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Annual Report 2013
Highlights
About DuluxGroup
Chairman's Report
Managing Director's Report
Operating and Financial Review
Strategy and Growth
Material Business Risks
Result Summary
Financial Performance
Segment Detail
Corporate Costs
Non-recurring Items
Future Financial Prospects
Sustainability Report
Board Members
Group Executive
Corporate Governance Statement
Financial Report
Shareholder Statistics
Shareholder Information
1
2
8
10
12
12
14
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23
30
31
32
33
38
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42
52
152
153
Bed2
dulux wash and
wear for bedroom
ABN 42 133 404 065
DuluxGroup Limited is an Australian company that owns the Dulux® trade mark in Australia, New Zealand, Papua New Guinea, Samoa and
Fiji only and the Cabot’s® trade mark in Australia, New Zealand, Papua New Guinea and Fiji only. DuluxGroup Limited is not associated with,
and has no connection to, the owners of the Dulux® and Cabot's® trade marks in any other countries, nor does it sell Dulux® and Cabot's®
products in any other countries.
DuluxGroup Annual Report 2013
2013 Highlights
A strong operating result in
generally weak markets was
underpinned by profitable market
share growth in core segments,
solid input cost control and good
cash management.
Strengthened market leadership positions and
continued investment in key capabilities and
longer term growth options have developed solid
foundations for the future.
NPAT, before non-recurring items
$94.1M
>l
18.2%
NPAT, before non-recurring items, of $94.1 million,
an increase of 18.2% over the 2012 equivalent NPAT
of $79.6 million.*
Earnings before interest and tax (EBIT)
excluding non-recurring items*
$156.2M
>l
24.7%
Sales revenue growth
$1.485B
>l
39.0%
Heritage DuluxGroup businesses grew 5.5% in generally
flat markets, due largely to market share gains, with the
remainder of the growth due to the addition of the former
Alesco businesses, which were acquired in December 2012.
Strong cash generation, with net debt
to EBITDA
1.95x
Strong cash generation, with net debt to EBITDA at 1.95x,
post the Alesco acquisition.
Final dividend
9.5cents
Final dividend of 9.5 cents per share fully franked, taking
the full year dividend to 17.5 cents, which represents a
70% payout ratio on NPAT, before non-recurring items.
Resilience and financial discipline
• Strong underlying profit growth
• Grew revenue despite generally flat markets
• Profitable market share gains in core markets
• Good input cost control and strong cash
generation
• Alesco corporate cost synergies delivered ahead
of schedule
Investing for growth
• Continued to invest in the fundamentals of brands,
innovation and customer service to build on our
premium branded, market leading positions in
core markets
• Progressed the integration of the new businesses
– Parchem Construction Chemicals and Equipment,
B&D Garage Doors and Openers, and Lincoln
Sentry Cabinet and Architectural Hardware
• Invested in sales and marketing capability in our
new businesses to capitalise on their market
leading positions and premium brands
• Shaped the China business to capitalise on growth
opportunities for Selleys, AcraTex and paints.
* Details of non-recurring items can be found on page 31.
DuluxGroup Annual Report 2013
1
About DuluxGroup
Products, Customers and End Markets
DuluxGroup is a leading marketer
and manufacturer of premium
branded products that enhance,
protect and maintain the places
and spaces in which people live
and work.
A broad
portfolio of
products and
markets.
Our Products
Whether you are sitting in a family room brought to
life through your own choice of colour and texture,
relaxing on your garden deck coated to seamlessly
blend with the indoors, enjoying a back garden
brimming with spring vegetables or marvelling at the
ease with which your garage door silently glides up
to reveal a beautifully matched driveway, DuluxGroup
products are at work.
Sales by business sectors
From the specialty coatings that protect landmarks
such as the Sydney Harbour Bridge and Auckland’s
iconic Princess Wharf building to concrete products
for community infrastructure such as the new Royal
Adelaide Hospital, DuluxGroup products are at work.
Our products are woven into the fabric of our
communities, helping us live better and more
comfortable lives.
Sales by Business Sectors
Sales by business sectors
Retail Paints 21%
Trade Paints 23%
Specialty Coatings 13%
Parchem Construction
Chemicals and
Equipment 8%
Garage Doors
and Openers 10%
Cabinet and Architectural
Hardware 9%
Yates Garden Care 7%
Selleys Home Care 9%
Retail Paints 21%
Trade Paints 23%
Specialty Coatings 13%
Parchem Construction
Chemicals and
Equipment 8%
Garage Doors
and Openers 10%
Cabinet and Architectural
Hardware 9%
Yates Garden Care 7%
Selleys Home Care 9%
2
DuluxGroup invests in its iconic
brands and focuses on providing
innovative product solutions to
drive growth and success through
our retail and trade customers.
DuluxGroup's primary focus
is on residential markets, with
a strong bias towards existing
homes. This is complemented
by a presence in commercial
and industrial markets.
Our Customer Channels
Almost two thirds of DuluxGroup’s business is
delivered via trade channels, comprising an extensive
network of customers including painters, specifiers,
architects, engineers, designers, builders, concreters,
cabinet makers, garage door dealers, project and
facilities managers.
Sales by channel
In addition to our own extensive company store
network, DuluxGroup’s products are sold through
thousands of retail customer outlets ranging from
large national home improvement and grocery
retailers to specialist paint and decorating and smaller
family-owned hardware stores.
Sales by Channel
Sales by channel
Retail 37%
Trade 63%
Our End Markets
Approximately two thirds of DuluxGroup’s business
is focused on the maintenance and improvement
of existing homes. Throughout economic cycles
consumers have continued to invest in making their
homes ‘a better place’, whether it be through
do-it-yourself (DIY) projects or engaging a trade
professional.
DuluxGroup also has some focus on new housing, with
a bias towards the premium end of the market where
Sales by end-market
consumer choice of brands plays a greater role. When
consumers are deciding which products to use in their
own living spaces – whether it be in an existing or a
new home – they seek out brands they know and trust.
Approximately one-fifth of DuluxGroup’s business
comes from commercial construction, infrastructure
and industrial markets.
Sales by End-market
Sales by end-market
Maintenance and Home
Improvement 64%
New Housing 16%
Commercial
Infrastructure 16%
Industrial 4%
Maintenance & Home
Improvement 64%
Commercial
Construction 10%
New Housing 16%
New Housing 16%
Industrial 4%
DuluxGroup Annual Report 2013
3
About DuluxGroup
Business Fundamentals
Our Core Purpose
At DuluxGroup we help our consumers to imagine
and create better places and spaces in which to live
and work. We call this ‘Imagine a Better Place’.
Our Strengths
Our People and Culture
DuluxGroup’s people span many geographies
and cultural backgrounds. They have developed
industry-leading expertise and deep experience in
areas as diverse as marketing, chemistry, colour
trends, finance, horticulture, sales, engineering and
materials handling. They have united to develop a
common set of values that guide them in delivering
our core purpose.
Those values, which underpin DuluxGroup’s
success, are:
Be customer focused and
consumer driven
innovate and grow
– unleash our potential
value people, work safely
and respect the environment
run the Business as your own
Driven by these values, DuluxGroup people
continue to finder smarter, market-leading
solutions for consumers and our retail and trade
customers. This quest to improve – our standards,
our products, our services – is supported by an
entrenched culture of operating with integrity,
strong financial discipline and a commitment
to care for the safety of colleagues and the
communities within which we operate.
Premium brands
and marketing
IMAGINE
A BETTER
PLACE
Broad product
portfolio
Our people
and culture
4
Comprehensive distribution
and customer relationships
across trade and
retail channels
Innovation
and technology
IMAGINE
A BETTER
PLACE
Financial discipline
Leading
customer service
Proven Business Fundamentals
DuluxGroup maintains and develops market-leading
positions by building strong relationships with
consumers who know and trust our brands.
Our world-class research and technology centres
take input from consumers and a global knowledge
base to develop product innovations that surprise
and delight consumers. We invest in world-class
manufacturing plants where those innovations are
brought to life in products that are rigorously tested
to ensure they are worthy of bearing the badge of
our iconic brands.
Our sales force – the biggest and most effective
in the business – supports a network of trade
professionals and our retail customers in meeting
the needs of our consumers in store.
All of those elements work to ensure a strong
and sustainable competitive advantage, a stable
earnings profile and provide a platform for
compelling growth options.
We seek leadership positions in
premium, higher-margin segments.
We build those positions by
investing in our key capabilities
to ensure sustainable competitive
advantage and to stimulate
growth.
We maintain a relentless focus
on financial discipline and
productivity improvement.
We continue to reinvest in the
right assets to enable growth.
DuluxGroup Annual Report 2013
5
About DuluxGroup
Our Brands and History
DuluxGroup’s brands are trusted and
relied upon for their quality. This reputation
is built on 100 years of history, rigorous
attention to detail, product innovation
and marketing investment.
Brands such as dulux, selleys, yates, cabot’s and B&d
are household names with the highest consumer
awareness in their respective markets.
6
®BLITZEM! About DuluxGroup
Our locations
DuluxGroup holds market-leading positions
in Australia and New Zealand with exposure
to the higher growth regions of Asia.
duluxgroup employs approximately 4000 people in australia,
new Zealand, papua new guinea, south east asia and china,
and has a comprehensive, world-class, scalable manufacturing
base and supply chain.
21 Main
Manufacturing Sites
21 Distribution Centres
120+ Company-Owned
Trade Outlets
AuTOMATIC OPENERS
Dalian, China
GARAGE DOORS
Hornby, Christchurch, New Zealand
East Tamaki, Auckland, New Zealand
Revesby, New South Wales, Australia
Clontarf, Queensland, Australia
Kilsyth, Victoria, Australia
Malaga, Western Australia
CONSTRuCTION CHEMICAlS
AND EquIPMENT
Wyong, New South Wales, Australia
Brunswick, Victoria, Australia
POWDER COATINGS
Guangdong Province, China
Dandenong, Victoria, Australia
Auckland, New Zealand
WOODCARE
Dandenong, Victoria, Australia
YATES
Wyee, New South Wales, Australia
Mt Druitt, New South Wales, Australia
Auckland, New Zealand
DECORATIvE PAINTS
Rocklea, Queensland, Australia
Gracefield, Wellington, New Zealand
Guangdong Province, China
Lae, Papua New Guinea
TExTuRE COATINGS
Beverley, South Australia
Shah Alam, Selangor, Malaysia
SEllEYS
Padstow, New South Wales, Australia
INNOvATION AND
TECHNOlOGY CENTRES
Clayton, Victoria, Australia
(DuluxGroup Head Office)
Padstow, New South Wales, Australia
Beverley, South Australia.
Sales by Geography
Australia 83%
New Zealand 10%
Asia/PNG 7%
Australia 83%
New Zealand 10%
Asia/PNG 7%
DuluxGroup Annual Report 2013
7
DuluxGroup Annual Report 2013
Chairman’s Report
This year DuluxGroup has
continued to grow and deliver very
strong results, despite generally
subdued conditions in most of
our core markets.
Dear fellow shareholders
This year DuluxGroup has continued to grow and
deliver very strong results, despite generally subdued
conditions in most of our core markets. At the same
time, we have further strengthened the company’s
platform for ongoing growth. Profitable market
share gains in our core Australian and New Zealand
business segments, the successful acquisition
and integration of the Alesco businesses, further
refinement of our position in China and Hong
Kong for medium to longer term growth, and the
disposal of the non-core Robinhood business, have
DuluxGroup well placed for ongoing success.
Today DuluxGroup has evolved into a broader paints,
home improvement and building products business.
In doing so, we have sought market leadership
positions in well structured, defendable markets
that have proven to offer relatively resilient earnings
streams throughout economic cycles.
The relative weakness in Australian construction
markets has continued in 2013, with some early
indications of very modest growth in 2014.
New Zealand housing construction markets returned
to growth in 2013 following a prolonged period of
decline. Those parts of DuluxGroup that have greater
exposure to these more challenging commercial and
industrial construction markets generally performed
well, with most achieving modest increases in
sales and market share. However, the majority of
DuluxGroup’s business is not derived from the more
cyclical new construction markets. Following the
addition of the Alesco businesses, DuluxGroup
remains predominantly focused on premium branded
products for the maintenance and improvement
of existing residential homes, though with a wider
product range. Almost two-thirds of group revenue
comes from this sector and, once again, it has held
up well amidst difficult times for the overall housing
and construction market.
An 18.2% increase in net profit after tax (NPAT),
before non-recurring items, was driven by a
particularly strong performance and profitable
growth from DuluxGroup’s heritage business. This
combined with a solid contribution from the newly
acquired Alesco businesses, which delivered proforma
earnings ahead of last year in very weak markets.
The result has been underpinned by strong cash
generation, which has assisted our net debt to
EBITDA ratio reduce from 2.3x, following the
Alesco acquisition in December last year, to 1.95x.
We are comfortable with this conservative debt level,
which provides the flexibility to respond judiciously
to value enhancing opportunities at the right time.
The Board has declared a final dividend of 9.5 cents
per share, fully franked, taking the total dividend for
the year to 17.5 cents per share, which represents
a 70% payout ratio on NPAT before non-recurring
items. The record date for the final dividend is
28 November 2013 and the dividend payment
date is 18 December 2013. DuluxGroup’s Dividend
Reinvestment Plan (DRP) will operate in respect of
the final dividend, and a discount of 2.5% will apply
to shares subscribed for under the DRP for the
final dividend.
8
It is now three years since DuluxGroup emerged as
an independent, publicly listed company. Over that
time, DuluxGroup’s total shareholder return (TSR)
has grown 127.8% (up until 30 September 2013).
Throughout, DuluxGroup has continued to focus
on stimulating organic growth across its existing
core market leadership positions in Australia and
New Zealand. In addition, we have invested to
broaden DuluxGroup’s end market and product
focus where we can leverage DuluxGroup’s existing
capabilities – as expert marketers and innovators
of premium branded products distributed through
extensive retail and trade channels.
“
We are very pleased with the overall
contribution from the new businesses in
their first ten months of ownership. Their
integration has been largely completed and
Alesco cost synergies have been delivered
ahead of schedule.
The successful acquisition of the Alesco businesses
is the most recent example of DuluxGroup’s expansion
into adjacent product categories where we have the
skills to add value. As a result, DuluxGroup now has
a greater presence in commercial and infrastructure
construction markets, which provides further options
for growth.
We have undertaken an extensive review of the
Alesco businesses and more closely assessed the
near and longer term growth opportunities they
present. This has reinforced our view that the
purchase was well timed and favourably priced.
In particular, there are compelling opportunities to
further leverage our expertise in marketing directly
to a growing network of trade customers, which now
contributes more than 60% of overall group revenue.
Following the review, the decision was taken to
retain the Lincoln Sentry Cabinet and Architectural
Hardware business. This is largely a trade distribution
business with premium branded home improvement
products, which plays to DuluxGroup’s strengths
and experience.
We are very pleased with the overall contribution
from the new businesses in their first ten months
of ownership. Their integration has been largely
completed and Alesco cost synergies have been
delivered ahead of schedule. The non-core,
loss-making Robinhood business has now been sold.
DuluxGroup remains committed to building a
profitable business in China over the medium to
long term. The performance of the business has
been assessed against expectations and external
value benchmarking of similar businesses. Based
on those factors, an impairment charge has been
recognised against the intangible assets relating to
our China joint venture. DuluxGroup’s equity share
of the impairment is $10.2 million (before and after
tax), which represents approximately 50% of the
total China goodwill. During the year we have taken
a number of steps to put the business on a stronger
footing from which to grow. We have reshaped
the business to focus on Selleys, AcraTex and paint,
reducing our focus on the retail woodcare market.
DuluxGroup now employs approximately 4000
people in Australia, New Zealand, Papua New Guinea,
South East Asia and China. Our operations now
include manufacturing sites, distribution centres
and company-owned trade stores in hundreds
of locations across these regions. An important
focus for the Board and DuluxGroup management
is ensuring that we are welcome and positive
participants in our communities. In 2013 DuluxGroup
made excellent progress towards its safety and
sustainability vision of ‘a future without harm’ and
delivered its best recordable case rate performance
for the second consecutive year. Significant
improvements were made in reducing the level of
waste generated to landfill, on a site-for-site basis.
Energy and water consumption were also well
managed during the year.
During the year the Board undertook a
comprehensive review of the company’s
remuneration structure, which is a combination
of fixed salary, short and long term incentives.
This model was found to work well, successfully
driving performance. Additionally, immediate
restricted share ownership has proven effective
in aligning the interests of our senior executives
with those of our shareholders. However we have
recognised opportunities to improve our explanation
of how each of the components works. For example,
we have provided more clarity around short and
long term incentives for key management personnel,
particularly in relation to the mix between financial,
safety and personal targets and their relative
weighting. This is outlined in section 5.3 of the
Remuneration Report.
On behalf of the Board and shareholders, I would
like to thank Patrick Houlihan, his management team
and all employees for their contribution to a very
successful year at DuluxGroup.
On behalf of Board members, I would like to thank
our shareholders for your continued support.
This year DuluxGroup has delivered very strong
results while investing to ensure ongoing profitable
growth options for 2014 and beyond. I look forward
to the next opportunity to update you on your
company’s performance.
peter kirby
13 november 2013
DuluxGroup Annual Report 2013
9
DuluxGroup Annual Report 2013
Managing Director’s Message
As part of the Alesco acquisition we
have welcomed approximately 1500
new employees to DuluxGroup.
Dear shareholders
I am pleased to report that this year DuluxGroup
has continued to perform well and deliver further
profit growth.
Net profit after tax (NPAT) for 2013, before
non-recurring items, was $94.1 million, an increase
of 18.2% over the 2012 equivalent of $79.6 million.
This excluded a net charge of $17.2 million, after tax,
relating to non-recurring items, which included $15.1
million of costs associated with the acquisition and
integration of the Alesco businesses, a $10.2 million
non-cash impairment charge (DuluxGroup’s share)
against the DGL Camel joint venture in China, and
an $8.1 million gain from the sale of a site in Western
Australia following changes to our warehouse and
logistics footprint.
Earnings before interest and tax (EBIT) decreased by
3.8% to $127.2 million. Excluding non-recurring items,
EBIT increased by 24.7% to $156.2 million.
Sales revenue increased by $416.8 million or 39%.
The result was underpinned by continued investment
in marketing, innovation and customer service to
support and grow our market leadership positions
and reflects solid input cost management and
excellent cash control.
The heritage DuluxGroup businesses performed very
well, growing revenue by 5.5%, and EBIT by 7.9%.
This result was driven by profitable market share gains
in weak but improving markets in Australia, where
our largest operating segment, Paints Australia,
was particularly strong. Selleys Yates delivered
solid earnings growth in Australia and New Zealand.
Our Paints New Zealand businesses delivered
profitable share gains in markets that have returned
to growth. New Zealand earnings also benefited
from currency translation. Our Papua New Guinea
and China businesses continued to be impacted
by soft market conditions.
The Alesco businesses also performed well in
generally weak markets. On a 12-month pro forma
basis, the continuing Alesco businesses delivered
EBIT of $31.2 million, an increase of 3.7%, on flat sales
in generally adverse markets. This result excludes
Robinhood, which has been divested. This result
reflected modest share gains and disciplined cost
control. At the same time, we invested to grow these
businesses, with a greater focus on marketing and
sales effectiveness. Alesco corporate cost synergies
were also delivered ahead of schedule.
Overall this has been a very successful year,
in which our heritage businesses have grown
profits, generally outperformed the market and
strengthened their market leadership positions,
while the new businesses have delivered solid
proforma earnings growth.
At the same time we have largely integrated the
new businesses and invested to capitalise on the
growth options offered by what is now DuluxGroup’s
broader paints, home improvement and building
products business.
We have been focussed on developing and
leveraging group capability across key areas,
including retail channel management, trade
distribution and store management, brand marketing
and consumer engagement. We have developed a
stronger platform from which to grow the Parchem,
Selleys Trade and Dulux Protective Coatings
position in commercial and infrastructure
construction markets.
10
“
One of the most pleasing aspects of
DuluxGroup’s performance this year has
been the excellent progress in ensuring
that we continue to improve our efforts to
value people, work safely and respect the
environment.
”
One of the most important elements of the
integration has been introducing our new
employees to DuluxGroup’s Values and Behaviours.
These were collectively developed and agreed upon
by our employees. They are designed to guide all
of our employees around the world, regardless of
geography, job role or seniority, and ensure that
we achieve our strategic goals while behaving
with integrity and according to the trust placed
in us by our colleagues, customers, shareholders
and our communities.
These are our values:
• Be customer focused and consumer driven
• Innovate and grow – unleash our potential
• Value people, work safely and respect the
environment
• Run the business as your own
As part of the Alesco acquisition we have welcomed
approximately 1500 new employees to DuluxGroup.
During the year, I have had the pleasure of visiting a
number of our new employees at various operational
sites, and the enthusiasm with which they have
embraced these Values and adopted them in their
own day-to-day decisions and judgements has been
terrific to see.
One of the most pleasing aspects of DuluxGroup’s
performance this year has been the excellent
progress in ensuring that we continue to improve
our efforts to value people, work safely and respect
the environment. For the second consecutive year
there was a significant reduction in injury rates
for employees across all businesses. We continue
to encourage our employees to speak up about
potential hazards that have the potential to cause
significant injury or worse, and I am pleased that
there has been ongoing improvement in the level
of reporting in this area.
We also encourage our employees to play an
active role in our communities and ‘strive to leave
our environment better than we found it’. A range
of company initiatives during the year provided
opportunities to help in our local communities,
sometimes working with trade customers such as
our Dulux accredited painters. Dulux Australia’s
program which offers to paint every Surf Life Saving
Club across Australia, Dulux New Zealand’s program
to supply paint and wood coatings to protect and
promote the iconic Department of Conservation
hiking trail huts throughout the country, Dulux PNG’s
support for local youth rugby teams, and support
for the State Emergency Services across Australia by
Dulux and B&D are some examples of such programs.
I am also proud of the numerous instances
throughout the year when our employees took their
own initiative and volunteered to contribute to local
communities. Painting a playground for children with
disabilities, participating in ‘Clean-up Australia Day’
or organising a ‘blood drive’ are just some of the
examples during the year of our employees making
a positive difference to improve the wellbeing
of others.
An important element of ensuring DuluxGroup
continues to grow is ensuring we have the leadership
structure to deliver on our strategic imperatives
and fully maximise the opportunities from our
strengthened growth platform. With the addition
of the new businesses, there were some changes
to the DuluxGroup Executive team. We welcomed
Tony Bova to lead the B&D Garage Doors business
and Stephen Cox to lead the Parchem Construction
Chemicals and Equipment business. Tony brings
more than 15 years’ experience in senior leadership
roles at DuluxGroup, while Stephen has successfully
led the Parchem business for almost 10 years.
Our employees at all levels have made a significant
contribution to another year of profitable growth at
DuluxGroup and I would like to thank each of them
for their efforts.
I would like to thank the DuluxGroup Board for its
ongoing guidance during the year.
Finally, I thank you, our shareholders, for your
continued support for DuluxGroup.
patrick houlihan
13 november 2013
DuluxGroup Annual Report 2013
11
These businesses share many of the characteristics
that have driven DuluxGroup’s success, such as
leadership positions in their chosen markets, premium
brands, local manufacturing expertise and extensive
trade networks including company-owned trade
stores. However, they also present complementary
opportunities to grow and extend our core market
leading Australian and New Zealand positions.
DuluxGroup remains predominantly an Australasian
paints, specialty coatings and adhesives company,
and almost two thirds of DuluxGroup’s business
continues to be exposed to the relatively stable
markets of the renovation and maintenance of
existing homes.
Looking forward, DuluxGroup aims to deliver solid
growth and strong cash flows from its existing
businesses and develop further options for growth
in a measured, low risk manner.
To this end we are focused
on our five key strategic
imperatives outlined below:
• Extend our market leadership
positions.
• Deliver on Alesco upside.
• lock down medium term
growth opportunities.
• Address performance hot spots.
• Maximise organisational leverage.
Operating and Financial Review
Strategy and Growth
DuluxGroup has evolved over nearly 100 years
from its original heritage in decorative paint for
Australian and New Zealand homes. Today,
DuluxGroup remains predominantly focused
on premium, branded products for residential
home improvement, but with a broader
product range.
Paint, specialty coatings and adhesives remain
the largest proportion of DuluxGroup revenue,
with Australia, New Zealand and Papua New Guinea
remaining our largest markets.
Over the last decade or more, DuluxGroup has
generated profit growth through an unrelenting
focus on growing profitable market share,
maintaining operating margins and generating fixed
cost productivity. As a custodian of many leading
brands in our categories, we fundamentally believe
that continued innovation and marketing investment,
underpinned by superior customer service,
are necessary to support and grow our market
leadership positions.
Additional revenue and profit growth have been
generated by broadening our end market and
product focus, though we have remained anchored
around our Core Purpose: ‘Imagine a Better Place’.
Importantly, this growth has been strategically
focussed around market leadership in
well-structured, premium branded home
improvement categories, where DuluxGroup
can leverage its marketing and sales capabilities
to be the “natural owner”.
Our assessment of natural ownership goes well
beyond product, and focuses on the degree to
which DuluxGroup’s capabilities can be utilised to
generate sustainable growth. These capabilities
include retail channel management (particularly in
hardware), trade distribution and store management,
brand marketing and consumer engagement.
Longer term growth options continue to be seeded
through DuluxGroup’s investment in China and other
parts of Asia, where DuluxGroup has operated for
more than 20 years.
In December 2012, DuluxGroup successfully
acquired all of Alesco Corporation Limited (Alesco).
This included the Parchem construction chemicals,
decorative concrete and equipment business, the
B&D garage doors and openers business and the
Lincoln Sentry cabinet and architectural hardware
distribution business.
12
Further detail on these imperatives is outlined in the table below:
Extend
market
leadership
Alesco
upside
delivery
• continuing to invest in our business fundamentals of marketing and innovation,
sales and distribution effectiveness and customer service to earn greater
profitable market share.
• cost and pricing discipline to maintain margins.
• achieve cost synergies and integrate within budget.
• lock down growth priorities, structure businesses appropriately, step up marketing,
sales and systems investment.
Lock down
medium term
growth
• execute next phase of construction chemicals growth.
• granular growth at sBu level supported by strategic m&a where appropriate.
• continue to develop china and asia for the longer term.
Address
performance
hot spots
Maximise
organisational
leverage
• margin improvement projects (e.g. yates).
• maintain appropriate balance between short term profit pressures and required
investment (e.g. china).
• particular focus on effectively sharing group capabilities (e.g. consumer engagement,
retail hardware channel management, trade distribution optimisation) whilst
maintaining business autonomy.
• continued ‘fit for purpose’ approach to processes, systems and costs.
• Whilst the margin improvement program in
Yates will take a number of years to complete,
the business did achieve an improved profit and
margin in the second half of 2013. Other projects
are also progressing well; and
• With a broader base of businesses, we have
established a central team to further build
organisational capability in several key areas
of strategic marketing and sales effectiveness.
Further detail on specific achievements within
individual businesses is included later in this report.
Good progress has been achieved in 2013 across
all imperatives. In particular:
• The achievement of further market share gains
in paints, adhesives and garden care businesses,
whilst maintaining margins, was an excellent
achievement in subdued markets;
• The integration of the Alesco businesses is
well progressed, and we are on track to meet
or exceed the synergy target of $9M, with
approximately $5M achieved in 2013. We remain
pleased with the opportunity for further growth
in these newly acquired businesses;
• The acquisition of Alesco has augmented our
medium term growth options. In particular, building
a stronger position in the Construction Chemicals
market, particularly in Australia, is a clear
opportunity and objective. In China, we are
focusing our energies on growth of Selleys, Acratex
and paint, and successfully achieved local Chinese
manufacture of key products during the year;
DuluxGroup Annual Report 2013
13
Operating and Financial Review
Material Business Risks
DuluxGroup maintains a risk management
framework that includes the development
and maintenance of risk registers within
each business and at a consolidated
group level for the most material risks.
The Board reviews this consolidated risk register
annually, and individual risks are discussed by the
Group Executive on a rotating basis across the year.
The material business risks that have the potential
to impact the achievement of the company’s future
financial prospects and strategic imperatives are
outlined below, together with mitigating actions
undertaken to minimise these risks.
The risks outlined are not in any particular order and
do not include generic risks that affect all companies
(e.g. execution risk, key person risk) or macro risks
such as significant changes in economic growth,
inflation, interest rates, employment, consumer
sentiment or business confidence which could
have a material impact on the future performance
of the company.
Risk
Nature of risk
Action/plans to mitigate
Key customer
relationships
DuluxGroup’s largest retail customers represent
a significant portion of total revenue. Loss of
revenue from key customers could impact the
group’s profitability.
• Ongoing investment in iconic brands
(marketing & innovation) to drive consumer
activity into our key retail channels and assist
our customers to succeed.
Catastrophic
event/hazard in
manufacturing and
distribution operations
DuluxGroup’s operations could be impacted by
accidents, natural disasters or other catastrophic
events that could materially disrupt its operations.
DuluxGroup has a concentrated manufacturing
approach across many of its products, including
decorative paint.
• Continued focus on providing superior
customer service.
• Broad base of retail and trade customers.
• Disaster recovery plans are in place for all major
sites. Disaster recovery plans for decorative
paint in Australia were utilised successfully
following the Queensland floods in January 2011.
• Increased safety and hazard identification,
audits and prevention systems at key sites.
• Significant investment in hazard prevention
and safety improvement projects.
• Insurance policies including business
interruption cover.
Competitive threats
There is a risk that DuluxGroup’s existing or future
multinational competitors could bring new levels
of innovation or lower cost to the Australian market,
threatening DuluxGroup’s market share and/or
operating margins.
• Strong, established brands supported by
ongoing marketing investment.
• Use of multinational suppliers for key
decorative paint raw materials to reduce
potential technology exposure.
• Active international research program to
monitor market developments and benchmark
product costs in key markets (e.g. US, UK).
• Significant investment in local innovation
and product formulation capability to ensure
products and services are well-suited to
our markets.
14
Risk
Nature of risk
Action/plans to mitigate
Erosion of brand equity
DuluxGroup’s portfolio of iconic brands are relied
upon for their quality and premium performance.
A significant loss of brand equity could have a
material adverse effect on revenue and profit.
Product liability or
other litigation
Litigation relating to product liability, regulatory
controls or environmental practices could result
in a materially adverse financial impact.
Raw material supply
Supply disruption and/or non-availability of key
input materials could impact revenue and/or price
volatility could impact operating margins.
Regulatory – safety
A death or major injury in the workplace would be
devastating for employees and families and could
jeopardise the group’s reputation as a first-choice
employer.
Inability to access debt
and/or equity markets
Failure to replace existing funding as it matures
and/or secure additional funding for growth
initiatives may inhibit future growth and restrict
the group’s business prospects.
• Active product stewardship focus.
• Systematic quality assurance and testing
process.
• Investment in product innovation.
• Investment in brands.
• Investment in quality assurance and
governance practices.
• Well developed customer service and
complaints response processes.
• Insurance policies.
• Utilisation of a range of suppliers.
• Robust supplier selection processes.
• Contingency supply arrangements.
• Insurance policies including business
interruption.
• Active raw material cost and gross margin
forecasting processes.
• Heavy focus on process safety, fatality
prevention and personal safety.
• Significant investment in safety resources,
training and audits.
• Refer to the Safety and Sustainability Report
for further information.
• Existing debt financing arrangements are with
a syndicate of Australian and international
banks and have a staggered maturity profile.
• Debt levels are well within established banking
covenants.
• Active bank and investor relations program.
DuluxGroup Annual Report 2013
15
Operating and Financial Review
Result Summary
• Sales revenue of $1,484.6M increased by $416.8M (+39.0%) on the prior year corresponding period (‘pcp’). Of this sales growth,
$358.5M relates to ten months’ sales from the Alesco Corporation Limited (Alesco) businesses acquired in December 2012. Excluding
this amount, sales from the heritage DuluxGroup businesses (heritage DuluxGroup) grew 5.5%, driven by strong performance in
subdued markets.
• EBIT3 of $127.2M, decreased by 3.8%. Excluding non-recurring items, EBIT increased by $30.9M (+24.7%) on the pcp. Heritage
DuluxGroup EBIT increased by 7.9%, largely due to revenue growth, with the remainder due to the addition of the Alesco businesses
for ten months.
• Net profit after tax (NPAT)5 was $76.9M, a decrease of 14.1%. NPAT before non-recurring items6 was $94.1M, an increase of 18.2% over
the pcp equivalent of $79.6M.
• Operating cash flow before non-recurring items7 of $133.8M increased by $32.2M with earnings growth before non-recurring items
the key driver, including the contribution from Alesco.
• Net debt to EBITDA8,9 ended the year at 1.95 times, which represents an improvement from 2.3 times at half year, due to strong cash
flow in the second half. This brings the ratio to below our post Alesco objective of 2.0 times.
Results1
A$M
Sales revenue
EBITDA2
EBIT3
EBIT before non-recurring items4
Net interest expense
Tax expense
Non-controlling interests
Net profit after tax (NPAT)5
NPAT before non-recurring items6
Operating cash flow
Operating cash flow before non-recurring items7
Net debt8 (closing)
Net debt to EBITDA9
Diluted earnings per ordinary share (EPS) (cents)
Diluted EPS before non-recurring items (cents)
Final dividend per share (cents)
Total dividend per share (cents)
Year ended 30 September
2013
Actual
1,484.6
2012
Actual
1,067.8
159.5
127.2
156.2
(27.6)
(34.0)
11.4
76.9
94.1
118.2
133.8
388.7
1.95
20.6
25.2
9.5
17.5
155.5
132.2
125.3
(21.4)
(24.5)
3.2
89.5
79.6
116.5
101.7
230.3
1.55
24.3
21.6
7.5
15.0
% change
39.0%
2.6%
(3.8%)
24.7%
(29.0%)
(38.8%)
256.3%
(14.1%)
18.2%
1.5%
31.6%
(68.8%)
(25.8%)
(15.2%)
16.7%
26.7%
16.7%
1. Other than as indicated in subsequent footnotes, the financial information contained in this document is directly extracted or calculated from the
Financial Statements included in the Financial Report which has been subject to audit.
2. EBITDA – represents ‘profit from operations’ plus ‘depreciation and amortisation expense’ per the Financial Report.
3. EBIT – the equivalent of ‘Profit from operations’ per the Financial Report.
4. EBIT before non-recurring items – represents ‘profit from operations’, excluding the non-recurring items outlined on page 31. Directors believe that the
result excluding these items provides a better basis for comparison from period to period.
5. Net profit after tax (NPAT) – represents ‘Profit for the year attributable to ordinary shareholders of DuluxGroup Limited’.
6. NPAT before non-recurring items – represents NPAT, excluding the non-recurring items per page 31. Directors believe that the result excluding these items
provides a better basis for comparison from period to period.
7. Operating cash flow before non-recurring items – the equivalent of ‘Net cash inflow from operating activities’ per the Financial Report, less the cash
component of the non-recurring items outlined on page 31.
8. Net debt – represents ‘interest bearing liabilities’ less ‘cash and cash equivalents’.
9. Net debt to EBITDA – is calculated by taking closing net debt as a percentage of EBITDA before non-recurring items. For 2013, this has been calculated
on a proforma basis (i.e., taking a full 12 months EBITDA from the Alesco businesses).
16
Operating and Financial Review
Financial Performance
Sales and EBIT for the period have three main components:
• Heritage DuluxGroup, which relates to the DuluxGroup businesses before the addition of the Alesco businesses;
• Alesco, being the result for the Alesco businesses, which are only included in the financial results from December 2012
(i.e. ten months); and
• Non-recurring items (refer following page for detail).
The split of sales and EBIT between these components is detailed below. NPAT is split between continuing business and
non-recurring items.
Components of Sales, EBIT and NPAT
A$M
Sales revenue
Heritage DuluxGroup
Alesco (10 mths in 2013)
Total
EBIT
Heritage DuluxGroup
Alesco (10 mths in 2013)
Non-recurring items
Total
NPAT5
NPAT before non-recurring items
Non-recurring items
Total
2013
Actual
1,126.1
358.5
Year ended 30 September
2012
Actual
% change
1,067.8
5.5%
-
1,484.6
1,067.8
39.0%
135.2
21.0
(29.0)
127.2
94.1
(17.2)
76.9
125.3
-
7.0
132.2
79.6
9.9
89.5
7.9%
(3.8%)
18.2%
(14.1%)
Proforma Results for Alesco Businesses
Given that the statutory results include only ten months of operating performance for the Alesco businesses in the current period,
proforma results for 2013 and 2012 are presented below to provide 12 months’ operating performance and a prior year comparison.
The figures are based on unaudited management accounts and exclude non-recurring items.
Proforma Results – Alesco (excl. Robinhood)
A$M
Sales
EBIT
Sale of Robinhood
Year ended 30 September
2013
428.9
31.2
2012
428.4
30.1
% change
0.1%
3.7%
The Robinhood business was divested in September 2013. The business was loss-making during the year (refer ‘Other Businesses’
segment performance). Given this, and given Robinhood was classified as ‘non-core’ in March 2013, we have excluded it from the proforma
analysis above and throughout this report, to enable like for like performance comparisons for the remaining Alesco businesses. The loss
on sale has been included as a non-recurring item, per page 31.
DuluxGroup Annual Report 2013
17
Operating and Financial Review
Financial Performance continued
Key Drivers of the Result
For Heritage DuluxGroup:
• Sales growth of $58.3M (+5.5%). Continued outperformance in core markets. Driven by profitable market share gains in weak but
improving markets in Australia, market growth, share gains and positive foreign exchange translation in New Zealand, partly offset
by market weakness in PNG; and
• EBIT growth of $9.9M (+7.9%). Flow-through of the sales growth plus margin improvement due to disciplined cost control, some
input cost relief from the highs of 2012, offset by an increase in Corporate costs (refer later in this report).
For Alesco (on a proforma basis excluding Robinhood):
• Proforma sales were in line with the pcp (+0.1%), in weak but improving markets, driven by modest share gains; and
• Proforma EBIT improved $1.1M (+3.7%), due to the benefits flowing from cost improvement programs and faster achievement
of corporate cost synergies, and despite additional investment in marketing and sales.
Non-recurring Items
Non-recurring items for 2013 (a net cost) and 2012 (a net gain) are detailed later in this report. The major items are:
2013: adverse movement of $29.0m pre-tax ($20.7m duluxgroup share); $17.2m post-tax
• The profit on sale of the O’Connor site in Western Australia following a reconfiguration of DuluxGroup’s state warehouse footprint
($8.1M pre-tax);
• A non-cash impairment charge of $18.5M ($10.2M DuluxGroup equity share) relating to our investment in China. This impairment
largely reflects continued soft trading performance for this business (refer later); and
• Alesco acquisition related costs: transaction and integration costs totalling $15.9M (pre-tax), purchase price allocation (PPA)
adjustments of $1.7M (pre-tax) and a loss on sale of Robinhood of $1.1M (pre-tax).
2012: favourable movement of $7.0m pre-tax; $9.9m post-tax
• An insurance uplift (gain) of $7.7M pre-tax, which refers to the difference between insurance income and flood-related profit and loss
expenses;
• Alesco acquisition related items: transaction costs totalling $3.6M (pre-tax), estimated interest of $1.8M (pre-tax) on the capital outlay
to acquire the initial 19.96% shareholding in Alesco and dividend income of $2.8M relating to the fully franked dividend received from
DuluxGroup’s 19.96% shareholding in Alesco; and
• A tax consolidation benefit of $6.3M (post-tax), which relates to the tax effect of recognising a deferred tax asset on the formation
of the Australian tax consolidated group upon demerger.
Other Items
Net interest expense1 of $27.6M reflects an average cost of debt of 5.9%. Interest expense was $6.2M higher than the pcp largely due
to the increase in debt associated with the acquisition of Alesco, partly offset by lower prevailing interest rates.
Income tax expense of $34.0M. Excluding non-recurring items, the effective tax rate was 29.2%, in line with our expected range of 29–30%.
Final dividend of 9.5 cents per share fully franked, which represents a 70.1% payout ratio based on NPAT before non-recurring items.
1. Net interest expense – represents ‘net finance costs’ per the Financial Report.
18
Segment Revenue and EBIT – Blended Proforma Basis
The following table shows segment sales and EBIT results before non-recurring items. Heritage DuluxGroup results are shown on an
actual basis and Alesco results on a proforma basis, excluding Robinhood. These are further discussed later in this report.
Segment Revenue and EBIT – Blended Proforma Basis
A$M
Sales revenue
Paints Australia
Paints New Zealand
Selleys Yates
Other businesses (Heritage DuluxGroup only)
Eliminations
Heritage DuluxGroup
Garage Doors and Openers (proforma)
Parchem (proforma)
Lincoln Sentry (proforma)
Proforma Alesco (excl. Robinhood)
Total Proforma sales (excl. Robinhood)
EBIT
Paints Australia
Paints New Zealand
Selleys Yates
Other businesses (Heritage DuluxGroup only)
Corporate – DuluxGroup
Heritage DuluxGroup
Garage Doors and Openers (proforma)
Parchem (proforma)
Lincoln Sentry (proforma)
Corporate – Alesco (proforma)
Proforma Alesco (excl. Robinhood)
Total Proforma EBIT (pre non-recurring items & excl. Robinhood)
Year ended 30 September
2013
Actual/
Proforma
2012
Actual/
Proforma
% change
643.1
85.5
252.2
162.6
(17.4)
1,126.1
160.5
121.3
147.1
428.9
1,555.0
110.4
11.4
26.3
5.7
(18.6)
613.9
72.3
244.6
154.6
(17.6)
1,067.8
157.3
120.0
151.0
428.4
1,496.2
101.0
8.1
24.9
6.7
(15.4)
135.2
125.3
17.4
8.2
7.1
(1.6)
31.2
166.3
17.8
7.7
7.4
(2.8)
30.1
155.4
4.8%
18.3%
3.1%
5.2%
1.1%
5.5%
2.0%
1.1%
(2.6%)
0.1%
3.9%
9.3%
40.7%
5.6%
(14.9%)
(20.8%)
7.9%
(2.2%)
6.5%
(4.1%)
42.9%
3.7%
7.0%
DuluxGroup Annual Report 2013
19
Operating and Financial Review
Financial Performance continued
Balance Sheet
Given the significant impact the Alesco acquisition has had on the Group’s balance sheet, movement analysis has been conducted
on significant underlying movements, rather than headline movements.
• Trade working capital1 (TWC) increased by $91.9M from September 2012, predominantly due to the acquisition of Alesco.
The movement in TWC for heritage DuluxGroup businesses was an increase of $7.6M, which reflected the increased level of sales
for the year, and resulted in the year end percentage to sales remaining at 12.4%.
• Rolling TWC to rolling sales2,3 increased from 13.3% in September 2012 to 15.0% (proforma), driven by the addition of Alesco, which
operates at over 20%. Heritage DuluxGroup rolling TWC to rolling sales improved to 12.8%.
• Intangible assets in total increased by $139.0M from September 2012, largely due to the acquisition of Alesco, partly offset by the
write down in DGL Camel due to impairment.
• Investments reduced by $35.9M from September 2012, as the initial 19.96% interest in Alesco acquired on 30 April 2012 was reversed
upon completion of the Alesco acquisition.
• The defined benefit fund liability decreased by $12.6M from September 2012 due to actuarial reassessment of the fund liability
at September 2013, as investment returns improved.
• Provisions excluding tax have increased by $37.5M mainly due to Alesco provisions acquired.
• Net debt increased due to the acquisition of Alesco, partly offset by the strong cash flow generated throughout the year. Please refer
to the cash flow commentary for further detail.
Balance Sheet
A$M
Inventories
Trade debtors
Trade creditors
Total trade working capital1
Non-trade debtors4
Tax balances (net)
Property, plant and equipment
Intangible assets
Investments
Non trade creditors5
Defined benefit fund liability
Provisions (excluding tax)
Net debt
Net other assets
Net assets
Total equity attributable to ordinary shareholders of DuluxGroup Limited
Non-controlling interest in controlled entities
Total shareholders' equity
Year ended 30 September
Sept 2013
Actual
Sept 2012
Actual
195.8
221.9
(193.3)
224.4
15.3
16.2
263.8
235.8
4.7
(55.1)
(8.3)
(77.4)
(388.7)
0.3
231.0
226.3
4.7
231.0
129.2
154.7
(151.4)
132.5
11.7
28.1
199.1
96.8
40.6
(34.8)
(20.9)
(39.9)
(230.3)
-
182.9
169.9
13.0
182.9
1. Trade working capital (TWC) – ‘trade receivables’ plus ‘inventory’, less ‘trade payables’, per the Financial Report.
2. Rolling TWC – the 12-month rolling average of month end TWC balances.
3. Rolling TWC to rolling sales – calculated as the rolling TWC (above) divided by the most recent 12 months sales revenue. This figure is not directly extracted
from the Financial Report.
4. Non trade debtors – represents the ‘other receivables’ portion of ‘trade and other receivables’, and ‘other assets’ per the Financial Report.
5. Non trade creditors – represents the ‘other payables’ portion of ‘trade and other payables’, per the Financial Report.
20
Cash Flow
The operating cash flow in the current year was adversely impacted by non-recurring items relating to the acquisition of Alesco
(transaction and integration costs). In 2012, the operating cash flow was positively impacted by insurance receipts relating to the
Queensland flood in 2011, offset partly by transaction costs relating to the Alesco acquisition.
Other non cash includes DGL Camel impairment ($18.5M), share based payment expense ($2.4M) and non-recurring PPA items ($1.7M).
The table below isolates the non-recurring items in 2013 and 2012 and shows that operating cash flow before non-recurring items
increased for the period.
