ABN 37 008 670 102
Results for announcement to the market
Full Year Ended 30 June 2018
Revenues from continuing operations
Loss before interest, taxes, depreciation and
amortisation from continuing operations
Loss before tax from continuing operations
Net profit after tax from continuing and
discontinued operations attributable to members
Dividends (distributions)
Final dividend
Date the dividends are payable
Record date for determining entitlements to the
dividends
Amount of dividend per security
Final dividend current year
previous year
Interim dividend current year
previous year
Special dividend previous year
(paid in each financial previous year
year)
Total dividend current year
previous year
Dividend reinvestment plan (DRP)
The Company’s DRP remained suspended.
Net Tangible Assets Per Security
As at 30 June 2018
As at 30 June 2017
Up
Up
Up
Up
11.7% to
168,739
N/A
N/A
N/A
(5,438)
(7,275)
5,651
Amount per security
Franked amount per security
Nil
N/A
N/A
Amount per
security
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Franked amount per
security at 30% tax
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1.30
1.30
For an explanation of the figures reported above see the attached commentary.
The attached financial statements and Directors’ declaration have been subject to an independent audit review.
ANNUAL REPORT
2018
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INTEGRITY
PROFESSIONALISM
Coventry Group Ltd and its controlled entities
Contents
Chairman's Report
Chief Executive Officer's Report
Consolidated statement of profit or loss
Consolidated statement of 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. Discontinued operation
4. Auditor's remuneration
5. Employment costs
6. Finance income and finance expenses
7. Taxes
8. Earnings per share
9. Cash and cash equivalents
10. Trade and other receivables
11.
Inventories
12. Parent entity disclosures
13. Property, plant and equipment
14.
15.
Intangible assets
Impairment of non-financial assets
16. Trade and other payables
17.
Interest-bearing loans and borrowings
18. Employee benefits
19. Share-based payments
20. Provisions
21. Capital and reserves
22. Financial risk management
23. Operating leases
24. Controlled entities
25. Reconciliation of cash flows from operating activities
26. Related parties
27. 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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57
58
Chairman’s Report
2018 has been a year of improving fortunes for the Group under the first full year of leadership by our CEO and Managing Director,
Robert Bulluss who was appointed in May 2017. Throughout 2018 Robert and his Executive Leadership Team have set about restoring
confidence in the business at the same time implementing a wide-ranging programme of manageable disruption touching many parts
of its operations. This has been particularly confronting in the Trade Distribution Australia business but the disruption was overdue and
the urgency necessary due to very poor financial results on the back of declining sales over many years and a very high cost base.
Pleasingly 2018 has seen four (4) quarters of Group quarter on quarter sales growth with all businesses, including Trade Distribution
Australia, producing positive sales growth in all quarters. Cooper Fluids has had a very strong and profitable 2018, is well led, has a
great team and is benefiting from the increased activity in the resources sector. Trade Distribution New Zealand, also well led and with
a strong team, had solid growth in 2018 and is a constant reminder of what is achievable in the Trade Distribution Australia business
with the right leadership and disciplines. The divestment of the AA Gaskets business was completed on 1 December 2017 and the
CEO will expand on the details of the divestment and the implications for the broader group.
Whilst we can be pleased with sales growth, the Board and management are keenly aware the Group is yet to return to profitability.
With 2017 as the base period (excluding AA Gaskets), there has been an underlying EBIT improvement in the order of $6.4M in 2018
on the back of a host of initiatives covering, but not limited to, sales growth, margin management, service improvement, cost control,
productivity improvement, procurement, inventory management and people development. All our plans are geared to a return to modest
Group profitability in 2019. Achievement of that goal would represent an EBIT turnaround in the order of $13.0M from 2017 and we
expect would provide great encouragement to those shareholders who have continued to support the business through what have been
some very difficult years. It would also provide great satisfaction to those working so diligently on the turnaround within the business
and serve as a solid foundation for further improvement in 2020. An important factor in a return to Group profitability in 2019 is achieving
a breakeven or better result from Trade Distribution Australia. This is a big challenge for our team but the turnaround plans are being
diligently implemented and the performance from Trade Distribution New Zealand is proof that with the right customer value proposition
and cost base the Australian business, over time, can similarly perform.
Further changes occurred in senior management ranks during 2018. Mr Rod Jackson was appointed Chief Financial Officer on 25
September 2017. Rod and Robert have worked with each other before so we are very pleased to have them again working together
at Coventry where the many challenges will require their experience and close collaboration. In January 2018 Ms Tracey Gibbons was
appointed General Manager of People, Safety, Wellness & Quality and is a member of the Executive Leadership Team. Tracey is an
experienced and qualified Human Resources, Health, Safety, Environmental and Quality Strategy professional with relevant experience
across a diverse range of businesses over a 25 year career. In the second half Mr Mark Page stepped down from the role of General
Manager of Trade Distribution in Australia. Mark now has responsibility for the Southern Region which is the least profitable of the
Australian regions and requires the most work. In the short term the Executive Leadership Team as a group is providing hands-on
oversight of the Australian trade business and to date this is having a material impact on its turnaround.
Since the changes noted in my last report there have been further changes at Board level. Mr Ken Perry retired at the conclusion of
the 2017 Annual General Meeting having served as an independent non-executive Director since 2009. As announced on 22
September 2017, Mr Andrew Nisbet joined the Board on 1 October 2017 and on 24 August 2018 we announced Mr James Todd would
be joining the Board effective 3 September 2018. The current state of the business has required a very agile and hands-on Board and
for a large part of 2018 a Board size of three (3) has been appropriate. The addition of Mr Todd to the Board will see it return to its
optimum size.
As announced on 22 September 2017, the Board reduced 2018 cash based non-executive Director fees in the order of 30%. At the
2017 Annual General Meeting shareholders approved an Executive and Director Incentive Plan and, further to the reduction in cash
based Director fees, approved the awarding of Performance Rights to the two (2) non-executive Directors. It was envisaged that with
the permanent reduction in cash based fees in the order of 30%, the awarding of Performance Rights to non-executive Directors would
continue into subsequent years, subject to shareholder approval at each Annual General Meeting of the Company. The non-executive
Directors have determined it is in the best interests of the Company that they do not further participate in the Executive and Director
Incentive Plan until the Group returns to profitability and that the permanent reduction in cash based fees remains in place. As a
consequence, there will be no approval sought at the 2018 Annual General Meeting of the Company for the awarding of Performance
Rights to non-executive Directors.
The Executive and Director Incentive Plan approved at the 2017 Annual General Meeting of the Company provides for the granting or
issuing of performance rights to eligible Executives in accordance with its terms and subject to the terms and performance hurdles set
by the Board. Mr Bulluss’s total remuneration includes a Plan award and, as required by the ASX Listing Rules, the Company will seek
shareholder approval to grant him Performance Rights for his participation in the Plan for 2019. Full particulars will be published in the
Notice of Annual General Meeting for the meeting to be held on 25 October 2018.
A minimum holding share buy-back for holders of unmarketable parcels of shares in the Company, announced on 7 December 2017
was completed on 23 January 2018. Of the eligible parcels held at that date, a total of 336,075 ordinary shares were acquired and
cancelled for a total amount paid of $373,315. The number of shareholders reduced by 1,290 to 1,784 at that time. The Company
expects to benefit from the reduction of associated administration and share registry costs.
In Australia there has been some consolidation of the Trade Distribution branch network in order to build scale in a number of existing
branches whilst exiting locations which were too small and were trading unprofitably. The CEO provides specific detail in his report.
Branch greenfield opportunities are now back on the agenda with new branch openings planned for Australia in 2019 and beyond.
Although our network in Australia provides good coverage, there is considerable opportunity for new store growth in all states. Our
current plans require steady growth to be funded internally via a return to profitability and improved working capital management.
In New Zealand the Trade Distribution branch network expanded by two (2) during the year and we believe there are further
opportunities to grow the network through greenfield and/or acquisition opportunities.
3
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 difficult Perth property market. We are encouraged by
signs of improvement in the Perth market and the increased levels of inquiry for sub-tenancies however we will experience a shortfall
in rental income in 2019 whilst lower rental rates are being achieved and space remains unfilled. This matter continues to be actively
managed, supported by local real estate resources.
The Group continues to have a strong working capital position with Current Assets exceeding Current Liabilities by $47.2M including a
cash balance of $5.0M. The Group had no debt at the end of the financial year.
On behalf of the Board my sincere thanks go to the CEO, the senior leadership team and all our colleagues throughout the business
for their hard work and commitment to the turnaround efforts underway at Coventry.
Outlook
As stated earlier, all our plans are geared to a return to modest Group profitability in 2019. That outcome will require measured,
considered and timely execution of those plans and the markets in which we operate to remain buoyant.
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
4
Chief Executive Officer’s Report
The Group’s performance improved in FY18 and is progressing to plan towards sustainable profitable growth. I am pleased to advise
that at the end of year 1 of a 5 year strategy our plans are largely delivering the results we expected. Our focus on the customer by
providing service excellence through quality products, stock availability, expertise and agility is delivering the sales growth that is
underpinning the improved results. An independent customer survey in July provided proof of our service improvements with an
increase in Customer Net Promoter Score to 33.9% from 4.3% 12 months earlier. Focus on our people has delivered, in a recent
internal employee engagement survey, an improvement of 40.2 points in the Net Promoter Score on the previous survey.
The health, safety and wellbeing of our people is valued first and foremost. During the year, we had 8 Lost Time Injuries (LTI’s) and
whilst all people returned to work in a short time frame, we are disappointed in this result. Our aspiration is for zero LTI’s and we are
implementing quality programs that will deliver continual improvement to our health and safety systems to achieve this goal. We are
also focussed on improving the culture in our business and delivering on our core values of Respect, Fairness, Teamwork,
Professionalism and Integrity.
Our experienced Executive Leadership Team (ELT) works collaboratively utilising its broad experience to deliver positive commercial
and financial outcomes for the Group. During the year the team has been strengthened with the appointments of Rod Jackson (Chief
Financial Officer) and Tracey Gibbins (General Manager – People, Safety, Well Being and Quality). Bruce Carter (General Manager –
Cooper Fluid Systems) and Mike Wansink (General Manager – Trade Distribution New Zealand) have a wealth of experience with the
Group, are integral members of the ELT and are involved in all key decisions for the Trade Distribution Australia (TDA) turnaround. In
the short term the Executive Leadership Team is taking a hands-on approach managing the TDA business. This has been important,
because as the Chairman noted, we have needed to implement substantial disruptive change in the Group, and in particular throughout
the TDA business. This level of disruption has proven to be more manageable when implemented by our experienced senior
management team working together.
We have made steady progress with the turnaround of the TDA business. The business will be returned to sustainable profitable
growth through profitable sales growth on the back of our quality service and value proposition, improving the TDA network, productivity
improvements and by reducing the size and cost of our Distribution Centres.
Both Cooper Fluid Systems (CFS) and Trade Distribution New Zealand (TDNZ) had excellent years with very strong sales growth
delivering significant increases in their contribution to the Group. Corporate costs were also reduced during the year.
We previously communicated the completion during the year of the sale of the AA Gaskets business to GUD Holdings following a
strategic decision to focus on our two core industrial supply businesses. The sale was a positive for the Group and shareholders and
enabled us to eliminate debt and free up cash for a minimum holding share buy-back and investment in our core businesses.
As we return TDA to profitability and improve support functions, our attention is turning to additional opportunities for growth. Organic
growth and acquisition opportunities exist for all business units and these will be carefully considered as and when presented.
