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Chairman’s Report
Managing Director’s Report and Review of Operations
Corporate Governance Statement
Directors' Report
Independent Audit Report
Directors’ Declaration
Statement of Financial Performance
Statement of Financial Position
Statement of Cash Flows
Notes to the Financial Statements
Additional Stock Exchange Information
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62
WALMART THE HOME DEPOT BUNNINGS LOWE’S JOHN DANKS & SON PRAKTIKER
MITRE 10 METRO SAM’S CLUB SUPERSPAN GLOBUS
KELMATT AUSTRALIA
ABC PRODUCTS ROCKLEA CANVAS J D & M J KNIGHT PORTCO NOLAN WAREHOUSES
J A GRIGSON HARRIS SCARFE BHP COLLIERS ACADEMY TARPS PATCHS CANVAS
MANUFACTURING SUN ‘N SURF INTERNATIONAL MAXITRANS MANUFACTURING
C E BARTLETT ICL TASMAN INSULATION AUSTRALIA DARLING DOWNS TARPAULINS
ORCHARD SUPPLY HARDWARE
THOR BUILDING PRODUCTS ABGAL DIXIELINE
JAYLON INDUSTRIES BUNNINGS FRED MEYER N L PRODUCTS A MART HARVEY NORMAN
RADINS CANVAS K MART STRATCO VISY PRICE COSTCO DAVID JONES PETS INTERNATIONAL
WESTARP HOME HARDWARE MAGNET MART OASIS TENSION STRUCTURES
2
3
C H A I R M A N ’ S R E P O R T
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
A YEAR OF EXPANSION
FINANCIAL PERFORMANCE
The Directors of Gale Pacific Limited, an Australian manufacturer and
Gale Pacific generated an after-tax profit attributable to members of
exporter of advanced polymer fabrics and related products, with
$7.004 million, an increase of 28.5% over the previous year’s $5.451
subsidiaries in the United States of America (USA), Germany, United
million on revenues of $106.4 million ($84.6 million in prior year). This
Arab Emirates (UAE) and the Peoples Republic of China, have pleasure
is an excellent result after absorbing one-time net costs of $1.3 million
in announcing a record full year result.
which predominately related to the acquisition and integration of the
The Company continued its growth path following the acquisition of
Jung Garten & Freizeit Vertriebsgesellschaft mbH (Jung) in Germany
Working capital management remains a key focus and operational
with growth in all offshore markets and improvements in our China
cash flow amounted to $12.403 million after absorbing the one-time
Jung operation and the utilisation of temporary premises in China.
C H A I R M A N ’ S R E P O R T
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
I would also like to thank Dr Huw Davies for his contribution over the past
three and a half years and welcome Mr George Richards who joined our
Board in May 2004. Mr Richards brings with him extensive experience in
the retail industry.
ANNUAL GENERAL MEETING
A notice of the annual general meeting for Monday 15 November 2004
commencing at 11.00am and a proxy form is enclosed with this report.
Executive Option Plan
operations.
costs related to the Jung acquisition and temporary production facilities.
The Company established an Executive Option Plan in November 2000,
Key performance indicators such as revenues, profit and earnings per
DIVIDENDS
share recorded strong growth.
The success in Gale developing an improved range of industrial
per share payable on 18 October 2004, making a full year dividend
fabrics has given the company confidence in recruiting key Product
of 7.5 cents per share fully franked representing 54% of after tax
The Directors have declared a fully franked final dividend of 4 cents
the rules of which were amended by resolution of the independant
Directors in September 2004. The independent Directors have also
resolved to recommend to shareholders that an allocation of options be
made to the two Executive Directors, Mr Gary Gale, the Managing
Director, and Mr Peter McDonald, the Chief Operating Officer.
Category and Research and Development personnel in the USA and
profits attributable to members. This is in accordance with the policy
The explanatory notes detailing the recent changes to the plan rules, the
China respectively. This will strengthen and accelerate our entry into
announced two years ago in which it was stated that the Company
the industrial market in the USA and allow for the development of
intended to pay out approximately 50-55% of after tax profits subject
core products customised for the USA and European markets.
to the performance of acquisitions. The book’s closure date for
determining entitlements for the dividend is 27 September 2004.
total number of options that may be issued under the plan, the terms
applicable to the options, and the allocation of options to the two
Executive Directors are contained in the notice paper accompanying this
Annual Report. The independent Directors recommend that shareholders
The Jung acquisition has brought with it access to major retailers in
A dividend reinvestment plan is available to all shareholders.
approve the requisite resolutions.
OUTLOOK
Re-election of Directors
the home and garden segment in countries centred in south-east
Germany. Jung, with its distribution expertise, will offer reliable and
cost effective access for the Gale product range into Europe. In line
with the Company’s stated goals in last year’s Annual Report, the
acquisition of Jung has enabled the Company to establish a foothold
into key European markets.
The key objectives for the forthcoming financial year are:
• To grow the industrial fabrics product sales in the United States.
• To install the new manufacturing plant in the China facility and to
An increase in sales in the Middle East was also realised against
targets set last year.
improve its productivity.
• To upgrade extrusion equipment in Australia.
• To develop and bring to market a range of external extendable
The Company continues to invest in the development of new
awnings.
products and commercialisation initiatives; these are covered in
• To complete at least two new business initiatives in the water
the Managing Director’s Report and Review of Operations.
conservation area.
• To capitalise on the European distributor network by expanding
The new factory in Beilun, south of Shanghai, which will officially open
Jung products into the Benelux countries and France, and integrate
in November, is now virtually complete. Most personnel and plant
Gale core products into the Jung network.
have already transferred to it from the temporary premises and as
this facility comes on line there will be further opportunities for more
PEOPLE
efficient production.
In last year’s Annual Report, we noted that the Company anticipated
that by 30 June 2004, most value-added products would be sourced
from the Gale Pacific China operation. I am pleased to announce that
in line with this expectation, the Company now produces the majority
of its products in China.
4
I would like to express my appreciation to all our personnel and my
fellow Board members for their contribution over the past year which
has continued to see Gale Pacific being a growth business with a track
record of successful integration of acquisitions.
Artists impression of our new manufacturing facility in Beilun, China.
Messrs Daryl Reilly and Peter McDonald retire as Directors by rotation in
accordance with the constitution of the Company and, being eligible,
offer themselves for re-election. Additionally Mr George Richards having
been appointed to fill a casual vacancy retires in accordance with the
constitution and, being eligible, offers himself for re-election. The Board
endorses the re-election of these Directors.
THEO EVERSTEYN
CHAIRMAN
Dated: 24 September 2004
5
M A N A G I N G D I R E C T O R ’ S
R E P O R T A N D R E V I E W O F O P E R A T I O N S
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
CONTINUATION OF ORGANIC GROWTH
AUGMENTED BY A MAJOR ACQUISITION
I am pleased to report that Gale Pacific’s world leading advanced polymer
fabric range and related value-added products have again delivered a
record result.
This 28.5% increase in earnings to $7.004 million has been achieved after
the poor weather conditions of the Australian summer. In our half yearly
report, we announced that the Australian season was slow due to poor
summer weather conditions but nevertheless in line with the robust
performance in the previous year when we experienced excellent summer
weather. The expansion of our markets has shown our strategy on market
diversity to be very sound. The Middle East grew some 40.0%, Europe
over 100% (in Gale core products), both from modest volumes, and the
USA by 16.9% when measured in their local currencies.
I am pleased to report that Gale Pacific’s world leading
advanced polymer fabric range and related value-added
products have again delivered a record result.
Revenue for the year was up 25.8% to $106.4 million after adjusting for
a further move away from independent contractors in China to our own
operation, resulting in an elimination of the contractor fabric sales.
This has been a year of significant change within the group with the
expansion of the Company’s markets into Europe with the Jung
acquisition, the continuing success of and investment in Cal-Shades’
product range in the USA, and the emergence of benefits from the
continuing investment in our manufacturing operations in China.
6
Examples of Gale Pacific’s world leading advanced polymer fabrics range.
7
M A N A G I N G D I R E C T O R ’ S
R E P O R T A N D R E V I E W O F O P E R A T I O N S ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
EUROPE / JUNG ACQUISITION
During February 2004 the Company completed the acquisition of
garden industry and show media. It is also pleasing to note that
the cooperation between our senior team in showing our worldwide
customer base these new market defining product developments
Jung, a leading and well-respected supplier to major home improvement
was complimented by local media representatives.
retailers in Germany, Austria, Switzerland and the Czech Republic.
The acquisition cost of €3.47 million (equating to $A6.4 million) was
funded through a $15.2 million capital raising. The additional capital
This trade show has delivered to Gale Europe significant opportunities
throughout the entire product range. The Company is now focused on
servicing these opportunities through the spring and summer of 2005
raised was used to fund working capital requirements, new product
in Europe.
development initiatives and reduce gearing. Under a share placement
to institutional investors the Company received $11.0 million, with the
balance of $4.2 million coming from an underwritten share purchase
plan. In total 5.83 million new shares were issued at a price of $2.60
each. We were very pleased that approximately two thirds of the
Company’s shareholder base participated in the share purchase plan.
Jung’s results for the year have exceeded expectations, and the
acquisition is enhancing Gale’s earnings per share after taking into
account capital raising to fund the Jung acquisition.
The Jung acquisition has already established Gale Europe with
effective customer service, a distribution facility and strong established
relationships with key German retailers. It has supplied Gale with a
low risk platform from which to generate strong organic growth from
Gale’s product range in the large European market. The procurement
expertise which the Company has gained through its China operations
has delivered improved margins on Jung’s established product lines.
NEW PRODUCT DEVELOPMENTS
AND INITIATIVES
The Company continues to invest significant resources into the
development of new business and product extensions within our range
of existing products. The commitment to these developments has
been stepped up a level to ensure all operating units are receiving
adequate support and regional customisation of those enabling
technologies we develop. During the year, China has experienced a
dramatic increase in staffing in this area to complement our Australian
team. China has delivered a large and unique expansion of our very
successful window furnishing range which was launched at the
European trade show at Cologne, Germany earlier this month.
Further advancements continue at Gale with our commitment to
products that both conserve water, an increasingly threatened
resource, and also maintain the purity of potable water.
The launch of Gale’s products through the Jung network has been
successfully implemented in several major German retailers and
catalogue customers with excellent sell-through results. It is the
Company’s intention to progressively establish a customer base
over 2004/05 through Jung in France, Holland, Belgium, Austria,
Switzerland, Poland and Italy.
Gale has completed a range of flexible water pipe trials in Griffith
NSW that are being monitored by the CSIRO. The Gale product is
being developed as an alternative to rigid piping and open channel
irrigation. We are sufficiently satisfied by the results and are developing
the specifications of the product range. We are moving closer to the
commercialisation of the opportunity with relevant parties.
Gale has already established distributors for its products in England,
Spain, Slovakia, Slovenia, Croatia, Serbia, Romania, Finland and Greece
that will be serviced directly from Gale’s manufacturing plant in China
and will be supported through Gale Europe’s customer service and
distribution centre.
Earlier this month, the Company attended the Gafa/Spoga international
trade show for garden related products. Senior representatives of
Gale’s operations in China, Australia, Dubai and our recently appointed
European sales managers attended the trade show. The quality of our
newly released product developments featuring our unique balcony
awnings and privacy screens received extensive coverage in the
5,100
4,600
4,100
3,600
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$1.00
3,100
2,600
Jul 02
SHARE PRICE PROGRESS
2.70
Gale Pacific Share Price
All Ordinaries Index
Source: Australian Stock
O ct 02
Jan 03
A pr 03
Jul 03
O ct 03
Jan 04
A pr 04
Jul 04
20 Sep 04
3.10
2.90
2.70
2.50
2.30
2.10
1.90
1.70
1.50
1.30
1.10
0.90
0.70
0.50
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r
P
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S
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Geographic expansion has successfully diversified the Company’s revenue and profit streams.
8
TOTAL REVENUE BY REGION
Germany
22%
Middle East
2%
USA
12%
China
8%
Australasia
56%
SALES PRODUCT MIX
Garden Products
26%
Window Furnishings
13%
Structures
7%
Commercial Fabrics
26%
NET PROFIT AFTER TAX
Retail Fabrics
28%
7,004
5,451
3,615
2001/02
2002/03
Year
2003/04
REVENUE
84,609
106,400
0
0
0
'
$
8000
7000
6000
5000
4000
3000
2000
1000
0
120000
100000
80000
0
0
0
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$
60000
55,777
40000
20000
0
2001/02
2002/03
Year
2003/04
9
M A N A G I N G D I R E C T O R ’ S
R E P O R T A N D R E V I E W O F O P E R A T I O N S ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
The Company has introduced the “Water Worm”, a flexible domestic
Gale Europe and its Coolaroo branded products into Jung’s
water tank that satisfies the Government’s tank rebate scheme for
traditional customer base. Mr Jung’s in-depth knowledge of the past
rainfall catchment. This product has the benefit over rigid tanks in that
and current challenges within the European market is invaluable to
it can be located under the house or in the garden. This product has
Gale in planning and executing its further expansion in this region.
been introduced at selected stores.
Emma Xu, Executive Director - China Operations. In 2002 when Emma
The Company has now commercialised a new light weight tube for
joined the Company she was a senior lawyer based in Shanghai with
mine venting and has made significant advancements in the production
Lehman Lee & Xu Lawyers. Emma has significant experience with
of our anti-wick PVC replacement fabrics in the industrial area.
start-up businesses and providing advice to offshore corporations
We have fully commercialised the Bioclip biological shearing nets and
She successfully maintains the relationships the Company has with
currently have received two orders each for 500,000 units for this
all government authorities and was responsible for the establishment
in the establishment and restructuring of their Chinese operations.
product; it is now in production in our China operations.