Statement of Cash Flows
A$M
Net operating cash flows
EBIT
less: Profit on sale of major assets (investing)
add: Loss on sale of Robinhood (investing)
Add: Depreciation
Add: Amortisation
EBITDA
Trade working capital movement
Non trade working capital movement
Other non cash
Income taxes paid
Net interest paid
Operating cash flow
Investing cash flow
Financing cash flow before debt movement
Total cash flow before debt movement
Cash conversion1
Year ended 30 September
2013
Actual
2012
Actual
% change
127.2
(8.2)
1.1
26.6
5.7
152.4
(1.9)
(5.3)
26.5
(30.6)
(23.1)
118.2
(161.6)
(37.2)
(80.7)
84%
132.2
(3.8%)
-
-
21.5
1.8
155.5
6.6
0.6
(1.5)
(27.5)
(17.2)
116.5
(64.0)
(57.0)
(4.5)
86%
nm
nm
23.7%
216.7%
(2.0%)
nm
nm
nm
(11.3%)
(34.3%)
1.5%
nm
34.7%
nm
1. Cash conversion is calculated as adjusted EBITDA, add/less movement in working capital and other non-cash, less minor capital spend (excluding flood
related capital spend), as a percentage of adjusted EBITDA. Adjusted EBITDA excludes non-recurring items.
nm = not meaningful
DuluxGroup Annual Report 2013
21
Operating and Financial Review
Financial Performance continued
Key drivers of the remainder of the cash flow are below:
• Investing cash outflows increased by $97.6M, due largely to the acquisition of Alesco in December 2012, offset partly by the disposal
of the O’Connor site and Robinhood business, which collectively generated $12.7M; and
• Financing cash outflows decreased by $19.8M as share capital was issued in 2013 to satisfy the Dividend Reinvestment Plan for both
final and interim dividends paid, whereas in 2012 shares were bought back on market for the final dividend of 2011 (paid in 2012).
Operating Cash Flow
A$M
Cash flow before non-recurring items
Non-recurring Alesco costs
Non-recurring flood impacts
Operating cash flow
2013
Actual
133.8
(15.7)
-
118.2
Year ended 30 September
2012
Actual
101.7
-
14.8
116.5
% change
31.6%
1.5%
22
Operating and Financial Review
Segment Detail
Paints Australia
A market leader which comprises the retail
paint, trade paint, woodcare, protective
coatings and texture coatings businesses.
It includes iconic brands such as Dulux, British
Paints, Berger, Walpamur, Cabot’s, Intergrain,
Feast Watson and AcraTex. Dulux is the number
one choice for home owners, renovators and
trade professionals throughout Australia.
Strong investment in marketing and new
product innovation is reflected in industry
leading brand recognition.
2013 Performance
EBIT of $110.4M, up 9.3% (before prior year flood
insurance uplift).
Strong revenue and profit growth, outperforming
in a flat market.
Paints Australia
A$M
Sales revenue
EBITDA before
flood insurance
uplift
EBIT
EBIT before flood
insurance uplift
Year ended
30 September
2012
Actual % change
613.9
4.8%
2013
Actual
643.1
122.1
112.9
8.1%
110.4
110.4
108.8
101.0
1.5%
9.3%
EBIT % sales*
17.2%
16.5%
* EBIT % sales for 2012 has been calculated by taking the
EBIT before insurance uplift, divided by sales revenue.
This provides a more accurate assessment of underlying
margin performance because it removes the distortion
effect of flood insurance accounting.
Dulux Wash & Wear
Sales Revenue up $29.2M (+4.8%)
• The Australian decorative paint market was flat
in volume terms. The trade channel declined over
the year though showed marginal growth in the
second half, while the retail channel experienced
growth as market drivers improved and hardware
retailer investment continued.
• Revenue growth was driven by continued
profitable share gains in the decorative paint
businesses and pricing discipline.
EBIT Increase of $9.4M (+9.3%)
Before Flood Insurance Uplift
in 2012
• Margins improved due to good cost control, a
full year of benefits from 2012 internal efficiency
programs and some short term input cost relief.
• This earnings growth was achieved while the
business continued its investment in marketing
and future growth initiatives.
2013 Achievements
• New products released during the year included
‘Dulux Wash & Wear Plus’ stain, mould and
bacteria resistant paint, ‘Dulux Metalshield’,
‘Dulux Fence & Gate’, ‘British Paints Clean & Protect’,
‘Feast Watson Wet Look’ decking oil, a new tank
lining coating for the petrochemical industry,
a high corrosion-resistant coating for marine
locations, and a new roof membrane product,
which has greater durability and gloss retention.
• The Dulux Shop Online was launched allowing
consumers to purchase colour swatches, sample
pots and room transparencies online so they can
test the best colour combinations to help them
to ‘imagine a better place’.
• To assist local communities, Dulux’s sponsorship
of Surf Life Saving Australia helped to restore and
protect Australia’s Surf Club buildings around the
nation and Berger partnered with Legacy to
launch ‘Berger Paint for a Mate’ which aims to
paint more than 40 homes a year to help families
of war service people who are experiencing
hardship.
• The Trade business has continued to upgrade
its store layout and operational model to provide
an industry leading in-store environment for the
professional painter, with a flagship store situated
in Springvale, Victoria.
DuluxGroup Annual Report 2013
23
Operating and Financial Review
Segment Detail continued
Paints New Zealand
A leading marketer and manufacturer of
premium branded decorative paints, texture,
protective and woodcare coatings products.
Manufacturing in New Zealand since 1939, the
business leads the market with such household
names as Dulux, British Paints, Levene and Cabot’s.
2013 Performance
Paints New Zealand EBIT of $11.4M, up 40.7%.
A strong result driven by robust market conditions
and share gains.
Paints
New Zealand
A$M
Sales revenue
EBITDA
EBIT
EBIT % sales
Year ended
30 September
2012
Actual % change
18.3%
32.1%
40.7%
72.3
10.6
8.1
11.2%
2013
Actual
85.5
14.0
11.4
13.3%
Cabot's deck & exterior stain
Sales Revenue up $13.2M (+18.3%)
• The New Zealand decorative paint market grew
by approximately 8% during the year, driven by
increased building activity, renovation activity,
housing churn and Christchurch reconstruction
related activity. Excluding the impact of
Christchurch activity, the market grew by
approximately 5%.
• Profitable market share gains were achieved
in both Retail and Trade businesses.
• Approximately 6.5% of the revenue growth was
attributable to a stronger New Zealand dollar.
EBIT Growth of $3.3M (+40.7%)
• EBIT margin expansion due to fixed cost
leverage and some short term input cost
relief, underpinned by pricing discipline.
• Approximately 6% of the EBIT growth was
attributable to a stronger New Zealand dollar.
2013 Achievements
• Further investment was undertaken to promote
the successful ‘Dulux Colours of New Zealand’
range, including the launch of the mobile
‘Dulux Colour Hut’ initiative to showcase
the range at high profile events.
• New product launches for 2013 included new
woodcare products which have been tailored for
the New Zealand market, the Dulux Wash & Wear
Plus range, a market first, all-in-one, machine
primed weatherboard with Dulux Weathershield
colour options and a full range of metal protection
products targeted at ‘do-it-yourself’ consumers.
• The team worked with Environment Canterbury
(ECAN) to develop an approved paint waste
disposal system, ‘Envirowash’, which helps our
trade customers meet their environmental
obligations.
• Upgraded the flagship Dulux Trade Centre in
Christchurch, with new ergonomic tint lines and
automatic tint machines to improve customer
service, while also launching a convenient advance
order and pick-up system for trade painters which
will be rolled out across all Dulux Trade Centres.
24
Selleys Yates
Selleys is Australia and New Zealand’s leading
manufacturer and marketer of adhesives,
fillers, sealants and other products for the
home improvement market.
Selleys has a heritage dating back to 1939 and
markets a strong array of brands that are relied
upon by homeowners and tradesmen, including
Selleys, Rota Cota, Polyglaze, Liquid Nails,
No More Gaps, Spakfilla, and BBQ Wipes.
Yates is Australia and New Zealand’s leading
manufacturer and marketer of products for home
gardening and small scale commercial horticulture.
Products include seeds, pest and disease control,
lawn care, fertilisers, pots, potting mix and organic
gardening products.
With origins dating back to the establishment of
the Yates garden seeds business in the late 1800s,
Yates boasts an array of brands that have become
household names including Yates, Hortico, Watkins,
Nature’s Way, Dynamic Lifter, Zero, Ratsak and Blitzem.
2013 Performance
Selleys Yates EBIT of $26.3M, up 5.6%.
Growth driven by improvement in Selleys, with
Yates also improving in the second half.
Selleys Yates
A$M
Sales revenue
EBITDA
EBIT
EBIT % sales
Year ended
30 September
2012
Actual % change
3.1%
244.6
3.2%
28.5
5.6%
24.9
10.2%
2013
Actual
252.2
29.4
26.3
10.4%
Sales Revenue up $7.6M (+3.1%)
• Selleys sales improved due to both market
and share growth. Growth in New Zealand
was also boosted on translation by the strong
New Zealand dollar.
• Yates sales grew in modestly growing markets.
EBIT Growth of $1.4M (+5.6%)
• In the second half, both Selleys and Yates grew
profit over pcp.
• The result was driven by the sales growth,
together with margin and cost control.
2013 Achievements
• New products launched in Selleys during the
year include ‘Selleys No More Gaps Multipurpose’
and ‘Selleys Liquid Nails Fast’. Yates launched a
number of new products including the ‘Yates
Lawn Master Liquid Hose On Lawn Food’ range,
‘Concentrated Lawn Food’ and innovative seed
range extensions.
• Selleys rolled out upgraded touch screen units
in selected stores nationally, allowing consumers
to better understand and select the right product
in-store and launched the ‘Handyman House’
through its website, allowing consumers to easily
find ‘how to’ videos that make common
household DIY tasks easy.
• Yates leads the industry with its direct consumer
engagement programs, including a Garden Club
which has more than 100,000 members throughout
Australia and New Zealand. Yates has also led the
way in the digital space, with the launch of the
‘My Garden’ smart phone app.
ideas from My Garden
smart phone App
25
Operating and Financial Review
Segment Detail continued
Garage Doors and Openers
This business is Australia and New Zealand’s
leading manufacturer of garage doors and
openers. Its product range includes garage
doors and automatic openers for residential,
commercial and industrial markets.
Its portfolio of iconic brands includes B&D, Garador,
Dominator and Automatic Technology Australia.
The business’s heritage dates back to the unveiling
of the first B&D Roll-A-Door in Sydney in 1956,
which has grown to become an Australian icon
and a consistent feature of Australian urban
streetscapes.
2013 Performance
Garage Doors and Openers proforma EBIT of
$17.4M, down 2.2%.
Revenue improving in a flat market; business
investing in a market showing the first signs
of recovery.
Garage Doors
and Openers
A$M
Statutory
(10 months in 2013)
Sales revenue
EBITDA
EBIT
130.4
17.8
12.3
9.4%
EBIT % sales
Proforma
(12 months in 2013 & 2012)
Sales revenue
160.5
EBITDA
EBIT
EBIT % sales
24.0
17.4
10.8%
Year ended
30 September
2013
2012 % change
–
-
-
-
157.3
24.1
17.8
11.3%
2.0%
(0.4%)
(2.2%)
Proforma Sales Revenue up
$3.2M (+2.0%)
• Market growth in New Zealand was offset by
an Australian market that retreated slightly.
• Share outcomes were mildly positive, with largest
gains in the openers business, driven by a strong
service offering, and B&D Australia in its core
residential renovations market through its strong
dealer network.
Proforma EBIT Decline of
$0.4M (-2.2%)
• EBITDA was marginally below prior year.
• Costs were well controlled, enabling an increased
investment of approximately $1.5M in sales
capability and marketing.
• Both current and prior years were favourably
impacted by net insurance gains resulting from
the Christchurch earthquake, of A$0.7M and
$0.5M respectively.
• Depreciation and amortisation increased by
$0.3M predominantly as a result of acquisition
accounting impacts.
2013 Achievements
• B&D has led the market in providing a variety of
wind-resistant doors fully tested and certified to
meet recently revised standards in cyclone-prone
areas of Queensland, Western Australia and
Northern Territory.
• Other product launches in 2013 included the
B&D Smooth panel sectional garage doors range
now being available in the Dulux paint colour
range, a range of industrial and commercial doors
offering an increased size range and a
new transmitter platform for ATA, providing a
generational leap forward in security for end users.
• The B&D Doors Australia website now includes
an interactive Design Centre that allows
customers to virtually model garage doors by
uploading a photo of an existing home.
• The B&D brand featured in a national advertising
campaign in August to stimulate the market and
entice homeowners to update their garage doors.
B&D
B&D
controller
controller
door
door
26
Dulux Annual Report 2013
Parchem
Parchem Construction Chemicals and
Equipment is a leading manufacturer and
supplier of construction chemicals, decorative
concrete products and related equipment for
the Australian and New Zealand civil engineering,
industrial, commercial, infrastructure, mining
and residential construction markets.
Its leading position reflects more than 50 years
of unmatched experience and technical expertise,
and the quality of its trusted brands, which include
Emer-Clad, Durafloor, Fosroc, Vandex, Corkjoint,
Sewpercoat, Index and Flextool.
2013 Performance
Parchem proforma EBIT of $8.2M, up 6.5%.
Solid result given a challenging Australian market.
Parchem
A$M
Statutory
(10 months in 2013)
Sales revenue
EBITDA
EBIT
97.5
7.6
5.5
5.6%
EBIT % sales
Proforma
(12 months in 2013 & 2012)
Sales revenue
EBITDA
EBIT
121.3
10.8
8.2
EBIT % sales
6.8%
Year ended
30 September
2013
2012 % change
-
-
-
-
120.0
10.5
7.7
6.4%
1.1%
2.9%
6.5%
'Sand Dunes' colour THRU
- COLOUR FOR CONCRETE
Proforma Sales Revenue up
$1.3M (+1.1%)
• The Australian core construction market declined
slightly, with growth in WA offset by subdued
conditions elsewhere. The New Zealand market
experienced solid growth, underpinned by
Christchurch rebuilding activity.
• Core Construction Chemicals revenue performed
strongly, growing approximately 7%. Decorative
Concrete was flat and Equipment was down 11%.
These latter two businesses represent less than
half of Parchem’s revenue.
Proforma EBIT up $0.5M (+6.5%)
• EBITDA grew marginally, driven by procurement
initiatives and tight control of costs, despite
higher trade store costs following prior year
store refurbishments.
• Depreciation decreased $0.2M as a result of
acquisition accounting impacts.
2013 Achievements
• A number of new products were launched during
the year, including Durafloor X, a heavy-duty
polyurethane resin floor system for use by
customers in industrial settings such as chemical
processing, manufacturing and food preparation,
and a new liquid waterproofing system which
makes installation of waterproof membranes
quicker and easier for applicators, and in turn
gives a more robust waterproof job for the
end user.
• The new Parchem website was launched to
make it easier for commercial customers, trade
professionals and consumers to find the products
and solutions they need.
Dulux Annual Report 2013
27
Operating and Financial Review
Segment Detail continued
Lincoln Sentry
Lincoln Sentry is the leading distributor of
hardware and components to the cabinet
making industry and window, door and
glazing fabricators.
Products include: drawer systems and hinges;
furniture handles and knobs; decorative lighting;
sinks and basins; office, shop and wardrobe systems;
sealants, adhesives and fasteners; window and
door hardware; security products; glass and glazing
products; and tools and accessories.
Its distributed brands include Blum, Hera,
SecureView, Dow Corning, Whitco and Breezway.
2013 Performance
Lincoln Sentry proforma EBIT of $7.1M, down 4.1%.
Flat EBITDA, second half revenue growth.
Year ended
30 September
2013
2012 % change
lincoln Sentry
A$M
Statutory
(10 months in 2013)
Sales revenue
EBITDA
EBIT
117.6
5.9
4.1
3.5%
EBIT % sales
Proforma
(12 months in 2013 & 2012)
Sales revenue
EBITDA
EBIT
147.1
9.2
7.1
EBIT % sales
4.8%
-
-
-
-
151.0
9.2
7.4
4.9%
Proforma Sales Revenue Down
$3.9M (-2.6%)
• Whilst full year revenues were adversely impacted
by continued subdued levels in the key renovation
and new housing markets, 2.8% revenue growth
was achieved in the second half of the year, driven
by modest market improvement and market
share gains.
• A range of product, sales and distribution strategy
initiatives drove these share gains.
Proforma EBIT Down $0.3M (-4.1%)
• EBITDA was flat, due to lower fixed costs driven by
the April 2012 cost reduction program and ongoing
cost discipline, and despite margin pressure due
to a weaker Australian dollar against the euro and
US dollar, and increased investment in marketing.
• Depreciation and amortisation increased $0.2M
due to acquisition accounting impacts.
2013 Achievements
• Lincoln Sentry launched the first stage of a new
online strategy to directly engage with end
consumers to assist them in specifying Lincoln
Sentry products in their new or existing homes.
An interactive website allows consumers to
visualise Lincoln Sentry products at work in
various parts of their own home.
• The business released a number of new products
including an ‘in kitchen’ waste management
program, and also launched an industry-first loyalty
program, direct to trade customers, to increase
awareness of the broader product package and
to reward customer loyalty.
• New Design and Selection Showrooms were
launched at Alexandria in Sydney, Albury, Sunshine
Coast and Canberra, targeted to be a selection
centre for our trade customers and their clients
alongside the specification and design community.
(2.6%)
0.0%
(4.1%)
BLUM CORNER SOLUTIONS
- SPACE CORNER WITH SERVO-DRIVE
28
Other Businesses
Comprises the China and South East Asia
coatings and home improvement businesses
(known as DGL Camel International and
DGL International respectively), the Papua
New Guinea coatings business and the
Powders, Refinish and Industrial Coatings
business in Australia and New Zealand.
During 2013 this segment also included the
Robinhood appliances business, which has
subsequently been divested.
2013 Performance
EBIT (equity share excluding Robinhood and
non-recurring items) down 14.3%.
Decline due to market softness in PNG.
Other Businesses
Year ended
30 September
A$M
2013
2012 % change
The Other businesses segment consists of DGL Camel
in China and Hong Kong, the Papua New Guinea
business, the Dulux Powder, Refinish and Industrial
Coatings Australia and New Zealand business
(Powder Coatings), the South East Asian business,
and the recently disposed of Robinhood appliance
business (acquired as part of Alesco).
• Statutory results for this segment were
impacted by the inclusion of ten months of
results from Robinhood, which was disposed
of on 16 September 2013, and the recognition
of an impairment expense in relation to the
intangible assets of the DGL Camel business.
• DGl Camel revenue grew $6.8M, partly due to
the December 2011 timing of the DGL Camel
merger, with 2013 being the first full year, and
$4.8M of foreign exchange benefits. Underlying
revenue performance was adversely impacted
by market contraction in both Mainland China
and Hong Kong markets. Earnings for DGL Camel
improved on the pcp, partly due to the timing of
the DGL Camel merger, and partly due to improved
margins driven by the localisation of Selleys
production and reformulation savings.
• Powder Coatings revenue grew moderately.
The relatively weak manufacturing and construction
markets in Australia were more than offset by
strong performances from its New Zealand Powder
and Industrial arms. Powder Coatings EBIT
increased, led by a strong result in New Zealand.
• Sales in Papua New Guinea were lower than the
pcp due to a slowdown in the local economy as the
construction phase of the ExxonMobil LNG project
nears completion. Papua New Guinea EBIT also
declined due to lower sales, combined with the
impact of a significant devaluation of the local
currency (Kina) in the second half of the year.
2013 Achievements
• DGL Camel launched a number of new products
into the market, including AcraTex texture coatings
products, ‘Selleys Liquid Nails’, and powder coatings
products for the industrial containers market.
13.6%
nm
nm
nm
154.6
11.4
6.7
4.3%
9.8
154.6
11.4
6.7
4.3%
Statutory
(includes 10 months
of Robinhood in 2013)
Sales revenue
EBITDA
EBIT
EBIT % sales
Equity share
of EBIT1
Excluding
Robinhood and
China impairment
Sales revenue
EBITDA
EBIT
EBIT % sales
Equity share
of EBIT1
Robinhood and
China impairment
Robinhood EBIT
Robinhood loss
on sale
China impairment
– 100%
China impairment
– equity share
175.7
(10.8)
(15.6)
(8.9%)
(4.6)
162.6
10.3
5.7
3.5%
8.4
(1.7)
(1.1)
(18.5)
(10.2)
5.2%
(9.6%)
(14.9%)
• Powder Coatings continued to build on its 2012
launch of Dulux Electro. It also launched Dulux
RapidCure, a product designed to save customers
on their energy costs through lower temperature
curing than conventional powder coatings.
9.8
(14.3%)
• Dulux PNG continued to develop its consumer
retail promotions in support of its market leading
decorative paints position in PNG and relaunched
a tailored offer of Cabot’s woodcare into the
PNG market.
-
-
-
-
nm
nm
nm
nm
1. Equity share represents the Group’s share in the Other
businesses segment, after accounting for the 49%
non-controlling interest in DGL Camel International.
Dulux Annual Report 2013
29
Operating and Financial Review
Segment Detail continued
Other Businesses continued
China Impairment
An impairment charge has been recognised against the intangible assets relating to our China business. DuluxGroup’s equity share1
of this charge is $10.2M.
The impairment represents around 50% of DuluxGroup’s share of the goodwill that arose from the original Opel investment in 2008 and
the subsequent merger with Camel in 2011. Following this impairment, DuluxGroup retains goodwill associated with DGL Camel of $9.9M.
The impairment follows an assessment of business performance against expectations, together with external benchmarking of fair value
against similar businesses. Considerations leading to the impairment charge are as follows:
• Despite an improved profit outcome in 2013, the financial performance of the business continues to be below expectations, with
ongoing weakness in the retail woodcare market a key driver;
• Our assessment at the March half year left very little headroom against internal forecasts – these forecasts were not met in the second
half; and
• Our assessment of possible fair value (based on transaction multiples for similar businesses) was revisited to take account of recent
observable market based information.
Since the acquisition of the Opel woodcare business in 2008, DuluxGroup has been focussed on building sustainable niche positions in
Selleys, Acratex and paint. The merger with Camel in 2011 assisted in providing greater product breadth, a stronger position in southern
China and Hong Kong, synergy benefits and deeper local knowledge. DuluxGroup remains committed to the China business, and
continues to focus on growth opportunities in Selleys, Acratex and decorative paint.
Progress was made during the year in Selleys in particular, establishing successful local manufacturing of Liquid Nails products for both
Hong Kong and China (which replaces product that was previously imported from Australia).
Corporate Costs
2013 Performance
Proforma Corporate costs of $20.2M, up 11.0%.
Increases in Heritage DuluxGroup costs and favourable non-recurring items in the prior period, partially offset by synergies in Alesco.
Corporate Costs
A$M
Heritage DuluxGroup – Actual
Alesco – Proforma
Total Corporate costs
Year ended 30 September
2013
Actual/
Proforma
2012
Actual/
Proforma
(18.6)
(1.6)
(20.2)
(15.4)
(2.8)
(18.2)
% change
(20.8%)
42.9%
(11.0%)
Heritage DuluxGroup costs up 20.8%
• Increased to $18.6M, broadly in line with previous guidance of $18M, due to higher incentive accruals as a result of the strong operating
performance of the Group and an increase in business development resources. The prior period also included a foreign exchange gain
of $1.1M.
• Changes in accounting standards impacting the movements in DuluxGroup’s defined benefit superannuation scheme take effect in
2014 and will also be applied retrospectively to the 2013 year. This will result in a further charge of approximately $2.8M to the 2013
comparative in results for 2014. The fringe benefits tax relating to any debt forgiveness associated with the pending close-out of the
2010 Long Term Incentive Scheme will be in addition to this (up to $1.5M). Aside from these items, Corporate costs are expected to
increase broadly in line with inflation.
Proforma Alesco costs down 42.9%
• The prior year figure of $2.8M included some favourable non-recurring items and largely excluded stranded costs following the
divestiture by Alesco of Parbury and Dekorform in March 2012. Given this, we estimated (per our March 2013 update) that baseline
Alesco Corporate costs were approximately $7M.
• The 2013 result of $1.6M reflects the realisation of synergies against this $7M base.
• We remain comfortable with our prior guidance of $9M of Alesco cost synergies, the majority of which will be realised by the end
of 2014.
• Alesco Corporate costs will not be separately identified from 2014 onwards.
1. Equity share of EBIT represents the Group’s share in the Other businesses segment, after accounting for the 49% non-controlling interest in
DGL Camel International.
30
Operating and Financial Review
Non-recurring Items
The non-recurring items are detailed below:
Non-recurring Items
A$M
2013
Non-recurring Alesco PPA adjustments
Alesco transaction costs
Alesco integration costs
Robinhood loss on sale
Gain on sale of O’Connor site, net of disposal costs
China impairment – equity share
China impairment – non-controlling interests share
Total
Total – equity share
2012
Alesco transaction costs
Alesco dividend
Interest on Alesco stake (est.)
Insurance uplift
Tax consolidation adjustment
Total
Year ended 30 September
EBIT
NPAT
(1.7)
(6.3)
(9.6)
(1.1)
8.1
(10.2)
(8.3)
(29.0)
(20.7)
(3.6)
2.8
–
7.7
–
7.0
(1.2)
(5.9)
(6.7)
(1.3)
8.1
(10.2)
-
(17.2)
(17.2)
(3.3)
2.8
(1.3)
5.4
6.3
9.9
Non-recurring Alesco PPA adjustments refer to the non-recurring component of the Purchase Price Allocation adjustments that have
been made as part of the Alesco acquisition accounting process. These primarily relate to the fair value adjustment to finished goods
inventory sold in the period.
Alesco transaction costs refer to the transaction costs associated with the acquisition of Alesco. These costs total $9.9M over 2012 and
2013, within the previously supplied guidance of $9M to $10M. No further costs will be incurred.
Alesco integration costs refer to the costs associated with integrating the Alesco businesses into DuluxGroup. Further integration costs
($4M – $5M) are anticipated to be spent during 2014. Total integration costs will be below our previously supplied guidance of up to $15M.
The Robinhood loss on sale largely relates to adviser costs, site exit costs and redundancy payments associated with the sale of this
business.
The gain on sale of the O’Connor site refers to the profit made upon disposal of the O’Connor site in Western Australia.
The China impairment relates to the impairment charge against the intangible assets of the DGL Camel business.
Alesco dividend in 2012 refers to the fully franked dividend income from DuluxGroup’s 19.96% shareholding in Alesco, prior to the
full acquisition.
Interest on Alesco stake in 2012 refers to the estimated incremental interest expense due to the $37.6M capital outlay in May 2012 to
acquire the Alesco shareholding.
The insurance uplift amount in 2012 relates to the last of the insurance proceeds following the 2011 flood at the decorative paint
manufacturing site in Rocklea, Queensland. The figure refers to the difference between insurance income of $15.0M and the flood-related
profit and loss expenses of $7.3M. There was no impact relating to this item in the current period.
Tax consolidation adjustment refers to the tax effect of recognising a deferred tax asset (associated with the revaluation of certain
non-current assets for tax purposes) on the formation of the Australian tax consolidated group upon demerger.
DuluxGroup Annual Report 2013
31
Operating and Financial Review
Future Financial Prospects
DuluxGroup considers a range of external
indicators in assessing outlook. These include
the market performance, raw material prices
and other cost drivers.
Market
Overall, DuluxGroup’s end market exposure is
biased to the existing home, with 64% of revenue
relating to residential renovation and improvement.
DuluxGroup also has a meaningful exposure to new
construction, with 16% of revenue relating to new
residential housing and 16% relating to commercial
and infrastructure construction. The remaining
4% of revenue relates to industrial markets. From
a geographic perspective, Australia represents
83% of revenue, New Zealand 10%, with the
remaining 7% relating to China, Papua New Guinea
and South East Asia.
Renovation and improvement to existing homes
in Australia tends to be impacted by factors
such as interest rates, house prices and consumer
confidence. Renovation statistics themselves are
less relevant, as many of the projects relevant to
DuluxGroup are below any recordable threshold.
In general, all of these factors have improved over
the last half in Australia and there is no immediate
sign of any adverse change.
Preliminary indications for new housing in Australia
are also positive, with new housing approvals
starting to show more consistent increases
over the prior year.
Given this, our expectation overall is most of
our markets in Australia will show modest
growth, though given most of DuluxGroup’s new
residential housing business occurs at the tail end
of construction, a flow through of any recovery to
DuluxGroup from this sector is still some time away.
In New Zealand, market growth is also expected
to continue, given underlying growth in housing
and other construction, underpinned by continued
rebuilding activity in Christchurch, which is expected
to continue for a number of years.
The Papua New Guinea market declined in the
second half of 2013 and some short term pressure
is expected to continue. Medium term this market
is expected to continue to grow, supported
by expected future investment in energy and
mining projects.
In China the longer term outlook remains positive,
supported by GDP growth projections. In the shorter
term, restrictions on the development of residential
housing have continued to put pressure on the
specific markets in which DGL Camel operates.
It is not clear when this pressure will ease.
Revenue Growth
DuluxGroup has a history of outperforming the
markets in which it operates, whilst maintaining
profitability, and will continue to seek to do this
across all businesses.
For the newly acquired B&D, Parchem and Lincoln
Sentry businesses, we expect to invest additional
sales and marketing resources to assist these
businesses in achieving revenue growth ahead
of the market over the medium-term.
Raw Materials and other costs
DuluxGroup has a wide range of raw materials.
The two largest are latex resin and titanium dioxide,
both of which are key ingredients in paint. There is
potential for upward pressure on raw material prices,
particularly in the second half of the financial year,
driven by supply/demand characteristics and the
A$/US$ exchange rate.
Approximately 20–30% of input costs have a direct
or indirect link to other currencies, such as the US$
and the Euro. If there is a material weakening of the
A$ during the year, then input costs may be
adversely affected.
In general, and over a number of years, DuluxGroup
has mitigated input cost variation through a number
of cost and price-related mechanisms. DuluxGroup
will endeavour to continue to achieve this outcome
in future.
DuluxGroup has a strong history of continuing
to invest in marketing and innovation. We aim
to continue to invest in marketing in line with
top line growth.
Overall Outlook
Subject to economic conditions and excluding
non-recurring items, we expect 2014 net profit
after tax to be higher than 2013 net profit after
tax, excluding non-recurring items, of $94.1M.
32
DuluxGroup Safety and Sustainability Report 2013
Safety and Sustainability Report
Welcome to the 2013 DuluxGroup Safety and
Sustainability Report. Excellent progress was
made in many areas throughout the year and
we achieved our best performance for the
second consecutive year. We continued our
focus on improving management of significant
risks, together with integration of the new
Garage Doors and Openers, Parchem and
Lincoln Sentry businesses.
GOVERNANCE
Safety and sustainability governance across
DuluxGroup is achieved via regular management
reviews and due diligence processes. This includes:
• a Board Safety and Sustainability Committee.
The Committee meets quarterly to review
performance, objectives and strategies;
• a Group Executive Safety and Sustainability
Council. The Council meets quarterly to review
performance, develop and approve strategy,
monitor implementation, and review findings;
• an annual safety and sustainability assurance
process whereby all businesses report on
performance and improvement progress;
STRATEGY
An integrated approach to management of risk
means that all DuluxGroup businesses operate
within a common safety and sustainability strategic
framework. In order to achieve DuluxGroup’s vision
of ‘A Future Without Harm’, our priorities are focused
on the following material aspects:
• People: fatality prevention, personal safety, health
and well-being, and community engagement.
• Operations: process safety, waste generation,
and water consumption.
• Products: solvents (VOCs), chemicals of concern,
non-renewable resources, carbon footprint and
post-consumer waste.
Although we have a strong history of improvement,
we recognise that our risk profile is constantly
changing as our business changes and therefore
our management of those risks needs to continually
evolve. Achievement of our vision is currently
enabled by four targeted strategies that recognise
management of high consequence risks:
• Process Safety: prevention of major disasters
(with potential for multiple fatalities) in our
factories handling chemical process hazards
such as flammable solvents.
• Fatality Prevention: prevention of fatalities from
common significant hazards across all businesses
such as forklifts, working at height and driving.
• Personal Safety: prevention of injuries from
everyday workplace hazards such as manual
handling and sharp objects.
• Sustainability: prevention of community and
environmental harm from all business activities.
This differentiated strategic approach recognises
that a singular management focus on everyday
injuries does not prevent high-consequence events
such as major fires, fatalities or environmental
legacies. These strategies are underpinned by a
focus on risk management basics (e.g., incident
reporting and investigation, management of change)
and most importantly, leadership and culture.
The strategies are linked to a continuous improvement
focus, reinforced by targeted improvement plans
and measurable performance indicators.
• an ongoing safety and sustainability audit
program of all businesses to assess effectiveness
of risk management.
All line managers are responsible for managing
safety and sustainability risks, supported by a
number of dedicated specialists. Senior management
remuneration is linked to safety and sustainability
performance, including leading improvement
activities (e.g., fatality prevention protocol and
product stewardship implementation) and lagging
performance (e.g., injury rates).
PERFORMANCE
1. PEOPlE
Fatality Prevention
During 2013 we continued our focus on continually
improving management of common fatality risks in
order to protect our people and ensure we sustain
our current fatality-free performance of more
than 19 years. While this excellent performance is
particularly pleasing, benchmarking with a diverse
range of organisations in recent years has clearly
shown that many are having fatalities irrespective of
good or improving injury performance, and that we
need to constantly challenge our management of
these common risks. The foundations of our fatality
prevention strategy remain near-miss reporting,
significant risk auditing, risk management basics
(e.g., permit to work, management of change), and
development of protocols that prescribe higher levels
of mandatory risk controls than traditional standards.
A major improvement activity during the year
involved rigorous analysis of mandatory three-metre
separation of pedestrians and forklifts across our
Dulux, Selleys and Yates operating sites as part
of the forklifts protocol implementation. This work
successfully challenged a number of our accepted
operating practices and identified significant risk
reduction opportunities through both changes to tasks
and capital improvements (e.g., barriers, workplace
layout changes). The business has committed to
spending approximately $3 million in capital
improvements, and a number of identified projects
at sites such as Dulux Rocklea, Dulux Dandenong,
Selleys Moorebank and Yates Auckland have already
been implemented. We also verified the 2012
implementation of our driver safety protocol to
ensure the improvement actions are being
completed and sustained.
DuluxGroup Annual Report 2013
33
DuluxGroup Safety and Sustainability Report 2013
Safety and Sustainability Report continued
Across the new Garage Doors and Openers,
Parchem and Lincoln Sentry businesses, a key
focus was completion of significant risk audits and
development of prioritised action plans at all factories
and warehouses to deliver improved control of
high-consequence risks. A number of these actions
have already been implemented including examples
such as installation of forklift–pedestrian segregation
barriers at B&D Revesby and traffic management
speed controls at Lincoln Sentry Prestons.
Our levels of serious near miss incidents associated
with fatality hazards across the heritage businesses
remained more than 37% lower than two years ago.
Meanwhile our total near miss reporting levels
continued to improve for the fifth consecutive year,
with a 15% increase over 2012. It was also pleasing
to see the new businesses starting to identify and
report serious near misses, while building on their
hazard reporting program implemented in recent
years. DGL Camel launched a near miss reporting
program during the year to encourage active
identification and reporting by all employees.
Personal Safety
We achieved excellent improvement in injury rates
across all businesses during the year, resulting in
fewer employees experiencing common injuries such
as slips and falls, cuts and strains. It was particularly
pleasing to observe that a significant improvement
was also achieved in the more serious injuries.
During 2013 we maintained our focus on key
activities introduced in recent years including
ergonomic risk reduction, risk assessment and
training, together with near miss reporting.
Investment to reduce risk was undertaken at a
number of sites, including a significant upgrade to
dust extraction systems at Dulux Rocklea to improve
workplace hygiene and continued installation of
pneumatic hook lifts to reduce manual handling in
Dulux Trade Centres, with 27 stores now completed.
Focusing on basics such as housekeeping through
lean manufacturing programs and training through
task based risk assessments continued across
many of our sites during the year, including Selleys
Padstow, Yates Mt Druitt, Parchem Wyong and
B&D Kilsyth.
Our heritage businesses, excluding Camel Paints
and the new Garage Doors and Openers, Parchem
and Lincoln Sentry businesses, achieved a
56% reduction in the Lost Workday Case Rate
(per 200,000 hours) to 0.28 and a 32% reduction
in the total Recordable Case Rate (per 200,000
hours) to 0.82. This outstanding result is the best
ever performance achieved by these businesses for
the second consecutive year and represents greater
than 60% reduction in injury levels from three years
ago. From benchmarking against international
decorative coatings businesses in the US and
UK/Europe completed in recent years, we also
know that this result is considered best practice.
Including Camel Paints and the new businesses,
the group’s Lost Workday Case Rate (per 200,000
hours) was 0.48 and the total Recordable Case
Rate (per 200,000 hours) was 1.81.
Health and Wellbeing
Protecting employee health and wellbeing
remained an important priority during the year.
Monitoring programs to measure potential hazardous
substances exposure were conducted at our Dulux,
Selleys and Yates manufacturing sites, with 100%
of results below the occupational exposure limits.
Health assessment monitoring programs to
proactively monitor employees working with
hazardous substances or in high-risk activities
(e.g., driving forklifts) were fully completed.
Introduction of these programs to the new
businesses will be completed during 2014.
Consistent with prior years, a number of wellbeing
initiatives were conducted across the businesses
during the year. These included 182 employees from
several businesses across Australia and New Zealand
participating in the 16-week Global Corporate
Challenge and walking the equivalent of 141,000
kilometres; more than 330 Victorian employees
participating in the government-funded WorkHealth
checks program; and multiple sites and businesses
participating in R U OK? Day to encourage regular
conversations and support for people who may be
experiencing difficulties.
Recordable Case Rate
The Recordable Case Rate is the number of recordable injuries
and illnesses (requiring time off work, restricted duties or
medical treatment) per 200,000 hours worked (US OSHA
system), which is equivalent to the percentage of employees
and contractors injured. The majority of our recordable injuries
are strain injuries from manual handling, cuts and injuries from
slips, trips and falls. The group Recordable Case Rate for 2013
was 1.81 compared with 1.85 in 2012. Excluding the Alesco and
Camel businesses acquired in 2013 and 2012 respectively, the
result for our heritage businesses was 0.82 compared with
1.21 in 2012.
Recordable Case Rate
2.0
1.5
1.0
0.5
0.0
1.96
1.78
1.81
1.85
1.81
1.21
0.82
2009 2010 2011
2012
2013
Heritage businesses (excluding Camel and Alesco)
All businesses (including Camel and Alesco)
34
leadership Development
Continuing to develop the safety and sustainability
leadership capability of our managers remained
a key focus during the year. This focus recognises
that management actions and behaviours at all
organisational levels create our culture and thereby
determine the ultimate success of any improvement
strategies and processes. During 2013 we launched
the operations stream of our new Safety and
Sustainability Management Program that provides
managers with the contemporary understanding of
how to apply our strategies and processes in order
to manage risk effectively. We also continued the
rollout of our Safety and Sustainability Leadership
Program that focuses on enhancing development of
critical safety leadership skills (e.g., communication,
leading by example), with a further 35 managers
completing the program during the year.
Community Engagement
The company formally adopted a community
participation program during 2012 whereby all
employees can undertake half a day per year of
volunteer work supported by the company. This
volunteer work complements the community support
activities undertaken by a number of our businesses.
Some examples of community engagement activities
during 2013 include the following:
• Dulux Australia continued their three-year
partnership with Surf Life Saving Clubs Australia to
paint every surf life saving club across the country,
with 75 clubs (24%) painted to date and 144 clubs
(47%) preparing to paint.
• Dulux New Zealand announced a three-year
conservation partnership with the Department
of Conservation to paint and protect 973 lodges
and huts across the country.
• Dulux New Zealand continued to work with
Habitat for Humanity and provided paint for
53 community housing projects.
• Yates employees in Western Australia worked
with Landcare to plant 2200 plants along
Bannister Creek in Ferndale.
• Dulux PNG worked with Port Moresby authorities
on the launch of a community campaign to
encourage creation of artwork and prevent graffiti
on local buildings and fences.
• DuluxGroup donated resources and employees
volunteered to assist a number of community
organisations, including Mental Illness Fellowship
Respite House, Glenallen Specialist School,
Minda Crisis Centre and Malvern Early Learning
Community Center.
• Selleys, Yates and Dulux employees from Padstow
participated in the Clean Up Australia program for
the 14th consecutive year, while Dulux Rocklea
employees participated in a local community event
to clean up Stable Swamp Creek at Coopers Plains.
2. OPERATIONS
Process Safety
Our critical focus on prevention of high consequence
incidents such as a major fire or explosion from
chemical process hazards in our factories
(e.g., flammable solvents, combustible dusts)
remained a high priority during the year.
The key improvement activity in this area, our
in-depth Periodic Hazard Study process that involves
a deep multi-month analysis of high consequence
risks and identification of the critical controls, was
completed at two more sites (DGL Camel Shanghai,
Dulux Lae) during the year. This brings to seven
the number of factories where this has now been
completed. All sites continued to make good
progress towards completing the identified
improvement actions (e.g. capital projects, improving
rigour of operating procedures, training and
competency) to ensure effective critical risk controls
are sustained. We also introduced our
new process safety lead indicator scorecard to
help these sites monitor and track their progress
in management of these major risks. Following
completion of a significant risks audit shortly
after acquisition, Parchem Wyong commenced
implementation of a number of improvement actions
to improve management of flammable solvent risks.
• B&D donated roller doors to the NSW State
Emergency Service Hunters Hill unit to help
securely store rescue equipment.
There were no serious process safety incidents
(e.g., significant chemical fires or spills) across the
group during the year. It is also pleasing to note that
Total General learning Incidents (per employee, per year)
Total General Learning Incidents
(per employee, per year)
We encourage our employees to report incidents that have the
potential to cause harm. General Learning Incidents are near miss
incidents and hazards that allow the company to identify and
correct potential hazards before harm occurs. Total General
Learning Incidents reported per employee across our heritage
businesses (excluding Camel and Alesco) increased to 2.56
during 2013. Near miss reporting from the new businesses will
be included in 2014.
2.56
2.22
1.92
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1.32
0.63
2009
2010
2011
2012
2013
Heritage businesses (excluding Camel and Alesco)
DuluxGroup Annual Report 2013
35
DuluxGroup Safety and Sustainability Report 2013
Safety and Sustainability Report continued
there have now been no such incidents across our
Dulux, Selleys and Yates factories for three years,
which represents substantial improvement over
historic performance levels.
Acquisition Integration
Integration of acquisitions, especially the former
Alesco businesses acquired in December 2012, was
a major focus during the year. A targeted integration
approach was developed in order to deliver short
term improved control of high consequence risks
(e.g. process safety, fatality prevention), together
with medium term alignment of standards, processes
and culture. This included:
• Significant risk audits of all factories and
distribution centres, plus a selection of stores,
followed by development of prioritised
action plans.
• Gap analysis of critical standards and processes,
together with identification of required
improvement actions.
• Desktop environmental review of all operating
sites to identify potential soil and groundwater
contamination issues and any required
management actions.
• Resources and structure review to ensure adequate
support during the integration process and
alignment of structures, including both support
resources and management review mechanisms.
Progress against the identified improvement actions
is being monitored regularly and reviewed by the
Board Safety and Sustainability Committee and the
Group Executive Safety and Sustainability Council.
The DGL Camel Dongguan manufacturing sites
continued to make good progress on implementation
of integration improvement actions following
completion of significant risk audits in 2012.
Resources and Environment
Water consumption (kilolitres per tonne of
production), excluding the new businesses, increased
significantly from 0.49 kL/t in 2012 to 0.78 kL/t,
due to the inclusion of Camel Dongguan sites for the
first time. Excluding Dongguan, water consumption
across the heritage businesses remained static
at 0.49 kL/t.
Waste generation (kilograms per tonne of
production), excluding the new businesses,
decreased from 13.8 kg/t in 2012 to a historically low
level of 11.8 kg/t. Excluding the Camel Dongguan
sites that reported for the first time during 2013,
waste generation across the heritage sites decreased
to 12.4 kg/t primarily due to continued efficiency
improvements at Yates Mt Druitt and Dulux Powders
Dandenong. During the year we continued to
progress development of a multi-year reduction
plan, following completion of waste audits at our
five largest waste generating sites in 2012.
Total energy consumption (gigajoules per tonne
of production), excluding the new businesses,
decreased from 0.74 GJ/t to 0.71 GJ/t. Excluding
the Camel Dongguan sites that reported for the first
time during 2013, energy consumption across the
heritage sites decreased to a historically low level
of 0.69 GJ/t, primarily due to product mix variation.
The new Garage Doors and Openers, Parchem and
Lincoln Sentry businesses will commence reporting
of water, waste and energy in 2014.
DuluxGroup meets the Australian National
Greenhouse and Energy Reporting System (NGERS)
reporting criteria, primarily due to use of solvents
as raw materials. Excluding raw material use, the
operational energy consumption and greenhouse
gas emissions from our Australian sites and
businesses are both below the NGERS reporting
and carbon tax thresholds. The total greenhouse
gas emissions (Scope 1 and 2) from our Australian
sites and business activities were 32,432 tonnes
(CO2-e or equivalent carbon dioxide emissions),
20% higher than 2012. Total energy consumed was
517,829 GJ, 14% higher than 2012. These increases
were due to inclusion of the new businesses.
Regulatory Compliance
There were no regulatory prosecutions, prohibition
notices or penalty infringement notices received
during the year, however there was one regulatory
warning for late submission of an EPA annual return
by Parchem Wyong. This compares with two penalty
infringement notices during 2012.