We remain fully focussed on our Customers and People, applying our values of Respect, Fairness, Teamwork, Professionalism and
Integrity.
Business Performance
Group financial performance improved during the year. Sales growth was achieved year on year and in every quarter for the year in
all business divisions including TDA. Daily sales run rates continued to improve in all business divisions.
Group sales for the full year were up 11.7% on the previous year with fourth quarter year on year growth at 13.6%. Group sales
(excluding AA Gaskets) for the year were $168.7m ($151.0m FY17). The underlying loss for FY18 was $6.1m, compared to an
underlying loss for FY17 of $12.5m (excluding the discontinuing operations of AA Gaskets). This is a $6.4m improvement on the
previous year and is aligned with our plans to return to Group profitability in 2019, being the end of year 2 of our 5 year strategy. The
reported loss for the year from continuing operations was $8.3m ($37.7m loss FY17).
At 30 June 2018 the Group had cash of $5.0m with no debt.
Performance by Division
Trade Distribution (TD)
TD sales for the year were up 6.6% on the prior year and up 10.0% year on year for the fourth quarter. The underlying loss for TD was
$3.0m compared to $5.2m in FY17.
Trade Distribution Australia (TDA)
TDA continued to show improvement with fourth quarter sales year on year up 6.1% and full year sales year on year up 3.5%. TDA’s
contribution loss in FY18 of $6.1m compared to a $7.5m loss in FY17, whilst an improvement, only underlines the depth of issues that
have developed over time in this business and the magnitude of the task of returning it to at least breakeven in FY19 in accordance
with our plans. Contribution improvements from sales growth and cost reductions from the Distribution Centre (DC) rationalisation
program were partly offset by investment in resources and equipment in the branch network and non-recurring costs in relation to
branch closures and mergers as we reset the trade distribution strategy.
Sales growth is occurring as a result of improving our value proposition, specifically:
• Sale of quality products from our local suppliers and own brand imported range. We have improved our relationships with our key
suppliers and are continuing to implement a directional buying and selling strategy focussed on fastening systems and cabinet
hardware systems combined with complementary products.
5
• Significantly improving our stock availability and DIFOT levels in the branch network with a focus on stocking what each branch
sells based on the markets the branch operates in. Stock availability has improved to over 95% in nearly all branches from an
average of 75% 12 months ago. Our target is 98%.
Increasing our capability in the branch network by ensuring we have an appropriate level of qualified resources and service delivery
agility.
Increasing the level of expertise in the business through recruitment and training.
•
•
As noted by the Chairman, Mark Page stepped down from the TDA General Manager role during the year and is now having a positive
impact leading and turning around performance in the Southern Region. Jarrod Taylor (ex Laminex, Rexel) joined the business early
in the year as Regional Manager for NSW and with a focus on customer and sales growth, has in a short time had a significant positive
impact on the regions results. Jarrod has also recently taken over responsibility on a national basis for our Artia cabinet hardware
systems product category having had previous experience in this market. In July 2018, Peter Shaw (ex Wesfarmers Industrial & Safety;
Total Fasteners) joined the business as Regional Manager for Queensland adding extensive fastener and industrial supply experience
to the team. Jerry Field continues to lead our business in WA and now has responsibility for NT.
We have largely completed the consolidation of our branch network in Australia with a number of branch mergers and closures taking
place during FY18 in order to provide scale benefits and improved service levels.
Consolidation of branches has occurred in the following locations:
Inner City Brisbane was merged into Morningside.
• Gympie and Caloundra were merged into Sunshine Coast.
•
• Geebung and North Brisbane were merged into a new larger location in Brendale.
•
Thomastown was merged into Campbellfield.
Branch closures have occurred in Coffs Harbour and Wodonga where material losses were occurring. In FY19 we are planning to
open three new branches. Our Tamworth branch has recently been relocated to a larger facility that will cater for growth in this region.
We are assessing options to relocate other facilities where the size or location of the branch does not support strong sales growth. We
are also systematically improving the layout, merchandising, signage and equipment in the branch network. Investment has been
made in operating leases for delivery vehicles to enable branches to provide an agile delivery service in addition to the use of third
party couriers.
Significant progress has been made reducing the cost of our expensive DC network with further plans for cost reductions in FY19. Our
DC operations in Sydney and Adelaide have been downsized to large branches and a project to downsize the Brisbane DC is underway.
Outside storage in Brisbane and Sydney for excess inventory has now been eliminated providing savings to the Group in FY19. Once
complete the number of DC’s will be reduced to two (Thomastown and Redcliffe) with their primary function being to receive and
distribute imported products. Annualised savings to date flowing from these changes are in the order of $3M which will be fully realised
in FY19 and, as stated above, more savings are planned.
Trade Distribution New Zealand (TDNZ)
Under the leadership of Mike Wansink and his management team, TDNZ had an excellent year with sales up 15.1% on last year with
highlights including growth in the construction industry and the opening of two new branches. TDNZ is the leading fastening systems
business in the construction and roofing and cladding markets in New Zealand and has good growth prospects. Profit contribution in
FY18 of $3.1m compared to $2.3m in FY17.
The new branches opened in Mount Maunganui and Timaru are both performing well.
Future growth will come from a combination of organic sales growth, the potential for branches in new locations and the potential
acquisition of profitable businesses in New Zealand. We also expect to relocate our construction branch in Auckland to a larger facility.
TDNZ is an example of what can be achieved in Australia. The business employs sensible business practices that we are replicating
in TDA.
Cooper Fluid Systems (CFS)
Under the leadership of Bruce Carter and his management team, CFS had an outstanding year. CFS had substantial growth with full
year sales growth of 20.9%. Sales growth is continuing to be driven by an increase in service, maintenance, upgrade and new
equipment activity in the resources sector. Profit contribution in FY18 of $5.0m compared to $2.6m in FY17.
We expect continuing sales and contribution growth in CFS in FY19. Future sales growth will come organically by expanding our
product and service offering, potential greenfield expansion and acquisitions. Activity in the mining and resources sector is continuing
to increase and we expect strong market conditions to continue for the coming years. We are conscious of the exposure CFS has to
the mining and resources cycle and accordingly our acquisition focus is on businesses with a diversified customer base outside of the
mining and resources sector. CFS is an excellent profitable business well positioned to integrate acquisitions.
6
Trade Distribution Australia Strategic Plan
Our aim is for TDA to be the premier Trade Distribution fastening systems supplier in Australia. Our sales growth strategy comprises
the following principles:
• Organic sales growth in Konnect and Artia driven by delivery of our value proposition of quality products, stock availability, expertise
and agility, supported by additional sales resources and business development capability across the branch network.
• Growth through new branch openings based on our revised trade distribution model.
•
•
• Potential acquisitions.
Increasing our share of the construction market.
Investing in e-commerce capabilities.
Other key activities include:
• Directional buying and selling where we buy what we sell by branch, focussed on fastening systems and cabinet hardware systems
combined with complementary products sourced through preferred suppliers.
• Continuing to invest in the branch network ensuring each branch has the right resources, delivery capability and appropriate store
•
layouts.
Introducing a structured approach to understanding and improving customer profitability typically by introducing more mutually
beneficial trading practices.
• Continued rollout of the DC optimisation project aimed at delivering material operating cost savings to TDA and the Group.
• Reducing inventory (excess and slow-moving stock) and improving stock turns.
•
Improving the branch control environment within a “model” branch concept.
• Using technology including EDI, e-commerce and improving the capabilities of our Oracle ERP system to achieve productivity gains.
•
Increasing the capability of our people through improved recruitment systems, training and development and succession planning.
Branch closures and mergers completed in the second half of FY18 and savings from the DC optimisation project will have a positive
impact on earnings in FY19.
Corporate Costs
Corporate costs were reduced during the year and remain under constant review. Our aim is to deliver productivity gains using
technology so that as sales grow, modest additional corporate costs are required. Corporate costs are currently running at 4.8% of
sales and we will continue to report this number over time in support of our continuing tight control of these costs.
Working Capital
Net assets of $60.6m compared to $61.6m in FY17. Reducing working capital to maximise cash generation is a key focus area for the
Group.
During FY18 we successfully relocated our Accounts Receivable function to Melbourne from Queensland. The new smaller and more
experienced credit team are already delivering a more efficient and cost effective credit function to the Group.
Inventory levels remained high in FY18 due to a focus on improving stock availability in the TDA branch network and the need for
additional inventory to manage the rapid sales growth in CFS. Detailed plans are being implemented to reduce excess and slow-
moving stock in FY19.
Capital expenditure continues to be tightly controlled.
Outlook
Our markets are performing well and we are seeing signs of improvement in the Western Australian economy. We remain confident
that all business units will continue to grow and deliver sustainable profitable growth. Pleasingly the strategy we set for TDA is delivering
largely as planned so we are confident our current direction is the right one.
I would like to acknowledge the support we have received from the Board and thank the Executive Leadership team and every person
in the Group for their contribution during the year. Their efforts have resulted in a material change in the FY18 result and the future
prospects for the Group following years of decline in business performance. We remain confident that our strategy will deliver
sustainable profitable growth with all plans geared to a return to Group profitability in FY19
Robert J Bulluss
Chief Executive Officer and Managing Director
7
Coventry Group Ltd and its controlled entities
Consolidated statement of profit or loss
For the year ended 30 June 2018
Continuing operations
Revenue from sale of goods
Cost of sales
Gross profit
Other income
Employment costs
Depreciation and amortisation expense
Occupancy costs
Communication costs
Freight
Vehicle operating costs
Restructuring, 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 (expense)/income
Loss before income tax
Income tax (expense)/benefit
Loss for the year from Continuing Operations
Discontinued operation
Profit from Discontinued operation, net of tax
Profit/(loss) for the year from Continuing and Discontinued operation
Profit/(loss) attributable to:
Owners of the Company
Non-controlling interests
Note
5
27
6
6
6
7
3(b)
Earnings/(loss) per share:
Basic loss from Continuing operations per share:
Diluted loss from Continuing operations per share:
Basic earnings/(loss) from Continuing and Discontinued operation per share:
Diluted earnings/(loss) Continuing and Discontinued operation per share:
8
8
8
8
2018
$’000
168,739
(106,535)
62,204
5,676
(42,702)
(1,337)
(10,056)
(2,705)
(5,686)
(1,446)
(443)
(10,033)
(6,528)
9
(756)
(747)
(7,275)
(1,026)
(8,301)
14,278
5,977
Restated*
2017
$’000
151,027
(94,751)
56,276
4,390
(40,437)
(2,777)
(10,063)
(2,302)
(5,796)
(1,606)
(15,445)
(10,144)
(27,904)
20
(743)
(723)
(28,627)
(9,052)
(37,679)
2,140
(35,539)
5,651
326
(36,127)
588
(22.1 cents)
(22.1 cents)
15.1 cents
15.1 cents
(99.8 cents)
(99.8 cents)
(95.7 cents)
(95.7 cents)
The consolidated statement of profit or loss is to be read in conjunction with the accompanying notes to the consolidated financial
statements.
* Comparative information for the year ended 30 June 2017 has been restated for the effects of the application of AASB 5 Non-
current Assets Held for Sale and Discontinued Operations following the disposal of the AA Gaskets business. The consolidated
statement of comprehensive income, consolidated statement of financial position, the consolidated statement of changes in equity
and consolidated statement of cash flows for this period is not required to be restated. Refer to Note 3 ‘Discontinued Operation’
to the financial statements.
