More recently, this type of malicious cyber-attack has received considerable worldwide
coverage and severely impacted organisations far larger and with greater resources than Coventry.
As previously reported to shareholders, in 2007 the Company entered into a single term twenty year lease for
property in Redcliffe, Perth. We have had some success with sub-leasing parts of the property in a depressed
Perth property market albeit at lower rental rates and for shorter terms. A decrease in rental income in the
order of $1m in relation to the sub-leasing of parts of the Redcliffe property is expected in 2018. This remains
a challenging legacy issue to deal with.
During the period, and as a result of continuing poor financial performance and accounting requirements, the
Board determined to make a number of non-cash adjustments to the carrying value of the Company’s assets
totalling $23.9m. Full particulars are detailed in the CEO’s report. The impact of these adjustments on net
asset backing per share is a reduction of $0.39c. The Group continues to have a strong working capital
position with Current Assets exceeding Current Liabilities by $47.5m including the debtor financing facility
undertaken to support short term liquidity requirements.
The current work environment at Coventry requires drive, determination and resilience and on behalf of the
Board my sincere thanks go to the CEO, the Executive Leadership Team and all our colleagues throughout
the business for their continuing efforts.
Outlook
With Cooper Fluids increasing activity levels as one of our measures, the signs from the mining segment
continue to be positive. This should have a positive flow on effect to Trade Distribution Australia but that
business must move as quickly as possible under new leadership to aggressively redirect focus to business
development activities and sales and customer growth. Quarterly trading updates will continue to be provided
to the market for the foreseeable future in order to keep shareholders informed.
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
(cid:3)
(cid:1006)(cid:3)
CEO report
The Chairman has expressed our disappointment in the financial performance of the Group during the past
financial year. Since accepting the role as Interim CEO at the start of April 2017 and my permanent
appointment to the position in May, I have worked diligently with the Executive Leadership Team and Senior
Management in our business to implement our revised business strategy for the Trade Distribution Australia
division (discussed in detail later in this report).
The Group is now primarily focussed on the customer and achieving sustainable profitable growth. Our aim is
to provide the best service levels in the respective markets of our business divisions through high stock
availability, agility and expertise.
Our Executive Leadership Team has extensive experience both in the Coventry Group and other leading
distribution businesses. By ensuring that we work collaboratively, we are able to utilise our broad experience
in order to deliver the best commercial and financial outcomes for the Group.
Recently we restructured our supply chain and category management functions, embedding them into the
Trade Distribution Australia business to improve service capability whilst achieving cost savings of close to
$1.2m per annum. Currently we are performing a review of the IT function, which we estimate will deliver
savings of approximately $0.7m per annum.
We are now fully focussed on our customers and people, applying our new values of Respect, Fairness,
Teamwork, Professionalism and Integrity.
Business performance
During the latter part of the financial year, Group financial performance showed signs of recovery. Revenue
in each business division has improved and we have seen encouraging results particularly during the period
May through August month to date. Daily sales run rates are improving in all business divisions. Cooper
Fluid Systems revenue is up 25% on the prior year May through July, predominantly from increased repair
and maintenance activity in the mining and resources sector. Historically this is a lead indicator for increased
activity in Konnect’s WA and QLD markets in Australia.
Group revenue for the full year was down 4.3% on the previous year, however the improving trend is
evidenced when viewing the year in two halves, with revenue in 2H17 down 0.9% on 2H16. The underlying
loss for the financial year was $8.7m, of which $3.0m is attributable to 2H17 compared to an underlying loss
for 1H17 of $5.7m.
We have estimated that the cyber-attack impacted sales during the recovery period in the vicinity of $1.0m.
The reported loss for the year of $35.5m includes significant items of $25.0m which are largely non cash in
nature. The key significant items are:
(cid:120) De-recognition of deferred tax assets $8.9m ($6.9m reported at the first half).
(cid:120) Non-cash impairments of $7.9m (reported at the first half).
(cid:120) Restructuring/Redundancy costs $0.9m.
(cid:120)
(cid:120) Cyber Attack recovery cost provision $0.6m.
(cid:120)
Provision for Stock Obsolescence/stock adjustments $7.1m.
Profit on sale of motor vehicle fleet -$0.4m.
The review of the carrying value of the inventory advised in the Half Year results has been completed. Our
revised business strategy is focused on directional buying and selling where we will sell a select product
range from preferred suppliers. Product and supplier rationalisation will occur as part of the strategy. As part
of the inventory review we determined that parts of our current inventory range is deemed to be ‘non-core'.
Management has taken a prudent approach and increased the slow stock provision against the non-core,
slow moving and obsolete products. In addition, the inventory review identified obsolete stock that has been
fully provided for and will be disposed of.
(cid:3)
(cid:1007)(cid:3)
Performance by division
Trade Distribution
TD sales were down 10.6% on the prior year for negative contribution of $5.2m before significant items.
Underlying loss in 2H17 reduced due to improved margin % and the impact of cost reductions despite lower
sales.
Trade Distribution Australia (TDA)
TDA sales showed encouraging signs of improvement during May, June, July and August month to date 2017.
Daily sales run rates are beginning to improve (particularly in WA and QLD), as the mining and engineering
construction sectors rebound and we make material improvements to our service levels.
There has been some consolidation of our branch network in Australia with a small number of branch mergers
taking place in order to provide scale benefits and improved service levels. Consolidation of branches is
occurring in the following locations:
(cid:120) Gympie and Caloundra will be merged into Sunshine Coast
(cid:120) Chinchilla will merge into Toowoomba
(cid:120)
(cid:120) Geebung will merge with North Brisbane into a new location.
Inner City Brisbane will merge into Morningside; and
In addition, we closed two small unprofitable branches in Richmond in Victoria and Dubbo in New South
Wales.
Trade Distribution New Zealand (TDNZ)
TDNZ performed strongly, with revenue up significantly on last year. TDNZ is the leading fastening systems
business in the construction and roofing and cladding markets and has good growth prospects.
In New Zealand new branches have been opened in Mount Maunganui and Timaru and the Hastings and
Napier branches have been merged to provide greater scale and service levels.
Cooper Fluid Systems (CFS)
CFS continues to perform strongly. Revenue improved steadily throughout the second half of FY17 driven by
the increase in repair and maintenance work in the resources sector. We expect reasonable growth and an
improved contribution from CFS in FY18.
AA Gaskets (owned 72.5% by the Group)
AA Gaskets had a record year and continues to consolidate its market position as the leading automotive
gasket company in Australia and New Zealand. AA Gaskets has continued its strong revenue growth since
securing a major new customer in late 2016.
Trade Distribution Australia strategic plan
We are working diligently to implement our revised strategy for sales growth and sustainable profitable
growth. Key initiatives include:
Returning to a selling model where our branches have control over the delivery of orders to the
customer. This involves returning stock to the branches and having direct delivery of local supplier
products, where it makes sense, to the branches.
Ensuring each branch stocks what it sells and improving stock availability of stocked lines to 98%.
Ensuring branches have the right resources (people, stock, store layout and merchandising, delivery
capabilities) to provide excellent service.
Some consolidation of our branch network in Australia with a small number of branch mergers in order
to provide greater scale and service levels.
Increasing the sales capability across the business with business development capability and sales
representatives with appropriate selling tools and training.