Water Consumption (kl/t)
Water Consumption (kL/t)
Water consumption (kiloliters per tonne of production) across
company operating sites increased to 0.78kL/t in 2013 from
0.49 kL/t in 2012, due to inclusion of Camel Dongguan sites for
the first time. Excluding Camel, water consumption across our
heritage sites remained static at 0.49kL/t. Water consumption
from former Alesco sites will be included in 2014.
0.78
0.57
0.55
0.53
0.49
0.49
0.8
0.6
0.4
0.2
0.0
2009 2010
2011
2012
2013
Heritage businesses (excluding Camel and Alesco)
All businesses (excluding Alesco)
36
legacy Issues
The company has undertaken a number of
investigations in prior years to ensure potential soil
and groundwater contamination issues are identified
and managed. Further investigative work was
completed during the year, including a desktop
review of all former Alesco sites, and no serious
issues were identified.
3. PRODuCTS
Product Stewardship
Our long-standing product stewardship focus
continued during the year, with all businesses
continuing to apply the new product risk assessment
and improvement planning processes that were
implemented in 2012. These new processes have
improved our ability to identify and action product
improvements that further reduce the potential for
harm. Some examples implemented during the
year include:
• Post Consumer Waste: Dulux Australia participated
in the PaintCare trial program, a collaboration of
Sustainability Victoria and the Australian Paint
Manufacturers’ Federation, that provided collection,
treatment and disposal of more than 120 tonnes of
waste paint from trade painters over a six-month
period. Dulux New Zealand introduced waste paint
hardener and paint stirring sticks manufactured from
50% recycled paint pail plastic into the local market.
• VOC (Solvents): Dulux Australia completed
reformulation of Enviro2 interior paint to improve
application performance and thereby encourage
further trade market adoption of low-VOC products.
• Chemicals of Concern: DGL Camel China completed
reformulation of all wood coating products to
remove a hazardous solvent commonly used in the
local market.
• Consumer Safety: Selleys reformulated another
sealant product (Maxi Clear) to eliminate a solvent
that can be used for deliberate vapour inhalation.
Yates voluntarily withdrew two products containing
organophosphate insecticides from the market,
recommending use of less-hazardous alternatives
in consumer markets.
Community Safety
The company’s emergency response service
responded to 599 calls during the year, compared
with 587 calls in the prior year. This service provides
emergency support 24 hours a day, with more than
98% of calls involving minor human and animal
exposures to products during consumer use. None of
the calls received during 2013 involved serious harm
or damage. Increased calls to the service in recent
years reflect increased use of the emergency
response contact number on our packaging labels
as part of our product stewardship focus.
There was one serious distribution incident involving
a raw material delivery to one of our factories
during the year, compared with no such incidents
in 2012. The incident was fully contained and there
were no environmental or community impacts.
A full investigation has been completed, including
corrective action follow-up with the supplier.
KEY FOCUS AREAS 2014
DuluxGroup’s key priorities during 2014 will be
the continued implementation of our four primary
improvement strategies and full integration of the
new Garage Doors and Openers, Parchem and
Lincoln Sentry businesses. Significant planned
actions include:
• Process Safety: Completion of periodic hazard
studies at additional sites, together with verification
audits of our process safety protocols for
flammable solvents and combustible dusts.
• Fatality Prevention: Completion of significant
risk audit actions across the new businesses and
continued implementation and development of
fatality prevention protocols across all businesses.
• Personal Safety: Continued focus on manual
handling risk reduction projects, hazard (near miss)
identification and basics such as housekeeping,
together with improved management of workers
compensation and return to work programs.
• Sustainability: Continued implementation of
product stewardship and waste reduction plans.
• Carbon: Dulux Powder Coatings introduced the
Rapidcure range of products that enable customers
to use less energy (e.g., lower oven temperatures)
during the curing process.
• Leadership: Continued delivery of our leadership
and management programs to ensure the ongoing
development of our safety and sustainability culture
and behaviours across all levels of the business.
Waste Generation (kg/t)
Waste Generation (kg/t)
Waste generation to landfill (kilograms per tonne of
production) across company operating sites decreased to
11.8kg/t in 2013 from 13.8 kg/t in 2012, due to improvements
across the heritage sites and inclusion of Camel Dongguan
sites for the first time. Excluding Camel, waste generation
decreased to 12.4 kg/t. Waste generation from former
Alesco sites will be included in 2014.
19
18.9
16.6
13.8
12.4
11.8
20
15
10
5
0
2009
2010
2011
2012
2013
Heritage businesses (excluding Camel and Alesco)
All businesses (excluding Alesco)
DuluxGroup Annual Report 2013
37
DuluxGroup Annual Report 2013
Board Members
Patrick Houlihan
Andrew Larke
Judith Swales
Peter Kirby
Bsc (hons), mBa
managing director and chief
executive officer since July
2010. member of the safety
and sustainability committee.
Former CEO of Orica Limited’s
DuluxGroup division and
member of Orica Limited’s
Group Executive from February
2007 to July 2010. Patrick was
also the Yates General Manager,
Selleys Sales Director and
Dulux Marketing Director.
Patrick has been an employee
of DuluxGroup since 1989.
llB, Bcom, grad dip
(corporations
& securities law)
non-executive director since
october 2010. member of the
audit and risk committee
and the remuneration and
nominations committee.
Andrew has spent more than
20 years in corporate strategy,
mergers, acquisitions, legal
and commercial roles in global
companies including Orica
Limited, where he is currently
Global Head – Chemicals &
Strategy. Previously, Andrew
was General Manager, Mergers,
Acquisitions and Strategy at
North Limited.
Bsc microbiology and virology
Bec (hons), ma (econ), mBa
non-executive director since
april 2011. member of the
audit and risk committee and
the safety and sustainability
committee.
Managing Director of Australia
for Fonterra Co-operative
Limited and former Director of
Foster’s Group Limited from
May 2011 to December 2011.
Judith has more than 21 years’
experience in high-profile,
global, consumer facing
companies. Previous roles
include Managing Director of
Heinz Australia and Chief
Executive Officer and Managing
Director for Goodyear & Dunlop
Tyres ANZ. Judith was also the
Managing Director of Angus &
Robertson and held positions
at UK retailers WH Smith plc
and Marks & Spencer plc.
chairman and non-executive
director since July 2010.
chair of the remuneration
and nominations committee
and member of the audit and
risk committee.
Director of Macquarie Group
Limited since August 2007
(and of Macquarie Bank since
June 2003). Former Director of
Orica Limited from July 2003
to July 2010, Managing Director
and Chief Executive Officer
of CSR Limited from 1998 to
March 2003, Chairman and
Director of Medibank Private
Limited and member of the
Board of the Business Council
of Australia. Peter was also the
Chairman/CEO of ICI Paints and
a member of the Executive
Board of ICI PLC.
38
Garry Hounsell
Stuart Boxer
Gaik Hean Chew
Simon Black
Beng (hons)
Bpharm (hons)
chief financial officer and
executive director since
July 2010.
Former CFO and General
Manager Strategy of Orica
Limited’s DuluxGroup division
from October 2008 to July
2010. Stuart was also the CFO
of Southern Cross Broadcasting
(Australia) Limited and held
various senior strategy and
finance roles at Village
Roadshow Limited and
LEK Consulting.
non-executive director since
august 2010. chair of the safety
and sustainability committee
and member of the remuneration
and nominations committee.
Director of CPS Color Group of
Finland and KCA International.
Gaik Hean has more than 32
years’ experience in the paints
and chemicals sectors, most
recently as Chief Executive of
ICI Paints Asia from 1995 until
2008 and also as the former
Managing Director of ICI
Singapore.
llB, Bcom, cert gov (admin),
csa (cert)
general counsel and company
secretary since July 2010.
Former Senior Legal Counsel
at Orica Limited’s DuluxGroup
division from January 2006 to
July 2010. Simon was also a
Senior Legal Counsel for Orica
Limited’s Chemicals division
from October 2004 to January
2006 and a Senior Legal and
Business Affairs Adviser at
Universal Pictures International,
London, UK.
BBus (accounting)
fca, cpa
non-executive director since
July 2010. chair of the audit
and risk committee and
member of the remuneration
and nominations committee.
Chairman of PanAust Limited
since July 2008 and a Director
of Qantas Airways Limited since
January 2005 and Treasury
Wine Estates since 1 September
2012. Garry was a Director
of Orica Limited from 2004
until 2013, Director of Mitchell
Communication Group Limited
from 2006 until 2010, Director
of Nufarm Limited from 2004
until 2012, and is a former
Senior Partner of Ernst & Young
and Chief Executive Officer and
Country Managing Partner of
Arthur Andersen.
DuluxGroup Annual Report 2013
39
DuluxGroup Annual Report 2013
Group Executive
Alan Preston
Patrick Jones
Stephen Cox
Mike Kirkman
Tony Bova
BBus (marketing),
mBa
general manager
– dgl international
asia
Alan has over 16
years’ paints industry
experience and has held
a number of domestic
and international roles
with the DuluxGroup
business including
General Manager of
Paints New Zealand,
Cabot’s General
Manager, CEO of ICI
Paints Philippines and
General Manger of Sales,
Marketing and R&D for
ICI Paints Asia. Alan left
the business in 2004 to
pursue other business
interests and then
rejoined DuluxGroup
in his current role in
February 2011. Prior to
joining DuluxGroup,
Alan had various roles
in fast-moving consumer
goods with Bowater
Scott and Rexona.
BBus (hons), cpa
BBus (marketing)
general manager
– dulux paints
australia
Patrick joined
DuluxGroup in 1999
and was appointed to
his current position in
May 2011. Patrick has
undertaken a variety
of commercial and
business management
roles including General
Manager of the Paints
New Zealand business
from May 2008. Other
roles previously held by
Patrick include National
Retail Manager for
Dulux Paints Australia,
Bunnings Business
Manager, Independents
Business Manager and
State Sales Manager.
general manager
– parchem
construction
chemicals and
equipment
Stephen joined
DuluxGroup in his
current role in December
2012, coming to the
business via the Alesco
acquisition. Stephen
has been General
Manager of the Parchem
business since 2003
and, before this role,
was Sales and Marketing
Manager for the Swedish
based company, ITT
Flygt. Stephen has
previously held a
variety of technical,
commercial and
business management
roles in industrial and
business-to-business
organisations.
Bsc, dip ed,
BBus(accounting)
general manager
– selleys yates
Mike joined DuluxGroup
in his current role in
October 2012. Prior to
joining DuluxGroup, Mike
was General Manager
of Climate Systems at
GWA Australia. For nine
years, Mike held senior
executive positions
at Stanley Black &
Decker including Sales
Director and then
Managing Director for
the Australian and New
Zealand businesses.
Prior to that, he was
State Manager (Victoria,
Tasmania and New
South Wales) for Ausco
Building Systems. Mike
has extensive senior
leadership experience
across sales, marketing,
operations and business
development.
Bcom (accounting
& management), cpa
general manager
– B&d garage doors
Tony was appointed
to his current role in
April 2013. Prior to that,
Tony was DuluxGroup
Manager of Growth and
Business Development
including working on the
Alesco acquisition and
integration. During his
15 years at DuluxGroup,
Tony has held various
commercial roles,
including as Business
Manager of Selleys ANZ.
Prior to joining
DuluxGroup, Tony held
various finance and
planning roles at
BHP Billiton.
40
Patrick Houlihan
Stuart Boxer
Julia Myers
Brad Hordern
Michael McMullen
Bsc (hons), mBa
Beng (hons)
Bsc (hons)
Beng (hons)
managing director and
chief executive officer
executive director and
chief financial officer
Patrick joined the
DuluxGroup business
in 1989 as a research
chemist and has since
progressed through a
succession of technical,
commercial and
senior leadership
roles including Selleys
Sales Director, Dulux
Marketing Director, and
Yates General Manager.
Patrick was appointed
CEO of Orica Limited’s
DuluxGroup division
and a member of the
Orica Group Executive
in February 2007.
Patrick was appointed
to his current role upon
the demerger of the
DuluxGroup division
from Orica Limited in
July 2010.
Stuart joined the
DuluxGroup business in
October 2008 as CFO
and General Manager
Strategy. Prior to joining
DuluxGroup, Stuart
held a number of senior
positions including
CFO of Southern Cross
Broadcasting (Australia)
Limited and various
senior strategy and
finance roles at Village
Roadshow Limited
and LEK Consulting.
Stuart was appointed
to his current role upon
the demerger of the
DuluxGroup division
from Orica Limited in
July 2010.
general manager
– dulux paints new
Zealand
general manager
– duluxgroup
supply chain
Julia joined DuluxGroup
in 1990 as a business
analyst based in Slough,
UK. Since then, Julia has
undertaken a variety of
functional, commercial
and business
management roles
including Group IT
Manager, Sales Force
Effectiveness Manager,
Dulux Independents
Business Manager and
Cabot’s Business
Manager. Julia was
appointed to her current
role in May 2011.
Brad was appointed
to his current role in
November 2006. Before
joining DuluxGroup, Brad
held a number of
senior operational
roles including Group
Manufacturing Manager
for SCA Australasia,
Logistics Director for
Campbell’s Arnott’s
Australia and National
Operations Manager for
Snack Brands Australia
(previously Frito-Lay
Australia).
Ba (economics,
industrial relations)
general manager
– duluxgroup
human resources
Michael joined
DuluxGroup in October
2011. Prior to joining
DuluxGroup, Michael
held a number of
senior strategic human
resources roles including
Group General Manager
Human Resources for
AWB and Agrium Inc.
Michael has also
performed a number
of human resources
management roles
within various divisions
of BHP Billiton including
Group Functions,
Development,
Commercial, BHP
Minerals and as Human
Resources Manager for
various mine sites in
Australia.
DuluxGroup Annual Report 2013
41
DuluxGroup Annual Report 2013
Corporate Governance Statement
We, together with the management team, lead by
example. We are confident that we have a best
practice framework in place. We are committed
to ensuring that it is respected and that, as an
organisation, we act in accordance with the spirit
of good governance. Our governance framework
(details of which can be found on our website
at www.duluxgroup.com.au) is consistent in all
substantial respects with the recommendations in
the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations
(ASX Principles).
At DuluxGroup, we help our consumers to imagine
and create better places and spaces in which to
live and work. We do this by manufacturing and
marketing a wide range of products that protect,
maintain and enhance those places and spaces.
We recognise that the way we do business is
critical in order for us to earn and maintain the
respect and trust of all stakeholders including our
employees, customers, suppliers, shareholders and
the community.
DuluxGroup’s Directors and management are
committed to conducting business in an ethical,
fair and transparent manner in accordance with
high standards of corporate governance in the
countries in which we operate.
As a Board, we believe that a strong corporate
governance framework – with a focus on
transparency, both internally and externally,
and on continuous improvement – translates
to a strong company.
Governance Snapshot
– 2013 Financial Year
the Board works to keep our governance framework ‘alive’.
each year, the Board agrees a calendar of activities and
initiatives aimed at enhancing the Board’s effectiveness
and its organisational oversight. these are considered and
agreed having regard to factors including the company’s
strategic plan and its current risk profile.
this year, we have sought to provide more meaningful
disclosure in relation to these activities by providing the
following ‘snapshot’ in respect of the 2013 financial year.
details of the company’s broader governance framework
are set out on pages 44 to 51.
42
DuluxGroup Annual Report 2013
2013 Snapshot
The Board
Composition
• The Board is currently comprised of seven Directors with five Non-Executive Directors (including the Chairman) and the Managing Director and
Chief Financial Officer as Executive Directors.
• Details of the length of tenure, skills, experience and expertise of each Director (as well as the period that each Director has held office and their
independent status) are set out on pages 38 to 39 of this annual report.
Enhancing Effectiveness – Board Review
• During 2013, the Board undertook a comprehensive review of its
Continuous Development Activities
• The Board has an active continuing education program in place
performance and of individual Directors. This performance review
was externally facilitated and included feedback from Directors and
senior management.
which comprises internal presentations, discussions with key external
subject matter experts, customers and/or suppliers as well as visits
to DuluxGroup sites and other places of interest.
• This review confirmed that the Board comprises Directors with an
effective mix of skills and experience. It also highlighted strong
working relationships amongst Directors and a boardroom
environment that promotes robust discussion and effective
decision-making.
• As part of the review, the Board recognised (among other things)
the importance of addressing the issue of Board succession in the
medium term, continued oversight of the key risks facing the
business and tapping into broader market perspectives relevant
to the company.
• During 2013, this program included, among other things:
– a specific session at each Board meeting focussing on a topical
issue facing one or more of the business units;
– a tour of the Rocklea manufacturing site and key new sites acquired
as part of the company’s acquisition of Alesco Corporation Limited;
– a tour of the United States to give the Board insight into the core
markets of our key coatings competitors;
– a presentation from an expert in macro-economics; and
– discussions with key suppliers.
Organisational Oversight
Strategy
• In 2013, the Board continued to focus on ensuring DuluxGroup delivered solid growth and strong cash flows from its existing businesses while
developing further options for growth in a measured, low-risk manner. Further details of the company’s strategy and 2013 initiatives can be found
on pages 12 to 13 of this annual report.
• Key Board activities during the year included an in-depth strategy planning session, an extensive analysis of the newly acquired Alesco
businesses and ongoing monitoring of the integration of those new businesses.
Leadership and Culture
• We recognise that our people are what make our company.
Accordingly, development and succession planning is an important
consideration at Board level. Our Board also recognises that our
people may be attractive to others in the market given the company’s
strong performance since listing.
• As a company, we address this through our culture, development
opportunities that we provide our people and also through our
remuneration framework.
• Key activities and initiatives during the 2013 financial year included:
– a comprehensive review of the remuneration structures within
the company (see pages 57 to 77 for further details);
– dedicated focus on the successful integration of the Alesco
businesses including a roll out of the company’s ‘Values and
Behaviours’ program and alignment of our long term share
incentive plan and our broader employee share plan;
– a Board review of the performance of the CEO and CFO as
well as review and evaluation of the performance agreements
for the executive management team;
– a workshop for our senior executives who hold positions on our
subsidiary boards among other employee training activities;
– implementation of the key learnings from the company-wide
culture survey conducted in August 2012; and
– continued commitment to promoting diversity within the company
(see pages 48 to 49 for further details of our progress during
the year).
• The Board is planning a focused talent review session in respect
of the senior executives during the 2014 financial year.
Risk
• The Board believes that effective risk management will support the
company’s ability to grow. In particular, the Board recognises the
importance of risk management practices across all businesses and
operations and also acknowledges that effective risk management
provides a framework to achieve and deliver the company’s strategy
and key objectives.
• We take risk oversight seriously and we have robust crisis
management and disaster recovery plans in place, which was most
recently demonstrated by our response to the Queensland floods
in 2011.
• In addition to its usual oversight of risk management and internal
control processes, during the 2013 financial year:
– the Board’s Audit and Risk Committee met with company’s
IT Director as well as the finance managers of various business
units to discuss risk management processes within their function
or business;
– the executive team and the Board separately reviewed and updated
the company’s Risk Register;
– we regularly monitored the key risks on the company’s Risk
Register including the status of key actions targeted at mitigating
those risks; and
– we carried out a theoretical and company-specific crisis
management exercise with the assistance of external consultants
to test our crisis management and disaster recovery plans.
DuluxGroup Annual Report 2013
43
DuluxGroup Annual Report 2013
Corporate Governance Statement continued
1. An effective Board
– role and composition
Role
The Board of DuluxGroup Limited sees its primary
role as the protection and enhancement of long term
shareholder value taking into account the interests of
other stakeholders including employees, customers,
suppliers and the wider community. The Board is
accountable to shareholders for the performance of
the company. It directs and monitors the business
and affairs of the company on behalf of shareholders
and is responsible for the company’s overall
corporate governance.
Charters have been established for the Board, the
Board committees, the Chairman and the Managing
Director which clearly describe their respective
functions and responsibilities.
The Board’s responsibilities include appointing the
Managing Director, DuluxGroup Executive succession
planning, approving major strategic plans, monitoring
the integrity and consistency of management’s
control of risk, agreeing business plans and budgets,
approving major capital expenditure, approving
acquisitions and divestments, approving funding
plans and capital raisings, agreeing corporate goals
and reviewing performance against approved plans.
Responsibility for managing, directing and promoting
the profitable operation and development of the
company, consistent with the primary objective of
enhancing long term shareholder value, is delegated
to the Managing Director who is accountable to
the Board.
Composition and Planning for Succession
The Directors are conscious of the need for Board
members to possess the diversity of skills and
experience required to fulfil the obligations of the
Board and of importance of addressing the issue
of Board succession in the medium term.
In considering membership of the Board, Directors
take into account the appropriate characteristics
needed by the Board to maximise its effectiveness
and the blend of skills, knowledge and experience
necessary for the present and future needs of
the company.
The Remuneration and Nominations Committee has
primary responsibility for conducting assessments
of the current mix of skills and experience of existing
Directors, the business and strategic needs of the
company, as well as broader succession planning
issues, to determine if it is necessary to recruit any
additional Directors. Feedback on planning for
succession was also specifically requested as part
of the Board review undertaken during the year.
Where a future need is identified or arises, including
as part of the Board’s succession planning, the
Remuneration and Nominations Committee intends
to undertake a search process (with the assistance
of professional consultants as necessary) to select
potential candidates based on the skills required by
the Board and the qualities and experience of the
candidates. Shortlisted candidates will then be
interviewed by the Chairman and other Directors
before being recommended to the full Board for
appointment. Nominations for appointment to the
Board are considered by the Remuneration and
Nominations Committee and approved by the Board
as a whole.
Directors (other than the Managing Director)
appointed by the Board must stand for election
at the Annual General Meeting following their
appointment and are subject to shareholder
re-election by rotation at least every three years.
Further, re-appointment of Non-Executive Directors
to the Board at the conclusion of their three-year
term is not automatic. Prior to the Board endorsing a
Director for re-election, the individual’s performance
as a Director, together with the performance of the
Board as a whole, is reviewed in accordance with
processes agreed by the Board from time to time.
All Directors must obtain the Chairman’s prior
approval before accepting Directorships or other
significant appointments.
Induction of New Directors
New Directors are provided with a formal letter
of appointment which sets out the key terms and
conditions of appointment, including duties, rights
and responsibilities, the time commitment envisaged
and the Board’s expectations regarding involvement
with committee work.
New Directors also participate in a formal induction
program which includes site visits, one-on-one
meetings with relevant members of management
and provision of relevant policies, charters and
other materials.
Independence
Directors are expected to bring independent
views and judgement to the Board’s deliberations.
The Board recognises the special responsibility of
Non-Executive Directors for monitoring executive
management and providing independent views.
Under the Board Charter, the Board must
maintain a majority of Non-Executive Directors
and have a non-executive independent Chairman
(with different persons filling the roles of Chairman
and Managing Director).
44
the Board has determined that, in respect of the 2013
financial year, the chairman and all non-executive directors
are independent of executive management and free of any
business or other relationship that could materially interfere
with the exercise of unfettered and independent judgement
or compromise their ability to act in the best interests
of the company.
The Board has adopted guidelines based on the
factors set out in the ASX Principles in assessing
the independent status of a Director. In summary,
the test of whether a relationship could, or could
be perceived to, materially interfere with the
independent exercise of a Director’s judgement
is based on the nature of the relationship and the
circumstances of that Director. The independence
of each Director is considered on a case-by-case
basis from the perspective of both the company
and the Director. Materiality is assessed by reference
to each Director’s individual circumstances, rather
than by applying general materiality thresholds.
Each Director is obliged to immediately inform the
company of any fact or circumstance which may
affect the Director’s independence.
The Board assesses the independence of its new
Directors upon appointment and will review all
Directors’ independence as appropriate.
2. Maximising effectiveness
in the Boardroom
Board Meetings
Directors receive comprehensive Board papers in
advance of the Board meetings. As well as holding
regular Board meetings, the Board sets aside a
two-day meeting annually to comprehensively review
company strategy. Directors also receive regular
updates in relation to key issues facing DuluxGroup’s
businesses from time to time. The Board calendar
also includes site visits to a range of DuluxGroup
operations to meet with employees, customers and
other stakeholders. Details for 2013 are set out in the
Governance Snapshot on page 43.
The Board recognises the importance of the
Non-Executive Directors meeting without the presence
of management to discuss company matters and
it is the Board’s practice that the Non-Executive
Directors meet separately either in conjunction with,
or in addition to, the scheduled Board meetings.
the Board typically holds at least
eight meetings per year, unless the
business of the company requires
additional meetings. for example,
one additional meeting of the full
Board was held during the 2013
financial year (further to the
additional 27 meetings held during
the 2012 financial year to consider
and effect the alesco takeover).
Board and Executive Performance
The Board is committed to a performance culture
and to ensuring that a range of formal processes are
in place to evaluate the performance of the Board,
Board Committees and executives.
The Board has approved a formal Board Evaluation
Policy, under which it carries out an evaluation of
its performance against agreed Board objectives
each year. This process is overseen by the Chairman.
It is the Board’s general practice that this is externally
facilitated every third year. As noted in the Snapshot,
the Board undertook a comprehensive review of its
performance during the year, which was externally
facilitated.
DuluxGroup Annual Report 2013
45
DuluxGroup Annual Report 2013
Corporate Governance Statement continued
Each Board committee also reviews its performance
annually against the responsibilities set out in the
committee’s charter and against its annual objectives.
As appropriate, the Board may also provide feedback
from time to time as to the effectiveness with which
it considers the Board committees assist the Board
in the discharge of its functions.
The Non-Executive Directors are responsible for
regularly evaluating the performance of the
Managing Director based on specific criteria
including the company’s business performance, short
and long term strategic objectives and the
achievement of personal objectives agreed annually
with the Managing Director.
All DuluxGroup executives are subject to an
annual performance review. The review involves
an executive being evaluated by their immediate
superior by reference to their specific performance
contract for the year, including the completion of key
performance indicators and contribution to specific
business and company plans. This review is aligned
to the company’s remuneration framework and is
considered for, among other things, the purposes
of determining any increases to fixed remuneration
and outcomes under the short term incentive plan.
Directors Fees and Executive Remuneration
The Remuneration Report on page 57 sets out
details regarding the company’s remuneration
policy, fees paid to Directors and specific details
of executive remuneration. Other than statutory
superannuation contributions, the company does not
operate any schemes for the payment of retirement
benefits to Non-Executive Directors.
Board Committees
The Board has established the following standing
committees to advise and assist the Board in the
effective discharge of its responsibilities:
• Audit and Risk Committee;
• Remuneration and Nominations Committee; and
• Safety and Sustainability Committee.
These committees, generally, review matters on
behalf of the Board and refer matters to the Board
for decision with a recommendation from the
committee.
The materials and the minutes of committee
meetings are circulated to the Board members.
Additionally, any Director is welcome to attend
any committee meeting and the committee Chair
periodically reports to the Board as required.
in october each year, the Board
reviews the charter for each standing
committee together with the
objectives set for each committee.
the Board also evaluated the performance of
mr andrew larke and ms gaik hean chew, who are standing
for re-election at the company's 2013 annual general
meeting, prior to the Board endorsing their nomination
for re-election.
in addition to reviewing the skills, knowledge and
experience that mr larke and ms chew bring to the Board,
the Board also considered their overall performance, their
attendances and participation at Board and committee
meetings, and their contributions to matters discussed.
in particular, the review confirmed that mr larke's
strategic and m&a experience was highly valued by
the Board during the alesco takeover. similarly,
ms chew's knowledge of, and experience in, asian
markets is highly regarded.
46
Details of the membership composition and responsibilities of each commitee are as follows:
Audit and Risk Committee
Remuneration and Nominations
Committee
Safety and Sustainability
Committee
Members
Mr Garry Hounsell (Chair)
Mr Peter Kirby (Chair)
Ms Gaik Hean Chew (Chair)
Mr Peter Kirby
Ms Judith Swales
Mr Andrew Larke (from
1 October 2013)
Mr Garry Hounsell
Ms Gaik Hean Chew
Mr Andrew Larke (from
1 October 2013)
Mr Patrick Houlihan
Ms Judith Swales
Details of qualifications and experience of each member are set out on pages 38 to 39 of this annual report.
Composition and
key responsibilities
The committee is to comprise of at
least three non-executive Directors,
all of whom satisfy the criteria for
independence and who have
relevant financial, commercial and
risk management experience.
The committee is to comprise of at
least three non-executive Directors,
all of whom satisfy the criteria for
independence.
The committee is to comprise of
at least two Directors including at
least one non-executive Director
and the Managing Director.
Full details of requirements for composition and key responsibilities are set out in the Committees’ Charters
which are available at www.duluxgroup.com.au.
Key activities
during 2013
• Considered safety and
sustainability issues that may
have strategic, financial and
reputational implications for the
group (including identifying key
risks and appropriate mitigation
strategies).
• Reviewed the effectiveness of the
group’s safety and sustainability
objectives, targets and strategies.
• Oversaw compliance with legal
and regulatory safety and
sustainability requirements.
• Reviewed significant safety
incident reports and made
recommendations to the Board
on necessary changes to
procedures.
• Ensured the Board is periodically
updated in relation to compliance
with best practice safety
standards.
• Reviewed the full year and half
year financial reports of the
group, including review of the
accounting policies and practices
of the group.
• Monitored and assessed the
adequacy of the systems for
financial and operating controls,
risk management and legal
compliance.
• Oversaw the scope and conduct
of external and internal audits
(including internal and external
audit programs, independence
of external auditor, and auditor
performance).
• Reviewed and assessed non-audit
services provided by the external
auditor.
• Made recommendations to the
Board on the appointment,
performance and remuneration
of the external auditor.
• The Committee undertook a
comprehensive review of
executive remuneration
arrangements during the year,
details of which are set out in the
Remuneration Report on pages
57 to 77.
• As part of the review, the
Committee recommended that a
minimum shareholding policy for
executives be implemented and
this policy was subsequently
adopted by the Board.
• Reviewed and made
recommendations to the
Board on:
– the total level of remuneration
of non-executive Directors
– the remuneration arrangements
of executive Directors and
direct reports to the Managing
Director (including short term
and long-term incentive
arrangements and performance
targets).
• Considered the Group
organisational strategy, including
in the context of the Alesco
acquisition, and reviewed the
plan for senior leadership
succession.
• Oversaw measurement of
performance against agreed
diversity objectives.
Attendance
Details of meeting attendance for members of each committee are set out in the Directors’ Report on page 53
of this Annual Report.
DuluxGroup Annual Report 2013
47
DuluxGroup Annual Report 2013
Corporate Governance Statement continued
In addition to the standing committees, the Board
may also establish special or ad hoc committees to
oversee or implement significant projects as they
arise. For example the Board established a special
committee during the 2012 financial year to assist the
Board with the company’s takeover bid for Alesco
Corporation Limited (Alesco). This Committee was
wound up following completion of the Alesco
takeover in December, 2012.
Access to Information and Independent Advice
All Directors have unrestricted access to employees
of DuluxGroup and, subject to the law, access to all
relevant company records and information held by
DuluxGroup employees and external advisers.
Subject to prior consultation with the Chairman,
each Director may seek independent professional
advice at the company’s expense to assist the
Director in the proper exercise of powers and
discharge of duties as a Director or as a member
of a Board committee.
Pursuant to a deed executed by the company and
each Director, a Director also has the right to have
access to all documents which have been presented
to meetings or made available to the Board or any
committee whilst in office, including materials
referred to in those documents, for a term of ten
years after ceasing to be a Director or such longer
period as is necessary to determine relevant legal
proceedings that commenced during this term.
Conflicts of Interest
Directors are required to avoid conflicts of interest
and immediately inform their fellow Directors should
a conflict of interest arise. Directors are also required
to advise the company of any relevant interest that
may result in a conflict.
The Board has adopted the use of formal standing
notices in which Directors disclose any material
personal interests and the relationship of these
interests to the affairs of the company. A Director is
required to notify the company of any new material
personal interest or if there is any change in the
nature or extent of a previously disclosed interest.
Where a matter in which a Director has a material
personal interest is being considered by the Board,
that Director must not be present when the matter
is being considered or vote on the matter unless all
of the Directors have passed a resolution to enable
that Director to do so or the matter comes within a
statutory exception.
3. Maximising effectiveness
in the workplace
One of our core values is to value people, work safely
and respect the environment.
Both the Board and management are committed
to providing an environment to our people that is
inclusive and promotes diversity of backgrounds
and thought – and one where they feel safe.
About DuluxGroup’s Approach to Diversity
During the 2013 financial year, DuluxGroup has
progressed its diversity agenda through focussing on
a number of key initiatives. The Diversity Council and
the Human Resources team continued the program
designed in 2012 with clear goals and priority actions
against each of those goals.
2013 – 2014 Measurable Objectives and Progress
The measurable objectives with respect to gender are:
1. Increase the number of women in DuluxGroup
2. Increase the number of women in leadership
positions in DuluxGroup; and
3. Build awareness of the business case for diversity.
In many job families and functions within the
‘heritage’ DuluxGroup businesses, women make up
about half of the workforce. In three main areas,
being Sales, Dulux Trade Centres and Supply Chain,
the percentage of women is lower but is in line with
industry benchmarks. Our diversity plan is focused
on these three areas that are traditionally more
male dominated. Our diversity plan also extends to
the new businesses acquired as part of the Alesco
acquisition. Increasing the number of women in
leadership has significant ongoing focus.
Progress during 2013
The Diversity Council (chaired by the CEO) meets
quarterly and reviews progress against the goals
and actions. Much of the activity is pro-active.
This includes working on ensuring we attract a
diverse range of candidates into DuluxGroup.
Attraction
During 2013, we have improved our profile as a
strong employer of women. This has been achieved
through actively publicising some of our senior
women and improvements in our job ads to make
them more gender neutral (among other things).
We have also reviewed our family leave and flexible
work policies to ensure we are competitive in the
labour market. We support women returning to work
following family leave with coaching to ensure they
are ready to return to work with confidence. These
are issues of concern to many candidates when
enquiring about employment with DuluxGroup.
48
Safety and Sustainability
The Board and management are committed to
ensuring that its operations reflect sustainable
business practices. The company has a strong
heritage of continuous improvement in sustainability
impacts and the Board acknowledges that
management of DuluxGroup’s financial,
environmental and social impacts is fundamental
to the success and wellbeing of the business and
its stakeholders.
The company therefore aspires to deliver on its safety
and sustainability vision of ‘A Future Without Harm’.
This is supported by our remuneration framework,
which links at least 10% of senior executive short
term incentive award opportunities to the achievement
of challenging safety and sustainability hurdles.
The Board has instituted a process whereby the
Directors receive a report on current safety and
sustainability issues and performance in the group at
each Board meeting. The Safety and Sustainability
Committee is responsible for reviewing and
monitoring environmental issues at Board level.
The actions being undertaken by the company to
continuously improve its environmental and safety
performance are further detailed on page 33 of this
Annual Report.
the Board is pleased that, during the
2013 financial year, our heritage
businesses achieved their best-ever
recordable case rate performance for
the second consecutive year with a
32% improvement on 2012.
Talent Management and Retention
When managing our talent internally (including
succession planning), we highlight women and
ensure their development is being managed
appropriately. Whilst we have not set targets or
quotas for appointments to senior roles, we work
hard to ensure we have balanced short lists and that
hiring managers consider a wide range of candidates.
Similarly, when reviewing nominations for leadership
development programs, we actively ensure a strong
female representation.
Communication
The internal communication of our diversity
messages has been broad-based and is making
an impact. During 2013, we ran an event on
International Women’s Day highlighting the careers
of some senior women. This event was well attended
and demonstrated that there is an interest in such
events within the business.
Training
Our compulsory Appropriate Workplace Behaviour
training program has been updated and is being
rolled out across the business. This training (which
covers all employees) highlights the link between
DuluxGroup’s Values and Behaviours and the
expectation that we have for all employees that they
can work in an environment free of harassment,
discrimination and any form of inappropriate
behaviour.
Diversity is a topic for discussion within personal
development programs for graduates, operational
leaders and senior managers.
External Benchmarking
The DuluxGroup Diversity Council constantly surveys
the market to benchmark our efforts. DuluxGroup is
a member of the Diversity Council of Australia
(DCA), the National Association of Women in
Operations (NAWO) and the Equal Employment
Opportunity Trust (EEO Trust) in New Zealand.
DuluxGroup also complies with the Workplace
Gender Equality Agency (WGEA) requirements
for reporting annually.
This activity continues to positively contribute to our
engaged and enabled culture.
Diversity Statistics
Percentage of women
2011
2012
2013
28.6%
28.6%
28.6%
7%
8.7%
5.7%*
Board
Leadership (defined by
those in senior graded
roles reporting to the
Managing Director
or Executives)
Organisation
35%
36%
33%*
* The decrease from 2012 to 2013 is due to the Alesco
acquisition which reduced the proportion of women both
overall and in leadership positions. Excluding the Alesco
acquisition, the diversity statistics for 2013 are broadly in
line with 2012.
DuluxGroup Annual Report 2013
49
DuluxGroup Annual Report 2013
Corporate Governance Statement continued
4. Risk Management
Integrity of Reporting
The Board and management have established
controls which are designed to safeguard the
company’s interests and the integrity of its reporting.
These include accounting, financial reporting, safety
and sustainability and other internal control policies
and procedures, which are directed at monitoring
whether the company complies with regulatory
requirements and community standards.
In accordance with the company’s system of internal
sign-offs, both the Chief Executive Officer and Chief
Financial Officer have provided assurances to the
Board that, having made appropriate enquiries, they
have formed the opinion that:
• the financial reports of the group represent a true
and fair view of the consolidated group’s financial
position and performance and are in accordance
with relevant accounting standards; and
• these statements are founded on a sound system
of risk management and internal control and that
the system is operating effectively in all material
respects in relation to financial reporting risks.
These assurances are based on a financial letter of
assurance that cascades down through management
and includes sign-off by business general managers
and business finance managers who are responsible
for implementing, maintaining and reporting on the
effectiveness of the systems.
Comprehensive practices have been adopted to
monitor that:
• capital expenditure and revenue commitments
above a certain size obtain prior Board approval;
• safety and sustainability standards and
management systems achieve high standards
of performance and compliance; and
• business transactions are properly authorised
and executed.
The company has appointed a Risk Manager who
is responsible for reviewing and recommending
improvements to controls, processes and procedures
used by the company across its corporate and
business activities. The Risk Manager is supported by
an independent external firm of accountants and an
in-house resource in conducting a specific internal
audit program.
The company’s financial statements are subject to an
annual audit by an independent, professional auditor
who also reviews the company’s half-yearly financial
statements. The Audit and Risk Committee oversees
this process on behalf of the Board.
Risk Identification and Management
The Board has established policies for the oversight
and management of material business risks and
internal controls. The Audit and Risk Committee
oversees the internal controls, policies and
procedures which the company uses to identify
business risks and ensure compliance with relevant
regulatory and legal requirements.
The design and implementation of the risk
management and internal control systems to
manage the company’s material business risks
is the responsibility of management.
The Board has adopted the following key elements
for the oversight and management of material
business risks:
• material financial and non-financial business risks
are systematically and formally identified and
assessed by the Board and Group Executive on
(at least) an annual basis;
• risk assessments are also performed for individual
material projects, capital expenditure, products and
country risks;
• internal controls are identified and, where
appropriate, management plans are established
for each significant identified risk outlining the
mitigation strategy and tasks, and the management
responsible for the action; and
• formal risk reporting is provided to the Board on an
ongoing basis including information in relation to
whether material business risks are being managed
effectively – this includes information relating to
risk profiles and progress against plans.
The Chief Executive Officer and Chief Financial Officer
have provided assurances to the Board that the
risk management and internal control systems have
been designed and implemented to manage the
company’s material business risks, and management
has reported to the Board as to the effectiveness of
the company’s and consolidated entity’s
management of its material business risks.
An independent external firm of accountants assists
in ensuring compliance with internal controls and risk
management programs by regularly reviewing the
effectiveness of the risk management and internal
control systems and periodically provides assistance
and input when undertaking risk assessments.
50
the chairman met with a number of governance bodies and
major investors during the year to discuss our governance
and remuneration practices, including in the context of the
broader remuneration review during the year (details of
which are set out in the remuneration report on pages 57
to 77).
the Board was pleased with the overall sentiment from
these meetings, and has taken specific feedback into
consideration, particularly in relation to the way in which
we can continue to provide our stakeholders with
meaningful communication.
• Continuous Disclosure, which establishes detailed
procedures for identifying and disclosing material
and price-sensitive information in accordance with
the Corporations Act 2001 and the ASX Listing
Rules. During the year, training was provided for
senior managers to ensure appropriate awareness
of how the continuous disclosure obligations apply
to DuluxGroup, including consideration of
materiality guidelines relevant to the company.
Advice in relation to the company’s continuous
disclosure obligations is also cascaded to the
broader organisation on a periodic basis.
• Shareholder Communications Policy, which sets
out the company’s commitment to communicating
with shareholders in a way that enables them
to exercise their rights as shareholders in an
informed manner.
5. DuluxGroup Governance Policies
The Board acknowledges the need for Directors,
executives, employees and contractors to observe
the highest ethical standards of corporate and
business behaviour.
DuluxGroup has adopted what the Board considers
to be a ‘best practice’ framework, which includes
the following policies, full details of which can be
viewed in detail on the company’s website at
www.duluxgroup.com.au. The policies are consistent
with the recommendations set out in the ASX
Principles:
• Code of Conduct, which sets out the standards of
business conduct required of all employees and
contractors of the company. A Speak Up line has
been established to enable employees to report
(on an anonymous basis) breaches of the Code
of Conduct. If a report is made, it is escalated
as appropriate for investigation and action.
A management committee monitors and reviews
the effectiveness of the Speak Up line on a periodic
basis. A report is also prepared for review by
the company’s Remuneration and Nominations
Committee on a quarterly basis.
• Share Trading Policy, which reinforces the
requirements of the Corporations Act 2001 in
relation to the prohibition against insider trading.
Outside of the trading windows set out in the
Policy and as determined by the Board from time
to time, Directors and senior executives must
obtain consent to trade in DuluxGroup shares.
DuluxGroup Annual Report 2013
51
Financial contents
directors’ report
directors’ report –
remuneration report (audited)
auditor’s independence
declaration
consolidated income statement
consolidated statement
of comprehensive income
consolidated Balance sheet
consolidated statement
of changes in equity
consolidated statement
of cash flows
notes to the consolidated
financial statements
directors’ declaration
independent auditor’s report
53
57
78
79
80
81
82
84
85
149
150
lounge
52
Directors’ Report
The Directors of DuluxGroup Limited (the Company) present the financial report for the Company and its
controlled entities (collectively ‘the consolidated entity’ or ‘the Group’ or ‘DuluxGroup’) for the financial year
ended 30 September 2013 and the auditor’s report thereon.
The information referred to below forms part of and is to be read in conjunction with this Directors’ Report:
the Remuneration Report appearing on pages 57 to 77;
•
• Review of Operations and Financial Performance and Review of Business Segment Performance on pages
16 to 30;
details of the current Directors and the Company Secretary on pages 38 to 39; and
•
• Note 28 to the financial statements accompanying this Report.
Directors
The Directors of the Company during the financial year and up to the date of this report are:
Peter Kirby, Chairman
Patrick Houlihan, Managing Director and Chief Executive Officer
Stuart Boxer, Chief Financial Officer and Executive Director
Gaik Hean Chew
Garry Hounsell
Andrew Larke
Judith Swales
Particulars of the current Directors’ and the Company Secretary’s qualifications, experience and special
responsibilities are detailed on pages 38 to 39 of the Annual Report.
Company Secretary
Simon Black is the Company Secretary and General Counsel.
Directors’ meetings
The number of Directors’ meetings (including meetings of committees of Directors) and the number of meetings
attended by each of the Directors of the Company during the financial year are listed below:
Director
Scheduled Board
Meetings(1)(2)
Audit and Risk
Committee(1)
Remuneration and
Nominations
Committee(1)
Safety and
Sustainability
Committee(1)
Peter Kirby
Patrick Houlihan
Stuart Boxer
Gaik Hean Chew
Garry Hounsell
Andrew Larke
Judith Swales
Held
9
9
9
9
9
9
9
Attended
9
9
9
9
9
9
9
Held
4
-
-
-
4
-
4
Attended
4
-
-
-
4
-
4
Held
5
-
-
5
5
-
-
Attended
5
-
-
5
5
-
-
Held
-
4
-
4
-
-
4
Attended
-
4
-
4
-
-
4
(1) Shows the number of meetings held and attended by each Director during the period the Director was a member of the Board or Committee. The
Scheduled Board Meetings include the 2012 Annual General Meeting.
(2) In addition to the Scheduled Board Meetings above, a special Board meeting was convened in relation to the takeover of Alesco Corporation
Limited (Alesco) and was attended by all Directors.
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DuluxGroup Annual Report 2013
53
Directors’ Report
Directors’ interests in share capital
The relevant interest of each Director in the share capital of the Company as at the date of this Directors’ Report
is set out below:
Number of fully paid
ordinary shares(1)
Peter Kirby
Gaik Hean Chew
Garry Hounsell
Andrew Larke
Judith Swales
Patrick Houlihan
Stuart Boxer
130,000
80,000
124,101
152,156
40,000
144,322
93,226
Number of shares held
pursuant to the 2010
DuluxGroup Long Term Equity
Incentive Plan Offer (2)
-
-
-
-
-
1,145,655
317,873
Number of shares held
pursuant to the 2011 and 2012
DuluxGroup Long Term Equity
Incentive Plan Offers (3)
-
-
-
-
-
1,320,764
333,621
(1) Unrestricted shares beneficially held in own name or held indirectly including in the name of a trust, superannuation fund, nominee company or
private company.