8
Coventry Group Ltd and its controlled entities
Consolidated statement of comprehensive income
For the year ended 30 June 2018
Note
Profit/(loss) for the year from Continuing and Discontinued operation
Other comprehensive (loss)/income
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 profit/(loss) for the year
Total comprehensive profit/(loss) attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive profit/(loss) for the year
2018
$’000
5,977
(842)
236
(606)
5,371
5,071
300
5,371
2017
$’000
(35,539)
(595)
36
(559)
(36,098)
(36,672)
574
(36,098)
The consolidated statement of comprehensive income is to be read in conjunction with the accompanying notes to the consolidated
financial statements.
9
Coventry Group Ltd and its controlled entities
Consolidated statement of financial position
As at 30 June 2018
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
Interest-bearing loans and borrowings
Income tax payable
Provisions
Total current liabilities
Employee benefits
Other payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity attributable to equity holders of the Company
Non-controlling interests
Total equity
Note
9
10
11
7
13
14
16
18
17
20
18
16
2018
$’000
4,966
30,504
46,444
81,914
6,120
4,581
6,071
16,772
98,686
30,522
3,701
-
416
90
34,729
146
3,197
3,343
38,072
60,614
2017
$’000
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
107,770
(4,969)
(42,187)
60,614
-
60,614
108,063
(815)
(47,838)
59,410
2,165
61,575
The consolidated statement of financial position is to be read in conjunction with the accompanying notes to the consolidated financial
statements.
10
Coventry Group Ltd and its controlled entities
Consolidated statement of changes in equity
For the year ended 30 June 2018
Share-
based
payments
reserve
Hedge
reserve
Translation
reserve
Other
reserve
Total
reserves
Share
capital
Retained
earnings
Total for
owners of
the Company
Non-
controlling
interests
Total
equity
$’000
$’000
$’000
(815)
$’000
$’000
108,063
(47,838)
$’000
59,410
$’000
$’000
2,165
61,575
Balance at 1 July 2017
Total comprehensive
income for the year
Profit for the year
Other comprehensive
(loss)/income:
Foreign currency translation
differences
Effective portion of changes in
fair value of cash flow hedges
Total other comprehensive
income/(loss)
Total comprehensive
income/(loss) for the year
Transactions with owners,
recorded directly in equity
Share based payment
transactions
Acquisition of non-controlling
interest
Conversion of performance
rights
Share buy-back
Dividends to equity holders
Balance at 30 June 2018
Amounts are stated net of tax
-
-
-
-
-
-
89
-
(89)
-
-
-
(44)
-
-
236
236
236
-
-
-
-
-
$’000
-
-
-
-
-
-
-
-
(816)
236
(580)
(580)
89
$’000
(771)
-
(816)
-
(816)
(816)
-
-
-
-
-
(3,574)
(3,574)
-
-
-
(89)
-
-
80
(373)
-
-
-
-
-
-
-
-
5,651
5,651
326
5,977
-
-
-
(816)
(26)
(842)
236
-
236
(580)
(26)
(606)
5,651
5,071
300
5,371
-
-
-
-
-
89
-
89
(3,574)
(2,327)
(5,901)
(9)
(373)
-
-
-
(138)
(9)
(373)
(138)
192
(1,587)
(3,574)
(4,969)
107,770
(42,187)
60,614
-
60,614
Share-
based
payments
reserve
Hedge
reserve
Translation
reserve
Other
reserve
Total
reserves
Share
capital
$’000
Retained
earnings
$’000
108,110
(11,711)
Total for
owners of
the Company
Non-
controlling
interests
Total
equity
$’000
96,233
$’000
$’000
2,031
98,264
$’000
(166)
-
-
(36,127)
(36,127)
588
(35,539)
(581)
-
-
(581)
(14)
(595)
36
-
-
36
-
36
(545)
-
-
(545)
(14)
(559)
(545)
-
(36,127)
(36,672)
574
(36,098)
-
(47)
-
(47)
-
(47)
(104)
-
-
(104)
-
(104)
-
-
-
-
(440)
(440)
(815)
108,063
(47,838)
59,410
2,165
61,575
Balance at 1 July 2016
Total comprehensive
(loss)/income for the year
(Loss)/profit for the year
Other comprehensive
(loss)/income:
Foreign currency translation
differences
Effective portion of changes in
fair value of cash flow hedges
Total other comprehensive
(loss)/income
Total comprehensive
(loss)/income for the year
Transactions with owners,
recorded directly in equity
Cancellation of Director
shares
Share based payment
transactions
Dividends to equity holders
Balance at 30 June 2017
Amounts are stated net of tax
$’000
$’000
104
(80)
$’000
(190)
-
-
-
-
-
(581)
-
36
-
-
36
(581)
-
36
(581)
-
-
-
(104)
-
-
-
-
-
(44)
-
(771)
$’000
-
-
-
-
-
-
-
-
-
-
11
Coventry Group Ltd and its controlled entities
Consolidated statement of cash flows
For the year ended 30 June 2018
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 Discontinued operation
Proceeds from sale of property, plant and equipment
Interest received
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash from/(used in) investing activities
Cash flows from financing activities
Proceeds from Borrowings
Repayment of Borrowings
Share buy-back
Dividends paid to non-controlling interests
Transactions with non-controlling interests
Net cash (used in)/from financing activities
Note
25
3
13
14
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of movements in exchange rates on cash and cash equivalents
Cash and cash equivalents at 30 June
9
2018
$’000
184,245
(187,585)
(3,340)
(509)
(230)
(4,079)
21,012
527
9
(1,782)
(324)
19,442
68,896
(76,941)
(373)
(138)
(5,927)
(14,483)
880
5,149
(1,063)
4,966
2017
$’000
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
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes to the consolidated financial
statements.
12
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies
Coventry Group Ltd (the “Company”) is a for profit company domiciled in Australia. The address of the Company’s registered office is
235 Settlement Road Thomastown VIC 3074 Australia. The consolidated financial statements ("financial report" or "consolidated
financial report") of the Company for the financial year ended 30 June 2018 comprises the Company and its controlled entities (together
referred to as the “Group”).
The financial report was authorised for issue by the Directors on 24 August 2018.
(a) Statement of compliance
This financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards
(AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations
Act 2001. The consolidated financial report of the Group complies with the International Financial Reporting Standards (IFRSs) and
interpretations adopted by the International Accounting Standards Board (IASB).
(b) Basis of preparation
The financial report is presented in Australian dollars, which is the Company’s functional currency. The financial report is prepared on
the historical cost basis except share based payments and derivative financial instruments which are stated at their fair value.
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March
2016 and in accordance with that Instrument, amounts in the financial report have been rounded off to the nearest thousand dollars,
unless otherwise stated.
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 made a profit after tax for the year ended 30 June 2018 of $6.0 million primarily as a result of the sale of AA Gaskets on 1
December 2017 along with continued strong results in Cooper Fluid Systems and improvements in the Trade Distribution business.
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 based on best-estimate assumptions that
are subject to influences and events outside of the control of the Group. The forecasts are supported by the performance of the
Group in the 12 months to 30 June 2018.
Should trading conditions unexpectedly deteriorate, the Group could seek to:
• Make further adjustments to business operations;
• Raise additional funds from shareholders or other parties; and
• Utilise available funds ($13m) in the Scottish Pacific securitised trade receivables facility.
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.
The recoverable amounts are predicated on the assumption that the Group will continue as a going concern. If, 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.
13
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(b) 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, 13 and 14; and
Inventory is set out in Note 1.
(c) Change in accounting policies
The Group has consistently applied the accounting policies as set out in Note 1(d) - (w) to all periods presented in this consolidated
financial report.
Certain comparative amounts in the statement of profit or loss have been restated, reclassified or re-presented as a result of an
operation discontinued during the current year (see Note 3).
New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 July
2017:
• AASB 2016-1 Amendments for Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses
• AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107, and
• AASB 2017-2 Amendments to Australian Accounting Standards – Further Annual Improvements 2014-2016 Cycle
The adoption of these amendments did not have any impact on the amounts recognised in prior periods and will also not affect the
current or future periods.
The amendments to AASB 107 require disclosure of changes in net debt arising from financing activities, see note 9.
(d) Basis of consolidation
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date. In assessing control, the Group takes
into consideration potential voting rights that currently are exercisable.
The Group measures goodwill at the acquisition date as:
•
the fair value of the consideration transferred; plus
•
the recognised amount of any non-controlling interests in the acquiree; plus
•
if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less
•
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a
business combination are expensed as incurred.
Controlled entities
Controlled entities are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Investments in
controlled entities are carried at their cost of acquisition in the Company’s financial statements, net of impairment write downs. Intra-
group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Non-controlling interests
NCI are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and
other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is
measured at fair value when control is lost.
14
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(e) Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the
dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at
the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured based on historical cost in a foreign
currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities that are measured
at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined.
Foreign currency differences arising on translation are recognised in the statement of profit or loss.
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 at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and presented in the translation reserve 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
translation reserve 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 translation reserve.
(f) Discontinued operation
A Discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished
from the rest of the Group and which:
•
•
•
represents a separate major line of business or geographic area of operations;
is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or
is a subsidiary acquired exclusively with a view to re-sale.
Classification as a Discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as
held-for-sale.
When an operation is classified as a Discontinued operation, the comparative statement of profit or loss and other comprehensive
income is re-presented as if the operation had been discontinued from the start of the comparative year.
(g) Cash and cash equivalents
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.
(h)
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.
15
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(i) Trade and other receivables
Trade and other receivables are stated at amortised cost less impairment losses.
(j) Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the
following:
•
•
•
the cost of materials and direct labour,
any other costs directly attributable to bringing the assets to a working condition for their intended use,
when the Group has an obligation to remove the assets or restore the site, an estimate of the costs of dismantling and removing
the items and restoring the site on which they are located, and
capitalised borrowing costs.
•
Cost includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant
and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from
disposal and the carrying amount of the item) is recognised in profit or loss.
Leased assets
Leases in terms of which the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases.
Other leases are classified as operating leases.
Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will
flow to the Group. Ongoing repairs and maintenance are expensed as incurred.
Depreciation
Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of
internally constructed assets, from the date that the asset is completed and ready for use.
Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values using the straight-
line basis over their estimated useful lives. Leased assets are depreciated over the shorter of the lease term and their useful lives
unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.
The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:
Class of Fixed Asset
- Plant and Equipment
- Buildings
Depreciation Rate
5% - 40%
2%
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(k)
Intangible assets and goodwill
Goodwill
Goodwill that arises upon the acquisition of subsidiaries is presented with intangible assets. For the measurement of goodwill at initial
recognition, see Note 1(d).
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of
goodwill is included in the carrying amount of the investment, and any impairment loss is allocated to the carrying amount of the equity
accounted investee as a whole.
Computer software
Computer software comprises licence costs and direct costs incurred in preparing for the operation of that software, including associated
process re-engineering costs. Computer software is stated at cost less accumulated amortisation and impairment losses.
16
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(k)
Intangible assets and goodwill (continued)
Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation
and any accumulated impairment losses.
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 lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(l)
Impairment of assets (financial and non-financial)
Non-financial
Goodwill and intangible assets that have an indefinite useful life are not amortised but are tested annually for impairment in accordance
with AASB 136. Other assets are tested 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 of disposal and value in use.
Financial
Financial assets that are measured at amortised cost are assessed to determine whether there is objective evidence that an impairment
has been incurred but not yet identified. For these receivables the estimated impairment losses are recognised in a separate provision
for impairment.