(cid:1008)(cid:3)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:3)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Enhanced customer engagement systems and processes. Returning to basics such as increasing sales
to existing customers and re-engaging with lost customers whilst actively pursuing new opportunities in
roofing and cladding, construction and infrastructure.
Re-engagement with suppliers to gain growth through joint selling calls and use of their product
expertise.
Implementation of a directional buying and selling model.
Investigating further cost reduction and productivity improvement opportunities.
Reducing inventory levels through stock clearance programs and improving ordering systems.
Operating costs
A review of corporate costs has occurred with savings occurring in IT and other areas. Controllable costs
such as consultant fees, legal fees, travel and entertainment have been considerably reduced.
A further review of operating costs across all business divisions and the corporate function is underway. In
the medium/longer term we will use technology to improve efficiency and productivity to further reduce costs
and minimise the need for additional resources to support sales growth.
Our current DC infrastructure footprint is too large for our revised business strategy and will be reduced in size
as lease expiry dates allow, further reducing infrastructure costs.
Working capital
Reducing working capital to maximise cash generation and reduce debt is a key focus area for management.
Our Inventory Clearance Program has successfully produced in excess of $1.3m in sales to date and will
continue through to the end of September 2017. Other inventory reduction projects have commenced
including automating purchasing systems, introduction of a China Postponement Hub, direct local supplier
deliveries to branches, excess stock reduction programs and relocation of non-moving stranded stock.
Capital expenditure will remain tightly controlled while the TDA revised strategy is implemented.
Outlook
We are confident that our refreshed business strategy for TDA will deliver improvements in financial
performance throughout FY18 and beyond. Our TDNZ, CFS and AA Gaskets business divisions will continue
to grow and deliver sustainable profitable growth.
Robert J Bulluss
Chief Executive Officer and Managing Director
(cid:3)
(cid:1009)(cid:3)
Coventry Group Ltd and its controlled entities
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
In thousands of AUD
Note
2017
2016
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, impairment and other significant 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 (expense)/benefit
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 loss for the year, net of income tax
Total comprehensive loss for the year
Loss attributable to:
Owners of the Company
Non-controlling interests
Loss for the year
Total comprehensive loss attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive loss for the year
Loss per share:
Basic loss per share:
Diluted loss per share:
4
26
5
6
169,146
(103,289)
65,857
4,596
(43,283)
(2,924)
(10,713)
(2,356)
(6,132)
(1,651)
(16,056)
(12,108)
(24,770)
24
(724)
(700)
(25,470)
(10,069)
(35,539)
(595)
36
(559)
(36,098)
(36,127)
588
(35,539)
(36,672)
574
(36,098)
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)
1,048
(93)
955
(866)
(2,867)
1,046
(1,821)
(1,942)
1,076
(866)
7
(95.7 cents)
(95.7 cents)
(7.6 cents)
(7.6 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.
(cid:1010)
Coventry Group Ltd and its controlled entities
Consolidated statement of financial position
As at 30 June 2017
In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Total non current assets
Total assets
Liabilities
Trade and other payables
Employee benefits
Loans and borrowings
Income tax payable
Provisions
Total current liabilities
Employee benefits
Other payables
Total non current liabilities
Equity
Issued capital
Reserves
Retained earnings
Total equity attributable to equity holders of the Company
Non-controlling interests
Total equity
Note
2017
2016
8
9
10
6
12
13
15
17
16
19
17
15
5,149
29,260
49,282
83,691
6,749
4,698
5,935
17,382
101,073
23,806
3,931
8,045
249
131
36,162
247
3,089
3,336
39,498
61,575
108,063
(815)
(47,838)
59,410
2,165
61,575
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
The consolidated statement of financial position is to be read in conjunction with the accompanying notes to the consolidated financial statements.
(cid:1011)
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Coventry Group Ltd and its controlled entities
Consolidated statement of cash flows
For the year ended 30 June 2017
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
Net cash used in operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Interest received
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash (used in)/from investing activities
Cash flows from financing activities
Proceeds from Borrowings
Repayment of Borrowings
Dividends paid
Dividends paid to non-controlling interests
Net cash from/(used in) financing activities
Net (increase)/decrease in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations
Cash and cash equivalents at 30 June
Note
2017
2016
187,778
(190,917)
(3,139)
(560)
(1,280)
(4,979)
4,515
24
(1,305)
(3,472)
(238)
83,354
(75,309)
-
(440)
7,605
2,388
3,520
(759)
5,149
202,187
(203,499)
(1,312)
(17)
(547)
(1,876)
4,026
15
(4,203)
(1,554)
(1,716)
-
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(946)
(1,663)
(2,609)
(6,201)
8,709
1,012
3,520
24
12
13
8
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes to the consolidated financial statements.
(cid:1013)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1.
Significant accounting policies
Coventry Group Ltd (the (cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:12) is a for profit company domiciled in Australia. The address of the (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)
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 2017
(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:76)(cid:86)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:79)(cid:72)(cid:71)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:11)(cid:87)(cid:82)(cid:74)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:180)(cid:12)(cid:17)(cid:3)
The financial report was authorised for issue by the Directors on 29 August 2017.
(a)
(b)
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).
Basis of preparation
The financial report is presented in Australian dollars, which is the (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86) functional currency. The financial report
is prepared on the historical cost basis except share based payments which are stated at their fair value.
Going Concern
In preparing the financial report, the Directors have made an assessment of the ability of the Group to continue as a
going concern, which contemplates the continuity of business operations, realisation of assets and settlement of
liabilities in the ordinary course of business and at the amounts stated in the financial report.
The Group incurred a loss after tax for the year ended 30 June 2017 of $35.5m primarily as a result of continued poor
trading results in the Trade Distribution business, asset impairments, inventory write downs, de-recognition of DTA,
restructuring and cyber-attack costs.
(cid:36)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72)(cid:3)(cid:20)(cid:25)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:76)(cid:86)(cid:3)(cid:73)(cid:88)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:68)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:82)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:11)(cid:181)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:12)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:80)(cid:76)(cid:81)(cid:76)(cid:80)(cid:88)(cid:80)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)
(cid:82)(cid:73)(cid:3)(cid:87)(cid:90)(cid:72)(cid:79)(cid:89)(cid:72)(cid:3)(cid:80)(cid:82)(cid:81)(cid:87)(cid:75)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:72)(cid:81)(cid:71)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:27)(cid:3)(cid:49)(cid:82)(cid:89)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:85)(cid:81)(cid:3)(cid:76)(cid:86)(cid:3)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:79)(cid:92)(cid:3)
dependent on the financier extending the term for at least 12 months and the Group remaining in compliance with the
Facility terms and conditions. The financier has indicated in writing on 28th August 2017 that should Coventry wish to
renew the Facility with a further 12 months minimum term, that at this time they would agree to do so.
The Directors have assessed the forecast trading results and cash flows for the Group, including the impact of
restructuring and other initiatives implemented by management to adjust to market conditions. These forecasts are
necessarily based on best-estimate assumptions that are subject to influences and events outside of the control of the
Group.
(cid:56)(cid:81)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:87)(cid:92)(cid:3)(cid:68)(cid:85)(cid:82)(cid:88)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:85)(cid:81)(cid:3)(cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:76)(cid:86)(cid:3)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)
on:
- The extension of the Facility for a term of at least 12 months from 8 November 2017; and
- Achieving budget, after allowing for reasonably possible changes.