(2) Since the end of the reporting period, these shares have met the applicable performance condition and vested on 13 November 2013. The
restriction on trading these shares will be lifted upon repayment of the loan. The loan must be repaid during the period from 29 November 2013
to 24 January 2014.
(3) These shares are held pursuant to the terms of the DuluxGroup Long Term Equity Incentive Plan (details of which are set out in the
Remuneration Report) and are subject to a restriction on trading until the relevant performance condition is met and the loans have been repaid.
Principal activities
The principal activities of the consolidated entity in the course of the financial year were the manufacture,
marketing, sale and distribution of premium branded paint, coatings, adhesives, garden care and other building
products to the residential home improvement, commercial and infrastructure markets across Australia, New
Zealand and Papua New Guinea, with niche positions in China and South East Asia.
Likely developments
Likely developments in the operations of the consolidated entity and the expected results of those operations
are covered generally in the Review of Operations and Financial Performance and Review of Business
Segment Performance on pages 16 to 30 of the Annual Report.
Review and results of operations
A review of the operations of the consolidated entity during the financial year and of the results of those
operations is contained on pages 16 to 30 of the Annual Report.
Dividends paid in the year ended 30 September 2013
In respect of the 2012 financial year, a fully franked final dividend of 8 cents per ordinary share was paid on 17
December 2012. The financial effect of this dividend has been included in the financial statements for the year
ended 30 September 2013.
In respect of the 2013 financial year, a fully franked interim dividend of 8 cents per ordinary share was paid on
14 June 2013. The financial effect of this dividend has been included in the financial statements for the year
ended 30 September 2013.
Since the end of the financial year, the Directors have determined a final dividend to be paid at the rate of 9.5
cents per share, details of which are set out in the section below entitled “Events subsequent to balance date”.
Changes in the state of affairs
Particulars of significant changes in the state of affairs of the consolidated entity during the year ended 30
September 2013 are as follows:
• Total assets of $1,033.2 million increased by $336.4 million on the prior year.
• Year end net debt of $389.5 million increased by $159.3 million on the prior year.
• Total equity attributable to the ordinary shareholders of DuluxGroup Limited of $226.2 million increased by
$56.3 million on the prior year.
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54
Directors’ Report
• The Company, through its wholly owned subsidiary DuluxGroup (Nominees) Pty Ltd, acquired 100% of the
shares in Alesco Corporation Limited. The new Alesco businesses have made a pleasing contribution to
DuluxGroup. The integration activities have been largely completed and cost synergies are on track to be
delivered ahead of the original target. The non-core, loss making, Robinhood business has been sold.As a
result of this successful acquisition, DuluxGroup now has a greater presence in commercial and industrial
construction markets which provides new opportunities for growth.
Events subsequent to balance date
On 13 November 2013, the Directors determined that a final dividend of 9.5 cents per ordinary share will be paid
in respect of the 2013 financial year. The dividend will be fully franked and payable on 18 December 2013. The
financial effect of this dividend is not included in the financial statements for the year ended 30 September 2013
and will be recognised in the 2014 financial statements.
The Directors have not become aware of any other significant matter or circumstance that has arisen since 30
September 2013, that has affected or may affect the operations of the consolidated entity, the results of those
operations, or the state of affairs of the consolidated entity in subsequent years, which has not been covered in
this report.
Environmental regulations
The Company recognises that commitment to sustainable management of our financial, environmental and
social impacts is fundamental to the success and well-being of both our business and our stakeholders. More
specific details about the Company’s safety and sustainability initiatives and performance can be found in the
Safety and Sustainability Report on pages 33 to 37 and at the Company’s website: www.duluxgroup.com.au.
The activities of the Company are subject to environmental regulations in the jurisdictions in which it operates.
Where applicable, manufacturing licences and consents are in place in respect of each DuluxGroup site. The
Board has oversight of the Company’s environmental practices and performance.
From time to time, the Company receives notices from relevant authorities pursuant to local environmental
legislation and in relation to the Company’s environmental licences. On receiving such notices, the Company
investigates to determine the cause and ensure the risk of recurrence is minimised, and works with appropriate
authorities to address any issues arising, which may include ongoing reporting obligations and/or development
of an environmental management plan. At the date of this Report, any costs associated with remediation or
changes to comply with regulations in the jurisdictions in which Group entities operate are not considered
material.
The Directors are not aware of any material breaches of Australian or international environmental regulations
during the year.
Indemnification of officers
The Company's Constitution requires the Company to indemnify any person who is, or has been, an officer of
the Company, including the Directors, the Company Secretary and other executive officers, against liabilities
incurred whilst acting as such officers to the extent permitted by law.
In accordance with the Company's Constitution, the Company has entered into a Deed of Indemnity, Insurance
and Access with each of the Company’s Directors. No Director or officer of the Company has received benefits
under an indemnity from the Company during or since the end of the year.
The Company has paid a premium in respect of a contract insuring officers of the Company and of controlled
entities against all liabilities that they may incur as an officer of the Company, including liability for costs and
expenses incurred by them in defending civil or criminal proceedings involving them as such officers, with some
exceptions. Due to confidentiality obligations and undertakings of the policy, no further details in respect of the
premium or the policy can be disclosed.
Non-audit services and auditor’s independence
During the year, KPMG, the Company’s auditor, has performed certain other services in addition to its audit
responsibilities.
55
DuluxGroup Annual Report 2013
55
Directors’ Report
The Board is satisfied that the provision of 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 to
ensure that they do not impact the integrity and objectivity of the auditor; and
•
the non-audit services provided did 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 of the Company,
acting as an advocate of the Company or jointly sharing risks or rewards.
No officer of the Company was a partner or director of KPMG. A copy of the auditor’s independence declaration
as required under Section 307C of the Corporations Act 2001 is contained on page 78 and forms part of this
Directors’ Report.
Details of the amounts paid to KPMG and its related practices for audit and non-audit services provided during
the year are disclosed in note 29 of the financial statements.
Rounding
The amounts shown in this report and in the financial statements have been rounded off, except where
otherwise stated, to the nearest thousand dollars, the Company being in a class specified in the ASIC Class
Order 98/100 dated 10 July 1998.
Signed on behalf of the Board in accordance with a resolution of the Directors of the Company.
Peter M. Kirby
Chairman
13 November 2013
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56
Directors’ Report
Remuneration Report (Audited)
Dear Shareholder
On behalf of the Board, I am pleased to present DuluxGroup’s 2013 Remuneration Report.
2013 has been another year of strong performance for the Company. There have been further improvements in key
financial metrics and market share, building on our consistent growth and performance over the past few years. Our
long term shareholders have been the beneficiaries of this success. Since we listed on the ASX in 2010:
•
our share price has increased from $2.50 in July 2010, to $5.28 as at 30 September 2013;
• we have achieved 127.8% Total Shareholder Return (TSR) growth over the period; and
•
the compound growth in earnings per share (before non-recurring items) to 30 September 2013 has been 8.5%
Consistent with this performance over the long term, awards under the 2010 Long Term Equity Incentive Plan (LTEIP)
were tested for the first time. The EPS gateway was met and the LTEIP shares have vested. The relative TSR
performance is being tested during the trading window after the release of the 2013 full year results for the purpose of
determining the loan forgiveness amount (and will be communicated at the AGM).
In the past 12 months DuluxGroup has performed strongly. Our NPAT (excluding non-recurring items) increased from
$79.6M in 2012 to $94.1M in 2013 and we recorded our best ever safety results. This performance reflects in the short
term incentive (STI) payments for KMP, which range from 59.1% to 88.9% of their potential maximum.
DuluxGroup enjoys a true ownership culture. One of our core values is to run the business as your own. In this context,
since listing we have made annual offers under our Employee Share Investment Plan (ESIP), including a mid year offer
this year to employees who have joined us since the 2012 offer, (through our acquisition of the Alesco businesses). As
a result approximately 63% of our eligible Australian and New Zealand (ANZ) employees are also shareholders of our
Company. This percentage is above 70% for the ‘heritage’ DuluxGroup businesses.
In addition to the minimum shareholding guideline that we introduced for Non-Executive directors last year, this year we
also introduced a minimum shareholding guideline for executives and senior managers. The Board believes that the
executive team should be fully aligned with shareholder interests.
During the year the Board, through the Remuneration and Nomination Committee (RNC), undertook a comprehensive
review of the Company’s remuneration arrangements. A key focus of this review was our remuneration philosophy and
objectives and whether our remuneration framework is in fact working to achieve those objectives.
While details of the review are set out in the Report, in general, the Board confirmed that it is comfortable that our
remuneration framework is indeed driving performance – our focus on earnings growth as a key deliverable of our
business strategy is reflected over the short term (through a large component of the STI being subject to profit targets)
and longer term (through the ‘gateway’ that applies to the long term incentive plan, which must be met in order for
executives to receive any benefit under the plan). In addition, as a result of the immediate restricted share ownership,
we believe our senior management group behave like shareholders.
While the Board is pleased with the way that our remuneration practices and communication of those practices have
been received (over 97% of shareholders have voted in favour of each report since we listed), we remain committed to
ensuring that we continue to report to you as clearly as possible, including to demonstrate how our performance
translates to remuneration outcomes. Therefore, as part of this year’s reporting process we have reviewed and
implemented changes to the way that we communicate our remuneration arrangements.
I hope you, our shareholders, will find our 2013 Remuneration Report provides a clear and simple explanation of our
remuneration policies and practices and the remuneration outcomes for our executive team for the 2013 financial year.
Yours faithfully
Peter M. Kirby
Chairman
57
DuluxGroup Annual Report 2013
57
Directors’ Report
Remuneration Report (Audited)
1. INTRODUCTION
The Directors of DuluxGroup Limited (the Company) present the Remuneration Report for the Company and its
controlled entities (collectively ‘the Group’ or ‘DuluxGroup’) for the financial year ended 30 September 2013 prepared in
accordance with the requirements of the Corporations Act 2001 and its regulations.
The Report outlines the remuneration arrangements in place for the Key Management Personnel (KMP) of DuluxGroup
which comprises all directors (Executive and Non-Executive) and those Executives who have authority and
responsibility for planning, directing and controlling the activities of the Group. In this report, ‘Executives’ refers to
members of the Group Executive Team identified as KMP.
The following were KMP during the 2013 financial year, all of whom were KMP for the entire year.
Table 1
Name
Non-Executive Directors
Peter Kirby
Gaik Hean Chew
Garry Hounsell
Andrew Larke
Judith Swales
Executive Directors
Patrick Houlihan
Stuart Boxer
Other KMP
Patrick Jones
Brad Hordern
Mike Kirkman
Role
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director and Chief Executive Officer (CEO)
Chief Financial Officer and Executive Director (CFO)
General Manager Dulux Paints Australia
General Manager DuluxGroup Supply Chain
General Manager Selleys Yates
2. REMUNERATION STRATEGY
In determining remuneration arrangements for executives within the Group’s remuneration framework and policies, the
Board has the following stated key strategic aims, which it reviewed and confirmed during the 2013 financial year:
•
•
•
•
To encourage a strong focus on performance and support the delivery of outstanding returns to DuluxGroup
shareholders.
To attract, retain and motivate appropriately qualified and experienced individuals who will contribute to
DuluxGroup’s financial and operational performance.
To motivate executives to deliver outstanding business results with both short and long term horizons.
To align executive staff and stakeholder interests through share ownership.
During 2013 a remuneration review was undertaken by the RNC to ensure the structures in place achieve the key
strategic aims. Fixed remuneration, STI and LTEIP were reviewed and considered to be appropriate. As such no
significant changes to the remuneration structures were considered necessary. The following diagram provides the
linkage between the components of remuneration for executives, the performance measures used to determine the
outcomes and the strategic objectives of DuluxGroup these are designed to achieve.
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Directors’ Report
Remuneration Report (Audited)
Component
Performance measure
Strategic objective
Fixed remuneration
Considerations:
Scope of individual’s role
Individual’s level of knowledge, skills &
expertise
Individual performance
Market benchmarking
NPAT ‘gateway’ - minimum threshold
performance level
Short-term incentive
Financial Measures (generally at least
70% of available STI)
(STI)
Delivered through
cash
Long-term equity
incentive plan
(LTEIP)
Delivered through
DuluxGroup shares
– allocated upfront,
pursuant to
company loan
Group NPAT(1)
Group EBIT
Business / Region EBIT (where
appropriate)
Cash flow
Trade working capital
Non-financial Measures (generally a
maximum of 30% of the available STI)
Safety & Sustainability
Personal objectives aligned to the
strategic objectives of the company
‘Gateway’ EPS condition:
The EPS gateway must be met before
any shares will vest. This gateway is
currently 4%* compound annual EPS
growth over the three year performance
period. (*2% in 2010).
Once shares vest, the loan needs to be
repaid
Total Shareholder Return (TSR)
performance condition:
A portion of the loan may be forgiven
at the end of the performance period,
based on relative TSR performance
against the comparator group. The
portion of loan forgiven will increase as
the company outperforms the peer
group. Refer section 5.4 for further
details
Set to attract, retain and motivate the right
talent to deliver on our strategy
For executives who are new to their roles, is to
set fixed remuneration at relatively modest
levels compared to their peers and to
progressively increase as they prove
themselves in their roles (i.e. performance
based)
Minimum threshold NPAT ensures a minimum
acceptable level of group profit before
executives receive any STI reward
Performance conditions designed to support the
financial and strategic direction of the company
(the achievement of which are intended to
translate through to shareholder return)
Large proportion subject to earnings targets -
Group or business unit, depending on the role of
the executive to ensure line of sight
Other financial targets to ensure strong
discipline maintained
Outcomes reviewed by way of “agreed upon
procedure” by independent auditors to maintain
the integrity of the award
Allocation of shares upfront encourages
executives to ‘behave like shareholders’ from
grant date
Designed to encourage executives to focus on
the key performance drivers which underpin
sustainable growth in shareholder value
Key benefits to participants under the plan are:
capital appreciation in DuluxGroup
shares consistent with shareholder
interest
the value of after tax dividends applied
towards repaying the loan thereby
increasing equity over the loan period
potential partial loan forgiveness (on a
sliding scale to a maximum of 30%) if our
TSR outperforms our comparator group
EPS gateway provides a ‘counterbalance’ to the
relative TSR performance condition, designed to
ensure the quality of the share price growth is
supported by company earnings performance,
not just market buoyancy
Total
remuneration
The total remuneration mix is designed to attract, retain and motivate appropriately qualified and experienced
individuals, encourage a strong focus on performance, support the delivery of outstanding returns to DuluxGroup
shareholders over the short and long term and to align executive and stakeholder interests through share ownership
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DuluxGroup Annual Report 2013
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Directors’ Report
Remuneration Report (Audited)
3. COMPANY PERFORMANCE AND REMUNERATION OUTCOMES FOR
2013
3.1
Company performance
As described in section 2, the key principles applied in the design of the executive remuneration framework and policy
relate directly to aligning the interests of executives and shareholders, with at-risk components of executives
remuneration designed to drive performance against the strategic objectives and performance of the Company.
The table below provides Company performance information since listing on the ASX on 12 July 2010 that is relevant in
considering shareholder return.
Table 2
NPAT attributable to ordinary shareholders of
DuluxGroup Limited ($m)
NPAT before non-recurring items ($m) (2)
Diluted EPS (cents)
Diluted EPS before non-recurring items (cents) (2)
Dividends paid per share (cents)
Opening share price at 1 October ($)
Closing share price at 30 September ($)
TSR % – DuluxGroup(4)
Recordable case rate (RCR)(5)
Definitions
NPAT - Net profit afer Tax, EPS – Earnings Per Share, TSR – Total Shareholder Return
2010 (1)
61.3
71.5
16.9
19.7
-
2.50
2.73
9.2%
1.81
(3)
2011
93.2
77.6
25.7
21.2
10.5
2.73
2.52
(3.8%)
1.96
2012
2013
89.5
79.6
24.3
21.6
15.0
2.52
3.30
36.9%
1.21/1.85
76.9
94.1
20.6
25.2
16.0
3.30
5.28
64.8%
0.82/1.81
(1) As DuluxGroup has only been listed since July 2010, it is not possible to present five years of financial data.
(2) Earnings excluding non-recurring income and expenses considered by the Board to be a better basis for comparison from period to period
as well as more comparable with future performance. They are also the primary measure of earnings considered by management in
operating the business and by the Board in determining dividends. Non-recurring items that were excluded were positive in 2011 ($15.6m)
and 2012 ($9.9m), and negative in 2013 ($17.2m). Details of non-recurring items in respect of 2013 are set out in section 3.2.
(3) Opening listing share price on 12 July 2010 for DuluxGroup Limited shares following the demerger from Orica Limited.
(4) TSR % has been calculated as the change in the share price for the period, plus dividends paid, divided by the opening share price.
(5) The RCR is the number of injuries and illnesses resulting in lost time, restricted duties, or medical treatment per 200,000 hours worked (US
OHSA system), which is equivalent to the hours worked by 100 people in a year. The RCR includes both DuluxGroup employees and
contractors. 2013 RCR was 0.82 (2012 1.21) excluding the former Alesco businesses and the Camelpaint business. It was 1.81 (2012
1.85) for the total Group including the Camelpaint and former Alesco businesses.
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Directors’ Report
Remuneration Report (Audited)
3.2
Key developments and outcomes for 2013
During 2013 a remuneration review was undertaken by the RNC to ensure the structures in place achieve the key
strategic aims (see section 2). Fixed remuneration, STI and LTEIP were reviewed and considered to be appropriate. As
such no significant changes to the remuneration structures were considered necessary.
The NPAT used for the 2013 STI gateway and 2010 LTEIP EPS growth calculations is NPAT before non-recurring
items of $94.1M. In 2013, the Board has exercised its discretion to exclude non-recurring items, which include Alesco
integration and transaction costs, the profit on sale of O’Connor site and the China impairment. Dividend payments to
shareholders have also been calculated using the same approach.
Fixed remuneration
2013 changes
Short term incentive
Structure of STI
Integration of Alesco
executives
2013 outcomes
Long term incentive
Structure of LTEIP
The Board determined to increase fixed remuneration of the CEO and CFO by approximately
7% and 9% respectively.
At the time of demerger, the Company set fixed remuneration for these Executives at
relatively modest levels compared to their peers in recognition that they were new to their
roles in the listed DuluxGroup environment.
The Board approved the increases based on the outcomes of the performance review
program, and noting that since demerger the Company has grown from a market
capitalisation of $905M to approximately $2B (at 30 September 2013), has performed strongly
in its heritage businesses, and has grown its international reach and new market
opportunities. The Board also had reference to independent benchmark data provided by
PricewaterhouseCoopers (PwC). Fixed remuneration changes for other Executives is
between 3.8 and 5.9%.
As part of the review of DuluxGroup’s remuneration arrangements during the year, the Board
considered the structure and operation of the STI. The Board confirmed that it considers the
STI as it currently operates to be appropriate in driving the achievement of DuluxGroup’s
business objectives.
The Board also considered whether DuluxGroup’s STI arrangements should incorporate a
deferred equity component. In light of the immediate share ownership that executives acquire
through LTEIP, and the minimum shareholding guidelines adopted this year, the Board
considers that KMP, executives and senior managers’ are sufficiently aligned to those of our
shareholders.
Accordingly, the Board determined that it is not necessary to introduce a deferred component
at this time.
Significant effort has been undertaken during the year to bring eligible executives who joined
the Group following the acquisition of the Alesco businesses onto DuluxGroup’s short term
incentive arrangements, with performance targets relevant to their role and the business in
which they work.
The profit gateway, which requires a minimum level of NPAT growth before STI awards can
vest, was exceeded. In respect of the 2013 STI, this gateway was the 2012 NPAT before non-
recurring items of $79.6M. The 2013 NPAT before non-recurring items was $94.1M.
As a result of performance during the year, in general:
• EBIT results were generally ahead of target
• Our safety performance was significantly ahead of targets resulting in Executives
achieving ‘stretch goals’ for this performance condition
• Key Alesco integration objectives were met
Accordingly, STI awards for Executives vested in the range of 59.1% to 88.9% of their
potential maximum. The Board has exercised its discretion to award two Executives an
additional discretionary amount (less than 5% of the Executives’ FAR). The details of the STI
awards are outlined in section 5.3.
The Board undertook a comprehensive review of DuluxGroup’s LTEIP during the year. Having
reviewed the relative merits of the LTEIP, and a number of alternative designs (including
performance rights plans), the Board confirmed that it considers it desirable that the long term
incentive component of executives’ remuneration be delivered through the LTEIP in its current
form. As part of the review, the Board considered the benefits to executives, the Company
and shareholders. In particular:
•
the immediate share ownership aligns participants’ interests with those of
shareholders from the outset (and annual grants, subject to a three year
performance period mean that executives hold a significant number of shares)
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•
•
participants benefit from share price appreciation over the loan period, and the value
of after tax dividends which are applied towards repaying the loan (therefore
increasing their equity over the loan period). Accordingly, participants behave like
shareholders throughout the loan period – the greater shareholder returns, the
greater the returns to participants
provides equivalent benefit to executives for a lower cost to the Company than
alternative schemes such as performance rights.
In Australia, these shares are taxed under the capital gains tax regime rather than
the income tax deferral provisions that relate to the other types of schemes.
Accordingly, concessional capital gains tax treatment is available once the shares
have been held for 12 months (and they must be held for 3 years under the LTEIP).
While the Company is required to pay fringe benefits tax in relation to any loan
forgiveness under the TSR performance condition, this cost has been factored into
the level of the forgiveness granted (such that the true ‘cost’ is effectively borne by
the participant).
In order to align the interests of eligible executives who joined the Group following the
acquisition of the Alesco businesses with other Group executives and those of our
shareholders as soon as possible, we made a mid year offer under our 2012 long term
incentive plan in July 2013.
The allocation of shares under the mid year offer was on the same terms as for other
executives (other than the allocation price of the shares), including the vesting and
performance conditions that apply in respect of the 2012 grant under LTEIP.
The 2010 grant under LTEIP was tested for vesting. The 2010 grant was made at the time of
demerger (i.e. July 2010), and also included a one-off demerger grant to ensure that
executives had an immediate reasonable level of exposure and to provide an element of
retention.
The EPS growth gateway, which in light of the challenges immediately following demerger
was set at 2% compound annual growth over the loan period (and has been increased to 4%,
in respect of subsequent offers) was tested utilising 30 September 2013 as the end date and
was exceeded. Accordingly LTEIP shares under the 2010 grant vested on 13 November
2013. DuluxGroup’s compound annual EPS growth over the period, calculated using EPS
before non-recurring items, was 8.5%.
The Company’s relative TSR against the comparator group is being tested by Ernst and
Young during the trading window after the release of the 2013 results. The relative TSR
performance will determine the percentage of loans to be forgiven.
Executives will be required to repay loans totalling $8,700,900 (before loan forgiveness) to the
Company.
A core value of DuluxGroup is to run the business as your own.
The Board believes that the executive team should be exposed to share price fluctuations,
further promoting the alignment of executive and shareholder interests. While the LTEIP
achieves this in part (in that, over time, executives generally acquire a ‘rolling’ 3 years’ worth
of shares under the LTEIP), the Board considers that executives should also maintain a direct
holding.
Accordingly, in addition to the minimum shareholding guidelines introduced for Non-Executive
Directors last year, this year we also introduced minimum shareholding guidelines for
executives and senior managers.
The guidelines encourage executives to acquire a minimum shareholding over a period of 5
years. The level of shareholding relative to the executives’ fixed annual remuneration is
determined based on their level of seniority. This level is set at 1 times fixed annual
remuneration for the CEO and CFO.
Integration of Alesco
executives
2013 outcomes
Shareholder alignment
Minimum shareholding
guidelines for
executives
Non-Executive Director fees
Review
A review of Non-Executive director fees was undertaken early in the 2013 financial year
utilising benchmark data provided by PwC. Within the shareholder approved maximum
aggregate fee amount, the Board approved an increase of 3% to the fees for Non-Executive
Directors so as to ensure these fees remain competitive with comparable companies, and
reflect the calibre, time commitment and responsibilities of the Directors.
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4. REMUNERATION GOVERNANCE – ROLE OF THE REMUNERATION
AND NOMINATIONS COMMITTEE (RNC)
The Board RNC is responsible for ensuring that the Group’s executive remuneration strategy aligns with the Company’s
short and longer term business objectives.
The Committee reviews and makes recommendations to the Board on the remuneration arrangements for the directors,
the CEO and the Executive team. Details of the composition and responsibilities of the RNC are set out on page 47.
To assist in performing its duties, and making recommendations to the Board, the Committee seeks independent advice
from external consultants on various remuneration related matters.
The Board has appointed PwC as remuneration consultants to the Board and the RNC. Prior to their appointment, the
Board and the RNC considered the nature and quantum of work to be provided to DuluxGroup and developed a
protocol for the provision of remuneration advice and recommendations so as to ensure such recommendations are
free from undue influence by members of the KMP to whom the recommendations may relate.
During the financial year ended 30 September 2013, the RNC engaged PwC to provide the Company with insights on
remuneration trends, regulatory updates, and market data in relation to Non-Executive Directors, the CEO and other
Executive remuneration. No remuneration recommendations as defined in section 9B of the Corporations Act 2001
were provided during the financial year ended 30 September 2013.
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5. EXECUTIVE REMUNERATION – DRIVING A PERFORMANCE
CULTURE
5.1
Policy and approach to setting remuneration – remuneration mix
As described in Section 2 the Board believes that remuneration packages of senior managers, including the Executives,
should include both a fixed component and an at-risk or performance-related component (comprising both short term
and long term incentives). Actual remuneration outcomes for executives vary depending on the level of performance
achieved at a Group, business unit and individual level. The weighting of at-risk remuneration reflects the Board’s
commitment to performance-based reward. The table below summarises the remuneration mix policy applicable for the
financial year ended 30 September 2013.
Table 3
% of Fixed Annual Remuneration
Short term
Incentive
Long term
incentive
Fixed annual
remuneration
(FAR)
$
Assuming a
‘Target’ level of
performance is
achieved
Assuming a
‘Stretch’ level of
performance is
achieved
005,530,1
600,000
500,000
410,000
410,000
%05
30%
30%
30%
30%
%09
60%
60%
60%
60%
%09
40%
40%
40%
40%
Name
Executive Directors
nahiluoH kcirtaP
Stuart Boxer
Other KMP
Patrick Jones
Brad Hordern
Mike Kirkman
The graph below shows this remuneration mix as a percentage of total potential remuneration for the financial year
ended 30 September 2013.
Executive Remuneration Mix
20%
15%
15%
20%
15%
15%
20%
15%
15%
20%
15%
15%
50%
50%
50%
50%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
32%
14%
18%
36%
Houlihan
Boxer
Jones
Hordern
Kirkman
Fixed Remuneration
Short Term Incentive – Target
Short Term Incentive – Stretch
Long Term Incentive
5.2
Fixed remuneration
The Group’s stated remuneration strategy is to attract, retain and motivate appropriately qualified and experienced
individuals who will contribute to the Company’s financial and operational performance.
All senior managers, including Executives, receive a fixed remuneration component. In general, this is expressed as a
total amount of salary and other benefits (including statutory superannuation contributions) that may be taken in an
agreed form.
Fixed remuneration is set based on the scope of an individual’s role, their level of knowledge, skills and experience.
Fixed remuneration levels are set with regard to the market median. For the purposes of setting market competitive
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remuneration, ‘market’ is considered to include both Australian Securities Exchange (ASX) listed companies of a
comparable market capitalisation and our key industry competitors.
Fixed remuneration is reviewed annually, having regard to performance of the individual, but there are no guaranteed
increases in fixed remuneration.
An executive remuneration review was undertaken by the Board in the 2013 financial year. In undertaking the review,
the Board had particular regard to the Company’s performance and growth since demerger in July 2010, during which
time the Company has grown from a market capitalisation of $905M to approximately $2B (as of September 30, 2013),
has performed strongly in its heritage businesses, and has grown its international reach and new market opportunities.
Section 3.2 describes the changes to Executive’s fixed remunerations for the 2013 year.
5.3
At-risk remuneration – Short Term Incentive Plan (STI)
The DuluxGroup STI is the Company’s at risk short term incentive component of the remuneration mix for senior
managers and Executives.
Table 4
Form and purpose of the plan
What is the
STI?
An annual cash incentive plan that involves linking a portion of senior managers’ reward opportunity to
specific performance conditions.
Who
participates in
the STI plan?
Why does the
Board
consider the
STI an
appropriate
incentive?
Does the STI
comprise a
deferred
component?
Governance
How is
performance
against the
performance
conditions
assessed?
How are
outcomes
against the
performance
conditions
approved?
When are
targets set
and reviewed?
All senior managers, including Executives which represents less than 10% of the workforce.
The STI is designed to put a proportion of senior manager remuneration at-risk to be determined
based on the achievement of targets linked to DuluxGroup’s annual business objectives.
During the year, the Board reviewed the components of DuluxGroup’s remuneration framework,
including whether the Company should introduce a deferred component to the STI.
In light of the immediate share ownership senior managers acquire through LTEIP, and the minimum
shareholding guidelines adopted this year, the Board considers that senior managers’ interests are
sufficiently aligned to those of our shareholders.
Accordingly, the Board determined that it would not introduce a deferred component to the STI at this
time.
All performance conditions under the STI are clearly defined and measurable.
The Board, on recommendation from the RNC, approves the targets and assesses the performance
outcomes of the CEO.
The CEO sets the targets and assesses the performance of the CFO and other Executives taking into
consideration the advice of the RNC. These are approved by the Board.
The Board has adopted a rigorous process for assessing performance under the STI.
Upon approving the extent to which STI performance conditions have been met, the Board asks
KPMG to perform ‘agreed upon procedures’ over the STI entitlement computation of the Group
Executive.
Under the STI plan, the Board has discretion to adjust STI outcomes based on achievements which
are consistent with the Group’s strategic priorities and in the opinion of the Board enhance
shareholder value.
Targets are set at the beginning of each financial year, while performance against these targets is
reviewed at the end of the financial year. Any payments are then made the following December.
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Performance conditions
What are the
STI
performance
conditions?
The performance conditions for 2013 comprised financial targets and non-financial targets. The Board
believes that the largest component of an executive’s STI payment should be affected by the financial
performance of the Company, and accordingly generally at least 70% of Executives’ awards are
subject to financial metrics. Performance conditions are set at both a DuluxGroup level and an
individual business level, and weightings that apply in respect of the conditions depend on the
Executive’s role and responsibilities (including whether they have Group or business level
responsibility). For the 2013 STI plan, the targets were set around the principle of year on year
improvement.
Non-financial metrics are based on performance against some of our core values – including safety
and sustainability, and making a step change on growth and productivity – and other individual
indicators such as successful implementation of a specific strategy or achieving specific customer or
consumer based objectives.
Detailed below is a breakdown of the structure of the STI performance conditions for the Executives.
Performance Conditions for STI
CEO
CFO
General
Manager
Paints
Australia
General
Manager
Selleys
Yates
General
Manager
Supply
Chain
DuluxGroup Financial
Performance conditions principally reflect Group
NPAT, EBIT and Cash Management and cost
focused initiatives. The CEO and CFO also had
Alesco specific financial performance objectives.
Business Unit Financial
Business Unit financial metrics including EBIT
and Cash Management.
70%
70%
15%
15%
60%
0%
0%
55%
55%
10%
(PNG)
Safety & Sustainability
A combination of Recordable Case Rate targets
and improvement objectives.
10%
10%
10%
10%
20%
Personal Objectives
At a Group level, performance conditions relate to
key strategic improvement and growth initiatives
as well as targets on the successful integration of
the Alesco acquisition. Business Unit objectives
are primarily focused on Business Unit growth and
improvement initiatives.
20%
20%
20%
20%
10%
Why were
these
conditions
chosen?
Is there an
STI
‘gateway’?
Overall the targets are set to reinforce and drive business strategy and align with the Group’s annual
budget and longer term plan.
The Board considers these performance measures to be appropriate as they are aligned with the
Company’s objectives of delivering profitable growth and improving shareholder return.
The Board considers it important that senior managers have a clear line of sight to the targets and are
able to affect results through their actions. Accordingly, performance conditions and weightings are
directly linked to individual executives’ responsibilities.
Yes.
The Board considers it important that, in general, the Company should achieve a minimum acceptable
level of group profit before any payments are made under the STI. No STI is awarded (upon
achievement of either financial or non-financial metrics) if minimum performance across DuluxGroup
does not achieve a threshold NPAT performance level.
For the purpose of the 2013 STI, the minimum performance level was set at the prior year NPAT
(before non-recurring items) of $79.6M.
Reward opportunity
What level of
reward can be
earned under
the plan?
The STI opportunities able to be earned under the plan are derived as a percentage of fixed annual
remuneration.
In relation to executives, this comprises an amount equal to 20%–30% (50% for the CEO) of their fixed
annual remuneration for target performance, and up to 40%–60% (90% for the CEO) of their fixed
annual remuneration for achieving stretch performance.
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Cessation of employment or a change of control
If an individual
ceases
employment
during the
year, will they
receive a
payment?
The individual will not be eligible for a payment if terminated due to misconduct or poor performance
nor in general, if they resign.
In certain appropriate circumstances (such as redundancy), the Board may consider eligibility for a
pro-rata payment.
The STI will be considered to have been met at target for the full performance year, notwithstanding
the date of change of control, unless the Board determines otherwise.
How would a
change of
control of the
Group impact
on STI
entitlements?
2013 outcomes
Actual STI payments reflect the financial performance at the Group level, as well as the financial performance of
individual business units. Individual outcomes from non-financial objectives further differentiated executive STI
outcomes.
A strong 2013 financial year NPAT result (when taking account of non-recurring items)1 resulted in outcomes well
ahead of target and approaching stretch. Similarly the performance conditions for Group EBIT (for both heritage
DuluxGroup and the newly acquired continuing Alesco businesses) were near stretch levels.
Cash Management performance conditions performed between target and stretch.
The Paints Australia business unit contributed strongly to the overall financial result with EBIT and Cash Management
performance approaching stretch.
The Selleys Yates business has a central focus on EBIT improvement in 2013. Whilst there was improvement, the
result was between hurdle and target for the year and slightly better on Cash Management. The PNG business unit
performed below hurdle for the year.
The Safety & Sustainability results at a Group level were record performances for recordable case rates. This was also
reflected at business unit level. Various improvement initiatives were also successfully delivered.
The personal objectives for Executives focused on delivery of key strategic, growth and market based improvement
initiatives as well as the successful integration of the former Alesco business units. These outcomes across the
Executives were rated between target and stretch.
The Board has exercised its discretion to award two Executives an additional discretionary amount to reflect their
specific efforts relating to significant changes to DuluxGroup’s retail distribution strategy. These amounts were less
than 5% of the Executives’ FAR and the total STI remains below their maximum achievable (stretch) incentive
percentage. The outcomes are detailed in table 5 below.
The short term incentive payments shown below reflect the performance for Executives in the current financial year.
(1) 2013 non-recurring items are defined in 3.2 above.
DuluxGroup Annual Report 2013
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2013 STI award
$(1)
STI payable at ‘Stretch’
$(2)
Table 5
For the financial
year ended
30 September 2013
Executive Directors
Patrick Houlihan
Stuart Boxer
Other KMP
52.6
Patrick Jones
47.0
Brad Hordern
35.5
Mike Kirkman
(1) STI constitutes a cash incentive earned during the 2013 financial year, which is expected to be paid in December 2013, based on the fixed
Actual STI payment
as % of ‘Stretch’
STI
Actual STI payment
as a % of FAR
% of ‘Stretch’ STI
payment forfeited
263,079
192,629
145,416
300,000
246,000
246,000
828,100
311,639
931,950
360,000
12.3
21.7
40.9
87.7
78.3
59.1
80.0
51.9
88.9
86.6
11.1
13.4
annual remuneration of Executives as at 30 September 2013.
(2) The STI payable assuming a ‘Stretch’ level of performance has been calculated based on the fixed annual remuneration of Executives as at
30 September 2013.
5.4
At-risk remuneration – Long Term Equity Incentive Plan (LTEIP)
The DuluxGroup LTEIP is the Company’s long term incentive component of the remuneration mix for senior managers
(including Executives). Section 3.2 describes the outcomes of the review of LTEIP that was undertaken during the
year.
Under the LTEIP, eligible senior managers are provided with a non-recourse loan from DuluxGroup for the sole purpose
of acquiring shares in the Company. The shares are granted upfront but are restricted and subject to a risk of forfeiture
until the end of the vesting/performance period and while the loan remains outstanding. Any dividends paid on the
shares are applied (on a notional after-tax basis) towards repaying the loan.
In order to reward superior performance, and subject to satisfaction of an earnings ‘gateway’, part of the loan may be
forgiven at the end of the vesting period subject to the achievement of a relative TSR performance condition.
To gain access to the shares, the Executives must repay the outstanding loan following testing of the performance
condition.
Details of how the LTEIP operates in respect of the grant made during the year are set out below.
Driving performance
How does the LTEIP
drive performance?
How does the plan
align participant’s
interests with
shareholders?
How does a participant
derive value from
LTEIP?
The LTEIP facilitates share ownership by senior managers and links a significant proportion of
their ‘at-risk’ remuneration to DuluxGroup Limited’s ongoing share price and returns to
shareholders over the performance period. It is designed to encourage senior managers to
focus on the key performance drivers which underpin sustainable growth in shareholder value.
The Board believes the LTEIP, which has both an earnings ‘gateway’ that must be achieved
before any shares vest and a TSR performance condition which provides for a portion of the
loan to be forgiven where DuluxGroup performs well against its market comparators,
promotes behaviour that should achieve superior performance over the long term.
The immediate share ownership aligns participants’ interests with those of shareholders from
the outset.
In summary a participant can derive value from LTEIP in three ways:
•
•
•
through appreciation of DuluxGroup’s share price over the loan period; and/or
through potential loan forgiveness of a portion of the loan as a reward for superior
performance against the Company’s market comparators; and/or
the value of after tax dividends ‘used’ in repaying the loan thereby increasing their
equity over the loan period.
Section 3.2 sets out further detail in relation to the benefits of the Plan.
Vesting and performance condition
What is the vesting /
performance period?
The gateway and performance condition are tested once approximately three years after the
grant is made.
What is the ‘gateway’? The Board has implemented a ‘gateway’ level of minimum performance below which no
benefit accrues. This ‘gateway’ is a minimum level of acceptable growth in EPS for any of the
LTEIP shares to vest.
The EPS gateway in respect of the offer made during the year is that compound annual
growth over the three year period from 1 October 2012 must equal or exceed 4% per annum.
Where the EPS gateway is met, at the end of the performance period there is potentially value
to senior managers if the value of the LTEIP shares is greater than the outstanding LTEIP
loan balance that must be repaid.
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Why does the Board
consider the gateway
appropriate?
What is EPS and how
is it calculated?
How is the relative
TSR performance
hurdle applied to the
plan?
How is the forgiveness
amount determined?
While the Board considers share price growth to be the primary indicator of DuluxGroup’s
success at present, the EPS gateway is designed to ensure the quality of the share price
growth is supported by Company performance, not market buoyancy alone.
For this reason, the Board considers that it is appropriate to set a minimum level of operating
performance below which no benefit accrues, and that EPS growth is an appropriate measure
for this purpose.
The Board considers that 4% remains appropriate, noting that it is set as a minimum level of
growth – the real benefit to senior managers is achieved through superior performance
against the relative TSR condition.
EPS is calculated by dividing DuluxGroup’s Net Profit After Tax (NPAT) before non-recurring
items by the weighted average number of ordinary shares on issue during the relevant period.
EPS growth measures the growth in earnings on a per share basis.
The Board has retained discretion to adjust EPS for individually material items on a case by
case basis when determining whether the EPS performance gateway condition has been met.
If the EPS gateway is met and the shares vest, a portion of the outstanding loan may be
forgiven in order to reward superior performance.
The level of loan forgiveness (if any) depends on DuluxGroup’s TSR performance against the
comparator group.
There is no loan forgiveness amount if DuluxGroup’s relative TSR is below the 51st percentile
against the comparator group.
If DuluxGroup Limited’s relative TSR is greater than or equal to the 51st percentile, a
proportion of the initial loan balance (up to a maximum of 30%) is forgiven on a ‘sliding scale’
as shown below.
What is TSR?
Who is the relative
TSR comparator
group?
Is the performance
condition re-tested?
Nature of the loan
Is the loan ‘interest
free’?
As the loans are non-
recourse, do senior
managers have to
repay their loans?
Relative TSR ranking
Less than 51st percentile
51st percentile
Between 51st percentile and
75th percentile
75th percentile or above
Loan forgiveness
0 %
10%
Percentage of loan forgiveness
increases on a straight-line basis
between 10% and 30%
30%
Broadly, TSR measures the increase in the Company’s share price over the performance
period, plus the value of dividends paid being treated as if they were reinvested in DuluxGroup
shares.
The comparator group comprises peer companies in the ASX 200 at the date of grant which
remain listed throughout the vesting period. The Board has approved the exclusion of
companies who operate in very different markets (mining, financial services, listed property
trusts and overseas domiciled companies) from the peer group. These approved exclusions
from the comparator group enables the performance of DuluxGroup to be compared to those
companies that truly compete with DuluxGroup for capital, that is Australian industrial, retail,
manufacturing and distribution businesses included in the ASX 200.
No, the performance condition is only tested once at the end of the performance period.
The loan is ‘interest-free’ in that there is no annual interest charge to the executive or senior
manager on the loan. An interest component, however, is taken into account in determining
the level of performance based debt forgiveness benefit that may be awarded to participants.
Yes, to access the shares, senior managers must repay their loan. Following the end of the
vesting period, assuming the earnings ‘gateway’ is achieved, the senior manager can either
repay the loan directly or sell some or all of their shares and apply the proceeds to repay the
loan. Shares remain restricted until the loan is repaid.
If the value of the shares is less than the outstanding loan balance at the end of the
performance period, or if the ‘earnings gateway’ is not achieved, the senior manager
surrenders and forfeits the shares to the Company in full settlement of the loan balance and
no benefit accrues to the senior manager. This is known as a ‘non-recourse loan’.
In respect of the 2010 LTEIP grant that vested on 13 November 2013, loans will become
repayable by participants to the Company. As at the date of this report the value of these
loans is $8,700,900. However the final value of the loans to be repaid will not be known until
after the relative TSR has been tested and any resulting debt forgiveness has been
calculated. This testing commences after the release of the 2013 results. This will be
communicated at the AGM and full details will be set out in the Company’s 2014 remuneration
report.
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Why is a non-recourse
loan provided?
The Board has structured the remuneration policy for senior managers to include a significant
proportion of ‘at-risk’ pay under the LTEIP. Accordingly, where the outstanding loan at the
end of the performance period exceeds the value of the shares, or if the ‘earnings gateway’ is
not achieved, the Board believes the loss of any remuneration value from the LTEIP in these
circumstances is a sufficient penalty to the senior managers.
Structure of awards (including how the loan operates)
What are the
participation levels for
Executives?
The amount of the loan offered to each participant is based on the relevant long term incentive
component target amount of their remuneration multiplied by an externally determined ‘value’
(calculated using an adjusted Black-Scholes option pricing valuation model).
For the grant made during the year, the CEO’s long term incentive component target amount
is 90% of fixed annual remuneration, and for other Executives it is 40% of FAR. The long term
incentive opportunities for the CFO and GM Dulux Paints Australia will increase to 60% for the
2014 financial year.
How are shares
acquired for allocation
to Executive Directors
under the LTEIP?
The Company has the flexibility under the LTEIP Rules to acquire shares on-market, issue
new shares or reallocate forfeited shares to participants in the Plan.
For the offer to the CEO and the CFO under the LTEIP proposed to be made in December
2013, the Company is seeking shareholder approval to issue new shares at the 2013 AGM to
conserve cash.
Cessation of employment or a change of control
What happens if a
LTEIP participant
ceases employment
prior to vesting and
repayment of the loan?
What happens to
‘good leavers’?
If a participant resigns from the Group or is terminated for cause during the loan period, the
shares are forfeited and surrendered to the Group (in full settlement of the loan) and the
individual has no further interest in the shares.
In general, all shares are forfeited and surrendered if a participant ceases employment prior to
the end of the performance period. The Board, however, has absolute discretion in
appropriate circumstances to determine that some or all of a participant’s LTEIP shares may
vest, and that some or all of the loan forgiveness amount may be granted.
How would a change
of control of the Group
impact on LTEIP
entitlements?
The LTEIP rules provide that the loan becomes immediately repayable upon a change of
control, with the outstanding loan balance reduced by the forgiveness amount at target,
except where the Board determines otherwise. The Board’s current intention is that it would
not exercise its discretion to vary this default position in the event of an actual change of
control.
Illustrative example of how LTEIP works
Initial share price at grant date is $4 and 15,000 shares are allocated (i.e. initial loan of $60,000).
The following example is based on an executive resident in Australia and assumes that:
•
• Total dividends paid of $2,400, less 46.5% to cover the participants’ individual tax obligations.
• Case A – EPS gateway achieved and relative TSR ranks at the 60th percentile (i.e. 17.5% loan forgiveness), share
price at the vesting date is $7.
• Case B – EPS gateway achieved but relative TSR ranks below the 51st percentile (i.e. no loan forgiveness), share
price at vesting date is $4.40.
• Case C – EPS gateway not achieved and relative TSR ranks above the 75th percentile, share price at the vesting
date is $7.
Initial loan
Less net dividends applied to loan balance
Less loan forgiveness(1,2)
Outstanding loan balance
Value of shares awarded at vesting
Less outstanding loan balance
Value of LTEIP to the executive
(1) This amount is determined net of interest charges.
(2)
In addition the Company incurs fringe benefits tax on the loan forgiveness.