All impairment losses are recognised in profit or loss. For non-financial assets other than goodwill 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.
(m) Employee benefits
A provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date. These
benefits include wages and salaries, annual leave and long service leave. Sick leave is non-vesting and has not been provided for.
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be
paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee
and the obligation can be estimated reliably.
The Group's net obligation in respect to long-term employee benefits is the amount of future benefit that employees have earned in
return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements 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.
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 and Director Incentive Plan was approved by shareholders in 2017. 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 and directors with the shareholders in the
medium to long term.
17
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(n) 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.
(o) 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.
(p) Revenue and other income
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.
(q) Leases
Leased assets
Assets held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified
as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present
value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting
policy applicable to the asset.
Assets held under other leases are classified as operating leases and are not recognised in the Group’s statement of financial position.
Lease payments
Payments made and material incentives received under operating leases are recognised in profit or loss on a straight-line basis over
the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the
lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the
outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
18
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(r) 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.
(s) Operating segments
The Group determines and presents operating segments based on the information that internally is provided to the CEO, who is the
Group’s chief operating decision maker.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating
segments operating results are regularly reviewed by the Group’s CEO to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial information is available.
Operating segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses and income tax assets
and liabilities.
Operating segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and
intangible assets other than goodwill.
(t)
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 profit or
loss 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.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences only to the extent
that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined
based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to
recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered,
based on the business plans for the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be realised however such reductions may be reversed when the probability of
future taxable profits improves.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related
dividend.
Tax consolidation
The Company and its wholly owned Australian resident entities have formed a tax consolidated group with effect from 1 November
2002 and are therefore taxed as a single entity from that date. The head entity within the tax consolidated group is Coventry Group
Ltd.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the
tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group using the
‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in the separate financial
statements of each entity and the tax values applying under tax consolidation.
19
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(t)
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.
(u) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the amount of GST
incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition
of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the
taxation authority is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows
on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or
payable to, the taxation authority are classified as operating cash flows.
(v) 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. The estimates and
associated assumptions are based on historical experience and on other factors it believes to be reasonable under the circumstances,
the results of which form the basis of the reported amounts that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions and conditions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that
have the most significant effect on the amounts recognised in the financial statements are described in the following notes:
•
•
•
•
Note 1 (h) - significant accounting policies - inventories;
Note 1 (t) - significant accounting policies - income tax and recovery of deferred tax assets (Note 7);
Note 15 - measurement of the recoverable amount of cash generating units; and
Note 22 - allowance for trade receivable impairment losses.
(w) 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.
20
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(x) 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 2018 are outlined below.
Application
of Standard*
Application
by Group*
1 January
2018
1 July 2018
Title of Standard
AASB 9 Financial
Instruments
Description
Nature of Change
AASB 9 replaces AASB 139 Financial Instruments: Recognition and
Measurement. AASB 9 adopts a more principle-based approach to the
classification of financial instruments. As such the classification, measurement
and derecognition requirements for financial assets and financial liabilities has
been changed. In addition, there are new rules for hedge accounting and a
new impairment model for financial assets.
Impact
The Group has reviewed its financial assets and liabilities and is expecting the
following impact from the adoption of the new standard on 1 July 2018:
• The Group’s financial assets that are currently classified as amortised cost
will pass the contractual cash flow and business model tests for
classification at amortised cost under AASB 9. The securitisation of the
trade receivables with Scottish Pacific does not modify or change the
intention of management to collect debt and receive the contractual cash
flows. Hence, there will be no change to the classification and
measurement of these financial assets.
• There will be no impact on the Group’s accounting for financial liabilities,
as the new requirements only affect the accounting for financial liabilities
that are designated at fair value through profit or loss and the Group does
not have any such liabilities.
• The new impairment model requires the recognition of impairment
provisions based on expected credit losses (ECL) and applies to financial
assets classified at amortised cost. As at reporting date, the Group is
currently profiling all customers and assessing the future lifetime expected
credit loss. This may impact the loss allowance for Trade receivables.
• The Group has confirmed that its current cash flow hedges will qualify as
continuing hedges upon the adoption of AASB 9.
• The new standard also introduces expanded disclosure requirements and
changes in presentation. These are expected to change the nature and
extent of the Group’s disclosures about its financial instruments
particularly in the year of adoption.
Transition
The Group will apply the new rules retrospectively from 1 July 2018, with the
practical expedients permitted under the standard. Comparatives will not be
restated. Differences in the carrying amounts of financial assets and financial
liabilities resulting from the adoption of AASB 9 will generally be recognised in
retained earnings and reserves as at 1 July 2018.
* Designates the beginning of the applicable annual reporting period.
21
Application
of Standard*
Application
by Group*
1 January
2018
1 July 2018
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(x) New standards and interpretations not yet adopted (continued)
Title of Standard
AASB 15 Revenue
from Contracts with
Customers
Description
Nature of Change
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).
The new standard is based on the core principle that revenue is recognised
when control of a good or service transfers to a customer. That is, 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.
Impact
The Group has performed a preliminary assessment of the potential impact
which has focused on the identification and understanding of the provisions
of the standard which will most impact the Group. The following points were
noted:
Trade Distribution
• The contracts are short-term and generally for standard products.
• The Group sells a significant portion of its products on FIS (Free-In-
Store). This means the Group is responsible for providing delivery
services. Under IFRS 15, the freight charges are required to be
accounted for as a separate performance obligation with revenue
recognised over time as the service is rendered. The Group is currently
quantifying the impact.
• The standard contracts permit the customer to return an item within a
defined period. For these contracts, revenue is currently recognised
when a reasonable estimate of the returns can be made, provided all
other criteria for revenue recognition are met. The Group does not
expect a significant impact.
Fluids
• The contracts are typically long-term (e.g. up to 1 year) and have non-
standard terms and conditions with differing performance obligations.
• The contracts relate to made-to-order specialised bespoke products
which are manufactured and have ongoing service obligations. The
Group’s initial assessment indicates that this will result in revenue, and
some associated costs for these contracts being recognised over time.
That is, before the goods are delivered to the customer’s premises. The
expected impact on implementation date is being estimated and will
depend on the work in progress contracts at 30 June 2018.
The application of AASB 15 may result in the identification of other impacts
which could affect the timing of the recognition of revenue.
Transition
The Group intends to adopt the standard using the cumulative approach
which means that the cumulative impact of the adoption will be recognised in
retained earnings as of 1 July 2018 and that comparatives will not be
restated.
22
Application
of Standard*
Application
by Group*
1 January
2019
1 July 2019
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(x) New standards and interpretations not yet adopted (continued)
Title of Standard
AASB 16 Leases
Description
Nature of Change
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. It will result in almost all leases being recognised on the balance
sheet, as the distinction between operating and finance leases is removed.
Lessees must now recognise a right-of-use asset (the right to use the leased
item) and a financial lease liability to pay rentals on the statement of financial
position. The only exceptions are short-term and low-value leases.
Lessor accounting will not significantly change. 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.
Impact
The Group has performed a preliminary assessment of the potential impact
which has focused on the identification and understanding of the provisions
of the standard which will most impact the Group.
AASB 16 contains a number of practical expedients, one of which permits
the retention of the classification of existing contracts as leases under
current accounting standards instead of reassessing whether existing
contracts are or contain a lease at the date of initial application of the new
standard. The Group will adopt this practical expedient.
AASB 16 is expected to have a significant impact on the consolidated
financial statements of the Group.
The standard will affect primarily the accounting for the Group’s non-
cancellable operating lease commitments for its rental premises and
branches. As at reporting date, the Group has non-cancellable operating
lease commitments, on an undiscounted basis of $39,609,000. (See Note
23). The Group estimates that an insignificant portion relates to payments
for short-term leases. For 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 actual impact and amount to be
recognised will depend on the term and value of leases that exist at 30 June
2019; the Group’s borrowing rate at 1 July 2019; and the Group’s
assessment of whether it will exercise any lease renewal options. It is
therefore not yet possible to estimate the amount of right-of-use assets and
lease liabilities that will have to be recognised on adoption of the new
standard.
No significant impact is expected for the Group’s finance leases.
Transition
At this stage, the Group does not intend to adopt the standard before its
effective date. The Group intends to adopt the standard using the modified
retrospective approach which means that the cumulative impact of the
adoption will be recognised in retained earnings as of 1 July 2019 and that
comparatives will not be restated.
* Designates the beginning of the applicable annual reporting period.
23
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
1. Significant accounting policies (continued)
(x)
New standards and interpretations not yet adopted (continued)
Other standards
The following amended standards and interpretations are not expected to have a significant impact on the Group’s consolidated
financial statements.
•
•
•
Annual Improvements to IFRSs 2014-2016 Cycle – Amendments to IFRS 1 and IAS 28.
Classification and Measurement of Share-based Payment Transactions (Amendments to AASB 2).
AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investments Property, Annual Improvements
2014-2016 Cycle and Other Amendments.
Sale or Contribution of Assets between an Investor and its Associated or Joint Venture (Amendments to AASB 10 and
AASB 128).
AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration.
AASB 23 Uncertainty over Income Tax Treatments.
•
•
•
24
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
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
Other business
units and
consolidation
adjustments
2018
$’000
Total
reportable
continuing
segments
2018
$’000
-
3,874
3,874
168,739
5,676
174,415
Gaskets
(discontinued)
2018
$’000
7,292
260
7,552
Total
2018
$’000
176,031
5,936
181,967
2018
$’000
2018
$’000
103,334
1,429
104,763
65,405
373
65,778
(2,972)
4,986
(8,099)
(6,085)
1,564
(4,521)
-
-
-
-
-
-
(747)
(747)
-
(747)
-
-
13,094
13,094
(443)
(443)
-
(443)
(2,972)
4,986
(9,289)
(7,275)
14,658
7,383
External sales
Other income
Total revenue
Reportable segment
profit/(loss) before finance
costs, income tax and
significant items
Net financial income/(loss)
Other significant items:
Gain on sale of AA Gaskets
Restructuring and other related
costs
Reportable segment
profit/(loss) before income tax
3
27
Reportable segment assets
Reportable segment liabilities
Capital employed
Capital expenditure
56,040
14,971
41,069
27,004
8,912
18,092
922
859
Depreciation and amortisation
368
550
14,723
13,693
1,030
105
419
97,767
37,576
60,191
1,886
1,337
919
496
423
98,686
38,072
60,614
220
2,106
56
1,393
25
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
2. Operating segments (continued)
Information about reportable
segments
Note
Trade
Distribution
Fluids
Other business
units and
consolidation
adjustments
2017
$’000
Total
reportable
continuing
segments
2017
$’000
Gaskets
(discontinued)
2017
$’000
Total
2017
$’000
-
3,176
3,176
151,027
4,390
155,417
18,119
206
18,325
169,146
4,596
173,742
2017
$’000
2017
$’000
96,936
1,411
98,347
54,091
(197)
53,894
(5,233)
2,627
(9,853)
(12,459)
3,746
(8,713)
313
-
(1,036)
(723)
23
(700)
-
27
(5,576)
-
-
361
361
(2,292)
(7,868)
-
-
361
(7,868)
(5,635)
(903)
-
(6,538)
(518)
(7,056)
27
(400)
(70)
-
-
(286)
(644)
(756)
(644)
(94)
-
(850)
(644)
(16,531)
1,654
(13,750)
(28,627)
3,157
(25,470)
53,545
11,579
41,966
25,418
6,726
18,692
12,112
18,978
(6,866)
91,075
37,283
53,792
9,998
2,215
7,783
101,073
39,498
61,575
External sales
Other income
Total revenue
Reportable segment
profit/(loss) before finance
costs, income tax and
significant items
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
Reportable segment
profit/(loss) before income tax
Reportable segment assets
Reportable segment liabilities
Capital employed
Capital expenditure
2,882
425
1,340
4,647
130
4,777
Depreciation and amortisation
1,121
984
672
2,777
147
2,924
Geographic information
Revenue from continuing operations based on the geographic location of customers was Australia $144,197,000 (2017: $128,320,000)
and New Zealand $30,218,000 (2017: $27,097,000).