MANAGEMENT
The Company has invested substantial time and funds in building
and restructuring its management team to ensure the effective
delivery of the Company’s objective to be the market leader in
each of its product categories in each of its markets.
The Company’s worldwide management team is cognisant of the
issues affecting our industry and adapting to the future challenges
in the rapidly changing commercial environments in which the
Company operates.
The Company is investing significant time and effort in preparing
succession planning in all operations at all levels. This provides
opportunities for advancement for Gale employees and enables
the Company to attract high calibre staff. In view of the significant
development of our international management team over the period
I would like to introduce them to you.
Doug Whyte, Vice President – Sales and Marketing of our USA
operation joined Gale in 2002 having held senior sales and marketing
positions with Black & Decker and Ingersoll Rand servicing the hardware
and home improvement channels in the USA. Doug has cemented our
relationships with all major USA accounts and is building a strong sales
and marketing team to capitalise on the ranging and marketing
opportunities we have in this large and important market.
Elmar Jung, Co-founder of Jung and Managing Director - Gale Europe,
Elmar has over the past 7 years built the business into one of the
premier garden and outdoor leisure distributors to the central
European market. Elmar maintains very close relationships with
leading German retailers built up through Jung’s exceptional service
and product innovation. Over the past 6 months he has integrated
of our corporation and management of all finance and administration
functions in its initial stages as CFO. Early in 2004, Emma took on
the position of Director on our Chinese board. In addition she is now
responsible for sales and marketing functions interfacing with the local
offices of offshore and local retailers. In these capacities she maintains
a stable organisational platform on which Paul Cashion can manage
our manufacturing operations.
Paul Cashion, General Manager Manufacturing - China Operations.
Paul has had a very successful career in general management of
textile operations throughout Australia, and recently joined us as
General Manager Manufacturing of our Ningbo production facility.
In the course of the last 6 months he has initiated significant technical
upgrades to our operations and ensured a smooth transition to our
new facility. Paul has adapted well to the Chinese environment and
is supported significantly by Emma Xu and her team. Paul has built
an excellent middle management team to effectively operate our new
manufacturing facilities and manage the growth they are experiencing
both now and into the future.
Warehousing
Sales Office/Distributor
Manufacturing
10
The Company continues to invest in exciting new technology and market areas.
11
M A N A G I N G D I R E C T O R ’ S
R E P O R T A N D R E V I E W O F O P E R A T I O N S ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
M A N A G I N G D I R E C T O R ’ S
R E P O R T A N D R E V I E W O F O P E R A T I O N S ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
Zafar Fakroddin joined Gale in 2002 to lead our Dubai operations.
This business has grown its sales rapidly and significantly improved
the performance of our Middle Eastern operations. Zaf comes from
Chicago, USA as principal and as senior manager of a well respected
Chicago trading organisation. Zaf is presently expanding the reach of
our Dubai office which is currently trading in Eastern Europe and most
of the GCC countries. Even through these difficult times within the
region we were able to grow our business by some 40.0% last year.
I would like to take this opportunity to thank our former Chief
Financial Officer, Mr Rod House, for his diligent efforts over the
last two years. We wish him well.
UNITED STATES OF AMERICA
USD revenue in the USA increased by 16.9% on the previous year
despite the loss of USD $0.870m in sales due to Kmart’s Chapter 11
bankruptcy and subsequent restructure, eliminating the category from
their stores. Sales to the Home Centres of Home Depot and Lowes
grew significantly due to the strong performance of the Cal-Shades
range.
We secured new business with Wal-Mart’s Sams Club giving us an
MIDDLE EAST
CASH FLOW
Revenue growth in the region has been at a rapid rate. Revenues in
The acquisition of Jung resulted in a significant improvement in operating
USD were 40.0% ahead of last year, predominantly in our architectural
cash flow from the prior year. This improvement was diminished by lower
fabrics range. With the rapid expansion of investment into the UAE
than anticipated sales in Australia resulting in marginally increased stock levels
infrastructure and leisure industries we have further opportunities for
($0.8m). In addition higher stock levels were maintained in the Company’s
growth. We are fortunately located in the environment most insulated
European operation in advance of an anticipated rise in the price of steel.
from the region’s conflicts, however there are a number of challenges
in developing these markets.
CHINA
OUTLOOK
The Company has positioned itself well for the medium term having well
established skills in the world’s most significant markets, namely the USA,
In September 2003 the Company acquired the remaining 15% equity
Europe and China, while continuing to develop its important home market
interest held by its joint venture partner and converted the business
of Australia.
into a “Wholly Foreign-Owned Enterprise” in China.
Construction of the new manufacturing facility in Beilun is nearing
product development and cost reduction provides the basis for greater
completion for the November official opening. The facility is 32,000
confidence in the Company’s ability to continue to deliver consistent and
square metres of factory, office and staff accommodation and with the
significant growth in shareholder value.
The investment by the Company in the last five years in market expansion,
significant growth in the northern hemisphere markets the additional
production capacity and product sourcing options this facility
provides will be of significant benefit over the medium term.
excellent base to build on for the future with this major retail account.
This will allow us to more than double the current manufacturing
In implementing our industrial fabric marketing strategy we employed
a highly skilled and experienced Industrial Sales & Marketing Manager
to execute our plans. We have already secured a new national industrial
fabric distributor late in the season developing a most promising base
volumes.
FINANCE, BANKING AND CORPORATE
GOVERNANCE
for future expansion in this market.
In line with the increasing globalisation of its operations, the
Company is currently finalising the transition to a broader range of
banking facilities with additional banking partners that have a greater
presence in the overseas regions in which we operate. The Company
has also increased the level of corporate governance in each jurisdiction
by expanding the role and activities of local boards and ensuring open
lines of communication with the parent Company board.
The Company has completed the integration of the Cal-Shades
product range under the “Coolaroo” brand and also its financial and
administrative systems. These changes have been very well received
by our major retail partners. The Cal-Shades custom shade business
has significantly grown during the year.
Good progress has been made on strengthening our USA management
team in order that we can more aggressively attack the existing
consumer markets and the emerging industrial opportunities in the
USA. We have hired further sales and marketing personnel to expand
our USA business.
OUR PEOPLE
The reduction in costs that the company presently enjoys and which
are necessary for the maintenance and improvement of its competitive
position could only have been made possible by the willing contribution,
effort and sacrifice made by all members of the Gale team. Whilst I thank
them all for their wonderful efforts we must all be aware that conditions
in the market require us to continue our efforts to satisfy our customers.
Maintaining customer service levels, managing costs and cash flow,
continuing to improve technology and providing innovation for new
products will allow access to new markets and continued growth
opportunities into the future.
GARY S GALE
MANAGING DIRECTOR
Dated: 24 September 2004
12
13
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
This statement sets out the corporate governance practices that
The Board periodically reviews the functions of management and
discharge of the duties of the Board and that accordingly his
auditor’s internal quality review processes including second
were in operation throughout the financial year for Gale Pacific
the responsibilities of the Board.
membership of the Board and the Audit Committee are appropriate.
partner review are accepted by the Committee.
Limited and its controlled entities (“the Company”) and which
substantially comply with the Australian Stock Exchange Corporate
1.2 Terms of Appointment
Governance Council recommendations.
1. BOARD OF DIRECTORS
The Board has settled a form of letter of appointment to be
provided to potential new non-executive directors which prescribes:
1.1 Responsibilities
• Remuneration.
The names of the Directors in office at the date of this Report, the
• To review the annual and half-year financial reports and to
ensure compliance with Australian Accounting Standards
year of appointment and their status as non-executive, independent
and generally accepted accounting principles.
or executive directors is set out on page 20 of the Directors’ Report.
• To monitor the establishment of an appropriate internal
2.2 Chairman
The role and responsibilities of the Board include the following:
• The expectation of the Board in relation to attending and
since May 2004 and was, at the date of his appointment and continues
• The term of appointment, subject to shareholder approval.
The Chairman, Mr T. Eversteyn has been chairman of the Company
• Setting and monitoring of objectives, goals and strategic
direction for management with a view to maximising
preparing for all Board Meetings and other duties.
• Procedures for dealing with conflicts of interest.
• Trading policy governing dealings in the Company’s
shareholder wealth.
securities.
• Accepting an annual budget and the monitoring of
• The availability of independent professional advice.
financial performance.
• Approving and monitoring the progress of major capital
Non-executive directors are remunerated for their services from
expenditure, capital management and acquisitions and
the maximum aggregated amount approved by shareholders for
divestments.
that purpose.
• Overseeing the Company’s processes for disclosure and
communications.
• Ensuring adequate internal controls exist and are
appropriately monitored for compliance.
• Ensuring significant business risks are identified and
appropriately managed.
• Maintaining the highest business standards and ethical
behaviour.
In addition to matters expressly required by law to be approved by the
Board, the powers specifically reserved for the Board are as follows:
2. BOARD STRUCTURE AND
COMPOSITION
2.1 Independence
At the date of this report, the Board comprises 3 non-executive
independent directors and 2 executive directors. The Directors
considered by the Board to constitute independent directors are:
T. Eversteyn, D. Reilly and G. Richards. The test to determine
independence which is used by the Company is whether a Director is
independent of management and any business or other relationship
to be, independent. The Chairman leads the Board and is responsible
for the efficient organisation and conduct of the Board’s functions.
2.3 Committees of the Board
The Board has established three permanent committees to assist
in the execution of its responsibilities. These are the Nomination
Committee, the Audit Committee, and the Remuneration Committee.
Nomination Committee
The Nomination Committee now consists of T. Eversteyn, G. Gale
and D. Reilly. It reviews the performance of the committees of
the Board and key executives on an ongoing basis and oversees
the appointment and induction process for Directors. It reviews
the composition of the Board and makes recommendations on the
appropriate skill mix, personal qualities, expertise and diversity.
When a vacancy exists or there is a need for particular skills, the
Committee determines the selection criteria based on the skills
deemed necessary. Potential candidates are identified by the
Committee with advice from an external consultant.
• Selecting, appointing and reviewing the performance of
with the group that could materially interfere with – or could reasonably
Audit Committee
the Chief Executive Officer and determining his/her terms
be perceived to materially interfere with – the exercise of their
The primary role of the Audit Committee is to assist the Board
of engagement and remuneration.
unfettered and independent judgement. All of the non-executive
in fulfilling its responsibilities relating to the accounting, internal
• Approval of transactions, expenditure or other matters in
directors are considered independent.
excess of discretionary authorities delegated to the Chief
Executive Officer from time to time.
• Approval of significant changes in organisational structure.
• The issue of any securities or equity instruments.
In reaching this conclusion, the Board specifically noted and sought
advice with respect to the fact that Mr T. Eversteyn is the only non-
executive director who has in the past three years, been a principal
control and reporting practices of the Company and its subsidiaries.
The Audit Committee now consists of only non-executive, independent
directors and it has an independent chairman who is not the chairman
of the Board. Mr D. Reilly is the Chairman of the Audit Committee.
of an adviser to the Group. Up to April 2004, the Company’s tax
The Committee’s responsibilities include:
control framework, and appropriate ethical standards.
• To monitor the procedures to ensure compliance with the
Corporations Act 2001 and the Australian Stock Exchange
Listing Rules and all other regulatory requirements.
• To address any matters outstanding with auditors,
Australian Taxation Office, Australian Securities and
Investments Commission, Australian Stock Exchange
and financial institutions.
Whilst during the year the Managing Director was a member
of the Audit Committee at the date of this report the Audit
Committee consists of three independent non-executive directors,
Mr T. Eversteyn, Mr D. Reilly and Mr G. Richards. The Committee has
access to management and the external auditors. The Committee
has adopted a formal charter.
Remuneration Committee
The Board has a Remuneration Committee consisting of two
independent non-executive directors, Mr T. Eversteyn and
Mr D. Reilly. The Committee meets once a year and as required.
The Remuneration Committee reviews the remuneration policies
applicable to all Directors and Executive Officers on an annual
basis and makes recommendations on remuneration packages
and terms of employment to the Board. Remuneration packages,
which consist of base salary, fringe benefits, incentive schemes
(including performance-related bonuses and share option schemes),
superannuation, and entitlements upon retirement or termination, are
reviewed with due regard to performance and other relevant factors.
Payment of bonuses, stock options and other incentive payments
are made at the discretion of the committee based predominantly
on an objective review of the Company’s financial performance, the
individuals’ achievement of stated financial and non financial targets
and any other factors the committee deems relevant.
In carrying out its responsibilities and powers, the Board recognises
advisory firm was Bentleys MRI, a firm of which Mr T. Eversteyn, the
its overriding responsibility to act honestly, diligently and in
Company’s Chairman, is a partner. Bentleys MRI ceased providing tax
accordance with the law in the best interests of the Company’s
advice to the Company in April 2004 and notwithstanding that Mr
shareholders while also having regard to the interests of its other
T. Eversteyn is a partner in this firm, the Board has concluded that
stakeholders, including its customers and employees.
he retains independence of character and judgement. The Board
considers Mr Eversteyn’s financial expertise to be important to the
14
• To recommend to the Board the appointment and dismissal
of the external auditors and setting the appropriate fee.
• To evaluate the performance of the external auditors,
including their independence and objectivity. The external
audit engagement partner is not rotated; however the
The Company’s remuneration policy is designed to retain and attract
executives of sufficient calibre to facilitate the efficient and effective
management of the Company’s operations. The Remuneration
Committee seeks the advice of external advisors in connection
with the structure of remuneration packages.
