Fleetwood Limited
Annual Report 2016

Plain-text annual report

T: (08) 9323 3300 | F: (08) 9202 1106 | info@fleetwood.com.au | ABN 69 009 205 261 21 Regal Place, East Perth WA 6004 www.fleetwoodcorporation.com.au ANNUAL REPORT 2016 CONTENTS Corporate Directory .......................................... 2 Fleetwood Divisions .......................................... 3 5 Year Summary .................................................... 4 Board of Directors & Executive Officers .......................................... 5 Managing Director’s Review ....................... 6 Financial Report 2016 ....................................... 8 Directors’ Report ............................................... 44 Directors’ Declaration ................................... 57 Auditor’s Independence Declaration ............................................................ 58 Auditor’s Report................................................. 59 ASX Additional Information ...................... 61 CORPORATE DIRECTORY DELIVERING THE PROMISE OUR OBJECTIVE To outperform financially by providing genuine value OUR BELIEFS We: want to do business build strong relationships in which each party wins expect all parties to make and honour their commitments value the support of our shareholders, clients and suppliers OUR COMMITMENT We will: act with honesty and integrity provide a safe and healthy workplace operate in an environmentally responsible manner develop and reward our people for their creativity and dedication deal with people in a concerned and professional way find better ways to do things always hold ourselves accountable for ‘Delivering the Promise’ DIRECTORS Phillip Campbell Brad Denison Michael Hardy Greg Tate COMPANY SECRETARY Yanya O’Hara AUDITOR Grant Thornton BANKER Westpac Banking Corporation REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS 21 Regal Place East Perth, WA 6004 T: (08) 9323 3300 F: (08) 9202 1106 E: info@fleetwood.com.au SHARE REGISTRY Computershare Level 11 172 St Georges Terrace Perth, WA 6000 T: (08) 9323 2000 F: (08) 9323 2033 E: www.investorcentre.com/contact 2 ACCOMMODATION DIVISION MANUFACTURED ACCOMMODATION VILLAGE OPERATIONS Design, manufacture and supply of accommodation for the affordable housing, education and commercial markets. Operation of accommodation villages - Searipple in Karratha and Osprey in South Hedland. RECREATIONAL VEHICLES DIVISION PARTS AND ACCESSORIES RECREATIONAL VEHICLES Manufacture and distribution of recreational and commercial vehicle parts and accessories. Manufacture of caravans and vehicle parts and accessories. 3 FIVE YEAR SUMMARY $ million (unless stated) 2016 2015 2014 2013 2012 Revenue 287.3 272.8 366.5 333.9 382.6 Earnings before interest, tax, depreciation, amortisation and impairment (EBITDA before impairment) 10.0 17.8 28.2 40.5 94.2 EBITDA margin 3.5% 6.5% 7.7% 12.1% 5.2% 9.3 0.7 (9.6) 12.3 17.6 16.1 14.9 5.5 2.3 10.6 24.5 5.6 24.5 4.9 4.9 -3.4% 0.8% 1.5% 7.3% 1.3% 3.7 (2.4) (13.4) (11.0) -2.6 4.0 (0.0) (1.6) (1.6) 1.2 (18.1) (2.6) 0.0 0.0 2.2 2.8 3.4 0.6 2.5 0.9 4.0 1.3 6.6 23.2 16.6 19.3 27.8 30.0 0.8 0.7 0.9 0.2 6.4 0.9 76.0 238.6 327.7 321.8 312.6 289.8 (3.1) 55.9 56.0 32.0 (16.5) 186.3 214.0 214.4 214.1 231.2 -2% 67.0 61.0 29% 42.2 61.0 29% 30.9 60.6 21% 25.4 60.5 0% 77.3 59.2 Depreciation and amortisation Earnings before interest, tax and impairment (EBIT before impairment) Earnings before interest and tax (EBIT) EBIT margin Finance costs Income tax (benefit) expense Operating (loss) profit before income tax Operating (loss) profit after tax Interest cover (times) Earnings per share (cents) Dividends per share (cents) Assets Net (cash) debt Shareholders funds Debt / Shareholders funds % Cash flows from operations Number of shares on issue (million) All numbers exclude discontinued operations 4 BOARD OF DIRECTORS & EXECUTIVE OFFICERS 1 PHILLIP CAMPBELL Non-Executive Director, Chairman Engineer, Technical Sales & Marketing, BE, GAICD Age 64 lives in Melbourne Phillip was appointed to the board in August 2016. His business career spans 35 years and includes national and international postings across a range of industries including resources, construction, manufacturing, food, and engineering services. Phillip has previously been a director of Pearl Street Limited, HRL Limited and Chairman of Farm Pride Foods Limited. He is currently a director and advisor to a number of unlisted public, private and not-for-profit organisations across Australia including Fodder King Limited. 2 BRAD DENISON Managing Director Fellow Certified Practising Accountant, B Comm Age 44 lives in Perth Brad was appointed Managing Director in August 2014. Prior to this, Brad was Chief Financial Officer and Company Secretary for 12 years. Before joining Fleetwood, Brad was employed in senior public company finance roles. 3 MICHAEL HARDY Non-Executive Director, Chairman of Remuneration and Audit Committees Barrister & Solicitor, B Juris LLB, BA Age 63 lives in Perth Michael has been a director of the company since 2004, and chair of the board from 2007 until 2016. Michael is a barrister and solicitor who has practised in Perth as a principal in the national firm, Clayton Utz, the boutique firm, Hardy Bowen and as a sole practitioner in the areas of commercial, property, corporate and administrative law. Michael is also a director of WA Country Health Services and an acting specialist member of the WA Development Assessment panels. 4 GREG TATE Non-Executive Director Chartered Accountant, B Comm Age 64 lives in Perth Greg was appointed a Non-Executive Director during listing of the company in 1987 and became Managing Director in 1990. He relinquished this role to become Executive Director of Operations in 2007. Greg retired from his executive position in December 2010. Prior to joining Fleetwood he founded a chartered accountancy practice after being employed in Australia and the USA by Deloitte. 5 YANYA O’HARA Company Secretary Barrister & Solicitor, LL B (Hon), LL M Yanya was appointed as Company Secretary on 1 August 2014. Prior to this, Yanya was employed by the Company for three years as Assistant Company Secretary. Prior to joining Fleetwood, Yanya practiced as a corporate attorney in New York and as barrister and solicitor in Perth. 1 2 3 4 5 5 MANAGING DIRECTOR’S REVIEW REVIEW OF OPERATIONS The 2016 financial year saw the company’s statutory profit impacted by asset impairment and discontinuation of the company’s mining rental business. Since the downturn in mining related construction, demand for rental accommodation has been gradually decreasing. This ultimately resulted in Fleetwood’s mining rental business generating an operating loss after tax of $2.8m in 2016. In addition to this, as operators in the industry have sold excess stock into the second hand market, values achievable for second hand units have decreased, most notably during the six months to 30 June 2016. As a result, the company has booked a pre-tax impairment charge of $19.7m against these assets. Fleetwood’s mining rental business was discontinued in 2016. Accordingly the loss from the discontinued operation of $16.9m has been disclosed separately to results from continuing operations in the profit and loss statement. Other impairment charges during the year were related to intangible assets in Fleetwoood’s parts and accessories business. With the effect of these adjustments excluded, the company generated earnings before interest and tax of $0.7m from operations that will continue into the future. The company reported a net cash position of $3m at 30 June 2016, compared to $56m of net debt at the previous year end. RV MANUFACTURING Since the global financial crisis heavily impacted the recreational vehicles industry in 2009, Fleetwood RV has been significantly restructured. This included consolidating manufacturing into a single facility, updating the company’s product range and expanding the dealer network. $ million 2016 2015 % change Revenue 29.6 34.0 -13.0% Operating EBIT - 8.1 - 7.6* -6.5% *Excludes impairment charge of $3.2m in 2015. The new product range was demonstrated to consumers at major capital city caravan and camping shows between February and June 2016. The effect has been a substantial increase in the order book and production run rates are now being increased to meet the demand. The dealer network is also being expanded. Two new dealers have been appointed in New South Wales and an additional dealer has been appointed in Victoria. While this is very encouraging it is not expected that the business will return to profitability during the first half of the 2017 financial year. However given how orders are trending, the board has confidence in the direction the business is taking. PARTS AND ACCESSORIES Fleetwood’s parts and accessories segment is comprised of Camec which is a major supplier of components to the RV industry and Flexiglass which supplies fibreglass canopies and aluminium trays for utility vehicles. $ million 2016 2015 % change Revenue 82.1 78.2 5.0% Operating EBIT 0.9* 0.6 46.7% In the last three years, Flexiglass’ operations have been restructured, resulting in the cessation of manufacturing in Australia and the commencement of supply from Thailand, where nine of the eleven global top selling utility vehicles are manufactured. *Excludes impairment charge of $10.3m in 2016. The directors have taken the conservative approach of recognising an impairment charge against the goodwill in Flexiglass, however notwithstanding this revenue and earnings are expected to gradually improve. Camec experienced significant pressure from overseas competitors throughout the recent period where AUD/US exchange rates were above parity, however the effect of this is now abating and Camec is expected to see an improved trading result in 2017. 6 MANUFACTURED ACCOMMODATION Following the downturn in the mining industry, Fleetwood’s key strategy in the manufactured accommodation segment has been to increase the company’s involvement in the affordable housing and education sectors. $ million 2016 2015 % change Revenue 142.5 116.4 22.4% Operating EBIT 3.6 -3.6 198.3% Fleetwood has supply agreements with the two largest operators in the Australian manufactured affordable housing industry, which are Gateway Lifestyle who are developing manufactured home estates throughout Queensland and New South Wales, and National Lifestyle Villages who develop and operate manufactured housing estates in Western Australia. The agreement with National Lifestyle Villages which was executed in June 2016 will contribute volume to Fleetwood’s Western Australian manufactured accommodation business over its initial five year term. The agreement is an important milestone for the WA business which has been significantly restructured since the downturn in the mining industry. Fleetwood’s agreement with the Victorian Education Department to build new classrooms and relocate existing classrooms provides a significant income stream for the group. Strong demand was also seen in other states during 2016. Demand is expected to moderate in 2017, however it will continue to be a strong contributor to Fleetwood’s overall earnings. VILLAGE OPERATIONS In February 2015 Fleetwood entered into an agreement with Rio Tinto to accommodate up to 804 workers at Searipple Village in Karratha. This agreement saw the village return to profitability in 2015 and 2016 and Searipple will continue to contribute future earnings. $ million 2016 2015 % change Revenue 33.0 34.7 -4.9% Operating EBIT 7.9 8.9* -11.2% * Excludes one-off adjustment related to the capital value of Osprey Village of $9.4m. In July 2015 Fleetwood reached agreement with the West Australian Government in respect of the sale of Osprey Village in Port Hedland. The sale agreement provides Fleetwood with the right to continue to manage the village for a term of fourteen years. Sale proceeds from the transaction of $62.2m were used to eliminate debt. While the downturn in the mining sector has seen demand for worker accommodation reduce, the income streams from Searipple and Osprey are underpinned by blue chip customers and provide strong cash flows for the company. DIVIDENDS A final dividend has not been declared, however the outlook is improving and the directors intend to resume the payment of dividends as soon as practicable. The company has a significant franking account balance to support this. BOARD CHANGES As announced on 12 August, following an extensive independent search process Phillip Campbell has been appointed Chairman of Fleetwood. After three years with Fleetwood, John Bond resigned as non-executive director on 24 August 2016. Any further changes the board considers necessary will be the subject of independent external advice. FLEETWOOD PEOPLE 2016 has been another challenging year for Fleetwood. Difficult trading conditions in some areas and taking advantage of new markets required our people to extend themselves. On behalf of the directors, I sincerely thank our people for rising to meet these challenges. 7 Consolidated statement of profit or loss and other comprehensive income Fleetwood Corporation Limited Year ended 30 June 2016 Continuing operations Sales revenue Other income Materials used Sub-contract costs Employee benefits Operating leases Impairment of non-current assets Other expenses (Loss) Profit before interest, tax, depreciation and amortisation (EBITDA) Depreciation and amortisation (Loss) Profit before interest and tax (EBIT) Finance costs Loss before incom e tax expense Income tax benefit Loss from continuing operations (Loss) Profit from discontinued operation (Loss) Profit for the year Other com prehensive incom e (loss) Items that may subsequently be reclassified to profit or loss Net exchange difference relating to foreign controlled entities (net of tax) Total com prehensive (loss) incom e for the year Earnings per share from continuing and discontinued operations Basic earnings per share (cents) Diluted earnings per share (cents) Earnings per share from continuing operations Basic earnings per share (cents) Diluted earnings per share (cents) To be read in conjunction with the accompanying notes. N o t e 2 2 2016 $ '000 2015 $ '000 287,062 272,821 195 (65) (110,382) (95,915) (75,311) (68,181) (56,092) (58,212) (10,059) (10,542) 14, 15 (10,312) (3,177) (25,444) (22,096) (343) 14,633 (9,305) (12,318) (9,648) (3,733) (13,381) 2,362 (11,019) (16,985) (28,004) 13 (27,991) (45.9) (45.8) (18.1) (18.0) 2,315 (3,959) (1,644) 44 (1,600) 1,776 176 (38) 138 0.3 0.3 (2.6) (2.6) 3 3 4 34 25 24 7 7 7 7 8 Consolidated statement of financial position Fleetwood Corporation Limited As at 30 June 2016 Current assets Cash and cash equivalents Trade and other receivables Inventories Other financial assets Non-current assets held for sale Total current assets Non-current assets Trade and other receivables Property, plant and equipment Goodwill Intangible assets Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Interest bearing liabilities Tax liabilities Provisions Other financial liabilities Total current liabilities Non-current liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity To be read in conjunction with the accompanying notes. Note 8 9 10 11 12 9 13 14 15 4 16 18 17 21 17 23 24 25 2016 $ '000 6,116 40,628 49,291 - 25,839 2015 $ '000 6,634 96,197 45,246 206 - 121,874 148,283 427 45,836 55,230 1,120 14,121 - 107,676 61,761 5,166 4,822 116,734 179,425 238,608 327,708 42,247 3,000 - 5,556 301 43,672 62,500 959 5,605 - 51,104 112,736 1,177 1,177 971 971 52,281 113,707 186,327 214,001 195,079 194,762 (244) (8,508) (257) 19,496 186,327 214,001 9 Consolidated statement of changes in equity Fleetwood Corporation Limited Year ended 30 June 2016 Balance 1 July 2014 Profit for the year Exchange differences arising on translation of foreign operations Total comprehensive income for the year Dividends paid Share-based payments Balance at 30 June 2015 Loss for the year Exchange differences arising on translation of foreign operations Total comprehensive income for the year Share-based payments Balance at 30 June 2016 To be read in conjunction with the accompanying notes. Foreign currency translation reserve $ '000 Issued capital $ '000 Retained earnings $ '000 Total $ '000 194,096 (219) 20,532 214,409 - - - 198 468 - (38) (38) - - 176 - 176 176 (38) 138 (1,212) (1,014) - 468 194,762 (257) 19,496 214,001 - - - 317 - 13 13 - (28,004) (28,004) - 13 (28,004) (27,991) - 317 195,079 (244) (8,508) 186,327 10 Consolidated statement of cash flows Fleetwood Corporation Limited Year ended 30 June 2016 Cash flows from operating activities Receipts in the course of operations Payments in the course of operations Interest received Income taxes paid Finance costs paid Note 9 2016 $ '000 2015 $ '000 384,750 (313,528) 327,500 (281,320) 290 (617) (3,918) 75 (129) (3,959) Net cash provided by operating activities 29.1 66,977 42,167 Cash flows from investing activities Acquisition of property, plant and equipment Proceeds from sale of non-current assets Payment for acquisition of subsidiary Payment for intangible assets Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Dividends paid Net cash used in financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effect of exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at the end of the financial year 8 To be read in conjunction with the accompanying notes. (7,972) (33,556) 436 - (484) 120 (4,915) (2,653) (8,020) (41,004) 85,000 (144,500) - (59,500) (543) 6,634 25 6,116 56,989 (56,900) (1,014) (925) 238 6,405 (9) 6,634 11 Notes to the financial statements Fleetwood Corporation Limited Year ended 30 June 2016 1 Statement of significant accounting policies The significant policies which have been adopted in the preparation of this financial report are: 1.1 Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001 (Cth), Accounting Standards and Interpretations, and complies with other requirements of the law. Compliance with Australian Accounting Standards ensures the consolidated financial statements and notes of the consolidated entity comply with International Financial Reporting Standards. The Company is a for profit entity and the financial statements comprise the consolidated financial statements of the Group. The financial statements were authorised for issue by the directors on 30 September 2016. The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to its operations and effective for the current annual reporting period. Adoption of these standards has had no effect on the amounts reported for the current or prior period. At the date of authorisation of the financial statements, the following applicable standards and interpretations have been issued but are not yet effective: Standard AASB 9 ‘Financial Instruments’, and the relevant amending standards Effective for reporting periods beginning on or after: Expected to be applied in the year ending: 1 January 2018 30 June 2019 AASB 15 ‘Revenue from Contracts with Customers’ 1 January 2017 30 June 2018 AASB 16 ‘Leases’ AASB 2014-3 ‘Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations’ AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation’ 1 January 2019 30 June 2020 1 January 2016 30 June 2017 1 January 2016 30 June 2017 AASB 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’ 1 January 2018 30 June 2019 AASB 2014-7 ‘Amendments to Australian Accounting Standards arising from AASB 9’ 1 January 2018 30 June 2019 AASB 2014-9 ‘Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements’ 1 January 2016 30 June 2017 AASB 2014-10 ‘Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture’ 1 January 2016 30 June 2017 AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle’ 1 January 2016 30 June 2017 AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101’ 1 January 2016 30 June 2017 AASB 2015-5 ‘Amendments to Australian Accounting Standards – Investment Entities: Applying the Consolidation Exception’ 1 January 2016 30 June 2017 AASB 2015-6 ‘Amendments to Australian Accounting Standards – Extending Related Party Disclosures to Not-for-Profit Public Sector Entities’; 1 July 2016 30 June 2017 AASB 2015-7 ‘Amendments to Australian Accounting Standards – Fair Value Disclosures of Not-for-Profit Public Sector Entities’ 1 July 2016 30 June 2017 AASB 2015-8 ‘Amendments to Australian Accounting Standards – Effective Date of AASB 15’ 1 January 2017 30 June 2018 AASB 2015-9 ‘Amendments to Australian Accounting Standards – Scope and Application Paragraphs’ 1 January 2016 30 June 2017 AASB 2015-8 ‘Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128’ 1 January 2016 30 June 2017 AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses’ 1 January 2017 30 June 2018 AASB 2016-1 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107’ 1 January 2017 30 June 2018 12 The Group is yet to undertake a detailed assessment of the impact of AASB 15 and AASB 9. Management are in the process of determining the potential impact of the initial application of the Standards and Interpretations. These Standards and Interpretations will be first applied in the financial report of the Group that relates to the annual reporting period beginning on or after the effective date of each pronouncement. 1.2 Basis of preparation The financial report has been prepared on the basis of historical costs, except for certain non-current assets and financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Cost is generally based on the fair values of the consideration given in exchange for assets. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 or value in use in AASB 136. Accounting policies have been consistently applied and except where there are changes in accounting policy, are consistent with those of the previous year. All amounts are presented in Australian Dollars unless otherwise noted. The Company has applied the relief available to it under ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016 / 191 and accordingly, amounts in the financial statements and directors’ report have been rounded to the nearest $1,000, or in certain cases, the nearest dollar. 1.3 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Company has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee, and has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders, potential voting rights held by the Company, other vote holders or other parties, rights arising from other contractual arrangements, and any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings. Income and expense of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company even if this results in the non-controlling interests having a deficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. When the Group loses control of a subsidiary, a gain or loss is recognised in the profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 139 ‘Financial Instruments: Recognition and Measurement’ or, when applicable, the cost on initial recognition of an investment in an associate. 1.4 Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum at the acquisition-date of the fair values of assets transferred by the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity instruments issued by the Company in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that deferred tax assets or liabilities or assets related to employment benefit arrangements are recognised and measured in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’ respectively. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non- controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. 13 1.5 Revenue recognition Revenue is recognised at the fair value of consideration received or receivable net of goods and services tax (GST). Sale of goods Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:      the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Group; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Construction contracts When the stage of completion can be reliably measured, revenue is recognised in proportion to the stage of completion of the contract. The stage of completion is measured based on the proportion of costs incurred for work performed to date relative to the estimated total contract cost. Variations in contract work, claims and incentive payments are included to the extent that the amount can be reliably measured and its receipt is considered probable. Where the outcome of a contract cannot be reliably estimated, costs are immediately recognised as an expense. Where it is probable costs will not be recovered, revenue is only recognised to the extent costs are recoverable. An expected loss is recognised immediately as an expense. When costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed costs incurred to date plus recognised profits less recognised losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statement of financial position, as a liability. Amounts billed for work performed but not yet paid are included in the consolidated statement of financial position as trade and other receivables. Rental Rental income is recognised on a straight line basis over the term of the relevant rental contract. Interest Interest is recognised on an accrual basis, taking into account the effective yield on the financial asset. Sale of non-current assets Gains or losses on sale of non-current assets are included as income or expenses at the date the significant risks and rewards of the asset pass to the buyer, usually when an unconditional contract of sale is signed. The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal. Dividends Dividends and distributions from subsidiaries are recognised by the parent entity when they are declared by the subsidiaries. Dividends received out of pre-acquisition reserves are eliminated against the carrying amount of the investment and not recognised as revenue. 1.6 Foreign currency Functional currency The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). The results and financial position of each group entity are expressed in Australian Dollars (‘$’), which is the functional currency of the Company and the presentation currency for the consolidated financial statements. Transactions Foreign currency transactions are translated to Australian currency at the rates of exchange ruling at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are translated at the rate of exchange ruling on that date. Exchange differences relating to amounts payable and receivable in foreign currencies are brought to account as exchange gains or losses in the statement of comprehensive income in the financial year in which they arose. Translation of controlled foreign operations The assets and liabilities of foreign operations, including subsidiaries, are translated at the rates of exchange ruling at balance date. Equity items are translated at historical rates. Exchange differences arising from translation are taken directly to the foreign currency reserve until disposal or partial disposal of the operations. Income and expense items are translated at the average exchange rates for the period. Exchange differences are recognised in other comprehensive income and accumulated in equity. 1.7 Goods and services tax Revenues, expenses and assets are recognised net of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables are stated with the amount of GST included. The net GST recoverable from, or payable to, the taxation authority is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities, which are recoverable from, or payable to, the taxation authority are classified as operating cash flows. 1.8 Taxation Current tax Current tax is calculated by reference to the amount of income tax payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by the reporting date. Current tax for current and prior periods is recognised as a liability or asset to the extent that it is unpaid or refundable. Taxable profit differs from profit before tax as reported in the consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. 14 Deferred tax Deferred tax is accounted for using the comprehensive statement of financial position liability method in respect of temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that a sufficient taxable amount will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. Deferred tax assets and liabilities are not recognised if the temporary differences arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable differences arising from goodwill. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets and the liabilities giving rise to them are realised or settled, based on tax rates and tax laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company/consolidated entity intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax is recognised as an expense or income in the statement of comprehensive income, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill. 1.9 Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in fair value and have a maturity of three months or less at the date of acquisition. 1.10 Acquisition of assets All assets including property, plant and equipment and intangibles are initially recorded at their cost at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition. The costs of assets constructed or internally generated by the consolidated entity, other than goodwill, include the cost of materials, direct labour, directly attributable overheads and other incidental costs. Expenditure, including that on internally generated assets other than development costs, is only recognised as an asset when it is probable that future economic benefits will eventuate and the costs can be measured reliably. Costs attributable to feasibility and alternative approach assessments are expensed as incurred. Costs incurred on assets subsequent to initial acquisition are capitalised when it is probable future economic benefits will flow to the consolidated entity. Costs that do not meet the criteria for capitalisation are expensed as incurred. 1.11 Non-current assets held for sale Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non- current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is only met when the sale is highly probable and the asset is available for immediate sale in its present condition and the sale is expected to be completed within one year from the date of classification. 1.12 Receivables Trade debtors are recorded at amortised cost less impairment. The collectability of debts is assessed at year-end and a provision is made for any doubtful debts. Changes in the carrying amount of the allowance are recognised in profit or loss. 1.13 Inventories Inventories are carried at the lower of cost and net realisable value. Cost is determined using standard cost and for work in progress includes an appropriate share of both variable and fixed costs. Net realisable value represents the estimated selling prices for the inventories less all estimated costs of completion and costs necessary to make the sale. 1.14 Impairment of assets other than goodwill At each reporting date, the carrying amounts of tangible and intangible assets are reviewed to determine whether there is any indication those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash- generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value through equity, in which case the impairment loss is treated as a revaluation decrease. 15 Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value through equity, in which case the reversal of the impairment loss is treated as a revaluation increase. 1.15 Leases Payments made under operating leases are expensed on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property. 1.16 Property, plant and equipment Each class of property, plant and equipment is stated at historical cost less, where applicable, any accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Property in the course of construction for production, supply or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Freehold land is not depreciated. The cost of self-constructed assets includes the cost of materials and direct labour and any other costs attributable to bringing an asset to a working condition ready for its intended use. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 1.17 Depreciation and amortisation All non-financial assets of the entity (except land) have limited useful lives and are depreciated/amortised using the straight-line method over their estimated useful lives to their estimated residual values. Assets are depreciated or amortised from the time an asset is ready for use. Depreciation and amortisation rates and methods and residual values are reviewed annually for appropriateness. When changes are made adjustments are reflected in current and future periods only. Depreciation and amortisation are expensed, except to the extent they are included in the carrying amount of another asset as an allocation of production overheads. Depreciation/amortisation rates used for each class of asset are as follows: Buildings Leasehold property and improvements Plant and equipment 1.18 Goodwill 2016 2.5% 2015 2.5% 2% - 25% 2% - 25% 2.5% - 50% 2.5% - 50% For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 1.19 Intangibles Product development costs Expenditure on research activities is recognised as an expense in the period in which it is incurred. An intangible asset arising from product development (or from the development phase of an internal project) is recognised if the following are demonstrated:       the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the expenditure attributable to the intangible asset during its development can be measured reliably. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the asset first meets the recognition criteria. Where no internally-generated asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. 16 Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses and are amortised on a straight-line basis over their useful lives of 2 to 5 years. An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised. 1.20 Employee benefits Wages, salaries, annual and long service leave Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Provisions expected to be settled within 12 months are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Provisions which are not expected to be settled within 12 months are measured as the present value of the estimated future cash flows to be made in respect of services provided by employees up to the reporting date. The expected future payments incorporate anticipated future wage and salary levels, experience of employee departures and periods of service, and are discounted at rates determined by reference to market yields at the end of the reporting period on high quality corporate bonds (2014: government bonds) that have maturity dates that approximate the timing of the estimated future cash flows. Any re-measurements arising from experience adjustments and changes in assumptions are recognised in profit or loss in the periods in which the changes occur. Share based payments Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value determined at grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the estimate of equity instruments that will eventually vest. At the end of each reporting period, the estimate of the number of equity instruments expected to vest is reviewed. The impact of the revision is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity. Superannuation Contributions to employee superannuation funds are expensed when the employees have rendered service entitling them to the contributions. 