Non-current assets, excluding deferred tax assets, based on the geographic location of the assets were Australia $9,890,000
(2017: $9,638,000) and New Zealand $762,000 (2017: $995,000).
Major customers
No single customers contributed 10% or more to the Group’s revenue for both 2018 and 2017.
3. Discontinued operation
(a) Description
On 20 November 2017 the Group announced the sale of the AA Gaskets business assets in Australia and New Zealand to GUD
Holdings Limited. AA Gaskets has been a strong revenue growth business with improving profitability in recent years. Management
committed to a plan to sell the AA Gaskets business in November 2017 following the Board's strategic decision to focus on our two
core businesses which fit the industrial supply market vision it has for the Group.
26
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
3. Discontinued operation (continued)
(a) Description (continued)
The AA Gaskets business, sold on 1 December 2017, was not previously classified as held-for-sale and is reported in the current period
as a Discontinued operation. Financial information relating to the Discontinued operation for the period to the date of disposal is set out
below.
(b) Results of Discontinued operation
The financial performance presented are for the five months ended 30 November 2017 and the year ended 30 June 2017.
Revenue
Expenses
Profit from operating activities
Income tax expense
Profit from operating activities, net of tax
Gain on sale of AA Gaskets
Profit from Discontinued operations, net of tax
2018
$’000
7,552
(5,988)
1,564
(380)
1,184
13,094
14,278
2017
$’000
18,325
(15,168)
3,157
(1,017)
2,140
-
2,140
The total comprehensive income attributable to owners of the Group from Discontinued operations was $14,278,000 (2017:
$2,086,000 adjusted for foreign exchange translation).
Earnings per share:
Basic earnings per share:
Diluted earnings per share:
(c) Details of the sale of the Discontinued operation
37.2 cents
37.2 cents
4.1 cents
4.1 cents
Consideration received or receivable
Carrying amount of net assets sold
Property, plant and equipment
Inventories
Trade and other receivables
Provisions
Other costs
Gain on sale
Income tax expense on gain
Gain on sale after income tax
(d) Cash flows from Discontinued operation
The cash flow information presented are for the five months ended 30 November 2017 and the year ended 30 June 2017.
Net cash from operating activities
Net cash from/(used in) investing activities
Net cash flow used in financing activities
Net increase/(decrease) in cash generated by the Discontinued operation
2018
$’000
1,434
20,930
(51)
22,313
27
2018
$’000
21,012
(407)
(4,760)
(3,833)
1,616
(534)
13,094
-
13,094
2017
$’000
1,072
(95)
(1,549)
(572)
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
4. Auditor's remuneration
Audit services
Auditors of the Group
KPMG Australia:
Engagement of audit and review of financial reports
Prior year additional charges and out of scope audit services
Other services
Auditors of the Group
KPMG Australia:
Advisory services (principally in relation to Cyber Attack)
KPMG New Zealand:
Tax services
5. Employment costs
Wages and salaries
Liability for annual leave and long service leave
Contributions to superannuation funds
Payroll taxes
Other associated personnel expenses
Share based payments
6. Finance income and finance expenses
Interest income from other entities
Net foreign exchange gain
Financial income
Interest expense
Net foreign exchange loss
Financial expenses
Net financing (expense)/income
7. Taxes
Current tax expense/(benefit)
Current year
Underprovision/(overprovision) prior year
Tax recognised in the profit or loss
Deferred tax expense
Origination and reversal of temporary differences
Revenue tax losses (recognised)/not recognised
De-recognition of previously recognised Deferred tax assets
Total deferred tax expense/(benefit)
Total income tax expense/(benefit)
Income tax expense is attributable to:
Loss from Continuing operations
Profit from Discontinued operation
28
2018
$
2017
$
195,000
39,819
234,819
241,000
12,149
253,149
-
135,185
11,100
11,100
2018
$’000
33,090
3,369
2,993
1,806
1,444
-
42,702
2018
$’000
9
-
9
(509)
(247)
(756)
(747)
2018
$’000
796
(19)
777
629
-
-
629
1,406
1,026
380
1,406
11,790
146,975
2017
$’000
30,554
3,342
2,675
1,681
2,138
47
40,437
2017
$’000
20
-
20
(539)
(204)
(743)
(723)
2017
$’000
(7,270)
(71)
(7,341)
(416)
8,759
8,927
17,410
10,069
9,052
1,017
10,069
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
7. Taxes (continued)
Current tax expense (continued)
Reconciliation of effective tax rate
Loss from Continuing operations for the period
Total income tax loss
Loss excluding income tax
Income tax using the Company’s domestic tax rate of 30%
Tax profit on sale of assets
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:
2018
$’000
(8,301)
1,026
(7,275)
(2,183)
2,072
1,131
(21)
-
27
-
1,026
2017
$’000
(37,679)
9,052
(28,627)
(8,588)
-
8,759
(6)
(46)
6
8,927
9,052
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
Liabilities
Net
2018
$’000
122
1,918
2,360
-
1,194
526
-
-
-
6,120
-
6,120
2017
$’000
2018
$’000
2017
$’000
333
2,412
2,360
-
1,248
228
37
19
112
6,749
-
6,749
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2018
$’000
122
1,918
2,360
-
1,194
526
-
-
-
6,120
-
6,120
2017
$’000
333
2,412
2,360
-
1,248
228
37
19
112
6,749
-
6,749
Tax losses in the Group Australian operations consist of post-consolidation carried forward tax losses of $71,621,957
(2017: $51,782,899), represented by the deferred tax asset of $Nil (2017: $Nil), 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 $Nil (2017: $1,606,008), represented by the deferred tax asset of $Nil (2017:
$112,637).
29
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
8. Earnings per share
2018
Continuing
operations
Discontinued
operation
Continuing
operations
(Restated)**
Total
2017
Discontinued
operation
(Restated)**
Total
(Restated)**
13,952,925
5,651,614
(37,679,570)
1,551,712
(36,127,858)
Earnings used in basic and
diluted earnings per share
calculation ($)*
Weighted average of shares in
year used in basic and diluted
earnings per share (number)
Earnings per share (cents)
* Excludes profit/(loss) attributable to non-controlling interests.
** Refer to Note 3
37,513,388
(22.1 cents)
(8,301,311)
37,513,388 37,513,388
15.1 cents
37.2 cents
37,753,145
(99.8 cents)
37,753,145
4.1 cents
37,753,145
(95.7 cents)
2018
$’000
4
4,962
4,966
2017
$’000
5
5,144
5,149
9. Cash and cash equivalents
Cash on hand
Bank balances
Cash and cash equivalents
Non-cash investing and financing activities
There were no non-cash investing and financing activities during the year (2017: $Nil).
Net debt reconciliation
Financing
liabilities
Borrowings
(included
finance
leases)
$’000
Other assets
2018
2017
Cash
$’000
Net debt
$’000
Net debt
$’000
Analysis of changes in net debt
Opening balance at the beginning of the financial year
Foreign exchange adjustment
Cash movements excluding exchange movements
Closing balance
8,045
-
(8,045)
-
(5,149)
1,063
(880)
(4,966)
2,896
1,063
(8,925)
(4,966)
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 22.
3,520
4
(628)
2,896
2017
$’000
2018
$’000
27,828
27,828
1,464
1,212
2,676
30,504
28,075
28,075
701
484
1,185
29,260
30,504
30,504
29,260
29,260
10. Trade and other receivables
Trade receivables
Other receivables
Prepayments
Total trade and other receivables
Current
Total trade and other receivables
The Group’s exposure to credit risks and impairment losses related to trade and other receivables are disclosed in Note 22. Included
in “other expenses” in the statement of profit or loss are impairment losses on trade receivables for the Group of $54,000 (2017:
$52,000).
30
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
11.
Inventories
Finished goods
Provision for obsolescence
Net Inventory balance
2018
$’000
52,821
(6,377)
46,444
2017
$’000
57,652
(8,370)
49,282
$387,000 (2017: $7,056,000) of inventory write-downs were recognised during the year.
12. Parent entity disclosures
As at, and throughout, the financial year ending 30 June 2018 the parent company of the Group was Coventry Group Ltd.
Results of the parent entity
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
13. Property, plant and equipment
Cost at 1 July 2017
Accumulated Depreciation at 1 July 2017
Carrying amounts at 1 July 2017
Additions
Depreciation charge for the year
Discontinued operation
Disposals
Effect of movements in foreign exchange
Carrying amounts at 30 June 2018
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
31
Company
2018
$’000
(8,945)
236
(8,709)
2017
$’000
(43,345)
36
(43,309)
68,361
91,434
61,534
97,636
29,719
36,085
29,948
33,285
107,770
192
(52,613)
55,349
108,063
(44)
(43,668)
64,351
Note
3
15
Plant and
equipment
$’000
40,500
(35,802)
4,698
1,782
(1,205)
(407)
(293)
6
4,581
43,725
(27,685)
16,040
1,305
(2,533)
(5,599)
(4,530)
15
4,698
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
14.
Intangible assets
Carrying amounts at 1 July 2017
Additions
Amortisation for the year
Carrying amounts at 30 June 2018
Carrying amounts at 1 July 2016
Additions
Amortisation for the year
Impairment charge for the year
Carrying amounts at 30 June 2017
15. Impairment of non-financial assets
Note
15
Goodwill
$’000
3,327
-
-
3,327
Computer software
$’000
2,608
324
(188)
2,744
3,327
-
-
-
3,327
1,796
3,472
(391)
(2,269)
2,608
Total
$’000
5,935
324
(188)
6,071
5,123
3,472
(391)
(2,269)
5,935
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.
Cooper Fluid Systems
2018
$’000
3,327
2017
$’000
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.
The Group assessed the carrying value of its assets as follows:
Trade Distribution
For the year ended 30 June 2018, the Group's value in use model indicated no evidence of further impairment in the carrying amount
of the assets of this business. Value in use was based on the following key assumptions:
• Sales growth at 9.2% for FY19 and 4.8% thereafter
•
Terminal growth 2.5%
• Post tax WACC of 11.5%
Cooper Fluids Systems
For the year ended 30 June 2018, the Group's value in use model showed the recoverable amount exceeded the carrying amount of
the Cooper Fluids Systems CGU. The values assigned to the key assumptions were:
• Sales growth at 6.7% for FY19 and 4.8% thereafter
•
Terminal growth 2.5%
• Post tax WACC of 11.5%
Any adverse change in the key assumptions may result in impairment.
32
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
16. Trade and other payables
Trade payables
Non trade payables and accrued expenses
Current
Non-current
2018
$’000
24,882
8,837
33,719
30,522
3,197
33,719
2017
$’000
18,386
8,509
26,895
23,806
3,089
26,895
The Group's exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 22.
17.