Should trading conditions not improve or continue to deteriorate or the Facility not be available for the forecast period,
the Group could seek to:
- Make further adjustments to business operations.
- Raise additional funds from shareholders or other parties; or
- Divest assets to raise additional funds.
After making enquiries and considering the matters described above, the Directors have a reasonable expectation
that the Group will have adequate resources to continue to meet its obligations as they fall due. For these reasons,
the Directors continue to adopt the going concern basis in preparing the financial report.
(cid:1005)(cid:1004)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1.
(b)
Significant accounting policies (continued)
Basis of preparation (continued)
The basis on which the Directors have determined the recoverable amount of:
- Non-current assets which comprise goodwill, deferred tax assets, computer software and plant and equipment is set
out in Notes 1 and 14; and
- Inventory is set out in Note 1.
The recoverable amounts are predicated on the assumption that the Group will continue as a going concern. In the
event that the Group is unable to continue as a going concern, a further provision would be required to write down the
value of assets to an alternative basis of valuation.
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)
(d)
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.
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 (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)
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.
(cid:1005)(cid:1005)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1.
(e)
Significant accounting policies (continued)
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
inception date. Term deposits with a maturity of three months or greater at inception 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.
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.
(cid:1005)(cid:1006)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1.
(i)
Significant accounting policies (continued)
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 Depreciation Rate
- Plant and Equipment 5% - 40%
- Buildings 2%
Depreciation methods, useful
appropriate.
lives and residual values are reviewed at each reporting date and adjusted if
(j)
Intangible assets and goodwill
Goodwill
Goodwill that arises upon the acquisition of subsidiaries is presented with intangible assets. For the measurement of
goodwill at initial recognition, see Note 1(d).
Subsequent measurement
is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the
Goodwill
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.
(cid:1005)(cid:1007)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1.
(j)
Significant accounting policies (continued)
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
recognised in profit or loss as incurred.
Amortisation
Except for goodwill, intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful
lives, from the date that they are available for use.
In current and comparative periods, goodwill was estimated to have an indefinite useful life and computer software
was estimated to have a useful life of 3 to 12 years.
Amortisation methods, useful
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 (cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86) 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 2017 were not met therefore no incentives triggered
under the plan.
(cid:1005)(cid:1008)
1.
(m)
(n)
(o)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
Significant accounting policies (continued)
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.
Trade and other payables
Trade and other payables are stated at amortised cost.
Trade payables are non interest bearing and are normally settled within 45 - 60 day terms.
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 income.
(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 (cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86) 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.
(cid:1005)(cid:1009)
1.
(q)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
Significant accounting policies (continued)
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
(cid:38)(cid:40)(cid:50)(cid:15)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86)(cid:3)(cid:70)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:72)(cid:70)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:85)(cid:17)(cid:3)
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 (cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86)
other components. All operating segments operating results are regularly reviewed by the (cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86) 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 (cid:181)(cid:86)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:72) taxpayer within (cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182) 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.
(cid:1005)(cid:1010)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1.
(s)
Significant accounting policies (continued)
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 (cid:11)(cid:179)(cid:42)(cid:54)(cid:55)(cid:180)(cid:12)(cid:15) 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 14 - measurement of the recoverable amount of cash generating units; and
- Note 21 - 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.
(cid:1005)(cid:1011)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
1.
Significant accounting policies (continued)
(w)
New standards and interpretations not yet adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Group for the
annual reporting period ended 30 June 2017 are outlined below.
Description
Application of
Standard *
Application by
Group *
The effects of the following Standards are not expected to be material:
AASB 2016-2 Amendments to
Australian Accounting Standards –
Disclosure Initiative: Amendments
to AASB 107
The amendments to AASB 107 Statement of Cash Flows are part of the IASB’s Disclosure
Initiative and help users of financial statements better understand changes in an entity’s debt.
1 January 2017 1 July 2017
AASB 9 Financial Instruments
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement .
1 January 2018 1 July 2018
AASB 9 adopts a more principle-based approach to the classification of financial instruments. As
such the classification and measurement requirements for financial assets and financial liabilities
has been changed. In addition there are changes to the credit loss model and requirements for
hedge accounting.
The impact of this standard depends upon the financial assets and liabilities and hedges as at 30
June 2018.
This Standard amends AASB 2 S hare-based Payment and clarifies how to account for certain
types of share-based payment transactions.
1 January 2018 1 July 2018
AASB Interpretation 22 Foreign
Currency Transactions and
Advance Consideration
AASB 2017-1 Amendments to
Australian Accounting Standards –
Transfers of Investments Property,
Annual Improvements 2014-2016
Cycle and Other Amendments
The amendments provide clarification on the determination of the spot exchange rates to use for
specific transactions.
1 January 2018 1 July 2018
The Standard makes amendments to AASB 1 First-time Adoption of Australian Accounting
Standards; AASB 12 Disclosure of Interests in Other Entities; AASB 128 Investments in
Associates and Joint Ventures and AASB 140 Investment Property arising from the IASB’s
Disclosure Initiative project.
1 January 2018 1 July 2018
The effects of the following Standard is still being determined:
AASB 15 Revenue from Contracts
with Customers
AASB 15 replaces all existing revenue requirements in Australian Accounting Standards and
applies to all revenue arising from contracts with customers, unless the contracts are in the scope
of other standards, such as AASB 117 (or AASB 16 Leases, once applied).
1 January 2018 1 July 2018
The core principle of the Standard is that an entity recognises revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services.
The potential effects on adoption of AASB 15 are yet to be determined.
AASB 16 Leases
AASB 16 requires lessees to account for all leases under a single on-balance sheet model in a
similar way to finance leases under AASB 117 Leases.
1 January 2019 1 July 2019
Lessees must now recognise a right-of-use asset and lease liability on the statement of financial
position and account for the lease in accordance with AASB 16.
Lessor accounting is substantially unchanged from today’s accounting under AASB 117. Lessors
will continue to classify all leases using the same classification principle as in AASB 117 and
distinguish between two types of leases: operating and finance leases.
The Group has performed a preliminary assessment of AASB 16 and notes that on application of
the standard on 1 July 2019, for the leases where the Group is the lessee, the Group is required to
recognise a right-of use asset and a lease liability in the Statement of Financial Position. The
amount to be recognised will depend on the term and value of leases that exist at 30 June 2019.
* Designates the beginning of the applicable annual reporting period.