1.21 Financial liabilities and equity instruments issued by the Group Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. Equity instruments issued by the Group are recognised at the amount received, net of direct issue costs. Payables Liabilities are recognised for amounts to be paid in the future for goods or services received regardless of whether they have been billed to the consolidated entity. They are initially valued at fair value, net of transaction costs. Interest bearing liabilities Bank loans are recognised initially at fair value net of transaction costs. Subsequent to initial recognition, bank loans are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit or loss over the period of the borrowing using the effective interest rate. Interest expense is recognised on an accrual basis. The Group derecognises liabilities when, the obligations are discharged, cancelled or expire. The difference between the carrying amount of the liability derecognised and the consideration paid and payable is recognised in profit or loss. 1.22 Comparative information Comparative information has been restated to account for the impact of the discontinued operation and other reclassifications to bring them in line with the current year classifications. 1.23 Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 1.24 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. 1.25 Derivative financial instruments The Group enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risk. Further details of derivative financial instruments are disclosed in notes 11, 21 and 28. Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the 17 Revenue from continuing operations comprises: 2 Revenue Sales revenue Goods Construction Rental Other income Interest Loss on sale of non-current assets Cost of sales Depreciation and amortisation of: buildings leasehold improvements plant and equipment product development Finance costs: Bank loans and overdraft Net bad and doubtful debts Research and development costs Superannuation expense Equity settled share-based payments 2016 $ '000 2015 $ '000 141,493 109,300 36,269 161,174 72,620 39,027 287,062 272,821 290 (95) 195 75 (140) (65) 287,257 272,756 226,240 202,248 34 1,921 6,602 748 9,305 34 4,149 6,885 1,250 12,318 3,733 3,959 1,192 65 310 4,174 317 11 4,347 468 All non-resource rental fleet units are available for sale and their sale is included in Sales revenue - Goods rather than profit on sale of non-current assets. 3 Profit before income tax expense Expenses from continuing operations contain the following items: derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. 1.26 Critical accounting judgments and key sources of estimation uncertainty In the application of accounting policies, management is required to make judgments, estimates and assumptions. The estimates and associated assumptions are based on experience and other factors that are considered relevant. Actual results may differ from these estimates. The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.       Accounting for construction contracts involves the continuous use of assessed estimates based on assumptions consistent with project scope and schedule, contract and risk management processes. Contracts may span several accounting periods. Estimates of forecast costs are regularly updated in accordance with the agreed work scope and schedule under the contract. Forecasts are based on the cost expected to apply when the related activity is undertaken. Contingencies are included in order to cover the risks in those forecasts. Revenues reflect the price agreed in the contract and variations where they have been approved or if it is probable they will be approved. Claims are included in contract revenue only where negotiations have reached an advanced stage such that it is probable that the client will accept the claim and recovery of the amount involved is probable. Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated except for where fair value less cost to sell has been applied. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Details of goodwill and the subsequent testing for impairment are set out in Note 14. Where the actual future cash flows are less than expected, a material impairment loss may arise. The Company uses valuation techniques that include inputs that are not based on observable market data to estimate the fair value of options issued during the year. Note 22 provides information about the key assumptions used in the determination of the fair value of these options. The Directors believe that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of the options. The carrying amount of goodwill at 30 June 2016 was $55.3 million (30 June 2015: $61.8 million) after an impairment loss of $6.5 million was recognised during 2016 (2015: $2.1 million). Details of the impairment loss calculation including key assumptions are set out in note 14. The carrying amount of property, plant and equipment at 30 June 2016 was $45.8 million (30 June 2015: $107.7 million) after an impairment loss of $19.7 million was recognised during 2016 (2015: $1.3 million) and transfers to non-current assets held for sale of $25.8 million (2015: nil). The Company has assessed a vendor financing arrangement between itself, a financial institution and one of its customers as meeting the derecognition criteria set out in AASB 139. This judgment was made based on elements in the arrangement that clearly demonstrate that the Company has transferred substantially all the risks and rewards of ownership of the financial asset. The essential clause in the arrangement that led to this judgment was the zero recourse component on the debt, whereby upon default of the customer, the Company would not be exposed to refunding amounts received under the arrangement. Further details are set out in note 9. 1.27 Profit or loss from discontinued operations A discontinued operation is a component of the Group that has either been disposed of, or is held for sale, and;    represents a separate major line of business or geographical area of operations; is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or is a subsidiary acquired exclusively with a view to resale. Profit or loss from discontinued operations, including prior year components of profit or loss, are presented in a single amount in the statement of profit or loss and other comprehensive income. This amount, which comprises the post-tax profit or loss of discontinued operations, is further analysed in Note 34. General information Fleetwood Corporation Limited is a public company listed on the Australian Securities Exchange (trading under the symbol ‘FWD’), incorporated in Australia and operating in Australia and New Zealand. The registered and business address of the Company is 21 Regal Place, East Perth, Western Australia. The telephone number of the company is (08) 9323 3300. Tax consolidation The Company and its wholly-owned Australian resident entities elected from 1 July 2003 to be taxed as a single entity. Fleetwood Corporation Limited, as the head entity, and the subsidiaries in the tax consolidated group continue to account for their own current and deferred tax amounts. The amounts are measured as if each entity continues to be a stand-alone taxpayer in its own right. The current tax balances are then transferred to the head entity via intercompany balances. The entities within the Group have entered a tax funding arrangement whereby each subsidiary will compensate the head entity for the amount of tax payable that would be calculated as if the subsidiary was a tax paying entity. The method used to calculate current and deferred tax amounts is summarised in Note 1.8. 18 2 Revenue Revenue from continuing operations comprises: Sales revenue Goods Construction Rental Other income Interest Loss on sale of non-current assets 2016 $ '000 2015 $ '000 141,493 109,300 36,269 161,174 72,620 39,027 287,062 272,821 290 (95) 195 75 (140) (65) 287,257 272,756 All non-resource rental fleet units are available for sale and their sale is included in Sales revenue - Goods rather than profit on sale of non-current assets. 3 Profit before income tax expense Expenses from continuing operations contain the following items: Cost of sales Depreciation and amortisation of: buildings leasehold improvements plant and equipment product development Finance costs: Bank loans and overdraft Net bad and doubtful debts Research and development costs Superannuation expense Equity settled share-based payments 226,240 202,248 34 1,921 6,602 748 9,305 34 4,149 6,885 1,250 12,318 3,733 3,959 1,192 65 310 4,174 317 11 4,347 468 19 4 Income taxes recognised in profit or loss Current tax (benefit) expense Deferred tax expense relating to origination and reversal of temporary differences (Over) Under provision of income tax in prior year Continuing operations Discontinued operations Reconciliation of income tax expense to the accounting profit Note 2016 $ '000 2015 $ '000 (1,531) (398) (433) 508 (611) 59 (2,362) (44) 34 (7,279) 761 Loss before tax from continuing operations (13,381) (1,644) The tax rate used for 2016 and 2015 is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. Income tax expense calculated at 30% (2015: 30%) (4,014) (493) Amortisation of leasehold improvements Effect of lower tax rates on overseas income Non-deductible expenses Research & development allowance Non-assessable amounts Sundry items Adjustments relating to income tax in prior year Deferred tax Deferred tax relating to: Property, plant and equipment Employee provisions Other provisions Accruals Unused tax losses 8 (8) 2,054 (74) 90 15 (1,929) (433) (2,362) 8 (14) 769 (313) (62) 2 (103) 59 (44) Balance 2014 $ '000 Charged to income $ '000 Balance 2015 $ '000 Charged to income $ '000 Balance 2016 $ '000 2,126 2,092 26 152 - 4,396 606 (118) (14) (48) - 426 2,733 1,973 12 104 - 4,822 5,515 46 6 97 3,635 9,299 8,248 2,019 18 201 3,635 14,121 The company anticipates future profits will be earned to utilise deferred tax assets. 20 5 Segment information Group operating segments are based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. Business segments Products / Services RV Manufacturing Manufacture of caravans and vehicle parts and accessories Parts and Accessories Manufacture and distribution of vehicle parts and accessories Manufactured Accommodation Design, manufacture and sale of manufactured accommodation Village Operations Operation of accommodation villages Unallocated Group corporate function Revenue and results by reportable operating segment: RV Manufacturing Parts and Accessories Manufactured Accommodation Village Operations Unallocated Finance costs Asset impairment Loss before income tax benefit Income tax benefit Loss from continuing operations (Loss) profit from discontinued operations (Loss) profit attributable to members of the parent entity Segment revenue Depreciation & amortisation 2016 $ '000 2015 $ '000 29,572 82,061 142,533 33,011 80 34,007 78,215 116,404 44,061 69 2016 $ '000 627 1,876 2,298 4,282 222 2015 $ '000 917 2,081 2,603 6,506 211 Segment result (EBIT) 2015 $ '000 2016 $ '000 (8,096) 858 3,583 7,948 (3,629) (7,605) 585 (3,644) 18,353 (2,197) 287,257 272,756 9,305 12,318 664 5,492 (3,733) (3,959) (10,312) (3,177) (13,381) (1,644) 2,362 44 (11,019) (1,600) (16,985) 1,776 (28,004) 176 Revenue from the top three external customers comprised 20.7%, 11.3% & 9.8%, respectively, of group revenue, derived from the manufactured accommodation & RV manufacturing segments. Impairment of $10.3 million relates to impaired goodwill and intangible assets to the Parts and Accessories segment for 2016 (2015: $3.2 million of impaired goodwill and intangible assets pertains to the RV manufacturing segment). The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 1. Segment results represents earnings before interest and tax without the allocation of corporate overheads. Group assets and liabilities by segment: Additions to Segment assets non-current assets 2015 $ '000 2015 $ '000 2016 $ '000 2016 $ '000 RV Manufacturing Parts and Accessories Manufactured Accommodation Village Operations Unallocated 15,959 54,838 97,148 27,786 42,877 11,785 64,390 90,369 88,956 72,208 847 1,114 3,789 172 2,659 474 7,390 2,557 1,510 28,941 Segment liabilities 2016 $ '000 6,280 13,343 25,428 2,442 4,788 2015 $ '000 3,459 11,355 20,767 3,232 74,894 For the purposes of monitoring segment performance and allocating resources all assets and liabilities are allocated to the reportable segments other than current and deferred tax amounts and assets and liabilities directly utilised by the Corporate entity. The Group operates in two principal geographical areas - Australia (country of domicile) and New Zealand. 238,608 327,708 8,581 40,872 52,281 113,707 21 5 Segment information (continued) Group non-current assets and revenues by geographical segment: Australia New Zealand 6 Dividends Recognised amounts Final 2014 - paid 2 cents per share fully franked Segment non-current assets Revenue from external customers 2016 $ '000 102,146 466 2015 $ '000 2016 $ '000 2015 $ '000 110,538 478 281,176 6,081 266,662 6,094 102,612 111,016 287,257 272,756 - - 1,212 1,212 Dividend franking account 30% franking credits available to shareholders of Fleetwood Corporation Limited for subsequent years 26,146 25,708 7 Earnings per share Earnings used in the calculation of basic and diluted earnings per share from continuing and discontinued operations Adjustment to exclude loss (profit) from discontinued operation Earnings used in the calculation of basic and diluted earnings per share from continuing operations (28,004) 176 16,985 (1,776) (11,019) (1,600) The weighted average number of ordinary shares used in the calculation of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: Weighted average number of ordinary shares used in the calculation of basic EPS Number of shares deemed to be issued for no consideration in respect of options Weighted average number of ordinary shares used in the calculation of diluted EPS From continuing and discontinued operations Basic earnings per share (cents) Diluted earnings per share (cents) From continuing operations Basic earnings per share (cents) Diluted earnings per share (cents) From continuing operations before impairment Basic earnings per share (cents) Diluted earnings per share (cents) There are no potential ordinary shares that are anti-dilutive. Weighted average number of shares used 61,039,412 60,847,809 131,220 72,600 61,170,632 60,920,409 (45.9) (45.8) (18.1) (18.0) (3.0) (3.0) 0.3 0.3 (2.6) (2.6) 2.6 2.6 22 8 Cash and cash equivalents Cash and cash equivalents 6,116 6,634 Cash at bank is at call and received interest at a weighted average rate of 0.98% (2015: 1.42%). 2016 $ '000 2015 $ '000 9 Trade and other receivables Current Trade receivables Less: allowance for doubtful debts Other debtors Non-Current Other debtors 29,813 (608) 11,423 32,768 (387) 63,816 40,628 96,197 427 427 - - Trade and other debtors are non-interest bearing and are generally on terms ranging between 7 and 60 days. The average credit period on sales of goods is 30 to 60 days. All trade and other debtors are expected to be settled within 60 days of year end. Retentions on construction contracts included within other debtors amount to $0.2 million (2015: 1.2 million), to be received from the customer on acceptance of the works performed and other contractual milestones. Included in other debtors is in the prior period is $56.3 million pertaining to the Osprey Project which was settled on 20 July 2015. The final settlement was by way of a vendor financing agreement involving a third party financial institution and is included in Receipts in the course of operations in the Consolidated Statement of Cash Flows. With respect to the judgement to de-recognise the other debtor, refer to note 1.27. Other non-current debtors represent funds held in trust for the employee and executive long term incentive plans. Concentrations of risk The five largest outstanding receivables at 30 June 2016 by customer are: Department of Education & Early Childhood Development (Victorian State Government) Department of Education, Training & Employment (Queensland State Government) Pilbara Iron Co (Services) P/L (Rio Tinto) GE Commercial Finance New Age Caravans 5,122 3,926 3,892 2,404 750 2,809 2,551 3,921 976 500 Trade receivables include amounts that are past due at the end of the reporting period but against which the Group has not recognised an allowance for doubtful receivables because there has not been a significant change in the credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. An analysis of aged receivables is included below: Less than 3 months Between 3 - 6 months Longer than 6 months Movement in allowance for doubtful debts Balance at beginning of year Impairment losses recognised on receivables Amounts (written off) / provided for during the year 4,081 41 645 4,767 387 625 (404) 608 3,874 239 2,715 6,828 15 49 323 387 23 10 Inventories Current Raw materials & stores Work in progress Finished goods 2016 $ '000 2015 $ '000 8,832 17,984 22,475 49,291 7,413 15,274 22,559 45,246 The cost of inventories recognised as an expense during the year in respect of continuing operations was $115.0 million (2015: $101.1 million). The cost of inventories written down to net realisable value during the year was nil (2015: $0.4 million) Included in current work in progress is $16.4 million (2015: $14.1 million) relating to construction contracts in progress, comprising costs incurred and recognised profits (less recognised losses). 