15
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
Non-Executive Directors receive directors’ fees and do not participate
in performance based remuneration.
4. FINANCIAL REPORTING
The payment of equity-based remuneration is made in accordance
with thresholds set in plans approved by shareholders.
The Board is currently documenting the existing functions, roles
and resposibilities of the committee.
3. ETHICAL AND RESPONSIBLE
DECISION-MAKING
3.1 Ethical Standards
The Company’s policy is that all Directors and staff maintain the
highest ethical standards of conduct. Gale Pacific Limited is an
equal opportunity employer.
The Company is in the process of documenting its code of conduct
so as to guide the Directors, management and all staff as to the
practices necessary to maintain confidence in the Company’s integrity
and the responsibility and accountability of individuals for reporting
and investigating allegations of unethical practices. A summary of
the main provisions of this code will be posted on the Company’s
web site as soon as it is available.
3.2 Share ownership and dealing
Directors and Executives may acquire or sell shares in the Company
only under the following conditions:
• Between 1 and 14 days after either the release of the
Company’s half-year or annual results to the Australian
Stock Exchange, the annual general meeting or any major
announcement; and
• At all other times only with the approval of the Chairman,
or in his absence, another non-executive director.
• Directors and Executives must disclose their trading in
Company shares to the Board. The Company does not
impose any restrictions of trading in the Company’s
securities on employees unless they are executives
of the Company.
4.1 Management Accountability
The Directors are committed to the preparation of financial
statements that present a balanced and clear assessment of the
Group’s financial position and prospects. The Board requires the
Managing Director and the Chief Financial Officer to state in writing
to the Board that the Company’s financial reports present a true
and fair view, in all material respects, of the Company’s financial
condition and operational results and are in accordance with
relevant accounting standards.
4.2 Audit Committee
The Audit Committee reviews the Company’s half yearly and annual
financial statements and makes recommendations to the Board. The
role of the Committee in the preparation and reporting of the financial
information of the Group is set out in principle 2.3 of this statement.
5. MARKET DISCLOSURE
The Company has established procedures designed to ensure
compliance with Australian Stock Exchange Listing Rule disclosure
requirements and to ensure accountability at a senior management
level for that compliance. The Managing Director, the Chief
Financial Officer and the Company Secretary are responsible for
interpreting the Company’s policy and where necessary informing the
Board. The Company Secretary is responsible for all communications
with the Australian Stock Exchange. The purpose of the procedures
for identifying information for disclosure is to ensure timely and accurate
information is provided equally to all shareholders and market
participants. The Company is in the process of documenting
this policy.
6. SHAREHOLDER RIGHTS
The Board informs shareholders of all major developments affecting
the Company’s state of affairs as follows:
• The Annual Report is distributed to all shareholders, including
relevant information about the operations of the consolidated
entity during the year and changes in the state of affairs.
• The half-yearly report to the Australian Stock Exchange
contains summarised financial information and a review of
the operations of the consolidated entity during the period.
16
New consumer products are being developed using our fabrics for many new market applications.
17
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
• All major announcements to the Australian Stock Exchange
The Board is provided with the information it needs to efficiently
are distributed to shareholders, and posted on the
discharge its responsibilities. The Board has a policy of enabling
Company’s website at www.galepacific.com.
Directors to seek independent professional advice at the Company’s
• Proposed major changes in the consolidated entity which
expense, subject to estimated costs being approved by the
may impact on share ownership rights are submitted to
Chairman in advance as being reasonable. All Directors have access
a vote of shareholders.
to the Company Secretary and the appointment and removal of the
• The Board encourages full participation of shareholders
Company Secretary is a matter for decision by the Board as a whole.
at the annual general meeting to ensure a high level of
accountability and identification with the consolidated
9. REMUNERATION
entity’s strategy and goals.
The Company’s auditor attends the annual general meeting.
non-executive) are set out on page 28 of the Directors’ Report.
Details of the remuneration paid to the Directors (executive and
7. RISK MANAGEMENT
10. CORPORATE SOCIAL RESPONSIBILITY
The Board has responsibility for monitoring risk oversight and
The Company’s Board and management are committed to ensuring
management and ensures that the Managing Director and the
the Company conducts its business in a way which reflects its
Chief Financial Officer report on the status of business risks through
health, safety, environment and community responsibilities.
risk management programs aimed at ensuring risks are identified,
assessed and appropriately managed.
The Company’s compliance with the Principles of Good Governance
and Best Practice Recommendations published by the Australian
Management has established and implemented a system for
Stock Exchange Corporate Governance Council in March 2003 is
identifying, assessing, monitoring and managing material risk
described in this Annual Report including the Corporate Governance
throughout the organisation. The Company’s risk management
Statement, the Directors’ Report and the Financial Statements.
procedures cover environment, occupational health and safety,
The Listing Rules of the Australian Stock Exchange require listed
property, financial reporting and internal control. The Company’s
companies to report on the extent to which they comply with the
risk management policy and internal compliance and control
system is currently being documented and will be posted on
the Company’s web site as soon as it is available.
Best Practice recommendations. These requirements take effect for
reporting periods ending on or after 30 June 2004. The Company
complies with the majority of the recommendations, and where it
does not, it has indicated so in this Corporate Governance Statement.
The Managing DIrector and the Chief Financial Officer are required
to state to the Board in writing that the integrity of the financial
While the Board of the Company is satisfied with its level of
statements is founded on a sound system of risk management
compliance with the new governance requirements, it recognises
and internal compliance and control and that the Company’s risk
and acknowledges that the Company’s practices and procedures
should be constantly reviewed. The Board has commenced a
program of review which will continue throughout the year and
which will aim at further improving the Company’s corporate
governance policies and procedures.
management and internal compliance and control system is
operating efficiently and effectively in all material respects.
8. BOARD AND MANAGEMENT
PERFORMANCE APPRAISAL
The Nomination Committee takes responsibility for evaluating the
Board’s performance and the Company’s key executives. A performance
evaluation for the Board and its members has taken place in the
reporting period. The Board is currently reviewing the requirement
for evaluation of the performance of each Director and the process
for same, if any, to be formally adopted.
18
Water management and crop protection continue to be important areas of focus for the business.
19
D I R E C T O R S ’ R E P O R T
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
The Directors of Gale Pacific Limited present their annual financial
report of the Company for the financial year ended 30 June 2004.
DIRECTORS
The Directors in office at any time during or since the end of the
year to the date of this report are:
MR THEO JOHN EVERSTEYN
Chairman
FCA, Graduate Diploma Industrial Accounting
and Bus. Admin.
age - 63
Mr Eversteyn joined the Board in 1998 in a non-executive capacity.
Mr Eversteyn has been a partner of the Chartered Accounting firm
Bentleys MRI since 1973 and was appointed Chairman of the
Melbourne partnership on 1 July 2004. During his career he has
focused on manufacturing and distribution businesses. He is also
the non-executive chairman of Valcorp Fine Foods Pty Ltd,
MR DARYL EDWARD JAMES REILLY
Non-Executive Director - Chairman Audit Committee
Graduate Diploma of Business (Accounting),
CPA, ACIS, FTMA, AICD
age - 50
Mr Reilly joined the Board in 1998. He was previously an Executive
Director and principal of Advent Management Group Limited
(“AMG”) and was AMG’s Chief Financial Officer and Company
Secretary between 1984 and 2004. During his twenty year career
in private equity, he has been a Director on the boards of numerous
companies involved in a diverse range of areas including
manufacturing, business to business, information technology,
tourism, leisure and hospitality and communications, in addition
to his funds management role within AMG. He remains a
significant shareholder of AMG.
MR GEORGE HENRY RICHARDS
Non-Executive Director
Endeavour Wines Pty Ltd and the Joval Pty Ltd Group. Mr Eversteyn
CPA, ACIS
age - 58
was a director of the Alzheimer’s Association of Victoria for the
period 1990 to 2000 and Bentleys MRI Australia Ltd for the period
2000 to 2004.
MR GARY STEPHEN GALE
Managing Director
age - 51
Mr Gale was responsible for the restructuring of the Gale Group
both in Australia and the USA in 1996/97 and was appointed as an
Executive Director of the Board in 1998. He was also responsible
for the Company entering the advanced polymer fabric industry
as a manufacturer in 1977. Mr Gale studied textile engineering
in Germany, and is the son of the founder of the Gale business.
Mr Richards joined the Board in 2004. He was the Chief Executive
of Mitre 10 South West Ltd from 1990 to 2000 and was previously
the Managing Director of Cooper Tools, a market leader in hand
tools manufacture and distribution. Mr Richards has had over
40 years experience in retail, marketing, manufacturing and
distribution. He was also formerly president of the Hardware
Federation of Australia and is a board member of The Alfred
Foundation, a Director of Magnet Mart Pty Ltd, Associate Member
of the Australian Institute of Company Directors and Australian
Institute of Management.
DR HUW GERAINT DAVIES
Non-Executive Director
MR PETER RONALD MCDONALD
BSc, PhD
age - 63
Chief Operating Officer
Bachelor of Business (Marketing) age - 38
Mr McDonald joined the Gale Group in 1988 and was appointed
as an Executive Director of the Company in 1998. Mr McDonald
has held the position of Product Manager, National Marketing
Manager and National Sales and Marketing Manager. Mr McDonald
is responsible for the day-to-day operations of the business
including the USA and Middle East businesses.
Former Chairman and Non-Executive Director. Mr Davies joined the
Board in 2000.
The above named Directors held office during and since the end
of the financial year except for:
Mr H. G. Davies – resigned 17 May 2004
Mr G. H. Richards – appointed 17 May 2004
20
Raw material development is critical to our on-going market success.
21
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
Principal Activities
Events Subsequent to Balance Date
The consolidated entity’s principal activities in the course of the
Subsequent to the end of the financial year, capital expenditure was
financial year were the manufacture and exporting of advanced
approved for the purchase of plant and equipment for the wholly
polymer fabrics and related products. With the acquisition of the
owned Chinese entity, Gale Pacific Textiles Company Limited
German subsidiary Jung, the Group now has a European distribution
("GPST").
facility with strong established relationships with key European
retailers. This has provided the Group with a platform from which
Other than the approval for capital expenditure mentioned above
to generate strong organic growth from Gale’s product range in
there has not arisen in the interval between the end of the financial
the large European market.
Results
year and the date of this report any item, transaction or event of a
material and unusual nature that, in the opinion of the Directors has
significantly affected or may significantly affect the operations of
the economic entity, the result of those operations, or the state of
The consolidated profit of the economic entity for the financial
affairs of the economic entity in subsequent financial years.
year attributable to the members of Gale Pacific Limited was
$7.004 million.
Review of Operations
Likely Developments
Disclosure of information regarding likely developments in the
operations of the consolidated entity in future financial years
A comprehensive review of the operations of the economic entity
and the expected results of those operations is likely to result in
during the financial year and the results thereof is contained in the
unreasonable prejudice to the consolidated entity. Accordingly,
accompanying Chairman’s Report and the Managing Director’s
this information has not been disclosed in this Report.
Report and Review of Operations of this Annual Report.
State of Affairs
Environmental Regulation and
Performance
In the opinion of the Directors there were no significant changes
The economic entity’s operations are not subject to any significant
in the state of affairs of the Company and its controlled entities
environmental regulations under the Commonwealth or State
that occurred during the financial year under review not otherwise
legislation. However, the Directors believe that the economic
disclosed in this report or the accompanying financial report.
entity has adequate systems in place for the management of its
Resolutions will be put to the shareholders at the annual general
meeting to amend the terms of the share option plan for subsequent
issues of options.
environmental requirements and is not aware of any breach of those
environmental requirements as they apply to the economic entity.
22
From domestic backyards to large scale commercial projects, our products span a breadth of applications.
23
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
Dividends
In respect of the financial year ended 30 June 2003, a final dividend
427,942 options have vested prior to this financial year. An
additional 45% vest when the share price reaches $3.20. A further
30% vest when the share price reaches $3.60 and 25% vest when
of 3.5 cents per share franked to 100% at the 30% corporate income
the share price reaches $3.95.
tax rate was paid to the holders of fully paid ordinary shares on
16 October 2003.
In respect of the financial year ended 30 June 2004, an interim
dividend of 3.5 cents per share franked to 100% at the 30%
During the financial year no options vested. As set out in the
accounting standard AABS 1046 and the revised ASIC guidelines,
the Company has valued the issued options. The Binomial option
pricing model was used and this model takes into account the
corporate income tax rate was paid to the holders of fully paid
following inputs:
ordinary shares on 17 April 2004.
• Current price of the underlying shares as at the grant date.
In respect of the financial year ended 30 June 2004, the Directors
• Exercise price.
have declared a final dividend of 4.0 cents per share franked to
100% at the 30% corporate income tax rate to be paid to the
holders of fully paid ordinary shares on 18 October 2004.
Share Options
• Expected volatility of the share price over the expected life
of the options.
• First exercisable date.
• Expected life.
• Expected dividend yield.
The Company has entered into an option agreement to grant options
to specified option holders over unissued shares in the Company.
The Company has utilised the Black-Scholes methodology as a
The options are exercisable upon achievement of certain conditions.
comparison to the values using the Binomial methodology and
there was a plus or minus 5% correlation between the values
During the financial year, 50,000 options over 50,000 ordinary
achieved under the two methodologies which is not unreasonable.
• Risk free interest rate for the expected life of the options.
shares were granted to Ms Emma Xu by the Company.