(cid:1005)(cid:1012)
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
2017
2017
2017
2017
In thousands of AUD
External sales
Other income
External revenue
Inter segment revenue
Total revenue
2017
96,936
1,411
98,347
-
2017
54,091
(197)
53,894
-
18,119
206
18,325
-
169,146
1,420
170,566
-
98,347
53,894
18,325
170,566
Reportable segment profit/(loss) before finance costs, income tax and
significant items
(4,622)
2,627
Net financial income/(loss)
Other significant items:
Gain on sale of assets (Motor Vehicle Leaseback Transaction)
Impairment loss
Stock obsolescence/adjustments
Restructuring and other related costs
Cyber Attack provision
Other one-off provisions
Reportable segment profit/(loss) before income tax
26
26
Reportable segment assets
Reportable segment liabilities
Capital employed
Capital expenditure
Depreciation and amortisation
313
-
(5,576)
(5,635)
(400)
-
-
(15,920)
53,545
11,579
41,966
2,882
1,121
-
-
-
(903)
(70)
-
-
1,654
25,418
6,726
18,692
425
984
3,158
23
-
-
(518)
(94)
-
-
2,569
9,998
2,215
7,783
130
147
Information about reportable segments
Note
Trade Distribution
Fluids
Gaskets
-
3,176
3,176
-
3,176
169,146
4,596
173,742
-
173,742
(9,432)
(8,269)
(1,036)
(700)
361
(2,292)
-
(286)
(644)
(444)
361
(7,868)
(7,056)
(850)
(644)
(444)
1,163
336
-
(5,576)
(7,056)
(564)
-
-
(11,697)
(13,773)
(25,470)
88,961
20,520
68,441
3,437
2,252
12,112
18,978
(6,866)
1,340
672
101,073
39,498
61,575
4,777
2,924
Total reportable
segment
Other business
units and
consolidation
adjustments
Total
15,119
211
2,012
17,342
-
176,784
1,581
2,012
180,377
17
17,342
180,394
2016
-
2,689
-
2,689
(17)
2,672
2016
176,784
4,270
2,012
183,066
-
183,066
4,926
22
-
6,782
41
(8,073)
(1,291)
27
68
(1,578)
(273)
(1,851)
2016
2016
2016
2016
In thousands of AUD
External sales
Other revenue
Gain on sale of property, plant and equipment
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:
108,484
1,165
-
109,649
15
109,664
(967)
19
53,181
205
-
53,386
2
53,388
2,823
-
Restructuring and other related costs
26
(1,484)
(94)
Reportable segment profit/(loss) before income tax
(2,432)
2,729
4,948
5,245
(8,319)
(3,074)
Reportable segment assets
Reportable segment liabilities
Capital employed
Capital expenditure
Depreciation and amortisation
68,761
15,622
26,953
5,968
53,139
20,985
3,885
1,306
1,024
981
10,651
106,365
22,624
128,989
2,841
7,810
117
211
24,431
6,294
30,725
81,934
16,330
98,264
5,026
2,498
731
829
5,757
3,327
Geographic information
Revenue based on the geographic location of customers was Australia $145,891,000 (2016: $155,888,000) and New Zealand $27,851,000 (2016:$27,178,000).
Non current assets, excluding deferred tax assets, based on the geographic location of the assets were Australia $9,638,000 (2016: $20,074,000) and New Zealand $995,000 (2016: $1,089,000).
(cid:1005)(cid:1013)
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
Other services
Auditors of the Group
KPMG Australia:
Advisory services
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
Financial income
Interest expense
Net foreign exchange loss
Financial expenses
Net financing loss
6. Taxes
Current tax expense
Tax recognised in the profit or loss
In thousands of AUD
Current tax expense
Current year
Overprovision prior year
Deferred tax expense
Origination and reversal of temporary differences
Revenue tax losses (recognised)/not recognised
Derecognition of previously recognised DTA
Consolidated
2017
2016
267,375
267,375
219,550
219,550
131,888
13,559
145,447
Consolidated
2017
32,526
3,544
2,995
1,851
2,320
47
-
7,750
7,750
2016
33,614
3,882
3,323
2,010
1,683
42
43,283
44,554
Consolidated
2017
2016
24
-
24
560
164
724
(700)
15
70
85
17
-
17
68
Consolidated
2017
2016
7,270
71
7,341
416
(8,899)
(8,927)
(17,410)
498
-
498
738
-
17
755
Total income tax (expense)/benefit
(10,069)
1,253
(cid:1006)(cid:1004)
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)
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 (recognised)/not recognised
Non-deductible expenditure
Over provision in prior periods
Effect of lower tax rate applicable to foreign controlled entity
Impairment of Deferred Tax Asset
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Consolidated
2017
(35,539)
10,069
(25,470)
7,641
-
(8,899)
51
71
(6)
(8,927)
(10,069)
Consolidated
In thousands of AUD
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
Employee benefits
Trade and other payables
Provisions
Translation Reserve
Tax loss carry forward
Tax assets/(liabilities)
Set off of deferred tax liability
Net deferred tax asset
Assets
2017
333
2,412
2,360
-
267
228
1,018
19
112
6,749
-
6,749
2016
66
1,234
1,050
29
1,441
155
77
-
12,178
16,230
(138)
16,092
Liabilities
2017
-
-
-
-
-
-
-
-
-
-
-
-
2016
(11)
(100)
-
-
(27)
-
-
-
-
(138)
138
-
Net
2017
333
2,412
2,360
-
267
228
1,018
19
112
6,749
-
6,749
2016
(1,821)
(1,253)
(3,074)
922
305
-
9
-
17
-
1,253
2016
55
1,134
1,050
29
1,414
155
77
-
12,178
16,092
-
16,092
Deferred tax asset of $8,927,000 has been de-recognised until it becomes probable that future taxable profits will be available in a reasonable timeframe against which
temporary differences and unused tax losses can be utilised.
Tax losses in the Group Australian operations consist of post-consolidation carried forward tax losses of $51,782,899 (30 June 2016: $38,538,000), represented by the
deferred tax asset of $ Nil (30 June 2016: $11,561,000), 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 $1,606,008 (30 June 2016: $2,203,000), represented by the deferred tax asset of $112,637 (30 June 2016: $617,000), can
be fully utilised against the future forecasted taxable profits in the New Zealand tax group.
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 21.
(cid:1006)(cid:1005)
Consolidated
2017
2016
(36,127,858)
(2,867,189)
37,753,145
37,836,479
(95.7 cents)
(7.6 cents)
Consolidated
2017
5
5,144
-
5,149
2016
25
3,162
333
3,520
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
Total trade and other receivables
Consolidated
2017
28,075
28,075
701
484
1,185
2016
28,180
28,180
1,889
752
2,641
29,260
30,821
29,260
29,260
30,821
30,821
The Group’s exposure to credit risks and impairment losses related to trade and other receivables are disclosed in Note 21. 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 $52,000
(2016: -$159,000).
10. Inventories
In thousands of AUD
Finished goods
Provision for obsolescence
Net Inventory balance
The movement in the provision is represented by significant items as per Note 26.
11. Parent entity disclosures
As at, and throughout, the financial year ending 30 June 2017 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 after tax
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
(cid:1006)(cid:1006)
Consolidated
2017
57,652
(8,370)
49,282
2016
58,707
(1,314)
57,393
Company
2017
(43,345)
36
(43,309)
Company
2017
61,534
97,636
29,948
33,285
108,063
(44)
(43,668)
64,351
2016
(1,774)
(93)
(1,867)
2016
67,656
131,007
20,256
23,422
108,110
23
(548)
107,585
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 2016
Accumulated Depreciation at 1 July 2016
Carrying amounts at 1 July 2016
Additions
Depreciation charge for the year
Impairment charge for the year
Disposals
Effect of movements in foreign exchange
Carrying amounts at 30 June 2017
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
Note
Land and
buildings
Consolidated
Plant and
equipment
Total
14
-
-
-
-
-
-
-
-
-
2,299
480
1,819
83
(22)
(1,880)
-
-
-
43,725
27,685
16,040
1,305
(2,533)
(5,599)
(4,530)
15
4,698
39,766
24,774
14,992
4,120
(2,911)
(142)
(35)
16
43,725
27,685
16,040
1,305
(2,533)
(5,599)
(4,530)
15
4,698
42,065
25,254
16,811
4,203
(2,933)
(2,022)
(35)
16
16,040
16,040
Disposals for the year end 30 June 2017 were recorded for the sale and leaseback transaction of the motor vehicle fleet of the parent entity. Refer
Note 22.