11 Other financial assets Current Derivatives not in designated hedge accounting relationships - 206 The Group has entered into forward exchange contracts to hedge foreign currency risk on highly probable future purchases of inventory from overseas. 12 Non-current assets held for sale Plant & equipment - idle mining rental assets 13 Property, plant and equipment Freehold land Cost Buildings Cost Accumulated depreciation Leasehold property and improvements Cost Accumulated amortisation Plant and equipment Cost Accumulated depreciation Assets under construction Cost 24 25,839 25,839 - - 2,964 2,964 1,342 (340) 1,002 1,342 (306) 1,036 50,744 (39,490) 53,903 (40,742) 11,254 13,161 67,928 (38,326) 140,047 (73,519) 29,602 66,528 1,014 23,987 45,836 107,676 13 Property, plant and equipment (continued) Movement in the carrying amounts of each class of property, plant and equipment: 2016 Financial Year Balance at 1 July 2015 Additions Transferred to non current assets held for sale Transferred from assets under construction Transferred to plant and equipment Transferred to other debtors Transferred to other creditors Disposals Depreciation and amortisation Impairment Effect of foreign exchange differences Freehold land Buildings Leasehold Property Plant and equipment Assets under Construction Total 2,964 1,036 13,161 - - - - - - - - - - - - - - - - - 14 - - - - - - (34) (1,921) - - - - 66,528 3,095 (25,839) 27,733 - - 288 (6,143) (16,397) (19,680) 17 23,987 107,676 4,989 8,098 - - (25,839) 27,733 (27,733) (27,733) (126) - (126) 288 (103) (6,246) - - - (18,352) (19,680) 17 Balance at 30 June 2016 2,964 1,002 11,254 29,602 1,014 45,836 2015 Financial Year Balance at 1 July 2014 Additions Acquisition through business acquired Transferred from assets under construction Transferred to plant and equipment Disposals Depreciation and amortisation Impairment Effect of foreign exchange differences 1,408 1,556 - - - - - - - 1,070 16,840 - - - - - 470 - - - - 75,776 1,675 89 20,255 14,608 109,702 30,092 33,793 - - 89 20,255 - (20,255) (20,255) (6,496) (238) (6,734) (34) (4,149) (23,680) - - - - (1,080) (11) - (27,863) (220) (1,300) - (11) Balance at 30 June 2015 2,964 1,036 13,161 66,528 23,987 107,676 $1.4m of land is mortgaged under the Group's financing arrangements with Westpac. A $19.7 million dollar impairment has been recognised with respect to the Company's mining rental assets due to the downturn in the mining industry and the resulting reduction in demand for construction workforce accommodation (2015: $1.3 million). 25 14 Goodwill Goodwill Reconciliation of the carrying amount of Goodwill: Gross carrying amount Opening balance Additional amounts recognised from business combination occurring during the period Effect of foreign exchange differences Accumulated impairment Opening balance Impairment loss in respect of caravan manufacturing CGU Impairment loss in respect of canopies, trays and accessories CGU Individual cash-generating unit (CGU) allocations: Parts and accessories Canopies, trays and accessories Manufactured accommodation 2016 $ '000 2015 $ '000 55,230 61,761 68,858 - (2) 68,856 (7,097) - (6,529) (13,626) 12,401 4,509 38,320 55,230 64,431 4,425 2 68,858 (5,000) (2,097) - (7,097) 12,401 11,040 38,320 61,761 The recoverable amount of the cash generating units has been determined based on value in use. The value in use has been calculated using cashflow projections based on financial budgets approved by the board with key assumptions based on past experience and where applicable external sources of information. Projections are extrapolated for a 5 year period using an estimated growth rate. The growth rate assumptions used in years 2-5 are: N/A (2015: 2.5%) for caravan manufacturing CGU, 2.5% (2015: 2.5%) for parts and accessories CGU, 2.5% (2015: 2.5%) for canopies, trays and accessories CGU and 2.5% (2015: 5%) for manufactured accommodation CGU. The terminal growth rate used for all CGUs is 2.5% (2015: 2.5%). Discount rate assumptions utilised in the value-in-use calculations are: N/A (2015: 18.9%) for caravan manufacturing CGU, 17.8% (2015: 18.9%) for parts and accessories CGU, 17.8% (2015: 13.3%) for canopies, trays and accessories CGU and 9.65% (2015: 12.25%) for manufactured accommodation CGU. The discount rate recognises the risk factor applicable to the industry in which each CGU operates. the Parts and Accessories CGU, In respect of foreign exchange rates and EBIT are considered to be key assumptions used in the value-in-use calculations. The cash flow projection for 2017 assumes an increase in annual EBIT from the CGU’s actual 2016 greater than 2.5%. This is based on anticipated sales of new products and the effects of cost reduction initiatives on operating expenditures enacted in fiscal 2016. Otherwise, the projection for 2017 reflects stable profit margins achieved immediately before budget period. the discount rate, If the 2017 cash flow projection were to be set using historic 2016 EBIT performance, with growth of 2.5% each year thereafter and all other inputs held constant, the CGU’s carrying value would still exceed its recoverable amount. Continuing under this scenario, with all other inputs held constant, an increase to the post-tax discount rate from 12.42% to 13.20% would cause the CGU’s recoverable amount to be equivalent to its carrying amount. Management has used the forecasts of industry specialists to determine the anticipated foreign exchange rates applied to overseas purchases in the forecasted periods. With all other inputs held constant, if the AUD were to weaken by approximately 2.5 cents to the USD when compared to the industry specialists’ predictions, the CGU’s recoverable amount would be equivalent to its carrying amount. If management’s assumptions for 2017 cash flows as described above were to be achieved, and maintaining steady growth of 2.5% for each period thereafter, the carrying amount would exceed the recoverable amount and no reasonable fluctuation in discounts rates, growth rates or exchange rates could cause the CGU’s carrying amount to exceeds its recoverable amount. Testing for impairment is carried out on an annual basis and whenever there is an indication of impairment. A $6.5 million impairment has been recorded against the goodwill of the canopies, trays and accessories CGU reflecting the challenging environment for Flexiglass (2015: Nil). In 2015 an impairment charge of $2.1m was recorded against the caravan manufacturing CGU. No impairment charge has been recorded since recognising goodwill except those mentioned. The recoverable amount of each CGU equals or exceeds the carrying amount of goodwill as at 30 June 2016. 26 15 Intangible assets Product development At cost Accumulated amortisation Product development WIP At cost Reconciliation of the carrying amounts: Product development Cost Opening balance Transferred from product development WIP Additions Disposals Impairment Accumulated amortisation Opening balance Amortisation charged for the year Eliminated on disposal Eliminated on impairment Product development WIP Carrying amount at beginning of year Additions Impairment Transferred to product development 2016 $ '000 2015 $ '000 289 (160) 129 991 1,120 4,993 (1,932) 3,061 2,105 5,166 4,993 505 238 (422) (5,025) 4,684 1,556 676 (283) (1,640) 289 4,993 1,932 748 (423) (2,097) 160 2,105 246 (854) (506) 991 1,921 1,250 (282) (957) 1,932 2,081 1,977 (397) (1,556) 2,105 Intangible assets have a useful life of 2 to 5 years A $3.7 million impairment has been recorded against product development as those products had reached the end of their life cycle and no longer represent on-going value to the Company (2015: $1.6 million) 16 Trade and other payables Trade creditors Payments in advance Other creditors and accruals 27,506 51 14,690 42,247 25,782 166 17,724 43,672 Payables include amounts for goods received not invoiced. Trade and other payables are non-interest bearing. The average credit period on purchases is 45 days. Included in other creditors and accruals is $2.6 million of advances received from customers related to work not yet performed on construction contracts in progress at the end of the reporting period (2015: $6.2 million) 27 17 Provisions Current Employee benefits Other Non-current Employee benefits Aggregate employee benefits 2016 $ '000 2015 $ '000 5,544 12 5,556 1,177 6,721 5,593 12 5,605 971 6,564 Provisions for employee benefits represent accrued annual leave and long sevice leave entitlements. Based on past experience, the consolidated entity does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled within the next 12 months. Other provisions represent amounts required to remove asbestos from portable buildings and other costs associated with the discontinued operation. 18 Interest bearing liabilities Current - at amortised cost Bank loans - secured 19 Financing arrangements The consolidated entity has access to the following lines of credit: Facilities available Bank overdraft Bank loans Bank guarantees Multi Option Facility 19 3,000 3,000 62,500 62,500 1,500 20,000 3,500 25,000 - 70,000 5,000 75,000 Under the terms of the Multi Option Facility, the consolidated entity is entitled to draw on any mix of commercial bill, bank guarantees, standby letter of credit or bank overdraft. Facilities utilised Bank loans Bank guarantees Facilities not utilised Bank overdraft Bank loans Bank guarantees 18 3,000 1,438 4,438 1,500 17,000 2,062 62,500 2,201 64,701 - 7,500 2,799 20,562 10,299 On 20 July 2015, Fleetwood sold the Osprey Village to the West Australian Housing Authority for $62.2m. The receivable created by the transaction has a term of 14 years and was subsequently assigned to its financier, Westpac for an upfront payment of $62.2m. Bank loans Bank loans are secured by a mortgage debenture over the assets of the consolidated entity and bear interest at the BBSY rate plus 0.875% (2015: 1.125%) plus a line fee of 0.875% (2015: 1.125%). The effective annual interest rate at the end of the financial year was 3.65% (2015: 3.22%). Bank guarantees Bank guarantees are utilised for construction contracts. No liability has been recognised in the statement of financial position in respect of bank guarantees. 28 20 Commitments Operating lease commitments Within one year Between one and five years Later than five years 2016 $ '000 2015 $ '000 7,293 13,846 - 21,139 8,400 7,238 - 15,638 The Group has a number of non-cancellable operating lease arrangements for land and buildings with lease terms of between 1 to 5 years. The leases have varying terms and renewal rights. The majority of these lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have the option to purchase the property at the expiry of the lease period. Operating lease receivables Within one year Between one and five years Later than five years 6,080 4,315 - 10,395 9,342 - - 9,342 The Group has a number of non-cancellable operating lease arrangements for portable buildings and contracts for the provision of accommodation services. The leases have varying terms and renewal rights. The majority of these lease contracts contain market review clauses. The lessee does not have the option to purchase the property at the expiry of the lease period. 21 Other financial liabilities Current Derivatives not in designated hedge accounting relationships 301 - The Group has entered into forward exchange contracts to hedge foreign currency risk on highly probable future purchases of inventory from overseas. 22 Share based payments Employee plan A scheme under which rights to acquire ordinary shares may be issued by the company to employees for no consideration was approved by shareholders at the 2014 annual general meeting. Employees who have been continuously employed by the group for at least one year are eligible to participate in the scheme. Employees will be issued shares in Fleetwood Corporation Limited upon the exercise of the rights. One third of the rights are exercisable 1 year from the date of issue and a further one third of the rights are exercisable in each of the next 2 years. One share right represents one Fleetwood Corporation Limited share. There are no voting or dividend entitlements attaching to the rights. No amount is payable upon exercise of the rights and shares issued upon exercise rank equally with existing shares on the ASX. Summary of movements: Weighted average share price at grant date $ 1.35 1.44 Issue date 18/12/14 2016 2015 08/09/15 2016 2016 2015 Rights at beginning of year No. Rights granted No. Rights expired / forfeited No. Rights exercised (shares issued) No. Rights at end of year No. Vested at end of year No. Fair value (market value) of shares on exercise $ 72,600 - - 284,700 (11,360) (212,100) (21,180) - 40,060 72,600 - 220,680 (187,080) - 33,600 72,600 - 220,680 284,700 (198,440) (212,100) (21,180) - 73,660 72,600 - - - - - 29,758 - - 29,758 - 29 22 Share based payments (continued) Employee share rights granted have been valued at the volume weighted average price at which Fleetwood’s share traded over five trading days commencing 1 September 2015 ($1.44). Executive Plan Long-term incentives in the form of shares received by the Managing Director, executives and key management personnel are determined in accordance with the provisions of the Executive Long Term Incentive plan (LTIP), which was approved by shareholders at the 2014 annual general meeting. Under the plan, eligible directors, executives and key management personnel are invited to participate in a grant of shares or options through a trust established for the LTIP. The Company provides participants with an interest free, non-recourse loan for an amount equivalent to the price of the shares or options issued, for the sole purpose of acquiring units in the trust to which shares in the Company are allocated. The loans are repayable upon the eventual sale or transfer of the shares from the trust to the participant. The share units are restricted and subject to a risk of forfeiture until the end of the vesting period. The number of shares granted is determined by the Board. The price of the shares issued is calculated using the Volume Weighted Average Price (VWAP) over the five days prior to the issue date. The LTIP contains a gateway level of minimum performance below which no benefit accrues. The performance gateway is met where the Company’s total shareholder return from grant to vesting date, equals or exceeds 15% p.a. and is equal to or greater than the ASX All Ordinaries Index. Assuming the participant continues to be employed by Fleetwood and the performance hurdles are reached, the vesting dates for the shares are as follows: for one third of the shares, the date that is at least a minimum of 1 year after being granted; for two thirds of the shares, the date that is at least a minimum of 2 years after being granted; and for the balance of the shares, the date that is at least a minimum of 3 years after being granted. In the event that a performance hurdle is not reached, or the value of the shares is less than the outstanding balance of the loan, or the participant ceases to be an employee for reasons other than death, illness and injury, the participant may surrender and forfeit the units in the trust to the Company in full settlement of the loan balance. The share units expire 5 years from the grant date. Until the shares vest, voting and dividend rights remain with the trustee. Summary of movements: Weighted average share price at grant date $ 1.35 1.22 Issue date 18/12/14 2016 2015 18/12/15 2016 2016 2015 Share units information: Share units at beginning of year No. Share uints granted No. Share units expired / forfeited No. Share units exercised (shares issued) No. Share units at end of year No. Fair value (market value) of shares on exercise $ Vested at end of year No. 360,000 - - 360,000 (60,000) - - 355,000 - 360,000 - 355,000 360,000 (60,000) - - - - - - 300,000 360,000 102,000 - 355,000 - 655,000 360,000 102,000 - - - - - - Issue Date Expiry Date Vesting tranche Volatility % Dividend yield % Risk free interest rate % Fair value at grant date $ Exercise price $ Weighted average share price at grant date $ Weighted average share price at exercise date 2016 $ Weighted average share price at exercise date 2015 $ 18/12/14 18/12/19 18/12/15 18/12/20 1 2 3 1 2 3 47.57 47.57 47.57 50.21 50.21 50.21 3.20 3.20 3.20 3.20 3.20 3.20 2.40 2.40 2.40 1.73 1.73 1.73 0.43 0.42 0.39 0.46 0.42 0.37 1.35 1.35 1.35 1.22 1.22 1.22 1.35 1.35 1.35 1.22 1.22 1.22 - - - - - - - - - - - - The fair value at grant date for Executive shares units is determined using a Monte Carlo simulation model. The expected volatility is based on historical share price volatility over the past 5 years, and the risk free interest rate and dividend yield have been assessed based on prevailing market conditions. In addition, specific factors in relation to the likely achievement of performance hurdles and employment tenure have been taken into account. 