Interest-bearing loans and borrowings
Total facilities available at balance sheet date
Debtor Financing Facility
Lease Liability
Facilities utilised at balance sheet date
Debtor Financing Facility
Lease Liability
Total interest-bearing loans and borrowings
Facilities not utilised at balance sheet date
Debtor Financing Facility
2018
$’000
13,000
-
13,000
2017
$’000
10,000
51
10,051
-
-
-
7,994
51
8,045
13,000
13,000
2,006
2,006
Debtor financing facility
The Group has a $13 million, securitised trade receivables facility with Scottish Pacific with a current expiry of August 2020. The facility
is subject to a floating interest on funds drawn.
Following the sale of the AA Gaskets business which was completed on 1 December 2017, the Scottish Pacific securitised trade
receivables facility was repaid but remains available for use in the future if required.
Guarantee facility
In addition to the borrowing facilities above, the Group has a guarantee 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 2018 was $155,000 (2017: $140,000).
Securities
The securitised trade receivables facility is secured by a fixed and floating charge over relevant assets. The guarantee 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.
33
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
18. Employee benefits
Current
Liability for long service leave
Liability for annual leave
Non-current
Liability for long service leave
19. Share-based payments
2018
$’000
1,593
2,108
3,701
2017
$’000
1,952
1,979
3,931
146
247
Executive and Director Incentive Plan
An Executive and Director Incentive Plan was approved by shareholders in 2017. 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 and directors with the shareholders in the
medium to long term. The Board has determined that there will be no grant or issue of performance rights in relation to 2018 to either
executives or directors.
20. Provisions
Current
Balance at 1 July 2017
Provisions increased/(decreased)
Provisions used
Balance at 30 June 2018
21. Capital and reserves
Share capital
On issue at 1 July 2017
Conversion of performance rights (i)
Share buyback – unmarketable parcels (ii)
Share buyback (iii)
Cancellation of Director shares
On issue at 30 June 2018
Warranty
$’000
Restructuring/
onerous contracts
$’000
85
102
(97)
90
46
-
(46)
-
Total
$’000
131
102
(143)
90
Company
Ordinary shares
2018
‘000
37,636
80
(336)
-
-
37,380
2017
‘000
37,836
-
-
-
(200)
37,636
(i) On 8 December 2017, 80,000 performance rights issued in accordance with the Executive and Director Incentive Plan were converted
to ordinary shares.
(ii) In December 2017, the Group announced a buyback of ordinary shares for holders of unmarketable parcels of shares. On 23
January 2018, the Company completed its unmarketable parcel minimum holding share buyback, where 336,075 ordinary shares were
acquired and cancelled at a price of $1.1108 per share.
(iii) In February 2018, the Group announced an on-market share buyback of up to 10% of its issued ordinary shares. The 12 month
buy-back period commenced on 1 March 2018.
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.
34
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
21. Capital and reserves (continued)
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 2018 (2017: $Nil).
The Company
2018
$’000
2017
$’000
6,009
4,743
Dividend franking account
30 per cent franking credits available to shareholders of the Company for
subsequent financial years
22. Financial risk management
Overview
The Group has exposure to the following risks from their use of financial instruments:
Credit risk
Liquidity risk
•
•
• Market risk
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s cash and cash equivalent and term deposits and receivables from customers.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the
Group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on
credit risk. The Group has no significant concentration of customer base.
Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the
Group’s standard payment and delivery terms and conditions are offered.
Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. The
Group's terms and conditions of trade have been amended to incorporate the Personal Property Security legislation. The Group does
not normally require collateral in respect of trade and other receivables.
The Group has established an allowance for impairment that represents its estimate of incurred losses in respect of trade and other
receivables. Based on historic default rates, the Group believes that no impairment allowance is necessary in respect of trade
receivables not past due or past due by up to 60 days.
The ageing of the Group’s trade receivables at the reporting date showed 91% of debtors were within terms (2017: 92%). The amount
of trade debtors that is past due but not impaired is $3,539,000 (2017: $2,258,000). The movement in the allowance for impairment in
respect of trade receivables during the year was a reduction of $709,000 (2017: increase of $878,000).
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:
35
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
22. Financial risk management (continued)
Cash and cash equivalents
Trade and other receivables (i)
9
10
2018
$’000
4,966
29,292
34,258
2017
$’000
5,149
28,776
33,925
Note
Carrying amount
(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
$24,993,000 (2017: $24,084,000) and New Zealand $4,299,000 (2017: $4,692,000).
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 $13 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:
Non derivative financial liabilities
Trade and other payables (i)
Carrying
amount
$’000
Contractual
cash flow
$’000
2018
6 mths
or less
$’000
6-12 mths
$’000
1-2 years More than
2 years
$’000
$’000
30,522
(30,522)
(30,522)
-
-
-
The outflows associated with forward contracts used for hedging are US$5.8 million (A$7.6 million), 2017: US$2.8 million, (A$3.7
million) and will have been made within 6 months or less.
Non derivative financial liabilities
Trade and other payables (i)
Borrowings
Carrying
amount
$’000
Contractual
cash flow
$’000
2017
6 mths
or less
$’000
6-12 mths
$’000
1-2 years More than
2 years
$’000
$’000
23,806
8,045
(23,806)
(8,045)
(23,806)
(8,045)
-
-
-
-
-
-
(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:
Variable rate financial assets (i)
Carrying amount
2018
$’000
4,962
2017
$’000
5,144
(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.
36
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
22. Financial risk management (continued)
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.
23. Operating leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
2018
$’000
8,725
20,378
10,506
39,609
2017
$’000
9,007
20,215
12,876
42,098
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 10 years and in some cases provide for an option to renew the lease after expiry. Lease payments
are reviewed periodically to reflect market rentals. None of the leases include contingent rentals.
During the financial year ended 30 June 2018 the Group recognised $8,510,459 (2017: $8,519,820) 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.
Less than one year
Between one and five years
More than five years
2018
$’000
1,513
1,915
-
3,428
2017
$’000
1,937
2,793
-
4,730
The Group subleases various premises under operating leases. The leases typically run for periods ranging from 1 year to 4 years and
in some cases provide for an option to renew the lease after expiry.
During the financial year ended 30 June 2018, the Group recognised $1,875,497 (2017: $2,854,034) as income in the statement of
profit or loss and other comprehensive income.
37
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
24. Controlled entities
Country of
Incorporation
Ownership interest
COV Holdings (Aust) Pty Ltd (i) (formerly AA Gaskets Pty Ltd)
Coventry Group (NZ) Limited
COV Holdings (NZ) Pty Ltd (ii) (formerly NZ Gaskets Limited)
Australia
New Zealand
New Zealand
The ultimate parent entity is Coventry Group Ltd.
2018
%
100
100
100
2017
%
72.5
100
72.5
(i) During the financial year, the Company acquired the non-controlling interest of COV Holdings (Aust) Pty Ltd (formerly AA Gaskets
Pty Ltd).
(ii) The company is a 100% controlled entity of COV Holdings (Aust) Pty Ltd (formerly AA Gaskets Pty Ltd) and operates in New
Zealand.
25. Reconciliation of cash flows from operating activities
Note
27
27
6
7
Cash flows from operating activities
Profit/(loss) for the period
Adjustments for:
Gain on sale of discontinued operation
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
Dividend received
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
26. Related parties
Transactions with key management personnel
Key management personnel compensation
Key management personnel compensation comprised the following:
Short-term employee benefits
Post-employment benefits
Termination benefits
Other long-term benefits
Share-based payments
2018
$’000
5,977
(13,094)
(1,993)
1,337
-
(4,484)
(9)
509
(362)
(234)
(1,026)
(13,379)
(1,244)
4,831
6,824
(372)
(3,340)
(509)
(230)
(4,079)
2018
$
866,281
59,345
-
69,447
88,800
1,083,873
2017
$’000
(35,539)
-
7,056
2,924
7,868
659
(24)
560
-
(610)
10,069
(7,037)
1,561
1,055
2,072
(790)
(3,139)
(560)
(1,280)
(4,979)
2017
$
1,185,502
79,766
360,073
19,309
20,768
1,665,418
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.
38
Coventry Group Ltd and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2018
26. Related parties (continued)
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 24). All transactions with controlled entities are at arm’s
length.
The aggregate amounts that resulted from transactions with controlled entities and balances as at period end are:
The parent entity only:
Dividend revenue
Revenue from sale of goods
Management fees
Aggregate amounts payable to controlled entities
Aggregate amounts receivable from controlled entities
2018
$
362,500
-
1,821,580
3,513,691
-
2017
$
1,160,000
655,684
1,510,613
-
146,049
During the year ended 30 June 2015, the Company entered into an intercompany loan with Coventry Group (NZ) Limited (CGL NZ).
The intercompany loan is subject to an interest charge of 5.13% p.a (2017: 5.63% p.a) and at 30 June 2018 the balance owing to CGL
NZ was $3,322,194 (2017: Owing from CGL NZ $114,728).
During the year ended 30 June 2018, the Company charged CGL NZ management fees of $1,821,580 (2017: $1,510,613).
27. Restructuring, impairment and other significant costs
The following restructure costs were incurred in the year ended 30 June 2018.
Restructuring, impairment and other significant costs
Redundancies, restructure
Impairment of assets
Stock obsolescence
(Gain) on sale of motor vehicles per sale and leaseback transaction
Other costs and legal fees
Cyber Attack
2018
$’000
302
-
-
-
141
-
443
2017
$’000
756
7,868
6,538
(361)
-
644
15,445
Redundancy costs
Costs associated with restructuring of head office employee costs and relocation of Accounts Receivable Team to Melbourne.
Other costs and legal fees
Principally associated with the sale of the AA Gaskets business assets.
39
Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2018
The directors present their report together with the consolidated financial report of the Group comprising Coventry Group Ltd (the
“Company”) and its controlled entities for the year ended 30 June 2018.
Contents of Directors' Report
1. Directors
2. Principal activities
3. Consolidated results
4. Dividends
5. Review of operations and results
6. Earnings per share
7. Significant change in the company's affairs
8. Events subsequent to reporting date
9. Likely developments
10. Remuneration report - audited
10.1 Key Management Personnel (KMPs)
10.2 Principles used to determine the nature and amount of compensation
10.3 Details of compensation
10.4 Service contracts
10.5 Director share movement
11. Environmental regulation
12.
Insurance of officers
13. Corporate governance
14. Non-audit services
15. Lead auditor's independence declaration
16. Company secretary
17. Rounding off
Directors' Declaration
Lead Auditor’s Declaration under S307C of the Corporations Act 2001
Independent Auditor’s Report
Shareholder Information
Corporate Directory
Page
41
42
43
43
43
44
44
44
44
44
44
46
47
47
47
48
48
48
48
48
48
49
50
51
57
58
40
Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2018
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
Neil George Cathie
FCPA, GAICD, FCIS
Chairman
Chairman of Remuneration Committee;
member Audit and Risk committee
Experience and other directorships
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.
Robert James Bulluss
FCPA, GAICD, B Bus (Acc)
Managing Director
Chief Executive Officer
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.
Andrew William Nisbet
GAICD
Independent Non-executive Director
Chairman of Audit and Risk Committee
Mr Bulluss retired as a Non-Executive Director for the privately owned Allpower
Industries Pty Ltd on 17 May 2018.
He held no other listed company directorships during the past 3 financial years.
Mr Nisbet was appointed as a director of the Company on 1 October 2017.
During his extensive career at ASX listed Reece Ltd he held a variety of senior leadership
roles, from Marketing to Merchandising, IT, Supply Chain Transformation, Innovation and
the management of a number of Strategic Business Units, including the Reece expansion
into New Zealand.