(cid:1006)(cid:1007)
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 2016
Additions
Amortisation for the year
Impairment charge for the year
Disposals
Write offs
Effect of movements in foreign exchange
Carrying amounts at 30 June 2017
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
14. Impairment of non-financial assets
Note
Goodwill
Consolidated
Computer
software
Total
3,327
-
-
-
-
-
-
3,327
3,327
-
-
-
-
-
1,796
3,472
(391)
(2,269)
-
-
-
2,608
636
1,554
(394)
-
-
-
5,123
3,472
(391)
(2,269)
-
-
-
5,935
3,963
1,554
(394)
-
-
-
3,327
1,796
5,123
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
2017
3,327
2016
3,327
The key assumptions used in the value in use calculations include projected sales growth, projected gross margins, terminal value, improvements in
working capital and the discount rate. These assumptions are based on historical experience and projected performance incorporating in the
company's restructure programme.
As a result of continuing poor performance of the business, the Group assessed the carrying value of its assets.
Consistent with the disclosure in the consolidated interim financial statements as at 31 December, 2016, the carrying value of certain assets were
determined to be higher than their recoverable amount based on a value in use basis. This resulted in an impairment charge of $7.86m ($5.58m
related to Trade Distribution) across Property Plant & Equipment and Intangible Assets.
Trade Distribution
For the year ended 30 June 2017, the Group's value in use model indicated no evidence of further impairment. Value in use was based on the
following key assumptions:
- Sales growth at 4% for Year 1-2 based on budget, 5% at Year 3-5 assuming strong growth as we fix service levels and resource the branch network
correctly.
- Terminal growth 2.5%
- Post tax WACC of 11.5%
Cooper Fluids Systems
For the year ended 30 June 2017, the Group's value in use model showed the recoverable amount exceeded the carrying amount of the Cooper Fluids
Systems CGU by $2.7 million (2016 $3.7 million). The values assigned to the key assumptions were:
- Sales growth at 5% Year 1 to Year 5, based on strong current growth as Mining & Resources servicing and repairs increase.
- Terminal growth 2.5%
- Post tax WACC of 11.5%
The model is sensitive to reasonably possible changes in the key assumptions keeping all other assumptions constant, the headroom would be
eliminated if the WACC increased to 14%.
(cid:1006)(cid:1008)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
15. Trade and other payables
In thousands of AUD
Trade payables
Non trade payables and accrued expenses
Current
Non current
Consolidated
2017
18,386
8,509
26,895
23,806
3,089
26,895
2016
17,501
7,322
24,823
21,838
2,985
24,823
The Group's exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 21.
16. Interest-bearing loans and borrowings
In thousands of AUD
Financing facilities
Total facilities available at balance sheet date
Overdraft Facility
Debtor Financing Facility
Guarantee facility
Corporate credit card facility
Lease Liability
Facilities utilised at balance sheet date
Debtor Financing Facility
Lease Liability
Facilities not utilised at balance sheet date
Overdraft Facility
Debtor Financing Facility
Guarantee facility
Corporate credit card facility
Consolidated
2017
2016
-
10,000
140
500
51
3,000
-
200
750
-
10,691
3,950
7,994
51
8,045
-
2,006
140
500
2,646
-
-
-
3,000
-
200
478
3,678
The Group established a $10 million, securitised trade receivables facility with Scottish Pacific with a minimum period of 12
months from November 2016. The facility is subject to a floating interest on funds drawn. Refer to Note 1(b) Going concern.
(cid:1006)(cid:1009)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
16. Interest-bearing loans and borrowings (continued)
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 2017 was $140,000 (2016: $200,000).
Corporate credit card facility
Credit cards for business use may be issued under this facility from time to time.
Securities
The securitised trade receivables facility is secured by a fixed and floating charge over relevant assets. The guarantee and
corporate credit card facility is secured by fixed and floating charges over the assets and undertakings of the Company, general
security agreements as well as corporate guarantees and indemnities from Coventry Group Limited and Coventry Group (NZ)
Limited, a deed of priority and a security sharing deed.
(cid:1006)(cid:1010)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
17. 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
18. Share-based payments
Executive incentive plan
Consolidated
2017
1,952
1,979
3,931
Consolidated
2017
247
2016
2,177
2,406
4,583
2016
260
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 2017 were not met therefore no incentives triggered under the Plan.
Loan funded share issue
During financial year 2014, 200,000 fully paid ordinary shares were issued to Peter Caughey. These were funded by a non
recourse loan from the Company. The loan repayment under the terms of the loan funded share issue was the the lower of the
original nominal loan value and the value of 200,000 shares at the time the loan settled. These shares were issued and held in
escrow with a trading lock until loan settlement in January 2017. The structure of the loan had no 'down side' exposure. The non
cash accounting expense/charge in the year is $21,000 (2016: $42,000).
In January 2017, the 200,000 fully paid ordinary shares were returned to the company in satisfaction of the non-recourse loan.
The shares were cancelled.
19. Provisions
Current
In thousands of AUD
Balance at 30 June 2016
Provisions increased/(decreased)
Provisions used
Balance at 30 June 2017
Warranty
Restructuring/
onerous
contracts
Total
74
156
(145)
85
182
(136)
-
46
256
20
(145)
131
(cid:1006)(cid:1011)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
20.
Capital and reserves
Share capital
In thousands of shares
On issue at 1 July (start of financial year)
Share buy back (i)
Cancellation of Director shares (ii)
On issue at 30 June
The Company
Ordinary
shares
2017
37,836
-
(200)
2016
37,836
-
-
37,636
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 22 November 2016.
(ii) In January 2017, the 200,000 fully paid ordinary shares issued under an interest free non recourse loan to Peter Caughey were returned to the company in satisfaction of the non-
recourse loan. The shares were cancelled.
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 functional 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
No dividends have been declared or paid for the year ended 30 June 2017 (2016:$Nil).
Dividend franking account
In thousands of AUD
30 per cent franking credits available to shareholders of the Company for subsequent financial years
The Company
2017
2016
4,743
4,246
(cid:1006)(cid:1012)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
21. 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 92% of debtors were within terms (2016: 91%). The amount of trade debtors that is past due but not
impaired is $2,258,000 (2016: $4,068,000). The movement in the allowance for impairment in respect of trade receivables during the year was $52,000 (2016:-$159,000).
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
9
Consolidated
Carrying amount
2017
2016
5,149
28,776
33,925
3,520
30,069
33,589
(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 $24,084,000 (2016: $24,100,000) and New Zealand
$4,692,000 (2016: $4,080,000).
(cid:1006)(cid:1013)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
21. 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. The Group maintains a $10 million securitised trade receivables facility on which interest is payable at prevailing market rates. Refer to Note 1(b) Going concern.