30 22 Share based payments (continued) Employee option plan The group ceased offering options to its employees and now utilizes the rights plan approved at its 2014 AGM. Options under the old Employee option plan remain valid options with the same terms as they were issued. Employees with more than 1 years service with the consolidated entity were granted options to purchase ordinary shares in Fleetwood Corporation Limited. No amounts are payable for the options. 50% of the options are exercisable 1 year from the date of issue and a further 25% are exercisable in each of the next 2 years. The options expire 5 years from the date of issue. There are no voting or dividend rights attaching to the options. Summary of movements: Exercise price $ Options at beginning of year No. Options granted No. Options expired / forfeited No. Options exercised (shares issued) No. Options at end of year No. Vested at end of year No. Proceeds received on exercise $ Fair value (market value) of shares on exercise $ 6.00 8.02 8.68 9.39 2.56 166,457 - (166,457) 237,031 279,199 255,156 300,133 303,400 366,640 416,050 509,050 1,211,637 1,621,479 - - - - - - - - - - (237,031) (42,168) (39,639) (44,977) (46,960) (63,240) (66,800) (93,000) (390,430) (409,842) - - - - - - - - - - - - - - 237,031 - 237,031 215,517 255,156 215,517 255,156 256,440 303,400 256,440 227,550 349,250 416,050 261,938 208,025 821,207 1,211,637 733,895 927,762 - - - - - - - - - - - - - - - - - - - - - - Issue date 31/10/09 2015 31/10/10 2016 2015 02/09/11 2016 2015 29/08/12 2016 2015 30/08/13 2016 2015 2016 2015 Weighted average exercise price ($) 2016 2015 Options information: 6.63 6.53 N/A N/A 7.32 6.24 N/A N/A 6.30 6.63 6.74 7.31 Option life Issue Date Expiry Date Years Volatility % Dividend yield % Risk free interest rate % Fair value at grant date $ Exercise price $ Share price at grant date $ Weighted average share price at exercise date 2016 $ Weighted average share price at exercise date 2015 $ 31/10/09 31/10/10 02/09/11 29/08/12 30/08/13 30/10/14 30/10/15 01/09/16 28/08/17 30/08/18 5 5 5 5 5 50.00 40.00 35.69 35.80 45.03 8.54 6.14 6.18 7.59 3.64 4.53 4.50 4.50 2.77 2.54 2.09 4.03 2.53 2.31 0.90 6.00 8.02 8.68 9.39 2.56 7.57 10.02 10.66 11.78 3.10 - - - - - - - - - - 31 22 Share based payments (continued) Executive option plan The previous Executive option plan has been replaced by the Executive Long Term Incentive Plan as approved at the 2014 AGM. Options issued under the old Executive option plan remain valid options with the same terms as they were issued. Executives are granted options to purchase ordinary shares in Fleetwood Corporation Limited. No amounts are payable for the options. For options issued prior to 1 July 2012, one third of the options are exercisable after the 30 June subsequent to the date of issue, a further one third of the options are exercisable in each of the next 2 years. Options issued after 1 July 2012 vest three years from the issue date. The options are only exercisable if the company’s total shareholder return equals or exceeds 15% p.a. compounded from the inception of the plan (1999) and is equal to or greater than the ASX300 All Industrials Accumulation Index. The options expire 5 years from the date of issue. There are no voting or dividend rights attaching to the options. Summary of movements: Exercise price $ Options at beginning of year No. Options granted No. Options expired / forfeited No. Options exercised (shares issued) No. Options at end of year No. Vested at end of year No. Proceeds received on exercise $ Fair value (market value) of shares on exercise $ 6.00 8.02 8.68 10.57 2.88 16,000 - (16,000) 81,666 101,666 96,775 131,337 130,000 190,000 270,000 350,000 578,441 789,003 - - - - - - - - - - (81,666) (20,000) (57,604) (34,562) (65,000) (60,000) (130,000) (80,000) (334,270) (210,562) - - - - - - - - - - - - - - 81,666 - 81,666 39,171 96,775 39,171 96,775 65,000 130,000 65,000 - 140,000 270,000 - - 244,171 578,441 104,171 178,441 - - - - - - - - - - - - - - - - - - - - - - Issue date 31/10/09 2015 31/10/10 2016 2015 02/09/11 2016 2015 20/02/13 2016 2015 30/08/13 2016 2015 2016 2015 Weighted average exercise price ($) 2016 2015 Options information: 6.30 6.42 N/A N/A 6.63 6.75 N/A N/A 5.86 6.30 9.86 8.38 Option life Issue Date Expiry Date Years Volatility % Dividend yield % Risk free interest rate % Fair value at grant date $ Exercise price $ Share price at grant date $ Weighted average share price at exercise date 2016 $ Weighted average share price at exercise date 2015 $ 31/10/09 31/10/10 02/09/11 20/02/13 30/08/13 30/10/14 30/10/15 01/09/16 19/02/18 30/08/18 5 5 5 5 5 50.00 40.00 35.69 35.39 45.03 8.54 6.14 6.18 7.59 3.64 4.53 4.50 4.50 2.85 3.68 2.09 2.43 2.53 1.15 1.40 6.00 8.02 8.68 10.57 2.88 7.57 10.02 10.66 9.66 3.10 - - - - - - - - - - Employee and Executive share options outstanding at the end of the financial year had a weighted average remaining contractual life of 517 days. 32 22 Share based payments (continued) The grant date weighted average fair value of options in existence at reporting date is:  Options issued in 2011: $3.24 per option  Options issued in 2012: $2.50 per option  Options issued in 2013: $1.57 per option  Options issued in 2014: $0.67 per option Employee Options were valued using the Black-Scholes option pricing model. The expected life used in the model has been adjusted based on management’s best estimate of the effects of exercise restrictions and behavioral considerations. The expected volatility is based on historical share price volatility over the past 5 years, and the risk free interest rate and dividend yield have been assessed based on prevailing market conditions. Executive Options were valued using a Monte Carlo simulation model. The expected volatility is based on historical share price volatility over the past 5 years, and the risk free interest rate and dividend yield have been assessed based on prevailing market conditions. 2016 $ '000 2015 $ '000 23 Issued capital Issued and paid-up capital 61,039,412 (2015: 61,039,412) ordinary shares, fully paid 195,079 194,762 Holders of ordinary shares are entitled to receive dividends as declared and to one vote per share held. 2016 2015 # Shares $ '000 # Shares $ '000 Movements in ordinary share capital Balance at beginning of year Equity settled share-based payments Shares issued pursuant to Dividend Reinvestment Plan Shares issued pursuant to Employee and Executive Option Plans 61,039,412 - - - 194,762 317 - - 60,581,211 - 98,201 360,000 194,096 468 198 - Balance at the end of year 61,039,412 195,079 61,039,412 194,762 Ordinary shares are allotted under the dividend reinvestment plan at a discount to the weighted average price of ordinary shares sold on the ASX over the period of 5 business days up to and including the record date. The current discount is 2.5% (2015: 2.5%). At 30 June 2016, employees held options over 821,207 ordinary shares of the Company, of which 215,517 will expire on 1 September 2016. At 30 June 2015, employees held options over 1,211,637 ordinary shares of the Company, of which 237,031 expired on 30 October 2015. At 30 June 2016, employees held rights over 73,500 ordinary shares of the Company. The rights do not have an expiry date. (2015: 72,600). At 30 June 2016, executives held options over 244,171 ordinary shares of the Company, of which 39,171 will expire on 1 September 2016. At 30 June 2015, executives held options over 578,441 ordinary shares of the Company, of which 81,666 expired on 30 October 2015. 24 Reserves (net of income tax) Foreign currency translation reserve Balance at beginning of year Translation of foreign operations Reserves relate to exchange differences on the translation of self-sustaining foreign operations. (257) 13 (244) (219) (38) (257) 33 25 Retained earnings Balance at beginning of year (Loss) profit attributable to members of the parent entity Dividends recognised 26 Auditors' remuneration Audit services Other services - taxation and accounting assistance The auditor of Fleetwood Corporation Limited is Grant Thornton. 27 Deed of cross guarantee 2016 $ '000 2015 $ '000 19,496 (28,004) - 20,532 176 (1,212) (8,508) 19,496 130 6 136 79 9 88 Pursuant to an ASIC Class Order 98/1418 dated 13 August 1998, relief was granted to the wholly owned subsidiaries listed below from the requirement to prepare, have audited and lodge financial reports. It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is that the Company guarantees to each creditor, payment in full of any debt in the event of winding up of any subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Law, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up. Subsidiaries subject to the deed are: Bocar Pty Ltd (formerly Bendigo Re-locatable Buildings Pty Ltd) BRB Modular Pty Ltd Camec Pty Ltd Fleetwood Recreational Vehicles Pty Ltd Fleetwood Finance (WA) Pty Ltd Fleetwood Pty Ltd Flexiglass Challenge Pty Ltd Windsor Caravans Pty Ltd A consolidated statement of financial performance and financial position comprising the Company and its subsidiaries, which are party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee is set out on the following page: 34 27 Deed of cross guarantee (continued) Statement of profit or loss and other comprehensive income Continuing operations Sales revenue Other income Materials used Sub-contract costs Employee benefits expense Operating leases Other expenses Profit before interest, tax, depreciation and amortisation and impairment Depreciation and amortisation expense Profit before interest, tax and impairment Impairment of non-current assets (Loss) Profit before interest and tax Finance costs Loss before income tax expense for the year Income tax expense Loss from continuing operations for the year Discontinued operations (Loss) Profit from discontinued operation Total (loss) profit and other comprehensive income for the year 2016 $ '000 2015 $ '000 281,498 1,259 (105,737) (75,311) (55,538) (9,761) (25,789) 267,505 570 (92,047) (68,181) (57,668) (10,265) (23,173) 10,621 16,741 (9,222) (12,165) 1,399 (10,312) (8,913) (3,733) (12,646) 2,470 (10,176) (16,985) (27,161) 4,576 (2,097) 2,479 (3,959) (1,480) 170 (1,310) 1,776 466 35 27 Deed of cross guarantee (continued) Statement of financial position Current assets Cash and cash equivalents Trade and other receivables Inventories Other financial assets Non-current assets held for sale Total current assets Non-current assets Trade and other receivables Investments Property, plant and equipment Goodwill Intangible assets Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Interest bearing liabilities Tax liabilities Provisions Other financial liabilities Total current liabilities Non-current liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity 2016 $ '000 2015 $ '000 5,805 39,566 47,296 - 25,839 6,121 95,211 43,179 206 - 118,506 144,717 427 66 45,649 55,256 1,120 14,146 - 88 107,457 61,786 5,166 4,830 116,664 179,327 235,170 324,044 41,296 3,000 - 5,521 301 43,152 62,500 900 5,575 - 50,118 112,127 1,177 1,177 971 971 51,295 113,098 183,875 210,946 195,073 (244) (10,954) 194,760 (257) 16,443 183,875 210,946 28 Financial instruments Capital management The Group manages capital to ensure it will be able to continue as a going concern, while maximising returns to shareholders through optimisation of debt and equity balances. The categories of financial instruments of the entity are apparent from the statement of financial position. The Group’s overall strategy remains unchanged since 2015. The capital structure of the Group includes borrowings and related repayment terms (as detailed in note 18), cash and cash equivalents (as detailed in note 8) and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings (as detailed in notes 23, 24 and 25). Operating cash flows are used to maintain and expand the Group’s operating assets, make payments of tax and dividends and to repay debt. Group policy is to borrow centrally to meet funding requirements. The Group does not have a target gearing ratio. The group has requirements imposed by its financier pertaining to gearing ratio, shareholders’ funds and interest cover. 36 28 Financial instruments (continued) Financial risk management objectives Financial instruments comprise cash, receivables, payables, hire purchase creditors, and bank loans. All financial instruments except forward foreign exchange contracts are carried at amortised cost. The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the Group financial risk management policy. The objective of the policy is to support delivery of financial targets whilst providing financial security. The main financial instrument risks are interest rate, foreign currency, credit and liquidity risk. Different methods are used to measure and manage risks including monitoring exposure to interest and foreign exchange rates and assessments of market forecasts for interest and foreign exchange rates. Ageing analysis and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the development of rolling cash flow forecasts. Foreign currency risk management The Group undertakes transactions denominated in foreign currencies. Consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward exchange contracts. The Group is mainly exposed to United States Dollars, the Euro and Chinese Yuan Renminbi. Foreign exchange sensitivity analysis to a 10% movement in the Australian Dollar - 10% + 10% USD $ '000 Euro $ '000 Renminbi $ '000 Total $ '000 USD $ '000 Euro $ '000 Renminbi $ '000 Total $ '000 2016 Profit 2015 Profit 2016 Equity 2015 Equity (1,212) (720) (1,212) (720) (449) (197) (449) (197) (104) (42) (104) (42) (1,765) (958) (1,765) (958) 1,212 720 1,212 720 449 197 449 197 104 42 104 42 1,765 958 1,765 958 Forward foreign exchange contracts Group policy is to enter into forward foreign exchange contracts to manage the risk associated with anticipated purchases denominated in foreign currency. Anticipated purchases are assessed out to twelve months from the date the contract is entered into, with 40-80% of the anticipated exposure covered. Basis adjustments are made to the carrying amounts of non-financial items when the anticipated purchase transaction takes place. Outstanding contracts Buy USD Less than 3 months 3 to 6 months 6 to 12 months Buy Euro Less than 3 months 3 to 6 months 6 to 12 months Buy Renminbi Less than 3 months 3 to 6 months 6 to 12 months Average exchange rate Foreign Currency Notional Value Fair Value 2016 $ 0.74 0.74 0.74 0.66 0.66 0.66 4.70 4.95 4.97 2015 $ 0.77 0.76 - 0.68 0.68 - 4.78 4.77 - 2016 FC '000 2015 FC '000 4,548 2,019 2,433 1,762 875 1,000 2,768 1,218 2,100 3,110 2,399 - 717 640 - 980 960 - 2016 $ '000 6,134 2,733 3,306 2,655 1,321 1,524 589 246 423 2015 $ '000 4,057 3,144 - 1,047 940 - 205 201 - 2016 $ '000 (142) 14 4 (72) (24) (39) (30) (4) (8) 2015 $ '000 96 69 - 25 15 - - - - (301) 205 During 2016 a loss of $301,000 was recognised in profit and loss pertaining to forward exchange contracts (2015: $205,000 gain). 37 28 Financial instruments (continued) Interest rate risk management Interest rate risk arises from borrowings. Group policy is to manage finance costs by using a mix of fixed and variable rate debt after considering market forecasts. Interest rate sensitivity analysis to interest rate risk Financial assets Cash and cash equivalents - 2016 Cash and cash equivalents - 2015 Financial liabilities Borrowings - 2016 Borrowings - 2015 2016 2015 Credit risk management Carrying amount $ '000 6,116 6,634 3,000 62,500 - 75 bps + 75 bps Profit $ '000 Equity $ '000 Profit $ '000 Equity $ '000 (46) (50) 23 469 (23) 419 (46) (50) 23 469 (23) 419 46 50 (23) (469) 23 (419) 46 50 (23) (469) 23 (419) Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Group policy is to deal with creditworthy counterparties and obtain sufficient collateral where appropriate as a means of mitigating the risk of financial loss from default. Reviews of customer creditworthiness are undertaken before payment and delivery terms are offered. The review assesses credit quality of the customer, taking into account its financial position, past experience, industry reputation and other factors. Purchase limits are established for each customer, and compliance with credit limits is regularly monitored. Customers that fail to meet benchmark creditworthiness may transact with the Group only on a prepayment basis. Sales to retail customers are required to be settled in cash or by using major credit cards, mitigating credit risk. The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to credit risk. Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk framework for the management of short, medium and long-term funding. Liquidity risk is managed by maintaining adequate reserves and banking facilities, by monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities. Note 19 lists unused facilities that the Group has at its disposal to reduce liquidity risk. The remaining contractual maturities of the Group are:   3 months or less: Trade and other payables as disclosed at Note 16. Trade and other payables do not attract an interest charge and are expected to be settled within 60 days of year end. 3 months or less: Bank Loans as disclosed at Note 19. Weighted average interest rate 4.18% (2015: 3.22%). Loans are expected to be settled within three months of year end. There were no contractual maturities greater than 12 months as at 30 June 2016 Fair value of financial assets and liabilities The fair value of financial assets and liabilities recognised in the statement of financial position is based on cash flows due from customers or payable to suppliers. The cash flows have not been discounted to their present value, except as disclosed in the table below. The carrying values approximate fair value. The fair values of financial instruments are derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. There are clearly observable quoted prices for all financial instruments held by the Group. Some of the Group’s financial assets and liabilities are measured at fair value and the end of each reporting period. Information about how the fair values of these financial liabilities are determined (in particular, the valuation techniques and inputs used). Fair value as at 2016 2015 Fair value Hierarchy Valuation technique and key inputs Significant unobservable inputs Relationship of unobservable inputs to fair value Financial assets Foreign currency forward contracts Financial liabilities Foreign currency forward contracts Nil $205,925 Level 2 $300,779 Nil Level 2 38 cash Discounted flow. Future cash flows are estimated based on rates forward exchange and contract forward rates, discounted to their present value. flow. Discounted flows are Future cash on estimated based forward exchange rates and contract forward rates, discounted to their present value. cash N/A N/A N/A N/A 29 Notes to the consolidated statement of cash flows 29.1 Reconciliation of profit from ordinary activities after income tax to net cash provided by operating activities Operating (loss) profit after income tax Items classified as investing activities: Loss on sale of non-current assets Non-cash items: Equity settled share-based payments Depreciation and amortisation expense - continuing operations Depreciation and amortisation expense - discontinued operations Written down value of rental fleet sold Impairment of plant and equipment Impairment of intangible assets Impairment of goodwill Changes in assets and liabilities during the year: (Increase) decrease in inventories Decrease (increase) in trade and other receivables (Decrease) increase in other financial assets (Decrease) increase in trade and other payables Increase (decrease) in provisions (Decrease) increase in income taxes payable Increase in deferred taxes receivable Increase (decrease) in other financial liabilities 2016 $ '000 2015 $ '000 (28,004) 176 95 140 317 9,305 9,795 5,813 19,680 3,782 6,529 (4,046) 55,142 (206) (1,425) 157 - (10,258) 301 468 12,318 16,795 6,313 1,300 1,080 2,097 45,003 (49,543) 155 5,819 (403) 1,014 (426) (139) Net cash provided by operating activities 66,977 42,167 29.2 Non-cash financing and investing activities No dividends were reinvested in the Company during the reporting period. In the prior year, dividends of $197,584 were reinvested in the Company as 98,201 fully paid ordinary shares pursuant to the Dividend Reinvestment Plan. The Company received dividends of $14,312,390 (2015: $12,047,591) from controlled entities by way of an increase in controlled entities loan accounts. 30 Contingent liabilities Under the terms of the Deed of Cross Guarantee, the Company has guaranteed the repayment of all current and non-current liabilities totalling $51,295,220 (2015: $113,098,184) in the event any of the entities which are party to the Deed are wound up. The Directors are not aware of any circumstances or information that would lead them to believe these liabilities will crystallise and consequently no provisions are included in the financial statements in respect of these matters. Certain claims arising out of construction and insurance contracts have been made by or against controlled entities in the ordinary course of business, some of which involved litigation or adjudication. The Directors do not consider the outcome of any of these claims will have a material adverse impact on the financial position of the consolidated entity. 39 31 Particulars relating to controlled entities Fleetwood Corporation Limited (Ultimate parent entity) Controlled entities Place of Incorporation Principal Activities Interest held (%) 2016 2015 Bocar Pty Ltd (formerly Bendigo Re-locatable Buildings Pty Ltd) Australia BRB Modular Pty Ltd Camec Pty Ltd Australia Australia Fleetwood Recreational Vehicles Pty Ltd Australia Fleetwood Pty Ltd Australia Dormant (Bocar products are traded through Flexiglass Challenge Pty Ltd) Accommodation solutions provider to the resources, education and affordable housing sectors. Manufacturer and distributor of parts and accessories to the recreational vehicles industry. Manufacturer of caravans, pop- tops and campers distributed through a national dealer network. Accommodation solutions provider to the resources, education and affordable housing sectors. Fleetwood Finance (WA) Pty Ltd Australia Dormant Flexiglass Challenge Pty Ltd Australia Distributor of canopies and trays for commercial vehicles. Windsor Caravans Pty Ltd Australia Dormant Flexiglass Challenge Industries (NZ) Limited New Zealand Dormant Camec NZ Limited New Zealand Manufacturer and distributor of parts and accessories to the recreational vehicles industry. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Fleetwood Corporation Limited is the head entity within the tax consolidated group. All companies incorporated in Australia are members of the tax consolidated group. 32 Related parties Directors The names of each person holding the position of Director of Fleetwood Corporation Limited during the financial year were P Gunzburg, M Hardy, G Tate, J Bond, B Denison. Details of directors’ remuneration is set out in the Remuneration Report contained in the Directors’ Report. No Director has entered into a material contract with the Company or the consolidated entity during and since the end of the financial year and there were no material contracts involving directors’ interests existing at year-end. Directors of the Company or its controlled entities may purchase goods from the consolidated entity. These purchases are on the same terms and conditions as those entered into by other consolidated entity employees. Further information on remuneration of key management personnel can be found in the Remuneration Report. Key management personnel Aggregate compensation of the key management personnel of the consolidated entity and the Company for the year: Short-term employee benefits Post-employment benefits Other long term benefits Share-based payments 2016 $ 2015 $ 2,556,902 183,131 45,337 81,272 2,262,070 160,706 73,971 97,833 2,866,642 2,594,580 Transactions between Fleetwood Corporation and its related parties During the financial year subsidiaries of the parent company made dividend payments totaling $14,321,390 (2014: $12,047,591) to the parent entity. Non-current loans totaling $178,584,357 (2014: $254,176,873) repayable to the parent are outstanding at reporting date. Transactions and balances between the company and its subsidiaries were eliminated in the preparation of the consolidated financial statements of the Group. 40 33 Parent entity disclosures 33.1 Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Retained earnings Total equity 33.2 Financial performance Profit for the year Other comprehensive income Total comprehensive income 2016 $ '000 2015 $ '000 6,317 180,873 6,363 273,124 187,190 279,487 572 547 65,201 573 1,119 65,774 195,079 (9,009) 194,762 18,951 186,070 213,713 9,790 - 9,790 6,875 - 6,875 33.3 Guarantees entered into by the parent entity in relation to debts of its subsidiaries Note Guarantee provided under the deed of cross guarantee 30 51,295 113,098 33.4 Commitments Operating lease commitments Within one year One year or later and no later than five years Later than five years 338 583 - 921 405 239 - 644 The accounting policies of the parent entity, which have been applied in determining the financial information above are the same as those applied in the consolidated financial statements. Under the terms of the Deed of Cross Guarantee, the Company has guaranteed the repayment of all current and non-current liabilities totaling $51,295,220 (2015: $113,098,184) in the event any of the entities which are party to the Deed are wound up. The parent entity had no other contingent liabilities as at 30 June 2016 (2015: nil). 41 34 Discontinued operation On 1 March 2016 the company ceased resource sector rental operations due to the downturn in the mining industry and the resulting reduction in demand for construction workforce accommodation. 34.1 Financial performance Revenue Impairment Expenses (Loss) profit from discontinued operation before income tax Attributable income tax benefit (expense) (Loss) Profit from discontinued operation after income tax 34.2 Cashflow information Net cash inflows from operating activities Net cash outflows from investing activities Net cash inflow (outlfow) from discontinued operations 34.3 Loss per share from discontinued operations Basic earnings per share (cents) Diluted earnings per share (cents) Revenue relates to the rental of portable buildings to the resource sector. 2016 $ '000 2015 $ '000 12,524 (19,680) (17,108) (24,264) 7,279 (16,985) 29,179 - (26,641) 2,538 (761) 1,777 9,729 (2,596) 7,133 29,267 (28,903) (364) (27.8) (27.8) 2.9 2.9 42 35 Business Combination 30 June 2016 There was no business combination event during the reporting period. 30 June 2015 Fleetwood Corporation Limited entered into an agreement to purchase the assets of Bocar Pty Ltd (Bocar) on 12 August 2014. Bocar was established over 25 years ago and is today a leading New South Wales based aluminium tray and accessory distributer to the automotive sector. The acquisition provides Fleetwood subsidiary Flexiglass with increased scale in New South Wales. The fair value of the identifiable assets of Bocar at the date of acquisition, the total cost and cash flows of the acquisition were as follows. Property, plant and equipment Inventory Total Assets Fair value of identifiable net assets acquired Book value of net assets (including working capital and plant and equipment) Goodwill Acquisition cost There were no liabilities assumed as part of the transaction Cash paid Direct costs relating to the acquisition (recorded in the income statement) Net consolidated cash outflow The cash flow on acquisition is as follows: Net cash acquired with the business Direct costs relating to the acquisition Cash paid Net consolidated cash outflow Carrying Value $ '000 Fair value recognised $ '000 89 251 340 340 89 251 340 340 340 4,425 4,765 4,765 150 4,915 - 150 4,765 4,915 The consideration paid for the combination included amounts in relation to the benefit of expected synergies, future market growth, customer relationships and assembled workforce of Bocar. Fair values of identifiable intangibles have not been determined at the date of this report for the reasons outlined above. The acquired business contributed revenues of $3,136,435 and net profit after tax of $704,479 (excluding incremental interest) to the Group for the period 12 August 2014 to 30 June 2015. Had Bocar been acquired at 1 July 2014, Group revenue would have been $302,365,079, and the profit attributable to members of the parent entity would have been $276,306. The directors have determined these 'pro-forma' numbers to represent an approximate measure of the performance of the group on an annualised basis. In determining the 'pro-forma' revenue and profit of the Group had Bocar been acquired at 1 July 2014, the directors have extrapolated the revenue and earnings for Bocar for the period from acquisition date to 30 June 2015 over a 12 month period, and added them to the revenues and profits of the remainder of the group for the year. 36 Significant events after the reporting period There were no material events subsequent to the reporting period. 43 Directors’ Report Fleetwood Corporation Limited The Directors of Fleetwood Corporation Limited present their report for the year ended 30 June 2016. Directors and Officers The names, qualifications, experience, special responsibilities, current and previous directorships for the last 3 years of the Directors who are in office at the date of the report are disclosed on page 5 of this Annual Report. During the reporting period Mr. John Bond, and Mr. Peter Gunzburg were directors of the Company. On 24 August 2016, Mr. Bond resigned as a non-executive director of the Company. Mr. Bond was appointed to the Board in March 2013. On 27 November 2015 Mr. Gunzburg resigned as a non-executive director of the Company. Mr. Gunzburg served as a non-executive director of the Company for 13 years. Principal Activities The principal activities of the entities in the Group during the financial year were: design, manufacture, and sale of manufactured accommodation;   manufacture of caravans and vehicle parts and accessories;  manufacture and distribution of vehicle parts and accessories; and  operation of accommodation villages. As at 1 March 2016, the manufactured accommodation business segments were reviewed, and the Board resolved to discontinue its resource sector rental operation. Further information regarding the discontinuance is disclosed in note 34 to the financial statements. Operations A review of operations for the year is contained in the Managing Director’s Review. Results of operations for the year are contained in the Financial Report. Financial Position A summary of the financial position of the Group is disclosed on page 4 of this Annual Report. State of Affairs During the financial year there was no significant change in the state of affairs of the consolidated entity. Significant Events After the Reporting Period There were no significant events which occurred after the reporting period. Future Developments The consolidated entity will continue to pursue increasing both profitability and market share in its major business sectors. Further information as to likely developments and expected future results are disclosed in the Managing Director’s Review. Dividends No interim or final dividend was declared or paid with respect to the year ended 30 June 2016. Share Options Details of all share based payment arrangements in existence at 30 June 2016 and unissued shares the subject of options at the date of this Annual Report and shares issued pursuant to the exercise of options during or since the end of the year are disclosed in note 22 to the financial statements. No options have been issued subsequent to year end. 254,688 options have been forfeited subsequent to year end. Details of unissued shares the subject of options as at the date of this report are outlined below. Employee Options Issue date Total unissued shares under option Exercise price ($) Expiry date Executive Options Issue date Total unissued shares under option Exercise price ($) Expiry date 29/08/2012 249,550 9.39 29/08/2017 30/08/2013 339,750 2.56 30/08/2018 20/02/2013 65,000 10.57 20/02/2018 30/08/2013 140,000 2.88 30/08/2018 The Employee and Executive Option Plans have been replaced by long term incentive share plans, approved by shareholders at the 2014 annual general meeting. Since that time, no options have been issued to employees or executives pursuant to those plans. With respect to the above options no voting or dividend rights attach to the options. Details of options previously granted to Directors, executives and key management personnel are contained in note 22 to the financial statements and in the Remuneration Report. Indemnification of Directors and Officers The Company has indemnified current and former Directors and officers of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Director or officer of the Company, except where 44 the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Insurance premiums in this regard relate to costs and expenses incurred by the relevant Directors and officers in defending proceedings, whether civil or criminal and whatever their outcome and other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an auditor of the Company or any related body corporate against a liability incurred as an auditor. Directors’, Audit Committee and Remuneration Committee Meetings Number of Board, Audit Committee and Remuneration Committee meetings held and attended by each Director of the Company during the financial year are as follows: Peter Gunzburg Michael Hardy Greg Tate John Bond Brad Denison Board Held Attended 8 15 15 15 15 8 14 15 15 15 Audit Committee Remuneration Committee Held Attended Attended Held 1 1 1 1 1 1 1 1 1 1* 1 1 1 1 1 1 1 1 1 1* *By invitation of the Audit Committee and Remuneration Committee Directors’ Shareholdings The relevant interest of each Director in Company shares and options at the date of this report, as notified by the Directors to the ASX in accordance with s205G(1) of the Corporations Act 2001 are as follows: Phillip Campbell Michael Hardy Greg Tate John Bond Brad Denison Remuneration Report (audited) Number of shares - 16,975 6,581,271 20,000 45,464 Number of share units - - - - 370,000 Number of options - - - - 150,000 The Remuneration Committee is responsible for determining the remuneration of Board members, executives and key management personnel. During the year the Remuneration Committee reviewed:      conditions of service and remuneration of the Directors, executives, and key management personnel; remuneration policies of the Group; proposals for new issues under, or changes