Case A
$
60,000
(1,284)
(10,500)
48,216
105,000
(48,216)
56,784
Case B
$
60,000
(1,284)
-
58,716
66,000
(58,716)
7,284
70
Case C
$
60,000
(1,284)
-
58,716
N/A
N/A
N/A
70
Directors’ Report
Remuneration Report (Audited)
LTEIP grants and 2013 outcomes
There have been three grants made to Executives under the LTEIP since demerger in July 2010. The table below
describes the general conditions associated with each of the grants made to date.
The 2010 grant has vested in 2013, the outcomes for the 2011 and 2012 grants will not be known until 2014 and 2015
respectively.
Table 6
Grant
2010
Gateway
Compound annual EPS
growth must equal or
exceed 2% per annum
(set to reflect
challenges immediately
following demerger)
Performance condition Performance period Outcomes
Relative TSR *
Demerger (12 July
2010) to November
2013
EPS gateway was exceeded and all
shares vested
Relative TSR to be measured during the
trading window after the release of the
full year results and will be
communicated at the Annual General
Meeting
2011,
2012
Compound annual EPS
growth must equal or
exceed 4% per annum
Relative TSR *
Three years
* Relative TSR is calculated based on performance against a comparator group, being ASX 200 companies excluding those which
operate in different markets e.g. mining, financial services, listed property trusts and overseas domiciled companies.
The Board anticipates the next offer will be made in December 2013. The Company is seeking shareholder approval at
its 2013 AGM for the LTEIP grant to be made to the Executive Directors.
71
DuluxGroup Annual Report 2013
71
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(
Directors’ Report
Remuneration Report (Audited)
6.1
DuluxGroup equity instruments granted to Executives
Under the LTEIP, executives acquire shares in DuluxGroup Limited funded by a non-recourse loan from the Group. While
shares are acquired under the plan for legal and taxation purposes, Australian Accounting Standards require the shares
be treated as options for accounting purposes.
As a result, the amounts receivable from Executives in relation to these loans are not recognised in the financial
statements.
The number and value of notional options granted to DuluxGroup Executives under the LTEIP is set out below.
8 elbaT
For the financial
year ended
30 September 2013
Executive Directors
Patrick Houlihan
Number
held at 1
October
2012(1) (2)
Number
granted
during
the year
Number
exercised
during the
year
Number
lapsed
during the
year
Number
held at 30
September
2013
Grant date
Value of
options at
grant
date(3)
$
Value of
options
included in
compensation
for the year
$(4)
2 December 2011
12 July 2010 1,145,655
-
708,743
-
-
612,021
1,854,398 612,021
30 November 2012
Stuart Boxer
Other KMP
Patrick Jones
Brad Hordern
12 July 2010
2 December 2011
30 November 2012
12 July 2010
2 December 2011
30 November 2012
12 July 2010
2 December 2011
30 November 2012
317,873
179,026
-
-
-
154,595
496,899 154,595
128,536
157,543
-
-
-
132,670
286,079 132,670
140,026
81,904
-
-
111,027
221,930 111,027
-
Mike Kirkman
30 November 2012
- 111,027
111,027
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,145,655 (5)
708,743
612,021
2,466,419
1,122,742
666,218
605,900
2,394,860
317,873 (5)
179,026
154,595
651,494
128,536 (5)
157,543
132,670
418,749
(5)
140,026
81,904
111,027
332,957
111,027
111,027
311,516
168,284
153,049
632,849
125,965
148,090
131,343
405,398
137,225
76,990
109,917
324,132
109,917
109,917
335,353
225,366
170,549
731,268
93,046
56,926
43,080
193,052
37,624
50,095
36,970
124,689
40,988
26,044
30,940
97,972
30,940
30,940
(1) The combination of shares and the non-recourse loan provided to fund those shares constitutes an option under Australian Accounting
Standards. These options vest over a period of approximately three years (three and a half years in relation to the 2010 grant made on
demerger). Under the terms of the LTEIP, the loan must be repaid before the Executives can deal with the shares. Accordingly, the exercise
period of these options is the loan repayment period, which commences following the testing of the performance condition typically in
November after the annual results announcement and continues through to the end of the trading window in January of the following year.
The options expire if the loan is not repaid within the repayment window.
(2) While shares are acquired under the plan for legal and taxation purposes, Australian Accounting Standards require that shares issued under
employee incentive share plans in conjunction with non-recourse loans are accounted for as options. These shares are not subject to an
exercise price. Refer to Table 9 of section 6.2 for details of non-recourse loans provided to eligible Executives for the sole purpose of acquiring
shares in DuluxGroup Limited.
(3) The option valuation is determined having regard to valuation advice from PwC. The valuation methodology utilises an adjusted form of the
Black-Scholes option pricing model which reflects the value (as at grant date) of options held. The minimum potential future value of grants
under LTEIP is $NIL.
(4) The amortised value for accounting purposes.
(5) Since the end of the reporting period,, these shares have met the applicable vesting condition and vested on 13 November 2013. The
restriction on trading these shares will be lifted upon repayment of the loan. The loan must be repaid during the period from 29 November
2013 to 24 January 2014.
73
DuluxGroup Annual Report 2013
73
Directors’ Report
Remuneration Report (Audited)
6.2
Loans to Executives under DuluxGroup long term incentive plans
Table 9
For the financial year ended
30 September 2013
Executive Directors
Patrick Houlihan
Stuart Boxer
Other KMP
Patrick Jones
Brad Hordern
Mike Kirkman
Opening
balance
$
Advances
during the
year(1)
$
Repayments
during the
year(2)
$
Closing
balance
$
Interest
free value
$
Highest
indebtedness
$
4,818,215
2,879,977
2,264,477
2,058,615
(184,931)
(120,377)
6,897,761
4,818,215
512,925
349,571
7,003,323
4,892,623
1,286,383
799,077
572,000
519,999
(49,151)
(32,693)
1,809,232
1,286,383
134,935
93,859
1,837,116
1,306,321
764,082
323,119
490,880
457,599
(30,167)
(16,636)
1,224,795
764,082
575,377
352,002
410,800
237,898
(23,749)
(14,523)
962,428
575,377
89,463
53,089
69,872
41,887
1,242,718
775,561
976,678
584,282
-
410,800
(4,752)
406,048
25,229
410,800
2013
2012
2013
2012
2013
2012
2013
2012
2013
Total
11,470,635
7,558,787
(1) Section 5.4 describes the nature of the loans to executives to acquire shares. Australian Accounting Standards require that shares issued
under employee incentive share plans in conjunction with non-recourse loans are to be accounted for as options. As a result, the amounts
receivable from employees in relation to these loans have not been recognised in the financial statements.
11,300,264
7,444,057
4,148,957
3,274,111
7,444,057
4,354,175
(292,750)
(184,229)
832,424
538,406
2013
2012
(2) Constitutes after tax dividends paid on the shares applied against the loan. The loan repayment period in relation to the 2010 grant is 29
November 2013 to 24 January 2014. In order to access the shares, the loan balances oustanding after loan forgiveness will need to be repaid
during that window.
A share-based payment expense is recognised in the income statement over the vesting period. Repayments of share
loans are recognised as share capital when the outstanding loan balance is repaid in full.
The share-based payment expense is measured at fair value at the grant date using an option valuation model. The
valuation model used generates possible future share prices based on similar assumptions that underpin the Black-
Scholes option pricing model. The assumptions underlying the options valuations are: (a) the exercise price of the option,
(b) the life of the option, (c) the current price of the underlying securities, (d) the expected volatility of the share price, (e)
the dividends expected on the shares, and (f) the risk-free interest rate for the life of the option.
Table 10
2010 LTEIP grant
2011 LTEIP grant
2012 LTEIP grant
Price of DuluxGroup
Limited shares at
valuation date
Expected
volatility in
share price
Dividends
expected
on shares
Risk free
interest
rate
Average value
per option
$
$2.54
$2.88
$3.50
30%
25%
22.5%
NIL
NIL
NIL
4.70%
3.22%
2.62%
0.98
0.94
0.99
74
74
Directors’ Report
Remuneration Report (Audited)
7. OTHER EXECUTIVE ARRANGEMENTS
7.1
Executive Service Agreements
Remuneration and other terms of employment for the Executives are formalised in service agreements. Specific
information relating to the terms of the service agreements of the current Executives are set out in the table below:
Table 11
Name
Executive Directors(1)
Patrick Houlihan
Stuart Boxer
Other KMP
Patrick Jones
Brad Hordern
Mike Kirkman
Term of
agreement
Notice period by
Executive
Open
Open
Open
Open
Open
6 months
6 months
6 months
6 months
6 months
Notice and termination benefits(2)
12 months fixed annual remuneration
12 months fixed annual remuneration
12 months fixed annual remuneration
12 months fixed annual remuneration
12 months fixed annual remuneration
(1) Messrs Houlihan and Boxer may also terminate their agreement in the event of a ‘Fundamental Change’, which includes circumstances where
there has been a substantial diminution of role and responsibility of the Executive, in which event they will be entitled to a payment equivalent
to 12 months fixed annual remuneration.
(2) Maximum termination payment (inclusive of any payment in lieu of notice) if DuluxGroup terminates the Executive’s employment other than for
cause.
Each of the Executives has agreed to restraints as part of their service agreements, which will apply upon cessation of
their employment to protect the legitimate business interests of DuluxGroup. No separate amount is payable, over and
above the contractual entitlements outlined above, in relation to these restraints.
7.2 Hedging
The Company has a policy that prohibits senior managers from entering into an arrangement to limit the risk attached to
(i.e. hedging) LTEIP shares prior to vesting (i.e. prior to the relevant performance conditions being met) or while they
continue to be subject to restrictions under the LTEIP.
DuluxGroup treats compliance with this policy as a serious issue and takes appropriate measures to ensure the policy is
adhered to.
75
DuluxGroup Annual Report 2013
75
Directors’ Report
Remuneration Report (Audited)
8. NON-EXECUTIVE DIRECTORS’ REMUNERATION
8.1
Policy and approach to setting fees
Overview of policy
Non-Executive Directors receive a base fee in relation to their service as a director of the
Board, and an additional fee for membership of or for chairing a committee.
Aggregate fees
approved by
shareholders
Alignment with
shareholders
Reviews
Base fees and travel
allowance
The Chairman, taking into account the greater time commitment required, receives a higher fee
but does not receive any additional payment for service on the respective committees.
In setting Non-Executive Directors’ fees, the Board has formulated a remuneration policy based
on external professional advice to pay fees that are competitive with comparable companies
(those with a similar market capitalisation), at a level to attract and retain directors of the
appropriate calibre and recognising the anticipated time commitments and responsibilities of
directors.
In order to maintain independence and impartiality, Non-Executive Directors are not entitled to
any form of incentive payments and the level of their fees is not set with reference to measures
of Company performance.
The Non-Executive Directors’ fees (comprising base and committee fees inclusive of
superannuation) have been set by the Board within the maximum aggregate amount of
$1,500,000 per annum as approved by DuluxGroup’s sole shareholder immediately prior to
demerger.
In order to promote alignment with shareholders, the Board has adopted a policy which
establishes a minimum shareholding for Non-Executive Directors equivalent to the value of 1
years’ pre-tax Board and Committee fees for each member.
Non-Executive Directors have 3 years from the later of 1 July 2011 (the date the Board adopted
the policy) or their appointment in which to establish this shareholding level.
Non-Executive director fees are reviewed annually and set and approved by the Board based
on independent advice received from external remuneration consultants.
A review of Non-Executive Director fees was undertaken early in the 2013 financial year
utilising benchmark data provided by PwC. Within the shareholder approved maximum
aggregate fee amount, the Board approved an increase of 3% to the fees for Non-Executive
Directors so as to ensure these fees remain competitive with comparable companies, and
reflect the calibre, time commitment and responsibilities of the Directors.
Following the review earlier this year, the Board approved the following base fees :
Base fees
Non-Executive Chairman (1)
Non-Executive Director
Committee fees
Audit and Risk Committee
Remuneration and Nomination
Committee
Safety and Sustainability Committee
$378,350
$140,350
Committee chair
$28,000
N/A (1)
$18,000
Committee member
$13,500
$11,250
$11,250
(1) The Non-Executive Chairman chairs the Remuneration and Nomination Committee and attends the Audit and
Risk Committee. He receives a base fee only. No separate Committee fees are paid.
In past years Directors received a statutory superannuation contribution in addition to their base
fees and committee fees. The base and committee fees approved from January 2013 are
inclusive of statutory superannuation. The Directors do not receive any retirement allowances.
In addition, Non-Executive Directors are paid a travel allowance of $2,500 per return trip (prior
to 1 January 2012 $5,000 per return trip) for international travel where the journey includes a
one way international trip in excess of 6 hours.
76
76
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DuluxGroup Annual Report 2013
77
78
Consolidated Income Statement
For the financial year ended 30 September:
Revenue
Other income
Expenses
Changes in inventories of finished goods and work in progress
Raw materials and consumables used and
finished goods purchased for resale
Employee benefits expense
Depreciation and amortisation expense
Purchased services
Repairs and maintenance
Lease payments - operating leases
Outgoing freight
Other expenses (1)
Share of net profit of joint venture accounted for
using the equity method
Profit from operations
Finance income
Finance expenses
Net finance costs
Profit before income tax expense
Income tax expense
Profit for the financial year
Attributable to:
Ordinary shareholders of DuluxGroup Limited
Non-controlling interest in controlled entities
Profit for the financial year
Earnings per share
Attributable to ordinary shareholders of DuluxGroup Limited:
Basic earnings per share
Diluted earnings per share
15
(1,181)
1,367,938
127,158
Notes
6
7
7
8
4
4
2013
$'000
1,484,563
10,533
2012
$'000
1,067,809
19,440
(4,611)
5,215
618,619
331,836
32,303
177,727
11,452
46,175
61,076
94,542
366
(27,956)
(27,590)
99,568
(34,027)
65,541
429,600
221,685
23,296
146,510
8,061
30,848
45,016
46,301
(1,500)
955,032
132,217
493
(21,920)
(21,427)
110,790
(24,526)
86,264
76,926
(11,385)
65,541
89,492
(3,228)
86,264
cents
cents
21.1
20.6
24.7
24.3
The above consolidated income statement should be read in conjunction with the accompanying notes.
(1) Other expenses largely comprises commissions, royalties, impairment losses and other fixed and variable costs.
79
DuluxGroup Annual Report 2013
79
Consolidated Statement of Comprehensive Income
For the financial year ended 30 September:
Profit for the financial year
Notes
2013
$'000
65,541
2012
$'000
86,264
Other comprehensive income
Items that may be reclassified subsequently to the income statement
Effective portion of changes in fair value of cash flow hedges
Foreign currency translation gain/(loss) on foreign operations
Income tax on items that may be reclassified subsequently to the income statement
Total items that may be reclassified subsequently to the income statement, net
of tax
Items that will not be reclassified to the income statement
Actuarial gains/(losses) on defined benefit plan
Revaluation of other financial assets at fair value through other comprehensive income
Income tax on items that will not be reclassified to the income statement
Total items that will not be reclassified to the income statement, net of tax
Other comprehensive income for the financial year, net of tax
Total comprehensive income for the financial year
8(c)
8(c)
8(c)
8(c)
Attributable to:
Ordinary shareholders of DuluxGroup Limited
Non-controlling interest in controlled entities
Total comprehensive income for the financial year
97
12,286
(29)
(517)
(1,379)
155
12,354
(1,741)
9,433
(940)
(2,830)
5,663
18,017
83,558
(875)
(752)
263
(1,364)
(3,105)
83,159
92,122
(8,564)
83,558
86,744
(3,585)
83,159
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
80
80
Consolidated Balance Sheet
As at 30 September:
Notes
2013
$'000
2012
$'000
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial assets
Other assets
Total current assets
Non-current assets
Trade and other receivables
Derivative financial assets
Investment in listed equity securities
Investment accounted for using the equity method
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing liabilities
Derivative financial liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Defined benefit liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings (1)
Total equity attributable to ordinary shareholders of DuluxGroup Limited
Non-controlling interest in controlled entities
Total equity
9
10
11
12
13
10
12
14
15
16
17
18
13
19
20
12
21
19
20
22
21
23
24
25
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226,666
195,779
298
6,211
475,328
96
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-
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263,809
235,758
48,906
4,231
557,478
1,032,806
248,401
15,707
2
14,915
37,124
316,149
-
419,372
17,802
40,249
8,266
485,689
801,838
230,968
193,383
(92,717)
125,559
226,225
4,743
230,968
28,508
157,717
129,220
56
3,546
319,047
22
2
36,848
3,747
199,056
96,830
36,186
4,998
377,689
696,736
186,146
13,523
39
7,224
17,652
224,584
43
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914
22,237
20,869
289,300
513,884
182,852
172,695
(105,340)
102,538
169,893
12,959
182,852
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
(1) The retained earnings of the consolidated entity includes the profits reserve of the parent entity, DuluxGroup Limited. For details of the parent
entity’s stand alone profits reserve, refer to Note 35.
81
DuluxGroup Annual Report 2013
81
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(
DuluxGroup Annual Report 2013
83
Consolidated Statement of Cash Flows
For the financial year ended 30 September:
Notes
2013
$'000
2012
$'000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income taxes paid
Insurance recoveries
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Payments for purchase of businesses and controlled entities, net of
cash acquired
Payments for investment in listed equity securites
Proceeds from joint venture distributions
Proceeds from disposal of business
Proceeds from sale of property, plant and equipment
Dividends received
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from short term borrowings
Repayments of short term borrowings
Proceeds from long term borrowings
Repayments of long term borrowings
Payments for purchase of treasury shares for the LTEIP and ESIP
Proceeds from employee share plan repayments
Dividends paid (net of shares issued as part of DuluxGroup's dividend
reinvestment plan)
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
Effects of exchange rate changes on cash
Cash at the end of the financial year
33
2
15
3
6
Reconciliation of cash
Cash and cash equivalents at the end of the financial year as shown in the statement
of cash flows is reconciled to the related items in the balance sheet as follows:
Cash at bank and on hand
Cash at bank - restricted(1)
9
9
9
1,663,462
(1,492,657)
366
(23,498)
(30,559)
1,040
118,154
1,179,715
(1,044,838)
493
(17,813)
(27,494)
26,468
116,531
(25,805)
(3,137)
(26,382)
(1,221)
(145,369)
-
250
2,967
9,493
-
(161,601)
38,127
(112,172)
4,130,381
(3,957,872)
-
998
(2,053)
(37,600)
250
-
156
2,820
(64,030)
5,215
(10,719)
3,016,253
(3,017,000)
(7,815)
760
(38,232)
61,230
17,783
28,508
83
46,374
(49,937)
(63,243)
(10,742)
39,540
(290)
28,508
43,529
2,845
46,374
25,298
3,210
28,508
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
(1) DuluxGroup operates a customer loyalty programme, which is managed on behalf of DuluxGroup by a third party. Under the terms of this
arrangement, DuluxGroup is required to maintain sufficient funds in a programme specific bank account to honour in full the potential
redemption value of rewards by customers. The ability to use this cash is contractually restricted and has therefore been presented
separately.
84
84
Notes to the Consolidated Financial Statements
For the financial year ended 30 September 2013
1
Accounting policies
2
3
4
5
6
7
8
9
Businesses acquired
Business disposed
Earnings per share (EPS)
Segment report
Other income
Expenses
Income tax
Cash and cash equivalents
10 Trade and other receivables
11 Inventories
12 Derivative financial assets and liabilities
13 Other assets
14 Investment in listed equity securities
15 Investments accounted for using the equity method
16 Property, plant and equipment
17 Intangible assets
18 Deferred tax assets
19 Trade and other payables
20 Interest-bearing liabilities
21 Provisions
22 Deferred tax liabilities
23 Superannuation commitments
24 Contributed equity
25 Reserves
26 Dividends
27 Share-based payments
28 Related party disclosures
29 Auditors’ remuneration
30 Critical accounting estimates and judgements
31 Contingent liabilities and contingent assets
32 Commitments
33 Reconciliation of profit for the financial year to net cash inflow from operating activities
34 Deed of cross guarantee
35 Parent entity financial information
36 Subsidiaries
37 Financial and capital management
38 Events subsequent to balance date
86
96
98
99
99
102
103
104
105
106
107
108
110
110
110
111
112
115
115
116
117
118
119
122
124
124
125
128
131
131
133
135
136
136
139
140
142
148
85
DuluxGroup Annual Report 2013
85
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies
The significant accounting policies adopted in
preparing the consolidated financial statements of
DuluxGroup Limited (the Company) and of its
controlled entities (collectively ‘the consolidated
entity’ or ‘the Group’ or ‘DuluxGroup’) are stated
below to assist in a general understanding of this
financial report. These policies have been
consistently applied to all the years presented,
unless otherwise stated.
a) Basis of preparation
The consolidated financial statements have been
prepared on a historical cost basis, except for
derivative financial instruments, investments in
financial assets (other than controlled entities and
joint ventures) and defined benefit obligations
which have been measured at fair value.
The consolidated financial statements were
approved by the Board of Directors on 13
November 2013 and are presented in Australian
dollars, which is DuluxGroup Limited’s functional
and presentation currency.
The consolidated financial statements are general
purpose financial statements which have been
prepared in accordance with the requirements of
applicable Australian Accounting Standards
including Australian Interpretations and the
Corporations Act 2001 and comply with
International Financial Reporting Standards (IFRS)
and interpretations adopted by the International
Accounting Standards Board. DuluxGroup is a for-
profit entity for the purpose of preparing the
consolidated financial statements.
Except as described below, the accounting policies
applied by DuluxGroup in these consolidated
financial statements are the same as those applied
by DuluxGroup Limited in its financial statements
for the financial year ended 30 September 2012.
The standards relevant to the Group that have
been early adopted during the year are:
AASB 2013-3 Amendments to AASB 136 –
Recoverable Amount Disclosures for Non-
Financial Assets.
AASB 2013-4 Amendments to Australian
Accounting Standards – Novation of
Derivatives and Continuation of Hedge
Accounting.
Adoption of these standards did not have a
significant impact on the consolidated financial
statements and has impacted disclosures only.
The standards and interpretations relevant to the
Group that have not been early adopted are:
AASB 10 Consolidated Financial Statements -
applicable for annual reporting periods
beginning on or after 1 January 2013.
AASB 11 Joint Arrangements – applicable for
annual reporting periods beginning on or after
1 January 2013.
AASB 12 Disclosure of Interests in Other
Entities – applicable for annual reporting
periods beginning on or after 1 January 2013.
AASB 119 Employee Benefits – applicable for
annual reporting periods beginning on or after
1 January 2013.
AASB 127 Separate Financial Statements –
applicable for annual reporting periods
beginning on or after 1 January 2013.
AASB 128 Investments in Associates and
Joint Ventures – applicable for annual
reporting periods beginning on or after 1
January 2013.
AASB 2011-4 Amendments to Australian
Accounting Standards to Remove Individual
Key Management Personnel Disclosure
Requirements – applicable for annual reporting
periods on or after 1 July 2013.
AASB 2011-7 Amendments to Australian
Accounting Standards arising from the
Consolidation and Joint Arrangements
Standards – applicable for annual reporting
periods beginning on or after 1 January 2013.
AASB 2011-10 Amendments to Australian
Accounting Standards arising from AASB 119
(September 2011) – applicable for annual
reporting periods beginning on or after 1
January 2013.
AASB 2012-10 Amendments to Australian
Accounting Standards – Transition Guidance
and Other Amendments – applicable for
annual reporting periods beginning on or after
1 January 2013.
AASB 119 Employee Benefits and AASB 2011-10
Amendments to Australian Accounting Standards
Arising from AASB 119 will apply to DuluxGroup for
financial years commencing on and after 1 October
2013. Upon adoption, these standards are applied
on a fully retrospective basis. These new standards
are expected to have an impact on DuluxGroup’s
financial statements in the following areas:
The defined benefit expense will no longer
include the expected return on the plan’s
assets. This expected return will be replaced
by a net interest income or expense,
calculated using a discount rate (based on
government bonds) applied to the net defined
benefit asset or liability.
86
86
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies (continued)
Presentation of the defined benefit cost will be
disaggregated into three components: service
cost to be presented in the income statement,
net interest on the net defined benefit asset or
liability in the income statement as part of
finance costs, and actuarial gains or losses to
be presented in other comprehensive income.
Disclosure of additional information about the
characteristics and risks arising from
DuluxGroup’s defined benefit plan.
If DuluxGroup had adopted these accounting
standards from 1 October 2012, this would have
reduced profit before income tax expense for the
financial year ended 30 September 2013 by
approximately $2,754,000 with a corresponding
increase in other comprehensive income. There
would be no impact to either total comprehensive
income or the statement of financial position as at
30 September 2013.
DuluxGroup expects to adopt the other standards
and interpretations in the financial year ending 30
September 2014 and subsequent financial years -
however they are not expected to have a
significant impact on the financial results of
DuluxGroup.
b) Changes to significant accounting policies
As a result of the acquisition of Alesco Group, the
following accounting policies have been adopted
by DuluxGroup during the financial year ended 30
September 2013. The adoption of these policies
does not have a significant impact on previous
financial periods.
Provision for warranty
A provision for warranty is made for claims
received and claims expected to be received in
relation to sales made or services provided prior to
reporting date, based on historical claim rates,
adjusted for specific information arising from
internal quality assurance processes.
Provision for surplus lease space
A provision is made for non-cancellable operating
lease rentals payable on surplus leased premises
when it is determined that no substantive future
benefit will be obtained from its occupancy and
sub-lease rentals do not recover the full rental cost.
The estimate is calculated based on discounted net
future cash flows, using the interest rate implicit in
the lease or an estimate thereof.
c) Comparatives
Where not significant, reclassifications of
comparatives have been made to disclose them on
the same basis as current financial year figures.
d) Consolidation
The DuluxGroup consolidated financial statements
are prepared by combining the financial statements
of all the entities that comprise the Group, being
the Company (the parent entity) and its
subsidiaries as defined in AASB 127 Consolidated
and Separate Financial Statements.
Consistent accounting policies are employed in the
preparation and presentation of the consolidated
financial statements.
The consolidated financial statements include the
information and results of each subsidiary from the
date on which the Company obtains control until
such time as the Company ceases to control such
entity. In preparing the consolidated financial
statements, all intercompany balances,
transactions and unrealised profits arising within
DuluxGroup are eliminated in full.
e) Business combinations
The acquisition method of accounting is used to
account for all business combinations, regardless
of whether equity instruments or other assets are
acquired. The consideration transferred for the
acquisition of a subsidiary comprises the fair
values of the assets transferred (including cash),
the liabilities incurred and the equity interests
issued by the DuluxGroup (if any). Acquisition
related transaction costs are expensed as incurred.
Other than acquisitions under common control,
identifiable assets acquired and liabilities and
contingent liabilities assumed in a business
combination are measured initially at their fair
values at the acquisition date.
The excess of the consideration transferred and
the amount of any non-controlling interest in the
acquiree over the fair value of the net identifiable
assets acquired is recorded as goodwill. If those
amounts are less than the fair value of the net
identifiable assets of the subsidiary acquired and
the measurement of all amounts has been
reviewed in accordance with the requirements of
AASB 3 Business Combinations, the difference is
recognised directly in profit or loss as a bargain
purchase.
On an acquisition-by-acquisition basis, DuluxGroup
recognises any non-controlling interest in the
acquiree either at fair value or at the non-
controlling interest’s proportionate share of the
acquiree’s net identifiable assets.
For acquisitions occurring while under common
control and for consolidation purposes, the assets
and liabilities acquired continue to reflect the
carrying values in the accounting records of the
consolidated group prior to the business
combination occurring.
87
DuluxGroup Annual Report 2013
87
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies (continued)
f) Revenue recognition
Revenue from sale of goods
Revenue from the sale of goods is measured at the
fair value of the consideration received or
receivable, net of returns, trade discounts and
customer rebates. External sales are recognised
when the significant risks and rewards of
ownership are transferred to the purchaser,
recovery of the consideration is probable, the
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.
Customer loyalty programme
DuluxGroup operates a loyalty programme under
which customers accumulate points for purchases
made which they are entitled to redeem for items
from a catalogue. The award points are
recognised as a separately identifiable component
of the initial sale transaction, by allocating the fair
value of the consideration received between the
award points and the other components of the sale,
such that the award points are recognised at their
fair value. Revenue from the award points is
deferred and recognised when the points are
redeemed. The amount of revenue is based on the
number of points redeemed relative to the total
number expected to be redeemed. Award points
expire three to four years after the initial sale.
Other income
Profits and losses from sale of businesses,
controlled entities and other non-current assets are
recognised when there is a signed unconditional
contract of sale.
Rental income is recognised in the income
statement on a straight-line basis over the term of
the lease.
Dividends are recognised in the income statement
when declared.
Royalty income is recognised on sale of licensed
product to the final customer.
g) Finance income and expenses
Finance income
Finance income includes interest income on funds
invested, which is recognised in the income
statement as accrued. Interest income is
recognised using the effective interest method.
Finance expenses
Finance expenses include interest, unwinding of
the effect of discounting on provisions,
amortisation of discounts or premiums relating to
borrowings and amortisation of ancillary costs
incurred in connection with the arrangement of
borrowings. Finance expenses are expensed as
incurred unless they relate to qualifying assets.
Where funds are borrowed specifically for the
production of a qualifying asset, the interest on
those funds is capitalised, net of any interest
earned on those borrowings. Where funds are
borrowed generally, finance expenses are
capitalised using a weighted average interest
rate.
h) Leases
Payments made under operating leases, net of
any incentives received from the lessor, are
charged to the income statement on a straight-
line basis over the period of the lease.
Lease income from operating leases where the
Group is a lessor is recognised in the income
statement on a straight-line basis over the lease
term.
i) Research and development costs
Research costs are expensed as incurred.
Development costs are expensed as incurred
except when it is probable that future economic
benefits associated with the item will flow to the
consolidated entity, in which case they are
capitalised.
j) Taxation
Income tax on the profit or loss for the financial
year comprises current and deferred tax and is
recognised in the income statement.
Current tax is the expected tax payable or
receivable on taxable income for the financial
year, using tax rates enacted or substantively
enacted at reporting date, and any adjustments
to tax payable or receivable in respect of
previous years.
Deferred tax balances are determined using the
balance sheet method which calculates
temporary differences based on the carrying
amounts of an entity's assets and liabilities in the
balance sheet and their associated tax bases.
The amount of deferred tax provided is based on
the expected manner of realisation of the asset or
settlement of the liability, using tax rates enacted
or substantively enacted at reporting date.
A deferred tax asset is recognised only to the
extent that it is probable that future taxable profits
will be available against which the asset can be
utilised. Deferred tax assets are reduced to the
extent it is no longer probable that the related tax
benefit will be realised.
Current and deferred tax is recognised in profit or
loss, except to the extent that it relates to items
recognised in other comprehensive income or
directly in equity. In this case, the tax is also
recognised in other comprehensive income or
directly in equity, respectively.
88
88
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies (continued)
k)
Inventories
Inventories are valued at the lower of cost or net
realisable value. Net realisable value is the
estimated selling price in the ordinary course of
business less the estimated cost of completion and
selling expenses. Cost is based on the first-in,
first-out or weighted average method according to
the type of inventory. For manufactured goods,
cost includes direct labour, direct material and fixed
overheads based on normal operating capacity.
For merchanted goods, cost is net cost into store.
l) Trade and other receivables
Trade and other receivables are recognised at their
cost less any impairment losses.
Collectability of trade and other receivables is
reviewed on an ongoing basis. Debts that are
known to be uncollectible are written off. An
impairment loss is recognised when there is
objective evidence that the Group will not be able
to collect amounts due according to the original
terms of the receivables.
The impairment expense is reported in the income
statement within other expenses.
A number of customers use bank facilities under
the trade card programme that are guaranteed or
partially guaranteed by DuluxGroup. As the risks
and rewards relating to these facilities have not
transferred to the financial institution, a receivable
and the equivalent interest-bearing liability have
been recognised in the balance sheet.
o) Property, plant and equipment and
depreciation
Property, plant and equipment are stated at cost
less accumulated depreciation and impairment
losses. Cost includes expenditure that is directly
attributable to the acquisition of the item.
Subsequent costs are included in the asset’s
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that
future economic benefits associated with the item
will flow to the consolidated entity and that the cost
of the item can be measured reliably. Property,
plant and equipment, other than freehold land, is
depreciated on a straight-line basis at rates
calculated to allocate the cost less the estimated
residual value over the estimated useful life of each
asset to the consolidated entity.
The assets' residual values, useful lives and
depreciation methods are reviewed, and adjusted if
appropriate, at least annually including at the end
of the financial year.
Estimated useful lives of each class of asset are as
follows:
Buildings and improvements
Machinery, plant and equipment
25 to 40 years
3 to 10 years
Profits and losses on disposal of property, plant
and equipment are recognised in the income
statement.
Assets under construction are not depreciated until
ready for use.
m) Investments accounted for using the equity
p)
Intangible assets and amortisation
method
Investments in joint ventures are accounted for in
the consolidated financial statements using the
equity method of accounting. Under the equity
method, the share of the profits and losses of the
joint venture is recognised in the income
statement, and the share of post-acquisition
movements in reserves is recognised in other
comprehensive income.
n) Other financial assets
DuluxGroup’s investments in financial assets other
than controlled entities and joint ventures are
measured at market value.
Identifiable intangibles
Amounts paid for the acquisition of software are
capitalised at the fair value of consideration paid.
Amounts paid for the acquisition of other
identifiable intangible assets (except for software)
are capitalised at the fair value of consideration
paid determined by reference to independent
valuations.
Identifiable intangible assets with a finite life are
amortised on a straight-line basis over their
expected useful life to the consolidated entity as
follows:
Patents, trademarks and
rights
Brand names
Software
Customer contracts
10 to 20 years
10 to 20 years
3 to 5 years
5 to 10 years
Identifiable intangible assets with an indefinite life
(selected brand names) are not amortised but the
recoverable amount of these assets is tested for
impairment at least annually as explained under
impairment of assets (refer Note 1(aa)).
89
DuluxGroup Annual Report 2013
89
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies (continued)
Unidentifiable intangibles
Where the fair value of the consideration paid for a
business acquisition exceeds the fair value of the
identifiable assets, liabilities and contingent
liabilities acquired, the difference is treated as
goodwill. Goodwill is not amortised but the
recoverable amount is tested for impairment at
least annually as explained under impairment of
assets (refer Note 1(aa)).
Subsequent expenditure
Subsequent expenditure on capitalised identifiable
intangible assets is capitalised only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure is expensed as incurred.
q) Trade and other payables
These amounts represent liabilities for goods and
services provided to the Group prior to the end of
the financial year, which remain unpaid at year
end.
Dividends
A liability for dividends payable is recognised in the
reporting period in which the dividends are
declared, for the entire undistributed amount,
regardless of the extent to which they will be paid
in cash.
The unwinding of the effect of discounting on
provisions is recognised as a finance expense.
Leased premises restoration
DuluxGroup is required to restore certain leased
premises to their original condition at the end of the
respective lease terms. A provision has been
recognised for the present value of the estimated
expenditure required to restore these premises to
an acceptable condition. These costs have been
capitalised as part of the cost of buildings and
leasehold improvements.
Where this provision is reassessed in subsequent
reporting periods, to the extent possible, an equal
and offsetting adjustment is made to the
corresponding asset balance. Where the
reassessment results in a decrease to the
provision which exceeds the carrying value of the
corresponding asset, any excess is recognised in
the income statement.
t) Employee entitlements
Annual leave
Liabilities for annual leave are accrued based on
statutory and contractual requirements, including
related on-costs. They are measured using the
rates expected to be paid when the obligations
are settled.
r)
Interest-bearing liabilities
Long service leave
Interest-bearing liabilities are initially recognised at
fair value less attributable transaction costs.
Subsequent to initial recognition, interest-bearing
liabilities are stated at amortised cost with any
difference between cost and redemption value
being recognised in the income statement over the
period of the liabilities on an effective interest
method basis.
Amortised cost is calculated by taking into account
any issue costs and any discount or premium on
issuance. Gains and losses are recognised in the
income statement in the event that the liabilities are
derecognised.
s) Provisions
A provision is recognised when there is a legal or
constructive obligation as a result of a past event
and it is probable that a future sacrifice of
economic benefits will be required to settle the
obligation and the amount can be reliably
estimated. If the effect is material, a provision is
determined by discounting the expected future
cash flows (adjusted for expected future risks)
required to settle the obligation at a pre-tax rate
that reflects current market assessments of the
time value of money and the risks specific to the
liability.
90
Liabilities for long service leave are accrued at the
present value of expected future payments to be
made resulting from services provided by
employees. Liabilities for long service leave
entitlements, which are not expected to be paid or
settled within 12 months, are discounted using the
rates attaching to Government fixed coupon bond
yields with similar maturity terms. When
discounting using Government bond yields,
DuluxGroup uses an average of State Government
bond yields.
Management judgment is applied in determining
the following key assumptions used in the
calculation of long service leave at balance date:
•
•
•
future increases in wages and salaries;
experience of employee departures and
period of service.
future on-cost rates; and
Bonuses
A liability is recognised for bonuses on the
achievement of predetermined bonus targets and
the benefit calculations are formally documented
and determined before signing the financial report.
90
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies (continued)
Superannuation
Contributions to defined contribution
superannuation funds are taken to the income
statement in the year in which the expense is
incurred.
For the defined benefit fund, the cost of providing
pensions is charged to the income statement so as
to recognise current and past service costs,
interest cost on defined benefit obligations, and the
effect of any curtailments or settlements, net of
expected returns on plan assets.
All actuarial gains and losses are recognised
directly in equity.
DuluxGroup’s net obligation in respect of the
defined benefit fund is calculated by estimating 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, and the fair value of
any plan assets is deducted. The discount rate is
the market yield on Government bonds that have
maturity dates approximating the terms of the
consolidated entity’s obligation. When discounting
using Government bond yields, DuluxGroup uses
an average of State Government bond yields. The
calculation is performed at least annually by a
qualified actuary using the projected unit credit
method.
Share-based payments
Shares issued under the Long Term Equity
Incentive Plan (LTEIP) in conjunction with non-
recourse loans are accounted for as options.
The options are externally measured at fair value at
the date of grant using an option valuation model.
This valuation model generates possible future
share prices based on similar assumptions that
underpin relevant option pricing models and
reflects the fair value (as at grant date) of options
granted. The assumptions underlying the options
valuations are:
the exercise price of the option,
the life of the option,
(i)
(ii)
(iii) the current price of the underlying securities,
(iv) the expected volatility of the share price,
(v)
(vi) the risk-free interest rate for the life of the
the dividends expected on the shares, and
option.
The fair value determined at the grant date of the
award is expensed in the income statement on a
straight-line basis over the relevant vesting period.
The amount recognised is adjusted to reflect the
actual number of share options that vest, except for
those that fail to vest due to market conditions not
being met.
The amounts receivable from employees in relation
to the non-recourse loans and any ordinary share
capital issued under LTEIP are not recognised on
consolidation.
Where the Company issues shares under the
Employee Share Investment Plan (ESIP) at a
discount, an expense for the fair value of the
discount on the granted shares is recognised in
the income statement.
Restructuring and employee termination benefits
Provisions for restructuring and employee
termination benefits are only recognised when a
detailed plan has been approved and the
restructuring and/or termination has either
commenced or been publicly announced or firm
contracts related to the restructuring or termination
benefits have been entered into. Costs related to
ongoing activities are not provided for.
u) Foreign currency
Functional currency
Items included in the financial statements of each
of the Group’s entities are measured using the
currency of the primary economic environment in
which the entity operates (the functional currency).
Foreign currency transactions
Transactions in foreign currencies are translated at
the foreign exchange rate ruling at the date of the
transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance
sheet date are translated to the functional currency
of the entity at the foreign exchange rate ruling at
that date. Foreign exchange differences arising on
translation are recognised in the income statement,
except when they are deferred in equity as
qualifying cash flow hedges.
Non-monetary assets and liabilities that are
measured at historical cost in a foreign currency
are translated using the exchange rate ruling at the
date of the transaction. Non-monetary assets and
liabilities denominated in foreign currencies that
are measured at fair value are translated to the
functional currency of the entity at foreign
exchange rates ruling at the dates the fair value
was determined. Translation differences on assets
and liabilities carried at fair value are reported as
part of the fair value gain or loss.
Foreign currency receivables and payables
outstanding at balance date are translated at the
exchange rates ruling at that date. Exchange
gains and losses on retranslation of outstanding
unhedged receivables and payables are
recognised in the income statement.
91
DuluxGroup Annual Report 2013
91
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies (continued)
Financial statements of foreign operations
The assets and liabilities of foreign operations,
including goodwill and fair value adjustments
arising on consolidation, are translated to
Australian dollars at foreign exchange rates ruling
at the balance sheet date.
The revenues and expenses of foreign operations
are translated to Australian dollars at rates
approximating the foreign exchange rates ruling at
the dates of the transactions.
Foreign exchange differences arising on translation
are recognised directly in other comprehensive
income.
v) Financial instruments – classification
DuluxGroup classifies its financial assets in the
following measurement categories:
(i) financial assets and liabilities at amortised cost;
(ii) financial assets at fair value through other
comprehensive income; and
(iii) financial assets and liabilities at fair value
through profit and loss.
Financial assets and liabilities at amortised cost
A financial asset is classified as at amortised cost
only if both of the following criteria are met:
•
the asset is held within a business model with
the objective being to collect the contractual
cash flows; and
•
the contractual terms give rise on specified
dates to cash flows that are solely payments
of principal and interest on the principal
outstanding.
Financial assets at amortised cost are classified as
‘Trade and other receivables’ in the balance sheet
(refer Note 10).
All financial liabilities are measured at amortised
cost unless held for trading or designated as at fair
value through profit and loss.
Financial liabilities at amortised cost are classified
as ‘Trade and other payables’ (refer Note 19) and
‘Interest-bearing liabilities’ (refer Note 20) in the
balance sheet.
Financial assets at fair value through other
comprehensive income
A financial asset is classified as fair value through
other comprehensive income only if both of the
following criteria are met:
•
•
the asset is not held for trading; and
an irrevocable election is made to recognise
changes in fair value through other
comprehensive income rather than profit or
loss.
Changes to fair values are presented in the
revaluation reserve in equity. On disposal, the
reserve amount is transferred to retained earnings.
Financial assets and liabilities at fair value through
profit and loss
A financial asset is classified in this category if it
does not qualify for recognition in any of the
categories above or if it is so designated by
management.
A financial liability is classified in this category if it
is acquired principally for the purpose of selling in
the short term (held for trading) or if it is so
designated by management.
The consolidated entity uses a number of
derivative instruments for economic hedging
purposes under Board approved Treasury risk
management policies. Those derivates which do
not meet the criteria for hedge accounting under
Australian Accounting Standards are categorised
as held for trading. Assets and liabilities in this
category are classified as current if they are
expected to be realised within 12 months of the
balance sheet date. The fair value of those
derivatives that meet the accounting criteria as
cash flow hedges and are designated as such are
transferred from the income statement to the cash
flow hedge reserve in equity.
w) Financial instruments – hedging
DuluxGroup uses financial instruments to hedge its
exposure to foreign exchange and interest rate
risks arising from operational, financing and
investment activities. In accordance with its Board
approved Treasury risk management policies,
DuluxGroup does not hold or issue financial
instruments for trading purposes. However,
financial instruments that do not qualify for hedge
accounting, but remain economically effective, are
accounted for as held for trading in accordance
with the requirements of AASB 9 Financial
Instruments.
Financial instruments are recognised initially at
cost. Subsequent to initial recognition, financial
instruments are stated at fair value. The gain or
loss on remeasurement to fair value is recognised
immediately in the income statement.
Where financial instruments qualify for hedge
accounting, recognition of any resulting gain or loss
on remeasurement to fair value depends on the
nature of the item being hedged.
Cash flow hedges
Where a financial instrument is designated as a
hedge of the variability in cash flows of a
recognised asset or liability, or a highly probable
forecast transaction, the effective part of any gain
or loss on the financial instrument is recognised in
equity.
92
92
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies (continued)
When the forecast transaction subsequently results
in the recognition of a non-financial asset or
liability, the associated cumulative gain or loss is
removed from equity and included in the initial cost
or other carrying amount of the non-financial asset
or liability.
If a hedge of a forecast transaction subsequently
results in the recognition of a financial asset or a
financial liability, then the associated gains and
losses that were recognised directly in equity are
reclassified into the income statement in the same
period or periods during which the asset acquired
or liability assumed affects the income statement.
For cash flow hedges other than those covered by
the preceding two policy statements, the
associated cumulative gain or loss is removed from
equity and recognised in the income statement in
the same period or periods during which the
hedged forecast transaction affects the income
statement.
The ineffective part of any gain or loss is
recognised immediately in the income statement.
When a hedging instrument expires or is sold,
terminated or exercised, or the entity revokes
designation of the hedge relationship but the
hedged forecast transaction is still expected to
occur, the cumulative gain or loss at that point
remains in equity and is recognised in accordance
with the above policy when the transaction occurs.
If the hedged transaction is no longer expected to
take place, then the cumulative unrealised gain or
loss recognised in equity is recognised immediately
in the income statement.
Hedge of monetary assets and liabilities
When a financial instrument is used to
economically hedge the foreign exchange
exposure of a recognised monetary asset or
liability, hedge accounting is not applied and any
gain or loss on the hedging instrument is
recognised in the income statement.
Anticipated transactions
Where a hedge transaction is designated as a
hedge of the anticipated purchase or sale of goods
or services, purchase of qualifying assets, or an
anticipated interest transaction, gains and losses
on the hedge, arising up to the date of the
anticipated transaction, together with any costs or
gains arising at the time of entering into the hedge,
are deferred and included in the measurement of
the anticipated transaction when the transaction
has occurred as designated. Any gains or losses
on the hedge transaction after that date are
included in the income statement.