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)
Borrowings
Carrying
amount
Contractual
cash flow
6 mths or less
6-12 mths
1-2 years
More than 2
years
2017
23,806
8,045
(23,806)
(8,045)
(23,806)
(8,045)
-
-
-
-
-
-
The outflows associated with forward contracts used for hedging are US$2.8 million (A$3.7 million), 2016: US$4.7 million, (A$6.5 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
2016
21,838
(21,838)
(21,838)
-
-
-
(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
2017
2016
5,144
3,162
(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.
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 USD forecast exposure.
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.
(cid:1007)(cid:1004)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
22. 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
2017
9,007
20,215
12,876
42,098
2016
7,292
17,484
14,974
39,750
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.
On the 30 June 2017, the parent entity entered into a sale and operating lease back transaction of its existing motor vehicle fleet. The future operating lease commitments
of $1.4 million over the term of the arrangement are reflected in the table above.
During the financial year ended 30 June 2017, the Group recognised $7,597,948 (2016: $8,381,000) 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
2017
1,998
2,846
171
5,015
2016
2,229
9,072
3,895
15,196
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 2017, the Group recognised $2,854,034 (2016: $2,576,000) as income in the statement of profit or loss and other comprehensive
income.
23. Controlled entities
AA Gaskets Pty Ltd
Coventry Group (NZ) Limited
NZ Gaskets Limited (i)
The ultimate parent entity is Coventry Group Ltd.
(i) The company is a 100% controlled entity of AA Gaskets Pty Ltd and operates in New Zealand
Country of
Incorporation
Australia
New Zealand
New Zealand
Ownership interest
2017
%
72.5
100
72.5
2016
%
72.5
100
72.5
(cid:1007)(cid:1005)
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 :
Provision for stock obsolescence
Depreciation and amortisation
Impairment Charge for the year
Other non-cash or non-operating exceptional items
Interest income from other entities
Interest expense
Net (gain) on disposal of property, plant and equipment
Income tax expense/(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
2017
2016
Consolidated
26
26
5
6
(35,539)
(1,821)
7,056
-
-
2,924
3,327
7,868
659
(24)
-
-
(15)
560 17
(610)
10,069
(7,037)
(2,003)
(1,253)
(1,748)
1,561
614
1,055
2,243
2,072
(790)
(3,139)
(560)
(1,280)
(4,979)
(333)
(2,088)
(1,312)
(17)
(547)
(1,876)
Consolidated
2017
2016
1,185,502
1,254,421
79,766
360,073
19,309
20,768
99,570
50,612
61,598
41,533
1,665,418
1,507,733
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
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
2017
2016
1,160,000
4,386,250
655,684
640,973
1,510,613
1,621,243
- 251,593
146,049
1,621,243
-
36,970
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 2017 the balance owing was $114,728 (2016: $1,877,785).
During the year ended 30 June 2017, the Company charged CGL NZ management fees of $1,510,613 (2016: $1,621,243).
(cid:1007)(cid:1006)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
26. Restructuring, impairment and other significant costs
During the prior financial year Coventry Group undertook a 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 2017.
In thousands of AUD
Restructuring, impairment and other significant costs
Redundancy costs
Impairment of assets
Stock obsolescence
(Gain) on sale of motor vehicles per sale and leaseback transaction
Fixed assets disposal and write off
Third party consultants, temporary staff and relocations
Onerous leases and exit costs
Other costs and legal fees
Cyber Attack
Redundancy costs
Costs associated with restructuring of head office employee costs.
Consolidated
2017
850
7,868
7,056
(362)
-
-
-
-
644
16,056
2016
883
-
-
-
35
1,213
10
(290)
-
1,851
Cyber Attack
Represents costs associated with remediation resulting from Cyber Attack event in June 2017.
Impairment of Assets
Consistent with disclosure in the half-year report as at 31 December, 2016, the board reassessed the carrying value of assets in the business and determined a non cash
impairment of $7.9m comprising:
- $2.1m Fixtures and Fittings associated with the leased Perth Warehouse
- $3.5m in fixtures and fittings across the branch network
- $2.3m in Intangibles relating to Software
Stock Obsolescence
The board assessed the carrying value of inventory as at 30 June 2017 with this amount representing the movement in the provision for obsolescence.
Refer note 10.
(Gain) on sale of motor vehicles per sale and leaseback transaction
A profit resulted from the sale of the net book value of motor vehicles as per the sale and leaseback transaction which occurred on the 30 June, 2017.
(cid:1007)(cid:1007)
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2017
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 2017.
Contents of directors' report
Page
35
36
37
37
37
37
37
37
37
38
38
39
40
41
41
41
42
42
42
42
42
43
44
45
51
52
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
10.2
10.3
10.4
10.5
Key Management Personnel (KMPs)
Principles used to determine the nature and amount of compensation
Details of compensation
Service contracts
Executive incentive plan
11.
12.
13.
14.
15.
16.
Environmental regulation
Insurance of officers
Corporate governance
Non-audit services
Lead auditor's independence declaration
Company secretary
17.
Rounding off
Directors' declaration
Lead Auditors Declaration under S307C of the Corporations Act 2001
Independent Auditors Report
Shareholder Information
Corporate Directory
(cid:1007)(cid:1008)
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2017
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
Robert James Bulluss, FCPA, GAICD, B Bus (Acc)
Managing Director
Chief Executive Officer
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
Vicky Papachristos, BE (Chem), MBA, AICD
Independent non-executive director
Member of audit and risk committee
Peter John Batman Caughey, B.Eng, MBA
Managing Director
Chief Executive Officer
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, ASX listed
Reece Australia Ltd, during which time he served as its Chief Financial Officer, Company
Secretary and General Manager, Finance and IT. 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 Bulluss was appointed Chief Executive Officer on 3 May 2017 and Managing Director and
Chief Executive Officer on 29 August 2017. He was previously Chief Finance Officer (CFO) of
the Company from October 2016 to April 2017. Prior to joining the Company he was CFO for
over 15 years for the Australasian division of Bunzl plc.
Mr Bulluss is also a Non-Executive Director for the privately owned Allpower Industries Pty Ltd.
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.
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.
She held no other listed company directorships during the past 3 financial years.
Ms Papachristos resigned as Director on 28 July 2017.
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.
He held no other listed company directorships during the past 3 financial years.
Mr Caughey resigned as Director and Chief Executive Officer on 30 March 2017.
(cid:1007)(cid:1009)
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2017
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:
NG Cathie
KR Perry
NJ Willis
RJ Bulluss
Number of
Ordinary Shares
72,200
30,000
5,400
-
During the 2016/17 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:
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 2017, and the number of meetings attended by each director.