to, the Company’s long and short term incentive plans; succession plans for senior management; and other related matters. The remuneration of non-executive directors is determined by the Board upon recommendation by the Remuneration Committee, within the aggregate limits approved by shareholders. Non-executive directors are not entitled to participate in the Fleetwood short or long term incentive plans. The remuneration arrangements of executive directors, executives and key management personnel is determined by the Remuneration Committee. When considering remuneration arrangements for executives and key management personnel the Remuneration Committee seeks to ensure that the remuneration arrangements motivate the recipient to pursue the short and long term performance objectives of the Company. It does this by ensuring that there is a clear relationship between Company performance and remuneration by striking an appropriate balance between fixed and variable (‘at risk’) remuneration. The proportion of fixed and variable remuneration is based on available market data for comparable roles, the capacity of the individual to influence the overall outcome of Company operations and return to shareholders. When considering the fixed component of remuneration, the Remuneration Committee will take into account the person’s responsibilities, qualifications and experience. When considering the variable component of remuneration, the Remuneration Committee considers the capacity of the individual to affect profit earned by the Company and the individual’s performance against key responsibilities, key competencies and period specific objectives. The variable remuneration includes short-term incentives in the form of cash payments and long-term incentives in the form of shares, which are subject to performance hurdles and vesting provisions. Short Term Incentive Plan Short-term incentives received by the Managing Director, executives and key management personnel are determined in accordance with the provisions of the Fleetwood Short Term Incentive Plan (STIP). Fleetwood’s STIP was revised in the 2015 financial year such that it only rewards exceptional performance. The STIP is designed to put a meaningful proportion of the participant’s remuneration at risk, to be delivered upon the achievement of targets linked to the Company’s annual business objectives. The STIP is linked to the Company’s annual business objectives through the incorporation of company specific qualifying gates. A participant will only qualify for a STIP payment if the qualifying gates are satisfied. Qualifying gates are met if, the Company or operating company the participant is employed by or manages (i) passes an independent internal safety audit, achieving at least at a 90% rating; and (ii) achieves at least 90% of budget Earnings Before Interest and Tax (EBIT) for the financial year. Once the gates have been met a review of the performance measures is undertaken to determine if exceptional performance has been demonstrated. 45 Remuneration Report (continued) The performance measures of the STIP comprise a combination of individual and company specific performance targets. The weighting is 50% non-financial and 50% financial. In setting the performance measures for the STIP, the Remuneration Committee is conscious to ensure that all targets are measurable and provide a challenging but meaningful incentive to participants. Non-financial metrics are based on performance against individual targets. Individual performance targets are derived from position descriptions, key responsibilities, key competencies and period specific objectives which are in turn aligned with key business strategies identified annually during the business planning process. Financial performance targets are derived from budgeted or forecast EBIT above the qualifying gate which is considered an appropriate measure of the Company’s profitability. Depending on the participant and their role within the Group, some targets may be restricted to the operating company in which the participant is employed, or expanded to include the Group as a whole. Financial targets are expressed as a range over which performance will be measured. The standard range is 100% to 125% of the applicable budget. The maximum amount a participant can earn through the STIP is capped at a percentage of the participant’s Annual Fixed Remuneration (AFR). STIP percentage caps as determined by the Remuneration Committee applicable to the Managing Director, executives and key management personnel are noted below. Maximum STIP as % of AFR 50% 40% 40% 40% 40% Brad Denison Jarrod Waring Giles Everest Manuel Larre Peter Naylor In order for a payment under the STIP to be made, the qualifying gate must be satisfied and the participant must: meet the minimum financial and non-financial performance measures, be an employee at the time the payment is to be made, and not have tendered their resignation at the time the payment is made. The Remuneration Committee is of the opinion that the STIP appropriately aligns executive remuneration with shareholder wealth generation. Executive Share Plan Long-term incentives in the form of shares received by the Managing Director, executives and key management personnel are determined in accordance with the provisions of the Executive Long Term Incentive plan (LTIP), which was approved by shareholders at the 2014 annual general meeting The objective of this plan is to retain and reward the Managing Director, executives and key management personnel and to align their long term interests with those of shareholders. Under the plan, eligible directors, executives and key management personnel are invited to participate in a grant of shares or options through a trust established for the LTIP. The Company provides participants with an interest free, non-recourse loan for an amount equivalent to the price of the shares or options issued, for the sole purpose of acquiring units in the trust to which shares in the Company are allocated. The loans are repayable upon the eventual sale or transfer of the shares from the trust to the participant. The share units are restricted and subject to a risk of forfeiture until the end of the vesting period. The number of shares granted is determined by the Board with reference to the participant’s performance over the immediately preceding financial year, the Group’s financial performance and shareholder wealth generation. The price of the shares issued is calculated using the Volume Weighted Average Price (VWAP) over the five days prior to the issue date. The LTIP contains a gateway level of minimum performance below which no benefit accrues. The performance gateway is met where the Company’s total shareholder return from grant to vesting date, equals or exceeds 15% p.a. and is equal to or greater than the ASX All Ordinaries Index. The Remuneration Committee considers that the use of this index provides an external benchmark that enables a comparison of the Company’s TSR performance to that of a broad group of diverse companies. Such a comparison reduces sensitivity to the performance of a particular competitor or the influence of cyclical industry specific factors. Assuming the participant continues to be employed by Fleetwood and the performance hurdles are reached, the vesting dates for the shares are as follows: for one third of the shares, the date that is at least a minimum of 1 year after being granted; for two thirds of the shares, the date that is at least a minimum of 2 years after being granted; and for the balance of the shares, the date that is at least a minimum of 3 years after being granted. In the event that a performance hurdle is not reached, or the value of the shares is less than the outstanding balance of the loan, or the participant ceases to be an employee for reasons other than death, illness and injury, the participant may surrender and forfeit the units in the trust to the Company in full settlement of the loan balance. The share units expire 5 years from the grant date. Until the shares vest, voting and dividend rights remain with the trustee. Up until the implementation of the LTIP, eligible directors, executives and key management persons participated in the Executive Option Plan. The options granted pursuant to that plan are noted in this Report, and that plan will remain in effect until all granted options have been exercised, fortified or have expired. Executive Option Plan Long-term incentives in the form of options received by eligible directors, senior executives and key management personnel were determined in accordance with the provisions of the old Executive Option Plan. The objective of that plan was to retain and reward eligible directors, executives and key management personnel and to align their long term interests with those of shareholders. Invitation to participate in the plan was at the discretion of the Board, however participants generally needed to be employed in an executive or key management position for a minimum period of two years before such invitation was extended. Under the plan, participants were granted options to purchase ordinary shares in Fleetwood. The number of options granted was determined by the Board with reference to the participant’s individual performance over the immediately preceding financial year, the Group’s financial performance and shareholder wealth generation. No amounts were payable for the options, and each option entitles the holder to subscribe for one ordinary share upon exercise. Assuming the participant continues to be employed by Fleetwood and the 46 Remuneration Report (continued) performance hurdles are reached, for options issued after 1 July 2012 100% of the issued options vest on the third anniversary of the grant date, and for options issued prior to 1 July 2012, one third of the options vest after 30 June subsequent to the date of issue, afurther one third of the options vest over each of the next 2 years. The exercise price of the options was calculated using the Volume Weighted Average Price (VWAP) of the shares over the five days prior to the issue date. The maximum discount that could be applied to the VWAP was 10%. The options are only exercisable if the company’s total shareholder return equals or exceeds 15% p.a. compounded from the inception of the plan and is equal to or greater than the ASX 300 All Industrials Accumulation Index. In the event that a performance hurdle is not reached, the options do not vest. If the participant ceases to be an employee for reasons other than death, illness, injury, the attainment of the normal age of retirement or for other reasons approved by the Board, the options lapse and terminate. The options expire 5 years from the date of issue. There are no voting or dividend rights attaching to the options. Movements in shareholder wealth for the five years to 30 June 2016: Share price at start of year ($) Share price at end of year ($) Dividend per share (cents) Earnings per share (cents) Diluted earnings per share (cents) $ Million Revenue Net profit before tax Net profit after tax 2012 11.33 11.74 76.0 90.4 89.2 382.6 75.6 53.2 2013 11.74 3.60 30.0 20.8 20.7 332.9 23.2 16.6 Remuneration of Directors and senior management Short-term employee benefits Post Share Employment Other long Based 2014 3.60 2.33 4.0 0.1 0.1 366.3 3.4 0.6 Share Based Salary & fees $ Bonus $ Non- monetary $ Superan- nuation $ Term Payment Payment Benefits Options Share units $ $ $ 2015 2.33 1.37 - 0.3 0.3 302.0 0.9 0.2 2016 1.37 1.91 - (45.9) (45.8) 287.1 (13.4) (11.0) Performance based Total $ remuneration % Key management personnel Directors* Michael Hardy 2016 2015 Peter Gunzburg (Resigned 27/11/15) 2016 2015 Greg Tate 2016 2015 John Bond (Resigned 24/08/16) 2016 2015 Brad Denison Managing Director 2016 2015 2016 Company and 2015 Consolidated 85,000 85,000 35,000 70,000 70,000 70,000 70,000 70,000 541,970 463,830 801,970 758,830 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 85,000 85,000 35,000 70,000 70,000 70,000 70,000 70,000 10,153 7,995 10,153 7,995 30,000 30,000 30,000 30,000 25,562 52,741 25,562 52,741 16,175 29,856 16,175 29,856 56,432 25,326 56,432 25,326 680,293 609,748 940,293 904,748 - - - - - - - - 10.7 9.0 1.7 3.3 * Phillip Campbell was appointed non-executive Chairman on 12 August 2016. 47 Remuneration Report (continued) Short-term employee benefits Post Share Employment Other long Based Share Based Key management personnel Salary & fees $ Bonus $ Non- monetary $ Superan- nuation $ Term Payment Payment Benefits Options Share units $ $ $ Performance based Total $ remuneration % Executives Bradley Van Hemert1 GM, International Procurement (Redundant 11/03/16) 2016 2015 Ben Rosser CEO, Fleetwood Pty Ltd (Resigned 28/11/14) 2015 Steve Carroll2 GM, International Business (Resigned 09/10/15) 2016 2015 414,165 306,200 150,660 60,502 237,407 Giles Everest Executive GM, Fleetwood Pty Ltd (Appointed 01/12/14) 2016 2015 Jarrod Waring3 (Appointed 01/09/14) Executive GM, BRB Modular Pty Ltd 2016 2015 Manuel Larre4 Executive GM, Camec & Flexiglass 2016 2015 Peter Naylor5 (Appointed 03/08/15) Executive GM, Fleetwood RV Pty Ltd 2016 Yanya O'Hara6 (Appointed 01/08/14) Company Secretary 2016 2015 248,948 246,216 275,272 208,349 282,706 165,505 159,181 - - - - - - - 25,000 9,000 - - - - - - - 26,220 28,570 - 7,926 (12,940) 23,885 (4,903) 4,469 422,542 371,050 (4.2) 7.6 275 11,908 (9,514) (30,625) - 122,704 (25.0) - 10,749 5,748 22,855 (9,468) 9,468 (8,087) 14,928 (4,903) 4,469 43,792 299,876 (29.7) 6.5 - - 21 52 6,850 2,980 305,537 184,328 9,200 4,469 309,412 283,132 19,308 18,806 6,936 4,589 36,328 20,659 12,249 3,892 6,003 11,176 9,200 4,469 339,052 248,545 2.2 1.6 11.1 4.8 4.5 6.3 25,124 262 - 2,865 310,957 0.9 15,154 14,373 153,131 130,706 9,039 4,264 43 144 5,316 2,235 195,057 180,197 19,775 21,230 (14,960) 19,560 23,625 23,091 1,926,350 1,689,832 2.7 1.3 1.7 3.1 - - - - - - - 272,680 152,208 - 15,000 25,250 13,535 757 605 2016 Company and 2015 Consolidated 1,719,778 1,460,221 25,000 9,000 - 26,024 Included in salary & fees are amounts of annual leave accrued during the reporting period. There are no post-employment benefits other than superannuation. Executive contracts do not provide for any termination payments, other than the payment of accrued leave entitlements. Other long term benefits comprise long service leave entitlements accrued to the executive during the reporting period. The amount included in remuneration as share-based payments are not related to or indicative of the benefits (if any) that individual executives may ultimately realise should the equity instruments vest. 1 Bradley Van Hemert commenced employment with the Company on 16 April 1979, and was appointed GM, International Procurement on 28 June 2015. Prior to this, Mr. Van Hemert was employed as CEO, Fleetwood Recreational Vehicles Pty Ltd. Included in Mr. Van Hemert’s short term salary & fees is $112,846 of previously unpaid leave entitlements and $89,568 of redundancy entitlements. 2 Steve Carroll was appointed GM, International Business on 17 August 2015. Prior to this, Mr. Carroll was employed as CEO, Camec Pty Ltd. 3 STIP gates were met by Jarrod Waring for the 2016 year. The Remuneration Committee resolved to grant Mr. Waring a $25,000 bonus for building sustainable income streams for BRB Modular Pty Ltd, including securing the exclusive supply agreement with Gateway Lifestyle and reappointment to the Victorian Education Department Transfer Program. 48 Remuneration Report (continued) 4 Manuel Larre was appointed Executive GM, Camec & Flexiglass on 17 August 2015. Prior to this, Mr. Larre was employed as GM, Flexiglass. 5 Peter Naylor was appointed as Executive GM of Fleetwood RV Pty Ltd on 3 August 2015. 6 Yanya O’Hara was appointed Company Secretary on 1 August 2014. Prior to this, Mrs. O’Hara was employed as Assistant Company Secretary. Share based payment arrangements in existence at the reporting date: Options Issue date Exercise price $ Options at beginning of year No. Options granted No. Options expired / forfeited No. Options exercised (shares issued) No. Options at end of year No. Vested at end of year No. Proceeds received on exercise $ Fair value (market value) of shares on exercise $ 6.00 8.02 8.68 9.39 10.57 2.56 2.88 31/10/09 2015 31/10/10 2016 2015 02/09/11 2016 2015 30/08/12 2016 2015 20/02/13 2016 2015 30/08/13 2016 2015 30/08/13 2016 2015 2016 2015 Weighted average price ($) 2016 2015 Options information: 16,000 - (16,000) 81,666 101,666 96,775 131,337 220 220 130,000 190,000 750 750 270,000 350,000 579,411 789,973 - - - - - - - - - - - - - - (81,666) (20,000) (57,604) (34,562) - - (65,000) (60,000) - - (130,000) (80,000) (334,270) (210,562) - - - - - - - - - - - - - - - - - - 81,666 - 81,666 39,171 96,775 39,171 96,775 220 220 220 147 65,000 130,000 65,000 - 750 750 140,000 270,000 500 250 - - 245,141 579,411 104,891 178,838 6.30 6.43 N/A N/A 6.63 6.75 N/A N/A 5.85 6.30 9.82 8.37 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Option life Issue Date Expiry Date Years Volatility % Dividend yield % Risk free interest rate % Fair value at grant date $ Exercise price $ Share price at grant date $ Weighted average share price at exercise date 2016 $ Weighted average share price at exercise date 2015 $ 31/10/09 31/10/10 02/09/11 20/02/13 30/08/13 30/10/14 30/10/15 01/09/16 19/02/18 30/08/18 5 5 5 5 5 50.00 40.00 35.69 35.39 45.03 8.54 6.14 6.18 7.59 3.64 4.53 4.50 4.50 2.85 3.68 2.09 2.43 2.53 1.15 1.40 6.00 8.02 8.68 10.57 2.88 7.57 10.02 10.66 9.66 3.10 - - - - - - - - - - Refer to summary on following pages for those options which are vested and exercisable, and vested and unexercisable. Yanya O’Hara was issued options under the Employee Option Plan in 2013 and 2014. Jarrod Waring was issued options under the Employee Option Plan in 2014. 