Further details of the option plan are disclosed in note 18 to the
The number of unissued ordinary shares under option as at the date
Financial Statements.
of this report is 477,942. The issue price of each option is zero. Each
option entitles the option holder to 1 ordinary share in Gale Pacific
Limited in the event that the option is exercised. The exercise price
for 427,942 of the issued options is $1.00 and the remaining 50,000
have an exercise price of $1.50. The first 427,942 options are not
exercisable after 1 December 2004 and the remaining 50,000 options
are not exercisable after 1 December 2006.
24
The Coolaroo brand is becomming more and more recognised in consumer markets.
25
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
INDEMNIFICATION OF OFFICERS AND AUDITORS
During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company
Secretary and all executive officers of the Company and of any related body corporate against a liability incurred as a Director, Secretary or
executive officer to the extent permitted by the Corporations Act 2001. 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 financial year, indemnified or agreed to indemnify an officer or auditor of the
Company or of any related body corporate against a liability incurred as an officer or auditor.
DIRECTORS’ MEETINGS
The following table sets out the number of Directors’ meetings (including meetings of committees of Directors) held during the financial
year and the number of meetings attended by each Director while they were a Director or committee member.
DIRECTORS’
MEETINGS
AUDIT
COMMITTEE MEETINGS
REMUNERATION
COMMITTEE MEETINGS
NOMINATION
COMMITTEE
No. OF
MEETINGS
ELIGIBLE TO
ATTEND
ATTENDED
No. OF
MEETINGS
ELIGIBLE TO
ATTEND
ATTENDED
No. OF
MEETINGS
ELIGIBLE TO
ATTEND
ATTENDED
No. OF
MEETINGS
ELIGIBLE TO
ATTEND
ATTENDED
18
17
18
18
18
1
16
17
18
15
18
1
2
-
2
-
2
-
1
-
2
-
2
-
1
-
-
-
1
-
1
-
-
-
1
-
3
-
3
-
3
-
3
-
3
-
3
-
DIRECTORS
T J Eversteyn (i)
H G Davies (ii)
G S Gale
P R McDonald
D E J Reilly (iii)
G H Richards (i)
(i) Mr T Eversteyn was appointed Chairman of the Board and Mr G Richards was appointed as a Director of the Board on 17 May 2004.
(ii) Mr H Davies resigned from the Board on 17th May 2004.
(iii) Mr D Reilly was appointed Chairman of the Audit Committee on 17 May 2004, replacing Mr Eversteyn.
DIRECTORS’ SHAREHOLDINGS
The following table sets out each Director’s relevant interest in shares and options in shares of the Company as at the date of this report:
NAME
FULLY PAID
SHARE OPTIONS
ORDINARY SHARES
T J Eversteyn
G S Gale
P R McDonald
D E J Reilly
G H Richards
175,000
14,790,104
235,966
270,612
10,000
-
427,942
-
-
-
26
The Company’s waterproof fabric range is being expanded into new market areas.
27
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
DIRECTORS’ AND EXECUTIVES’
REMUNERATION
The Remuneration Committee reviews the remuneration packages
of all Directors and executive officers on an annual basis and makes
recommendations to the Board. Remuneration packages are reviewed
with due regard to performance and other relevant factors, and
advice is sought from external advisors in relation to their structure.
Remuneration packages contain the following key elements:
• Primary benefits – salary/fees;
• Benefits, including the provision of motor vehicles and
superannuation; and
• Incentive schemes, including share options under the
executive share option plan as disclosed in Note 18 and
Note 25 to the financial statements.
The following table discloses the remuneration of the Directors of the Company:
SALARY
& FEES
$
PRIMARY
BONUS
$
NON-
SUPER-
MONETARY ANNUATION
$
$
POST EMPLOYMENT
PRESCRIBED
BENEFITS
$
2004
Executive Directors
G S Gale
P R McDonald
322,498
252,961
120,000
75,000
66,500
36,037
11,002
11,002
Non-Executive Directors
49,583
60,554
47,500
6,167
T J Eversteyn
H G Davies
D E J Reilly
G H Richards
2003
Executive Directors
-
-
-
-
-
-
-
-
-
-
-
-
G S Gale
P R McDonald
265,504
235,537
90,000
60,000
61,364
19,926
11,002
11,002
Non-Executive Directors
T J Eversteyn
H G Davies
D E J Reilly
41,250
55,000
41,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
EQUITY
OPTIONS
$
OTHER
$
OTHER
BENEFITS
$
TOTAL
$
-
-
-
-
-
-
-
-
-
-
-
33,889
26,358
-
-
-
-
33,889
26,358
-
-
-
-
-
-
-
-
-
-
-
-
-
-
553,889
401,358
49,583
60,554
47,500
6,167
461,759
352,823
41,250
55,000
41,250
PROCEEDINGS ON BEHALF OF THE
COMPANY
No person has applied for leave of a Court to bring proceedings on
behalf of the Company or intervene in any proceedings to which the
Company is a party for the purpose of taking responsibility on behalf
of the Company for all or any part of those proceedings. The Company
was not a party to any such proceedings during the year.
ROUNDING OFF OF AMOUNTS
The Company is a Company of the kind referred to in ASIC Class Order
98/0100, dated 10 July 1998, and in accordance with that Class Order
amounts in the financial report are rounded off to the nearest thousand
dollars.
Signed in accordance with a resolution of Directors made pursuant to
s.298(2) of the Corporations Act 2001.
On behalf of the Directors
THEO EVERSTEYN
GARY S GALE
CHAIRMAN
MANAGING DIRECTOR
Dated: 24 September 2004
The following table discloses the remuneration of the 5 highest remunerated executives of the Company and the consolidated entity.
SALARY
& FEES
$
162,307
139,373
262,272
219,855
170,000
PRIMARY
BONUS
$
30,000
-
33,660
-
-
R. House (i)
P. Cashion (ii)
D. Whyte (iii)
E. Jung (iv)
S. Carroll
NON-
SUPER-
MONETARY ANNUATION
POST EMPLOYMENT
PRESCRIBED
BENEFITS
$
$
19,026
62,629
31,116
-
14,608
-
-
-
25,000
15,300
$
-
-
-
-
-
EQUITY
OTHER
OPTIONS
$
$
10,000
17,465
-
-
-
-
-
-
-
-
OTHER
BENEFITS
$
-
-
-
-
-
TOTAL
$
253,406
202,002
327,048
219,855
210,300
(i) Mr House received a $10,000 eligible termination payment on 27 July 2004.
(ii) Mr Cashion is based in China and is principally remunerated in US dollars converted to Australian dollars in the table above.
(iii) Mr Whyte is based in the USA and remunerated in US dollars converted to Australian dollars in the table above.
(iv) Mr Jung is based in Germany and remunerated in Euro converted to Australian dollars in the table above.
The company’s fabrics are being used in organic growing applications, as well as grain and water storage.
28
29
I N D E P E N D E N T A U D I T R E P O R T
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
SCOPE
AUDIT OPINION
We have audited the financial report of Gale Pacific Limited for
In our opinion, the financial report of Gale Pacific Limited is in
the financial year ended 30 June 2004 comprising of the Directors'
accordance with:
Declaration, Statement of Financial Performance, Statement of
Financial Position, Statement of Cash Flows and Notes to the
(a)
the Corporations Act 2001, including:
Financial Statements.
The financial report includes the consolidated financial statements
of the consolidated entity comprising the Company and the entities
• giving a true and fair view of the Company's and
consolidated entity's financial position as at 30 June 2004
and of their performance for the year ended on that date;
it controlled at the year's end or from time to time during the
and
financial year. The Company's Directors are responsible for the
• complying with Accounting Standards in Australia and the
financial report. We have conducted an independent audit of this
Corporations Regulations 2001; and
(b)
other mandatory professional reporting requirements
in Australia.
PITCHER PARTNERS
financial report in order to express an opinion on it to the members
of the Company.
Our audit has been conducted in accordance with Australian
Auditing Standards to provide reasonable assurance whether the
financial report is free of material misstatement. Our procedures
included examination, on a test basis, of evidence supporting
the amounts and other disclosures in the financial report, and
the evaluation of accounting policies and significant accounting
estimates. These procedures have been undertaken to form an
opinion whether, in all material respects, the financial report is
presented fairly in accordance with Accounting Standards and other
mandatory professional reporting requirements in Australia and the
Corporations Act 2001 so as to present a view which is consistent
with our understanding of the Company's and consolidated entity's
financial position and performance as represented by the results
of their operations and their cash flows.
The audit opinion expressed in this report has been formed on the
PARTNER
M W PRINGLE
above basis.
Melbourne
24 September 2004
30
The company continues to build a reputation for quality and innovation.
31
D I R E C T O R S ’ D E C L A R A T I O N
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 4
The Directors of the Company declare that:
1.
The financial statements and notes, as set out on pages 34
to 61 are in accordance with the Corporations Act 2001
including:-
• compliance with Accounting Standards in Australia
and the Corporations Regulations 2001; and
• providing a true and fair view of the financial position
as at 30 June 2004 and of the performance, as
represented by the results of the operations and the
cash flows, of the Company and economic entity for
the year ended on that date.
2.
In the Directors' opinion there are reasonable grounds to
believe that the Company will be able to pay its debts as
and when they become due and payable.
This declaration is made in accordance with a resolution of the
Board of Directors.
THEO EVERSTEYN
GARY S GALE
CHAIRMAN
MANAGING DIRECTOR
Dated this 24 day of September 2004
32
The Company’s position in commercial markets around the world continues to grow.
33
STATEMENT OF FINANCIAL PERFORMANCE
STATEMENT OF FINANCIAL POSITION
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
A S A T 3 0 J U N E 2 0 0 4
C O N S O L I D A T E D
C O M P A N Y
C O N S O L I D A T E D
C O M P A N Y
Note
2003/04
$ ’000
Revenue from ordinary activities
2
106,400
Expenses from ordinary activities,
excluding borrowing costs expense:
Changes in inventories of finished
goods and work in progress
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation expenses
Operating overheads
Other expenses from ordinary activities
Borrowing costs expense
Profit from ordinary activities before
income tax expense
Income tax expense relating to
ordinary activities
Net profit from ordinary activities
after income tax
Net profit attributable to outside
equity interests
Net profit from ordinary activities
after income tax expense attributable
to the members of the parent entity
Net exchange difference on translation
of financial reports of self-sustaining
foreign operations
Total valuation adjustment attributable
to members of the parent entity
recognised directly in equity
Total changes in equity other than
those resulting from transactions with
owners as owners
Basic earnings per share
(cents per share)
Diluted earnings per share
(cents per share)
3
4
20
19
22
31
31
2002/03
$ ’000
84,609
4,349
(41,554)
(15,622)
(3,345)
(14,889)
(4,050)
(1,725)
7,773
(2,220)
5,553
(102)
2003/04
$ ’000
2002/03
$ ’000
71,942
76,519
1,051
(33,326)
(12,276)
(3,669)
(13,348)
(2,051)
(2,313)
3,156
(40,281)
(13,561)
(2,956)
(11,450)
(3,062)
(1,725)
6,010
6,640
(1,882)
(2,182)
4,128
4,458
-
-
(14,273)
(32,309)
(16,542)
(4,677)
(23,492)
(3,085)
(2,398)
9,624
(2,615)
7,009
(5)
7,004
5,451
4,128
4,458
-
-
-
-
1,223
(1,198)
1,223
(1,198)
8,227
15.20
15.05
4,253
12.73
12.42
CURRENT ASSETS
Cash assets
Receivables
Inventories
Other
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Other financial assets
Plant and equipment
Intangible assets
Deferred tax assets
Other
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Interest-bearing liabilities
Current tax liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing liabilities
Deferred tax liabilities
Provisions
Note
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
5
6
7
8
6
9
10
11
12
8
13
14
15
16
14
15
16
18
19
20
21
22
6,710
28,605
34,093
1,058
70,466
-
-
32,168
9,641
346
1,382
43,537
114,003
15,942
20,783
724
989
38,438
18,046
4,213
110
22,369
60,807
53,196
38,899
(273)
14,576
53,202
(6)
53,196
1,457
13,420
19,820
359
35,056
-
-
28,309
7,244
204
597
36,354
71,410
7,736
11,864
502
968
21,070
13,872
3,515
110
17,497
38,567
32,843
22,798
(1,496)
10,847
32,149
694
32,843
2,513
8,932
16,886
512
28,843
22,348
15,397
25,036
3,190
-
1,381
67,352
96,195
6,557
17,386
-
936
849
7,680
15,835
237
24,601
7,693
7,066
25,942
3,396
-
597
44,694
69,295
6,479
11,864
425
935
24,879
19,703
18,046
3,923
110
22,079
46,958
49,237
38,899
-
10,338
49,237
-
49,237
13,872
3,327
110
17,309
37,012
32,283
22,798
-
9,485
32,283
-
32,283
4,128
4,458
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained profits
PARENT ENTITY INTEREST
Outside equity interests
TOTAL EQUITY
34
T h e a c c o m p a n y i n g n o t e s f o r m p a r t o f t h e s e f i n a n c i a l s t a t e m e n t s
T h e a c c o m p a n y i n g n o t e s f o r m p a r t o f t h e s e f i n a n c i a l s t a t e m e n t s 35
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
C O N S O L I D A T E D
C O M P A N Y
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING
(b)
Income Tax
Note
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
POLICIES
The economic entity adopts the liability method of tax-effect
107,418
(90,458)
45
(2,398)
(2,204)
83,227
(73,280)
67
(1,725)
(1,977)
61,190
(50,673)
282
(2,313)
(1,986)
75,193
(66,389)
66
(1,725)
(1,938)
The financial report is a general purpose financial report that has
accounting whereby the income tax expense shown is based
been prepared in accordance with Accounting Standards, Urgent
on the profit from ordinary activities adjusted for any
Issues Group Consensus Views and other authoritative
permanent differences between taxable and accounting
pronouncements of the Australian Accounting Standards Board
income.
and the Corporations Act 2001.