Mr Nisbet is a graduate of the Australian Institute of Company Directors, has been an
advisor in setting up an SME board, has been an active board member of a not for profit
charity and is currently studying part time to complete a Bachelor in Psychological
Sciences.
He held no other listed company directorships during the past three financial years.
Kenneth Royce Perry
B.Sc (Hons), MBA, MAICD
Independent non-executive Director
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.
Mr Perry had 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. Mr Perry is also a
member of various private boards. He held no other listed company directorships during
the past 3 financial years.
Mr Perry resigned as Director on 22 November 2017.
Nicholas John Willis
B.Sc, FAIM
Independent non-executive director
Mr Willis was appointed a director of the Company in September 2014. He had
extensive and highly relevant experience in industry spaces of the Group and had many
years at a senior level in ASX listed companies.
He held no other listed company directorships during the past 3 financial years.
Mr Willis resigned as Director on 31 August 2017.
Vicky Papachristos
BE (Chem), MBA, AICD
Independent non-executive director
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.
41
Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2018
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
RJ Bulluss
AW Nisbet
Number of Ordinary Shares
237,972
40,000
57,750
During the 2017/18 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.
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 2018, and the number of meetings attended by each director.
NG Cathie
RJ Bulluss
AW Nisbet
KR Perry
NJ Willis
V Papachristos
10
10
10
10
10
10
Held
Attended
Board of Directors
Eligible
to attend
10
8
7
5
2
1
10
8
7
5
2
1
Attended
Held
Audit & Risk Committee
Eligible
to attend
2
-
1
1
-
-
2
-
1
1
-
-
2
-
2
2
-
-
Attended
Held
Remuneration Committee
Eligible to
attend
2
2
1
-
1
-
2
2
2
-
2
-
2
2
1
-
1
-
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.
During the year the Group completed the sale of the Gaskets manufacturing business to GUD Holdings Limited following a strategic
decision to focus on the Group’s two core industrial supply businesses.
Except as noted above, there have been no changes to the principal activities of the Group during the year ended 30 June 2018.
42
Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2018
3. Consolidated results
Results of the Group for the year ended 30 June 2018 were as follows:
Revenue from sale of goods
Profit/(loss) before tax
Income tax (expense)/benefit
Loss for the year from Continuing operations
Profit from Discontinued operations, net of tax
Profit/(loss) for the year from Continuing and Discontinued operations
Profit/(loss) after tax for the year attributable to:
- Owners of the Company
- Non-controlling interests
Profit/(loss) after tax for the year
4. Dividends
2018
$’000
168,739
(7,275)
(1,026)
(8,301)
14,278
5,977
5,651
326
5,977
Restated*
2017
$’000
151,027
(28,627)
(9,052)
(37,679)
2,140
(35,539)
(36,127)
588
(35,539)
There were no dividends paid or declared by the Group to members for the year ended 30 June 2018 (2017: $Nil).
5. Review of operations and results
People
The Group had 8 Lost Time Injuries (LTI’s) during the year which is a disappointing result. Our aspiration is for zero LTI’s and plans
are being implemented to improve our safety systems to achieve this goal.
We remain fully focussed on our Customers and People, applying our values of Respect, Fairness, Teamwork, Professionalism and
Integrity.
Financial performance
Revenue from sale of goods
Underlying EBITDA
Underlying EBIT
Loss from continuing operations
Profit/(loss) for the year (i)
NTA per share ($)
Net cash
Share price at year end
2018
$M
168.7
-4.7
-6.1
-8.3
6.0
1.30
5.0
1.35
2017
$M
151.0
-9.7
-12.5
-37.7
-35.5
1.30
-2.9
0.60
% change
11.7
n/m
n/m
n/m
n/m
0.7
n/m
123.0
(i) Including the discontinuing operations of AA Gaskets and the profit on sale of the AA Gaskets business assets.
n/m = not meaningful
Review of businesses
Trade Distribution (TD)
TD sales for the year were up 6.6% on the prior year and up 10.0% year on year for the fourth quarter. The underlying loss for TD
was $3.0m compared to $5.2m in FY17.
Trade Distribution Australia continued to show improvement with fourth quarter sales year on year up 6.1% on PCP and full year
sales year on year up 3.5%. Contribution improvement of $1.4m for the year.
Trade Distribution New Zealand had an excellent year with sales up 15.1% on last year. TDNZ is the leading fastening systems
business in the construction and roofing and cladding markets in New Zealand and has good growth prospects. Profit contribution in
FY18 of $3.1m compared to $2.3m in FY17.
Cooper Fluid Systems
CFS had substantial sales growth with 4th quarter sales up 19.4 % year on year and full year sales growth of 20.9% year on year.
Sales growth is continuing to be driven by an increase in service, maintenance, upgrade and new equipment activity in the resources
sector. Profit contribution in FY18 of $5.0m compared to $2.6m in FY17.
43
Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2018
6. Earnings per share
Basic earnings from continuing and discontinued operations per share for the year ended 30 June 2018 was 15.1 cents. This compares
to a basic loss from continuing and discontinued operations per share of 95.7 cents for the previous year.
7. Significant change in the Company's affairs
Except for the sale of the AA Gaskets business, in the opinion of the Directors, there have been no other significant changes in the
Group’s state of affairs during the financial year.
8. Events subsequent to reporting date
The directors are not aware of any matter or circumstance having arisen since the end of the financial year and the date of this report
that has significantly affected, or may significantly affect the operations of the Group, the results of those operations, or the state of
affairs of the Group, in future financial years.
9.
Likely developments
The Group will continue to implement its 5 year strategy and continue to operate in the markets in which it currently participates.
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:
Directors
NG Cathie
RJ Bulluss (Managing Director and CEO)
AW Nisbet (appointed 1 October 2017)
KR Perry (resigned 22 November 2017)
NJ Willis (resigned 31 August 2017)
V Papachristos (resigned 28 July 2017)
Key Management Personnel
RJ Jackson (appointed 25 September 2017)
A Donaldson
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. They are eligible to participate in the Executive and
Director Incentive Plan which was approved by shareholders at the Annual General Meeting of the Company in November 2017. This
followed the decision by the Board in September 2017 to reduce cash based non-executive director fees in the order of 30%. The non-
executive directors have determined it is in the best interests of the Company that they do not participate further in the plan until the
Group returns to profitability.
Non-executive directors’ cash 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 (2017: $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. Non-executive directors do not receive termination benefits. There is no provision for retirement
allowances to be paid to non-executive directors.
44
Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2018
10. Remuneration report – audited (continued)
As at 30 June 2018 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
2018
$
96,000
72,000
-
-
-
2017
$
127,500
85,000
15,000
5,000
5,000
Remuneration policies
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. 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.
Cash incentives of up to 65% of fixed annual compensation are payable to the senior executives upon the achievement of various
annual performance targets.
An Executive and Director Incentive Plan was approved by shareholders at the 2017 annual general meeting. This share-based plan
provides for the granting or issuing of performance rights in accordance with its terms and subject to the terms and performance hurdles
set by the Board. The Board has determined there will be no grant or issue of performance rights in relation to 2018 to executives.
45
Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2018
10. Remuneration report – audited (continued)
10.3 Details of compensation
The following table provides the details, nature and amount of elements of compensation for the key management personnel of the Company and the Group for the year ended 30 June 2018.
Short-term
Cash salary,
leave paid
and fees
STI
cash
bonus
Non-
monetary
benefits
Total
Post-
employment
Super-
annuation (i)
$
$
$
$
$
Other
long-term
Long-service &
annual leave
provision
accrual
$
Share-based payment
Termination
benefits
Share-
based
payment (iii)
Proportion of
remuneration
performance
related
Value of loans
as proportion
of
remuneration
Total
$
$
$
2018
2017
2018
2017
2018
2018
2017
2018
2017
2018
2017
2017
2018
2017
2018
2018
2017
2018
2017
2018
2017
87,671
125,571
379,951
226,826
49,315
34,931
95,890
12,176
82,192
6,088
82,192
455,508
570,132
1,068,179
230,952
65,197
117,323
296,149
117,323
866,281
1,185,502
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87,671
125,571
379,951
226,826
49,315
34,931
95,890
12,176
82,192
6,088
82,192
455,508
570,132
1,068,179
230,952
65,197
117,323
296,149
117,323
866,281
1,185,502
8,329
11,929
20,049
14,475
4,685
3,319
9,110
1,156
7,808
578
7,808
19,616
38,116
70,746
15,036
6,193
9,020
21,229
9,020
59,345
79,766
-
-
45,097
19,309
-
-
-
-
-
-
-
-
45,097
19,309
17,997
6,353
-
24,350
-
69,447
19,309
-
-
-
-
-
-
-
-
-
-
-
360,073
-
360,073
-
-
-
-
-
-
360,073
55,500
-
-
-
33,300
-
-
-
-
-
-
20,768
88,800
20,768
-
-
-
-
-
88,800
20,768
151,500
137,500
445,097
260,610
87,300
38,250
105,000
13,332
90,000
6,666
90,000
855,965
742,145
1,539,075
263,985
77,743
126,343
341,728
126,343
1,083,873
1,665,418
-
-
-
-
-
-
-
-
-
-
-
2.4%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2.4%
-
-
-
Directors
NG Cathie - Chairman
RJ Bulluss (appointed August 2017) (ii)
AW Nisbet (appointed October 2017)
KR Perry (resigned November 2017)
NJ Willis (resigned August 2017)
V Papachristos (resigned July 2017)
PJB Caughey (resigned March 2017)
Total directors' remuneration
Key Management Personnel
RJ Jackson (appointed September 2017)
A Donaldson
J Nicolazzo (resigned September 2016)
Total key management personnel
remuneration
Total directors' and key management
personnel remuneration
Premiums in respect of the Directors’ and Officers’ insurance policy are not included above, as the policy does not specify the premium paid in respect of individual directors and officers.
(i) Includes statutory superannuation contributions and additional voluntary contributions.
(ii) In the previous financial year RJ Bulluss was a key management personnel. Total remuneration for the 2018 year is included and the 2017 remuneration represents the remuneration paid as a key management personnel
from October 2016 to June 2017.
(iii) In November 2017, shares in the Company were issued to NG Cathie (50,000) and AW Nisbet (30,000) pursuant to their participation in the Company’s Director and Executive Incentive Plan. Approval for the issue was
obtained under listing rule 10.14 at the November 2017 Annual General Meeting.
46
Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2018
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:
Robert Bulluss, CEO and Managing Director (appointed CEO 3 May 2017, appointed CEO and Managing Director 29 August 2017)
•
•
•
•
• Other than for an act that may have a serious detrimental effect on the Company, such as wilful disobedience, fraud or misconduct,
The contract has no fixed term.
Fixed annual compensation to be reviewed annually by the Remuneration Committee.
Long service leave is payable by the Company in accordance with relevant state legislation.
The contract provides for participation in short-term and long-term incentive plans.
termination of employment requires six months’ notice by the Company.
Rodney Jackson, Chief Financial Officer (appointed 25 September 2017)
•
•
•
•
• Other than for an act that may have a serious detrimental effect on the Company, such as wilful disobedience, fraud or misconduct,
The contract has no fixed term.
Fixed annual compensation to be reviewed annually by the Remuneration Committee.
Long service leave is payable by the Company in accordance with relevant state legislation.
The contract provides for participation in short-term and long-term incentive plans.
termination of employment requires eighteen weeks’ notice by the Company.
Angela Donaldson, Commercial Manager and Company Secretary (appointed Commercial Manager 15 March 2017, Appointed
Company Secretary 03 May 2017)
•
•
•
•
• Other than for an act that may have a serious detrimental effect on the Company, such as wilful disobedience, fraud or misconduct,
The contract has no fixed term.