49 Remuneration Report (continued) Share based payment arrangements in existence at the reporting date: Share units Weighted average share price at grant date $ 1.35 1.22 Issue date 18/12/14 2016 2015 18/12/15 2016 2015 2016 2015 Share units at beginning of year No. Share uints granted No. Share units expired / forfeited No. Share units exercised (shares issued) No. Share units at end of year No. Vested at end of year No. Fair value (market value) of shares on exercise $ 325,000 - - 325,000 (60,000) - - - 325,000 - 325,000 - 325,000 325,000 - - (60,000) - - - - - - - 265,000 325,000 90,100 - 325,000 - 590,000 325,000 - - 90,100 - - - - - - - Issue Date Expiry Date Vesting tranche Volatility % Dividend yield % Risk free interest rate % Fair value at grant date $ Exercise price $ Weighted average share price at grant date $ Weighted average share price at exercise date 2016 $ Weighted average share price at exercise date 2015 $ 18/12/14 18/12/19 18/12/15 18/12/20 1 2 3 1 2 3 47.57 47.57 47.57 50.21 50.21 50.21 3.20 3.20 3.20 3.20 3.20 3.20 2.40 2.40 2.40 1.73 1.73 1.73 0.43 0.42 0.39 0.46 0.42 0.37 1.35 1.35 1.35 1.22 1.22 1.22 1.35 1.35 1.35 1.22 1.22 1.22 - - - - - - - - - - - - 50 Remuneration Report (continued) Shares, options and share units held by Directors, executives and key management personnel and movements during the reporting period; Shares Directors Michael Hardy 2016 2015 Greg Tate 2016 2015 John Bond (Resigned 24/08/16) 2016 2015 Brad Denison 2016 2015 Executives Bradley Van Hemert (Redundant 11/03/16) 2016 2015 Ben Rosser (Resigned 28/11/14) 2015 Jarrod Waring (Appointed 01/09/14) 2016 2015 2016 2015 Shares at beginning of year No. Options exercised No. Net other change No. Shares at end of year No. 16,975 16,975 6,581,271 6,581,271 20,000 20,000 45,464 45,464 175,810 175,448 10,000 8,504 2,804 6,848,024 6,851,962 - - - - - - - - - - - - - - - - - - - - - - - 16,975 16,975 6,581,271 6,581,271 20,000 20,000 45,464 45,464 (59,173) 362 116,637 175,810 (4,000) 6,000 - 5,700 8,504 8,504 (59,173) 2,062 6,788,851 6,854,024 Other than share units that vested during the reporting period, Giles Everest, Manuel Larre and Yanya O’Hara did not hold any shares during FY2015 or FY2016. Peter Gunzburg, Steve Carroll and Peter Naylor did not hold any shares during FY2015 or FY2016. 51 Granted No. Forfeited No. Exercised No. Vested during the year No. Vested and exer- cisable at end of year No. Vested and unexer- cisable at end of year No. Proceeds received on exercise $ Options at end of year No. Remuneration Report (continued) Options Directors Brad Denison 2016 2015 Executives Steve Carroll (Resigned 09/10/15) 2016 2015 Bradley Van Hemert (Redundant 11/03/16) 2016 2015 Ben Rosser (Resigned 28/11/14) 2015 Jarrod Waring (Appointed 01/09/14) 2016 2015 Manuel Larre 2016 2015 Yanya O'Hara (Appointed 01/08/14) 2016 2015 2016 2015 Options at beginning of year No. 215,837 231,837 108,433 108,433 199,171 199,171 - - - - - - (26,666) (16,000) (108,433) - (199,171) - 114,562 - (114,562) 250 250 55,000 55,000 720 720 579,411 709,973 - - - - - - - - - - - - - - (334,270) (130,562) - - - - - - - - - - - - - - - 189,171 215,837 50,000 13,057 - 108,433 - 6,144 - 199,171 40,000 13,057 - 11,521 250 250 83 83 55,000 55,000 15,000 - 720 720 240 240 245,141 579,411 105,323 44,102 - - - - - - - 166 83 - - 553 313 719 396 89,171 65,837 - 33,432 - 79,170 - - - 15,000 - - - 104,171 178,439 - - - - - - - - - - - - - - - Giles Everest and Peter Naylor did not hold any options during the reporting period. 52 Remuneration Report (continued) Option values that form part of current year remuneration; Directors Brad Denison 2016 2015 Executives Bradley Van Hemert (Redundant 11/03/16) 2016 2015 Ben Rosser (Resigned 28/11/14) 2015 Steve Carroll (Resigned 09/10/15) 2016 2015 Jarrod Waring (Appointed 01/09/14) 2016 2015 Manuel Larre 2016 2015 Yanya O'Hara (Appointed 01/08/14) 2016 2015 2016 2015 Movements in option entitlements during the year: Year Options Granted 2013 $ 2014 $ Total $ Remuneration as options % 4,669 7,667 11,506 22,190 16,175 29,857 2.4% 5.4% (3,735) 6,133 (9,205) 17,752 (12,940) 23,885 -3.1% 6.6% (11,829) (18,796) (30,625) -23.2% (2,334) 3,833 (5,753) 11,095 (8,087) 14,928 -18.5% 5.1% - - 1,401 2,300 - 40 - 8,144 21 52 4,602 8,876 43 104 1,214 41,273 21 52 6,003 11,176 43 144 1,214 49,417 0.0% 0.0% 1.8% 4.6% 0.0% 0.1% 0.1% 2.4% Options granted No. at grant date Value at grant date $ Options exercised (shares issued) Value at exercise date $ No. during year Amounts paid $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Options Vested No. during year 50,000 40,000 - 83 15,000 240 Value of options included in remuneration Remuneration by options % for the year $ 16,175 (12,940) (8,087) 21 6,003 43 2.4 (3.1) (18.5) 0.0 1.8 0.0 Key management personnel Brad Denison Bradley Van Hemert Steve Carroll Jarrod Waring Manuel Larre Yanya O'Hara 66,666 options lapsed during the year. No options were forfeited during the year because the person did not meet service or performance criteria. 53 Remuneration Report (continued) Share units Share units Directors Brad Denison 2016 2015 Executives Steve Carroll (Resigned 09/10/15) 2016 2015 Bradley Van Hemert (Redundant 11/03/16) 2016 2015 Peter Naylor (Appointed 03/08/15) 2016 Giles Everest (Appointed 01/12/14) 2016 2015 Jarrod Waring (Appointed 01/09/14) 2016 2015 Manuel Larre 2016 2015 Yanya O'Hara (Appointed 01/08/14) 2016 2015 2016 2015 Units at beginning of year No. Granted No. Forfeited No. Exercised No. Units at end of year No. Vested during the year No. Vested at end of year No. Proceeds received on exercise $ 170,000 - 200,000 170,000 - - 30,000 - - 30,000 (30,000) - 30,000 - - 30,000 (30,000) - - 20,000 20,000 - 25,000 20,000 30,000 - 30,000 - 30,000 30,000 30,000 30,000 15,000 - 325,000 - 20,000 15,000 325,000 325,000 - - - - - - - - - (60,000) - - - - - - - - - - - - - - - - - - 370,000 170,000 57,800 - 57,800 - - 30,000 - - - 30,000 10,000 - 20,000 - - - - - - 45,000 20,000 6,800 - 6,800 - 60,000 30,000 60,000 30,000 10,200 - 10,200 - 35,000 15,000 590,000 325,000 5,100 - 100,100 - 10,200 - 10,200 - 5,100 - 90,100 - - - - - - - - - - - - - - - - - 54 Remuneration Report (continued) Share units values that form part of current year remuneration; Directors Brad Denison 2016 2015 Executives Bradley Van Hemert (Redundant 11/03/16) 2016 2015 Steve Carroll (Resigned 09/10/15) 2016 2015 Giles Everest (Appointed 01/12/14) 2016 2015 Jarrod Waring (Appointed 01/09/14) 2016 2015 Manuel Larre 2016 2015 Peter Naylor (Appointed 03/08/15) 2016 Yanya O'Hara (Appointed 01/08/14) 2016 2015 2016 2015 Movements in share unit entitlements during the year: Year Share units granted Remuneration as share units 2015 $ 27,784 25,326 (4,903) 4,469 (4,903) 4,469 3,269 2,980 4,903 4,469 4,903 4,469 2016 $ 28,648 - - - - - 3,581 - 4,297 - 4,297 - Total $ 56,432 25,326 (4,903) 4,469 (4,903) 4,469 6,850 2,980 9,200 4,469 9,200 4,469 % 8.3% 4.5% -1.2% 1.2% -11.2% 1.5% 2.2% 1.6% 3.0% 1.6% 2.7% 1.8% - 2,865 2,865 0.9% 2,452 2,235 33,504 48,417 2,865 - 46,553 - 5,317 2,235 80,058 48,417 2.7% 1.3% 7.3% 2.3% Key management personnel Share units granted No. at grant date Value at grant date Share units exercised (shares issued) Value at exercise date No. during year Amounts paid Brad Denison Bradley Van Hemert Steve Carroll Giles Everest Jarrod Waring Manuel Larre Peter Naylor Yanya O'Hara 200,000 - - 25,000 30,000 30,000 20,000 20,000 $ 83,333 - - 10,417 12,500 12,500 8,333 8,333 - - - - - - - - $ - - - - - - - - $ - - - - - - - - Units Vested No. during year 57,800 - - 6,800 10,200 10,200 - 5,100 Value of share units included in remuneration Remuneration for the year by share units $ 56,432 (4,903) (4,903) 6,850 9,200 9,200 2,865 5,316 % 8.3 (1.2) (11.2) 2.2 3.0 2.7 0.9 2.7 The issue date for shares granted pursuant to the LTIP was 18 December 2015 at a price of $1.22 per share (2015: 18 December 2014 at a price of $1.35 per share). Under the LTIP, each unit can be redeemed for one underlying share in the Company upon repayment of the loan. There have been no alterations to the terms and conditions of this grant since the grant date. 55 Remuneration Report (continued) Due to the limited financial products available to facilitate hedging of unvested or vested options and share units the Board does not impose any restrictions in relation to a person limiting his or her exposure to the risk in respect of share units issued by the Company. No Director is a party to a contract whereby such person would have a right to call for or deliver shares in, or debentures of or interests in a registered scheme made available by the Group. Loans to key management personnel in connection with the Long Term Incentive Plan totaling $747,785 (2015: $438,750) were outstanding at the end of the reporting period. As the loans are non-recourse there is no fixed term, and no allowance for doubtful debts or impairment loss has been recognised against them. The number of key management personnel included in the aggregate of loans is 6. Mr. Denison had loans totaling $469,521 (2015: $229,500) made to him during the reporting period, with the total loan remaining outstanding at the end of the reporting period in connection with the Long Term Incentive Plan. As the loan is non-recourse there is no fixed term, and no allowance for doubtful debts or impairment loss has been recognised against it. There were no other individuals with loans above $100,000 during the reporting period. No share units issued during the year vested or lapsed during the year. No bonuses or share units were forfeited during the year because the person did not meet service or performance criteria. The terms and conditions of employment of senior executives and key management personnel are governed by individual employment contracts. Employment contracts are not limited in duration and do not contain termination payments. Each employment contract may be terminated by either party upon the giving of 4 weeks’ notice. However, the Company may terminate an employment contract at any time and without notice if serious misconduct has occurred. Non-audit Services The Directors are satisfied that the provision of non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditors did not compromise the auditor independence requirement of the Corporations Act 2001 for the following reasons:   all non-audit services have been reviewed by the Audit Committee to ensure that they do not impact impartiality and objectivity of the auditor; and none of the services undermine the general principle relating to auditor independence as set out in the Corporations Act 2001 or the Code of Conduct APES 110 Code of Ethics for Professional Accountants, as amended, issued by the Accounting Professional and Ethical Standards board, including reviewing or auditing the auditors own work, acting in a management or a decision making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Details of the amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 26 to the financial statements. Company Secretary Yanya O’Hara is the Company Secretary. Prior to her appointment, Yanya was employed by the Company for three years as Assistant Company Secretary. Prior to joining Fleetwood, Yanya practiced as a corporate attorney in New York and as a barrister and solicitor in Perth. Corporate Governance Statement The Company’s Corporate Governance Statement for the year ended 30 June 2016, may be accessed from the Company’s website at http://www.fleetwoodcorporation.com.au/Investors/Corporate-Governance. Rounding The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and accordingly amounts in the financial report and directors’ report have been rounded to the nearest one thousand dollars, unless otherwise indicated. Signed in accordance with a resolution of the Directors. P Campbell Chairman 30 September 2016 56 Directors’ Declaration In the opinion of the directors of Fleetwood Corporation Limited: a) The financial statements and notes set out on pages 8 to 43, are in accordance with the Corporations Act 2001 (Cth), including: i. Complying with Australian Accounting Standards and the Corporations Regulations 2001 (Cth); and ii. Giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance for the financial year ended on that date; and b) c) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and There are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order 98/1418 applies, as detailed in note 27 to the financial statements will, as a Group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee. The Directors’ draw attention to note 1 to the financial statements, which includes a statement of compliance with International Financial Reporting Standards. The directors have been given the declarations required by s.295A of the Corporations Act 2001 (Cth) from the Managing Director. Signed in accordance with a resolution of the directors. On behalf of the Directors P Campbell Chairman 30 September 2016 Perth 57 Auditor’s Independence Declaration To the Directors of Fleetwood Corporation Limited Level 1 10 Kings Park Road West Perth WA 6005 Correspondence to: PO Box 570 West Perth WA 6872 T +61 8 9480 2000 F +61 8 9322 7787 E info.wa@au.gt.com W www.grantthornton.com.au In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Fleetwood Corporation Limited for the year ended 30 June 2016, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants P W Warr Partner - Audit & Assurance Perth, 30 September 2016 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. 58 58 Independent Auditor’s Report To the Members of Fleetwood Corporation Limited Level 1 10 Kings Park Road West Perth WA 6005 Correspondence to: PO Box 570 West Perth WA 6872 T +61 8 9480 2000 F +61 8 9322 7787 E info.wa@au.gt.com W www.grantthornton.com.au Report on the financial report We have audited the accompanying financial report of Fleetwood Corporation Limited (the “Company”), which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001. The Directors’ responsibility also includes such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial report that gives a true and fair view in order to Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. 59 59 design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: a the financial report of Fleetwood Corporation Limited is in accordance with the Corporations Act 2001, including: i ii giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. b the financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements. Report on the remuneration report We have audited the remuneration report included in pages 45 to 56 of the directors’ report for the year ended 30 June 2016. The Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion on the remuneration report In our opinion, the remuneration report of Fleetwood Corporation Limited for the year ended 30 June 2016, complies with section 300A of the Corporations Act 2001. GRANT THORNTON AUDIT PTY LTD Chartered Accountants P W Warr Partner - Audit & Assurance Perth, 30 September 2016 60 60 ASX Additional Information as at 27 September 2016 Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below. Twenty largest shareholders Name National Nominees Limited Karrad Pty Ltd HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Limited One Managed Invt Funds Ltd Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited-Gsco Eca Jarli Pty Ltd Trinity Management Pty Ltd One Managed Invt Funds Ltd <1 A/C> Adventure Holdings Pty Ltd Creative Living (Qld) Pty Ltd Zero Nominees Pty Ltd Mr Greg Tate Mr John Ian Amos + Mrs Cintra Gail Amos ABN Amro Clearing Sydney Nominees Pty Ltd Mr Brian Garfield Benger RPG Management Pty Ltd Tideways Classic Pty Ltd Nulis Nominees (Australia) Limited Substantial shareholders The number of shares held by substantial shareholders are set out below: Name National Nominees Limited Greg Tate HSBC Custody Nominees (Australia) Limited One Managed Invt Funds Ltd J P Morgan Nominees Australia Limited Distribution of equity security holders Category 1 -1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Shareholders holding less than a marketable parcel Number of ordinary shares held 9,274,386 5,211,823 4,644,954 2,047,475 1,983,134 1,685,161 1,352,836 800,000 705,000 624,159 596,315 460,000 449,180 338,873 309,143 303,289 232,151 216,915 191,860 187,272 31,613,926 9,275,186 6,581,271 5,998,846 2,607,293 2,047,475 % 15.19% 8.54% 7.61% 3.35% 3.25% 2.76% 2.22% 1.31% 1.15% 1.02% 0.98% 0.75% 0.74% 0.56% 0.51% 0.50% 0.38% 0.36% 0.31% 0.31% 51.79% 15.20% 10.78% 9.83% 4.27% 3.35% Number of shareholders 3,061 3,331 735 544 30 7,701 876 Voting rights of shareholders On a show of hands, every member in person or by proxy shall have one vote. Upon a poll, voting rights of such members shall be one vote for each share held. On market buy-back There is no current on market buy-back. Other information Fleetwood Corporation Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. 61 T: (08) 9323 3300 | F: (08) 9202 1106 | info@fleetwood.com.au | ABN 69 009 205 261 21 Regal Place, East Perth, WA 6004 www.fleetwoodcorporation.com.au 

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