The net amount receivable or payable under open
swaps, forward rate agreements, options and
futures contracts and the associated deferred gains
or losses are not recorded in the income statement
until the hedged transaction matures. The net
receivables or payables are then revalued using
the foreign currency, interest or commodity rates
current at balance date.
When the anticipated transaction is no longer
expected to occur as designated, the deferred
gains and losses relating to the hedged transaction
are recognised immediately in the income
statement.
Gains and losses that arise prior to and upon the
maturity of transactions entered into under hedge
strategies are deferred and included in the
measurement of the hedged anticipated
transaction if the transaction is still expected to
occur as designated. If the anticipated transaction
is no longer expected to occur as designated, the
gains and losses are recognised immediately in the
income statement.
x) Financial instruments – impairment
For financial assets carried at amortised cost, the
amount of any loss is measured as the extent to
which the asset’s carrying amount exceeds the
present value of estimated future cash flows
(excluding future credit losses that have not been
incurred) discounted at the financial asset’s original
effective interest rate. The carrying amount of the
asset is reduced and the amount of the loss is
recognised in the income statement.
y) Cash and cash equivalents
For the purpose of presentation in the statement of
cash flows, cash and cash equivalents includes
cash on hand and deposits held at call that are
readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes
in value, net of bank overdrafts.
z) Contributed equity
Ordinary shares in DuluxGroup Limited are
classified as contributed equity.
When share capital recognised as contributed
equity is repurchased by the Company or its
controlled entities, the amount of the consideration
paid, including directly attributable costs is
recognised as a deduction from total equity.
Transaction costs of an equity transaction are
accounted for as a deduction from equity, net of
any related income tax benefit.
DuluxGroup has formed a trust to administer the
Group’s employee share scheme. This trust is
consolidated, as the substance of the relationship
is that the trust is controlled by DuluxGroup.
93
DuluxGroup Annual Report 2013
93
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies (continued)
Cash flows used for value in use calculations are
estimated for the asset in its present condition and
therefore do not include cash inflows or outflows
that improve or enhance the asset’s performance
or that may arise from future restructuring.
The pre-tax discount rate used for a:
• value in use calculation is derived based on an
•
independent external assessment of the
Group's post-tax weighted average cost of
capital in conjunction with risk specific factors to
the countries in which the CGU operates.
fair value less cost to sell calculation is based
on an independent external assessment of the
cost of capital of a willing buyer taking into
account risk specific factors to the countries in
which the CGU operates.
The pre-tax discount rates applied in the
discounted cash flow models range between 11%
and 15% (2012 11% and 15%). The average sales
revenue compound annual growth rates applied in
the discounted cash flow models range between
0% and 10% (2012 0% and 10%).
An impairment loss is recognised whenever the
carrying amount of an asset or its CGU exceeds its
recoverable amount. Impairment losses are
recognised in the income statement as part of
‘Other expenses’. Impairment losses recognised in
respect of CGUs are allocated first to reduce the
carrying amount of any goodwill allocated to CGUs
and then to reduce the carrying amount of the
other assets in the unit.
Reversals of impairment
An impairment loss is reversed if the subsequent
increase in recoverable amount can be related
objectively to an event occurring after the
impairment loss was recognised. An impairment
loss in respect of goodwill or other indefinite life
intangible assets is not reversed. An impairment
loss in other circumstances is reversed only to the
extent that the asset’s carrying amount does not
exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
Where ordinary shares are issued to the trust for
the purpose of the employee share schemes, this
ordinary share capital is not recognised on
consolidation. Where shares are purchased on-
market by the trust for the purpose of the employee
share schemes, the purchase is accounted for as a
buy-back and the amount is deducted from
contributed equity as treasury shares on
consolidation.
aa) Impairment of other assets
Goodwill and indefinite life intangible assets are
tested for impairment at least annually. The
carrying amount of DuluxGroup’s other non-current
assets, excluding any defined benefit fund assets,
deferred tax assets and financial assets are
reviewed at each reporting date to determine
whether there are any indicators of impairment. If
such indicators exist, the asset is tested for
impairment by comparing its recoverable amount to
its carrying amount.
The recoverable amount of an asset is determined
as the higher of fair value less costs to sell and
value in use.
The recoverable amount is estimated for each
individual asset or where it is not possible to
estimate for individual assets, it is estimated for the
Cash-Generating Unit (CGU) to which the asset
belongs.
A CGU is the smallest identifiable group of assets
that generate cash inflows largely independent of
the cash inflows of other assets or group of assets
with each CGU being no larger than a reportable
segment.
When determining fair value less costs to sell,
DuluxGroup takes into account information from
recent market transactions of a similar nature. If
no such transactions can be identified, an
appropriate valuation model is used. These are
corroborated by other available market based
information.
In calculating recoverable amount using a valuation
model, estimated future cash flows based on Board
approved budgets, four year business plans and
related strategic reviews are discounted to their
present values using a pre-tax discount rate that
reflects the current market assessments of the
risks specific to the asset or CGU. Cash flow
projections beyond the four year period are
extrapolated using estimated growth rates, which
are not expected to exceed the long term average
growth rates in the applicable markets. Foreign
currency cash flows are discounted using the
functional currency of the CGUs and then
translated to Australian dollars using the closing
exchange rate.
94
94
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
1 Accounting policies (continued)
ab) Earnings per share
Basic earnings per share is calculated by dividing
the net profit attributable to the ordinary
shareholders of the Company by the weighted
average number of ordinary shares outstanding
during the financial year.
Diluted earnings per share is calculated by dividing
the net profit attributable to the ordinary
shareholders of the Company by the weighted
average number of ordinary shares outstanding
during the financial year plus the weighted average
number of ordinary shares that would be issued
upon the conversion of all dilutive potential ordinary
shares into ordinary shares.
ac) Segment reporting
Operating segments are reported in a manner
which is consistent with the internal reporting
provided to the chief operating decision maker.
The chief operating decision maker has been
identified as the Managing Director and Chief
Executive Officer.
ad) Goods and services tax (GST)
Revenues, expenses, assets and liabilities other
than receivables and payables, are recognised net
of the amount of GST, except where the amount of
GST incurred is not recoverable from the relevant
taxation authorities. In these circumstances, the
GST is recognised as part of the cost of acquisition
of the asset or as part of an item of expense. The
net amount of GST recoverable from, or payable
to, the relevant taxation authorities is included as a
current asset or liability in the consolidated balance
sheet.
Cash flows are included in the consolidated
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 relevant
taxation authorities are classified as operating cash
flows.
ae) Rounding
The amounts shown in the financial report have
been rounded off, except where otherwise stated,
to the nearest thousand dollars with the Group
being in a class specified in the ASIC Class Order
98/100 dated 10 July 1998.
95
DuluxGroup Annual Report 2013
95
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
2 Businesses acquired
2013
On 18 December 2012, DuluxGroup announced that it had been successful in acquiring over 90% of the ordinary share
capital of Alesco and had commenced compulsory acquisition for the remainder of the shares. Compulsory acquisition was
completed on 29 January 2013.
Refer to Note 36 for details of the entities that were acquired as part of this transaction.
From an accounting perspective, the acquisition date is 12 December 2012, being the date on which DuluxGroup’s offer
for Alesco Group was made unconditional and DuluxGroup obtained the ability to govern the financial and operating
policies of Alesco Group through securing Board and management control of this group. The results of the acquired
businesses have been consolidated from the close of business on 11 December 2012.
At the date of acquisition and in accordance with accounting standard requirements, the Group’s original 19.96% interest
in Alesco Group, which was previously accounted for as an investment in listed securities through other comprehensive
income, has been disposed and reacquired at fair value, with any reserve amounts in other comprehensive income
transferred to retained earnings. This transfer is included as part of ‘Transfer of reserve to retained earnings’ in the
consolidated statement of changes in equity.
The acquisition accounting for this transaction is considered provisional due to the ongoing work to be carried out on the
identification and valuation of net assets acquired. Therefore, the amounts recognised at 30 September 2013 may be
subject to change before 12 December 2013. Finalisation is expected no later than close of business on 11 December
2013. As allowed under the relevant Australian Accounting Standards, adjustments made to these provisional numbers
will be reflected in future financial periods.
The provisional assets and liabilities recognised as a result of this transaction by the consolidated entity are as follows:
Fair value
total
$'000
Fair value
adjustment
$'000
Book
value
$'000
2013
Consideration
Cash payments to ordinary shareholders of Alesco(1)
Investment in Alesco at fair value through other comprehensive income
Net cash acquired
Total consideration
Net assets of controlled entities acquired
Trade and other receivables (2)
Inventories
Property, plant and equipment
Intangibles including purchased goodwill(3)
Other assets
Deferred tax assets
Trade and other payables
Interest-bearing liabilities
Leased properties provisions
Contingent liabilities
Current income tax provision
Other provisions
Provision for employee entitlements
Deferred tax liabilities
Net identifiable assets acquired
Goodwill on acquisition(4)
145,940
35,908
(571)
181,277
82,714
72,517
56,669
333,194
2,414
13,839
(68,781)
(75,001)
(4,642)
-
(4,486)
(1,931)
(12,933)
(2,802)
390,771
-
-
-
-
(860)
(7,135)
6,251
(278,382)
-
4,631
(2,469)
-
(4,306)
(7,476)
(1,898)
(2,286)
(970)
(14,728)
(309,628)
145,940
35,908
(571)
181,277
81,854
65,382
62,920
54,812
2,414
18,470
(71,250)
(75,001)
(8,948)
(7,476)
(6,384)
(4,217)
(13,903)
(17,530)
81,143
100,134
Cash payment to ordinary shareholders of Alesco for accounting purposes comprises $125,584,000 relating to the purchase of ordinary
shares in Alesco and $20,356,000 in relation to payment of a special dividend.
Includes an insurance receivable of NZD 700,000 (AUD 550,000) for recoveries from the Christchurch earthquake.
Book value includes purchased goodwill of $230,125,000.
None of the goodwill recognised is expected to be deductible for tax purposes.
96
(1)
(2)
(3)
(4)
96
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
2 Businesses acquired (continued)
The acquired trade and other receivables comprise gross contractual amounts due of $83,951,000 of which $2,097,000
was expected to be unrecoverable at the acquisition date.
Transaction costs with respect of this acquisition during the year ended 30 September 2013 were $6,305,000 (2012
$3,596,000). These costs have been included as part of purchased services in the consolidated income statement.
Results contributed by the acquired business since acquistion date:
Revenue
Profit from operations
$'000
358,503
15,323
If the acquisition had occured on 1 October 2012, the results of the consolidated entity would have been:
Revenue
Profit from operations
$'000
1,571,688
135,483
The information on revenue and profit from operations above was compiled by management based on financial
information available and assuming no material transactions between DuluxGroup and the acquired businesses. Goodwill
on the purchase of these entities is attributable mainly to the skills and technical talent of the acquired businesses’ work
forces and the synergies expected to be achieved from integrating these businesses and the reduction in duplicated
corporate costs.
2012
On 30 November 2011, DuluxGroup Limited merged its DGL International entities in Hong Kong and China with the Hong
Kong and China operations of NLPP to create DGL Camel International Group (DGCI Group).
Under the terms of the merger arrangement DuluxGroup holds 51% of the issued capital in DGL Camel International
Limited, comprising DGL Camel International (a newly formed holding company) and its controlled entities, and has
secured board and management control of this group. The following legal entities were acquired as part of this
transaction:
• DGL Camel (Hong Kong) Limited;
• DGL Camel (China) Limited; and
• DGL Camel Coatings (Dongguan) Limited (formerly Dongguan Benson Paint Company Limited).
As a result of the merger, DuluxGroup has obtained control of its joint venture with DGL Camel Powder Coatings Limited
through an increased board and management representation and an increase to its existing 50% ownership interest to
51%.
The results of the acquired businesses have been consolidated from close of business on 30 November 2011.
The residual 49% interest in the DGCI Group is held by NLPP and accordingly its share of the DuluxGroup results and
equity have been recognised as non-controlling interest.
97
DuluxGroup Annual Report 2013
97
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
2 Businesses acquired (continued)
The acquisition accounting for this transaction has now been finalised. The assets and liabilities recognised as a result of
the acquisitions by the consolidated entity are as follows:
2012
Consideration
Shares issued in DGCI at fair value
Cash paid and settled via loans with related entities
Purchase price adjustment(1)
Net cash acquired
Total consideration
Net assets of controlled entities acquired
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
Other assets
Deferred tax assets
Trade and other payables
Interest-bearing liabilities
Other provisions
Provision for employee entitlements
Deferred tax liabilities
Net identifiable assets acquired
less: interest retained by non-controlling interests in acquired net assets
Net identifiable assets acquired, net of non-controlling interests
Goodwill on acquisition(2)
Book
value
$'000
Fair value
adjustment
$'000
Fair value
total
$'000
12,112
4,000
(710)
(1,947)
13,455
13,066
4,961
2,975
-
259
-
(11,429)
(3,571)
(24)
(282)
-
5,955
-
-
-
-
-
-
-
-
1,700
-
396
-
-
-
-
(281)
1,815
12,112
4,000
(710)
(1,947)
13,455
13,066
4,961
2,975
1,700
259
396
(11,429)
(3,571)
(24)
(282)
(281)
7,770
(4,780)
2,990
10,465
(1) At 30 September 2013 the purchase price adjustment is included in trade and other receivables.
(2) As permitted by Australian Accounting Standards, DuluxGroup have elected in its accounting policies to recognise acquired goodwill on a
proportional basis. Therefore, only DuluxGroup’s 51% share of goodwill arising from this transaction has been recognised. None of the
goodwill recognised is expected to be deductible for tax purposes.
Transaction costs recognised in respect of this acquisition during the year ended 30 September 2013 were $11,700 (2012
$504,000). These costs have been included as part of purchased services in the consolidated income statement.
Goodwill on the purchase of these entities is attributable mainly to the skills and technical talent of the acquired
businesses’ work forces and the synergies expected to be achieved from integrating these businesses.
3 Business disposed
2013
On 29 August 2013, DuluxGroup entered into an agreement to dispose the Robinhood kitchen and laundry appliance
business which was acquired through the Alesco acquisition, for $3,428,000. This transaction was completed on 16
September 2013. During the financial year ended 30 September 2013 DuluxGroup received proceeds of $2,967,000
(exclusive of GST), with the balance recognised in trade and other receivables at 30 September 2013.
A net loss before tax of $1,118,000 ($1,293,000 net of tax), including transaction costs, was recognised during the
financial year ended 30 September 2013 and is reported as part of employee benefits expense ($332,000), purchased
services ($348,000) and other expenses ($438,000). This loss is included in the ‘Other businesses’ segment (refer Note
5). A deferred tax asset of $500,000 was written off as part of the disposal.
Assets disposed include inventories of $3,944,000, property, plant and equipment of $464,000 and deferred tax assets of
$32,000. Liabilities disposed include trade creditors of $136,000 and provisions totalling $846,000.
2012
No business disposals occurred during the financial year ended 30 September 2012.
98
98
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
4 Earnings per share (EPS)
As reported in the consolidated income statement
Total attributable to ordinary shareholders of DuluxGroup Limited
Basic earnings per share
Diluted earnings per share
Earnings used in the calculation of basic and diluted earnings per share
Profit for the financial year attributable to ordinary shareholders of DuluxGroup Limited
2013
Cents
per share
2012
Cents
per share
21.1
20.6
$'000
76,926
Number
24.7
24.3
$'000
89,492
Number
Weighted average number of ordinary shares outstanding used as the denominator:
Number for basic earnings per share
Effect of the potential vesting of shares under the LTEIP and ESIP(1)
Number for diluted earnings per share
364,645,445
361,805,421
9,317,040
373,962,485
6,691,151
368,496,572
(1) The calculation of the weighted average number of shares has been adjusted for the effect of these potential shares from the date of issue or
the beginning of the financial year. For further details on the LTEIP and ESIP, refer to Note 27.
5 Segment report
As a result of the acquisition of the Alesco Group, three new reportable segments have been introduced for the financial
year ended 30 September 2013. These are Garage Doors and Openers, Parchem and Lincoln Sentry. The introduction
of these segments has no impact on prior year disclosures.
The consolidated entity's policy is to transfer products internally at negotiated commercial prices. Other income includes
insurance recoveries, royalties, rental income, profit on sale of property, plant and equipment and net foreign exchange
gains.
The major products and services from which DuluxGroup’s segments derive revenue are:
Defined reportable
segments
Paints Australia
Paints New Zealand
Selleys Yates
Products/services
Manufacture and supply of paints and other surface coatings to the decorative
market in Australia for both consumer and professional markets.
Manufacture and supply of paints and other surface coatings to the decorative
market in New Zealand for both consumer and professional markets.
Manufacture and distribution of home improvement and garden care products in
Australia and New Zealand for both consumer and professional markets.
Garage Doors and Openers
Manufacture and supply of a range of garage doors for domestic and
commercial use as well as commercial and residential automatic openers.
Parchem
Lincoln Sentry
Other businesses
Manufacture and supply of construction chemicals, decorative concrete
solutions and related equipment.
Distributor of hardware and components to the cabinet making industry and
window, door and glazing fabricators.
China and South East Asia specialty coatings and adhesives businesses, Papua
New Guinea coatings business, the powders and industrial coatings business in
Australia and New Zealand and the former Robinhood kitchen and laundry
appliance business.
99
DuluxGroup Annual Report 2013
99
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For the financial year ended 30 September 2013
5 Segment report (continued)
Geographical information
Revenue from external customers is attributed to geographic location based on the location of customers. The revenue
from external customers by geographical location is as follows:
Australia
New Zealand
Other countries
2013
$'000
1,204,328
159,967
120,268
1,484,563
2012
$'000
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125,893
112,459
1,067,809
The location of non-current assets other than financial assets, investments accounted for using the equity method,
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Australia
New Zealand
Other countries
6 Other income
Net profit on sale of property, plant and equipment
Royalty income
Rental income
Insurance recoveries (2)
Dividend income from listed equity securities
Net foreign exchange gains
Other
2013
$'000
438,948
44,124
20,726
503,798
2012
$'000
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35,978
33,364
300,884
(1)
2013
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450
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10,533
2012
$'000
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254
15,000
2,820
781
439
19,440
(1)
Includes a gain on disposal of the O’Connor site in Western Australia of $8,149,000.
(2) For the year ended 30 September 2013, this comprises recoveries from the Christchurch earthquake. For the financial year ended 30
September 2012, this comprises recoveries from the Queensland flood.
102
102
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
7 Expenses
Profit before income tax includes the following specific expenses:
Depreciation and amortisation
Depreciation (Note 16)
Buildings
Machinery, plant and equipment
Amortisation (Note 17)
Patents, trademarks and rights
Brand names
Software
Customer contracts
Total depreciation and amortisation expense
Provisions - net of amounts written b ack (Note 21)
Environmental provision
Deferred income - customer loyalty programme provision
Leased properties provision
Warranty provision
Other provisions
Finance expenses
Interest and finance charges paid/payable for financial liabilities
not at fair value through profit and loss
Provisions: unwinding of discount (Note 21)
Amount capitalised (Note 16)
Net loss on sale of property, plant and equipment
Net foreign exchange losses
Loss on disposal of a business (Note 3)
Impairment of property, plant and equipment (Note 16)
Impairment of intangibles (Note 17)
Impairment of inventories
Impairment of trade and other receivables (Note 10(c))
Research and development expense
2013
$'000
2012
$'000
2,590
23,970
26,560
419
385
2,118
2,821
5,743
32,303
-
1,292
154
2,983
4,016
8,445
26,582
1,374
-
27,956
-
114
1,118
140
18,500
3,086
2,831
17,764
1,947
19,573
21,520
183
225
1,368
-
1,776
23,296
(404)
1,648
(325)
1,200
1,509
3,628
21,469
531
(80)
21,920
278
-
-
513
-
816
712
15,823
103
DuluxGroup Annual Report 2013
103
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
8
a)
Income tax
Income tax expense recognised in the consolidated income statement
Current tax expense
Deferred tax expense/(benefit)
Over provision in prior years (1,2)
Total income tax expense in the consolidated income statement
Deferred tax expense/(benefit) included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
Decrease in deferred tax liabilities
b) Reconciliation of prima facie tax expense to income tax expense
Profit before income tax expense
Prima facie income tax expense calculated at 30%
of profit before income tax expense
Tax effect of items which (decrease)/increase tax expense:
Variation in tax rates of foreign controlled entities
Entertainment
Non allowable share-based payments
Research and development
Share of net profit of joint venture accounted for using the equity method
Net non-deductible/non-assessable income
Non-deductible impairment of intangibles
Tax consolidation adjustment(2)
Tax offset for franked dividends
Tax losses not recognised
Non-assessable gain on sale of asset
Non-deductible transaction costs
Sundry items
Income tax expense reported in the consolidated income statement
2013
$'000
32,876
1,750
(599)
34,027
2012
$'000
33,945
(1,449)
(7,970)
24,526
2,792
(1,042)
1,750
(1,393)
(56)
(1,449)
2013
$'000
99,568
2012
$'000
110,790
29,870
33,237
814
359
704
(542)
(354)
(3,430)
4,625
-
-
1,761
(2,659)
1,535
1,344
34,027
13
274
452
(372)
(450)
(3,008)
-
(6,250)
(846)
1,738
-
-
(262)
24,526
(1)
(2)
The over provision recognised for the financial year ended 30 September 2012 largely comprises changes to the tax consolidation
adjustments recognised in previous reporting periods. Refer footnote 2 below for further details.
On forming the Australian tax consolidated group effective from 19 July 2010, management undertook an exercise to calculate the impact of
tax consolidation on the recognised values of deferred tax balances in Australia. Management has completed the tax exit calculation with no
further deferred tax asset recognised in the financial year ended 30 September 2013 (2012 $6,250,000).
c)
Income tax expense recognised in other comprehensive income
2013
2012
$'000
$'000
$'000
$'000
$'000
$'000
Before
tax
Tax
expense
Net of
tax
Before
tax
Tax
benefit
Net of
tax
Effective portion of changes in fair value of cash flow
hedges
Actuarial gains/(losses) on defined benefit plan
97
9,433
9,530
(29)
(2,830)
(2,859)
68
6,603
6,671
(517)
(875)
(1,392)
155
263
418
(362)
(612)
(974)
104
104
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
8
Income tax (continued)
d) Unrecognised deferred tax assets and liabilities
Tax losses not recognised in:
China(1)
Hong Kong
Singapore
(1)
Expiration dates between 2013 and 2018 (2012 between 2012 and 2017).
e) Unrecognised temporary differences
Temporary differences relating to investments in subsidiaries for
which deferred tax assets/(liabilities) have not been recognised
Unrecognised deferred tax assets relating to the above temporary differences
2013
$'000
2012
$'000
5,109
107
27
5,243
3,441
27
23
3,491
2013
$'000
2012
$'000
66
12,352
20
3,706
A deferred tax asset has not been recognised in respect of temporary differences arising as a result of the translation of
the financial statements of the Company’s subsidiaries. The deferred tax asset will only be realised in the event of
disposal of the subsidiary and no such disposal is expected in the foreseeable future.
f) Tax consolidation
DuluxGroup Limited is the head entity of the Australian tax consolidated group. As the head entity, the Company
recognises the tax effects of its own transactions and the current tax liabilities and the deferred tax assets arising from
unused tax losses and unused tax credits assumed from the subsidiary entities.
g) New Zealand Inland Revenue Department proceedings
On 5 March 2013 the New Zealand Court of Appeal handed down its judgement in favour of the Commissioner of
Taxation. The decision upheld the judgement of the High Court handed down on 12 December 2011 in relation to the tax
challenge proceedings issued in 2010 against the Inland Revenue Department by Alesco New Zealand Limited (Alesco
NZ), now a wholly owned subsidiary of DuluxGroup. Alesco NZ has applied for and been granted leave to appeal the
decision to the New Zealand Supreme Court and the hearing date has been set for 18 February 2014.
The proceedings relate to the question of tax deductibility of interest on an Optional Convertible Note (OCN) financing
arrangement put in place by Alesco NZ in 2003 and relates to the 2003-2008 tax years. This arrangement was unwound
in July 2010. There is also an exposure for the 2009-2011 tax years which were not subject to the proceedings but are
likely to be dealt with in the same manner as eventually determined for the 2003-2008 tax years and therefore also
included in the amount provided.
At 30 September 2013, a total of NZD 12,718,000 (AUD 11,324,000), representing the potential total liability, has been
recognised as part of provisions for contingent liability from business acquisitions (NZD 7,688,000 (AUD 6,845,000)) and
current tax (NZD 5,030,000 (AUD 4,479,000)).
9 Cash and cash equivalents
Cash at bank and on hand
Cash at bank - restricted(1)
2013
$'000
43,529
2,845
46,374
2012
$'000
25,298
3,210
28,508
(1) DuluxGroup operates a customer loyalty programme, which is managed on behalf of DuluxGroup by a third party. Under the terms of this
arrangement, DuluxGroup is required to maintain sufficient funds in a programme specific bank account to honour in full the potential
redemption value of rewards by customers. The ability to use this cash is contractually restricted and has therefore been presented
separately.
105
DuluxGroup Annual Report 2013
105
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
10 Trade and other receivables
Current
Trade receivables
Less allowance for impairment
Other receivables
Non-current
Other receivables
a) Trade receivables
2013
$'000
2012
$'000
224,954
(3,079)
221,875
4,791
226,666
157,120
(2,544)
154,576
3,141
157,717
96
22
Current trade receivables include $6,925,000 (2012 $8,471,000) of receivables arising from trade cards used by
customers to finance trade debts that have effectively been transferred from DuluxGroup. These receivables do not
qualify for derecognition due to DuluxGroup's exposure to the credit risk associated with the relevant debtors via
guarantees provided to financial institutions should the debtors not pay. A corresponding liability is recognised in interest-
bearing liabilities (refer Note 20).
In addition, current receivables is net of $23,278,000 (2012 $24,045,000) of rebates payable. DuluxGroup has the legal
right to offset such balances as they are with the same customers and it is DuluxGroup’s intention to net settle any
outstanding balances.
Refer to Note 28 for terms and conditions relating to related party trade receivables.
b) Trade receivables and allowance for impairment
Not past due
Past due 0 - 30 days
Past due 31 - 60 days
Past due 61 - 90 days
Past due 91 - 120 days
Past 120 days
2013
2013
Gross Allowance
$'000
$'000
87
183,996
28
27,984
17
3,823
54
2,456
475
2,886
2,418
3,809
3,079
224,954
2012
Gross
$'000
131,601
15,762
2,787
2,037
1,493
3,440
157,120
2012
Allowance
$'000
18
99
92
129
180
2,026
2,544
Trade receivables have been aged according to their due date in the above ageing analysis.
Trade receivables are carried at amounts due. Receivables that are not past due and not impaired are considered
recoverable. Payment terms are generally 30 days from the end of the month in which the invoice is issued. A risk
assessment process is used for all accounts with a stop credit process in place for most long overdue accounts. Credit
insurance cover is obtained where appropriate.
The collectability of trade receivables is assessed continuously and at balance date specific allowances are made for any
doubtful trade receivables based on a review of all outstanding amounts at year end. Bad debts are written off during the
year in which they are identified.
The following basis has been used to assess the allowance for doubtful trade receivables:
•
•
•
a statistical approach to determine the historical allowance rate for various tranches of receivables;
an individual account by account assessment based on past credit history; and
prior knowledge of debtor insolvency or other credit risk.
No material security is held over trade receivables.
There are no individually significant receivables that have had renegotiated terms that would otherwise, without that
renegotiation, have been past due or impaired.
106
106
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
10 Trade and other receivables (continued)
c) Movement in allowance for impairment of trade receivables
Balance at 1 October
Allowances made during the year
Allowances written back during the year
Allowances utilised during the year
Foreign currency exchange differences
Balance at 30 September
d) Fair values
2013
$'000
2,544
3,601
(770)
(2,524)
228
3,079
2012
$'000
3,137
1,022
(310)
(1,263)
(42)
2,544
The net carrying amount of trade and other receivables approximates their fair values.
e) Concentrations of credit risk
The maximum exposure to credit risk is the carrying value of receivables. No material collateral is held as security over
any of the receivables.
DuluxGroup has policies in place to ensure that the supply of products and services are made to customers with
appropriate credit history. Customers who wish to trade on credit terms are subject to credit verification procedures,
including an assessment of their independent credit rating, financial position, past experience and industry reputation.
DuluxGroup has some major customers who represent a significant proportion of its revenue. However, the customers’
size, credit rating and long term history of full debt recovery are indications of lower credit risk.
11 Inventories
Raw materials
Work in progress
Finished goods
2013
$'000
33,161
5,606
157,012
195,779
2012
$'000
23,425
3,996
101,799
129,220
The cost of goods sold recognised in the consolidated income statement for the financial year ended 30 September 2013
amounted to $845,611,000 (2012 $602,327,000).
107
DuluxGroup Annual Report 2013
107
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
12 Derivative financial assets and liabilities
Current
Derivative financial assets
Foreign exchange options - cash flow hedges
Derivative financial liabilities
Foreign exchange contracts - held for trading
Non-current
Derivative financial assets
Interest rate options - cash flow hedges
Cash flow hedges
2013
$'000
2012
$'000
298
298
2
2
-
-
56
56
39
39
2
2
Cash flow hedges are used to hedge exposures relating to borrowings and ongoing business activities, where there is a
highly probable sale, purchase or settlement commitment in foreign currencies.
a) Foreign exchange transactions
The hedging of foreign exchange transactions is described under foreign exchange risk management in Note 37(b).
The fair value of foreign exchange options used as hedges of foreign exchange transactions at 30 September 2013 was
$298,000 (2012 $56,000), comprising assets of $298,000 (2012 $56,000).
The following table shows the maturities of the receipts/payments of derivative instruments designated as cash flow
hedges:
Vanilla European Option Contracts
Buy US Dollars/sell Australian Dollars
No later than one year
Buy Chinese Renminbi/sell Australian Dollars
No later than one year
Weighted
average
rate
2013
Weighted
average
rate
2012
‘000
2013
’000
2012
0.9107
USD 9,324
1.0047
USD 5,557
5.4000 RMB 45,000
-
-
The cash flow hedge reserve at 30 September 2013 includes a net gain of $1,400 ($1,000 net of tax) (2012 net loss of
$71,000 ($50,000 net of tax)) on foreign exchange options which is expected to be recognised within 12 months.
The terms of the foreign currency hedges have been negotiated to match the terms of the commitments.
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly
in equity. Then depending on the nature of the underlying hedged item the amount deferred in the cash flow hedge
reserve in equity will subsequently be transferred to either the income statement or the cost of the asset or liability. Refer
Note 1(w) for further details.
108
108
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
12 Derivative financial assets and liabilities (continued)
b)
Interest rate option contracts
Interest rate options are stated at fair value and classified as cash flow hedges if they are used to transfer floating rate
debt into fixed rate debt. The portion of the gain or loss on the options that is determined to be an effective hedge is
recognised directly in equity, with the remainder recognised in the income statement. All options are matched directly
against the appropriate loans and interest expense and as such are considered highly effective. There was a derivative
asset of $NIL (2012 $2,000) recognised as at 30 September 2013.
The notional amounts of interest rate options as summarised below represent the contract or face values of these
derivatives. The notional amounts do not represent amounts exchanged by the parties. The amounts to be net settled will
be calculated with reference to the notional amounts and the interest rates determined under the terms of the derivative
contracts. Each option contract involves quarterly receipt of the net amount of interest where applicable:
Floating to fixed options
One to two years
Fixed interest rate p.a.
2013
$’000
2012
$’000
120,000
5.50%
150,000
5.00% to 5.50%
The cash flow hedge reserve at 30 September 2013 includes a net gain of $NIL ($NIL net of tax) (2012 a net loss of
$24,000 ($17,000 net of tax)) on interest rate options which is largely expected to be recognised within 12 months.
Derivatives not designated in a hedging relationship
Certain derivative instruments do not qualify for hedge accounting, despite being commercially valid economic hedges of
the relevant risks. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are
recognised immediately in the income statement (for example, changes in the fair value of any economic hedge not
qualifying for hedge accounting).
Fair value of derivatives
The carrying value of derivatives approximates their fair values. Valuation techniques include, where applicable, reference
to prices quoted in active markets, discounted cash flow analysis, fair value of recent arm’s length transactions involving
the same instruments or other instruments that are substantially the same, and option pricing models.
The fair value of forward exchange contracts are calculated by reference to forward exchange market rates for contracts
within similar maturity profiles at the time of valuation.
The fair values of interest rate options, foreign exchange option contracts and other financial liabilities measured at fair
value are determined using valuation techniques which utilise data from observable markets. Assumptions are based on
market conditions existing at each balance date. The fair value is calculated as the present value of the estimated future
cash flows using an appropriate market based yield curve, which is independently derived and representative of
DuluxGroup’s cost of borrowings.
The table below presents the Group’s derivative financial assets and liabilities measured and recognised according to the
fair value measurement hierarchy.
2013
Forward foreign exchange contracts
Foreign exchange options
2012
Forward foreign exchange contracts
Interest rate options
Foreign exchange options
Level 1(1)
$’000
-
-
Level 1(1)
$’000
-
-
-
Level 2(2)
$’000
(2)
298
Level 2(2)
$’000
(39)
2
56
Level 3(3)
$’000
-
-
Level 3(3)
$’000
-
-
-
Total
$’000
(2)
298
Total
$’000
(39)
2
56
(1)
(2)
(3)
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Inputs other than quoted prices included within Level 1 that are observable for the asset or liabilities, either directly (as prices) or indirectly
(i.e. derived from prices).
Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).
109
DuluxGroup Annual Report 2013
109
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
13 Other assets
Current
Prepayments
Other
Non-current
Prepayments
Other
14 Investment in listed equity securities
Equity investments at fair value through other comprehensive income
Ordinary shares held in Alesco Corporation Limited(1)
2013
$'000
6,165
46
6,211
4,231
-
4,231
2012
$'000
3,444
102
3,546
4,996
2
4,998
2013
$'000
2012
$'000
-
-
36,848
36,848
(1) As at 30 September 2013, this investment is eliminated in full on consolidation owing to DuluxGroup’s successful takeover of Alesco. Refer to
Note 2 for further details of this transaction. For the financial year ended 30 September 2012, the fair value of the ordinary shares held in
Alesco is derived from quoted prices (unadjusted) from the Australian Securities Exchange.
15 Investments accounted for using the equity method
The consolidated entity has an interest in the following entity:
Percentage of
ownership interest
held at end of the
Name of entity
Pinegro Products Pty Ltd(1)
financial year Contribution to net profit
2012
$'000
2012
%
2013
$'000
2013
%
50.0
50.0
1,181
1,500
(1) Acquired on 1 December 2009 and incorporated on 10 April 1979.
There were no commitments and contingent liabilities in the joint ventures as at 30 September 2013 (2012 $NIL).
Results of joint venture
Share of joint venture’s profit before income tax
Share of joint venture’s income tax expense
Share of net profit of joint venture accounted for using the equity method
Movements in carrying amounts of investments
Balance at 1 October
Share of net profit of joint venture accounted for using the equity method
Less distributions from joint venture
Balance at 30 September
Summary of profit and loss of the joint venture on a 100% basis
The revenue from sale of goods and net profit for the financial year of the joint venture is:
Revenue from sale of goods
Net profit for the financial year
Summary of balance sheet of the joint venture on a 100% basis
The assets and liabilities of the joint venture are:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
2013
$'000
1,687
(506)
1,181
3,747
1,181
(250)
4,678
2012
$'000
2,143
(643)
1,500
2,497
1,500
(250)
3,747
16,640
2,362
14,778
2,093
5,860
6,094
11,954
2,271
327
2,598
9,356
4,559
6,407
10,966
2,759
713
3,472
7,494
110
110
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
16 Property, plant and equipment
Land
At cost
Buildings and leasehold improvements
At cost
Less accumulated depreciation and impairment
Machinery, plant and equipment
At cost
Less accumulated depreciation and impairment
Total net book value
At cost
Less accumulated depreciation and impairment
Total net book value of property, plant and equipment
a) Assets under construction
2013
$'000
2012
$'000
37,112
28,989
90,186
(29,645)
60,541
327,551
(161,395)
166,156
454,849
(191,040)
263,809
67,754
(28,628)
39,126
270,547
(139,606)
130,941
367,290
(168,234)
199,056
Included in the above are assets under construction at 30 September 2013 of $10,850,000 (2012 $5,205,000).
b) Capitalised borrowing costs
Included in the above is interest capitalised on qualifying assets during the financial year ended 30 September 2013 of
$NIL (2012 $80,000). For the financial year ended 30 September 2012, the capitalisation amount is the actual interest
expense incurred on borrowings used specifically to fund the capital expenditure on qualifying assets.
c) Reconciliations
Reconciliations of the net book values of property, plant and equipment are set out below:
2013
Balance at 1 October 2012
Additions
Additions through business acquisitions (Note 2)
Disposals
Reduction through business disposal (Note 3)
Offset with provisions
Depreciation expense
Impairment expense
Foreign currency exchange differences
Balance at 30 September 2013
2012
Balance at 1 October 2011
Additions
Additions through business acquisitions (Note 2)
Disposals
Offset with provisions
Depreciation expense
Impairment expense
Foreign currency exchange differences
Balance at 30 September 2012
(1) Refer to footnote 1 of Note 21(g) for further details of this transfer.
Buildings
and leasehold
Land improvements
$'000
$'000
Machinery,
plant and
equipment
$'000
28,989
-
8,270
(360)
-
-
-
-
213
37,112
28,970
-
-
-
-
-
-
19
28,989
39,126
2,921
20,230
(716)
-
(26)
(2,590)
-
1,596
60,541
33,907
7,699
-
(31)
(597)
(1,947)
-
95
39,126
(1)
(1)
130,941
22,449
34,420
(226)
(464)
-
(23,970)
(140)
3,146
166,156
133,482
14,980
2,975
(403)
-
(19,573)
(513)
(7)
130,941
Total
$'000
199,056
25,370
62,920
(1,302)
(464)
(26)
(26,560)
(140)
4,955
263,809
196,359
22,679
2,975
(434)
(597)
(21,520)
(513)
107
199,056
111
DuluxGroup Annual Report 2013
111
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
17 Intangible assets
Goodwill
At cost
Patents, trademarks and rights
At cost
Less accumulated amortisation
Brand names
At cost
Less accumulated amortisation
Software
At cost
Less accumulated amortisation
Customer contracts and relationships
At cost
Less accumulated amortisation
Total net book value
At cost
Less accumulated amortisation
Total net book value of intangible assets
a) Assets under development
2013
$'000
2012
$'000
138,404
138,404
54,136
54,136
7,576
(4,433)
3,143
4,455
(3,645)
810
64,130
(1,592)
62,538
41,211
(1,064)
40,147
27,609
(20,915)
6,694
20,355
(18,618)
1,737
27,800
(2,821)
24,979
-
-
-
265,519
(29,761)
235,758
120,157
(23,327)
96,830
Included in the above are software assets under development at 30 September 2013 of $3,445,000 (2012 $1,361,000).
112
112
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
17 Intangible assets (continued)
b) Reconciliations
Reconciliations of the net book values of intangible assets are set out below:
2013
Balance at 1 October 2012
Additions
Additions through business
acquisitions (Note 2)
Amortisation expense
Impairment of intangibles
Adjustment for prior year
acquisitions
Foreign currency exchange differences
Balance at 30 September 2013
2012
Balance at 1 October 2011
Additions
Additions through business
acquisitions (Note 2)
Amortisation expense
Foreign currency exchange differences
Balance at 30 September 2012
Patents,
trademarks
and rights
$'000
Brand
names Software
$'000
$'000
Customer
Contracts
$'000
Total
$'000
810
-
40,147
-
1,737
3,546
-
-
96,830
3,546
2,700
(419)
-
-
52
3,143
20,800
(385)
-
1,700
276
62,538
(1)
979
-
40,434
-
3,512
(2,118)
-
-
17
6,694
1,906
1,221
-
(183)
14
810
-
(225)
(62)
(1)
40,147
-
(1,368)
(22)
1,737
27,800
(2,821)
-
-
-
24,979
-
-
-
-
-
-
154,946
(5,743)
(18,500)
629
4,050
235,758
87,024
1,221
11,536
(1,776)
(1,175)
96,830
Goodwill
$'000
54,136
-
100,134
-
(18,500)
(1,071)
3,705
138,404
43,705
-
11,536
-
(1,105)
54,136
(1)
Includes an amount of $59,158,000 (2012 $38,358,000) relating to brand names with indefinite useful lives.
c) Allocation of goodwill and intangible assets with indefinite useful lives
The allocation of goodwill and brand names with indefinite lives to cash-generating units are as follows:
Paints Australia
Selleys Yates
China(3)
Garage Doors and Openers (4)
Parchem (4)
Lincoln Sentry(4)
Goodwill (1)
2013
$'000
8,063
20,325
9,882
53,139
25,187
21,808
138,404
2012
$'000
8,063
20,210
25,863
-
-
-
54,136
Brand names (2)
2013
$'000
23,500
14,858
2012
$'000
23,500
14,858
-
15,000
3,400
2,400
59,158
-
-
-
-
38,358
(1) Goodwill acquired in a business combination is measured at cost less any accumulated impairment losses.
(2) Brand names assessed to have indefinite lives are identified on the basis of brand strength, expectations of continuing profitability and future
business commitment to these brands.
(3) Includes DuluxGroup’s operations in China and Hong Kong.
(4) Allocation of goodwill and brand names associated with the acquisition of the Alesco Group is currently provisional. Refer to Note 2 for further
details.
113
DuluxGroup Annual Report 2013
113
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
17 Intangible assets (continued)
d) Impairment testing of goodwill and intangible assets with indefinite useful lives
Other than for the China CGU as discussed below, impairment testing at 30 September 2013 did not result in impairment
charges being recognised by DuluxGroup.
The calculation of recoverable amount for DuluxGroup impairment testing purposes is sensitive to changes in discount
rates, terminal value growth rates applied in perpetuity, expected sales revenue growth rates in the forecast period, and
earnings varying from the assumptions and forecast data used. As such, sensitivity analysis was undertaken to examine
the effect of a change in a variable on each CGU. For all CGUs other than the China CGU, a reasonable possible change
in these inputs would not cause the recoverable amount to be below the carrying amount.
For the China CGU, the recoverable amount has been determined based on its fair value less cost to sell, and takes
account of recent observable market based information, in particular gross margin and revenue multiples for similar
businesses in China. Following completion of the impairment testing on this basis, it was determined that the carrying
amount of the China CGU was in excess of its recoverable amount. DuluxGroup’s share of this charge was $10,200,000.
The income statement includes an impairment loss of $18,500,000, being DuluxGroup’s share of $10,200,000 and
$8,300,000 attributable to non-controlling interest. A further impairment loss of $1,500,000 attributable to the non-
controlling interest has not been recognised, as the remaining goodwill is attributable to the merger of the Group’s Hong
Kong and China net assets with those of National Lacquer Paint and Products Co Ltd (NLPP) which were accounted for
on a proportional basis, meaning that only DuluxGroup’s share of goodwill from this transaction is recognised (refer Note
2). The impairment loss of $18,500,000 is included in ‘Other expenses’ in the income statement and is disclosed as part of
‘Other businesses’ in the segment report (refer Note 5).
As a result of recognising the impairment charge, the carrying value of the China CGU is at its recoverable amount. Any
further decline in this recoverable amount will result in further impairment losses to be recognised in future financial years.
114
114
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
18 Deferred tax assets
The balance comprises temporary differences attributable to:
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
Trade and other payables
Provisions
Employee entitlements
Tax losses
Other
Deferred tax assets
Expected to be recovered within 12 months
Expected to be recovered after more than 12 months
Movements:
Balance at 1 October
Additions made through business acquisitions (Note 2)
Reduction through business disposal
(Charged)/credited to profit or loss
(Charged)/credited to other comprehensive income (Note 8(c))
Foreign currency exchange differences
Balance at 30 September
19 Trade and other payables
Current
Trade payables
Other payables
Non-current
Other payables
2013
$'000
2012
$'000
1,140
2,785
5,472
5,116
8,105
7,840
16,628
447
1,373
48,906
26,344
22,562
48,906
36,186
18,470
(532)
(2,792)
(2,859)
433
48,906
484
1,934
6,094
5,265
3,093
1,972
15,723
434
1,187
36,186
13,814
22,372
36,186
33,994
396
-
1,393
418
(15)
36,186
2013
$'000
2012
$'000
193,299
55,102
248,401
-
-
151,262
34,884
186,146
43
43
a) Significant terms and conditions
Trade payables are normally settled within 60 days from invoice date or within the agreed payment terms with the supplier.
Refer to Note 28 for terms and conditions applicable for related party trade payables.
b) Fair values
The carrying amount of trade and other payables approximate their fair values due to their short term nature.
115
DuluxGroup Annual Report 2013
115
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
20 Interest-bearing liabilities
Current
Unsecured
Trade cards (1)
Bank loan - RMB denominated(2)
Bank loan - HKD denominated(3)
Non-current
Unsecured
Bank loan - AUD denominated(4)
2013
$'000
2012
$'000
6,925
7,213
1,569
15,707
8,471
4,558
494
13,523
419,372
419,372
245,237
245,237
(1) Trade cards used by customers to finance trade debts which are partially guaranteed by DuluxGroup. Therefore, these do not qualify for
derecognition and have been included in both trade receivables (refer Note 10) and interest-bearing liabilities.