The financial report covers Gale Pacific Limited as an individual
periods in which items of revenue and expense are included
parent entity and Gale Pacific Limited and controlled entities as
in the determination of accounting profit and taxable income
Timing differences which arise due to the different accounting
CASH FLOW FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Borrowing costs paid
Income tax paid
Net cash provided by
operating activities
23(b)
12,403
6,312
6,500
5,207
an economic entity. Gale Pacific Limited is a company limited by
are brought to account as either a provision for deferred
CASH FLOW USED IN INVESTING ACTIVITIES
Proceeds from sale of plant and equipment
Payment for plant and equipment
Payment for acquisition of business
23(c)
Investment in controlled entity
Payment for intangible assets
Payment for other non-current assets
Amounts advanced to related parties
Proceeds from repayment of related
party receivables
8
(6,459)
(5,233)
-
(55)
(2,972)
-
-
95
(6,225)
(3,305)
-
(787)
(763)
-
-
Net cash used in investing activities
(14,711)
(10,985)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from/(repayment of) borrowings
Proceeds from issue of equity securities
Repayment of principal on finance leases
Proceeds from/(repayment of principal on)
hire purchases
Dividends paid
Proceeds/(repayment) from outside equity interest
Net cash provided by financing activities
Net increase in cash held
Cash at beginning of year
Effects of exchange rate changes on items
denominated in foreign currencies
Cash at end of year
23(a)
(5,811)
15,461
(108)
(1,011)
(2,635)
(706)
5,190
2,882
1,457
1,091
5,430
2,812
-
(1,719)
6,592
(2,058)
592
6,219
1,546
361
(450)
1,457
8
(2,182)
(5,522)
(1,979)
(55)
(2,974)
(14,655)
-
(27,359)
9,526
15,461
(108)
(1,011)
(2,635)
-
21,233
374
849
-
1,223
95
(4,014)
-
(2,375)
(730)
(763)
(2,040)
-
(9,827)
2,812
-
(1,719)
6,592
(2,058)
-
5,627
1,007
(158)
-
849
shares, incorporated and domiciled in Australia.
income tax or as a future income tax benefit at the rate of
The financial report has been prepared on an accruals basis and is
be received or the liability will become payable.
based on historical costs and does not take into account changing
money values or, except where stated, current valuations of non-
Future income tax benefits are not brought to account unless
current assets. Cost is based on the fair value of consideration
realisation of the asset is assured beyond any reasonable
income tax applicable to the period in which the benefit will
given in exchange for assets.
The following is a summary of the material accounting policies
doubt. Future income tax benefits in relation to tax losses are
not brought to account unless there is virtual certainty of
realisation of the benefit. The tax effect of capital losses are
adopted by the economic entity in the preparation of the financial
not recorded unless realisation is virtually certain.
report. The accounting policies have been consistently applied,
The amount of benefits brought to account or which may be
realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation, and
the anticipation that the economic entity will derive sufficient
future assessable income to enable the benefit to be realised
and comply with the conditions of deductibility imposed by
the law.
unless otherwise stated.
(a) Principles of Consolidation
A controlled entity is any entity controlled by Gale Pacific
Limited. Control exists where Gale Pacific Limited has the
capacity to dominate the decision-making in relation to the
financial and operating policies of another entity so that the
other entity operates with Gale Pacific Limited to achieve the
objectives of Gale Pacific Limited. Details of the controlled
entities are contained in Note 29. All inter-company balances
and transactions between entities in the economic entity,
including any unrealised profits or losses, have been
eliminated on consolidation. Where a controlled entity has
entered or left the economic entity during the year its
operating results have been included from the date control
was obtained or until the date control ceased.
36
T h e a c c o m p a n y i n g n o t e s f o r m p a r t o f t h e s e f i n a n c i a l s t a t e m e n t s
37
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING
The depreciation rates used for each class of assets are:
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING
Contributions are made by the economic entity to an
POLICIES (cont’d)
(c)
Inventories
Class of fixed asset Depreciation rates Depreciation basis
Inventories are measured at the lower of cost and net
Leasehold
Determined by
Straight Line
realisable value. Net realisable value is determined on the
improvements
lease term
basis of each inventory line’s normal selling pattern. Costs
are assigned on a first-in first-out basis and include direct
materials, direct labour and an appropriate proportion of
Plant and
equipment
6.7% - 20.0%
Straight Line
variable and fixed overhead expenses.
(d) Plant and Equipment
Each class of plant and equipment is carried at cost less,
where applicable, any accumulated depreciation.
Plant and equipment
Plant and equipment are measured on the cost basis. The
carrying amount of plant and equipment is reviewed annually
by Directors to ensure it is not in excess of the recoverable
amount from those assets. The recoverable amount is
assessed on the basis of the expected net cash flows that
will be received from the asset’s employment and subsequent
disposal. The expected net cash flows have not been
discounted to present values in determining recoverable
amounts. The cost of fixed assets constructed within the
economic entity includes the cost of materials, direct labour
and an appropriate proportion of fixed and variable overheads.
Depreciation
The depreciable amounts of all fixed assets including
capitalised leased assets are depreciated on a straight line
basis over their estimated useful lives to the entity commencing
from the time the asset is held ready for use. Leasehold
improvements are depreciated over the shorter of either the
unexpired period of the lease or the estimated useful lives
of the improvements. Depreciation and amortisation rates
are reviewed annually for appropriateness. When changes
are made, adjustments are reflected in current and future
periods only.
Leased plant
6.7% - 20.0%
Straight Line
and equipment
Motor vehicles
20.0%
Straight Line
Office equipment
14.3% - 50.0%
Straight Line
(e) Leases
Leases of fixed assets, where substantially all the risks and
benefits incidental to the ownership of the asset, but not
the legal ownership, are transferred to the entities within
the economic entity are classified as finance leases. Finance
leases are capitalised, recording at the inception of the lease
an asset and a liability equal to the present value of the
minimum lease payments, including any guaranteed residual
values. Leased assets are depreciated on a straight line basis
over their estimated useful lives where it is likely that the
economic entity will obtain ownership of the asset or over
the term of the lease. Lease payments are allocated between
the reduction of the lease liability and the lease interest
expense for the period.
Lease payments for operating leases, where substantially
all the risks and benefits remain with the lessor, are charged
as expenses in the periods in which they are incurred. Lease
incentives received under operating leases are recognised
as a liability.
(f)
Investments
Controlled Entities
Investments in controlled entities are carried in the holding
company's financial statements at cost less amounts written
off to recognise any permanent diminution in value.
Dividends are brought to account in the statement of
financial performance when they are proposed by the
controlled entities.
POLICIES (cont’d)
employee superannuation fund and are charged as expenses
(g) Foreign Currency Transactions and Balances
when incurred.
Foreign currency transactions during the year are converted
(i) Research and Development Expenditure
to Australian currency at the rates of exchange applicable
Research and Development costs are charged to profit from
at the dates of the transactions. Amounts receivable and
ordinary activities before income tax as incurred or deferred
payable in foreign currencies at balance date are converted
where it is expected beyond any reasonable doubt that
at the rates of exchange ruling at that date.
sufficient future benefits will be derived so as to recover
The gains and losses from conversion of short-term assets
those deferred costs.
and liabilities, whether realised or unrealised, are included
Deferred Research and Development expenditure is
in profit from ordinary activities as they arise.
amortised on a straight-line basis over the period during
The assets and liabilities of overseas controlled entities,
which the related benefits are expected to be realised, once
commercial production is commenced but not exceeding
which are self-sustaining, are translated at year-end rates
three years.
and operating results are translated at rates ruling at the end
of each month. Gains and losses arising on translation are
(j) Cash
taken directly to the foreign currency translation reserve.
For the purposes of the statement of cash flows, cash
Exchange differences arising on hedged transactions
undertaken to hedge foreign currency exposures, other than
includes cash on hand and at call, deposits with banks
or financial institutions, investments in money market
instruments maturing within less than two months and
those for the purchase and sale of goods and services, are
net of bank overdrafts.
brought to account in the profit from ordinary activities when
the exchange rates change. Any material gain or loss arising
(k) Comparative Figures
at the time of entering into hedge transactions is deferred
Where required by Accounting Standards comparative figures
and brought to account in the profit from ordinary activities
have been adjusted to conform with changes in presentation
over the lives of the hedges.
for the current financial year.
Costs or gains arising at the time of entering hedged
(l) Revenue
transactions for the purchase and sale of goods and services,
Revenue from the sale of goods is recognised upon the
and exchange differences that occur up to the date of
delivery of goods to customers.
purchase or sale are deferred and included in the
measurement of the purchase or sale.
(h) Employee Entitlements
Where a Government grant (including SIP income) is received
or receivable relating to research and development costs that
have been expensed, the grant is recognised as revenue.
Provision is made for the economic entity's liability for
Where a grant is received or receivable relating to research
employee entitlements arising from services rendered by
and development costs that have been deferred, the grant
employees to balance date. Employee entitlements expected
is deducted from the carrying amount of the deferred costs.
to be settled within one year together with entitlements
arising from wages and salaries, annual leave and sick leave
Other revenue is recognised when the right to receive the
which will be settled after one year, have been measured at
revenue has been established.
their nominal amount. Other employee entitlements payable
later than one year have been measured at the present value
of the estimated future cash outflows to be made for those
entitlements.
All revenue is stated net of the amount of goods and services
tax (GST).
38
39
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING
The key differences in accounting policies that are expected
POLICIES (cont’d)
to arise from adopting Australian equivalents to IFRS are
(m) Intangibles
Goodwill
detailed below:
Income taxes
Goodwill and goodwill on consolidation are initially recorded
Under IFRS, a balance sheet approach will be adopted under
at the amount by which the purchase price for a business or
which temporary differences are identified for each asset and
for an ownership interest in a controlled entity exceeds the
liability rather than accounting for the effect of timing and
fair value attributed to its net assets at date of acquisition.
permanent differences between taxable income and
Both purchased goodwill and goodwill on consolidation are
accounting profit.
amortised on a straight-line basis over the period of 20 years.
The balances are reviewed annually and any balance
representing future benefits for which the realisation is
considered to be no longer profitable is written off.
Goodwill
Amortisation of goodwill will cease on adoption of IFRS.
Under IFRS, goodwill will be subject to impairment testing.
Patents and Trademarks
Intangible Assets
Patents and trademarks are valued in the accounts at cost
of acquisition and are amortised over the period in which
the benefits are expected to be realised, but not exceeding
Patents, Trademarks & Licences are classified as internally
generated identifiable intangible assets and will be
derecognised if they do not satisfy the identifiability or
20 years.
(n) International Financial Reporting Standards
The company is currently:
recognition criteria.
Impairment of Assets
The recoverable amount test under Australian GAAP will be
replaced by impairment testing, whereby recoverable amount
is determined as the higher of fair value less costs to sell and
• Evaluating the key differences in accounting policies;
value in use. Value in use incorporates the use of discounted
• Identifying the changes to the company's financial
cash flows.
reporting systems; and
• Commencing evaluation of the financial impact
The effects of changes in foreign exchange rates
arising from key differences in accounting policies
Under IFRS, foreign subs will no longer be classified as
that are expected to arise from adopting Australian
self-sustaining/integrated entities. Different translation
equivalents of IFRS.
rules will apply.