(cid:69)(cid:39)(cid:3)(cid:18)(cid:258)(cid:410)(cid:346)(cid:349)(cid:286)
(cid:69)(cid:58)(cid:3)(cid:116)(cid:349)(cid:367)(cid:367)(cid:349)(cid:400)
(cid:115)(cid:3)(cid:87)(cid:258)(cid:393)(cid:258)(cid:272)(cid:346)(cid:396)(cid:349)(cid:400)(cid:410)(cid:381)(cid:400)
(cid:60)(cid:90)(cid:3)(cid:87)(cid:286)(cid:396)(cid:396)(cid:455)
(cid:87)(cid:58)(cid:17)(cid:3)(cid:18)(cid:258)(cid:437)(cid:336)(cid:346)(cid:286)(cid:455)
Board of Directors
Audit & Risk Committee
Remuneration Committee
Held
Eligible to attend
Attended
Held
Eligible to attend
Attended
Held
Eligible to attend
Attended
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1011)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1005)(cid:1004)
(cid:1011)
(cid:1007)
(cid:882)
(cid:1007)
(cid:1007)
(cid:882)
(cid:1007)
(cid:882)
(cid:1007)
(cid:1007)
(cid:882)
(cid:1007)
(cid:882)
(cid:1007)
(cid:1007)
(cid:882)
(cid:1006)
(cid:1006)
(cid:882)
(cid:1006)
(cid:882)
(cid:1006)
(cid:1006)
(cid:882)
(cid:1006)
(cid:882)
(cid:1006)
(cid:1005)
(cid:882)
(cid:1006)
(cid:882)
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, importation and distribution of automotive and industrial gaskets.
There have been no changes to the principal activities of the Group during the year ended 30 June 2017.
(cid:1007)(cid:1010)
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2017
3. Consolidated results
Results of the Group for the year ended 30 June 2017 were as follows:
In thousands of AUD
Revenue from sale of goods
Loss before tax
Income tax (expense)/benefit
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
4. Dividends
2017
2016
169,146
(25,470)
(10,069)
(35,539)
(36,127)
588
(35,539)
176,784
(3,074)
1,253
(1,821)
(2,867)
1,046
(1,821)
There were no dividends paid or declared by the Group to members for the year ended 30 June 2017 (2016: $Nil).
5. Review of operations and results
People
The Group had no Lost Time Injuries during the year which is an excellent result. A newly appointed Group Health and Safety Manager will continue to drive improvement in our Health, Safety and Well Being systems. Our priority has
always been safety first.
The Executive Leadership Team, Senior Management and Human Resources are committed to implementing our new values and improving employee retention.
Financial performance
$m
Revenue (from continuing operations)
(Loss)/Profit before income tax
(Loss)/Profit after tax
NTA per share
Basic loss per share (cents)
n/m = not meaningful
Significant items
Significant items $m
Full year to
30.06.17
Full year to
30.06.16
% change
169.1
-25.5
-35.5
1.30
-95.6
176.8
-4.30%
-3.1
-1.8
2.03
-7.6
n/m
n/m
-36.00%
n/m
1H17
2H17
FY17
Restructuring/Redundancy costs
0.4 0.5 0.9
Provision for Stock Obsolescence/stock adjustments
- 7.1 7.1
Cyber Attack Provision
- 0.6 0.6
De-recognition of Deferred Tax Asset
6.9 2.0 8.9
Impairtment Adjustments
Profit on sale of motor vehicle fleet
Total significant items
Review of businesses
Trade Distribution
7.9 - 7.9
-
-0.4
-0.4
15.2 9.8 25.0
TD sales were down year on year by 10.6%. We are seeing positive signs in daily sales run rates early in FY18 as market conditions improve and implementation of our revised strategy begins to impact on performance.
Cooper Fluid Systems
CFS sales were up on prior year by 1.7% and the business has had very strong growth in the past three months. The business is investing in additional equipment and recruiting service technicians to manage current growth and
opportunities. The business contributed $2.6m.
Investments/Other
AA Gaskets
CGL’s 72.5% investment in AAG continued to improve during 2017. Sales growth of 19.8% was achieved during the year and the business paid dividends to CGL of $1.2m.
6. Earnings per share
Basic loss per share for the year ended 30 June 2017 was 95.7 cents. This compares to a basic loss per share of 7.6 cents for the previous year.
7. Significant change in the company's affairs
The directors are not aware of any significant change in the Group’s state of affairs that occurred during the financial year not otherwise disclosed in this report or the consolidated accounts.
8. Events subsequent to reporting date
The directors are not aware of any matter or circumstance having arisen since the end of the financial year and the date of this report that has significantly affected, or may significantly affect the operations of the Group, the results of those
operations, or the state of affairs of the Group, in future financial years.
9. Likely developments
Complete the restructure plan and continue to operate in the markets in which it currently participates.
(cid:1007)(cid:1011)
Coventry Group Ltd
Directors’ report
For the year ended 30 June 2017
10. Remuneration report - audited
Remuneration is referred to as compensation throughout this remuneration report.
10.1 Key Management Personnel ( KMPs )
KMPs are the persons who have authority and responsibility for planning, directing and controlling the activities of the Company and the Group.
The following were KMPs of the Group at any time during the reporting period and unless otherwise indicated were KMPs for the entire period:
Non-executive directors
KR Perry
NG Cathie
NJ Willis
V Papachristos (resigned 28 July 2017)
Executives
Executive directors
PJB Caughey, CEO & Managing Director (resigned 30 March 2017)
Robert Bulluss, Chief Executive Officer and Managing Director (appointed CFO 18 October 2016, appointed acting CEO 30 March 2017, appointed CEO 3 May 2017, appointed CEO and Managing Director 29 August 2017)
Joe Nicolazzo, Chief Financial Officer (CFO) (appointed 21 September 2015, resigned 1 September 2016)
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 2017 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
2017
2016
$
$
127,500
85,000
15,000
5,000
5,000
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 60% 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.
(cid:1007)(cid:1012)
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Coventry Group Ltd
Directors’ report (continued)
For the year ended 30 June 2017
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:
(cid:3)
Robert Bulluss, CEO and Managing Director (appointed CEO 3 May 2017, appointed CEO and Managing Director 29 August 2017)
(cid:882) The contract has no fixed term.
(cid:882) Fixed annual compensation to be reviewed annually by the Remuneration Committee.
(cid:882) Long service leave is payable by the Company in accordance with relevant state legislation.
(cid:882) The contract provides for participation in short-term and long-term incentive plans.
(cid:882)
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.
(cid:1008)(cid:1004)
Coventry Group Ltd
Directors’ report (continued)
For the year ended 30 June 2017
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. In January 2017, the
200,000 fully paid ordinary shares were returned to the company in satisifaction of the non-recourse loan. The shares were cancelled. Mr Caughey resigned his position on 30 March
2017.
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:
Directors
KR Perry
NG Cathie
NJ Willis
PJB Caughey (resigned 30 March 2017)
RJ Bulluss
V Papachristos (resigned 28 July 2017)
Held at
30 June 2016
Held on
appointment
Purchases
Sales /
Cancelled
Held at
Resignation/
Retirement
Held at
30 June 2017
30,000
72,200
5,400
300,176
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(200,000)
-
-
-
-
-
100,176
-
-
30,000
72,200
5,400
N/A
-
-
No other key management person held shares, directly, indirectly or beneficially, in the Company at 30 June 2017 (2016: Nil).
11. Environmental regulation
The Group is not subject to any specific environmental regulation.
The Group mainly operates warehousing and distribution facilities throughout Australia and New Zealand which have general obligations under environmental legislation of the respective
statutory authorities in relation to pollution prevention.
The Company has reviewed its obligations under the National Greenhouse & Energy Reporting Act 2007 (the Act). As the Group is under the minimum greenhouse and energy
thresholds stipulated in the Act, there are no registration and reporting requirements that have to be complied with as at the date of this report.
For the financial year ended 30 June 2017 and as at the date of this report, the Group has not been prosecuted nor incurred any infringement penalty for environmental incidents.