(2) The current Chinese Renminbi (RMB) unsecured bank loan amount comprises of RMB 41,000,000 (AUD 7,213,000) (2012 RMB 30,000,000
(AUD 4,558,000)) drawn under an overseas bank loan facility.
(3) The current Hong Kong Dollar (HKD) unsecured bank loan amount comprises of HKD 11,300,000 (AUD 1,569,000) (2012 HKD 4,000,000
(AUD 494,000)) drawn under an overseas bank loan facility.
(4) The non-current AUD denominated unsecured bank loan amount comprises of $423,000,000 (2012 $248,000,000) drawn under the Group’s
syndicated bank loan facilities, net of unamortised prepaid establishment fees of $3,628,000 (2012 $2,763,000).
a) Fair values
The carrying amounts of the Group's current and non-current interest-bearing liabilities approximate their fair values.
b) Assets pledged as security
While there were no assets pledged as security by DuluxGroup Limited and its controlled entities, the following entities
have provided a guarantee in relation to the Group’s syndicated bank loan facilities and other overseas bank facilities:
• DuluxGroup Limited
• DuluxGroup (Finance) Pty Ltd
• DuluxGroup (Investments) Pty Ltd
• DuluxGroup (New Zealand) Pty Ltd
• DuluxGroup (Australia) Pty Ltd
• Dulux Holdings Pty Ltd
• DuluxGroup (Nominees) Pty Ltd
• DuluxGroup (PNG) Pte Ltd
• Alesco Corporation Limited
• Alesco Finance Pty Ltd
• Automatic Technology (Australia) Pty Ltd
• B&D Australia Pty Ltd
•
• Parchem Construction Supplies Pty Ltd
• B&D Doors (NZ) Limited
• Concrete Plus Limited
Lincoln Sentry Group Pty Ltd
c) Defaults and breaches
During the current and prior year, there were no defaults or breaches of covenants on any loans.
116
116
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
21 Provisions
Current
Employee entitlements
Environmental
Deferred income - customer loyalty programme
Leased properties
Warranty
Contingent liability from business acquisitions
Other
Non-current
Employee entitlements
Deferred income - customer loyalty programme
Leased properties
Contingent liability from business acquisitions
Other
2013
$'000
2012
$'000
(1)
20,511
867
1,023
593
1,570
8,025
4,535
37,124
27,075
1,517
11,657
-
-
40,249
15,576
97
1,070
395
514
-
-
17,652
16,224
1,763
3,681
568
1
22,237
(1) Includes an amount of NZD $7,688,000 (AUD $6,845,000) (2012 NZD $NIL (AUD $NIL)) relating to the New Zealand Inland Revenue
Department Proceedings (refer Note 8(g)).
a) Environmental
Estimated costs for the remediation of soil and untreated waste that have arisen as a result of past events have been
provided where a legal or constructive obligation exists and a reliable estimate of the liability is able to be assessed.
DuluxGroup expects to settle the obligation within the next 12 months.
b) Deferred income – customer loyalty programme
DuluxGroup operates a loyalty programme under which customers accumulate points for purchases made which they are
entitled to redeem for items from a catalogue. The award points are recognised as a separately identifiable component of
the initial sale transaction by allocating the fair value of the consideration received between the award points and the other
components of the sale such that the award points are recognised at their fair value. Revenue from the award points is
deferred and recognised when the points are redeemed. This provision accounts for this deferral. DuluxGroup expects to
settle these provisions over a period of up to 4 years.
c) Leased properties
The Group leases offices, warehouses, retail bulky goods and manufacturing sites under non-cancellable operating
leases. The leases have varying terms, escalation clauses and renewal rights.
In accordance with the accounting policy in Note 1(h), payments to be made under leases with fixed rent escalation
clauses are recognised in the income statement on a straight-line basis over the term of the lease contract. In addition,
under certain circumstances DuluxGroup has an obligation to restore its leased premises to an acceptable condition at the
end of the respective lease terms. A provision is recognised to account for any amounts arising from these requirements.
DuluxGroup had also identified certain leased sites that were surplus to its requirements. Where these sites have non-
cancellable leasing arrangements and DuluxGroup is unable to sub-lease the sites at a rate that would allow it to recover
its rental costs, a provision is recognised for the shortfall in rental income. DuluxGroup expects to settle these provisions
over the life of the respective lease terms.
d) Warranty
DuluxGroup generally offers a warranty for its products. A provision is recognised for DuluxGroup’s obligation to honour
the warranty provided to customers. DuluxGroup expects to settle these obligations within the next 12 months.
e) Contingent liability from business acquisitions
A provision is recognised on acquisition of a business for contingent liabilities of that business. DuluxGroup expects to
settle these liabilities within the next 12 months.
f) Other
Other provision comprises of amounts for committed internal reorganisations and sales returns. DuluxGroup expects to
settle these provisions within the next 12 months.
117
DuluxGroup Annual Report 2013
117
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
21 Provisions (continued)
g) Reconciliations
Reconciliations of the carrying amounts of provisions in the current financial year are set out below:
Deferred
income -
customer
loyalty
programme
$'000
2,833
1,292
Environmental
$'000
97
-
Leased
properties
$'000
4,076
652
Warranty
$'000
514
3,220
Contingent
liability
from
business
acquisition
$'000
568
-
Other
$'000
1
4,016
Total
$'000
8,089
9,180
900
-
(130)
-
-
-
-
-
(1,831)
-
-
246
8,948
2,369
7,476
948
20,641
(498)
(2,159)
(237)
(3,563)
-
(903)
-
(430)
(735)
(9,016)
(1)
(26)
-
-
1,128
(788)
-
-
-
-
-
-
-
-
4,535
(26)
(788)
1,374
1,068
29,787
-
867
-
2,540
129
12,250
55
1,570
884
8,025
Current and non-current
Balance at 1 October 2012
Provisions made during the year
Additions through business
acquisitions (Note 2)
Provisions written back during the
year
Provisions utilised during the year
Offset with property, plant and
equipment
Reduction through business
disposals
Unwind of discounting
Foreign currency exchange
differences
Balance at 30 September 2013
(1) In accordance with DuluxGroup’s accounting policy in Note 1(s), the creation of a leased property restoration provision requires recognition of
an equal and offsetting asset amount as part of property, plant and equipment at inception of the lease. When this provision is reassessed in
subsequent reporting periods, to the extent possible, an equal and offsetting adjustment is made to the corresponding asset balance. Where a
decrease in the provision exceeds the carrying value of the corresponding asset, any excess is written off to the income statement and is
included in provisions written back during the year in the table above.
22 Deferred tax liabilities
The balance comprises temporary differences attributable to:
Property, plant and equipment
Intangible assets
Trade and other payables
Other
Deferred tax liabilities
Expected to be settled within 12 months
Expected to be settled after more than 12 months
Movements:
Balance at 1 October
Additions through business acquisitions
Credited to profit or loss
Foreign currency exchange differences
Balance at 30 September
118
2013
$'000
2012
$'000
336
255
322
1
914
324
590
914
986
-
(56)
(16)
914
3,212
14,260
69
261
17,802
331
17,471
17,802
914
17,811
(1,042)
119
17,802
118
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
23 Superannuation commitments
a) Superannuation plans
DuluxGroup contributes to a number of superannuation plans that exist to provide benefits for employees and their
dependants on retirement, disability or death. The superannuation plans cover company sponsored plans, other qualifying
plans and multi-employer industry/union plans.
Company sponsored plans
The principal benefits are pensions or lump sum payments for members on resignation, retirement, disability or death.
The benefits are provided on either a defined benefit basis or a defined contribution basis.
Employee contribution rates are either fixed by the rules of the plans or selected by members from time to time from a
specified range of rates. The employer entities contribute the balance of the cost required to fund the defined benefits
or, in the case of defined contribution plans, the amounts required by the rules of the plan.
The contributions made by the employer entities to defined contribution plans are in accordance with the requirements
of the governing rules of such plans or are required under law.
Government plans
Some controlled entities participate in government plans on behalf of certain employees, which provide pension
benefits. There exists a legally enforceable obligation on employer entities to contribute as required by legislation.
Industry plans
Some controlled entities participate in industry plans on behalf of certain employees.
These plans operate on an accumulation basis and provide lump sum benefits for members on resignation,
retirement, disability or death.
The employer entities have a legally enforceable obligation to contribute a regular amount for each employee member
of these plans.
The employer entities have no other legal liability to contribute to the plans.
b) Defined contribution pension plans
The consolidated entity contributes to several defined contribution pension plans on behalf of its employees. The amount
recognised as an expense for the financial year ended 30 September 2013 was $19,322,000 (2012 $12,216,000).
c) Defined benefit pension plans
DuluxGroup (Australia) Pty Ltd is the sponsoring employer of the defined benefit post-employment section of The
DuluxGroup Super Fund (the Fund) in Australia.
Funding for post-employment benefits is carried out in accordance with the requirements of the Trust Deed for the Fund
and the advice of the Fund’s actuarial adviser. During the financial year ended 30 September 2013, the consolidated
entity made employer contributions of $5,623,000 (2012 $5,594,000) to the Fund. DuluxGroup’s external actuaries have
forecast total employer contributions to the Fund of $4,375,000 for the financial year ending 30 September 2014. The
Fund is currently closed to new members.
119
DuluxGroup Annual Report 2013
119
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
23 Superannuation commitments (continued)
c) Defined benefit pension plans (continued)
i)
Balance sheet amounts
The amounts recognised in the balance sheet are determined as follows:
Present value of the defined benefit obligations
Fair value of defined benefit plan assets
Net defined benefit liability recognised in the balance sheet at the end of the financial year
2013
$’000
141,297
(133,031)
8,266
2012
$’000
142,259
(121,390)
20,869
ii) Categories of plan assets
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
Equity instruments
Fixed interest securities
Property
Cash and other assets
iii) Reconciliations
Reconciliation of present value of the defined benefit obligations:
Balance at 1 October
Current service cost
Interest cost
Actuarial (gains)/losses
Contributions by plan participants
Benefits paid
Distributions
Balance at 30 September
Reconciliation of the fair value of the defined benefit plan assets:
Balance at 1 October
Expected return on plan assets
Actuarial gains
Contributions by employer
Contributions by plan participants
Benefits paid
Distributions
Balance at 30 September
2013
47%
14%
14%
25%
2012
41%
18%
14%
27%
2013
$’000
2012
$’000
142,259
4,196
6,042
(3,960)
1,438
(7,552)
(1,126)
141,297
121,390
7,785
5,473
5,623
1,438
(7,552)
(1,126)
133,031
139,539
4,282
6,280
5,387
1,474
(13,576)
(1,127)
142,259
116,925
7,588
4,512
5,594
1,474
(13,576)
(1,127)
121,390
The fair value of plan assets does not include any amounts relating to the DuluxGroup’s own financial instruments,
property occupied by, or other assets used by, the consolidated entity (2012 $NIL).
120
120
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
23 Superannuation commitments (continued)
c) Defined benefit pension plans (continued)
iv) Amounts recognised in the consolidated income statement
Current service cost
Interest cost
Expected return on plan assets
Total included in employee benefits expense
v) Principal actuarial assumptions
The principal actuarial assumptions used were as follows:
2013
$’000
4,196
6,042
(7,785)
2,453
2012
$’000
4,282
6,280
(7,588)
2,974
2013
2012
Discount rate(1)
Expected return on plan assets at 1 October
Future salary increases
Future inflation
(1) The discount rate assumption used for the purposes of discounting the defined benefit obligation is determined by reference to the average
7.25%
3.75%
2.75%
7.25%
3.75%
2.75%
3.40%
4.70%
yield on State Government bonds.
vi) Historic summary
Defined benefit plan obligations
Defined benefit plan assets
Deficit
Experience loss/(gain) arising on plan liabilities
Experience gain/(loss) arising on plan assets
Actual return on plan assets
2013
$’000
141,297
(133,031)
8,266
2012
$’000
142,259
(121,390)
20,869
2011
$’000
139,539
(116,925)
22,614
2010
$’000
127,674
(114,405)
13,269
4,909
5,473
13,258
2,085
4,512
12,100
(811)
(6,706)
859
(764)
(2,860)
4,883
vii) Amounts included in the consolidated statement of comprehensive income
Total actuarial gains/(losses) before tax
Tax (expense)/benefit on total actuarial losses
Total actuarial gains/(losses) after tax
2013
$’000
9,433
(2,830)
6,603
2012
$’000
(875)
263
(612)
The consolidated entity has elected under AASB 119 Employee Benefits, to recognise all actuarial gains/losses in the
consolidated statement of comprehensive income. The cumulative amount of net actuarial loss (before tax) included in the
consolidated statement of comprehensive income to 30 September 2013 is $2,684,000 (2012 loss of $12,117,000).
viii) Expected rate of return on assets assumption
Owing to the adoption of the revised AASB 119 Employee Benefits from 1 October 2013, the expected rate of return
assumption is no longer applicable in the determination of the defined benefit expense to be recognised in the income
statement for financial years commencing after 1 October 2013.
For the financial year ended 30 September 2012, the overall expected rate of return on assets assumption is determined
by weighting the expected long term rate of return for each asset class by the target allocation of plan assets to each
class. The rates of return used for each class are net of investment tax and investment fees.
121
DuluxGroup Annual Report 2013
121
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
24 Contributed equity
Issued and fully paid
Ordinary shares
Less treasury shares
Ordinary shares of the consolidated entity
2013
$'000
201,099
(7,716)
193,383
2012
$'000
180,457
(7,762)
172,695
Movements in fully paid ordinary shares on issue since 1 October 2011 were as follows:
Details
Ordinary shares
Balance at 1 October 2011
Shares issued under the DuluxGroup dividend reinvestment plan (DRP)(1)
Shares vested under the ESIP(2,3)
Shares vested under the LTEIP(2,4)
Balance at 30 September 2012
Shares issued under the DuluxGroup 30 September 2012 final DRP(5)
Shares issued under the DuluxGroup 31 March 2013 interim DRP(6)
Shares issued under the ESIP and the LTEIP(2)
Shares vested under the ESIP(2,3)
Balance at 30 September 2013
Number
of shares
Issue
price $
367,456,259
1,528,643
-
-
368,984,902
2,976,371
2,303,145
2,755,012
-
377,019,430
-
2.92
-
-
3.48
4.44
-
-
$'000
175,629
4,464
77
287
180,457
10,358
10,226
-
58
201,099
(1) The Company has established a DRP under which holders of ordinary shares may be able to elect to have all or part of their dividend
entitlements satisfied by the issue of new fully paid ordinary shares or shares purchased on-market by DuluxGroup. In relation to the interim
dividend paid 15 June 2012, 1,528,643 new shares were issued at a price of $2.92. No new shares were issued in relation to the dividends
paid on 16 December 2011 as the required shares were purchased on-market.
(2)
For details of the DuluxGroup LTEIP and the ESIP, refer to Note 27.
(3) Upon cessation of employment and settlement of amounts outstanding for their ESIP shares, 35,770 shares vested to plan participants (2012
47,824).
(4) In accordance with the plan rules, 124,324 shares vested under the 2010 LTEIP.
(5) Pursuant to the DRP as described in footnote 1, 2,976,371 new shares were issued at a price of $3.48 (net of a discount of 2.5%) for the
dividend paid on 17 December 2012.
(6) Pursuant to the DRP as described in footnote 1, 2,303,145 new shares were issued at a price of $4.44 (net of a discount of 2.5%) for the
dividend paid on 14 June 2013.
122
122
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
24 Contributed equity (continued)
a) Shares issued to subsidiaries and treasury shares
The Company has the flexibility under the ESIP and LTEIP rules to purchase shares on-market, issue new shares or
reallocate forfeited shares to participants in the plans.
DuluxGroup has formed a trust to administer the Group’s employee share schemes. DuluxGroup (Employee Share Plans)
Pty Ltd, is the trustee for the plans. The trust is consolidated as the substance of the relationship is that the trust is
controlled by DuluxGroup.
Where ordinary shares are issued to the trust for the purpose of the employee share schemes, this ordinary share capital
is not recognised on consolidation. Where shares are purchased on-market by the trust for the purpose of the employee
share schemes, the purchase is accounted for as a buy-back and the amount is deducted from contributed equity as
treasury shares on consolidation.
Movements in these shares since 1 October 2011 were as follows:
Details
Balance at 1 October 2011
Shares vested under the ESIP(1,4)
Shares vested under the LTEIP(2,4)
Purchase of shares for the LTEIP and
ESIP(3,4)
Balance at 30 September 2012
Shares vested under the ESIP(1,4)
Shares issued for the LTEIP and
ESIP(4,5)
Balance at 30 September 2013
Number of shares
Issued to
Total
Treasury
subsidiaries
4,872,750 - 4,872,750
(29,460) (18,364) (47,824)
$'000
Issued to
Total
subsidiaries Treasury
12,525 -
12,525
(77) (53) (130)
(124,324)
- (124,324)
(320) - (320)
- 2,690,652 2,690,652
- 7,815 7,815
4,718,966 2,672,288 7,391,254
12,128 7,762 19,890
(20,040)
(15,730)
(35,770)
(58)
(46)
(104)
2,755,012
- 2,755,012
7,453,938 2,656,558 10,110,496
10,533
- 10,533
22,603 7,716 30,319
(1) Upon cessation of employment and settlement of amounts outstanding for their ESIP shares, 35,770 shares vested to plan participants (2012
47,824).
(2) In accordance with the plan rules 124,324 shares vested under the 2010 LTEIP and proceeds of $287,292 were received as settlement, being
the residual balance after applying dividends and debt forgiveness of $32,220.
(3) DuluxGroup’s 2011 LTEIP and ESIP requirements were satisfied by an on-market purchase of 2,690,652 DuluxGroup ordinary shares and
reallocation of forfeited 2010 LTEIP and ESIP shares returned to DuluxGroup during the vesting period by executives and employees leaving
DuluxGroup respectively. As these shares are held by the DuluxGroup Employee Share Plan Trust, a wholly owned subsidiary of DuluxGroup
Limited, these shares are either recognised as treasury shares or not recognised depending on whether the shares were originally purchased
on-market or were from a new share issue.
(4) Refer to Note 27 for details of the DuluxGroup LTEIP and ESIP.
(5) DuluxGroup’s 2012 LTEIP and ESIP requirements were satisfied by an issue of 2,755,012 DuluxGroup ordinary shares and the reallocation of
forfeited 2010 and 2011 LTEIP and ESIP shares returned to DuluxGroup during the vesting period by executives and employees leaving
DuluxGroup respectively. As these shares are held by the DuluxGroup Employee Share Plan Trust, a wholly owned subsidiary of DuluxGroup
Limited, these shares are either recognised as treasury shares or not recognised depending on whether the shares were originally purchased
on-market or were from a new share issue.
123
DuluxGroup Annual Report 2013
123
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
25 Reserves
Reserves
Share-based payments
Cash flow hedge
Foreign currency translation
Common control
Revaluation - other financial assets
a) Share-based payments reserve
2013
$'000
7,514
1
(2,530)
(97,702)
-
(92,717)
2012
$'000
5,176
(67)
(11,995)
(97,702)
(752)
(105,340)
The amount reported in the share-based payments reserve each year represents the share-based payments expense
adjusted for amounts transferred to contributed equity on vesting of shares.
b) Cash flow hedge reserve
The amount in the cash flow hedge reserve represents the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred (net of tax).
c) Foreign currency translation reserve
The foreign currency translation reserve records the foreign currency differences arising from the translation of foreign
operations, the translation of transactions that hedge DuluxGroup’s net investment in a foreign operation or the translation
of foreign currency monetary items forming part of the net investment in a foreign operation.
d) Common control reserve
DuluxGroup Limited has elected to account for business combinations under common control at carrying value. As
permitted by Australian Accounting Standards, certain of its subsidiaries, primarily DuluxGroup (New Zealand) Pty Ltd
elected to apply purchase accounting in its own accounting books and records. On consolidation, the effect of this policy
difference on the pre-July 2010 demerger acquisition of the business assets and liabilities in New Zealand is reversed with
the recognition of a common control reserve to the extent that the fair value of the business assets and liabilities exceeded
their carrying value at the date of acquisition.
e) Revaluation reserve – other financial assets
The revaluation reserve represents the cumulative net change in the fair value of listed equity investments that
DuluxGroup has made an irrevocable election to revalue through other comprehensive income.
26 Dividends
The declaration of dividends is subject to the Company satisfying the ‘solvency test’ requirements of the Corporations Act
2001.
a) Ordinary shares
2013
On 13 May 2013, the Directors declared a fully franked interim dividend of 8.0 cents per ordinary share. Dividends
totalling $29,575,000 were paid on 14 June 2013.
On 14 November 2012, the Directors declared a fully franked final dividend of 8.0 cents per ordinary share. Dividends
totalling $29,241,000 were paid on 17 December 2012.
2012
On 14 May 2012, the Directors declared a fully franked interim dividend of 7.5 cents per ordinary share. Dividends
totalling $27,294,000 were paid on 15 June 2012.
On 14 November 2011, the Directors declared a fully franked final dividend of 7.5 cents per ordinary share. Dividends
totalling $27,336,000 were paid on 16 December 2011.
124
124
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
26 Dividends (continued)
b) Subsequent events
On 13 November 2013, the Directors declared a final dividend of 9.5 cents per ordinary share, fully franked and payable
on 18 December 2013.
The financial effect of the final dividend has not been brought to account in the financial report for the financial year ended
30 September 2013 and will be recognised in the financial report for the financial year ending 30 September 2014.
The Company’s DRP will operate with respect to the final dividend. The DRP pricing period will be the five trading days
from 2 December 2013 to 6 December 2013 inclusive. A discount of 2.5% will be applied to the DRP price. Ordinary
shares issued under the DRP will rank equally with all other ordinary shares.
c) Franking credits
Franking credits available at the 30% corporate tax rate after allowing for tax payable in respect of the current year's profit
and the payment of the final dividend for 2013 is $16,143,170 (2012 $NIL).
27 Share-based payments
Total expenses arising from share-based payment transactions recognised during the financial year as part of employee
benefit expense were as follows:
DuluxGroup Long Term Equity Incentive Plan
DuluxGroup Employee Share Investment Plan
2013
$
2,381,072
-
2012
$
1,477,201
615,928
2,381,072
2,093,129
a) DuluxGroup Long Term Equity Incentive Plan (LTEIP)
The LTEIP has been established to incentivise executives to generate shareholder wealth. Under the LTEIP, eligible
executives are provided with an interest free, non-recourse loan from DuluxGroup for the sole purpose of acquiring shares
in the Company. Executives may not deal with the shares while the loan remains outstanding and any dividends paid on
the shares are applied (on an after-tax basis) towards repaying the loan. Executives are entitled to exercise the voting
rights attaching to their DuluxGroup ordinary shares from the date of allocation of those shares. The shares issued to the
executives can be newly issued shares, purchased on-market or reallocated forfeited shares. Shares allocated under this
plan in conjunction with non-recourse loans are accounted for as options. As a result, the amounts receivable from
employees in relation to these loans are not recognised in the financial statements. New shares issued to a wholly owned
subsidiary to satisfy the requirements under this plan are not recognised on consolidation (refer Note 24). Shares
purchased on-market by a wholly owned subsidiary or the Company to satisfy the requirements under this plan are
accounted for as a buy-back and recognised as treasury shares on consolidation (refer Note 24). In accordance with the
requirements of AASB 2 Share-based Payment, a share-based payments expense is recognised in the income statement
over the vesting period based on the fair value of the options. Settlement of share loans upon vesting are recognised as
contributed equity.
Under the LTEIP, the shares allocated to executives are returned to DuluxGroup, subject to discretion retained by the
Directors, if the executives leave DuluxGroup within the vesting period. Typically, the vesting period is approximately
three years, with performance tested following the announcement of annual results in the third year after a grant is made.
Detailed remuneration disclosures, including the link between the LTEIP and shareholder wealth, are provided in the
Remuneration Report section of the Directors’ Report.
125
DuluxGroup Annual Report 2013
125
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
27 Share-based payments (continued)
a) DuluxGroup Long Term Equity Incentive Plan (LTEIP) (continued)
Details of shares issued under this plan and the associated share-based payment expense is as follows:
2010 LTEIP grant
2011 LTEIP grant
2012 LTEIP grant
2012 LTEIP grant(3)
Number at
issue date
4,401,850
2,641,325
2,417,231
330,210
Issue date
19 July 2010/5 August 2010
20 December 2011
19 December 2012
9 July 2013
Issue
price
$2.57
$2.90
$3.70
$4.17
Total expense(1,2)
2012
$
899,230
577,971
-
-
2,381,072 1,477,201
2013
$
1,197,244
646,767
506,391
30,670
(1) Represents the value calculated under AASB 2. The share-based payment expense represents the expense incurred during the financial year
in respect of current incentive allocations to executives. These amounts are therefore not amounts actually received by executives during the
financial year. Whether an executive receives any value from the allocation of long term incentives in the future will depend on the
performance of the Company’s shares. The minimum potential future value of grants under LTEIP is $NIL (2012 $NIL).
(2) Refer to Note 27(a)(ii) for details of the valuation of share options issued in accordance with AASB 2.
(3) A special grant of LTEIP shares was made to eligible Alesco and other new executives on 28 June 2013. These shares were issued on 9 July
2013.
i) Movement in the number of equity instruments held by executives during the year
Grant date
12 July 2010(3)
2 December 2011(6)
30 November 2012(8)
28 June 2013(10)
(1) Where share options are forfeited due to the executive leaving during the year, these amounts are reported as other changes during the year.
Expiry date
January 2014(4)
January 2015(7)
January 2016(9)
January 2016(9)
Exercise
price
N/A
N/A
N/A
N/A
Number
held at year
end
3,705,682
2,556,604
2,366,643
330,210
Number
exercisable
at year end
-(5)
-
-
-
Number
held at 1
October
2012
3,819,099
2,586,143
Number
granted
during
the year
-
-
- 2,417,231
330,210
-
Number
other
changes
during the
year(1,2)
(113,417)
(29,539)
(50,588)
-
(2) The combination of shares and the non-recourse loan provided to fund those shares constitutes an option under Australian Accounting
Standards. These options vest over a period of approximately three to three and a half years. Under the terms of the LTEIP, the loan must be
repaid before the executives can deal with the shares. Accordingly, the exercise period of these options is the loan repayment period, which
commences following the testing of the performance condition typically in November after the annual results announcement and continues
through to the end of January of the following year. In the event options expire as the loan is not repaid within the repayment window these
amounts are reported as other changes during the year.
(3) While the issue and allocation of LTEIP shares to the executives only occurred on either 19 July 2010 or 5 August 2010, in accordance with
the requirements of Australian Accounting Standards, the ‘grant date’ is 12 July 2010 being the date that the Company and the executives
agreed to enter a share-based payment arrangement.
(4) Expiry date is 24 January 2014 coinciding with end of the trading window following the 30 September 2013 results announcement on 13
November 2013.
(5) Since the end of the reporting period, the options relating to the 2010 LTEIP have met the applicable performance condition and vested on 13
November 2013. The restriction on trading these shares will be lifted upon repayment of the loan. The loan must be repaid during the period
from 29 November 2013 to 24 January 2014.
(6) While the issue and allocation of LTEIP shares to the executives only occurred on 20 December 2011, in accordance with the requirements of
Australian Accounting Standards, the ‘grant date’ is 2 December 2011 being the date that the Company and the executives agreed to enter a
share-based payment arrangement.
(7) Expected expiry date is January 2015 coinciding with end of the trading window following the 30 September 2014 results announcement,
which is expected to be in November 2014.
(8) While the issue and allocation of LTEIP shares to the executives only occurred on 19 December 2012, in accordance with the requirements of
Australian Accounting Standards, the ‘grant date’ is 30 November 2012 being the date that the Company and the executives agreed to enter a
share-based payment arrangement.
(9) Expected expiry date is January 2016 coinciding with end of the trading window following the 30 September 2015 results announcement,
which is expected to be in November 2015.
(10) While the issue and allocation of LTEIP shares to the executives only occurred on 9 July 2013, in accordance with the requirements of
Australian Accounting Standards, the ‘grant date’ is 28 June 2013 being the date that the Company and the executives agreed to enter a
share-based payment arrangement.
126
126
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
27
Share-based payments (continued)
a) DuluxGroup Long Term Equity Incentive Plan (LTEIP) (continued)
ii) Fair value of share options granted
The fair value at grant date for the purposes of AASB 2 is independently determined using an adjusted form of the Black-
Scholes option pricing model. Standard option pricing inputs include underlying share price, exercise price, expected
dividends, expected risk-free interest rates and expected share price volatility. In addition, specific factors in relation to the
likely achievement of performance hurdles and employment tenure have been taken into account.
The fair value inputs for share options granted and not yet vested under the DuluxGroup LTEIP are:
LTEIP 2012(1)
28 June 2013(2)
LTEIP 2012
30 November 2012(3)
LTEIP 2011
2 December 2011(4)
LTEIP 2010
12 July 2010(5)
Grant date
Fair value estimate at grant
date ($)
Gateway condition(6)
$1.26
Compound annual
EPS growth over
the three year
period from 30
September 2013
must equal or
exceed 4%
TSR ranking
$0.99
Compound annual
EPS growth over the
three year period
from 30 September
2012 must equal or
exceed 4%
$0.94
Compound annual
EPS growth over
the three year
period from 30
September 2011
must equal or
exceed 4%
TSR ranking
TSR ranking
Performance condition(7)
Expected life of share
options (years)
Expected dividend yield (%)
Expected risk-free interest
rate (%)
Expected share price
volatility (%)
Grant date share price ($)
(1) A special grant of LTEIP shares was made to eligible Alesco and other new executives on 28 June 2013.
22.5%
$4.21
22.5%
$3.50
3.1
NIL
3.1
NIL
2.75%
2.62%
3.1
NIL
3.22%
25.0%
$2.88
$0.98
Compound annual
EPS growth over
the three year
period from 30
September 2010
must equal or
exceed 2%
TSR ranking
3.5
NIL
4.70%
30.0%
$2.54
(2) While the issue and allocation of LTEIP shares to the executives only occurred on 9 July 2013, in accordance with the requirements of
Australian Accounting Standards, the ‘grant date’ is 28 June 2013 being the date that the Company and the executives agreed to enter a
share-based payment arrangement.
(3) While the issue and allocation of LTEIP shares to the executives only occurred on 19 December 2012, in accordance with the requirements of
Australian Accounting Standards, the ‘grant date’ is 30 November 2012 being the date that the Company and the executives agreed to enter a
share-based payment arrangement.
(4) While the issue and allocation of LTEIP shares to the executives only occurred on 20 December 2011, in accordance with the requirements of
Australian Accounting Standards, the ‘grant date’ is 2 December 2011 being the date that the Company and the executives agreed to enter a
share-based payment arrangement.
(5) While the issue and allocation of LTEIP shares to the executives only occurred on either 19 July 2010 or 5 August 2010, in accordance with
the requirements of Australian Accounting Standards, the ‘grant date’ is 12 July 2010 being the date that the Company and the executives
agreed to enter a share-based payment arrangement.
(6) The Board has implemented a ‘gateway’ level of minimum performance for the DuluxGroup LTEIP below which no benefit accrues. This
‘gateway’ is a minimum level of acceptable performance for any of the LTEIP shares to vest.
(7) The relative Total Shareholder Return (TSR) performance hurdle is used to determine the level of loan forgiveness under the DuluxGroup
LTEIP (the forgiveness amount). There is no loan forgiveness amount if DuluxGroup’s relative TSR is below the 51st percentile against a
comparator group. If DuluxGroup’s relative TSR is greater than or equal to the 51st percentile, a proportion of the initial loan balance (on a
‘sliding scale’ from 10% at the 51st percentile up to a maximum of 30% at or above the 75th percentile) is forgiven.
127
DuluxGroup Annual Report 2013
127
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
27 Share-based payments (continued)
b) DuluxGroup Employee Share Investment Plan (ESIP) (continued)
In December 2012, eligible Australian employees of the Group were invited to acquire DuluxGroup ordinary shares to the
value of $1,000 (December 2011 $500 with DuluxGroup matching this participation up to a further $500). Eligible
employees in New Zealand were invited to acquire ordinary shares to the value of NZD 780 (December 2011 NZD 390
with DuluxGroup matching this participation up to a further NZD 390).
In June 2013, a special offer was made to eligible new and former Alesco employees of the Group in Australia to acquire
DuluxGroup ordinary shares to the value of $1,000 or $500. Eligible new and former Alesco employees in New Zealand
were invited to acquire ordinary shares to the value of NZD 780 or NZD 390.
The number of DuluxGroup shares allocated was based on the volume weighted average price at the time of allocation
under the ESIP. The offer was only open to full time and permanent part time employees who had been continuously
employed within the DuluxGroup business for a period of three months prior to the date of the offers and specifically
excluded members of the senior management team and Directors.
A participating employee is entitled to receive all cash dividends paid on their DuluxGroup shares and to exercise the
voting rights attaching to those shares from the date of allocation. Employees who leave DuluxGroup must salary sacrifice
any remaining amount owed prior to becoming entitled to the shares. A share allocated to a participating employee under
the ESIP has trade restrictions attached until the earlier of the end of three years after the date of allocation and the time
when the participant ceases to be employed by DuluxGroup Limited or any of its controlled entities. At the end of the
restriction period, the employee will be able to sell or otherwise deal with their DuluxGroup shares.
In accordance with AASB 2 the accounting expense to the Group for the matching is recognised in full at the time of the
offer. Details of shares issued during the financial year ended 30 September 2013, the associated share-based payment
expense, and the number of unvested shares at 30 September 2013 is as follows:
Total expense
Number of
participants
1,311
1,306
1,362
Number at issue
date
489,840
424,105
341,058
2010 ESIP grant(1)
2011 ESIP grant(2)
2012 ESIP grant(3)
(1) These shares were issued on 9 August 2010 or 28 September 2010 at an issue price of $2.56 or $2.69 respectively.
(2) These shares were issued on 20 December 2011 at an issue price of $2.90.
(3) These shares were issued on 19 December 2012 or 28 June 2013 at an issue price of $3.70 or $4.15 respectively.
Number unvested at
30 September 2013
425,330
390,011
334,968
2013
$
-
-
-
2012
$
-
615,928
-
28 Related party disclosures
a) Key Management Personnel compensation summary
In accordance with the requirements of AASB 124 Related Party Disclosures, the Key Management Personnel (KMP)
include Non-Executive Directors and members of the Group Executive Team who have authority and responsibility for
planning, directing and controlling the activities of DuluxGroup. ‘Executives’ refers to members of the Group Executive
Team identified as KMP.
A summary of KMP compensation is set out in the following table:
Short term employee benefits
Other long term benefits
Post employment benefits
Share-based payments
Total
(1) Includes current and former KMP.
2013
$
5,736,116
86,227
144,797
1,177,921
7,145,061
2012(1)
$
5,338,749
87,458
177,269
971,367
6,574,843
Information regarding individual Director’s and Executive’s compensation and some equity instruments disclosure as
required by Corporation Regulation 2M.3.03 is provided in the Remuneration Report section of the Directors’ Report.
128
128
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
28 Related party disclosures (continued)
b) Key Management Personnel’s transactions in shares and options
The relevant interests of KMPs, including their related parties, in the share capital and options of the Company from the
earlier of their date of appointment or 1 October 2012 are:
Balance held
at date of
appointment
or 1 October
2012
Number of options
for fully paid
ordinary shares held
at 30 September
2013(3)
Number
acquired(1)
Net
change
other(2)
Number of fully paid
ordinary shares held at
30 September 2013
-
12,000
4,925
-
20,000
130,000
68,000
119,176
152,156
20,000
As at 30 September 2013
Non-Executive Directors
Peter Kirby
Gaik Hean Chew
Garry Hounsell
Andrew Larke
Judith Swales
Executive Directors
Patrick Houlihan
Stuart Boxer
Other KMP
Michael Kirkman(4)
2,549
15,408
Brad Hordern
13,753
Patrick Jones
Total
758,590
(1) Includes DuluxGroup Limited shares acquired through purchases and exercise of options.
(2) Net change other includes changes resulting from sales during the financial year.
(3) These interests include shares acquired under a loan agreement. A general description of these agreements (LTEIP) is provided in the
130,000
80,000
124,101
152,156
40,000
13,840
16,046
14,323
808,014
11,291
638
570
49,424
144,322
93,226
144,322
93,226
-
-
-
-
-
-
-
-
-
-
-
-
-
2,466,419
651,494
111,027
332,957
418,749
3,980,646
Remuneration Report. Under AASB 2, the LTEIP plan is deemed to be an option plan for accounting purposes and the amounts receivable
from employees in relation to the underlying loans and share capital allocated under these schemes is not included in the total contributed
equity amount reported by the consolidated entity.
Since the end of the reporting period, the options relating to the 2010 LTEIP have met the applicable performance condition and vested on 13
November 2013. The restriction on trading these shares will be lifted upon repayment of the loan. The loan must be repaid during the period
from 29 November 2013 to 24 January 2014. Refer to the Remuneration Report for details of the number of shares vested as required by
Corporation Regulation 2M.3.03.
(4) Mr Kirkman was appointed to the role of General Manager, Selleys Yates on 1 October 2012 and became a KMP on that date. The opening
balance in the table includes the balance of his share and option holdings at 1 October 2012.
Balance held
at date of
appointment
or 1 October
2011
Number of options
for fully paid
ordinary shares held
at 30 September
2012(3)
Number
acquired(1)
Net
change
other(2)
Number of fully paid
ordinary shares held at
30 September 2012
-
-
-
-
-
-
19,000
5,962
2,716
20,000
130,000
49,000
113,214
149,440
-
As at 30 September 2012
Non-Executive Directors
Peter Kirby
Gaik Hean Chew
Garry Hounsell
Andrew Larke
Judith Swales
Executive Directors
Patrick Houlihan
Stuart Boxer
Other KMP
Brad Hordern
Patrick Jones
Former KMP
Graeme Doyle(4)
41,287
Julia Myers(5)
1,610
709,799
Total
(1) Includes DuluxGroup Limited shares acquired through purchases and exercise of options.
(2) Net change other includes changes resulting from sales during the financial year.
(3) These interests include shares acquired under a loan agreement. A general description of these agreements (LTEIP) is provided in the
130,000
68,000
119,176
152,156
20,000
41,287
1,695
799,023
-
85
89,224
124,322
73,226
144,322
93,226
14,636
13,064
15,408
13,753
20,000
20,000
772
689
-
-
-
-
-
-
-
1,854,398
496,899
221,930
286,079
464,996
120,747
3,445,049
Remuneration Report. Under AASB 2, the LTEIP plan is deemed to be an option plan for accounting purposes and the amounts receivable
from employees in relation to the underlying loans and share capital allocated under these schemes is not included in the total contributed
equity amount reported by the consolidated entity.
(4) Mr Doyle ceased to be a KMP at close of business on 30 September 2012.
(5) Ms Myers was appointed to the role of General Manager, Dulux Paints New Zealand on 1 May 2011 and became a KMP on that date. The
opening balance in the table includes the balance of her share and option holdings at 1 May 2011. Ms Myers ceased to be a KMP at close of
business on 30 September 2012.
129
DuluxGroup Annual Report 2013
129
-
-
-
-
-
-
-
-
-
-
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
28 Related party disclosures (continued)
c) Other transactions with Key Management Personnel
All transactions with KMPs are made on normal commercial terms and conditions and in the ordinary course of business.
2013
At 30 September 2012, consulting and subsidiary board fees of $43,750 remain unpaid to Ms Chew.
There were no other transactions during the financial year nor balances owing to or from KMP as at 30 September 2013.
2012
At 30 September 2012, consulting and subsidiary board fees of $7,292 remain unpaid to Ms Chew.
There were no other transactions during the financial year nor balances owing to or from KMP as at 30 September 2012.
d) Parent entity
The ultimate parent entity within the Group is DuluxGroup Limited, which is domiciled and incorporated in Australia.
e) Controlled entities
Interests in subsidiaries are set out in Note 36.
f) Transactions with other related parties
All transactions with other related parties are made on normal commercial terms and conditions and in the ordinary course
of business. Transactions during the year with joint ventures were:
Sales of goods to joint ventures
Purchases of goods from joint ventures
Distributions received from joint ventures
Royalty income received from joint ventures
g) Outstanding balances with other related parties
2013
$
233,832
2,962,651
250,000
-
2012
$
243,631
2,822,366
250,000
30,000
The following balances are outstanding at the reporting date in relation to transactions with related parties other than KMP:
Current receivables from joint ventures
Current payables to joint ventures
2013
$
34,863
725,572
2012
$
41,875
903,425
No provisions for doubtful debts have been raised against amounts receivable from other related parties.
In the normal course of business, the Group occasionally enters into transactions with various entities that have Directors
in common with DuluxGroup. Transactions with these entities are made on commercial arm’s-length terms and conditions.
The relevant Directors do not participate in any decisions regarding these transactions.
130
130
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
29 Auditors’ remuneration
Total remuneration received, or due and receivable, by the auditors of the Company for:
Audit services - audit and review of financial reports
KPMG Australia
Overseas KPMG firms (1)
Other services (2)
Other assurance services - KPMG Australia
Other assurance services - Overseas KPMG firms
2013
$
2012
$
764,700
427,333
1,192,033
98,900
14,818
113,718
460,000
304,461
764,461
103,300
60,000
163,300
(1) Includes fees paid or payable for overseas subsidiaries' local statutory lodgement purposes and other regulatory compliance requirements.
(2) Other services primarily include assurance based engagements undertaken for compliance and internal governance purposes and tax
compliance. The Audit and Risk Committee must approve any non-statutory services (other services) provided by KPMG above a value of
$50,000 per assignment prior to commencement. Throughout the year, the Committee also reviews and approves other services provided by
KPMG below a value of $50,000. The protocols adopted by KPMG in relation to the provision of other services ensure their independence is
not compromised.
Other services provided by KPMG to the Group are subject to appropriate corporate governance procedures encompassing the selection of
service providers and the setting of their remuneration.
30 Critical accounting estimates and judgements
Management determines the development, selection and disclosure of the consolidated entity’s critical accounting policies,
estimates and judgements and the application of these policies, estimates and judgements. Management necessarily
makes estimates and judgements that have a significant effect on the amounts recognised in the financial statements.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
reasonable expectations of future events. Management believes the estimates used in preparing the financial report are
reasonable and in accordance with accounting standards. Changes in the assumptions underlying the estimates may
result in a significant impact on the financial statements. The most critical of these assumptions and judgements are:
a) Provisions against current assets
In the course of normal trading activities, management uses its judgement in establishing the net realisable value of
various elements of working capital – principally inventory and trade receivables. Provisions are established for obsolete
or slow moving inventories (refer Note 11) and bad or doubtful receivables (refer Note 10). Actual expenses in future
periods may be different from the provisions established and any such differences would affect future earnings of the
Group.
b) Property, plant and equipment and definite life intangible assets
The Group’s property, plant and equipment (refer Note 16) and intangible assets (refer Note 17), other than indefinite life
intangible assets, are depreciated/amortised on a straight-line basis over their useful economic lives. Management
reviews the appropriateness of useful economic lives of assets at least annually but any changes to useful economic lives
would affect prospective depreciation rates and asset carrying values.
131
DuluxGroup Annual Report 2013
131
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
30 Critical accounting estimates and judgements (continued)
c)
Impairment of assets
The Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication
that those assets are impaired (refer Note 17). In making the assessment for impairment, assets that do not generate
independent cash inflows are allocated to an appropriate CGU. The recoverable amount of those assets, or CGUs, is
measured as the higher of their fair value less costs to sell and value in use. Management necessarily applies its
judgement in allocating assets that do not generate independent cash inflows to appropriate CGUs.
The determination of recoverable amount requires the estimation and discounting of future cashflows. The estimation of
cashflows considers all information available at balance date which may deviate from actual developments. This includes,
amongst other things, changes in discount rates, terminal value growth rates applied in perpetuity, expected sales revenue
growth rates in the forecast period, and earnings varying from the assumptions and forecast data used. Subsequent
changes to the CGU allocation or to the timing and quantum of cash flows may impact the carrying value of the respective
assets.
Management also applies judgement when determining the recoverable amount using fair value less costs to sell. This
judgement is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or
observable market prices less incremental costs for disposing of the assets.
d) Defined benefit superannuation fund obligations
The expected costs of providing post-employment benefits under defined benefit arrangements relating to employee
service during the period are charged to the income statement. Any actuarial gains and losses, which can arise from
differences between expected and actual outcomes or changes in actuarial assumptions, are recognised immediately in
the consolidated statement of comprehensive income. In all cases, the superannuation costs are assessed in accordance
with the advice of independent qualified actuaries but require the exercise of significant judgement in relation to
assumptions for future salary, superannuation increases, long term price inflation, discount rates and investment returns.
While management believes the assumptions used are appropriate, a change in the assumptions used would impact the
earnings and equity of the Group. For details of DuluxGroup’s defined benefit plan refer to Note 23.
e) Environmental
The Group is subject to a variety of laws and regulations in the jurisdictions in which it operates or maintains properties.
Provisions for expenses that may be incurred in complying with such laws and regulations are set aside if environmental
inquiries or remediation measures are probable and the costs can be reliably estimated (refer Note 21). For sites where
there are uncertainties with respect to what DuluxGroup’s remediation obligations might be or what remediation
techniques might be approved and no reliable estimate can presently be made of regulatory and remediation costs, no
amounts have been provided for. It is also assumed that the methods planned for environmental clean-up will be able to
treat the issues within the expected time frame.
It is difficult to estimate the future costs of environmental remediation because of many uncertainties, particularly with
regard to the status of laws, regulations and the information available about conditions in the various countries and at the
individual sites. Significant factors in estimating the costs include previous experiences in similar cases, expert opinions
regarding environmental programs, current costs and new developments affecting costs, management’s interpretation of
current environmental laws and regulations, the number and financial position of third parties that may become obligated
to participate in any remediation costs on the basis of joint liability, and the remediation methods which are likely to be
deployed.