C O N S O L I D A T E D
C O M P A N Y
Note
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
NOTE 2: REVENUE
Operating activities
-
-
-
Sale of goods
SIP income
Interest income – other parties
- Other revenue
Outside operating activities
-
Proceeds from disposals of
non-current assets
Total revenue
NOTE 3: PROFIT FROM ORDINARY ACTIVITIES
Profit from ordinary activities before income
tax expense has been determined after:
Cost of sales
Borrowing costs
- Other persons
Depreciation of non-current assets:
-
-
Leasehold improvements
Plant and equipment
- Motor vehicles
- Office Equipment
Amortisation of non-current assets:
-
-
Leased plant and equipment
Leased motor vehicles
- Goodwill
-
Patents and trademarks
Research and Development expenditure:
-
-
Capitalised and amortised
Expensed as incurred
Increase in provision for obsolete inventory
Bad and doubtful debts:
-
-
Bad debts written off - trade debtors
Bad debt recoveries - trade debtors
- Movement in provisions for doubtful
debts - trade debtors
104,963
1,086
286
57
8
106,400
81,767
2,562
68
117
95
84,609
70,508
1,086
283
57
8
71,942
73,678
2,562
67
117
95
76,519
59,955
49,517
46,192
48,233
2,398
1,725
2,313
1,725
32
2,926
267
483
(10)
20
489
119
351
1
366
1
-
405
17
1,858
125
344
273
38
295
107
288
4
34
53
-
8
18
2,471
225
305
(10)
20
193
96
351
1
(5)
1
-
(27)
14
1,670
110
267
273
38
205
91
288
3
34
-
(8)
8
40
41
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
C O N S O L I D A T E D
C O M P A N Y
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
C O N S O L I D A T E D
C O M P A N Y
Note
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
NOTE 3: PROFIT FROM ORDINARY
ACTIVITIES (cont’d)
Remuneration of the auditors of
parent entity for:
Auditing the financial report
Other services
Remuneration of other auditors of
controlled entities – audit services
Total remuneration of auditors
Foreign currency translation losses / (gains)
Net loss on disposal of non-current assets
Plant and equipment
Operating lease rental expense
NOTE 4: INCOME TAX EXPENSE
The prima facie income tax payable on
profit from ordinary activities is reconciled
to the income tax expense as follows:
Prima facie tax payable on profit from ordinary
activities before income tax at 30%
Add:
Tax effect of:
Amortisation of intangible assets
Less:
(Under)/over provision for income tax
in prior year
-
Attributed CFC income
- Other non-allowable/non-assessable
items
Tax rate differentials in foreign countries
Income tax expense attributable to
profit from ordinary activities
83
20
60
163
(211)
51
2,703
90
63
69
222
53
9
2,565
83
20
60
163
(211)
51
2,510
90
63
69
222
53
9
2,565
2,887
2,332
1,803
1,992
120
3,007
-
(28)
(325)
(39)
2,615
87
2,419
(13)
-
38
(224)
2,220
56
1,859
60
2,052
-
28
(5)
-
-
100
30
-
1,882
2,182
NOTE 5: CASH ASSETS
Cash on hand
Cash at bank
NOTE 6: RECEIVABLES
CURRENT
Trade debtors
Less provision for doubtful debts
Other debtors
NON-CURRENT
Amounts receivable from:
Controlled entities
NOTE 7: INVENTORIES
CURRENT
Raw materials at cost
Work in progress at cost
Finished goods at cost
Less provision for obsolescence
NOTE 8: OTHER ASSETS
CURRENT
Prepayments
NON-CURRENT
Research & development
26
6,684
6,710
21,882
(437)
21,445
7,160
28,605
6
1,451
1,457
10,837
(32)
10,805
2,615
13,420
2
2,511
2,513
5,266
(5)
5,261
3,671
8,932
2
847
849
5,436
(32)
5,404
2,276
7,680
-
-
22,348
7,693
2,136
3,364
29,056
(463)
34,093
1,058
1,382
1,381
2,186
16,350
(97)
19,820
359
597
613
2,772
13,593
(92)
16,886
512
1,381
1,034
1,724
13,174
(97)
15,835
237
597
NOTE 9: OTHER FINANCIAL ASSETS
NON-CURRENT
Shares in controlled entities
at cost
29
-
-
15,397
7,066
42
43
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
NOTE 10: PLANT AND EQUIPMENT
Plant and equipment
At cost
Less accumulated depreciation
Under lease
At cost
Less accumulated amortisation
Leasehold Improvements
At cost
Less accumulated depreciation
Motor vehicles
At cost
Less accumulated depreciation
Under lease
At cost
Less accumulated amortisation
Office equipment
At cost
Less accumulated depreciation
Total plant and equipment
C O N S O L I D A T E D
C O M P A N Y
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
37,727
(10,397)
27,330
1,501
(210)
1,291
309
(101)
208
1,488
(467)
1,021
126
(80)
46
3,688
(1,416)
2,272
32,168
32,673
(7,471)
25,202
1,227
(220)
1,007
286
(70)
216
1,103
(199)
904
139
(60)
79
1,839
(938)
901
28,309
31,417
(9,418)
21,999
1,501
(210)
1,291
274
(82)
192
1,200
(408)
792
126
(80)
46
1,820
(1,104)
716
25,036
30,186
(6,947)
23,239
1,227
(220)
1,007
271
(63)
208
950
(183)
767
139
(60)
79
1,440
(798)
642
25,942
NOTE 10: PLANT AND EQUIPMENT (cont’d)
Movements in Carrying Amounts
Movement in the carrying amounts
for each class of plant and equipment
between the beginning and the
end of the year:
2003/04
Balance at the beginning of the year
Additions
Disposals
Depreciation expense
Carrying amount at the end of the year
2003/04
Balance at the beginning of the year
Additions
Disposals
Depreciation expense
Carrying amount at the end of the year
2003/04
Balance at the beginning of the year
Additions
Asset - business acquired
Disposals
Depreciation expense
Carrying amount at the end of the year
L E A S E H O L D I M P R O V E M E N T S
P L A N T & E Q U I P M E N T
Consolidated
$ ’000
Company
$ ’000
Consolidated
$ ’000
Company
$ ’000
216
24
-
(32)
208
208
2
-
(18)
192
25,202
5,131
(77)
(2,926)
27,330
23,239
1,231
-
(2,471)
21,999
L E A S E D P L A N T A N D E Q U I P M E N T
M O T O R V E H I C L E S
Consolidated
$ ’000
Company
$ ’000
Consolidated
$ ’000
Company
$ ’000
1,007
274
-
10
1,291
1,007
274
-
10
1,291
904
428
(44)
(267)
1,021
767
294
(44)
(225)
792
O F F I C E E Q U I P M E N T
L E A S E D M O T O R V E H I C L E S
Consolidated
$ ’000
Company
$ ’000
Consolidated
$ ’000
Company
$ ’000
901
618
1,238
(2)
(483)
2,272
642
381
-
(2)
(305)
716
79
-
-
(13)
(20)
46
79
-
-
(13)
(20)
46
44
45
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
NOTE 11: INTANGIBLE ASSETS
Goodwill on consolidation at cost
Less accumulated amortisation
Patents, trademarks and licenses at cost
Less accumulated amortisation
RECONCILIATION OF INTANGIBLE ASSETS
2003/04
Balance at the beginning of the year
Additions
Amortisation expense
Carrying amount at the end of the year
C O N S O L I D A T E D
C O M P A N Y
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
10,445
(1,439)
9,006
934
(299)
635
9,641
7,511
(950)
6,561
863
(180)
683
7,244
3,829
(1,053)
2,776
659
(245)
414
3,190
3,800
(860)
2,940
604
(148)
456
3,396
G O O D W I L L
P A T E N T S , T R A D E M A R K S
& L I C E N C E S
Consolidated
$ ’000
Company
$ ’000
Consolidated
$ ’000
Company
$ ’000
6,561
2,934
(489)
9,006
2,940
29
(193)
2,776
683
71
(119)
635
455
55
(96)
414
C O N S O L I D A T E D
C O M P A N Y
Note
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
NOTE 12: DEFERRED TAX ASSETS
The future income tax benefits comprise:
Timing differences
346
204
-
-
NOTE 13: PAYABLES
CURRENT
Unsecured liabilities
Trade creditors
Sundry creditors and accruals
NOTE 14: INTEREST BEARING LIABILITIES
CURRENT
Secured liabilities
Bank overdrafts
Bank loans
Commercial bills
Finance lease liability
Hire purchase liability
NON-CURRENT
Secured liabilities
Commercial bills
Finance lease liability
Hire purchase liability
23(e)
23(e)
23(e)
27(a)
27(b)
23(e)
27(a)
27(b)
NOTE 15: INCOME TAX LIABILITIES
CURRENT
Income tax
NON-CURRENT
Deferred income tax
8,387
7,555
15,942
1,280
15,525
1,500
310
2,168
20,783
11,700
615
5,731
18,046
724
4,213
4,335
3,401
7,736
-
7,893
1,500
328
2,143
11,864
6,400
705
6,767
13,872
502
3,515
3,651
2,906
6,557
1,290
12,118
1,500
310
2,168
17,386
11,700
615
5,731
18,046
4,062
2,417
6,479
-
7,893
1,500
328
2,143
11,864
6,400
705
6,767
13,872
-
425
3,923
3,327
46
47
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
NOTE 16: PROVISIONS
CURRENT
Employee entitlements
NON-CURRENT
Employee entitlements
(a) Aggregate employee
entitlements liability
(b) Number of employees
at year end
NOTE 17: NON-HEDGED FOREIGN
CURRENCY BALANCES
The Australian dollar equivalents of
foreign currency balances included
in the financial statements that are
not effectively hedged are as follows:
US Dollars & Euro
Payables
Current - $US
Current - Euro
Non-current – Euro
Receivables
Current - $US
Current - Euro
Non-current - $US
Non-current - Euro
48
C O N S O L I D A T E D
C O M P A N Y
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
C O M P A N Y
2003/04
$ ’000
2002/03
$ ’000
989
968
936
935
50,358,425 fully paid ordinary shares (2003: 43,459,282)
38,899
22,798
NOTE 18: CONTRIBUTED EQUITY
Paid up Capital
110
1,099
427
110
1,078
329
110
1,046
200
110
1,045
198
17,470
8,918
2,114
28,502
19,850
342
-
-
10,252
14,593
8,995
-
-
-
-
-
-
10,252
14,593
8,995
7,248
-
-
-
-
342
11,475
10,893
22,710
1,507
-
7,624
-
9,131
20,192
7,248
Movement in Share Capital
Shares issued at the beginning of the financial year
974,811 shares issued as part of the consideration for acquisition of a business
1,602,601 shares issued as part of the Company Share Purchase Plan
4,230,769 shares issued to Institutional Investors
237,930 shares issued under Dividend Reinvestment Plan
827,843 shares issued under the Company option scheme
487,175 shares issued under Dividend Reinvestment Plan
22,798
-
4,167
10,466
640
828
-
38,899
20,858
1,250
-
-
-
-
690
22,798
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
A dividend reinvestment plan was established on 5 September 2001, and is available to all shareholders.
A Share Purchase Plan available to all shareholders and a share placement with institutional investors was made to fund the
acquisition of the German based company, Jung Garten & Freizeit Vertriebsgesellschaft mbH, as well as Gales’ working capital
requirements and new product initiatives, and to reduce gearing.
Options
The Company maintains an option scheme for certain staff and executives, including executive Directors, as approved by
shareholders at an annual general meeting. The issue price of each option is zero. Each option entitles the option holder to 1
ordinary share in the Company in the event that the option is exercised. The exercise price of the 427,942, issued options is $1.00
and the remaining 50,000 options have an exercise price of $1.50. The vesting of options is determined by the performance of the
Company’s share price over time. The first 427,942 options are not exercisable after 1 December 2004 and the remaining 50,000
options are not exercisable after 1 December 2006. Options carry no rights to dividends and no voting rights.
Balance at the beginning of the financial year
Granted during the financial year (20 May 2004)
Options Exercised during the financial year
Lapsed during the financial year (Issued 18 December 2002)
Granted during the financial year (18 December 2002)
Lapsed during the financial year (Issued 18 December 2002)
Balance at the end of the financial year
At 30 June 2004, 427,942 options on issue had vested.
No.
No.
1,310,785
760,785
50,000
(827,843)
(55,000)
-
-
-
-
-
650,000
(100,000)
477,942
1,310,785
49
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
NOTE 19: RESERVES
Foreign currency reserve
Movement during the year:
Opening balance
Foreign currency loss
on consolidation
Closing balance
C O N S O L I D A T E D
C O M P A N Y
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
(273)
(1,496)
(1,496)
1,223
(273)
(298)
(1,198)
(1,496)
-
-
-
-
-
-
-
-
Exchange differences relating to foreign currency monetary items forming part of the net investment in a self-sustaining foreign
operation and the translation of self-sustaining foreign controlled entities are brought to account by entries made directly to the
foreign currency translation reserve, as described in Note 1(g).
NOTE 20: RETAINED PROFITS
Retained profits at the beginning of the financial year
10,847
Net profit attributable to members of the entity
Dividends paid
Retained profits at reporting date
NOTE 21: OUTSIDE EQUITY INTERESTS
Outside equity in controlled entities comprises:
Opening balance
(Proceeds from outside entity)/payment
Net profit attributable to outside interest
7,004
(3,275)
14,576
694
(705)
5
(6)
6,884
5,451
(1,488)
10,847
-
592
102
694
9,485
4,128
(3,275)
10,338
6,515
4,458
(1,488)
9,485
NOTE 22: EQUITY
Total equity at the beginning of the financial year
32,843
27,444
32,283
27,373
Total changes in equity recognised in the
Statement of Financial Performance
Movement in outside equity interest
Movement in contributed capital
Transactions with owners as owners
-
Dividends
Total equity at reporting date
8,227
(700)
16,101
(3,275)
53,196
4,253
694
1,940
(1,488)
32,843
4,128
-
16,101
(3,275)
49,237
4,458
-
1,940
(1,488)
32,283
C O N S O L I D A T E D
C O M P A N Y
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
26
6,684
(1,280)
5,430
6
1,451
-
1,457
2
2,511
(1,290)
1,223
2
847
-
849
NOTE 23: CASH FLOW INFORMATION
(a) Reconciliation of cash
Cash at the end of the financial year as
shown in the statement of cash flows is
reconciled to the related items in the
statement of financial position as follows:
Cash on hand
Cash at bank
Bank overdrafts
(b) Reconciliation of cash flow from operations
with profit from ordinary activities
Profit from ordinary activities after income tax
7,009
5,553
4,128
4,458
Non-cash flows in profit from ordinary activities:
Amortisation of intangible assets
Amortisation of other non-current assets
Depreciation and amortisation of plant
and equipment
Other
Accrued SIP income
Changes in assets and liabilities:
Decrease in receivables
Decrease in other assets
(Increase) in inventories
Increase/(decrease) in payables
and accruals
Increase in income tax payable
Net cash provided by operations
608
351
3,718
106
(1,086)
1,983
2,575
(1,596)
(1,675)
410
12,403
402
288
2,655
8
(1,315)
74
500
(4,349)
2,252
244
6,312
289
351
3,029
21
(1,086)
143
1,532
(1,051)
(752)
(104)
6,500
296
288
2,372
8
(1,315)
125
871
(3,755)
1,612
247
5,207
50
51
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
C O N S O L I D A T E D
C O M P A N Y
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
NOTE 24: COMPANY DETAILS
The registered office of the company is:
Gale Pacific Limited
145 Woodlands Drive
Braeside Victoria 3195
NOTE 23: CASH FLOW INFORMATION (cont’d)
(c) Acquisition of business
During the financial year a business was acquired.