12. Insurance of officers
During the financial year the Company has paid premiums in respect of contracts insuring the directors and officers of the Company against certain liabilities incurred in those capacities.
The contracts prohibit further disclosure of the nature of the liabilities and the amounts of the premiums.
(cid:1008)(cid:1005)
Coventry Group Ltd
Directors’ report (continued)
For the year ended 30 June 2017
13. Corporate governance
The Statement of Corporate Governance Practices is disclosed on the company's website.
14. Non-audit services
During the year KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties. The Board has considered the non-audit services provided
during the year by the auditor and is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor
independence requirements of the Corporations Act 2001, for the following reasons:
all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Company’s Audit and Risk Committee to ensure
they do not impact the integrity and objectivity of the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants , as they
did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly
sharing risks and rewards.
•
•
Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non-audit services provided during the year are set out in Note 3 to the full
financial report.
15. Lead auditors independence declaration
The lead auditor’s independence declaration made in accordance with Section 307C of the Corporations Act 2001 forms part of this directors’ report.
16. Company secretary
Mr Christopher Lloyd was appointed to the position of Company Secretary in October 2015 following the resignation of Mr Keith Smith.
Mr Robert Bulluss was appointed to the position of Company Secretary in November 2016 following the resignation of Mr Christopher Lloyd.
Ms. Angela Donaldson and Ms. Beatrice Silva were appointed to the position of Company Secretary in May 2017 following the appointment of Mr Robert Bulluss as CEO.
Ms Beatrice Silva resigned as company secretary in August 2017.
17. Rounding off
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and in accordance with that Class Order, amounts in the
financial report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.
Signed in accordance with a resolution of the directors.
N.G. CATHIE
Chairman
Melbourne
29 August 2017
R.J. BULLUSS
CEO and Managing Director
Melbourne
29 August 2017
(cid:1008)(cid:1006)
Directors’ declaration
1. In the opinion of the directors of Coventry Group Ltd (“the Group”):
(a)
the financial statements and notes, and the remuneration report in the directors' report, set out on pages 31 to 33, are in
accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of their performance, for the financial year
ended on that date; and
(ii)
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001;
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a) of the full financial
report;
(c)
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.
2.
The directors have been given the declarations by the chief executive officer and chief financial officer for the financial year ended 30 June
2017 pursuant to Section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors.
N.G. CATHIE
Chairman
Melbourne
29 August 2017
ROBERT BULLUSS
CEO and Managing Director
Melbourne
29 August 2017
(cid:1008)(cid:1007)
Shareholder Information
As at 23 August 2017
TWENTY LARGEST SHAREHOLDERS
Name
1
2
3
4
5
6
7
8
9
10
10
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ONE MANAGED INVT FUNDS LTD
DORSETT INVESTMENTS PTY LTD
MRS ANNE KYLE
DEVADIUS PTY LTD
NATIONAL NOMINEES LIMITED
ELLAND ROAD PTY LTD
ARUMA BEACH PTY LTD
GARSIND PTY LTD
TPSC SMIRK PTY LTD
DAVID NEWNHAM SUPER PTY LTD
CITICORP NOMINEES PTY LIMITED
FFSF ASSET MANAGEMENT PTY LTD
BUDUVA PTY LTD
MR GEOFFREY KYLE
MRS JUDITH ANNE SMIRK
DISTRIBUTION OF SHAREHOLDING
Size of Holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Ordinary Shares
Number
5,652,660
4,674,140
1,668,714
1,356,660
1,000,000
836,619
820,642
442,000
415,000
400,000
400,000
377,000
361,208
360,902
350,000
349,539
347,248
325,000
320,000
206,663
20,663,995
Number of
holders
1,745
834
245
330
42
3,196
% of Total
15.02
12.42
4.43
3.60
2.66
2.22
2.18
1.17
1.10
1.06
1.06
1.00
0.96
0.96
0.93
0.93
0.92
0.86
0.85
0.55
54.90
%
54.60
26.10
7.67
10.33
1.31
100.00
Number of
shares
608,427
2,165,144
1,814,579
9,339,516
23,708,813
37,636,479
%
1.62
5.75
4.82
24.82
62.99
100.00
Unmarketable parcels field information:
Minimum Parcel Size
562
Holders
1,484
Units
401,028
SUBSTANTIAL SHAREHOLDERS
The Company's register of substantial shareholders showed the following particulars as at 23 August 2017.
Name of Substantial Shareholder
Viburnum Funds Pty Ltd
Intrepid Capital Management Inc
Sandon Capital Investments Lty Ltd
Extent of
Interest
(Number of
Shares)
4,485,296
2,820,026
2,297,056
Date of last
notification
31.07.2017
03.07.2017
22.03.2016
(cid:910)(cid:94)(cid:272)(cid:346)(cid:396)(cid:381)(cid:282)(cid:286)(cid:396)(cid:3)(cid:47)(cid:374)(cid:448)(cid:286)(cid:400)(cid:410)(cid:373)(cid:286)(cid:374)(cid:410)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:47)(cid:374)(cid:448)(cid:286)(cid:400)(cid:410)(cid:381)(cid:396)(cid:400)(cid:3)(cid:68)(cid:437)(cid:410)(cid:437)(cid:258)(cid:367)(cid:3)(cid:272)(cid:286)(cid:258)(cid:400)(cid:286)(cid:282)(cid:3)(cid:410)(cid:381)(cid:3)(cid:271)(cid:286)(cid:3)(cid:400)(cid:437)(cid:271)(cid:400)(cid:410)(cid:258)(cid:374)(cid:410)(cid:349)(cid:258)(cid:367)(cid:3)(cid:400)(cid:346)(cid:258)(cid:396)(cid:286)(cid:346)(cid:381)(cid:367)(cid:282)(cid:286)(cid:396)(cid:400)(cid:3)(cid:282)(cid:437)(cid:396)(cid:349)(cid:374)(cid:336)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:296)(cid:349)(cid:374)(cid:258)(cid:374)(cid:272)(cid:349)(cid:258)(cid:367)(cid:3)(cid:455)(cid:286)(cid:258)(cid:396)(cid:856)
UNQUOTED EQUITY SECURITIES
(cid:69)(cid:349)(cid:367)(cid:3)
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
51
Corporate Directory
Coventry Group
ABN 37 008 670 102
Registered and Principal Administrative Office
235 Settlement Road,
Thomastown, Victoria 3074
Postal Address
P O Box 526
Thomastown, Victoria 3074
Website
www.cgl.com.au
Secretary
Angela Donaldson
Bankers
Australian and New Zealand Banking Group Limited
Scottish Pacific Business Finance Pty Ltd
Auditors
KPMG
Tower Two
Collins Square
727 Collins Street
Melbourne, Victoria 3008
Share Registry
Computershare Investor Services Pty Ltd
Level 11 172 St Georges Terrace
Perth Western Australia 6000
or
GPO Box 2975
Melbourne, Victoria 3000
Telephone from within Australia: 1300 763 414
Telephone from outside Australia: +(61) 3 9415 4000
Fascimile: +(61) 3 9473 2500
Email: web.queries@computershare.com.au
Website: www.investorcentre.com/au
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 Addess
Shareholders wishing to enquire about their shareholdiongs, dividend payments, or change
their address should contact the Company's share registry.