Fixed annual compensation. There is no reference to agreed review periods in relation to remuneration
Long service leave is payable by the Company in accordance with relevant state legislation.
The contract provides for participation in a company profit share plan.
termination of employment requires notice by the Company as outlined within the National Employment Standards.
10.5 Director share movement
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
NG Cathie
AW Nisbet (appointed October 2017)
RJ Bulluss
KR Perry (resigned November 2017)
NJ Willis (resigned August 2017)
V Papachristos (resigned 28 July 2017)
Held at
30 June
2017
72,200
-
-
30,000
5,400
-
Purchases
Conversion
of
Performance
Rights
Sales /
Cancelled
Held at
Resignation/
Retirement
Held at
30 June
2018
115,772
27,750
40,000
-
-
-
50,000
30,000
-
-
-
-
-
-
-
-
(5,400)
-
-
-
-
30,000
-
-
237,972
57,750
40,000
N/A
N/A
N/A
No other key management person held shares, directly, indirectly or beneficially, in the Company at 30 June 2018 (2017: 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 2018 and as at the date of this report, the Group has not been prosecuted nor incurred any
infringement penalty for environmental incidents.
47
Coventry Group Ltd
Directors’ Report
For the year ended 30 June 2018
12.
Insurance of officers
During the financial year the Company has paid premiums in respect of contracts insuring the directors and officers of the Company
against certain liabilities incurred in those capacities. The contracts prohibit further disclosure of the nature of the liabilities and the
amounts of the premiums.
13. Corporate governance
The Statement of Corporate Governance Practices is 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 4 to the full financial report.
15. Lead Auditor’s 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
Ms. Angela Donaldson was appointed to the position of Company Secretary in May 2017.
17. Rounding off
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and in
accordance with that Instrument, 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
24 August 2018
R.J. BULLUSS
CEO and Managing Director
Melbourne
24 August 2018
48
Coventry Group Ltd and its controlled entities
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 44 to 47, are in
accordance with the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of their performance, for the
financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
b)
c)
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a) of the full financial
report;
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 2018 pursuant to Section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors.
N.G. CATHIE
Chairman
Melbourne
24 August 2018
R.J. BULLUSS
CEO and Managing Director
Melbourne
24 August 2018
49
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Coventry Group Ltd
I declare that, to the best of my knowledge and belief, in relation to the audit of Coventry Group Ltd for
the financial year ended 30 June 2018 there have been:
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
i.
ii.
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
J Carey
Partner
Melbourne
24 August 2018
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Independent Auditor’s Report
To the shareholders of Coventry Group Ltd
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Coventry Group Ltd (the Company).
In our opinion, the accompanying Financial
Report is in accordance with the
Corporations Act 2001, including:
• giving a true and fair view of the
Group’s financial position as at
30 June 2018 and of its financial
performance for the year ended on
that date; and
•
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report comprises:
• Consolidated statement of financial position as at
30 June 2018
• Consolidated statement of profit or loss,
Consolidated statement of comprehensive income,
Consolidated statement of changes in equity, and
Consolidated statement of cash flows for the year
then ended
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year end or from time to time during
the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
• Going concern basis of accounting;
• Valuation of inventory; and
• Disposal of the AA Gaskets business.
Going concern basis of accounting
Refer to Note 1(b) to the Financial Report
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in
our audit of the Financial Report of the current period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
The key audit matter
How the matter was addressed in our audit
The Group’s use of the going concern basis of
accounting and the associated extent of
uncertainty is a key audit matter due to the high
level of judgement required by us in evaluating
the Group’s assessment of going concern and
the events or conditions that may cast
significant doubt on their ability to continue as a
going concern. These are outlined in Note 1(b).
The Directors have determined that the use of
the going concern basis of accounting is
appropriate in preparing the Financial Report.
Their assessment of going concern was based
on cash flow projections. The preparation of
these projections incorporated a number of
assumptions and significant judgements, and
the Directors have concluded that the range of
possible outcomes considered in arriving at this
judgement does not give rise to a material
uncertainty casting significant doubt on the
Group’s ability to continue as a going concern.
We critically assessed the levels of uncertainty,
as it related to the Group’s ability to continue as
a going concern, within these assumptions and
judgements, focusing on the Group’s planned
levels of operational and capital expenditures,
and the ability of the Group to manage cash
outflows within available funding, including the
impact of ongoing restructuring and other
initiatives implemented by the Group.
In assessing this key audit matter, we involved
senior audit team members who understand
the Group’s business, industry and the
economic environment it operates in.
Our procedures included:
•
We analysed the cash flow projections by:
-
-
-
Evaluating the underlying data used to
generate the projections. We specifically
looked for their consistency with those
used by the Directors, and tested by us,
their consistency with the Group’s
intentions as outlined in Directors
minutes, and their comparability to past
practices;
Analysing the impact of reasonably
possible changes in projected cash flows
and their timing, to the projected periodic
cash positions. Assessing the resultant
impact to the ability of the Group to pay
debts as and when they fall due and
continue as a going concern. The specific
areas we focused on were informed from
our test results of the accuracy of
previous Group cash flow projections and
sensitivity analysis on key cash flow
projection assumptions; and
Assessing the planned levels of operating
and capital expenditures for consistency
of relationships and trends to the Group’s
historical results since year end including
the impact of ongoing restructuring and
other initiatives implemented by the
Group, and our understanding of the
business, industry and economic
conditions.
•
We evaluated the Group’s going concern
disclosures in the Financial Report by
comparing them to our understanding of the
matter, the events or conditions
incorporated into the cash flow projection
assessment, the Group’s plans to address
those events or conditions, and accounting
standard requirements.
Valuation of inventory ($46.4 million)
Refer to Note 11 to the Financial Report
The key audit matter
How the matter was addressed in our audit
We considered valuation of inventory to be a
key audit matter given:
• Relative magnitude - inventory is a key
audit matter due to its significant size to
the Group’s financial position (and
represents 47% of the Group’s total assets
at 30 June 2018); and
•
The extent of audit effort – inventory was a
key audit matter due to the high proportion
of audit effort we applied to gather
sufficient appropriate audit evidence on the
net realisable value of inventory.
A key indicator for at-risk inventory values, is
the identification of current slow moving and
obsolete inventory. These can signal demand
shifts resulting in potential over-supply issues
and downward pressure on prices.
Our procedures included:
•
Testing key controls designed by the Group to
identify slow moving and obsolete inventories
such as monthly management review and
approval of inventory ageing report;
• Obtaining, on a sample basis, the most recent
sales invoices of selected product lines to
compare the carrying amount to the realisable
value of the product line;
• Attending year end stock takes in significant
locations. We observed and tested the
process of identifying slow moving and
potentially obsolete inventory. We traced this
to the accounting records for inventory
valuations of slow moving and obsolete stock
on a sample basis;
• Assessing the mathematical accuracy of the
provision for slow moving and obsolete stock
computation; and
• Assessing the Group’s inventory valuation
methodologies and the Group’s disclosure in
respect of inventory valuation against the
requirements of relevant accounting
standards.
Disposal of the AA Gaskets business (Gain on sale of business: $13.1 million)
Refer to Note 3 to the Financial Report
The key audit matter
How the matter was addressed in our audit
We considered the disposal of the AA Gaskets
business to be a key audit matter given:
• Relative magnitude – the disposal of the AA
Gaskets business was a key audit matter
due to the significant size of the of $13.1m
gain on sale and the derecognition of the
associated assets and liabilities to the
Group’s Financial Report; and
•
The extent of audit effort we applied in
checking the mathematical accuracy of the
gain on sale of the business and evaluating
the accounting entries for the disposal of
the business.
Our procedures included:
• Reading the sale contractual terms to
understand the key terms and conditions of
the disposal;
• Evaluating the substance of the disposals,
using the terms and conditions of the
transaction documents, against the criteria for
discontinued operations in the accounting
standards;
• Assessing the identification of assets and
liabilities disposed of, comparing to transaction
documents and underlying financial records at
the point of disposal;
• Checking the mathematical accuracy of the
gain on sale of the business, including
identification and consideration of other costs
and legal fees incurred;
• Checking the proceeds received for the
disposal to bank statements;
• Assessing the accounting entries for the
disposal of the business against the
accounting standards;
• Assessing the adequacy of the disclosure
against the requirements of AASB 5 Non-
current Assets Held for Sale and Discontinued
Operations, including the accuracy of
continuing and discounting operations
disclosures.
• Checking the accuracy of the restatement of
comparative information.
Other Information
Other Information is financial and non-financial information in Coventry Group Limited’s annual
reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors
are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error
• assessing the Group and Company’s ability to continue as a going concern and whether the
use of the going concern basis of accounting is appropriate. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group and Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is to:
• obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
•
issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our Auditor’s
Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Coventry Group Limited for the year
ended 30 June 2018, complies with
Section 300A of the Corporations Act
2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
the Directors’ report for the year ended 30 June 2018.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
J Carey
Partner
Melbourne
24 August 2018
Coventry Group Ltd
Shareholder Information
As at 20 August 2018
TWENTY LARGEST SHAREHOLDERS
Name
1
2
3
4
5
6
7
8
9
10
10
10
13
14
15
16
17
18
19
19
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
CITICORP NOMINEES PTY LIMITED
ELLAND ROAD PTY LTD
ARUMA BEACH PTY LTD
GARSIND PTY LTD
TPSC SMIRK PTY LTD
BENTALE PTY LTD
DAVID NEWNHAM SUPER PTY LTD
MR CLIFFORD MAXWELL KYLE
MR GEOFFREY KYLE
MRS JUDITH ANNE SMIRK
CHARLES PETER TAYLOR
GLENBARRY PTY LTD
MR GEOFFREY RAYMOND KIRKMAN AND MRS ELIZABETH EVELYN
KIRKMAN
Ordinary Shares
Number
8,682,722
3,987,821
1,668,714
1,356,660
1,000,000
836,619
779,506
610,926
442,000
400,000
400,000
400,000
396,000
377,000
361,208
320,000
206,663
201,182
200,000
200,000
% of Total
23.23
10.67
4.46
3.63
2.68
2.24
2.09
1.63
1.18
1.07
1.07
1.07
1.06
1.01
0.97
0.86
0.55
0.54
0.53
0.53
DISTRIBUTION OF SHAREHOLDING
Size of holding
1 – 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Unmarketable parcels field information:
SUBSTANTIAL SHAREHOLDERS
Number of
holders
442
775
205
304
37
1,763
22,827,021
61.07
%
25.07
43.96
11.63
17.24
2.10
100.00
Number of
shares
262,624
1,982,575
1,498,558
8,587,262
25,049,385
37,380,404
Minimum
Parcel Size
365
Holders
74
%
0.70
5.30
4.01
22.97
67.02
100.00
Units
6,525
The Company's register of substantial shareholders showed the following particulars as at 20 August 2018.
Name of Substantial Shareholder
Viburnum Funds Pty Ltd
Intrepid Capital Management Inc
Sandon Capital Investments Pty Ltd
UNQUOTED EQUITY SECURITIES
Nil
Extent of
Interest
(Number of
Shares)
7,295,121
2,865,254
2,297,056
Date of last
notification
28.06.2018
09.05.2018
22.03.2016
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
57
Coventry Group Ltd
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
Facsimile: +(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 Address
Shareholders wishing to enquire about their shareholdings, dividend payments, or change their address should contact the
Company's share registry.
58