Details of the acquisition are as follows:
Consideration
Cash
Ordinary shares
Fair value of net assets acquired
Current assets
Cash
Inventories
Receivables
Other assets
Non-current assets
Plant and equipment
Intellectual property
Goodwill
Current Liabilities
Creditors & Accruals
Non-current liabilities
Interest Bearing Liabilities
Net assets acquired
Less
Cash acquired
Foreign currency reserve
Balance payable 20 August 2004
Net cash outflow on acquisition
(d) Non-cash financing and investing activities
Plant and equipment
6,351
-
6,351
256
11,537
9,660
6,029
1,189
-
2,939
(8,202)
(17,057)
6,351
(256)
(33)
(829)
5,233
3,305
1,250
4,555
-
269
-
-
130
223
3,933
-
-
4,555
-
-
-
3,305
6,351
-
6,351
256
11,537
9,660
6,029
1,189
-
2,939
(8,202)
(17,057)
6,351
-
-
(829)
5,522
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
During the financial year the economic entity acquired plant and equipment with an aggregate fair value of $274,000
(2003: $325,000) by means of finance leases. These acquisitions are not reflected in the Statement of Cash Flows.
(e) Multi Option Facility and Bills Discount Facility
The Company has access to a Multi Option Facility (including an AUD overdraft, USD overdraft, commercial bills, fixed rate
trade advances, documentary credit and trade finance), a Bills Discount Facility and a Bank Guarantee facility to a maximum
of $33,450,000 as at 30 June 2004 (2003 $19,800,000), leaving an unused facility of $3,445,000 (2003: $2,017,000).
This facility is secured by a First Ranking Registered Equitable Mortgage by Gale Pacific Limited over all its assets and
undertakings including uncalled capital, and a First Ranking Registered Equitable Mortgage by Gale Pacific USA Inc over all
its assets and undertakings including uncalled capital.
52
NOTE 25: DIRECTORS’ AND EXECUTIVES’ REMUNERATION
The Specified Directors of the economic entity who held office during the year were:
TJ Eversteyn (Chairman, non-executive)
H G Davies (Non-executive), resigned 17 May 2004
G S Gale (Chief Executive Officer)
D E J Reilly (Non-executive)
P R McDonald (Chief Operating Officer)
G H Richards (Non-executive), appointed 17 May 2004
The Specified Executives of the economic entity at the date of this report are:
S Carroll (Gale Australasian Sales & Marketing Manager)
P Cashion (Gale China Operations - General Manager
Manufacturing)
L Doddridge (Chief Financial Officer)
E Jung (Jung/Gale Europe, Managing Director)
D Whyte (Gale USA Vice President Sales & Marketing)
Specified Directors and Specified Executives’ remuneration
The Remuneration Committee reviews the remuneration packages of all directors and executive officers on an annual basis and
makes recommendations to the Board. Remuneration packages are reviewed with due regard to performance and other relevant
factors, and advice is sought from external advisers in relation to their structure.
Remuneration packages contain the following key elements:
a. Salary/fees;
b. Benefits, including the provision of motor vehicles and superannuation; and
c. Incentive schemes, including share options under the Executive Share Option Plan
as disclosed in note 18 to the Financial Statements.
2004
SPECIFIED
DIRECTORS
SALARY
& FEES
$
PRIMARY
BONUS
$
Executive Directors
POST EMPLOYMENT
PRESCRIBED
NON-
SUPER-
MONETARY ANNUATION BENEFITS
$
$
$
G S Gale
322,498
120,000
66,500
11,002
P R McDonald
252,961
75,000
36,037
11,002
Non-Executive Directors
T J Eversteyn
H G Davies
D E J Reilly
G H Richards
49,583
60,554
47,500
6,167
-
-
-
-
-
-
-
-
-
-
-
-
Total
739,263
195,000
102,537
22,004
No options have vested in the current year.
-
-
-
-
-
-
-
EQUITY
OTHER
$
OPTIONS
$
OTHER
BENEFITS
$
TOTAL
$
-
-
-
-
-
-
-
33,889
26,358
-
-
-
-
60,247
-
-
-
-
-
-
-
553,889
401,358
49,583
60,554
47,500
6,167
1,119,051
53
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
NOTE 25: DIRECTORS’ AND EXECUTIVES’ REMUNERATION (cont’d)
NOTE 25: DIRECTORS’ AND EXECUTIVES’ REMUNERATION (cont’d)
2003
SPECIFIED
DIRECTORS
SALARY
& FEES
$
PRIMARY
BONUS
$
Executive Directors
POST EMPLOYMENT
PRESCRIBED
NON-
SUPER-
MONETARY ANNUATION BENEFITS
$
$
$
EQUITY
OTHER
$
OPTIONS
$
OTHER
BENEFITS
$
G S Gale
P R McDonald
265,504
235,537
90,000
60,000
61,364
19,926
11,002
11,002
Non-Executive Directors
41,250
55,000
41,250
-
-
-
-
-
-
-
-
-
638,541
150,000
81,290
22,004
-
-
-
-
-
-
T J Eversteyn
H G Davies
D E J Reilly
Total
2004
SPECIFIED
EXECUTIVES
SALARY
& FEES
$
PRIMARY
BONUS
$
POST EMPLOYMENT
PRESCRIBED
NON-
SUPER-
MONETARY ANNUATION BENEFITS
$
$
$
Specified Executives
L. Doddridge (i)
5,105
R. House
P. Cashion (ii)
D. Whyte (iii)
E. Jung (iv)
S. Carroll
Total
162,307
139,373
262,272
219,855
170,000
958,912
-
30,000
-
33,660
-
-
775
19,026
62,629
31,116
-
25,000
63,660
138,546
459
14,608
-
-
-
15,300
30,367
-
-
-
-
-
-
-
-
-
-
-
-
-
OTHER
$
33,889
26,358
-
-
-
60,247
EQUITY
OPTIONS
$
-
-
10,000
17,465
-
-
-
-
-
-
-
-
10,000
17,465
TOTAL
$
461,759
352,823
41,250
55,000
41,250
952,082
-
-
-
-
-
-
OTHER
BENEFITS
$
TOTAL
$
-
-
-
-
-
-
-
6,339
253,406
202,002
327,048
219,855
210,300
1,218,950
(i) Mr. L Doddridge was appointed as Chief Financial Officer on 22 June 2004 and therefore the details of his remuneration for the
reporting period shown cover eight working days.
(ii) Mr Cashion is based in China and is remunerated in US dollars converted to Australian dollars in the table above.
(iii) Mr Whyte is based in the USA and is remunerated in US dollars converted to Australian dollars in the table above.
(iv) Mr Jung is based in Germany and is remunerated in Euro converted to Australian dollars in the table above.
FULLY PAID ORDINARY SHARES
BALANCE
1 JULY 2003
RECEIVED AS
REMUNERATION
OPTIONS
EXERCISED
NET
CHANGE (i)
BALANCE
30 JUNE 2004
Executive Directors
G S Gale
P R Mc Donald
Non-Executive Directors
T J Eversteyn
D E J Reilly
G H Richards
Specified Executives
None
Total
14,771,134
360,510
185,000
214,507
-
-
15,531,151
-
-
-
-
-
-
-
-
332,843
-
-
-
-
13,846
54,766
5,000
45,105
10,000
14,784,980
415,276
190,000
259,612
10,000
-
-
332,843
128,717
15,659,868
(i) Net change refers to purchases and sales during the year.
54
SHARE OPTIONS
BALANCE
1 JULY 2003
RECEIVED AS
REMUNERATION
OPTIONS
EXERCISED
BALANCE
30 JUNE 2004 VESTED
TOTAL
TOTAL
30 JUNE 2004
EXERCISABLE
Executive Directors
G S Gale
P R Mc Donald
Non Executive Directors
None
Specified Executives
None
Total
427,942
332,843
-
-
760,785
-
-
-
-
-
-
427,942
427,942
427,942
(332,843)
-
-
-
-
-
-
-
-
-
-
-
(332,843)
427,942
427,942
427,942
Directors acquired shares through the Dividend Reinvestment Plan on the same terms and conditions available to other shareholders.
REMUNERATION PRACTICES
The Company’s policy for determining the nature and amounts of emoluments of the board members and senior executives is as
follows.
The remuneration structure for executive officers, including executive directors, is based on a number of factors including length
of service, particular experience of the individual concerned, and overall performance of the Company. The contracts of service
between the Company and Specified Directors and Executives are on a continuing basis the terms of which are not expected to
change in the imediate future. Upon retirement, Specified Directors and Executives are paid employee benefit entitlements accrued
to date of retirement. Payment of bonuses, stock options and other incentive payments are made at the discretion of the Remuneration
Committee based predominantly on an objective review of the Company’s financial performance, the individual’s achievement of
stated financial and non financial targets and any other factors the Committee deems relevant.
NOTE 26: DIVIDENDS
Ordinary Shares
Interim dividend – fully franked
Final dividend – fully franked
Adjusted franking account balance
Cents per
Share
3.5
3.5
2 0 0 3 / 0 4
2 0 0 2 / 0 3
Total
$ ’000
1,751
1,524
3,275
3,889
Cents per
Share
Total
$ ’000
3.5
-
1,488
-
1,488
4,693
Since the end of the financial year, Directors have declared a fully franked final dividend of 4.0 cents per share,
amounting to $2,014,000.
The final dividend for the year ended 30 June 2004 has not been recognised in this financial report because the final dividend
was declared subsequent to 30 June 2004. On the basis that Directors will continue to declare dividends subsequent to
reporting date, in future financial reports the amount disclosed as ‘recognised’ will be the final dividend in respect of the
prior financial year, and the interim dividend in respect of the current financial year.
55
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
C O N S O L I D A T E D
C O M P A N Y
Note
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
NOTE 27: CAPITAL AND LEASING COMMITMENTS (cont’d)
C O N S O L I D A T E D
C O M P A N Y
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
NOTE 27: CAPITAL AND LEASING COMMITMENTS
(a) Finance Leasing Commitments
Payable
not later than one year
later than one year and not later than five years
Minimum lease payments
Less future finance charges
Total lease liability
Represented by:
Current liability
Non-current liability
14
14
363
669
1,032
107
925
310
615
925
433
833
1,266
233
1,033
328
705
1,033
363
669
1,032
107
925
310
615
925
433
833
1,266
233
1,033
328
705
1,033
The consolidated entity leases production plant and equipment under finance leases expiring from one to five years.
At the end of the lease term the consolidated entity has the option to purchase the equipment deemed to be a bargain
purchase option.
C O N S O L I D A T E D
C O M P A N Y
Note
2003/04
$ ’000
2002/03
$ ’000
2003/04
$ ’000
2002/03
$ ’000
(b) Hire Purchase Commitments
Payable
not later than one year
later than one year and not later than five years
Minimum hire purchase payments
Less future finance charges
Total hire purchase liability
Represented by:
Current liability
Non-current liability
14
14
2,447
6,067
8,514
615
7,899
2,168
5,731
7,899
2,490
8,450
10,940
2,030
8,910
2,143
6,767
8,910
2,447
6,067
8,514
615
7,899
2,168
5,731
7,899
2,490
8,450
10,940
2,030
8,910
2,143
6,767
8,910
56
(c) Operating Lease Commitments
Non-cancellable operating leases contracted for
but not capitalised in the accounts:
Payable
-
-
-
not later than one year
3,411
later than one year and not later than five years
7,908
later than five years
2,999
14,318
2,808
8,353
-
11,161
2,685
5,502
-
8,187
2,663
8,269
-
10,932
The Company leases property under operating leases expiring in 1 to 10 years. Leases of property generally provide the
Company with a right of renewal at which time all leases are renegotiated. Lease payments comprise a base amount plus
an incremental contingent rental. Contingent rentals are based on the consumer price index.
NOTE 28: RELATED PARTY TRANSACTIONS
(a) Equity Investments in Controlled Entities
Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 29 to the financial statements.
(b) Directors’ Remuneration
Details of Directors’ remuneration are disclosed in Note 25.
(c) Directors’ Equity Holdings
Details of Directors’ equity holdings are disclosed in Note 25.
(d) Transactions with Directors and Director-related entities
Current
C O N S O L I D A T E D
C O M P A N Y
2003/04
$ ’000
25
2002/03
$ ’000
30
2003/04
$ ’000
25
2002/03
$ ’000
30
Mr T Eversteyn is a Partner of the Chartered Accounting firm
Bentleys MRI. In addition to Directors fees received (and
disclosed in Note 25) Bentleys MRI have provided taxation
and other business advice during the year ended 30 June
2004 to Gale Pacific Limited. The value of services provided
was $166,863 (2003:$ 151,688).
During the financial year, Directors and their Director-related
entities purchased goods, which were domestic or trivial in
nature, from the company on the same terms and conditions
available to other employees and customers. The current year
closing balance of $25,000 is represented by director’s fees
payable as follows;
Mr T Eversteyn
Mr D Reilly
Mr G Richards
7,083
13,750
4,167
25,000
(e) Transactions Within the Wholly-Owned Group
The wholly-owned group includes:
The ultimate parent entity in the wholly-owned group; and
-
- Wholly-owned controlled entities.
The ultimate parent entity in the wholly-owned group is
Gale Pacific Limited, which is also the parent entity in the
economic entity.