Environmental costs are estimated using either the work of external consultants and/or internal experts. Changes in the
assumptions underlying these estimated costs may impact future reported results. Subject to these factors, but taking into
consideration experience gained to date regarding environmental matters of a similar nature, DuluxGroup believes the
provisions to be appropriate based upon currently available information. However, given the inherent difficulties in
estimating liabilities in this area, it cannot be guaranteed that additional costs will not be incurred beyond the amounts
provided. It is possible that final resolution of these matters may require expenditures to be made in excess of established
provisions over an extended period of time that may result in changes in timing of anticipated cash flows from those
assumed and in a range of amounts that cannot be reasonably estimated.
132
132
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
30
Critical accounting estimates and judgements (continued)
f) Business acquisitions
The consolidated financial statements include the information and results of each subsidiary from the date on which the
Company obtains control until such time as the Company ceases to control such entity (refer Note 2).
The determination as to the existence of control or significant influence over an entity necessarily requires management
judgement to assess the Group’s ability to govern the financial and operating activities of an investee. In making such an
assessment, a range of factors are considered including voting rights in an investee and Board and management
representation.
A business acquisition also requires judgement with respect to the determination of the fair value of purchase
consideration given and the fair value of identifiable net assets and liabilities acquired. Many of these assets and liabilities
either given up or acquired are not normally traded in active markets, and thus management judgement is required in
determining their fair values. Management judgement is also required in ascertaining the assets and liabilities which
should be recognised, in particular with respect to intangible assets such as brand names, customer relationships, patents
and trademarks and contingent liabilities.
g) Taxation
DuluxGroup is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement
is required in determining the worldwide provision for income taxes. There are transactions and calculations undertaken
during the ordinary course of business for which the ultimate tax determination is uncertain. The Group estimates its tax
liabilities based on the Group's understanding of the tax law. Where the final tax outcome of these matters is different
from the amounts initially recorded, such differences will impact the current and deferred income tax provision in the period
in which such determination is made.
In addition, deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable profits are available to utilise those temporary differences and losses, and the tax losses
continue to be available having regard to the nature and timing of their origination and compliance with the relevant tax
legislation associated with their recoupment.
Assumptions are also made about the application of income tax legislation. These assumptions are subject to risk and
uncertainty and there is a possibility that changes in circumstances will alter expectations which may impact the amount of
deferred tax assets and deferred tax liabilities recorded on the consolidated balance sheet and the amount of tax losses
and timing differences not yet recognised. In these circumstances, the carrying amount of deferred tax assets (refer Note
18) and liabilities (refer Note 22) may change, resulting in an impact on the earnings of the Group.
h) Warranty
DuluxGroup generally offers warranties for its products. Management estimates the related provision for future warranty
claims (refer Note 21) based on historical warranty claim information, as well as recent trends that might suggest that past
cost information may differ from future claims. Factors that could impact the estimated future warranty claims include
information on future parts and changes in labour costs.
31 Contingent liabilities and contingent assets
DuluxGroup had contingent liabilities at 30 September 2013 in respect of:
a) Orica Separation Deed
The Separation Deed between Orica Limited (Orica) and DuluxGroup Limited, which covers the period since demerger at
July 2010, deals with certain commercial, transitional and legal issues arising in connection with the legal and economic
separation of DuluxGroup from Orica. A key part of the Separation Deed is the agreement between the parties in relation
to the ‘Demerger Principle’. This fundamental underlying principle of the demerger is that, on and from the effective date
of the demerger, DuluxGroup has the entire economic benefit, commercial risk and liabilities of all businesses to be
conducted by DuluxGroup after the effective date and all former DuluxGroup businesses, as though DuluxGroup had
always owned and operated those businesses. The principle also states that Orica will have the entire economic benefit,
commercial risk and liabilities of all businesses to be conducted by Orica after the effective date, and any company,
business or asset which is not a business to be conducted by DuluxGroup after the effective date or a former DuluxGroup
business, as though Orica had always owned and operated those businesses. To support this principle, DuluxGroup and
Orica indemnify each other against all claims, and liabilities relating to any claim brought by the other, relating to liabilities
which are liabilities of their businesses or former businesses following the application of the Demerger Principle. The
Separation Deed also contains specific indemnities with respect to certain matters.
133
DuluxGroup Annual Report 2013
133
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
31
Contingent liabilities and contingent assets (continued)
b) Deed of cross guarantee
All of DuluxGroup Limited's Australian subsidiaries, excluding DuluxGroup Employee Share Plan Trust and Alesco
Management Share Plan Trust, are party to a Deed of Cross Guarantee pursuant to ASIC Class Order 98/1418. The
terms of this Deed of Cross Guarantee include a provision that each party guarantees the debts of each other party on
insolvency.
c) Camelpaint warranties
As part of the acquisition of the Camelpaint entities (refer Note 2), DuluxGroup and NLPP agreed to provide general
warranties to each other in respect of matters that were not disclosed during the due diligence process. In addition, the
parties agreed to provide each other with indemnities in relation to environmental, tax and other specific matters in respect
of the period prior to the acquisition. The warranties and indemnities are subject to certain limitations as to the period
during which claims can be made and maximum claim amounts.
There are certain assets of NLPP that were not intended to form part of the transaction but which formed part of the
entities that were transferred to DGCI Group (the ‘excluded NLPP assets’). These excluded NLPP assets have been
segregated pending their formal transfer back to NLPP or a NLPP nominee. The Group and NLPP have agreed that
NLPP will be responsible for all costs and liabilities associated with the operation and maintenance of the excluded NLPP
assets as if NLPP was the owner of those excluded assets from the completion of the transaction.
d) Legal proceedings
The nature of DuluxGroup's consumer products business and its geographic diversity means that the Company receives a
range of claims from various parties and is from time to time required to make its own assessment of obligations arising
from legislation across the jurisdictions in which it operates. These claims, and actual or potential obligations, are
evaluated on a case-by-case basis considering the information and evidence available as well as specialist advice as
required to assess the appropriate outcome.
The outcome of currently pending and future litigation cannot be predicted with certainty. Accordingly, an adverse
decision in a lawsuit could result in additional costs that are not covered, either wholly or partially, under insurance policies
and that could materially affect the financial position, results of operations or cash flows of the Group. Litigation and other
judicial proceedings raise difficult legal issues and are subject to many complexities. Upon resolution of a legal matter, the
Group may incur charges in excess of the presently established provisions and related insurance coverage. Where it is
considered probable that a future obligation will result in a material outflow of resources, then this is accounted for
accordingly by the Group.
134
134
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
32 Commitments
a) Capital expenditure commitments
Capital expenditure on property and plant and equipment contracted but not
provided for and payable:
- No later than one year
- Later than one, no later than five years
b) Lease commitments
i)
Non-cancellable operating leases
2013
$'000
2012
$'000
1,034
-
1,034
899
133
1,032
The Group leases offices, warehouses, retail bulky goods and manufacturing sites under non-cancellable operating
leases. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are
renegotiated. There are no restrictions placed upon the lessee by entering into these leases. Excess space is sub-let to
third parties also under non-cancellable operating leases.
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
- No later than one year
- Later than one, no later than five years
- Later than five years
2013
$'000
2012
$'000
27,664
43,270
11,025
81,959
21,266
43,639
12,703
77,608
Not included in the above commitments are contingent rental payments which may arise as part of rental increases
indexed to the Consumer Price Index (CPI) or the higher of a fixed rate or the CPI.
Future minimum lease payments expected to be received in relation to non-
cancellable sub-leases of operating leases
ii) Cancellable operating leases
2013
$'000
2012
$'000
3,153
3,558
DuluxGroup also leases various plant and machinery under cancellable operating leases. Generally, DuluxGroup is
required to give three months notice for termination of these leases.
Commitments in relation to cancellable operating leases contracted for at the
reporting date but not recognised as liabilities payable:
- No later than one year
- Later than one, no later than five years
2013
$'000
2012
$'000
7,682
7,711
15,393
6,327
7,403
13,730
c) Other contractual commitments
As part of the normal course of business, the Group has signed various contracts that contain a penalty for early
termination of these contracts. At balance date, it is expected that the Group will fulfil the entire term of these contracts.
135
DuluxGroup Annual Report 2013
135
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
33 Reconciliation of profit for the financial year to net cash inflow from operating
activities
Profit for the financial year
Depreciation and amortisation
Share-based payment expense
Share of joint ventures' net profit
Loss on disposal of business
Impairment of inventories
Impairment of trade and other receivables
Net (gain)/loss on sales of property, plant and equipment
Unrealised foreign exchange loss
Amortisation of prepaid loan establishment fees
Impairment of property, plant and equipment
Impairment of intangibles
Dividend income from listed equity securities
Changes in working capital and provisions excluding the effects of
acquisitions and disposals of businesses and controlled entities
Decrease in trade and other receivables
(Increase)/decrease in inventories
Decrease/(increase) in other assets
Increase/(decrease) in deferred taxes payable
Decrease in trade payables and provisions
Increase/(decrease) in current tax liabilities
Net cash inflow from operating activities
2013
$'000
65,541
32,303
2,381
(1,181)
1,118
3,086
2,831
(8,191)
153
1,627
140
18,500
2012
$'000
86,264
23,296
2,093
(1,500)
-
816
712
278
1,071
1,124
513
-
-
(2,820)
10,577
(8,207)
516
1,788
(6,508)
1,680
118,154
7,012
10,652
(63)
(1,435)
(9,965)
(1,517)
116,531
34 Deed of cross guarantee
Entities which are party to a Deed of Cross Guarantee (Closed Group), entered into in accordance with ASIC Class Order
98/1418 dated 27 September 2010 are disclosed in Note 36. A consolidated income statement, consolidated statement of
comprehensive income and consolidated balance sheet for the Closed Group are disclosed below.
a) Consolidated income statement and retained earnings
Profit before income tax expense
Income tax expense
Profit for the financial year
Retained earnings
Balance at 1 October
Profit for the financial year
Actuarial gains/(losses) on defined benefit plan recognised directly in
retained earnings (net of tax)
Transfers in from revaluation reserve - other financial assets
Dividends paid - ordinary shares
Balance at 30 September
136
2013
$'000
92,252
(30,949)
61,303
105,975
61,303
6,603
(1,692)
(58,816)
113,373
2012
$'000
113,751
(20,909)
92,842
68,213
92,842
(612)
-
(54,468)
105,975
136
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
34 Deed of cross guarantee (continued)
b) Consolidated statement of comprehensive income
Profit for the financial year
Other comprehensive income
Items that may be reclassified subsequently to the income statement
Effective portion of changes in fair value of cash flow hedges
Foreign currency translation gain on foreign operations
Income tax on items that may be reclassified subsequently to the income statement
Total items that may be reclassified subsequently to the income statement, net of tax
Items that will not be reclassified to the income statement
Actuarial gains/(losses) on defined benefit plan
Revaluation of other financial assets at fair value through other comprehensive income
Income tax on items that will not be reclassified to the income statement
Total items that will not be reclassified to the income statement, net of tax
Other comprehensive income for the financial year, net of tax
Total comprehensive income for the financial year
2013
$'000
61,303
2012
$'000
92,842
97
7,454
(29)
7,522
9,433
(940)
(2,830)
5,663
13,185
74,488
(517)
732
155
370
(875)
(752)
263
(1,364)
(994)
91,848
137
DuluxGroup Annual Report 2013
137
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
34 Deed of cross guarantee (continued)
c) Consolidated balance sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial assets
Other assets
Total current assets
Non-current assets
Derivative financial assets
Investment in controlled entities
Investment in listed equity securities
Investment accounted for using the equity method
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing liabilities
Derivative financial liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Defined benefit liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
2013
$'000
2012
$'000
29,493
229,178
174,993
298
5,324
439,286
-
65,125
-
4,678
254,236
220,424
45,139
4,231
593,833
1,033,119
221,231
7,481
2
7,825
28,203
264,742
419,372
16,839
38,935
8,266
483,412
748,154
284,965
223,702
(52,110)
113,373
284,965
17,435
159,382
115,476
56
3,042
295,391
2
55,795
36,848
3,747
192,675
69,855
34,872
4,991
398,785
694,176
166,960
15,543
39
4,647
17,090
204,279
245,237
596
21,492
20,869
288,194
492,473
201,703
192,585
(96,857)
105,975
201,703
138
138
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
35 Parent entity financial information
a) Summary financial information
The individual financial statements for the parent entity, DuluxGroup Limited, show the following aggregate amounts:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity(1,2)
Profits reserve(3)
Other reserves
Retained earnings
Profit before income tax expense(4)
Income tax benefit
Profit for the financial year
Total comprehensive income of the parent entity
2013
$'000
83,192
229,260
312,452
871
37,864
38,735
273,717
223,702
30,000
6,503
13,512
273,717
58,765
1,843
60,608
60,608
2012
$'000
77,220
199,260
276,480
127
37,864
37,991
238,489
192,585
-
4,163
41,741
238,489
93,055
1,734
94,789
94,789
(1)
(2)
(3)
(4)
Includes $30,319,000 (2012 $19,890,000) relating to 10,110,496 (2012 7,391,254) DuluxGroup Limited ordinary shares issued to or
purchased on-market by DuluxGroup (Employee Share Plans) Pty Ltd, as trustee for the employee share schemes (LTEIP and ESIP). On
consolidation, where the shares were issued to the trust, the ordinary share capital is not recognised. On consolidation where the shares
were purchased on market, the purchase is accounted for as a buy-back and the amount is deducted from contributed equity as treasury
shares. Refer Note 24(a) for details of these shares.
Includes $20,584,000 (2012 $4,464,000) relating to 5,279,516 (2012 1,528,643) DuluxGroup Limited shares issued as part of the DRP.
A profits reserve has been created in DuluxGroup Limited. The reserve represents an appropriation of amounts from retained earnings for
the payment of future dividends. On consolidation, this reserve is included as part of the consolidated retained earnings.
Profit before income tax expense includes dividend income of $65,000,000 declared by DuluxGroup (New Zealand) Pty Ltd during the
financial year ended 30 September 2013 (2012 $90,119,000 declared by DuluxGroup (New Zealand) Pty Ltd and $8,754,000 declared by
DuluxGroup (Investments) Pty Ltd).
b) Guarantees
Details of guarantees entered into by the parent entity in relation to external banking facilities as at 30 September 2013 are
set out in Note 20(b). In addition, the parent entity is a party to the deed of cross guarantee as disclosed in Note 34.
c) Capital commitments
There were no capital commitments entered into by the parent entity as at 30 September 2013 (2012 $NIL).
d) Contingent liabilities and contingent assets
Refer to Note 31 for information relating to contingent liabilities and contingent assets of the parent entity.
139
DuluxGroup Annual Report 2013
139
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
36 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of DuluxGroup Limited and the
following subsidiaries in accordance with the accounting policies described in Note 1(d):
Name of entity
DuluxGroup (Investments) Pty Ltd(1)
DuluxGroup (Finance) Pty Ltd(1)
DuluxGroup (New Zealand) Pty Ltd(1)
DuluxGroup (Australia) Pty Ltd(1)
Dulux Holdings Pty Ltd(1)
DuluxGroup (Employee Share Plans) Pty Ltd(1)
DuluxGroup Employee Share Plan Trust
DuluxGroup (Nominees) Pty Ltd(1)
Alesco Corporation Limited (2,3)
Alesco Finance Pty Ltd(2,3)
Alesco Holdings Pty Ltd(2,3)
Alesco No. 2 Pty Ltd(2,3)
Alesco No. 1 Pty Ltd(2,3)
B&D Australia Pty Ltd(2,3)
Automatic Technology (Australia) Pty Ltd(2,3)
Parchem Construction Supplies Pty Ltd(2,3)
Robinhood Australia Pty Ltd(2,3)
Lincoln Sentry Group Pty Ltd(2,3)
Concrete Technologies Pty Ltd(2,3)
Pargone Pty Ltd(2,3)
ACN 009 130 858 Pty Ltd(2,3)
ACN 000 639 252 Pty Ltd(2,3)
Joinery Products Hardware Supplies Pty Ltd(2,3)
ATA Innovations Pty Ltd(2,3)
Alesco Management Share Plan Trust(2)
DGL International (Shenzhen) Co Ltd(5)
DGL Camel Coatings (Shanghai) Limited(4)
DGL Camel Powder Coatings (Dongguan) Limited(4)
DGL Camel Coatings (Dongguan) Limited (formerly Dongguan
Benson Paint Company Limited)(4)
Countermast Technology (Dalian) Company Limited(2)
DGL International (Hong Kong) Ltd
DGL Camel International Limited(4)
DGL Camel Powder Coatings Limited(4)
DGL Camel (Hong Kong) Limited(4)
140
Country of
incorporation
/registration
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
China
China
China
China
China
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Equity holding
2013
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
51
51
100
100
51
51
51
2012
%
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
51
51
51
-
100
51
51
51
140
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
36 Subsidiaries (continued)
Name of entity (continued)
DGL Camel (China) Limited(4)
Countermast Limited(2)
DGL International (Malaysia) Sdn Bhd
Alesco New Zealand Limited(2)
Alesco NZ Trustee Limited(2)
B&D Doors (NZ) Limited(2)
Concrete Plus Limited(2)
Easy Iron Limited(2)
Lincoln Sentry Limited(2)
Robinhood Limited(2)
Supertub Limited(2)
Dulux Holdings (PNG) Ltd
DGL Camel (Singapore) Pte Ltd(4)
DuluxGroup (PNG) Pte Ltd
DGL International (Singapore) Pte Ltd
DGL International (Vietnam) Limited Company
Country of
incorporation
/registration
Hong Kong
Hong Kong
Malaysia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Papua New Guinea
Singapore
Singapore
Singapore
Vietnam
Equity holding
2013
2012
%
51
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
%
51
-
100
-
-
-
-
-
-
-
-
100
51
100
100
100
(1) These controlled entities have each entered into a Deed of Cross Guarantee with DuluxGroup Limited in respect of relief granted from specific
accounting and financial reporting requirements in accordance with the ASIC Class Order 98/1418. The deed was dated 27 September 2010
and all of these controlled entities, with the exception of DuluxGroup (Nominees) Pty Ltd, have been members since inception. On 26
September 2012, DuluxGroup (Nominees) Pty Ltd acceded to the deed with effect from the date of its incorporation in 2012.
(2) Acquired during the financial year ended 30 September 2013.
(3) On 13 September 2013, these entities joined the Deed of Cross Guarantee with DuluxGroup Limited.
(4) These entities form part of the DGL Camel International Group.
(5) Entity liquidated during the financial year ended 30 September 2013.
141
DuluxGroup Annual Report 2013
141
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
37 Financial and capital management
Capital management
DuluxGroup’s objectives when managing capital (net debt and total equity) are to safeguard the consolidated entity’s
ability to continue as a going concern and to ensure that the capital structure enhances, protects and balances financial
flexibility against minimising the cost of capital.
In order to maintain the appropriate capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, utilise a dividend reinvestment plan, return capital to shareholders or issue new equity, in addition to
incurring an appropriate mix of long and short term borrowings. Currently, DuluxGroup intends to pay at least 70% of its
net profit after tax (subject to satisfying the solvency test set out in the Corporations Act 2001) as dividends to DuluxGroup
shareholders each year.
DuluxGroup monitors capital on the basis of various credit metrics, principally an interest cover ratio (earnings before
interest, tax, depreciation and amortisation (EBITDA) divided by net financing costs) and Net Debt to EBITDA. In addition,
DuluxGroup monitors the accounting gearing ratio (which is calculated as net debt divided by net debt plus total equity).
The key credit metrics and accounting gearing ratios calculated on a statutory basis and presented in accordance with the
requirements of AASB 7 Financial Instruments: Disclosures are as follows:
Interest-bearing liabilities
Less:
Prepaid loan establishment fees
Trade cards
Cash and cash equivalents
Net debt
Earnings before interest, tax, depreciation and amortisation(1)
Net Debt to EBITDA (times)
The interest cover ratio is calculated as follows:
Earnings before interest, tax, depreciation and amortisation
Net finance costs (2)
Interest cover ratio (times)
The accounting gearing ratio is calculated as follows:
Net debt(3)
Net debt plus total equity
Net debt to net debt plus total equity
2013
$'000
438,707
2012
$'000
261,523
3,628
6,925
46,374
381,780
159,461
2.4
2,763
8,471
28,508
221,781
155,513
1.4
2013
$'000
2012
$'000
159,461
25,963
6.1
155,513
20,303
7.7
2013
$'000
381,780
612,748
62%
2012
$'000
221,781
404,633
55%
(1) Includes EBITDA of Alesco Group from close of business 11 December 2012 to 30 September 2013.
(2) Net finance costs exclude the amortisation of prepaid loan establishment fees of $1,627,000 (2012 $1,124,000).
(3) Refer calculation of net debt presented above for the Net Debt to EBITDA metric.
Financial risk factors
DuluxGroup has exposure to the following principle financial risks:
• Market risk (interest rate, foreign exchange and commodity price risk)
•
• Credit risk
Liquidity risk
DuluxGroup’s overall risk management program seeks to mitigate these risks and reduce the volatility of DuluxGroup’s
financial performance.
142
142
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
37 Financial and capital management (continued)
Financial risk factors (continued)
All financial risk management is carried out or monitored centrally by the Treasury department and is undertaken in
accordance with various treasury risk management policies (the Treasury Policy) approved by the Board.
DuluxGroup enters into derivative transactions for risk management purposes only. Derivative transactions are entered
into to hedge financial risk relating to underlying physical exposures arising from business activities. Types of derivative
financial instruments used to hedge financial risks (such as changes to interest rates and foreign currencies) include
interest rate options, foreign exchange options and forward exchange contracts.
The consolidated entity held the following financial instruments as at 30 September:
2013
Financial assets
Cash at bank and on hand
Cash at bank - restricted
Trade and other receivables (current)
Trade and other receivables (non-current)
Derivative financial assets (current)
Financial liabilities
Trade and other payables (current)
Derivative financial liabilities (current)
Interest-bearing liabilities (current)
Interest-bearing liabilities (non-current)
2012
Financial assets
Cash at bank and on hand
Cash at bank - restricted
Trade and other receivables (current)
Trade and other receivables (non-current)
Derivative financial assets (current)
Derivative financial assets (non-current)
Investment in listed equities (non-current)
Financial liabilities
Trade and other payables (current)
Trade and other payables (non-current)
Derivative financial liabilities (current)
Interest-bearing liabilities (current)
Interest-bearing liabilities (non-current)
Cash and
cash
equivalents
$'000
Financial
assets at
amortised
cost
$'000
Financial
liabilities at
amortised
cost
$'000
Derivative
instruments
designated
as hedges
$'000
Financial assets
at fair value
through other
comprehensive
income
$'000
Total
carrying
amount
$'000
43,529
2,845
-
-
-
46,374
-
-
226,666
96
-
226,762
-
-
-
-
-
-
-
157,717
22
-
-
-
157,739
-
-
-
-
-
25,298
3,210
-
-
-
-
-
28,508
-
-
-
-
-
-
-
-
-
-
-
-
248,401
-
15,707
419,372
683,480
-
-
-
-
-
-
-
-
-
-
-
-
-
-
186,146
43
-
13,523
245,237
444,949
-
-
-
-
298
298
-
-
-
2
2
-
-
-
-
56
2
-
58
-
-
39
-
-
39
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,848
36,848
-
-
-
-
-
-
43,529
2,845
226,666
96
298
273,434
248,401
2
15,707
419,372
683,482
25,298
3,210
157,717
22
56
2
36,848
223,153
186,146
43
39
13,523
245,237
444,988
143
DuluxGroup Annual Report 2013
143
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
37 Financial and capital management (continued)
a)
Interest rate risk management
Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates.
DuluxGroup is primarily exposed to interest rate risk on outstanding long term interest-bearing liabilities. Non-derivative
financial assets are predominately short term liquid assets, such as cash at bank balances.
Interest rate risk on long term interest-bearing liabilities is managed by adjusting the ratio of fixed interest debt to variable
interest debt. Under the Treasury Policy, a maximum of 90% of debt with a maturity of less than five years can be fixed
and a maximum 50% of debt with a maturity of five years or greater can be fixed. DuluxGroup operated within this range
during the current year.
As at 30 September 2013, DuluxGroup had no fixed interest rate long term interest-bearing liabilities.
DuluxGroup's exposure to interest rate risk and the weighted average effective interest rates on financial assets and
liabilities at 30 September 2013 are:
Cash at bank and on hand
Cash at bank - restricted
Derivative financial assets (current)
Derivative financial assets (non-current)
Total financial assets
Bank loan
Trade cards
Derivative financial liabilities
Total financial liabilities
Net financial liabilities
Note
9
9
12
12
20
20
12
2013
% p.a.
1.1
1.4
-
-
(1)
5.3
9.2
-
2013
$'000
43,529
2,845
298
-
46,672
431,782
6,925
2
438,709
392,037
25,298
3,210
56
2
28,566
253,052
8,471
39
261,562
232,996
2012
2012
$'000 % p.a.
1.3
2.5
-
-
(1)
6.4
9.9
-
(1) The weighted average effective interest rate on the bank loan excludes the amortisation of the prepaid establishment fee on the loan facility.
The table below shows the effect on profit and total equity after tax if interest rates at that date had been 10% higher or
lower based on the relevant interest rate yield curve applicable to the underlying currency DuluxGroup’s financial assets
and liabilities are denominated in with all other variables held constant, taking into account all underlying exposures and
related hedges and does not include the impact of any management action that might take place if these events occurred.
A sensitivity of 10% has been selected as this is considered reasonable given the current level of both short term and long
term interest rates. The Directors cannot nor do not seek to predict movements in interest rates.
Increase/(decrease) in profit before income tax expense
If interest rates were 10% higher, with all other variables held constant
If interest rates were 10% lower, with all other variables held constant
Increase/(decrease) in profit after income tax expense
If interest rates were 10% higher, with all other variables held constant
If interest rates were 10% lower, with all other variables held constant
Increase/(decrease) in total equity
If interest rates were 10% higher, with all other variables held constant
If interest rates were 10% lower, with all other variables held constant
144
2013
$'000
(2,045)
2,045
(1,431)
1,431
(1,431)
1,431
2012
$'000
(916)
916
(641)
641
(641)
641
144
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
37 Financial and capital management (continued)
b) Foreign exchange risk management
Foreign exchange risk - transactional
Transactional foreign exchange risk refers to the risk that the value of a financial commitment, recognised asset or liability
or cash flow will fluctuate due to changes in foreign currency rates.
DuluxGroup is exposed to foreign exchange risk primarily due to purchases and sales being denominated, either directly
or indirectly in currencies other than the functional currencies of the consolidated entity’s subsidiaries. Major exposures
are against the United States Dollar (USD), New Zealand Dollar (NZD), Chinese Renminbi (RMB), Hong Kong Dollar
(HKD) and the Euro (EUR). With regard to purchases, hedging is undertaken to protect against unfavourable foreign
currency movements, however there is flexibility as to when hedging is initiated and the instrument used to hedge the risk.
In determining which instrument to use, consideration is given to the ability of DuluxGroup to participate in favourable
movements in exchange rates. Approximately 20% to 30% of DuluxGroup's purchases are denominated in, or are
indirectly linked to a foreign currency, primarily to the USD, RMB and the EUR.
Foreign exchange hedging is carried out or monitored centrally in accordance with the Treasury Policy. The derivative
instruments used for hedging purchase exposures are forward exchange options and forward exchange contracts.
The Group’s exposure to foreign currency risk including external balances and internal balances (eliminated on
consolidation) at the reporting date was as follows (Australian dollar equivalents):
Cash
Trade and other receivables
Trade and other payables
Interest-bearing liabilities
Net expos ure
USD
'000
1,102
5,001
(8,087)
(469)
(2,453)
NZD
'000
5,072
817
(1,155)
(228)
4,506
2013
RMB
'000
-
-
(2,640)
-
(2,640)
HKD
'000
1,332
773
(57)
-
2,048
EUR
'000
229
34
(1,056)
-
(793)
USD
'000
518
839
(4,806)
-
(3,449)
NZD
'000
-
1,351
(550)
-
801
2012
RMB
'000
-
-
-
-
-
HKD
'000
-
-
-
-
-
EUR
'000
87
-
(345)
-
(258)
The table below shows the reported exchange rates for the USD, NZD, RMB and HKD against the Australian Dollar (AUD)
as at 30 September.
AUD/USD
AUD/NZD
AUD/RMB
AUD/HKD
AUD/EUR
2013
0.9287
1.1231
5.6844
7.2004
0.6883
2012
1.0368
1.2565
6.5807
8.0959
0.8057
145
DuluxGroup Annual Report 2013
145
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
37 Financial and capital management (continued)
b) Foreign exchange risk management (continued)
Foreign exchange risk – transactional (continued)
The table below shows, the effect on profit before income tax expense, profit after income tax expense and total equity of
retranslating cash, receivables, payables and interest-bearing liabilities denominated in USD, NZD, RMB, HKD and EUR
into AUD, had the rates been 10% higher or lower than the relevant year end rate, with all other variables held constant,
and taking into account all underlying exposures and related hedges. A sensitivity of 10% has been selected as this is
considered reasonable taking in to account the current level of exchange rates and the volatility observed both on a
historical basis and on market expectations for future movements. The Directors cannot nor do not seek to predict
movements in exchange rates.
Increase/(decrease) in profit before income tax expense
AUD/USD
AUD/NZD
AUD/RMB
AUD/HKD
AUD/EUR
Increase/(decrease) in profit after income tax expense
AUD/USD
AUD/NZD
AUD/RMB
AUD/HKD
AUD/EUR
Increase/(decrease) in total equity
AUD/USD
AUD/NZD
AUD/RMB
AUD/HKD
AUD/EUR
2013
-10%
$'000
+10%
$'000
(397)
501
(281)
228
72
(278)
350
(197)
159
50
(278)
350
(197)
159
50
114
(410)
163
(186)
(88)
80
(287)
114
(130)
(62)
80
(287)
114
(130)
(62)
2012
-10%
$'000
(570)
89
-
-
23
(399)
62
-
-
16
(399)
62
-
-
16
+10%
$'000
466
(73)
-
-
(29)
326
(51)
-
-
(20)
326
(51)
-
-
(20)
In addition, DuluxGroup has a current pricing arrangement for purchases in the Euro (EUR) that allow DuluxGroup to be
invoiced in the AUD equivalent value of these purchases. As a result, although DuluxGroup does not have a balance
sheet exposure to the EUR at 30 September 2013, the fluctuations of the EUR/AUD exchange rate will have an impact on
the amount ultimately invoiced to DuluxGroup in AUD.
Foreign currency risk - translational
Foreign currency earnings translation risk arises primarily as a result of earnings in NZD, PGK and RMB being translated
into AUD and from the geographical location of a number of other individually minor foreign currency earnings. The
Treasury Policy allows hedging of this exposure in order to reduce the volatility of full year earnings resulting from changes
in exchange rates. At 30 September 2013, the Group did not have any derivative instruments outstanding to hedge
foreign currency earnings translation exposures (2012 NIL).
c) Commodity price risk management
DuluxGroup is exposed to commodity price risk from a number of commodities, including titanium dioxide, tin plate, hot
rolled coil steel and some petroleum based inputs, for example latex and resin. The cost of these inputs is impacted by
changes in commodity prices, foreign currency movements and industry specific factors. To the extent that any increases
in these costs cannot be passed through to customers in a timely manner, DuluxGroup’s profit before and after income tax
and shareholder’s equity could be impacted adversely. Owing to the short delivery lead times for these commodities,
there is no significant exposure to price movements for the Group.
As at 30 September 2013, DuluxGroup did not have any outstanding commodity contracts in relation to these inputs (2012
$NIL). Accordingly, no analysis of the impact of reasonable possible changes in commodity prices is presented.
146
146
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
37 Financial and capital management (continued)
d) Liquidity risk management
Liquidity risk is the risk that DuluxGroup will not be able to meet its financial obligations as and when they fall due.
DuluxGroup manages liquidity risk by:
• Maintaining an adequate level of undrawn committed facilities in various currencies that can be drawn upon at short
notice;
• Retaining appropriate levels of cash and cash equivalent assets;
•
• Monitoring expected liquidity requirements on an ongoing basis taking account of forecast business performance and
To the extent practicable, the spreading of the maturity dates of long term debt facilities; and
critical assumptions such as input costs, sales price and volumes, exchange rates and capital expenditure.
Facilities available and the amounts drawn and undrawn as at 30 September 2013 are as follows:
Unsecured bank overdraft facilities(1)
Unsecured bank overdraft facilities available
Amount of facilities undrawn
Committed standby and loan facilities
Committed standby and loan facilities available(2,3)
Amount of facilities unused
2013
$'000
8,452
8,452
2012
$'000
3,865
3,865
632,824
201,042
681,179
428,127
(1) The bank overdrafts are payable on demand and are subject to an annual review.
(2) The repayment dates of the committed loan facilities range from 30 April 2015 to 8 November 2017 (2012 20 May 2013 to 8 November 2016).
(3) Includes an AUD 400,000,000 (2012 AUD 400,000,000) multi-currency unsecured syndicated bank loan facility and an AUD 220,000,000
(2012 AUD 270,000,000) unsecured AUD syndicated bank loan facility. Refer to Note 20(b) for details of the associated guarantees.
Includes the RMB 50,000,000 (AUD 8,796,000) (2012 RMB 50,000,000 (AUD 7,598,000)) unsecured bank loan facility established in China
and two unsecured bank loan facilities established in Hong Kong for HKD 19,000,000 (AUD 2,638,000) (2012 HKD 19,000,000 (AUD
2,346,000)) and HKD 10,000,000 (AUD 1,390,000) (2012 HKD 10,000,000 (AUD 1,235,000)) respectively. DuluxGroup has a 51% share in all
three of these facilities.
The contractual maturity of DuluxGroup's fixed and floating rate financial liabilities and derivatives, based on the financing
arrangements in place at 30 September 2013 (2012 30 September 2012), are shown in the table below. The amounts
shown represent the future undiscounted principal and interest cash flows:
2013
Financial liab ilities
Trade and other payables
Trade bills and trade cards
Bank loan
2012
Financial liab ilities
Trade and other payables
Trade bills and trade cards
Bank loan(1)
Derivative financial liabilities
Carrying
amount
$'000
Less than
1 year
$'000
1 to 2
years
$'000
2 to 5
years
$'000
248,401
6,925
33,471
288,797
-
-
-
-
41,903
41,903
421,293
421,293
Total
$'000
248,401
6,925
496,667
751,993
186,146
8,471
21,938
39
216,594
43
-
-
-
16,430
273,104
-
-
16,473
273,104
186,189
8,471
311,472
39
506,171
248,401
6,925
428,154
683,480
186,189
8,471
250,289
39
444,988
(1) On 5 October 2012, DuluxGroup exercised its option to extend Tranche A (AUD 100,000,000) of its AUD 400,000,000 unsecured syndicated
bank loan facility for a further three years from 8 November 2012 to 8 November 2015. The contractual maturity of principal borrowed under
the extended Tranche falls between two and five years. The impact of this renewal is reflected in the table above.
147
DuluxGroup Annual Report 2013
147
Notes to the Consolidated Financial Statements (continued)
For the financial year ended 30 September 2013
37 Financial and capital management (continued)
e) Credit risk management
Credit risk is the risk of financial loss to DuluxGroup if a customer or counterparty to a financial asset fails to meet its
contractual obligations. Credit risk arises principally from DuluxGroup’s receivables from customer sales and derivative
financial instruments.
For the Group’s maximum exposure to credit risk on receivables (without taking into account the value of any collateral
obtained) and discussion on how this risk is managed, refer to Note 10.
In regards to credit risk arising from derivative financial instruments and cash, this is the credit exposure to financial
institutions that are counterparties to cash deposits and derivative financial contracts with a positive fair value (i.e.
derivative financial assets) from DuluxGroup’s perspective (refer Notes 9 and 12 respectively for the Group’s maximum
exposure).
To manage this risk, DuluxGroup restricts dealings to highly rated counterparties approved within its credit limit policy.
The higher the credit rating of the counterparty, the higher DuluxGroup’s allowable exposure is to that counterparty under
the Treasury Policy. The consolidated entity does not hold any credit derivatives or collateral to offset its credit exposures.
Given the high credit ratings of DuluxGroup’s counterparties, the Company does not expect any counterparty to fail to
meet its obligations with respect to any derivative financial assets as at 30 September 2013.
38 Events subsequent to balance date
On 13 November 2013, the Directors declared a final dividend of 9.5 cents per ordinary share, fully franked and payable
on 18 December 2013. The financial effect of the final dividend has not been brought to account in the financial report for
the financial year ended 30 September 2013 and will be recognised in the financial report for the financial year ending 30
September 2014.
The Directors have not become aware of any other significant matter or circumstance that has arisen since 30 September
2013 that has affected or may affect the operations, the results of those operations, or the state of affairs of DuluxGroup in
subsequent years, which has not been covered in this report.
148
148
Directors’ Declaration
For the financial year ended 30 September 2013
In the directors’ opinion:
(a)
the financial statements and notes, and the remuneration report in the Directors’ report, set out on
pages 53 to 148, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and consolidated entity's financial position as at 30
September 2013 and of their performance for the financial year ended on that date; and
(ii) complying with Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable;
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the
extended closed group identified in Note 36 will be able to meet any obligations or liabilities to which
they are, or may become, subject to by virtue of the deed of cross guarantee described in Note 34;
and
(d)
the financial statements and notes comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer
required by section 295A of the Corporations Act 2001 for the financial year ended 30 September 2013.
This declaration is made in accordance with a resolution of the directors.
Peter M. Kirby
Chairman
Melbourne
13 November 2013
149
DuluxGroup Annual Report 2013
149
150
DuluxGroup Annual Report 2013
151
Duluxgroup Annual Report 2013
Shareholder Statistics
As at 25 October 2013
Distribution of Ordinary Shareholders and Shareholdings
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 or more
Rounding
Total
Total holders
units
% of issued capital
18,709
14,607
2,589
1,497
112
9,354,278
32,411,550
18,480,126
31,130,469
285,643,007
37,514
377,019,430
2.48
8.60
4.90
8.26
75.76
0.00
100.00
Included in the above total are 693 shareholders holding less than a marketable parcel of 98 shares.
The holdings of the 20 largest holders of fully paid ordinary shares represent 70.37% of that class of shares.
Twenty Largest Ordinary Fully Paid Shareholders
Rank
Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
AMP Life Limited
Argo Investments Limited
Mr Patrick Houlihan
Australian Foundation Investment Company Limited
BNP Paribas Nominees Pty Ltd ACF Pengana
HSBC Custody Nominees (Australia) Limited
Bond Street Custodians Limited
RBC Investor Services Australia Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
Avanteos Investments Limited <2477966 DNR A/C>
Bond Street Custodians Limited
Bond Street Custodians Limited
20.
Suncorp Custodian Services Pty Limited
units
% of units
78,946,485
20.94
57,210,794
45,041,247
29,210,377
18,412,108
8,872,649
4,206,796
3,414,421
3,135,181
2,555,741
2,509,072
2,341,000
1,639,591
1,576,255
1,119,636
1,106,842
1,047,518
1,008,349
1,007,530
963,587
15.17
11.95
7.75
4.88
2.35
1.12
0.91
0.83
0.68
0.67
0.62
0.43
0.42
0.30
0.29
0.28
0.27
0.27
0.26
total
265,325,179
70.37
Register of Substantial Shareholders
The names of substantial shareholders in the company, and the number of fully paid ordinary shares in which
each has an interest, as disclosed in substantial shareholder notices to the company on the respective dates
are as follows:
Date
Name
6 september 2013
Commonwealth Bank Of Australia And Subsidiaries
15 february 2012
BT Investment Management Limited
Shares
% of total
28,353,551
27,481,035
7.52
7.48
Voting Rights
Voting rights as governed by the Constitution of the company provide that each ordinary shareholder present
in person or by proxy at a meeting shall have:
(a) on a show of hands, one vote only; and
(b) on a poll, one vote for every fully paid ordinary share held.
152
Duluxgroup Annual Report 2013
Shareholder Information
Stock Exchange listing
DuluxGroup’s shares are listed on the Australian
Securities Exchange (ASX) and are traded under the
code DLX.
DuluxGroup Share Registry
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford, Victoria 3067, Australia
Telephone (within Australia): 1300 090 835
Telephone (international): +61 3 9415 4183
Facsimile: +61 3 9473 2500
Website: www.computershare.com
Tax and Dividend Payments
For Australian registered shareholders who have not
quoted their Tax File Number (TFN) or Australian
Business Number (ABN), the company is obliged to
deduct tax at the top marginal rate plus Medicare
levy from unfranked and/or partially franked
dividends. If you have not already quoted your TFN/
ABN, you may do so by contacting our Share
Registry (see above for contact details).
Dividend Payments
Your dividends will be paid in Australian dollars by
cheque mailed to the address recorded on the share
register, unless you have elected to be paid by direct
credit or are a full participant in the Dividend
Reinvestment Plan (DRP). If you have not elected to
be paid by direct credit or fully participate in the
DRP, why not have us bank your dividend payments
for you so you can have immediate access to your
dividend payment? Your dividend payments can be
credited directly into any nominated bank, building
society or credit union account in Australia.
Dividends paid by direct credit appear in your
account as cleared funds, thus allowing you to
access them on payment date. You may elect to
receive your dividends by way of direct credit by
going to our Share Registry’s website
www.investorecentre.com.
Dividend Reinvestment Plan (DRP)
The DRP enables DuluxGroup’s fully paid ordinary
shareholders (having a registered address or
being resident in Australia or New Zealand) to
reinvest all or part of their dividends in additional
DuluxGroup fully paid ordinary shares. Applications
are available by going to our Share Registry website
www.investorecentre.com.
Consolidation of Multiple Holdings
If you have multiple issuer sponsored holdings that
you wish to consolidate into a single account, please
notify the Share Registry in writing, quoting your full
registered names and Securityholder Reference
Number (SRN) for these accounts and nominating
the account to which the holdings are to be
consolidated.
Change of Name and/or Address
For issuer sponsored holdings: please notify
the Share Registry in writing if you change your
name and/or address (please supply details
of your new/previous name, your new/previous
address and your SRN), or change the details
online by going to our Share Registry website
www.investorecentre.com.
For CHESS holdings: please notify your sponsor
(usually your broker) in writing if you change
your name and/or address.
Share Enquiries
Shareholders seeking information about their
shareholding or dividends should contact the
DuluxGroup’s Share Registry, Computershare
Investor Services Pty Limited. Contact details
are above. Callers can obtain information on
their investments with DuluxGroup by calling
the Investor Line on 1300 090 835 (international
+61 3 9415 4183). Before you call, make sure you have
your SRN or Holder Identification Number (HIN)
handy. You can do so much more online via the
internet by visiting our Share Registry website
www.investorecentre.com.
You can access a wide variety of holding information
and make some changes online or download forms
including:
• check your current and previous holding balances
• choose your preferred annual report option
• update your address details (Issuer Sponsored
holdings)
• update your bank details
• confirm whether you have lodged your TFN or
ABN or exemption
• register your TFN/ABN/exemption
• check transaction and dividend history
• enter your email address
• check share prices and graphs
• download a variety of instruction forms
• subscribe to email announcements.
You can access this information via a security login
using your SRN or HIN as well as your surname (or
company name) and postcode/country code (must
be the postcode/country code recorded for that
holding).
DuluxGroup Annual Report 2013
153
Duluxgroup Annual Report 2013
Shareholder Information continued
SHAREHOLDER TIMETABLE*
31 March 2014
DuluxGroup 2014 Half Year End
12 May 2014
Announcement of Half Year Financial Results
30 September 2014
DuluxGroup 2014 Year End
12 November 2014
Announcement of Full Year Financial Results
22 December 2014
Annual General Meeting 2014
* Timing of events is subject to change
DuluxGroup Communications
DuluxGroup’s website www.duluxgroup.com.au
offers shareholders details of the latest share price,
announcements to the ASX, investor and analyst
presentations, webcasts and the Chairman’s and
Managing Director’s AGM addresses. The website
also provides further information about the company
and offers insights into DuluxGroup’s businesses.
DuluxGroup’s printed communications include the
Annual Report, however, we can now provide all
communications electronically including dividend
statements, notices of meeting and proxy forms.
Electronic transmission enhances shareholder
communication, results in significant cost savings for
the company and is more environmentally friendly.
Shareholders wishing to receive all communications
electronically should visit the Share Registry website
www.investorecentre.com to register their
preference.
Shareholders may elect to receive a copy
of the Annual Report or notification by email
when the Annual Report is available online at
www.duluxgroup.com.au. If you do not make an
Annual Report election you will not receive a copy of
the Annual Report. If you wish to change your
Annual Report election, you may do so at any time,
please go to www.investorecentre.com or contact
our Share Registry.
Copies of reports are available on request.
Telephone: +61 3 9263 5678
Facsimile: +61 3 9263 5030
Email: company.info@duluxgroup.com.au
Auditors
KPMG
DuluxGroup limited
ABN 42 133 404 065
Registered address and head office:
1956 Dandenong Road
Clayton, Victoria 3168
Australia
Postal address:
PO Box 60
Clayton South, Victoria 3169
Telephone: +61 3 9263 5678
Facsimile: +61 3 9263 5030
Email: company.info@duluxgroup.com.au
Website: www.duluxgroup.com.au
Investor Relations
Telephone: +61 3 9263 5678
Email: company.info@duluxgroup.com.au
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DuluxGroup Limited
1956 Dandenong Road
Clayton, Victoria 3168
Australia