Amounts receivable from entities in the wholly-owned group
are disclosed in Note 6. These amounts are repayable at call,
and no interest is charged on outstanding balances.
Transactions that occurred during the financial year between
entities in the wholly owned group were:
-
-
Sale and purchase of goods at cost plus mark up
of up to 20%.
Reimbursement of certain operating costs.
(f) Transactions With Non-wholly Owned Controlled Entity
Transactions that occurred during the financial year with a
non-wholly owned controlled entity were:
- Net Sales of goods at cost of $412,000.
57
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
NOTE 29: CONTROLLED ENTITIES
C O U N T R Y O F
I N C O R P O R A T I O N
O W N E R S H I P
I N T E R E S T ( % )
Parent Entity:
Gale Pacific Limited
Controlled Entities:
Gale Pacific USA Inc.
Gale Pacific FZE
Gale Pacific Special Textiles Company Limited
Aquaspan Pty Ltd
Jung Garten & Freizeit Vertriebsgesellschaft mbH
Australia
USA
United Arab Emirates
China
Australia
Germany
2003/04
2002/03
-
-
100%
100%
100%
50%
100%
100%
100%
85%
50%
-
Gale Pacific Special Textiles Company Limited was formed on 21 November 2002, and manufactures advanced durable polymer
fabrics and value added structures made from these fabrics. During September 2003 Gale Pacific Limited purchased the remaining
15% share and obtained the relevant Chinese Government approval to operate as a wholly foreign owned enterprise in China.
On 20 February 2004, Gale Pacific Limited acquired 100% of the issued shares in Jung.
NOTE 30: SEGMENT REPORTING
China
Segment results, assets and liabilities include items directly
A Manufacturing facility is located in Ningbo, which supplies
attributable to a segment as well as those that can be allocated
products to Australia and the USA.
on a reasonable basis. Unallocated items mainly comprise
income-earning assets and revenue, interest-bearing loans,
USA
borrowings and expenses, and corporate assets and expenses.
Sales offices are located in Florida and California which service
the North American region.
Segment capital expenditure is the total cost incurred during the
period to acquire segment assets that are expected to be used
Middle East
for more than one period.
A sales office is located in the United Arab Emirates which
Inter-segment pricing is predominantly determined on an arm's
length basis.
Geographical segment
In presenting information on the basis of geographical segments,
services the region.
Germany
A sales and distribution facility is located in Western Germany to
service the European markets
segment revenue is based on the geographical location of
Business Segment
customers. Segment assets are based on the geographical
location of the assets.
The consolidated entity operates predominantly in one business
segment, being the advanced polymer fabrics industry. The
The consolidated entity comprises the following main
consolidated entity manufactures and markets advanced durable
geographical segments, based on the consolidated entity's
knitted and woven polymer fabrics and value added structures
management reporting system:
Australia/New Zealand
Manufacturing and distribution facilities are located in Victoria,
Australia. Sales offices are located in all states in Australia and
through distribution agreements in New Zealand.
made from these fabrics. With the acquisition of “Jung” the
company now markets domestic garden products to the home
hardware sector in Europe.
58
AUST/NZ
$’000
CHINA
$’000
USA
$’000
MIDDLE EAST
GERMANY
ELIMINATIONS CONSOLIDATION
$’000
$’000
$’000
$’000
60,685
11,439
72,124
6,024
(1,886)
4,138
3,675
1,086
68,757
-
15,842
2,125
28,160
(412)
106,400
10,466
10,466
-
-
15,842
2,125
971
-
971
320
-
78
42
120
303
-
94
-
94
14
-
-
28,160
2,855
(1,141)
1,714
69
-
(21,905)
(22,317)
(398)
370
(28)
296
-
106,400
9,624
(2,615)
7,009
4,677
-
1,086
9,578
14,522
1,562
26,357
(7,119)
113,657
47,003
2,949
1,413
139
9,230
(4,140)
NOTE 30: SEGMENT REPORTING (cont’d)
Primary Reporting – Geographical Segments
2004
Revenue outside the
economic entity
Inter-segment revenue
Total revenue
Segment operating profit
Income tax expense
Operating Profit after tax
Depreciation and Amortisation
Reimbursement of
R&D expenditure
Segment Assets
Unallocated Assets
Total Assets
Segment Liabilities
Unallocated Liabilities
Total Liabilities
2003
Revenue outside the
economic entity
Inter-segment revenue
Total revenue
Segment operating profit
Income tax expense
Operating Profit after tax
Depreciation and Amortisation
Reimbursement of
R&D expenditure
Segment Assets
Unallocated Assets
Total Assets
Segment Liabilities
Unallocated Liabilities
Total Liabilities
Acquisition of non-current assets
2,183
3,893
298
85
66,925
9,595
76,520
6,606
(2,083)
4,523
2,903
2,562
55,172
3,264
3,264
761
-
761
51
-
-
15,911
1,773
-
-
15,911
1,773
310
(94)
216
285
-
294
(88)
206
16
-
598
3,299
12,525
35,790
210
1,088
125
Acquisition of non-current assets
6,458
1,711
3,619
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(12,859)
(12,859)
(198)
45
(153)
90
-
(388)
(44)
-
346
114,003
56,594
4,213
60,807
6,459
84,609
-
84,609
7,773
(2,220)
5,553
3,345
2,562
71,206
204
71,410
37,169
1,398
38,567
11,788
59
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 4
NOTE 31: EARNINGS PER SHARE
NOTE 32: FINANCIAL INSTRUMENTS (cont’d)
C O M P A N Y
2003/04
2002/03
Earnings used in the calculations of basic and diluted earnings per share
$7,004,000
$5,451,000
Weighted average number of ordinary shares used in the calculation
of basic earnings per share
Number of share options on issue
Weighted average number of Share Options issued during the year
Weighted average number of ordinary shares and potential ordinary
46,064,420
42,832,976
477,942
5,738
760,785
293,836
shares used in the calculation of diluted earnings per share
46,548,100
43,887,597
NOTE 32: FINANCIAL INSTRUMENTS
(a) Financial instruments
Derivative Financial Instruments
Derivative financial instruments may be used by the
economic entity to hedge exposure to exchange rate
risk associated with foreign currency borrowings. The
derivative financial instruments are recognised in the
financial statements. Transactions for hedging purposes
are undertaken without the use of collateral as the
Company only deals with reputable institutions with
sound financial positions.
(b) Credit Risk
The maximum exposure to credit risk, excluding the value
of any collateral or other security, at balance date to
recognised financial assets is the carrying amount of those
assets, net of any provisions for doubtful debts of those
assets, as disclosed in the statement of financial position
and notes to the financial statements.
Credit risk for derivative financial instruments arises from
the potential failure by counterparties to the contract to
meet their obligations. The credit risk exposure to forward
exchange contracts is the net fair value of these contracts.
The economic entity does not have any material credit risk
exposure to any single debtor or group of debtors under
financial instruments entered into by the economic entity.
(c) Net Fair Values
The net fair value of assets and liabilities approximates their
carrying value. No financial assets and financial liabilities
are readily traded on organised markets in standardised
form other than forward exchange contracts.
(d)
Interest Rate Risk
The economic entity's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result
of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial
liabilities, is as follows:
WEIGHTED FLOATING
INTEREST
AVERAGE
RATE
INTEREST
$‘000
RATE
FIXED
INTEREST
RATE
$‘000
NON
INTEREST
BEARING
$‘000
NOTE
MATURING
TOTAL
$‘000
1 YEAR
OR LESS
$‘000
1 TO 5 MORE THAN
YEARS
$‘000
5 YEARS
$‘000
30 June 2004
Financial Assets
Cash assets
Receivables
Financial Liabilities
Payables
Bank overdrafts and loans
Commercial bills
Commercial bills
Commercial bills
Commercial bills
Lease liabilities
Hire purchase liabilities
Employee entitlements
30 June 2003
Financial Assets
Cash assets
Receivables
Financial Liabilities
Payables
Bank overdrafts and loans
Commercial bills
Commercial bills
Lease liabilities
Hire purchase liabilities
Employee entitlements
5
6
13
14
14
14
14
14
14
14
16
5
6
13
14
14
14
14
14
16
2.5%
6.9%
6.0%
6.0%
6.0%
7.5%
8.2%
4.65%
3.3%
6.9%
5.9%
8.3%
8.4%
-
-
-
-
-
2,500
2,400
6,600
200
615
5,731
110
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5.15%
6,710
-
-
-
-
-
3,100
3,300
6,600
200
925
7,899
-
6,710
6,710
28,605
28,605
28,605
28,605
35,315
35,315
15,942
15,942
15,942
-
-
-
-
-
-
-
16,805
16,805
3,100
3,300
6,600
200
925
7,899
1,099
600
900
-
-
310
2,168
989
-
6,710
-
16,805
-
-
-
-
-
-
-
-
1,099
16,805
22,024
17,041
55,870
37,714
18,156
847
-
847
-
7,893
-
-
-
-
-
-
-
-
-
-
3,700
4,200
1,033
8,910
-
7,893
17,843
610
1,457
1,457
13,420
14,030
13,420
13,420
14,877
14,877
7,736
7,893
3,700
4,200
1,033
8,910
1,078
7,736
7,893
600
900
328
2,143
968
7,736
-
-
-
-
-
1,078
8,814
2,400
3,300
705
6,767
110
700
-
-
-
-
34,550
20,568
13,282
700
60
NOTE 33: SUBSEQUENT EVENTS
Subsequent to the end of the financial year, capital expenditure was approved for the purchase of plant and equipment for the
wholly owned Chinese entity, Gale Pacific Textiles Company Limited ("GPST").
61
ADDITIONAL STOCK EXCHANGE INFORMATION
ADDITIONAL STOCK EXCHANGE INFORMATION
A S A T 2 0 S E P T E M B E R 2 0 0 4
A S A T 2 0 S E P T E M B E R 2 0 0 4
Number of Holdings of Equity Securities
Twenty Largest Holders of Quoted Equity Securities
The fully paid issued capital of the Company consisted of 50,358,425 ordinary fully paid shares held by 1,460 shareholders. Each
share entitles the holder to one vote.
Two option holders hold 477,942 options over ordinary shares. Options do not carry a right to vote.
Distribution of Holders of Equity Securities
SIZE OF SHAREHOLDING
FULLY PAID ORDINARY SHARES
OPTIONS OVER ORDINARY SHARES
NUMBER OF SHAREHOLDERS
1 – 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Holdings less than a marketable parcel
Substantial Shareholders
Shareholder
Gale Australia Pty Ltd
Gary Stephen Gale
Barbara Gale
Thorney Holdings Pty Ltd
Commonwealth Bank of Australia
Equipsuper Pty Ltd
170
572
365
317
36
1,460
32
No.
14,790,104
14,790,104
14,790,104
5,894,342
3,511,402
2,904,809
-
-
-
1
1
2
-
%
29.4%
29.4%
29.4%
11.7%
7.0%
5.8%
Ordinary Shareholders
1. Gale Australia Pty Ltd
2. Thorney Holdings Pty Ltd
3. Citicorp Nominees Pty Limited
4. National Nominees Limited ( Equipsuper Account )
5. National Nominees Limited
6. Equity Trustees Limited (SGH PI Smaller Co’s Fund)
7. J P Morgan Nominees Australia Limited
8. Equity Trustees Limited (JM Asset Management)
9. Mrs Anne Lesley Gale
10. Westpac Custodian Nominees
11. Invia Custodian Pty Ltd (White A/C)
12. Thorney Holdings Pty Ltd
13. Invia Custodian Pty Ltd (Thirty Five A/C)
14. Cognet Nominees Pty Ltd
15. Benefund Limited
16. Guardian Trust Australia Ltd
17. RBC Global Services Australia
18. ANZ Nominees Limited
19. Mrs Diane Kay Riddell
20. Malla Pty Ltd
Total
No.
13,816,181
3,663,785
3,092,963
2,904,809
2,306,123
1,353,869
1,012,148
1,000,786
973,923
963,403
776,838
676,335
514,086
472,258
450,000
371,456
364,512
360,203
319,600
300,000
%
27.4%
7.3%
6.1%
5.8%
4.6%
2.7%
2.0%
2.0%
1.9%
1.9%
1.5%
1.3%
1.0%
0.9%
0.9%
0.7%
0.7%
0.7%
0.6%
0.6%
35,693,278
70.6%
The substantial shareholding of Thorney Holdings Pty Ltd includes holdings of Invia Custodian Pty Ltd, being numbers 11 and 13
on the schedule of Twenty Largest Holders of Quoted Equity Securities and includes a holding outside of the top twenty holdings
Financial Report
The twenty members holding the largest number of shares together held a total of 70.6% of the issued capital.
Following the completion of the Financial Report, the Statement of Financial Performance has been amended from the ASX Appendix 4E
Preliminary Final Report with Depreciation and amortisation expenses restated as $4,677, operating overheads restated as $23,492 and
other expenses from ordinary activities restated as $3,085. These were re-allocations and did not alter the profit after tax.
Other information:
The name of the Company Secretary is Ms S Karzis.
Ms Karzis was appointed the Company Secretary on 11 June 2004 following the resignation of Mr R L House.
The address of the principal registered office in Australia, and the principal administrative office, is:
145 Woodlands Drive, Braeside, Vic, 3195, Tel: (03) 9518 3333
The Company is listed on the Australian Stock Exchange. The home exchange is Melbourne.
Registers of securities are held by:
Computershare Investor Services Pty Ltd
Level 12, 565 Bourke Street
Melbourne, Victoria, 3000
Ph (03) 9611 5711 Fax (03) 9275 7925
62
63